ACCESSION NUMBER:227117 FILE ID:PO-504 DATE:05/08/92 TITLE:CONGRESSIONAL REPORT, FRIDAY, MAY 8 (05/08/92) TEXT:*92050804.POL CONGRESSIONAL REPORT, FRIDAY, MAY 8 (Non-Proliferation Act of 1992) (630) OFFICIALS OPPOSE BILL ON NON-PROLIFERATION TECHNOLOGY U.S. administration officials from the State, Defense and Treasury Departments May 8 voiced their support for non-proliferation efforts, but they uniformly opposed a new House bill designed to withhold funding from key international development organizations which include members that proliferate weapons. The officials testified at a hearing sponsored by the House Committee on Banking, Finance and Urban Affairs on the Non-Proliferation of Weapons of Mass Destruction and Regulatory Improvement Act of 1992 (H.R. 4803), which was introduced by the committee's chairman Henry Gonzalez in April. Gonzalez said the legislation promotes the non-proliferation of the technology needed to produce weapons of mass destruction by denying funding to the International Monetary Fund, the World Bank and its affiliates, and the multilateral development institutions until they revoke the membership of countries not adhering to appropriate non-proliferation regimes. 1he bill also prohibits the Export-Import Bank from providing assistance to nations that are not adhering to regimes controlling weapons of mass destruction. Gonzales said the legislation "authorizes the appropriate federal regulator, subject to a hearing, to revoke the charter of federally-insured depository institutions" if two or more of their officers or directors have been convicted of arms and export control offenses. William Rope, principal deputy assistant secretary of state for politico-military affairs, said arms proliferation should be combated in every reasonable way and that the United States works throughout the world to try to halt it. He pointed out, however, the bill would penalize international financial institutions "and recipient countries that need development assistance." This is not the best way, he said, "to get at those relatively few governments that violate international non-proliferation norms." Rope and Central Intelligence Agency Director Robert Gates, who also testified before the committee, pointed out that it is often difficult to know for sure that an infraction of an arms control regime has occurred. While supporting the objectives of Gonzalez's bill, Rope said he saw no reason to involve financial institutions. He said existing sanctions "target the violators" without hitting innocent bystanders. A third witness, Carl Ford, principal deputy assistant secretary of defense for International Security Affairs, said legislation which "targets the international development organizations for the poor behavior of one member would be counterproductive to our efforts to gain regional support from those innocent members who are impacted." A fourth witness, Barry Newman, deputy assistant secretary of treasury for International Monetary Affairs, said the legislation would "jeopardize the ability of the institutions to undertake activities of key importance to the U.S." For example, he suggested that the bill would end up interfering inadvertently with efforts to help the Russian currency stabilization fund. The Treasury official also said that the foreign bank provisions of the bill would have effects "that go well beyond the stated purpose of the legislation." Provisions limiting the activities of foreign government-controlled banks, he said, "would effectively put such firms out of business in the U.S." Newman said the bill would "impose draconian new penalties for financial firms which violate export control laws, including forfeiture of charters, termination of insurance or loss of the ability to participate in the most basic banking activities." Two non-government witnesses expressed support for H.R. 4803. Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control, described the bill as "sound" and said criticism expressed by government officials could easily be addressed through minor changes in the bill. Kathleen Bailey, director of arms control studies for the National Institute for Public Policy, supported the legislation, noting that current export controls cannot prevent proliferation and future control regimes will be even less effective. NNNN .