(Non-Proliferation Act of 1992)  (630)
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.