[Budget of the United States Government, Fiscal Year 1999]
[Page 125-132]
[DOCID: f:1999_bud.bud09.wais]
From the Budget of the U.S., FY 1999 Online via GPO Access

[[Page 125]]



  Nations are now setting the international ground rules for the 21st Century, 
laying a foundation for security and prosperity for those who live within them, 
while isolating those who challenge them from the outside. This system will 
develop and endure only if those who follow the rules of peace and freedom 
fully reap their rewards. Only then will our people believe that they have a 
stake in supporting and shaping the emerging international system.                                                                                                         
                                      President Clinton                                                        
                                      September 1997                                                          


  Americans have a tremendous stake in world events. The establishment 
of democracy and market economies in the former Soviet bloc, the safe 
disposal or storage of weapons of mass destruction in Russia and 
elsewhere, the identification and control of deadly tropical diseases in 
Africa, and the maintenance of healthy economies in Asia and Latin 
America--all of these are important to the security, health, and 
prosperity of the American people.
  American diplomacy, implemented through international affairs 
programs, is the means by which the United States leads abroad on many 
important issues. For several years, the resources that Congress 
provided were inadequate to ensure that leadership. In 1998, however, 
the Administration and Congress worked successfully to build major 
bipartisan support for an increase in international affairs spending, 
including special legislative provisions to facilitate support of 
international financial institutions and the United Nations (UN) and 
other international organizations.
  Despite welcome congressional action on international affairs 
programs, an unfinished agenda remains in areas critical to U.S. 
national interests. Most striking, the Federal Government must provide 
more resources for key programs. To support continued U.S. economic 
growth, Congress should continue to support the decisive action of the 
International Monetary Fund (IMF) and U.S. leadership in that 
institution by providing the supplementary contingent IMF funding that 
the Administration sought and replenishing the IMF's basic financial 
resources. For the UN, whose Security Council deals with security issues 
from Iraq to Bosnia, and for related international organizations dealing 
with such issues as health and labor conditions, Congress should take 
steps to pay $1 billion in U.S. arrears on treaty-mandated 
contributions. Congress should also continue to pay off arrears to the 
multinational development banks and the Global Environment Facility 
(GEF), which total $638 million.
  In the area of trade, where the growth in exports has been so critical 
to our recent economic prosperity, Congress should give the President 
traditional negotiating authority to help fuel our surging exports into 
the next century. Congress also should enact legislation promoting trade 
with Africa and the Caribbean Basin. The Administration proposes more 
export financing to take advantage of opportunities emerging in regions 
such as the New Independent States (NIS) of the former Soviet Union and 
to match the government financing offers of other countries. The 
Administration also proposes to maintain or expand programs that support 
democracy and free market economic systems in the former communist 
countries and in Africa by encouraging trade and investment, not only 
for America's security but also for creating sources of future export 

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  In providing $19.6 billion for regular international affairs programs 
and $502 million for arrears, the budget proposes an activist approach 
to advance U.S. leadership around the world (see Table 9-1). It would 
complete last year's unfinished business and target funding increases to 
the most effective programs to achieve foreign policy objectives, 
rejecting outmoded activities and poorly-performing projects. This 
request would strengthen U.S. leadership and benefit the American 
people, while costing just a third of one percent of our national 

Protecting American Security and Promoting Democracy

  Protecting America's key strategic interests remains a timeless goal 
of our diplomacy. As we move toward the 21st Century, we have a great 
opportunity to expand the scope of democracy, further ensuring that our 
interests remain unthreatened. Facing the dilemmas of peacekeeping, 
regional crises, and economic change, the international community has 
generally been unable to act effectively without the United States as a 
leader and a full partner. Advancing U.S. interests in a global economy 
brings expanded missions to our diplomacy, our trade strategy, and our 
assistance programs. A less-orderly world also creates new challenges to 
our security--such as the proliferation of weapons of mass destruction, 
international terrorism and crime, narcotics, and environmental 
  Developments in the NIS will prove important to U.S. national 
security. Progress in most of those countries toward democracy and free 
markets has been steady, but sometimes slow and uneven. In Russia, the 
key to regional security, a freely elected government is gradually 
creating the legal framework and governmental infrastructure for 
democracy and a sound economy. Across the NIS, America's continued 
leadership will be key to maintaining international support for this 
crucial transition.
  The budget proposes $925 million for assistance to the NIS, 20 percent 
above the 1998 level. These funds will advance work under the 
Partnership for Freedom program

                                Table 9-1.  INTERNATIONAL DISCRETIONARY PROGRAMS                                
                                 (Budget authority, dollar amounts in millions)                                 
                                                                                               Dollar    Percent
                                                                  1997      1998      1999     Change:   Change:
                                                                 Actual   Estimate  Proposed   1998 to   1998 to
                                                                                                1999      1999  
International development and humanitarian assistance \1\.....     6,494     7,036     7,427      +391       +6%
International security assistance.............................     5,980     6,044     6,159      +115       +2%
Conduct of foreign affairs \1\................................     3,890     3,741     4,146      +405      +11%
Foreign information and exchange activities \2\...............     1,116     1,134     1,134  ........  ........
International financial programs..............................       670       619       782      +163      +26%
Subtotal, International discretionary programs................    18,150    18,574    19,648    +1,074       +6%
  Multilateral Development Bank arrears.......................  ........       360       502      +142      +39%
  International Organization arrears \3\......................  ........       100  ........        NA        NA
Total, including Arrears......................................    18,150    19,034    20,150    +1,119       +6%
 ANA = Not applicable.                                                                                          
\1\ Excluding arrears payments.                                                                                 
\2\ Pursuant to Section 309(g) of the Foreign Relations Authorization Act, 1994 and 1995, the President hereby  
  determines that continuation of funding for Radio Free Asia for 1999 is in the interest of the United States. 
\3\ The Administration will transmit its request for arrears later.                                             


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to use trade and investment measures, private sector partnerships, and 
cooperation with non-governmental organizations to stimulate free market 
economic growth. One new activity is the Presidential Management 
Training Initiative, to which Presidents Clinton and Yeltsin recently 
agreed, that will enable NIS business managers to receive training and 
internships with U.S. firms, benefitting the managers, the firms, NIS 
economies, and U.S. foreign policy.
  After nearly a decade of U.S. and international support, the 
transition to democracy and free markets in Central and Eastern Europe 
has been remarkably successful. Our assistance to the governments of 
most of the countries in the northern portion of the region has ended, 
or will soon. These countries are moving toward economic integration 
with the United States and Western Europe. Last year's highlight was 
NATO's decision to accept three countries--the Czech Republic, Hungary, 
and Poland--as members. As a result, the budget will provide over $100 
million in security assistance to help integrate these countries' 
military forces and to aid other potential candidates for NATO 
membership. In addition, this budget projects increases in NATO's three 
common-funded budgets for the coming years to reflect certain costs 
associated with NATO's enlargement. In December, NATO estimated that the 
costs of enlargement that it will bear within these three budgets will 
be about $1.5 billion over the next 10 years, of which the United States 
will pay about one-quarter, or less than $40 million a year on average 
during this period, from Defense Department funds.
  The budget proposes $465 million in economic aid for Eastern Europe 
and the Baltic States, $225 million of which would support the firm U.S. 
commitment to see the Dayton Accords fully implemented for Bosnia. 
Assistance to Bosnia will complement the continuation of U.S. troops in 
that troubled nation, particularly by financing training and other 
support for local police to foster effective, fair, and professional 
public safety forces. Economic assistance will strengthen the emergence 
of a vital private sector. The Bosnians are beginning to realize the 
benefits of free markets, and we must strongly foster their nascent 
prosperity to demonstrate that a return to hostilities will hurt all 
  For the other southern-tier countries of Eastern Europe, U.S. 
assistance will apply the lessons learned elsewhere in the region to 
accelerate economic reform, particularly in Romania, where the United 
States has offered a reform-oriented partnership with the newly elected 
government. During the Cold War, private civil institutions in Eastern 
Europe eroded greatly, and fully reconstructing them within the short 
time since then has not been easy. Thus, the budget proposes to create 
an innovative $100 million Civil Society Trust Fund, financed half by 
Federal funds and half by private contributions, mainly from 
foundations. In countries where our official aid has ended, the Fund 
will foster grass roots political activity and viable non-governmental 
   Our strategic interest in peace in the Middle East is as strong as 
ever. The peace process has achieved much already. The need for 
reconciliation remains urgent, and America continues to play a unique 
leadership role in the effort to craft a durable, comprehensive regional 
peace. The budget proposes $5.3 billion for security assistance to 
sustain the Middle East peace process. The assistance program provides 
$100 million for the third year of a Middle East Peace and Stability 
Fund that will provide aid mainly to Jordan in recognition of that 
country's needs and King Hussein's important continuing contributions 
toward peace and reconciliation.
  The rest of our security assistance programs are designed to support 
peace and democracy in countries and regions where our leadership has 
helped those processes emerge. Under the budget, economic support 
funding for Haiti would double, to $140 million, to ensure the success 
of that country's hard-won democracy. The budget also would support 
reconciliation and peace in Guatemala and strengthen the capacity of 
African governments to provide regional peacekeeping on that troubled 

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Ensuring America's Leadership in the International Community

  Following World War II, the United States assumed a unique leadership 
role in building international institutions to bring the world's nations 
together to meet mutual security, economic, and humanitarian needs. We 
sponsored and provided significant funding for the UN, NATO, the IMF, 
and the World Bank, along with other specialized regional security and 
financial institutions that became the foundation of international 
cooperation during the Cold War.
  To ensure financial stability for this international community, 
members of many of the UN and related international organizations (IOs) 
entered into treaties or similar instruments committing them to pay 
specified shares (or, ``assessments'') of IO budgets. Congress ratified 
these agreements, making them binding on the United States. For the 
multilateral development banks (MDBs--that is, the World Bank, its 
regional development bank partners, and the GEF), the developed 
countries, including the United States, make firm commitments to regular 
replenishments of their resources, in our case subject to the 
congressional authorization and appropriations processes.
  By 1997, America's leadership in this international institutional 
network had seriously eroded due to past congressional cuts in 
appropriations needed to meet our assessments and commitments. The 
resulting arrears to the IOs had accumulated to almost $1.5 billion, and 
arrears to the MDBs were nearly $900 million. In the 1998 budget, the 
Administration proposed to pay off the bulk of our arrears on 
assessments over two years if the IOs undertook budget and management 
reforms, including lowering the U.S. annual assessment percentage in the 
future. It also proposed to pay off MDB arrears over three years in 
light of program and management reforms already under way.
  As part of last year's bipartisan budget agreement, Congress provided 
room in the budget resolution to pay most of the accumulated arrears 
while still funding ongoing international affairs programs at an 
adequate level. Under this arrangement, Congress cleared over a third of 
the Nation's MDB arrears. The Administration and Congress also developed 
bipartisan support for authorizing legislation to clear many of the 
assessment arrears over three years in return for specified IO reforms, 
and Congress passed an initial 1998 appropriation of $100 million, 
subject to enacting the authorization. But the legislation stalled, thus 
undermining U.S. diplomatic efforts to achieve budgetary reforms and 
leading to a serious loss of U.S. credibility in the UN and other IOs.
  With the U.S. failure to address its sizable arrears, the UN General 
Assembly in December 1997 established assessment rates for the next 
three years without reducing the U.S. percentage. Due to a major U.S. 
diplomatic effort, however, UN members agreed to reconsider the three-
year decision in June 1998--provided that the United States resolves its 
arrears situation. To effect UN rate changes, the Administration and 
Congress must enact legislation by May 1998. The Administration will 
shortly transmit a proposal that seeks early legislative action to pay 
over $1 billion of the $1.5 billion of accumulated arrears. The proposal 
will give the Administration the statutory flexibility it needs in June 
to reduce our assessment rates and achieve other key reforms over the 
next two years. The Administration is prepared to work with Congress to 
shape the legislation. In addition, Congress must appropriate $931 
million to meet 1999 assessments--more than would have been required if 
Congress had passed last year's authorizing package.
  In addition, the budget proposes $502 million to continue the planned 
payoff of MDB and GEF arrears and $1.15 billion to pay current 
commitments to these institutions, which provide most of the assistance 
to those poor countries around the world that are undertaking promising 
economic reforms. The United Sates has convinced the MDBs to do more, 
while asking less from the American taxpayer. As a result of recent 
negotiations, U.S. commitments for all the MDBs have been cut by 40 
percent and are now below what we once paid for the World Bank's 
International Development Association affiliate alone.

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Supporting International Monetary Programs

  As the world becomes more economically integrated, the smooth 
functioning of its monetary system becomes more critical to every 
nation's economy. Severe disruptions in Asian economies demonstrate the 
world-wide impact of crises in major economies. Even the U.S. economy is 
not immune, despite its size, strength, and depth. The Administration is 
having urgent consultations with Congress on the most effective means to 
foster an early, tenable return to more stable international monetary 
  For 1998, the Administration proposed a one-time appropriation to a 
special international facility, the New Arrangements to Borrow (NAB). 
With credit commitments from 24 other nations, including most 
industrialized countries and several emerging market economies, NAB 
would provide a set of contingent credit lines to supplement IMF 
resources, if necessary, when a monetary crisis in one or more countries 
threatens the entire system. Congress did not enact the appropriation. 
These funds are urgently needed as a reserve in case the emergency 
demands on IMF quota resources deplete the IMF's liquidity so much that 
it cannot maintain international monetary stability.
  As the global economy and capital markets expand, the IMF's basic 
(quota) resources must rise so that it can carry out its ongoing 
responsibilities to promote monetary stability and healthy economies. 
Since its inception in 1945, the IMF has played a major role in 
fostering the unprecedented growth in world prosperity. Recent IMF 
programs to provide crisis assistance in Asia have drawn heavily on the 
Fund's quota resources. The United States needs to provide its share of 
the IMF's proposed $87 billion increase in regular resources so that the 
IMF can continue to meet members' anticipated demands while coping with 
additional exceptional calls under current crisis conditions should they 
arise. In consultation with Congress, the Administration expects to 
request a 1998 supplemental appropriation of $14.5 billion for a U.S. 
quota increase for the IMF and of $3.4 billion for the U.S. credit 
commitment to the NAB. Because they are monetary exchanges, neither the 
quota increase nor the credit commitment to the NAB would entail budget 

Increasing American Prosperity Through Trade

   The Administration remains committed to opening global markets and 
integrating the global economic system, which has become a key element 
of continuing economic prosperity here at home. This goal is 
increasingly central to America's diplomatic activities. The 
Administration is helping to lay the groundwork for sustained, non-
inflationary growth into the next century by implementing the North 
American Free Trade Agreement and the multilateral trade agreements 
concluded during the Uruguay Round. Specifically, the Administration is 
working hard to ensure that America receives the full benefit of these 
agreements, as recently illustrated by the December 1997 conclusion of a 
key agreement on financial services.
  To promote more mutually-beneficial trade relationships, the 
Administration last year proposed fast track legislation to give the 
President authority to negotiate trade agreements on which Congress 
would get a simple up-or-down vote, without amendments that would 
require renegotiation. Such trade agreements would further promote U.S. 
export growth, creating high-wage jobs for Americans. Congress should 
give the President this traditional negotiating authority.
  The Administration also will propose to extend the Generalized System 
of Preferences, which cuts tariffs on many imports from the developing 
countries, beyond its current expiration date of June 30, 1998, and to 
give expanded trade benefits to the eligible countries under the 
Caribbean Basin Initiative. Also, as part of a larger trade and 
investment initiative for Africa, the Administration will propose 
special trade benefits to African countries that are reforming their 
economies to encourage economic growth.
  As various trade agreements offer opportunities for exports, the 
demand for trade finance and investment support increases. The main U.S. 
trade finance agency, the Export-Import Bank, has expanded its direct 
and guaranteed loans and export insurance to countries that

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                                          Investing in Trade Promotion                                          
  Trade plays a growing role in the U.S. economy. A third of America's economic growth of the last five years   
has come from trade, while exports of manufactured goods, high-technology products, and agricultural goods have 
risen by over 40 percent. Exports grew to 11.4 percent of Gross Domestic Product (GDP) in 1996, compared to 4.8 
percent in 1960, while imports grew to 12.6 percent in 1996, compared to 4.3 percent in 1960. Today, exports    
support over 11 million U.S. jobs--including one in five manufacturing jobs--and have generated nearly two      
million new jobs in the past four years alone.                                                                  
  But the Nation has huge opportunities for further growth. While America accounts for 22 percent of the world's
wealth, it has only four percent of its consumers. The greatest export opportunities lie in the emerging market 
economies of Latin America, Asia, the Middle East, Africa, Central and Southern Europe, and the New Independent 
States of the former Soviet Union. Middle- and lower-income countries accounted for 80 percent of the rapid U.S.
export growth of the past eight years.                                                                          
  Trade barriers in these new markets often remain high, however, while some developed nations provide export   
subsidies to their home-grown businesses. U.S. trade promotion programs are designed to open foreign markets,   
combat foreign subsidies, finance and insure U.S. trade and investment where the private sector does not,       
provide information, develop foreign markets, and provide government-to-government advocacy.                    
  This budget invests heavily in trade promotion. It provides substantial increases for the Export-Import Bank, 
which finances U.S. exports, and funds the Overseas Private Investment Corporation, which insures U.S.          
investments abroad. In addition, the budget proposes increases for the Commerce Department's International Trade
Administration, which promotes U.S. trade through its Export Assistance Centers and overseas foreign commercial 
offices. The multi-agency Africa Initiative and higher funding for the Agency for International Development will
help foster growing economies and future trading partners. Also, the budget proposes to extend the Generalized  
System of Preferences and to provide expanded trade benefits for Caribbean Basin Initiative countries.          

cannot get import financing at reasonable terms and to match the 
government export financing offers of other industrialized countries. 
The Bank expects particularly heavy demand from the NIS for exports that 
will benefit both the U.S. and the countries that receive them, and 
contribute to economic and political reform across the NIS. The budget 
proposes $825 million for the Bank, 18 percent above the 1998 level. It 
also continues support for the investment insurance and finance programs 
of the Overseas Private Investment Corporation, which also increase 
exports, and for the Trade and Development Agency's (TDA) grants for 
feasibility studies of capital investments abroad that can generate 
follow-on exports. A special TDA program will focus on creating trading 
opportunities in China. In addition, the budget provides an 18-percent 
increase, to $20 million, for the Commerce Department's Market Access 
and Compliance Unit, whose members monitor trade agreements and identify 
compliance problems.

Supporting Development Assistance

  Development assistance through the MDBs and, bilaterally, through the 
U.S. Agency for International Development (USAID) helps many of the 
poorest countries give their peoples more effective governments and 
higher living standards. This assistance, including projects that create 
the conditions for economic growth, promote democracy, enhance human 
health, and provide basic education, serves long-term U.S. interests and 
diminishes the need for short-term crisis intervention.
  The Administration has streamlined USAID lending as well, focusing it 
on countries most vigorously committed to the reforms that will generate 
sustainable development. The budget proposes $1.8 billion for USAID's 
development assistance programs. Along with ongoing African aid 
programs, the budget proposes $30 million of special development

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aid programs to support the broader trade and investment initiative for 
the continent. In addition, the budget proposes $35 million in special 
debt relief to African countries eligible for the initiative. 
Complementing these programs, another $35 million of security assistance 
will go to the Great Lakes region in the interior of Africa to promote 
the rule of law and conflict prevention among the warring parties there, 
thus creating political conditions favorable to achieving the economic 
growth that the area so badly needs.
  The Peace Corps has helped spur the development of many countries 
while promoting better understanding among nations, and the American 
people strongly support the program. The budget proposes $270 million, 
20 percent more than in 1998, to enable the agency to begin increasing 
the number of volunteers abroad--with the goal of 10,000 volunteers by 
the year 2000.

Leading the Response to New International Challenges

  Another fundamental goal, and an increasing focus of our diplomacy, is 
meeting the new transnational threats to U.S. and global security--the 
proliferation of weapons of mass destruction, drug trafficking and the 
spread of crime and terrorism on an international scale, unrestrained 
population growth, and environmental degradation.
  In 1997, the Administration sought and obtained Senate ratification of 
the Chemical Weapons Convention, which will begin imposing controls on a 
class of destructive weapons not well regulated in the past. Congress 
has not ratified the Comprehensive Nuclear Test Ban Treaty, which the 
Administration transmitted in September 1997 and which is so important 
to our national security. U.S. diplomacy and law enforcement activities 
are playing a key role in preventing the spread of weapons of mass 
destruction to outlaw states such as Libya, Iraq, Iran, Syria, and North 
Korea. In addition, U.S. support for such organizations as the 
International Atomic Energy Agency and the Korean Peninsula Energy 
Development Organization is critical to meeting our non-proliferation 
  U.S. bilateral assistance programs are critical to tackling other 
important transnational problems. Our international counter-narcotics 
efforts are making continued progress in drug-producing countries. After 
several years of cutting deeply the Administration's funding proposals 
for counter-narcotics, Congress has begun providing the requested 
increases in order to cut the supply of illegal drugs, particularly 
cocaine. The budget proposes a 20-percent increase in anti-drug funding, 
to $255 million, which will permit the United States to intensify its 
efforts to curb cocaine production in the Andean countries by offering 
growers attractive economic alternatives.
  In addition, USAID development assistance and U.S. contributions to 
international efforts, such as the GEF, support large and successful 
programs to improve the environment and reduce population growth. The 
GEF works closely with the MDBs, promoting sound responses to climate 
change, depletion of the ozone layer, and the extinction of species. The 
United States is the recognized world leader in promoting safe, 
effective family planning projects.

Conducting and Administering Diplomacy

  Effective diplomacy is the critical foundation for meeting our foreign 
policy goals. The budget supports a strong U.S. presence at over 250 
embassies and other posts overseas, promoting U.S. interests abroad and 
protecting and serving Americans by providing consular services. The 
basic work of diplomacy at these posts--the reporting, analysis, 
negotiations, and other efforts that often go unnoticed--are at the core 
of all U.S. foreign policy achievements, allowing us, among other 
things, to anticipate and prevent threats to our national security as 
well as discover new opportunities to promote American interests. The 
overseas posts also serve as the administrative platform for the many 
other U.S. agencies with personnel abroad, from USAID to the Departments 
of Defense, Justice, and the Treasury.
  In 1997, the Administration took two major steps to improve the 
management of our diplomacy. First, a new management system, the 
International Cooperative Administrative Support Services, will more 
fairly allocate--

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among all agencies with an overseas presence--the administrative costs 
that the State Department used to bear on its own. Agencies, in turn, 
will be able to use the administrative services that most suit them. 
Second, the State Department will reengineer its procurement system, 
eliminating cumbersome procedures, providing services much quicker, and 
significantly cutting costs.
  The budget proposes $2.8 billion for the State Department to maintain 
its world-wide operations, take major steps to modernize its information 
technology and communications systems and ensure year 2000 compliance, 
and accommodate security and facility requirements at posts abroad. It 
proposes two major initiatives--construction of a new embassy building 
in Berlin, where U.S. personnel have been in temporary facilities since 
their move to the new German capital, and an embassy and related 
facilities in Beijing, where current arrangements are inadequate to 
house the representation appropriate to diplomacy with an important 
world power and to ensure security.
  Finally, the Administration expects Congress to enact legislation in 
early 1998 to implement its proposal to consolidate the Arms Control and 
Disarmament Agency and the U.S. Information Agency into the State 
Department, thus better integrating arms control and public diplomacy 
into the mainstream of foreign policy.