[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3256 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 3256

  To establish an index of economic freedom to evaluate on an annual 
   basis the level of economic freedom of countries receiving United 
 States development assistance and to provide for a phase-out of that 
         assistance based on the index, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 24, 1998

 Mr. Solomon introduced the following bill; which was referred to the 
Committee on International Relations, and in addition to the Committee 
  on Banking and Financial Services, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To establish an index of economic freedom to evaluate on an annual 
   basis the level of economic freedom of countries receiving United 
 States development assistance and to provide for a phase-out of that 
         assistance based on the index, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``International Responsibility and 
Self-Sufficiency Act of 1998''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Economic freedom plays the single greatest role in the 
        ability of a country to develop sustainable levels of economic 
        growth.
            (2) Poverty is largely a condition imposed on people by 
        ill-conceived and repressive economic policies. Other factors 
        such as history, culture, war, and climate influence a 
        country's development, but no such factor is as important as 
        economic freedom. No amount of foreign aid can make up for the 
        conditions that result from economically unfree economies.
            (3) Governments have placed various constraints on economic 
        activity throughout history, and some governments have placed 
        greater constraints on economic activity than others. 
        Generally, these constraints can be measured. Since economic 
        freedom is the degree to which individuals are free to produce, 
        distribute, and consume goods and services, one method by which 
        economic freedom can be measured is to study the number of 
        constraints a government imposes on production, distribution, 
        and consumption. Government policies and conditions that either 
        maximize personal economic choices or restrict personal 
        economic choices can be objectively examined.
            (4) United States foreign assistance has failed to help 
        other countries grow economically. 67 countries have received 
        foreign assistance from the United States for more than 35 
        years. Of these 67 countries, 37 countries have economies that 
        grew by less than 1 percent per year since receiving such 
        foreign assistance. These countries are no better off 
        economically than before receiving such foreign assistance.
            (5) Of these 37 countries, 19 countries actually are poorer 
        than they were before receiving United States foreign 
        assistance.
            (6) Assistance from multilateral institutions such as the 
        World Bank and the International Monetary Fund have been 
        equally ineffective at promoting sustainable levels of economic 
        growth.
            (7) Of the 66 less developed countries receiving loans from 
        the World Bank for more than 25 years (most for more than 30 
        years), 37 are no better off today than they were before they 
        received such loans.
            (8) Of these 37 countries, a majority (20 in all) actually 
        are poorer today than they were before receiving assistance 
        from the World Bank.
            (9) Of the 89 less developed countries that received loans 
        from the International Monetary Fund between 1965 and 1995, 48 
        are no better off economically today than they were before 
        receiving such loans. Of these 48 countries, 32 are poorer than 
        they were before receiving such loans, and, of these 32 
        countries, 14 have economies that are at least 15 percent 
        poorer than when they received their first such loans.
            (10) United States foreign assistance fails to support the 
        foreign policy interests of the United States. 68 percent of 
        United States foreign assistance recipients voted against the 
        United States in the United Nations on United States-supported 
        foreign policy goals a majority of the time in the 1996 session 
        of the United Nations, an increase from 64 percent of United 
        States foreign assistance recipients in the 1995 session. Thus, 
        two out of every three United States foreign assistance 
        recipients voted against the United States most of the time in 
        the United Nations.
            (11) Of the ten largest United States foreign assistance 
        recipients, six voted against the United States more than half 
        the time in the United Nations. The United States will give 
        approximately $323,000,000 in foreign assistance in 1997 to 
such ten largest United States foreign assistance recipients.
            (12) United States foreign assistance fails to support 
        United States commercial interests abroad. United States 
        foreign assistance recipients enforce the highest barriers to 
        trade in the world. The average tariff rate for all recipients 
        of United States foreign assistance is more than five times 
        higher than the average tariff rate of Japan--a non-recipient 
        of United States foreign assistance. Bangladesh, for example, 
        received almost $70,000,000 in foreign assistance for fiscal 
        year 1997, but it has an average tariff rate of 50 percent. 
        Angola, which received more than $47,000,000 in United States 
        foreign assistance in fiscal year 1997, has an average tariff 
        rate of 30 percent.
            (13) The average tariff rate for all United States foreign 
        assistance recipients is approximately 17 percent. By 
        comparison, the European Union has an external tariff of 3.6 
        percent, Japan has an average tariff of less than 2 percent, 
        and Hong Kong has an average tariff rate of 0.1 percent.
            (14) On average, countries receiving higher levels of 
        United States foreign assistance do not import more in United 
        States exports of goods and services and do not have lower 
        average tariff rates than countries receiving lower levels of 
        United States foreign assistance.

SEC. 3. ESTABLISHMENT OF ANNUAL INDEX OF ECONOMIC FREEDOM.

    (a) In General.--The Secretary of State shall establish an index of 
economic freedom for the purpose of evaluating on an annual basis the 
level of economic freedom of countries receiving United States 
development assistance.
    (b) Overall Economic Factors.--In establishing the index under 
subsection (a), the Secretary shall, on an annual basis, review the 
laws, policies, and practices of each country receiving development 
assistance that most contribute to or detract from the achievement of 
economic freedom in the country. In reviewing such laws, policies, and 
practices, the Secretary shall use, among other sources, the annual 
Country Reports on Economic Policy of the Department of State and the 
Country Commercial Guides of the Department of Commerce. The index 
shall review the following factors with respect to the country before 
assigning a specific numerical rating of between one (for the highest 
level of economic freedom) to five (for the lowest):
            (1) Trade policy.--Trade policy, including the following:
                    (A) The average tariff rates of the country.
                    (B) The extent to which the country has established 
                any significant non-tariff barriers.
                    (C) The extent to which corruption exists within 
                the customs service of the country.
            (2) Taxation policy.--Taxation policy, including the 
        following:
                    (A) The level of the highest income tax rate.
                    (B) The level of the tax rate that is applied to 
                the average income of individuals in the country.
                    (C) The level of the highest corporate tax rate.
                    (D) The extent to which other taxes exist in the 
                country.
            (3) Government intervention in the economy.--Government 
        intervention in the economy, including the following:
                    (A) The level of government consumption as compared 
                to the total level of consumption in the economy.
                    (B) The extent to which the government owns or 
                otherwise controls businesses or industries.
                    (C) The level of output of the economy that is 
                attributable to the government.
            (4) Monetary policy.--Monetary policy, including the 
        average rate of inflation for the most recent 10-year or other 
        relevant period, as appropriate.
            (5) Capital flows and foreign investment.--Capital flows 
        and foreign investment, including the following:
                    (A) The extent to which the country has established 
                a foreign investment code.
                    (B) The extent to which the country allows for 100 
                percent ownership by foreign investors in domestic 
                businesses.
                    (C) The extent to which foreign investors are 
                restricted from investing in certain businesses or 
                industries.
                    (D) The extent to which foreign investors are 
                subject to certain performance requirements.
                    (E) The extent to which foreign individuals can own 
                land.
                    (F) The extent to which foreign businesses and 
                domestic businesses are treated equally under the law.
                    (G) The extent to which the country allows foreign 
                businesses to repatriate their earnings.
                    (H) The extent to which foreign businesses are 
                allowed to receive local financing.
            (6) Banking policy.--Banking policy, including the 
        following:
                    (A) The number of banks that the government owns.
                    (B) The extent to which foreign banks can open 
                branches and subsidiaries in the country.
                    (C) The extent to which the government influences 
                the allocation of credit.
                    (D) The extent to which banks are allowed to 
                operate without undue government regulation, including 
                regulation relating to--
                            (i) deposit insurance; and
                            (ii) the offering of various types of 
                        financial services, including buying and 
                        selling real estate, securities, and insurance 
                        policies.
            (7) Wage and price control policy.--Wage and price control 
        policy, including the following:
                    (A) The minimum wage established by the government.
                    (B) The extent to which businesses are allowed to 
                establish their own prices without influence from the 
                government.
                    (C) The extent to which the government establishes 
                prices for certain products.
                    (D) The extent to which the government provides 
                subsidies to businesses to affect prices.
            (8) Property rights and the rule of law.--Property rights 
        and the rule of law, including the following:
                    (A) The extent to which the legal system is free 
                from undue government influence.
                    (B) The establishment of a commercial code that 
                defines contracts.
                    (C) The extent to which the country allows foreign 
                arbitration of contract disputes.
                    (D) The extent to which the government can 
                expropriate property.
                    (E) The extent to which corruption exists within 
                the judiciary.
                    (F) The extent of major delays in receiving 
                judicial decisions.
                    (G) The extent to which property rights are granted 
                and protected by legal means.
            (9) Regulation policy.--Regulation policy, including the 
        following:
                    (A) A license requirement to operate a business, 
                including the degree of difficulty in obtaining such a 
                license.
                    (B) The extent to which corruption exists within 
                the government.
                    (C) The level of government regulation of 
                businesses, including--
                            (i) regulation of activities such as the 
                        work week, paid vacations, and maternity leave; 
                        and
                            (ii) regulation of environmental, consumer 
                        safety, and worker health issues.
                    (D) The extent to which such government regulations 
                impose a burden on businesses.
            (10) The state of the black market.--The state of the black 
        market, including the following:
                    (A) The extent to which the following is supplied 
                on the black market:
                            (i) Labor.
                            (ii) Transportation.
                            (iii) Agricultural production.
                            (iv) Manufacturing.
                            (v) Services.
                    (B) The level of piracy of intellectual property on 
                the black market.
                    (C) The level of smuggling in the country.
    (c) Ranking of Countries by Category.--
            (1) Determination of average score.--After assigning a 
        specific numerical rating for each of the 10 factors under 
        subsection (b) with respect to a country for a fiscal year, the 
        Secretary shall determine an average score for the country.
            (2) Categorization of country.--After determining the 
        average score for a country for a fiscal year, the Secretary 
        shall, based upon such average score, categorize the country 
        into one of four categories in accordance with the following:
                    (A) A country with an average score of 1 to 1.99 
                shall be categorized as ``free''.
                    (B) A country with an average score of 2 to 2.99 
                shall be categorized as ``mostly free''.
                    (C) A country with an average score of 3 to 3.99 
                shall be categorized as ``mostly unfree''.
                    (D) A country with an average score of 4 to 5 shall 
                be categorized as ``repressed''.

SEC. 4. PHASE-OUT OF DEVELOPMENT ASSISTANCE BASED ON ANNUAL INDEX OF 
              ECONOMIC FREEDOM.

    (a) Annual Ranking by Category of Recipient Countries.--In 
conjunction with the submission of the annual requests for enactment of 
authorizations and appropriations for foreign assistance programs for 
each fiscal year, the President shall submit to the Congress a ranking 
by category of each country for which development assistance is 
requested for the fiscal year based upon the index of economic freedom 
established under section 3.
    (b) Assistance for Free Countries.-- In the case of a country 
determined to be a free country under section 3 with respect to 
assistance provided for fiscal year 2000--
            (1) development assistance may be provided for such country 
        for such fiscal year; and
            (2) development assistance may not be provided for such 
        country for any subsequent fiscal year.
    (c) Assistance for Mostly Free Countries.--
            (1) Fiscal year 2000.--Development assistance may be 
        provided for fiscal year 2000 for a country determined to be a 
        mostly free country under section 3 with respect to assistance 
        provided for such fiscal year.
            (2) Subsequent fiscal years.--
                    (A) No change in ranking; change to free or mostly 
                unfree country.--If a mostly free country described in 
                paragraph (1) continues to be ranked as a mostly free 
                country under section 3 with respect to assistance 
                provided for fiscal years 2001 and 2002, or if such 
                country is determined to be either a free country or a 
                mostly unfree country under section 3 with respect to 
                assistance provided for fiscal years 2001 or 2002, 
                then--
                            (i) development assistance may be provided 
                        for such country for such fiscal years; and
                            (ii) development assistance may not be 
                        provided for such country for any subsequent 
                        fiscal year.
                    (B) Change to repressed country.--If a mostly free 
                country described in paragraph (1) is determined to be 
                a repressed country under section 3 with respect to 
                assistance provided for either fiscal year 2001 or 
                2002, then development assistance may not be provided 
                for such country for such fiscal year and any 
                subsequent fiscal year.
    (d) Assistance for Mostly Unfree Countries.--
            (1) Fiscal year 2000.--Development assistance may be 
        provided for fiscal year 2000 for a country determined to be a 
        mostly unfree country under section 3 with respect to 
        assistance provided for such fiscal year.
            (2) Subsequent fiscal years.--
                    (A) No change in ranking; change to free or mostly 
                free country.--If a mostly unfree country described in 
                paragraph (1) continues to be ranked as a mostly unfree 
                country under section 3 with respect to assistance 
                provided for fiscal years 2001 through 2004, or if such 
                country is determined to be either a free country or a 
                mostly free country under section 3 with respect to 
                assistance provided for fiscal years 2001 through 2004, 
                then--
                            (i) development assistance may be provided 
                        for such country for such fiscal years; and
                            (ii) development assistance may not be 
                        provided for such country for any subsequent 
                        fiscal year.
                    (B) Change to repressed country.--If a mostly 
                unfree country described in paragraph (1) is determined 
                to be a repressed country under section 3 with respect 
                to assistance provided for any of the fiscal years 2001 
                through 2004, then development assistance may not be 
                provided for such country for such fiscal year and any 
                subsequent fiscal year.
    (e) Assistance for Repressed Countries.--
            (1) Fiscal year 2000.--Development assistance may be 
        provided for fiscal year 2000 for a country determined to be a 
        repressed country under section 3 with respect to assistance 
        provided for such fiscal year.
            (2) Subsequent fiscal years.--
                    (A) No change in ranking.--If a repressed country 
                described in paragraph (1) continues to be ranked as a 
                repressed country under section 3 with respect to 
                assistance provided for each of the fiscal years 2001 
                through 2004, then development assistance may not be 
                provided for such country for such fiscal years and any 
                subsequent fiscal year.
                    (B) Change to free country.--If a repressed country 
                described in paragraph (1) is determined, subsequent to 
a revolution, coup, or other major political change, to be a free 
country under section 3 with respect to assistance provided for any of 
the fiscal years 2001 through 2004, then development assistance may not 
be provided for such country for such fiscal year and any subsequent 
fiscal year.
                    (C) Change to mostly free country.--If a repressed 
                country described in paragraph (1) is determined, 
                subsequent to a revolution, coup, or other major 
                political change, to be a mostly free country under 
                section 3 with respect to assistance provided for any 
                of the fiscal years 2001 through 2004, then--
                            (i) development assistance may be provided 
                        for such country for such fiscal year and, if 
                        such country continues to be a mostly free 
                        country, for the succeeding fiscal year; and
                            (ii) development assistance may not be 
                        provided for such country for any subsequent 
                        fiscal year.
                    (D) Change to mostly unfree country.--If a 
                repressed country described in paragraph (1) is 
                determined, subsequent to a revolution, coup, or other 
                major political change, to be a mostly unfree country 
                under section 3 with respect to assistance provided for 
                any of the fiscal years 2001 through 2004, then--
                            (i) development assistance may be provided 
                        for such country for such fiscal year and, if 
                        such country continues to be a mostly unfree 
                        country, for each of the succeeding 3 fiscal 
                        years; and
                            (ii) development assistance may not be 
                        provided for such country for any subsequent 
                        fiscal year.
    (f) Assistance for New or Successor Countries.--If a new or 
successor country comes into existence at any time from fiscal year 
2000 through fiscal year 2003, then development assistance shall be 
provided for such country in accordance with this section, except that 
any reference in this section to fiscal year 2000 and to any subsequent 
fiscal year shall be deemed to refer to the first fiscal year for which 
assistance is to be provided for such country and to the corresponding 
fiscal year that comes after such first fiscal year, respectively.

SEC. 5. OPPOSITION TO ASSISTANCE BY INTERNATIONAL FINANCIAL 
              INSTITUTIONS TO COUNTRIES INELIGIBLE TO RECEIVE UNITED 
              STATES DEVELOPMENT ASSISTANCE.

    (a) Position of United States in International Financial 
Institutions Regarding Assistance to Countries Ineligible To Receive 
United States Development Assistance.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary of the Treasury shall instruct the United States 
        Executive Director of each international financial institution 
        (as defined in section 1701(c)(2) of the International 
        Financial Institutions Act) to use the voice and vote of the 
        United States to oppose the provision of any assistance, 
        directly or indirectly, by the institution to the government of 
        any country with respect to which development assistance may 
        not be provided (as determined under section 4), any citizen or 
        national of such country in such country, or any entity 
        established in such country.
            (2) Exception.--The requirement to oppose the provision of 
        assistance, directly or indirectly, by an international 
        financial institution to a country under paragraph (1) shall 
        not apply with respect to the provision of disaster assistance 
        for such country.
    (b) Limitation on Provision of Federal Funds to International 
Financial Institutions that Provide Assistance to Countries Ineligible 
To Receive United States Development Assistance.--If an international 
financial institution (as defined in section 1701(c)(2) of the 
International Financial Institutions Act) provides assistance, directly 
or indirectly, to the government of any country with respect to which 
development assistance may not be provided (as determined under section 
4), any citizen or national of such country in such country, or any 
entity established in such country, then the United States shall 
withhold from payment to the institution, from amounts that would 
otherwise be paid by the United States to the institution, the amount 
that the Secretary of the Treasury determines was the United States 
portion of the amount necessary to support the loans provided to such 
country by the institution during the preceding fiscal year of the 
institution.
    (c) Sense of the Congress Relating to Adoption and Implementation 
of Index of Economic Freedom by International Financial Institutions.--
It is the sense of the Congress that each international financial 
institution (as defined in section 1701(c)(2) of the International 
Financial Institutions Act)--
            (1) should establish an index of economic freedom similar 
        to the index of economic freedom established under section 3; 
        and
            (2) should implement a phase-out of assistance based on 
        such index similar to the requirements to phase out United 
        States development assistance under section 4.

SEC. 6. WITHDRAWAL OF THE UNITED STATES FROM THE INTERNATIONAL 
              FINANCIAL INSTITUTIONS.

    As soon as possible after development assistance may not be 
provided for any subsequent fiscal year to each country to which an 
international financial institution (as defined in section 1701(c)(2) 
of the International Financial Institutions Act) may provide 
assistance, the Secretary of the Treasury shall withdraw the United 
States from the institution, and shall seek to negotiate an agreement 
on the method of settling accounts with the institution.

SEC. 7. DEFINITIONS.

    As used in this Act:
            (1) Development assistance.--The term ``development 
        assistance'' means--
                    (A) assistance under the Agricultural Trade 
                Development and Assistance Act of 1954 (7 U.S.C. 1691 
                et seq.);
                    (B) assistance under section 401 of the Foreign 
                Assistance Act of 1969 (22 U.S.C. 290f);
                    (C) assistance under the African Development 
                Foundation Act (22 U.S.C. 290h et seq.);
                    (D) assistance under chapter 1 of part I of the 
                Foreign Assistance Act of 1961 (22 U.S.C. 2151 et 
                seq.), including population planning assistance, 
                environmental assistance, and economic growth 
                assistance, except for child survival assistance under 
                section 104 of such Act;
                    (E) micro- and small enterprise development credits 
                and microenterprise development grant assistance;
                    (F) assistance from private sector enterprise 
                funds;
                    (G) assistance under the Urban and Environmental 
                Credit Program;
                    (H) assistance under chapter 10 of part I of the 
                Foreign Assistance Act of 1961 (22 U.S.C. 2293 et seq.; 
                relating to the Development Fund for Africa);
                    (I) assistance under chapter 11 of part I of such 
                Act (22 U.S.C. 2295 et seq.; relating to assistance for 
                the independent states of the former Soviet Union), 
                except for democracy building assistance;
                    (J) assistance under the Support for East European 
                Democracy (SEED) Act of 1989 (22 U.S.C. 5401 et seq.), 
                except for democracy building assistance;
                    (K) assistance under the Freedom for Russia and 
                Emerging Eurasian Democracies and Open Markets Support 
                Act of 1992 (22 U.S.C. 5801 et seq.), except for 
                democracy building assistance; and
                    (L) assistance under any successor program to a 
                program described in subparagraphs (A) through (K).
            (2) New or successor country.--The term ``new or successor 
        country'' means a country that--
                    (A) becomes independent of another country of which 
                it had formed a part; or
                    (B) arises because of the dismemberment of the 
                country of which it had been a part.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of State.
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