SPEAKERS CONTENTS INSERTS
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43–265 CC
1997
NEW THINKING ON FOREIGN ASSISTANCE
HEARING
BEFORE THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
FEBRUARY 26, 1997
Printed for the use of the Committee on International Relations
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
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JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
JERRY MORAN, Kansas
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
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SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
WALTER CAPPS, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
DENNIS J. KUCINICH, Ohio
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
MARK KIRK, Counsel
ALLISON K. KIERNAN, Staff Associate
C O N T E N T S
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WITNESSES
Hon. Mickey Edwards, Council on Foreign Relations
Mr. Stephen Solarz, Council on Foreign Relations
Mr. David Gordon, Overseas Development Council
Ms. Julia Taft, President, InterAction
Ms. Carol Lancaster, Assistant Professor, School of Foreign Service, Georgetown University
APPENDIX
Opening statement of Chairman Benjamin A. Gilman
Statement of Hon. Mickey Edwards and Mr. Stephen Solarz
Statement of Mr. David Gordon
Statement of Ms. Julia Taft
Statement of Ms. Carol Lancaster
InterAction Policy Paper
List of signatories who have endorsed Council on Foreign Relations statement
NEW THINKING ON FOREIGN ASSISTANCE
WEDNESDAY, FEBRUARY 26, 1997
House of Representatives,
Committee on International Relations,
Washington, DC.
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The Committee met, pursuant to notice, at 10:10 a.m. in room 2172, Rayburn House Office Building, Hon. Benjamin A. Gilman (chairman of the Committee) presiding.
Chairman GILMAN. Good morning, ladies and gentlemen. This morning we are holding our third major hearing before marking up our State Department foreign assistance authorization bill.
We began our hearings with our new Secretary of State, Madeleine Albright. We followed her testimony yesterday with the Administrator of the Agency for International Development, Brian Atwood. I was pleased when Administrator Atwood stated that the foreign assistance authorization bill was—and I quote—''a superb basis for crafting a bipartisan foreign policy bill.'' We will follow this hearing with a hearing involving our new Secretary of Defense, William Cohen, and a final hearing involving outside witnesses.
Today, we want to focus on the major studies that we recently completed on the foreign assistance budget and bureaucracy. Three major studies have been recently completed under the sponsorship of the Brookings Institute, Council on Foreign Relations, Overseas Development Council Interaction Association, comprised of 160 nongovernmental organizations, and Georgetown's Professor Carol Lancaster, who until recently was AID's Deputy Administrator, and will hopefully be able to give us her unvarnished opinion now that she no longer has to coordinate.
We are truly fortunate to have some real talent today, not just on foreign policy and foreign aid but also on how Congress should handle these important issues. I would first like to welcome back to the House Mickey Edwards, who represented the people of Oklahoma for some 16 years in the Congress before joining the faculty at Harvard. I wanted to ask Mickey if that growth was part of the criteria for faculty requirement.
Mr. EDWARDS. Mr. Chairman, the growth is but the white and gray; it came from serving here.
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Chairman GILMAN. Yesterday I noticed that Central America turned from countries in crisis to democratic allies whose 25 million people now buy more goods from America than the 900 million people of India.
No one, but Ronald Reagan, had more to do with halting communism and bringing democratic reform to Central America than our former colleague, Mickey Edwards, from his position as the ranking Republican on the House Foreign Operations Appropriations Subcommittee, and we want to warmly welcome him.
We are also pleased to welcome Steve Solarz. Steve represented the people of New York for some 17 years and served on this Committee, on the Asia and Pacific Subcommittee as its chairman, before joining George Washington University and APCO Associates. Steve Solarz has been the single most important person who rekindled the spirit of Philippine democracy which suffered under the Marcos regime.
When the history of that new Asian tiger is written, I am sure that Steve will enter their history along with Quezon and Aquino.
And David Gordon of the ODC, you are younger, but your service to your Nation is well known both here in Congress and in the fields of Africa. The reports from this Committee are that you were as missed by the Republicans as well as the Democrats when you left to join the ODC.
And Julia Taft, who has become virtually a continual visitor to our Committee, represents America's secret weapon in foreign assistance. It is safe to say that no other country fields larger or stronger NGO's than our Nation. The most charitable giving in the world is American, and Julia's 160 NGO members represent the best of what our Nation has to offer.
The staff advises me we have before us the following: A conservative Republican, liberal Democrats who want AID consolidated into the State Department, and Julia and Carol who urge us to just get on with America's overseas agenda in the 21st century.
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With that, I would like to recognize our senior Democrat, Mr. Berman.
Mr. BERMAN. Thank you. Do I get to take my seniority with me?
Thank you, Mr. Chairman. I didn't know I would be the senior Democrat here.
I don't have a prepared statement, but I do want to say to you I compliment you very much for holding this hearing. I think this demonstrates your understanding that this whole question is a priority to which we give the international relations function, and the many different purposes it serves are worthy of input from us. The authorizing process on to the budget process, as well, is perhaps useful in terms of how you want to organize our international relations functions. You have assembled an excellent panel here and a diverse one, and so I look forward to the hearing.
Chairman GILMAN. Thank you, Mr. Berman.
Are there any other Members seeking recognition? If not, I want to also note that we had a very good hearing yesterday with AID Administrator Atwood, finally moving the Administration to endorse our bill in a briefing yesterday by Major General Nash, commander of the First Army. General Nash was about the most convincing speaker I have heard outlining our efforts in this program which help the men and women of our armed forces when they are deployed abroad.
I will note that General Nash and his 20,000 Americans did not suffer a single casualty due to enemy action during their year in Bosnia. Part of the reason was that the people knew our Nation and our troops were part of that solution, not part of the problem. He played a big role in this and urged the Members of our Committee to attend these sessions. The information which was gathered will help us, when we reach the Floor, to explain the role of our Committee.
We also had Peter McPherson, former AID administrator, with us as well as Julia Taft. We also had Terrence Bracy, who was president of the Business Council, representing the alliance of some 1,000 businesses.
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So let's get on with our task today, and we again thank our panelists for taking their time to be with us, and I will ask Mr. Edwards if he would start his testimony.
STATEMENTS OF HON. MICKEY EDWARDS, COUNCIL ON FOREIGN RELATIONS
Mr. EDWARDS. Mr. Chairman, thank you. On behalf of the Brookings Institute and the Council on Foreign Relations Task Force on Resources for International Affairs, we want to thank you for inviting us to testify before you today.
During the summer of 1996, an independent task force was formed by both of these nonprofit, nonpartisan organizations in order to examine the trend in foreign affairs funding and make recommendations based on those findings. The task force has a formal statement that is accompanied by a list of signatories that we would like to submit for the record, if we may.
Chairman GILMAN. Without objection.
Mr. EDWARDS. And in doing so, we would like to call your attention to the signatory list as our statement has been endorsed by a large bipartisan group of distinguished Americans. You have our report, and Mr. Solarz will discuss more the details, as I would be glad to do later, but I would like to address some of the broader concerns that led me to accept this assignment and to support this conclusion.
Development of a foreign policy that serves America's national interests and enhances its security is not a partisan affair. I say this because much of the effort to increase funding for those programs would be led by the President and come to you as part of the President's budget request, and we all know that the debate over budget levels does sometimes become a partisan exercise. But national security, and the money that is spent to protect our security through nonmilitary means, is really beyond partisan consideration.
The report that we have given you calls for an increase in foreign affairs funding by $2 billion. It is a report endorsed, I will say to my Republican friends, by people like Bob Michel, the former Republican leader; Frank Carlucci; Al Haig; George Shultz; Brent Scowcroft; as well as leading Democrats like Cyrus Vance; Zbig Brzezinski; and Dante Fascell.
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Some of you will remember that I have long been an advocate of constraint, both in domestic and international spending. During the 16 years I spent in the House, the 5 years I was the ranking Member of the Foreign Operations Subcommittee, I consistently fought the whole ''down'' spending with the 150 account, but I also fought to provide the funding levels that were needed.
We have had great success in eliminating unnecessary spending, but we have gone beyond constraint. In real terms, we have now cut our spending on international affairs by 20 percent from the average spending in the 1980's. On the present course, it will decline another 30 percent in the next 5 years.
I support a balanced budget. I support a balanced budget amendment, but spending should be constrained wisely. We are in a time of rapid change in the world. Ethnic and racial divisions threaten to erupt at every moment. China emerges as a real concern. International economic relations are changing rapidly. Keeping the peace, and keeping the world stable, are real-life, everyday concerns that we have to be prepared to meet.
We all have different perspectives in the international affairs mission, and the question is always, what is our national interest? Sometimes it is moral, sometimes it is humanitarian, but there is a very real security interest. We must not only be strong militarily, but we must promote and protect democracy around the world. That was Ronald Reagan's belief, and that is mine; a proactive policy strengthening democracy in Central America and Russia, and supporting stable governments in the Middle East and Africa. That is not something we do for them, that is something we do for us.
As the Chairman commented, I was the chairman of a bipartisan Central American task force when I was in the House, and we worked to promote freedom, democracy and stability in that region. But, recently, when we needed more money for the Middle East, we had to take that money from what had been earmarked for demobilizing the warring factions in Central America.
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All of us played a role in the decision to send troops to the Persian Gulf to stop Saddam Hussein, but when we didn't have the money to monitor a cease-fire between Kurdish factions in Northern Iraq, Saddam was able to move in and strengthen his power.
Our embassies use old and outdated equipment. Our ability to use our embassies to collect information is deteriorating. The goal, Mr. Chairman, is to be frugal, not to be weak. The goal is to be prudent, not to increase our risk.
So, Mr. Chairman, we Republicans, and our Democratic friends will forgive me, but we Republicans believe in American strength. Strength keeps the peace. We should not destroy the capacity of our armed forces to do their job, and we should not destroy the ability of our diplomat forces to do their job.
I would like to just touch on one other concern. This task force—because I know it is going to come up in this hearing—this task force took no position on the question of consolidation. We discussed it. At one task force meeting we voted on it. We voted not to recommend consolidation. Frankly, the task force is divided on that question.
I have not. I oppose the consolidation of AID to the State Department. It is true that consolidation of AID into the State Department will save money. It will save much less than the advocates of consolidation have claimed. Many of those savings could be realized with less drastic administration restructurings proposed by the Administration.
As you know, I have been long critical of AID, but Congress now has the ability to affect it, to focus on it, to insist on certain policies and procedures, and the Congress has been effective in doing so. If AID is subsumed into the huge bureaucratic structure of the State Department, the ability of Congress to directly affect AID policies will be greatly reduced. I found that AID's single, stand-alone status made it much more possible for us to monitor its work and insist on change.
If we believe development programs are sometimes important in the promotion of stability, and in creating markets and protecting democracies, it would be a mistake to turn those programs over to a structure that is dedicated to an entirely different kind of mission.
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And finally, I believe we have an obligation to keep close tabs on how American money is used. Putting AID into the State Department will inevitably lead to less reliance on our bilateral programs and greater reliance on multilateral programs in which the United States may at times have only a marginal influence. I think that would be a serious mistake.
Mr. Chairman, I thank you for letting me participate in this hearing. We believe that our report makes a very persuasive case for increasing assistance for international affairs spending, not just foreign aid but international affairs spending, and we hope the Committee will consider it very seriously.
Chairman GILMAN. Thank you, Professor Edwards, and I am sure my colleagues may have some questions after the panelists finish their remarks.
Mr. Solarz.
STATEMENT OF HON. STEPHEN J. SOLARZ, COUNCIL ON FOREIGN RELATIONS
Mr. SOLARZ. Thank you very much, Mr. Chairman. It is good to be back with you and some of my friends from the Committee. I appreciate your kind comments. It was certainly a lot nicer than the observation a woman made to me at O'Hare Airport about a year or two ago. She came up to me and she said, ''Weren't you somebody once?'' So it is nice to be back here and be remembered.
Chairman GILMAN. We all face that kind of a reputation.
Mr. SOLARZ. Mr. Chairman, a copy of the report that was issued by the task force established by the Council on Foreign Relations and the Brookings Institute on the 150 account has been submitted to the Committee, and hopefully some of you will have a chance to review it.
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I think that what Mr. Edwards and I have demonstrated together, with many of the other participants in the task force, that bipartisanship, when it comes to foreign policy, is certainly alive and well off the Hill. We very much hope it can be resuscitated here on the Hill.
As Mr. Edwards indicated, we recommended an increase for fiscal year 1998 of about $2 billion to a level of $21 billion, with annual adjustments for inflation through 2002, which, using CBO inflation assumptions, would bring the total funding for the 150 account by 2002 up to $23 billion.
The President, as you know, has submitted a budget which, very fortunately and fortuitously, reverses the dangerous downward trend in spending in the 150 account, which has resulted so far in a roughly 20-percent cut from 1990 to the present and the resources available for this function.
But unfortunately, if you look at the out-year figures in the President's proposal by 2002, nominal funding for the 150 account will only be $19 billion, which means an additional, real cut using CBO inflation assumptions of about 15 percent. I think it would be the view of our task force that that level of funding would make it impossible for the United States to provide the kind of international leadership which our national interests require and deserve.
Now, in our report, we made a number of specific recommendations both for savings and add-ons which I briefly would like to share with you. We are not among those who think that the 150 function should be immune to any and all cuts. We think there are some savings that can prudently be achieved.
For example, we think that through some kind of reorganization and consolidation, which hopefully will be agreed upon by the President and the Congress, it ought to be possible to achieve savings of around $150 million a year. We think that through the kind of U.N. reform which hopefully with the new Secretary General will become possible, it ought to be conceivable for us to reduce our U.N. spending by about $100 million a year.
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We also think we could prudently eliminate Title 1 and Title 3 of Public Law 480, which would produce savings of another $250 billion a year.
Title 1, you will recall, is that title for the Food for Peace Program which provides for the commercial sale of American agricultural surpluses. Paradoxically, we have found out over the years that countries that are doing better economically tend to import more food products from the United States. Title 1, by providing food which is sold at below-market cost to these countries, has the effect of reducing agricultural output in the nations it is supposed to be helping over the long term, thereby diminishing the demand for American agricultural production.
So, our recommendation for the elimination of Title 1 and Title 3 would leave intact the humanitarian food component in Title 2, Public Law 480. Those are the recommended savings, but we do, of course, recommend a number of increases.
To begin with, we recommend an increase of about $600 million a year in flexible funding through the ESF account to enable the Administration and the Congress to respond to unanticipated foreign policy challenges abroad. We have configured our military establishment to enable us to respond to major wars at the same time. That at least is the theory. I realize there is some debate about whether the resources that are made available to the military will enable us to do that, but that is clearly the objective.
We think we ought to have as an objective, with respect to our foreign aid program, that we have the capacity to deal with two unanticipated emergencies or challenges, which is more or less the rate at which these problems have been developed.
Right now, when these difficulties develop, whether it is the conflict between the Kurdish factions in northern Iraq, which resulted in a military incursion in the no-go zone by Saddam Hussein, or the tragic genocide in Rwanda, we end up, in order to be able to deal with those problems, raiding other accounts for which the resources are then not available. Or, as in the case of northern Iraq, where our diplomats had brokered an agreement between the two Kurdish factions, the implementation of which was rendered null and void by our failure to provide only $2 million for the implementation of an impartial police force in the agreement. As a consequence of our failure to provide those monies which we didn't have available in the budget, the two Kurdish factions fell to fighting among themselves and Saddam had an excuse to enter northern Iraq.
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Now, there will obviously be some concern with what some, who would not be receptive to such a recommendation, would characterize as a slush fund to be used by the President as he sees fit. I think the way to deal with that concern would be to establish procedures similar to what we have now, whereby if any of these were used, the relevant committees would have to be notified, and they would have an opportunity to raise objections.
The key is to provide the resources so that we have the capacity to respond in a timely fashion to unanticipated developments which have potentially significant consequences to fundamental American interests and values.
Second, we recommend $150 million a year, until 2002, for the technological modernization of the Department of State. Right now, up to half of the employees in the State Department do not have access to modern computers or telecommunications equipment. We think by the time we reach the 21st century, it would probably be helpful to bring the State Department, technologically speaking, into the 21st century.
To the extent that there is going to be any kind of restructuring at all—and my own view here is that as a practical matter—if the Congress is going to provide the additional resources that the President has asked for, the even greater resources our task force has recommended will probably be necessary for the Administration to agree on some kind of restructuring or consolidation.
I think there is probably going to be a legislative and political tradeoff there, but our estimate is that in order to facilitate that restructuring, another $100 million will be needed for a year or two to buy people out and to otherwise make the necessary adjustments.
We also recommend an increase of $500 million a year for sustainable development programs which will begin to bring us back to the levels that we made available for sustainable development in the 1980's.
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I would suggest for those of you who are skeptical, as many in Congress and around the country are, about whether foreign aid has really produced any beneficial results, look at one of the charts we have in our task force report. These charts indicate that in terms of the key indicia by which sustainable development programs are measured—increases in life expectancy, decreases in infant mortality, increases in per capita income—over the course of the last 2 decades, there have been some significant and even dramatic improvements which, to some extent, were facilitated by our development assistance programs.
Our next recommendation is that we provide $200 million a year for the next several years to make good on our arrearages to the United Nations. The President has approached us in a slightly different fashion. He recommends $100 million this year and, assuming U.N. reform, $900 million next year.
However it is done, we think there is much to be said for the proposition, as a Nation committed to the rule of law, we ought to have a lawful obligation to the United Nations. Certainly, if we do not, our influence in the world body will inevitably diminish, and whatever the problems many of us have had with the United Nations, there is no question that it serves our interest in many ways and on many fronts, and particularly now that the cold war is over. It would be a tragedy if we forsook the influence that we will have at the United Nations. We are entitled to this influence so long as we meet our obligations there.
Similarly, we recommend an additional $200 million a year to enable us to make good on both our arrearages and current obligations to the international financial institutions where we have been able to leverage far greater donations and contributions for development assistance and other forms of aid around the world. We believe it is important for us to preserve our interests there as well.
So those are the cuts and the increases we recommend. Let me conclude, if I may, Mr. Chairman, with just a brief word about the politics regarding this on the Hill.
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We recognize that as a practical matter it would be virtually inconceivable to expect Congress to provide more for the 150 account than what is requested by the President. He sets the upper limit. And while we are pleased that he has asked for more in fiscal year 1998, we are deeply concerned over his figures for the out-years which would result in using CBO inflation estimates and an additional cut of 15 percent in the 150 account down to the 20-percent cut that has already taken place.
I think that if this problem is going to be dealt with adequately, if the kind of overall funding levels called for in our report, a report endorsed by former Secretaries of State Shultz and Vance, by NSC directors like Brzezinski and Scowcroft, by former Members like Bob Michel and Dante Fascell, former Secretaries of Defense like Frank Carlucci and others, if we are going meet those objectives, it will probably have to take place within the framework of a balanced budget agreement between the President and the leadership of the Congress in which adequate funding is put into the 150 account.
The question you may ask is this: ''Is it possible to both balance the budget by 2002, and at the same time provide the level of funding recommended in our report which by 2002 would reach a level of $23 billion?'' My answer to that question is, ''By all means, it can be done, and it can be done easily.''
The increases we are calling for, $2 billion for fiscal year 1998 with adjustments for inflation in the out-years, comes to less than four-tenths of 1 percent of all Federal discretionary spending. So we believe that if there is a willingness on the part of the President, and a willingness on the part of the Congress to provide these additional incremental levels of funding, it will in no way whatsoever diminish our capacity to balance the budget by 2002, because less than four-tenths of 1 percent of all discretionary funding can surely be found elsewhere in the budget.
[The prepared statements of Messrs. Edwards and Solarz appear in the appendix.]
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Chairman GILMAN. Thank you, Mr. Solarz.
Our next panelist, David Gordon, is director of the Overseas Development Council and is leading a foreign policy project in a joint effort with the Henry L. Stimson Center examining the principles, purposes, and interests that should form the U.S. foreign policy in the next century.
I am going to ask our panelists if they would try to be brief. You can put your full statement into the record, and we do have a number of colleagues that would like to engage in a dialog.
Mr. Gordon.
STATEMENT OF DAVID F. GORDON, OVERSEAS DEVELOPMENT COUNCIL
Mr. GORDON. Thank you, Mr. Chairman. I want to thank you and the Members of the Committee for inviting me to testify on the question of rethinking foreign assistance.
The views that I express this morning are my own, and do not necessarily reflect those of the Overseas Development Council, nor its board of directors. They draw from a recent study on the future of foreign aid that I have prepared with our senior vice president, Catherine Gwin, and Steven Sinding of the Rockefeller Foundation.
Under Brian Atwood's energetic, creative leadership, AID has gone a long way toward streamlining its bureaucracy and redirecting its operations. But despite these efforts, the U.S. foreign aid program remains politically adrift, having lost its cold war anger as a tool for containing Congress expansion. Forced continually to defend its eroding mandate, AID finds it more difficult to undertake effective development work.
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What is called for is not the end to aid, nor the continued nibbling away of AID's capacity to undertake its mandate, which will make aid failure a self-fulfilling prophecy. Rather, we need an even more substantial revision of our assistance policies and practices in ways consistent with changing foreign policy purposes and changed realities in the developing world.
During the cold war, proponents of development assistance sought to insulate these programs from the day-to-day political pressures of foreign policy concerns. Today, we need to go in exactly the opposite direction. The separation of aid from the main foreign policy apparatus no longer ''protects'' the development objectives of aid; it marginalizes and trivializes them.
The Congress, and this Committee in particular, has an important role to play in this reform process.
In my remarks today, I wish to address three main themes. First, I will explain why I believe that we continue to need a robust foreign aid program as we face the challenges of the new millennium. Second, I will discuss the role of aid in the global marketplace. Finally, I will explore what changes are needed, substantive and organizational, to enable aid to continue to be an effective instrument of U.S. Foreign policy.
During the cold war, the main purpose of aid was to support strategically important regimes, regardless of whether the recipient used aid resources efficiently. Some argue that after the cold war there is no longer a foreign policy role for foreign aid. According to this view, eliminating most aid is an appropriate ''peace dividend'' from the end of the Cold War. This view ignores the emerging foreign policy interests of the United States. Today, it is advancing global problem solving, promoting crucial transitions, and development itself, not the buying of allies, that serve our contemporary foreign policy goals and interests.
Supporting the historic transitions of our time, to democracy and market economies in Eastern Europe and the former Soviet Union, and to regional peace in the Middle East, presents the opportunity to change the international environment in ways favorable to American territorial security, material well-being, and core values. In addition, there is now and will inevitably continue to be, need for short-term transition support for other ''hot spots'' that, for various reasons, command special policy salience, as Haiti, Bosnia, and South Africa do today.
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An array of serious global problems, that no nation can handle on its own, offer new forms of international cooperation. The most important of these are drug trafficking and the spread of infectious diseases. These problems directly affect the quality of life here at home and can only be addressed through effective cooperation with developing countries. In the absence of aid, we would be totally dependent upon persuasion and treaty negotiations for tackling these problems, especially in poor countries that may want to respond but lack the financial and technical wherewithal to do so.
More generally, the end of the cold war allows us to focus our development efforts on the linkage between poor countries and develop social and environmental well-being on our own. Democracy and development provide for the underpinnings for regional peace, a climate of cooperation and coping with problems and mutually beneficial economic interactions, each important interests in the United States.
Globalization has linked our own economic prosperity inextricably with international trade and investment. Trade now accounts for over one-fourth of our GNP. For many of the agricultural States of the American heartland, virtually the entire increase in grain sales in recent years has been in exports to developing countries. Promoting the economic, social, and political development in regions not yet fully integrated in the global economy is desirable not only to open new markets for U.S. trade and investment but as a strategy to head off strife and manage a range of concerns.
But is foreign aid still needed for development? Has aid become economically passe, overtaken by the more significant factors of trade and global capital markets? It certainly is true that over time, trade and investment are more important tools of development than aid. Today, public resource flows make up less than one-fourth of the total financial flows for development. As a result, a growing number of countries no longer have the need for traditional forms of aid.
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But while it is true that aid can never be the main engine of development, it is equally true that the poorest countries in the world are the least able to participate in the expansion of trade and are still almost completely excluded from the expansion of capital flows.
Historically, aid has been a precursor of increased U.S. trade and investment. Markets did not just appear one day fully grown, they were cultivated. Many of today's emerging markets were yesterday's major aid recipients. In the fifties and early sixties, the four developing countries that received the most U.S. aid were Brazil, Korea, Taiwan, and Turkey. Today, the United States has over $100 billion in annual trade with these four countries.
The remaining low-income countries represent huge potential markets to the further expansion of trade and investment, and in recent years aid has been a major facilitator of economic reform in many of these countries. The task now is to adapt aid to meet the new challenges and seize the new opportunities in this rapidly changing world.
I wish to address three points: First, how can aid be better integrated into the mainstream of foreign policy? Second, to present a new operational concept for bilateral assistance programs; and third, discuss the need for greater selectivity.
Development and related global issues are now a crucial part of foreign policy issues and should be placed at or near the center of our foreign policy agenda. This implies the need to break down the current division whereby long-term problems are set aside as, ''aid issues,'' and not given sufficient policy attention or support. Any reorganization effort must begin with this assumption, or it will not lead to more effective American engagement abroad. If done correctly, however, the merger of foreign affairs agencies would make better use of severely constrained resources and would also better fit the foreign policy requirements of the post-cold war era. Most of the donor nations have combined their foreign ministries and their aid staffs in diminishing the effectiveness of the latter.
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To help ensure the maximum effectiveness for U.S. assistance programs, it is appropriate to bring together, within the core of the State Department, the policy and oversight responsibilities for all international assistance programs to be led by a Deputy Assistant Secretary of State for Development of Global Issues.
The primary responsibility for State Department input into U.S. policy toward the multilateral development banks and for U.N. social and economic fund programs should be moved into this broad portfolio. Essential to this reform would be building up the analytical and programming capabilities concerning development and global problem solving within the State Department, the Department not known for its interest or expertise on these issues.
At the same time, we need to both sustain and revise our programs that focus on long-term development. Today, such assistance is delivered by AID based on detailed strategic plans, a complex design procurement process, and heavy operational oversight by AID staff in the field. This mode of operation is outdated given the communications revolution, the rise of important capacities and resources in nongovernmental institutions, and the emerging consensus that government should be a facilitator rather than a director of programs and activities.
Our long-term development efforts should be programmed through a semiautonomous, international development fund which would operate more as a catalytic agent than as an implementation agency, as is the case with AID. Operating as a grant-making entity, the fund would harvest American expertise and build linkages between U.S. institutions and both governments and nongovernmental organizations in recipient countries. It would both seek out and respond to proposals from a variety of eligible partners. This would permit a less complex procurement process and encourage greater responsibility for designing and implementing aid by institutions that aid is supporting.
Consistent with the theme of integrating development into U.S. foreign policy, the fund would report to the Deputy Assistant Secretary for Development of Global Affairs, who would have primary responsibility for negotiating the fund's broad policy direction and budget with Congress.
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Selectivity: Recent research has provided solid evidence that in the absence of sound economic policies, development assistance does little to promote sustainable development. But when good policies are in place, aid can make a significant difference in improving economic performance. Moreover, the provision of aid in key moments can help facilitate the consolidation of shifts to better economic policy. Yet donors still give virtually as much money to those with bad policies as those with good policies.
The implications of this are clear. We need to be more selective in the provision of aid resources to provide both a stronger incentive for good policies, and to ensure that our taxpayer's dollars are used as effectively as possible. Of course, humanitarian relief must be provided where ever needed, and modest support for NGO's working on child survival and other basic services should be continued even where government performance is poor. In general, our development aid resources should be directed at those countries struggling to carry out democratic and market reforms.
To conclude, Mr. Chairman, foreign aid remains an important instrument in the tool box of U.S. foreign policy and will continue to be needed to respond to the challenges and opportunities we face going into the new millennium. But for aid to be effective, it must be better integrated into the mainstream of foreign policy, change its operations to reflect the new international environment, and become more selective. Such changes at the same time will enhance the political viability of aid, enabling it to better enhance American security and prosperity while reinforcing the humanitarian ideals of our citizens.
Congress, and this Committee in particular, has an important role to play in this reform process. It is not to legislate the details of a reorganization plan, and it does not hold the responsibility for deciding organizational issues. Rather, this appropriately lies with the executive branch; to facilitate a debate serving principles and purposes for foreign aid with an eye toward reestablishing a broad bipartisan consensus, without which foreign aid is unlikely to remain an effective tool of U.S. foreign policy.
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[The prepared statement of Mr. Gordon appears in the appendix.]
Chairman GILMAN. Thank you, and we appreciate your remarks.
Julia Taft is president and CEO of InterAction, as I noted before, the American Council for Voluntary International Action. It is a coalition of over 150 U.S.-based private voluntary agencies working internationally in the fields of development and humanitarian assistance.
Ms. Taft served as former assistant of AID and director of the President's Indochinese Refugee Resettlement Task Force, coordinator in the Department of State, and Deputy Assistant Secretary of Health, Education, and Welfare.
You've had trouble holding down a job.
Ms. Taft.
STATEMENT OF JULIA V. TAFT, PRESIDENT, INTERACTION
Ms. TAFT. Thank you very much, Mr. Chairman. I am delighted to be here to testify before the Committee today on behalf of InterAction.
Of our 160 members, we calculate that we have about 40 million donors across the country and thousands of Americans who participate on a voluntary basis with our agencies. We are every organization you can imagine—American Red Cross, CARE, Catholic Relief Services, Council on Jewish Foundations—and many, many more. What we represent is a full range of America's faith-based and secular charities working internationally. We represent the positive, people-centered side of foreign aid, the side that was all too often marginalized in the Washington debates about funding and restructuring of U.S. foreign policy.
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Our community has firsthand experience carrying out programs in the field. From child survival to microenterprise, family planning and environmental protection. Every day our staff sees firsthand the impact of the delivery of clean water, health services, food, and assistance to people to help them help themselves—the education, training, credit programs—that they need to get themselves out of poverty.
We also recognize that there is a need to reform various aspects of U.S. foreign assistance. Too often the reform debate has been about cutting the budget and organizational boxes. In response to this, InterAction has drafted a paper, which we would like to insert for the record and hope you all will review, which we hope will inform this important policy discussion——
Chairman GILMAN. Without objection, that will be part of the record.
Ms. TAFT. Thank you, sir.
We hope this paper will inform ongoing policy discussions about the future of foreign assistance programs and will raise the level of debate above the budgets and the boxes.
This paper is about strengthening our development cooperation and outlines essential principles upon which we believe effective development systems must be based. Mainly that they be people-centered, that they involve a balanced partnership between public and private sectors, and that they would have a primary goal of reducing poverty.
The paper states our community's strong belief that the United States should make human development a much greater priority in our foreign policy and in our foreign aid budget. Much more than it is now. We have supported the Brookings Institute and the Council on Foreign Relations budgetary levels that they are requesting. We would like to underscore that within the last 2 years the total development assistance program in areas that we are involved in has declined by at least one-third and these cuts are much deeper and disproportionate than they are in other aspects of the 150 account.
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Our paper also seeks to inform the debate about possible restructuring. Three models with some additional variation were presented today, but the three major models are most discussed. One is the retaining of AID with some reform; second, the replacing of much of AID with essentially a grant-making, independent foundation; and third, the merging of AID into the State Department, creating a Deputy Assistant Secretary for International Development and Global Affairs. These models are described more fully in the document that we are submitting to you.
But we urge that any proposed structure should have six characteristics.
First, it has to follow a clear definition of what are the program purposes and objectives. We want to also make development assistance a key component of foreign policy. Any structure has to provide the framework that can cost-effectively manage substantial resources. The structure should protect development assistance from short-term political agendas. We believe it should maintain a field presence of development professionals, not diplomats, to build partnership and monitor results. And finally, and most important, to ensure that any structure weighs the costs versus the benefits.
There are no silver bullets here. No one model can meet all of these criteria satisfactorily, and for this reason our community does not endorse one model. So it is not an easy test. But rather what we are doing is, for the first time, presenting the pros and cons of each model so that it will inform the decisionmaking process. Our bottom line is that we believe that humanitarian development concerns must be kept front and center.
Let me spend just a few minutes highlighting some of the pros and cons, because I know you all are interested in weighing the benefits of each. Let me start with the development agency model, which probably has more of the strengths and weaknesses that we know.
Retaining the independent agency structure would continue to build on AID's existing strengths, which we believe include the technical expertise and field mission capacity and the lessons it has learned from decades of experience.
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As you know, AID has been in the process of streamlining its administrative and procurement procedures to make it more responsive. However, it is not as flexible in this regard as might be a smaller, decentralized, grant-making foundation. AID has increasingly relied upon large contracting mechanisms to implement programs that AID itself conceived and designed. These require more administrative oversight and often exclude the grass-roots organizations best suited to carry out projects.
Because AID is not a Cabinet-level department, we believe AID may lack the clout with the Administration and the Congress to protect or, more importantly, expand its resource base.
Finally, the independent agency model could be less efficient and more costly than the State Department model in that it requires separate administrative public affairs and legislative structures which are parallel to those that currently exist in the State Department.
With regard to the foundation model, we believe it could facilitate an approach to international cooperation that does separate development from short-term policy influences. It could be the most cost-effective of the three in that it would have low administrative expenses and streamline policies and funding mechanisms. As a grant-making entity, it could be flexible enough to respond to initiatives generated in developing countries and to form partnerships that harness the expertise and resources of local entities' NGO's in the private sector. This model may be the least likely of the three to base distinctions on short-term policy considerations.
One drawback that we see from the foundation is that it could separate development programs from relief and transition programs at a time when greater coordination among these activities is urgently needed. Worse, this model might further distance development from other foreign policy concerns and could jeopardize the level of resources that would be available for development purposes.
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Finally, some comments about the State Department model. It presupposes that development assistance will become an even more important part of U.S. foreign policy in the coming decades and should be managed by the branch of government that has primary responsibility for foreign policy. This model could result in closer policy coordination and program implementation. It could strengthen the ties between relief and development initiatives and their related diplomatic concerns.
We also believe this model would minimize duplication of functions between the State Department and AID and provide a clearer focal point for interagency coordination as well as donor coordination. However, unless some precautions are taken, the State Department model could threaten the commitment to long-term development objectives especially if these are overshadowed by short-term policy goals of the State Department.
Since the State Department primarily relates to foreign governments, this model could create pressure to expand government-to-government transfers and assistance rather than a more balanced portfolio that engages NGO's and businesses. Furthermore, a model is unlikely to facilitate reforms in the design assistance strategy since the State Department, as it was mentioned earlier, has little experience in such operational matters and has a less than exemplary record of performance.
In summary, the policymakers need to decide what they want from their development assistance agency. Streamlining, reforming, or reorganizing the executive branch isn't enough to address what is wrong with foreign assistance. Congress bears at least as much of the burden with the imposition of conflicting mandates, regulatory and statutory obstacles, and insufficient resources. So there really needs to be a partnership between Congress and the Administration along with the private sector to realign priorities and deliver the flexibility that is needed.
We have been asked to comment on a preliminary draft of this Committee's draft legislation initiative. I would like to highlight some reactions to the portions of it that we have been able to see.
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First, we would like to say that clarifying the relationship of the AID administrator to the Secretary of State is very important. We believe there has to be improved coordination even if there is no absorption in the State Department.
Second, our community greatly appreciates the Chairman's continued emphasis on channeling assistance through PBO's due to their grass-roots linkages and cost-effectiveness, and we urge retention of the PBO language.
We would also support continuation of the Development Fund for Africa. This has been a key tool in alleviating poverty and promoting democratic change. We would also urge line items for the Development Fund and Development Fund for Africa, which is very important.
Now I know this is all in a sea of preliminary pieces, and we have only seen pieces of what is written, but those are elements of any legislation which we would be extremely supportive of and urge that you consider.
In closing, this Committee has an essential role to play in shaping the future of our foreign assistance program. Regardless of how the boxes are—and there will be no substantial improvements in how our aid is delivered unless we fix some of the basic mechanics that bog down the system—a new authorization bill would be very helpful to address these obstacles and problems that exist, and we look very much forward to working with you on this and other matters that come before the Committee.
Thank you so much, Mr. Bereuter.
[The prepared statement of Ms. Taft appears in the appendix.]
Mr. BEREUTER [presiding]. Thank you.
We will hear from Ms. Carol Lancaster. Among other experiences and qualifications, Ms. Lancaster served on the policy planning staff at the Department of State during the Carter Administration, 1977 to 1980, and was the Department's Assistant Secretary for the Bureau of Department Affairs, more recently Deputy Administrator for the U.S. Agency for International Development, before returning to the Georgetown University School of Foreign Service.
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Please proceed.
STATEMENT OF CAROL LANCASTER, ASSISTANT PROFESSOR, SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY
Ms. LANCASTER. Thank you, Mr. Bereuter.
Just to make reference to previous remarks of the Chairman, what I am going to say today is what I am truly able to say and believe it happens not to be very different or any different from what I said as Deputy Administrator on the issues I am going to address.
I suppose I am fortunate in that my views are consistent with the Administration policy at that time. I am basing my comments on my own experience at the policy level both in the Department of State and USAID as well as my scholarly interest in aid-related issues.
Let me say very briefly I add my voice to those who have said that it is important to maintain a healthy 150 budget. We have seen, in many different manifestations, the problems of reform cuts that have been taken in that budget.
I would like to make three points with regard to the issue of consolidation on merger, the organizational issue that has come up now repeatedly in this hearing. Those forms are the following: First of all, given the existing missions and purposes of USAID and the Department of State, a merger involving a significant reorganization of either one of those agencies is not warranted at this time.
Second, what is warranted and needed is a much more extensive debate on the future missions and purposes for which U.S. congressional assistance should be used in the post-cold war world.
We need to clarify real alternatives here. There are others out there that have been mentioned and elaborated, and I think we need to focus on those and their implications, and I think we need to build, if possible, a bipartisan consensus behind those purposes. I think what we see today is a lack of clarity and consensus on those purposes.
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My final point is that if you reorganize before you decide on purposes or missions, you are likely going to make decisions on purposes and missions implicit on your decisions on reorganization, and I think that is probably the wrong way to go.
Let me just spend a moment on the issue of merger and why I think it is a poor idea. Some of the reasons have already been mentioned, but let me elaborate just a moment. The Department of State's core mission is managing U.S. bilateral relationships with other governments. Its process for doing that involves reporting representation, policy development, and dealing often with crises in those bilateral relationships.
The purpose of USAID is to promote long-term economic, social and political changes in foreign countries. The processes by which AID does try to implement those purposes involves a strategic planning and implementation mechanism and the programming of the taxpayer's funds. The clientele, if you like, the partners that USAID works with, as Julia Taft said, are both government and increasingly nongovernmental organizations in countries where it works.
Now it was interesting, I was dipping into a little bit about the public administration literature in connection with a couple of things I am writing and came across a really classic statement of basis for organizational decisions, very much, I think, in the classical mode of public administration, and they are really four bases for organizational decisions. Purpose, process, clientele, and place.
The place where an organization works—and it does seem to me that if we look at the State Department today and USAID—purpose, process, and clientele are all quite different and I think argued very strongly for maintaining a measure of difference between the two organizations.
My own view is that if there were a merger of AID into the Department of State, the much more powerful agency—the Department of State—would very likely take over or overwhelm the purposes for which AID has been set up and functions. I think that is really a fundamental consideration when one thinks about consolidation and organizational change. I think it would be very difficult to keep this from happening. At least that has been my experience with the State Department.
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There is a discussion often in these debates about a merger involving coherence, and an argument is often made that we need greater coherence between what the Department of State does and what USAID does. There is an enormous amount of coordination/collaboration already. Rarely a day went by when I was the Deputy Assistant Secretary of State that I wasn't in the Secretary's staff meetings, I was very frequently in the offices of my State Department colleagues, and the coordination goes from the top to the bottom and even more impressively in the field.
I am not arguing that it is perfect, it is far from perfect, but the structures are there, and what is needed is not a different structure but a strong commitment on the part of the leadership of both agencies to make it work together. I think we are seeing that now with the new Secretary as well.
There is an argument made, and my colleague David Gordon made it, for mainstreaming development work as part of the Department of State's agreement. I think that the importance put on development by the Secretary of State and the senior officials in the State Department is one of choice, not of location. If the choice is made that what development does is quite key to U.S. foreign policy, I think I see relatively little problem with it. It is a question of choice, and I don't think putting AID in the State Department would necessarily increase the mainstreaming and could argue that it could have the opposite effect.
The budget savings is another issue that is often raised in support of a merger. Frankly, I think there is a lot less budget savings that can be gained from a merger than people think. Even though you have an Africa Bureau in the State Department, what the offices do is very different, and I think that a merger that would eliminate one, or substantially reduce one, would actually change the mission as much as changing the organization. I think unless you want to change your mission of aid, I doubt if one would get very much budget savings through a merger.
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Let me make a final point on the idea of a merger. Reorganizations of any kind can have enormous cost, as I saw when I was at USAID. It could be especially costly to try to consolidate a partly reformed agency into an agency that has yet to begin to tackle the reforms that are required for the future. I think that is the situation with USAID and the State Department. I think to justify a significant merger, you would really have to be able to identify major gains, because the costs would be significant. I honestly don't see where those major gains are at this point.
The idea of a separate development foundation that would be distanced from the State Department, further distances than now, is also a poor idea, because I do think that foreign aid needs to be managed within a broad context of U.S. foreign policy. It certainly cannot be managed in the way it contradicts foreign policy.
Opening up the distance further begins to loosen the collaboration and coordination that exists and I think it could have unfortunate effects for foreign policy and reduce the value of foreign aid in supporting foreign policy.
I would also raise questions about the proposal that David Gordon has made to take the policy part of AID and put it in the State Department, and take the implementation part and make it more independent. I think that is a recipe for ineffective operations if you divide policy from implementation. What you can do is simply feed conflict, because it is always going to be difficult to know where policy ends and implementation begins.
The learning that comes from implementation will not be as available to policymakers as I think is important. Particularly when you are dealing with development activities, you need to have that back and forth type of learning.
An example of where this does not work is the Japanese case where they have separated policy development, from implementation. They have made a role that is not nearly as much of a leadership role as the amount of their assistance would suggest, and I think it has a direct relationship with the organization. It would be a bad idea to do it here.
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I am against a merger, personally, but I don't think we need to say the status quo is perfect. It is far from perfect. I think what we need to do is focus on mission. There are some proposals out there that need to be considered seriously.
One may or may not agree with Professor Kennedy's proposal that he published in ''Foreign Affairs'' urging the United States to concentrate its aid in pivotal States, but there is a question of whether there should be a greater political aid program or bilateral aid program and level development work to the international financial institutions. That is a real proposal we can agree to.
He has published what I think will be the seminal book on U.S. development assistance, which is to set up two institutions, two separate foundations, if you like, one to finance science and technology transfer to poorer countries along the lines of the Canadian aid organization, and another to do development work through NGO's. I think these are worthy of consideration and I think they need to be looked at further.
There is one more issue, one more thing that one can raise, and that is the possibility of decentralizing foreign aid to our domestic agencies, the Health and Human Services Department and others. I think this is beginning to happen willy nilly. I think that is an option to consider.
[The prepared statement of Ms. Lancaster appears in the appendix.]
Mr. BEREUTER. Thank you very much for all the time that you have devoted to this subject matter in respecting studies and activities as well as your time here today.
I will start first with the Brookings Institute's Council on Foreign Affairs and our two former colleagues and cochairman. You said a few things that certainly caught my attention. One is that you said you expected to have $150 million in savings or spending reductions per year. I am looking forward to some detail if you have any to present.
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I suggested to Secretary Albright when she was here, if she felt she had a chattel of information and she guaranteed she and the Department received some very good information. I got that from the field through consulates and embassies. I think that was brushed aside as something that probably was tried before and not worthy of too much additional attention, but I heard some very specific examples of how money can be spent better from the lips of foreign service officers.
I saw the refutations related to the elimination of Titles 1 and 3, and, in fact, the Title 1 expenditures are largely suggested to be shifted over to the Agriculture Department, which would make our request and/or authorization look a little smaller.
My judgment is, we ought to eliminate the $10 million that is left if that is a legitimate expenditure, which I highly doubt we could subsidize the merchant marine fleet. It probably ought to be done by the Defense Department or the DOT. That is another $10 million we can get out of budget. Title 3 is one I thought brought some results, so I would be interested at this time or later if you could give us your ideas about why Title 3 should be eliminated.
Steve, I heard your comments about the President probably setting the upper limit on what this Congress will approve. That is certainly the conventional wisdom. Everything suggests that you are probably right about that, but, as you pointed out to us, we do not see a very courageous leader.
Leanne Wilton asked the President earlier last year to boost the expenditure by at least a billion dollars, and the agricultural organizations, with all the leading organizations involved, including the Farmers Union, and Farm Bureau, that never agree on anything, suggested 2 years ago that it be boosted by $2 billion.
I wonder if there isn't enough courage in this institution to take a step to increase funding authorization this year if we feel that it is going to be spent well to enhance our diplomatic and economic presence, and it is not all simply going to pay arrearages, because that is what most of the President's increase is for.
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I would like a little stimulation from you for our courage level here, if you have any to offer.
Mr. SOLARZ. I see the ghost of Arthur Vandenberg stalking this chamber, and I am certainly pleased to hear that he has some latter-day counterparts who are supporting the kind of robust American presence on a bipartisan basis that he was famous for.
But I have to say, Mr. Chairman, that I would be very skeptical, given the political realities, that it will be possible for those Members of the House and Senate like yourself, who recognize the need for more adequate levels of funding, to be able to secure the approval of the Congress for a level above what the President has requested. I hope I am wrong on that. And if you can pull it off, I think you will deserve to be Time's Man of the Year, and that would be an extraordinary legislative achievement.
Mr. BEREUTER. Howard Berman wrote a very strong op-ed piece on this subject that got wide distribution.
Mr. SOLARZ. I thought that was a very insightful, creative piece.
Let me say, Mr. Chairman, I think a way that you and others like you could be particularly helpful would be to pass the word to the President that if he does request a higher level of funding in the context of a budget agreement for the out-years, that you and others would be prepared to actively support that when it comes up for a vote in the Congress. I would hope, given the strong advocacy of Secretary Albright, and I think the strong support of Sandy Berger, the NSC advisor, that if the President can be persuaded that a recommendation on his part for a higher level of funding would indeed have real support on the Hill, that there is an excellent chance that he would be prepared, in the context of budget negotiations and an agreement on a balanced budget, to insist on a more adequate level of funding in the out-years.
Mr. BEREUTER. Would you like to say anything about where you are going to get your savings?
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Mr. EDWARDS. Before he does that, if I could just add one thing to what he said, I guess it is presumptuous of us who once served here to try to suggest to you who are here what could and could not be passed by Congress.
We are obviously concerned that there is always a fear factor when it comes to spending money on international affairs and that for many Members it is necessary to have some cover which is provided by a President aggressively stating what the need is. And we called in our report for the President to take a lead more forcefully than he has.
I am encouraged by the fact that not only Sandy Berger and Madeleine Albright but Franklin Raines and others say the Administration seems to have a real interest in trying to turn around this deterioration in our international affairs spending. But, as you know, I have always been a bit of a nonconformist in the sense that I believe honestly that the Constitution very clearly states that the authority and responsibility for setting foreign policy is in the Congress of the United States and not in the executive branch. And I think that if a number of you who saw the need and felt the importance of increasing our national security resources were to let the Administration know that there would be support on the Hill for it, I think we would see a much more aggressive stand by the President.
Mr. BEREUTER. Thank you very much.
I should go to my colleagues now. You can come back with the answers on the other questions. I turn to my colleague from California, Mr. Berman.
Mr. BERMAN. Thank you, Mr. Chairman.
I don't think we should be focusing too much on out-year numbers in the President's budget. I think the significant story is that in a declining budget, as both representatives from the task force pointed out, in the context of a continuous decline, the President, after a great deal of debate within the executive branch in the context of trying to meet the commitment for a balanced budget in the year 2002, made a significant turnaround. He proposed an increase of $1.1 billion for this coming fiscal year as well as a $900-million supplemental to deal with the U.N. arrearages issue, the subject contingent on the reform question.
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Now the question comes, what is the process going to be? I think there is more for the President to do. He has proposed a budget and made a reference in the State of the Union to the importance of this issue. I think a detailed focus in terms of a speech, a statement to the Congress, that he is willing to spend his political capital in a way that people notice on this issue is critical to getting those who want to help in Congress. I think there are many on both sides of the aisle, and I think in the Republican leadership in the House as well, who would want to help. I think that act will help to produce that.
Then there are questions that only those in this room are going to be able to answer. Is this process going to take place before the budget resolution begins to move through the House? Is it going to take place not until the end of the fiscal year with the appropriations bill?
Obviously, to me, the key decision in terms of the executive branch was the turnaround in terms of the next fiscal year. The outcomes have to be adjusted, the context of the overall negotiations. I think there is very little question about that.
I think now the issue is how to persuade the Congress that the President's budget is a serious effort and to create the conditions either for a summit of a budget resolution which would precede some negotiations, or to set the tone for those summit negotiations should they take place before the movement of a budget resolution.
I think you folks helped create conditions that caused this shift from a year ago, and from what otherwise might have been the case by virtue of your work, and I think you are to be tremendously complimented for all of that.
I would like to hear what you say more about the strategy for making this happen, but I would like to turn a little bit more to the discussion here about goals in terms of foreign assistance. It was really quite fascinating.
Mr. Gordon, I was noticing in your testimony the old problem with the development assistance in Zaire, Sudan, and Somalia, all originating in the cold war and the decisions to try and effect change underlying fundamental and important political reason. Now that the cold war has ended, we don't have to worry so much about rat holes, except those rat holes still exist.
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Mr. GORDON. They are rat holes, but we aren't providing aid to them anymore.
Mr. BERMAN. In other words, all you are really saying is that the end of the cold war gives us a reason to extricate ourselves from a lot of our assistance programs because now we shift toward whether they are doing the things necessary to make that happen.
I am interested in hearing your response to some of the points Ms. Lancaster made about the proposal—in a world where your proposal is the two alternative kinds of things at the same time, and bifurcate policy from implementation, and I am interested in your response to those criticisms.
Mr. BEREUTER. Mr. Gordon, she took a lot of criticism directed at some of your comments.
Take 5 minutes to respond.
Mr. GORDON. Let me flush out in a little more detail what we are proposing, because from what Mrs. Taft was saying, it is a mixture of two of her models, it is not a pure model.
What we are suggesting is that there is a need to put aid issues, development issues, global problem-solving issues, transition support, and humanitarian assistance, more into the mainstream of U.S. foreign policy in order to, over time, shift the orientation of the State Department away from simply thinking about short-term and narrowly diplomatic issues. That is not something that can happen overnight, and it is not an original proposal. It is not a silver bullet. So I recognize that there are some dangers here.
Mr. BERMAN. Are you trying to get into the State Department as a way to give the State Department more responsibility for assistance and therefore they will quit thinking short-term?
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Mr. GORDON. Partially, yes. I think that these are issues that both Secretary Christopher and Secretary Albright have already articulated as themes of U.S. foreign policy.
In some of the last addresses that Secretary Christopher made, he emphasized the importance of global problem-solving as a main issue of U.S. foreign policy moving into the next century. Yet these issues are seen in the State Department as aid issues. They are peripheral issues to the day-to-day concerns of the Department.
So what I am proposing is that you would, on the one hand, bring the policy issues, the oversight issues, the analysis responsibilities of AID and of the other units within the State Department that deal with various pieces of foreign aid, both the multilateral development banks and the United Nations, together into a unit of the Department to be led by a Deputy Secretary for Global Issues and Development.
This would improve policy coordination on these issues, and allow the Department and the U.S. Government to speak in a single voice. It would facilitate decisionmaking over what are the appropriate inducements for addressing these issues, be it bilateral assistance, multilateral assistance within the multilateral study that be done through the World Bank or through the U.N. institutions, or should we be working for nongovernmental mechanisms. It would also end what we now have as a distinction between policy responsibilities that are normally in the State Department, and resources that are in AID that has been a source of some serious tension.
At the same time, the proposal to create the International Development Fund recognizes that long-term assistance activities need to be somewhat protected from day-to-day political pressures.
The International Development Fund will not manage all the foreign aid. Most of foreign aid, in fact, will be handled through this, directly in this unit of development of global affairs. The distinction of what goes where is really the short-term/long-term distinction, so anything having to do with immediate political purposes, such as the transition issues in the Soviet Union or Eastern Europe, anything having to do with immediate emergency or humanitarian operations, anything have to do with a more diplomatic approach would be in the Department.
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Long-term development issues and long-term global problem solving could be undertaken in this International Development Fund which would take its guidance from the Department but would operate somewhat autonomously of it. It would have a mandate, a series of goals that would be decided jointly with the Congress, and it would operate as a grant-making entity. It has some themes in common with part of what AID does, but also the long-term element of what AID does, and it would be done in a way in which AID had much less control over the operations which give responsibility to the recipients themselves.
Mr. BEREUTER. Thank you, Mr. Gordon.
We turn to Ms. Ros-Lehtinen for questions.
Ms. ROS-LEHTINEN. Thank you, Mr. Bereuter.
It is a pleasure to see all of you again, especially our former colleagues, Steve and Mickey, especially Steve because his mom lives in my congressional district.
It is always a pleasure to see you, Mr. Solarz.
In the report I was glancing through, you recommend $1 billion in administrative savings. I am sure that some of this has already been covered in the questions before I arrived here. It included our administrative reforms, stricter aid, criteria consolidation of foreign affairs, administrative support structure, elimination of policy offices and programs. I wanted to ask you specifically what multilateral reforms you are speaking about, and who would lose with a stricter aid criteria?
Mr. SOLARZ. I think what we had in mind there was getting the multilateral lending institutions to focus more than they have been on the economic rationale of the policies being pursued by the governments to which they are providing assistance, and the theory that it ultimately doesn't help much to provide aid to a country that is pursuing irrational economic policies. Therefore, a system should be focused on those countries that pursue policies that give some real hope of the kind of long-term economic growth which is the single most effective way of alleviating poverty.
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Now, I gather that we have begun to do this in our own bilateral aid program. I have the impression that more could be done along these lines, but there is even greater room for improvement in the policies and practices of the multilateral lending institutions.
Ms. ROS-LEHTINEN. What administrative functions would you be consolidating?
Mr. SOLARZ. We, as Mr. Edwards indicated in his testimony, decided not to recommend the particular form of consolidation because there was too much of a division of opinion on the members of the task force about what to consolidate and what not to consolidate. But there was a strong feeling that the issue needed to be looked at.
We recommended the establishment of a joint executive branch-legislative task force or possibly a commission to look into it and to make recommendations.
I have to say, speaking personally, this kind of issue tends to leave me a little bit cold. I don't really care that much whether AID is in the State Department or out of the State Department. All things being equally probable, I would just as soon see it out of the State Department, but it is not the kind of issue I am going to live and die for.
To me, the important question is, how much money is available? And I have the impression that there are a number of key Members in the House and the Senate for whom consolidation is a very, very important mission. And to the extent that they would be willing to support more generous levels of assistance, which I believe are essential in terms of vital national interest, if there was an agreement by the President to accept some kind of consolidation, I think that would be a price worth paying. But if you don't get any real increase in funding for consolidation, then I think it is probably an exercise we could do without.
Mr. EDWARDS. If I could just add to that, the President himself is recommending some forms of top-level administrative reforms. We are supportive of these. Some of the things we have seen coming out of this Committee look very encouraging to us.
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I said in my opening statement that I am very strongly opposed to consolidation that places AID within the State Department, because the State Department has a very different mission. It would increase reliance on multilaterals, which is something I would be very opposed to. There are, short of putting AID into the State Department, some top-level areas where there is duplication that can be, in fact, dealt with. I think the President wants to do that, and we support him on it.
Mr. SOLARZ. I would like to add one other comment. I think it is important for the Committee to look at this not simply in terms of how much money can be saved but also in terms of how the money that is available can be used most effectively.
Here, I would like to pass along the suggestion that was put forward in the course of the deliberations of our task force which, personally, I think makes a lot of sense. As you probably know, right now, in most embassies around the world, State Department personnel constitute only 40 or 50 percent of the total of U.S. personnel there. You have all of these other Federal departments and agencies, from DOD to the Justice Department to Commerce, that have people there. And the suggestion was, in order to maximize the effectiveness of the resources, we have to conduct, on an embassy-by-embassy basis, a bottom-up review under the supervision of the ambassador to determine how we can most effectively utilize the resources available.
So, for example, you might have an embassy with six military attaches and two commercial foreign service officers in that country. It may be we are better off with fewer CIA personnel and more political counselors from the State Department. The idea would be for the ambassador to submit a recommendation to Washington which would be subjected to an interagency review and then an ultimate decision by the President under circumstances where, if it was concluded by the President upon the recommendation of the ambassador and the interagency review which followed, that it made sense to have more from one agency and fewer from another, it would be possible, and this would probably require legislation to take the money from the Department whose personnel were being reduced and transferring that money to the Department whose personnel were being increased so you could fund the shift.
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I suspect if you did this within an overall mandate to reduce by, say, 10 percent the total amount of funding for every Federal Department for that particular embassy, you would be able to achieve not only a savings but at the end of the day a more effective use of the resources that are available.
Ms. ROS-LEHTINEN. Thank you.
I have another question if you have the time.
Chairman GILMAN [presiding]. The gentlelady's time has expired. Thank you.
Mr. Menendez.
Mr. MENENDEZ. Thank you, Mr. Chairman.
I want to thank the panel for their insights. Let me just ask two questions. One is on the broader, development side.
I am one of those persons who believe maybe we need a broader definition of what is our national interest for development monies. Let me cite one particular area that I have an interest in since I came to the Committee 4 years ago. The question is on Latin America. I know Mr. Gordon expressed some comments on that in his written statement.
It seems to me that while economic opportunities and new markets are extremely important both for us, and for those countries abroad, there are precursors to that. The fact of the matter is that in Latin America, where over 50 percent of the population is below the poverty level, trade alone is not going to resolve those issues because the possibility for trade must be established.
We lack drug trafficking as a major issue. We look at questions of immigration. We are spending a fortune on border control. The fact is, people leave their country for two reasons: Civil unrest and economic opportunities.
We talked about creating sustainable development alternatives in those countries. If we look at the civil unrest that is taking place in several countries in Latin America, because they are doing exactly what we would like to see them do, which is more of a move toward the market reforms that we want to see take place, yet we don't seem to respond to some of the civil unrest in terms of assisting those countries into the transition to the market reforms that we ultimately want.
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If we work at the opportunity to cement the peace movements that have taken place in Central America, my question to you is, do we not need a little broader definition of ''national interest'' as we look at the development question?
And my second question, having heard all of your eloquent statements on behalf of greater budgetary allotments for foreign policy, having traveled to Geneva and seen the U.N. Commission on Human Rights, and seeing our embassy changing light bulbs from one embassy to another, which is a true story, because they didn't have enormous resources, or vans not being used because of the fact that all of the people who went to the U.N. Commission on Human Rights voluntarily from nonprofit organizations and nongovernmental organizations who were there to advocate on different human rights issues that the United States is interested in the world and yet couldn't be transported to the center where the hearings and where the meetings were being conducted because they didn't have resources to fix those vans—the average American wouldn't fathom that that is what we face.
The question then becomes, since I believe that it is impossible to have successful foreign policy without domestic support and, as a corollary to that, successful budgetary increases without domestic support to some degree, how do we create the domestic support and domestic recognition—as I like to call it, ''Joe Lunch Bucket''—that it is, in fact, in their interest that we do this, what is your role in doing that? What is our role? What is the executive's role?
We have advocated this to the Secretary of State both past and present. I would like to hear your views on that, because I think that is part of the fortitude here in this House.
Mr. EDWARDS. I would be glad to start a response. We weren't sure quite whom that was directed at. Let me tell you——
Mr. MENENDEZ. Any or all of you.
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Mr. EDWARDS. I agree with you completely, I think we need to look at ''national interest.'' You need to define it in a way that goes beyond pure short-term military protection. And Ronald Reagan recognized this. That is why he supported the National Endowment for Democracy and the Caribbean Basin Commission.
The idea is that our national security, long term, is enhanced by ensuring stability in various regions, by stabilizing democracies and protecting those democracies, and building markets so that they become part of the international free trade community. All of those things are important parts of our national interest. It is a misnomer to call it aid. It is really advancing America's security.
And to me, that also answers your last question. It is how you have to begin dealing with this question with the public. I think the public misunderstands what amount of money we spend on this. It is a very small amount, as we all know, but they also think that what we are doing is, instead of concerning ourselves with people in New York or Oklahoma, which are areas that we were focused on helping people in distant lands, and they don't understand how this, in fact, helps protect those people in their jobs, in not having to send people to war, because the hardest thing to prove is something that never happened. And if there is a war that didn't happen, if there is a rebellion in a country that didn't happen because we were able to forestall, that secures everybody's interest in the United States.
We just have to start talking it in that way, and that is why Steve and I and our task force believe it is important for the President to take a lead in this, because the President has a bigger microphone than anybody else.
Ms. TAFT. If I may just comment on this as well, I remember when we were working on this CFR Brookings study. One of the bottom lines of every single meeting was, how do we get the President out there to say why there needs to be a fulsome international affairs budget? And I think the fact that in his State of the Union speech he came out very strongly in educating the American people that only 1 percent of the budget goes for these activities was really extremely helpful to our community.
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The NGO community struggles very hard to try to communicate what humanitarian involvement is, what the goals of foreign assistance are. It is everybody's job to do that.
In terms of relating to personal experience, our community resonates very well on the issues of the moral imperatives to do. We are very lucky in this country. We need to understand that there is that connectedness.
I think the environmental issues are very persuasive. In the next 10 years, we will have solved most of the problems domestically in terms of air pollution, retrofitting and controls, but then most pollution is going to be coming from other parts of the world, and it is easier now to work with those countries to help them. I think that issue resonates.
Probably for families, it is more a question of health. Polio, the Ebola virus, and all of these other kinds of health concerns are ones that I think mothers, fathers, and professionals in this country are very worried about. So there are some real positive stories out there. We just all need to be able to communicate them, and we would be glad in our community to help any of you who get letters about where is this money going. It is really important to me we have material, and we would be glad to share it with you.
Chairman GILMAN. The gentleman's time has expired.
Mr. Sherman.
Mr. SHERMAN. I understand we have to go vote soon.
Chairman GILMAN. Yes. We have one 15-minute vote and three 5-minute votes, so if you will be brief, I will try to be brief. I have an inquiry.
Mr. Sherman.
Mr. SHERMAN. I have got more than I can possibly say. I want to commend Mr. Solarz for his ideas on the contingency fund and country-by-country review. I regret Mr. Gordon's comments about reducing our aid to the Middle East or in beginning a plan to reduce aid to the Mideast, or hopefully I misinterpreted those.
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I would like Ms. Lancaster to tell us whether we are selling foreign aid, I think, wrongfully on the idea that it isn't aid, although this is what Mr. Edwards says and it promotes trade in our defense interests. Wouldn't we better achieve those interests if we had the State Department administering AID and were able to reward countries that allow us to fly our planes over or that made favorable trade concessions to us, et cetera?
Ms. LANCASTER. Thank you for your question. If those are the missions you want to attach the aid to, the quid pro quos, if you like, for overflight rights and trade concessions, then yes, put it in the organization that manages that. I am not sure the State Department would be the place to put it on trade. I think you might find yourself putting it in SR, or you might want to put it in the Commerce Department or whatever. But I think that those are missions that are somewhat different from the ones that exist right now.
So it brings me back to the question of mission: What is it we want to do with the money? I think when we decide that, we can figure out the organizational implications but think there is a lot of foreign policy in the way AID works, the way it allocates money by countries, but it doesn't, to my knowledge, do so on the basis, for example, of trade concessions or overflight rights at this point.
Mr. SHERMAN. I would hope that we would be able to advance for NATO on the basis that it is the right thing to do, not necessarily the way to market Coca-Cola.
With that, I will yield.
Chairman GILMAN. Thank you, Mr. Sherman. I appreciate your being brief.
I will keep the record open for any questions any Members may wish to address to the panelists, and I hope the panelists will respond expeditiously so we can make it part of the record. I have one or two questions.
David Gordon, your ODC plan looks much like Secretary Christopher's plan. I know it was vetoed by President Clinton for suggesting that only one out of three major agencies be consolidated into the State Department. It is my understanding that Vice President Gore led the charge in the Administration to keep the status quo on preserving each and every one of these agencies separate and independent. Isn't this dead as long as President Clinton and Vice President Gore remain steadfast in their position?
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Mr. GORDON. A couple of points: First, that the plan that we discussed, while having some superficial similarities, is really substantially different from the plan that was proposed in the Senate Foreign Relations Committee last year and taken up by this Committee.
In particular, it would raise the profile rather than lower the profile of development and related global affairs, so that the Helms plan was a plan to utilize reorganization to further marginalize development and global affairs. The plan that we are talking about attempts to try to envision a reorganization scenario that would sustain and, indeed, upgrade those functions.
I currently do not know where the Administration's thinking is on this issue. These issues, as Secretary Albright discussed in her hearing before the Senate Foreign Relations Committee, are now under discussion in the Administration at various senior levels. I certainly do believe that it is the responsibility of the executive branch to determine the appropriate organizational construct.
Chairman GILMAN. Thank you.
Julia Taft, many of us here in Congress want AID to move to judicial government aid projects like the Government of Ghana building the dam to support the trade development agencies' work and in finding new U.S. markets in Copenhagen. Even Vice President Gore promised the NGO community that 40 percent of AID's resources would go toward their world vision, but we are far from that goal. Are we not and shouldn't Congress begin pushing the Vice President to make good on his promises?
Ms. TAFT. Music to my ears. The goal is supposedly 40 percent. I think AID is judging they have made about 31 percent of the funds, but it is of a small amount of money. I would encourage that.
I think NGO's are very cost-effective, very targeted, and they reach the people-to-people programs that are important. They can't do it all, but we would encourage you all to consider supporting it.
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Thank you.
Chairman GILMAN. Thank you very much, and I would thank our panelists. We would be submitting some questions for you to respond, and I thank our panelists for taking the time to be with us today. And, Mr. Sherman, we have 5 minutes to get to the floor.
[At press time no responses had been received.]
[Whereupon, at 12 noon, the Committee was adjourned.]