[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2861 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2861

 To establish a biannual certification of eligibility for development 
    assistance based on 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 certification, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 13, 2000

   Mr. Frist introduced the following bill; which was read twice and 
             referred to the Committee on Foreign Relations

_______________________________________________________________________

                                 A BILL


 
 To establish a biannual certification of eligibility for development 
    assistance based on 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 certification, 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 ``Foreign Assistance Reform and 
Democracy Support Act of 2000''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The World Bank has concluded that development aid can 
        be effective only in an environment of sound economic policies 
        and good economic management. Economic freedoms, rule of law, 
        and governmental and regulatory transparency are essential 
        elements in providing an environment in which aid can 
        reasonably be expected to promote economic growth.
            (2) While many internal and external factors contribute to 
        poverty and quality of life for the people in recipient 
        countries, the governments of those recipient countries 
        determine the degree of economic freedom, economic management, 
        and regulatory and transparency which dictate whether 
        development assistance can reasonably be expected to help 
        promote sustained economic growth.
            (3) Such sustained economic growth is in the interest of 
        both the recipient and the donor, and is within the stated 
        national interests of the United States.
            (4) Recipient countries which do not provide economic 
        freedom, sound management, and regulatory transparency do not 
        provide an environment where development assistance can be 
        expected to eliminate poverty and promote economic growth. 
        Thus, the provision of development assistance into such 
        unreceptive environments does not promote United States' or the 
        people of recipient countries' interests to a reasonable degree 
        and would thus be more effectively committed elsewhere.

SEC. 3. DEFINITIONS.

    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.

              TITLE I--PHASE-OUT OF DEVELOPMENT ASSISTANCE

SEC. 101. BIANNUAL REPORT ON ECONOMIC FREEDOM OF DEVELOPMENT ASSISTANCE 
              RECIPIENTS.

    (a) Report Required.--
            (1) In general.--At the times specified in paragraph (3), 
        the President shall submit a report to Congress on the level of 
        economic freedom in countries receiving United States 
        development assistance.
            (2) Composition.--The report shall detail each country 
        reviewed under subsection (b) by category of economic freedom.
            (3) Deadlines for submission of reports.--The report 
        required by paragraph (1) shall be submitted each year at the 
        time of submission of the congressional presentation documents 
        on foreign assistance for the next fiscal year and on the date 
        that is 6 months after that date.
            (4) Publication.--The Secretary shall publish the report in 
        the Federal Register on the date that is 30 days after the date 
        of submission to Congress of the report.
    (b) Overall Economic Factors.--Prior to publication of each report, 
the Secretary shall review the laws, policies, and practices of each 
country receiving development assistance that directly address or 
otherwise affect the economy or the degree of economic freedom in that 
country and that were in effect during the preceding 6-month period. 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 Secretary shall review the following 
factors applicable to each such country during the preceding 6-month 
period in order to determine whether the country is free, mostly free, 
mostly unfree, or repressed, in terms of the level of economic freedom:
            (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) Price control policy.--Wage and price control policy, 
        including the following:
                    (A) The extent to which businesses are allowed to 
                establish their own prices without influence from the 
                government.
                    (B) The extent to which the government establishes 
                prices for certain products.
                    (C) 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 of 
                government influence or interference.
                    (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.
            (11) Additional factors.--
                    (A) The total level of all development assistance, 
                financing by multilateral institutions (including loan 
                guarantees), and financial instruments used in economic 
                development programs to recipient governments, and a 
                description of the sources of such funds and the 
                targeted sector or goal of such programs.
                    (B) The total revenues of each recipient government 
                from all domestic and outside sources.
                    (C) The total expenditure out of domestically 
                generated revenues by each recipient government on 
                programs and sectors in which donors have provided 
                assistance in any form during the preceding 5 years.
                    (D) The total each recipient government expends on 
                military or security-related activities and the 
                security threats that justify such expenditures.

SEC. 102. CERTIFICATION REQUIREMENT.

    (a) In General.--Together with the submission of each report 
required under section 101, the President shall certify to Congress, 
with respect to each country that is proposed to receive United States 
development assistance, whether that country is free, mostly free, 
mostly unfree, or repressed, in terms of the level of economic freedom 
determined for that country in that report.
    (b) Decertification.--A certification made under subsection (a) 
shall be in effect with respect to such country for the fiscal year for 
which assistance is proposed to be provided by the congressional 
presentation materials submitted in that year, unless--
            (1) the President changes the designation of the country 
        under the certification; or
            (2) Congress enacts a joint resolution disapproving a 
        designation under the certification.

SEC. 103. PHASE-OUT OF DEVELOPMENT ASSISTANCE FOR MOSTLY UNFREE AND 
              REPRESSED COUNTRIES.

    (a) Assistance for Mostly Unfree Countries.--In the case of a 
country designated as a mostly unfree country pursuant to a 
certification in effect under section 102, the following shall apply:
            (1) Prohibition.--Except as provided in paragraph (2), 
        development assistance may not be provided for such country 
        after fiscal year 2005.
            (2) Limited development assistance permitted.--The 
        limitation on assistance described in subsection (c) shall 
        apply to the country in fiscal year 2006 and each fiscal year 
        thereafter.
    (b) Assistance for Repressed Countries.--In the case of a country 
designated as a repressed country pursuant to a certification in effect 
under section 102 the following shall apply:
            (1) Prohibition.--Except as provided in paragraph (2), 
        development assistance may not be provided for such country 
        after fiscal year 2004.
            (2) Limited development assistance permitted.--The 
        limitation on assistance described in subsection (c) shall 
        apply to the country in fiscal year 2005 and each fiscal year 
        thereafter.
    (c) Limitation on Assistance.--For each fiscal year for which this 
paragraph is specifically made applicable with respect to a country, 
development assistance is authorized to be provided only for program 
assistance strictly limited to primary or secondary education, basic 
public health programs, democracy and governance programs, or technical 
assistance that directly and expressly addresses one of the factors 
contributing to the determination of eligibility under section 101.

SEC. 104. ACTIONS WITH RESPECT TO FREE AND MOSTLY FREE COUNTRIES.

    In the case of any country designated as a free or mostly free 
country pursuant to a certification in effect under section 102, the 
following shall apply:
            (1) Support from private investment.--The Overseas Private 
        Investment Corporation (OPIC), the Export-Import Bank of the 
        United States, and the Trade and Development Agency shall 
        undertake programs to encourage, finance, or otherwise support 
        private investment from United States sources, with emphasis on 
        projects in sectors of critical need such as health, education, 
        transportation, financial, and communications infrastructure.
            (2) Debt assessment.--The Secretary of the Treasury shall--
                    (A) undertake a review on the feasibility of 
                restructuring, rescheduling, or eliminating the 
                sovereign debt of such country if such debt is held by 
                any agency of the United States Government; and
                    (B) direct the United States Executive Director of 
                each international financial institution to which the 
                United States is a member to propose that such 
                institution undertake a review on the feasibility of 
                restructuring, rescheduling, or eliminating the 
                sovereign debt of such country if such debt is held by 
                such institution.

SEC. 105. CHANGE OF RECIPIENT COUNTRY STATUS SUBSEQUENT TO 
              CERTIFICATION BY PRESIDENT.

    (a) Change From Repressed or Mostly Unfree to Free or Mostly 
Free.--In the event that the President determines subject to biannual 
certification, after consultation with Congress, that--
            (1) a significant political change has occurred in a 
        country or credible potential to hasten such change exists 
        after the country is certified under section 102 as a repressed 
        or mostly unfree country,
            (2) such change presents the United States with the 
        opportunity to act decisively to support a transition to 
        democracy, and
            (3) if a new or successor country comes into existence at 
        any time,
then the President is authorized for a period of three fiscal years to 
carry out a democratic development program (within the meaning of the 
Foreign Assistance Act of 1961) with respect to the country, without 
regard to any other provision of this Act.
    (b) Extension of Limitation or Authorization.--If the President 
determines, after consultation with Congress, that it is in the 
national interests of the United States to do so, the President may 
extend the period of authorization under subsection (a) for an 
additional period not to exceed two fiscal years.

SEC. 106. 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 103), 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 or assistance strictly limited to primary or 
        secondary education, basic public health programs, democracy 
        and governance programs, or technical assistance which directly 
        and explicitly addresses one of the factors contributing to the 
        determination of eligibility under section 101.
    (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 
103), 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.

SEC. 107. WAIVER.

    The President may exercise a waiver of all restrictions and 
requirements of this title on a country-by-country basis if he 
determines that United States national interests would be served 
thereby. The waiver and its rationale shall be submitted as a part of 
the biannual certification. The waiver covers only the biannual period 
and must be resubmitted each certification process.

   TITLE II--PROCUREMENT REFORM IN DEVELOPMENT LENDING AND ASSISTANCE

SEC. 201. REQUIREMENTS FOR FAIR COMPETITION IN FOREIGN COMMERCE.

    (a) In General.--Not later than 180 days after the date of 
enactment of this Act, the Secretary of the Treasury shall transmit to 
the President and to appropriate committees of Congress a strategic 
plan for requiring the use of independent third-party procurement 
monitoring and other international procurement reforms relating to the 
United States participation in multilateral development banks and other 
lending institutions.
    (b) Strategic Plan.--The strategic plan shall include an 
instruction by the Secretary of the Treasury to the United States 
Executive Director of each multilateral development bank and lending 
institution to use the voice and vote of the United States to oppose 
the use of funds appropriated or made available by the United States 
for any nonhumanitarian assistance, until--
            (1) the recipient international financial institution has 
        adopted an anticorruption plan that requires the use of 
        independent third-party procurement monitoring services and 
        ensures openness and transparency in government procurement; 
        and
            (2) the recipient country institutes specific strategies 
        for minimizing corruption and maximizing transparency in each 
        stage of the procurement process.
    (c) Annual Reports.--Not later than June 30 of each year, the 
Secretary of the Treasury shall submit a report to Congress on the 
progress in implementing procurement reforms made by each multilateral 
development bank and lending institution and each country that received 
assistance from a multilateral development bank or lending institution 
during the preceding year.
    (d) Restrictions on Assistance.--Notwithstanding any other 
provision of law, no funds appropriated or made available for 
nonhumanitarian foreign assistance programs, including the activities 
of the Agency for International Development, may be expended for those 
programs unless the recipient country, multilateral development bank, 
or lending institution has demonstrated that--
            (1) procurement practices are open, transparent, and free 
        of corruption, fraud, inefficiency, and other misuse; and
            (2) independent third-party procurement monitoring has been 
        adopted and is being used by the recipient.

SEC. 202. REPORTING REQUIREMENT.

    The President shall include in the annual congressional 
presentation documents on foreign assistance programs a section on--
            (1) the organizations proposed to receive development 
        assistance grants or contracts during the year;
            (2) the total amount each organization is proposed to 
        receive; and
            (3) the nationality of each group and whether it is a 
        subgroup, affiliate, or division of any other or larger 
        organization.
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