    [Budget Supplement]
    [Projecting American Leadership]
    [3. Advancing United States Leadership in the World]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 37]]
      The age of possibility, about which the President has spoken, extends
    beyond American borders to the world at large. The end of the Cold War
    and the spread of democracy and free markets across the globe offer the
    promise of a safer, more prosperous world and a more secure America.
      Nevertheless, the world is not without its dangers. Indeed, the Nation
    faces an international arena of unprecedented uncertainty, with new
    dangers that know no borders and that do not fit neatly into the
    convenient framework of the Cold War.
      It is a world in which the line between foreign and domestic issues is
    increasingly blurred. With American standards of living increasingly
    dependent on how well our businesses compete overseas, what we do abroad
    matters a great deal for how well we live at home. Put simply, retreat
    from the international arena is not an option for the United States.
      On the diplomatic front, our leadership has helped ease tensions, end
    conflicts, and bring peace in Europe, the Middle East, North Korea, and
    elsewhere over the last three years. And through trade and overseas
    assistance programs, we are helping spur democracy, expand markets,
    promote our exports, and meet humanitarian needs.
      When needed, we have called on our military forces--the world's
    strongest and best prepared--to promote our interests and sustain the
    peace. For 1997 and beyond, the budget would ensure that our forces
    remain ready and obtain the best military technology to continue to do
    their job.

    [[Page 39]]

               3.  ADVANCING UNITED STATES LEADERSHIP IN THE WORLD

      ----------------------------------------------------------------------

      All over the world, even after the Cold War, people still look to us to help them seek the blessings of peace
    and freedom.... The United States can and should be the very best peacemaker.... By keeping our military strong,
    by using diplomacy where we can and force where we must, by working with others to share the risk and cost of
    our efforts, America is making a difference for people here and around the world.

                                          President Clinton
                                          January 1996

      ----------------------------------------------------------------------
      The budget provides the resources to support American diplomatic
    leadership in defending our interests and promoting democracy, free
    markets, and peace throughout the world.
      The call and the opportunity for American leadership have never been
    greater. At a time when major threats to the United States are few, the
    opportunity to expand the reach of democracy and free markets is great.
    At the same time, new challenges to our well-being and to world peace
    have arisen--from regional, ethnic, and national conflicts; to the
    proliferation of weapons of mass destruction; to international terrorism
    and crime, narcotics trading, and environmental degradation.
      In this environment, the United States is uniquely suited to lead.
    And, in this environment, the Nation must not foolishly, and
    shortsightedly, withdraw into isolationism and protectionism and deny
    ourselves the resources we require to provide that leadership.
      The President proposes $19.2 billion for international affairs,
    slightly over 1 percent of the budget and 0.25 percent of Gross Domestic
    Product. Nearly all industrialized countries spend a greater portion of
    their income on international activities.
      As America engages overseas, we must first ensure that we promote and
    protect our interests in regions that are critical to our security. Over
    the past three years, our achievements have been heartening.

    Spurring Foreign Policy Achievements

      Through skilled diplomacy, the judicious use of the world's finest
    military force, and the careful provision of foreign assistance, the
    United States has promoted peace and reduced threats to our security to
    a remarkable extent. Though problems obviously remain in the Middle
    East, the seemingly intractable hostility between Arabs and Israelis is
    giving way gradually to a recognition that the people of the region can
    benefit far more from cooperation than confrontation. We continue to
    lead in promoting the peace process, particularly between Syria and
    Israel.
      In Europe, U.S. leadership in NATO proved critical in bringing an end
    to the longest and bloodiest conflict on that continent since World War
    II. American diplomacy, forces, and assistance programs are now offering
    hope to Bosnians and others in a region torn by struggle for over four
    years. Our decision to lead in ending this conflict has brought together
    a coalition of nations providing forces and assistance to the new
    Federation.
      Nor is Bosnia the only American success in Europe. Though the peace
    process in Northern Ireland remains difficult, it has made more progress
    in the past two years than it has in decades--thanks, in part,
    [[Page 40]]
    to our
    leadership in helping to bring the parties together.
      In Central Europe, which was at the heart of the Cold War struggle,
    challenges continue on the road to democracy and free markets. Yet the
    amount of change, which our support and strong leadership helped to
    spur, is truly amazing. In many cases, Central European economies are
    free and largely privatized. Gradually, these countries--for example,
    Poland, the Czech Republic, and Hungary--are becoming strong U.S.
    trading and diplomatic partners and, along with some of Europe's other
    new democracies, are well on their way to integration with the
    transatlantic community.
      While progress is slower in the New Independent States, U.S. relations
    with Russia are strong and vital; in that critical country, the United
    States has provided unwavering support for the movement to democracy and
    free markets. We also have new, strong partnerships with other key
    countries in the region, such as Ukraine.
      In Asia, America created an international coalition to end the threat
    of nuclear proliferation in North Korea. The North Korean framework
    agreement continues to move forward with international assistance. We
    maintain a strong diplomatic and economic relationship with Japan and
    are building a better, though complex, relationship with China.
      In our own Western Hemisphere, we have also led the way in promoting
    democracy and healthy trade and investment relationships. Most notably,
    U.S. leadership restored democratic government and freedom to the people
    of Haiti, where the first peaceful transition from one elected president
    to another has just occurred.
      ----------------------------------------------------------------------

                                    Table 3-1.  INTERNATIONAL DISCRETIONARY PROGRAMS
                                     (Budget authority, dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                   Dollar    Percent
                                                        1993      1995        1996        1997     Change:   Change:
                                                       Actual    Actual    Estimate\1\  Proposed   1993 to   1993 to
                                                                                                    1997      1997
    ----------------------------------------------------------------------------------------------------------------
    International development and humanitarian
     assistance.....................................     8,900     8,441       7,061       7,472    -1,428      -16%
    International security assistance...............     6,148     5,670       5,915       5,828      -320       -5%
    Conduct of foreign affairs......................     4,300     4,061       3,951       4,164      -136       -3%
    Foreign information and exchange activities.....     1,247     1,421       1,115       1,162       -85       -7%
    International financial programs................       599       536         553         567       -32       -5%
                                                     ---------------------------------------------------------------
      Total, International discretionary programs...    21,194    20,129      18,595      19,193    -2,001       -9%
    ----------------------------------------------------------------------------------------------------------------
    \1\Includes Administration's proposed adjustments to 1996 continuing resolution levels.

      ----------------------------------------------------------------------

    Promoting Our Security Objectives

      The budget continues to support our Nation's critical security
    objectives.
       The budget will provide funding for international security
    assistance, especially critical to the Middle East peace process, at
    $5.8 billion (see Table 3-1). Of this amount, $5.3 billion in military
    financing grants and economic support (about the same as in 1996) would
    help further the peace process.
      In addition, the budget proposes to partly finance the cost of a
    squadron of F-16 aircraft to Jordan, in recognition of the risks that
    King Hussein is taking to advance the Middle East peace process.
    Separately, the Administration has requested funds in 1996 to initiate
    this important program.
      The budget proposes to provide foreign military financing grants to
    our emerging partners in Central and Eastern Europe under
    [[Page 41]]
    the President's Partnership for Peace initiative, which would help these
    countries meet the conditions for membership in NATO. Economic support
    fund grants to countries such as Haiti and Cambodia are designed to help
    consolidate recent democratic gains in those countries.
      The budget proposes to continue assistance to support the transition
    to democracy and free markets in Central Europe and the peace process in
    the Balkans. Specifically, it proposes $475 million for assistance
    programs in the region. While the budget continues to phase down
    assistance to northern tier countries, it includes the second $200
    million installment toward economic reconstruction funding for Bosnia.
    The Administration has already requested the first installment of this
    program as a supplement to the 1996 budget.
      Burden sharing is especially strong in this program; the United States
    is providing only 20 percent of the bilateral reconstruction assistance
    that Bosnia will receive. This aid would help restore municipal
    infrastructure that was severely damaged by the war, and would offer
    financing for small, private enterprises in order to rapidly boost
    employment. By 1997, the economic recovery that this aid should foster
    would permit a gradual phasedown in humanitarian aid.
      U.S. assistance to the New Independent States of the former Soviet
    Union would continue at $640 million. Given the potential for political
    and economic change in this region, legislative earmarking of the funds
    by country and activity is particularly inappropriate and may frustrate
    the achievement of objectives it is designed to reach.

    Promoting Trade

      America's second major international goal is to promote an open
    trading system, which will contribute to U.S. economic prosperity. We
    have gone a long way toward laying the groundwork for sustained, non-
    inflationary growth into the next century, most notably with
    implementation of the North American Free Trade Agreement and the
    multilateral trade agreements concluded during the Uruguay Round. In
    addition, we have more closely integrated the Government's many trade
    promotion activities through the Trade Promotion Coordinating Committee,
    creating synergy among agency trade programs, significantly improving
    American business' ability to win contracts overseas, and creating
    export-related jobs at home. Consequently, we expect the recent
    increases in U.S. exports to continue, leading to major U.S. economic
    and job gains.
      The budget puts a high priority on programs that help U.S. exporters
    meet foreign competition and seize the opportunities that trade
    agreements offer.
      The Trade and Development Agency makes grants for feasibility studies
    of capital projects abroad, and the Overseas Private Investment
    Corporation insures and finances U.S. investment in developing
    countries. The activities of both agencies are designed to help increase
    exports, and the budget holds 1997 funding levels close to or above the
    1996 enacted level.
      A larger source of support for exports is the Export-Import Bank,
    which offers loans, loan guarantees, and insurance for exports,
    primarily of capital goods. The budget maintains funding levels for the
    Bank's core export financing and insurance programs.
      Finally, Commerce Department programs promote U.S. trade, especially
    through the International Trade Administration (ITA) and its U.S. Export
    Assistance Centers. The budget proposes a slight increase for the ITA,
    compared to 1996 funding levels.
      Bilateral development assistance through the U.S. Agency for
    International Development (USAID) and contributions to the multilateral
    development banks (MDBs) also support U.S. exports. In the near term,
    development assistance promotes American exports by financing
    development projects abroad which import American goods (such as imports
    of American bulldozers to build a U.S.-financed road). In the longer
    term, dynamic economies in developing countries create strong commercial
    demand for U.S. exports (as illustrated by recipients of development aid
    in East Asia). For 1997, the budget proposes that USAID development
    assistance grow by four percent, to $1.7 billion.
    [[Page 42]]
      The budget proposes that U.S. contributions to the World Bank and the
    regional development banks grow to $1.4 billion, a 24 percent increase
    over 1996. Congress cut the President's MDB budget request by 50 percent
    in 1996, reflecting a serious misunderstanding of how important MDBs
    are--they not only help the United States achieve its economic
    development and export promotion objectives, they also leverage our
    foreign assistance dollars through contributions from other donors.
      When the World Bank, the first MDB, was established at the end of
    World War II, the United States provided nearly all of the international
    funding. Today, the average U.S. share of annual contributions to the
    MDBs is only slightly over 20 percent. Moreover, the MDBs, particularly
    the World Bank group, are coordinating multilateral and bilateral
    assistance programs and providing large-scale funding to countries and
    regions of critical importance to the United States--the Middle East,
    Bosnia, South Africa, the New Independent States, and Central and
    Eastern Europe.

    Addressing New Threats

      The third goal of our international leadership is to address the new
    transnational threats to U.S. and global security and prosperity: 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.
      U.S. diplomacy and law enforcement activities are playing a key role
    in preventing the spread of nuclear and other major destructive weapons,
    particularly to outlaw states like Libya, Iraq, and Iran. The Defense
    Department's Nunn-Lugar program and the State Department's
    Nonproliferation and Disarmament Fund are important parts of our
    commitment. (For additional information on the Nunn-Lugar program, see
    Chapter 4.)
      U.S. bilateral assistance programs relate directly to solving other
    transnational problems. For example, assistance programs emphasize
    source-country approaches to the war on drugs. The budget proposes $213
    million for the State Department's narcotics and anti-crime programs,
    nearly double the 1996 level. In addition, USAID carries out large and
    successful programs to improve the environment, and America is a
    recognized world leader in promoting safe and effective family planning
    projects. The budget requests over $700 million to meet the needs in
    these two sectors.
      The United States also plays a key leadership role as the world
    community addresses these problems. The United Nations and its related
    specialized agencies, such as the World Health Organization and the
    International Atomic Energy Agency (IAEA), are important mechanisms for
    such international cooperation. In some instances, such as the U.N.'s
    and IAEA's efforts to identify and destroy Iraq's weapons of mass
    destruction, international organizations prove an indispensable vehicle
    to help us achieve our national interests.

    Meeting Our U.N. Commitments

      The United States has provided leadership to these international
    organizations for over 40 years. Today, that leadership is under attack,
    threatened by sharp cuts in appropriations for U.S. contributions to the
    organizations. For many of these institutions, member-country
    contributions are mandated by treaty; when America fails to meet its
    commitments, it accumulates arrears.
      For the United Nations, related organizations, and peacekeeping, U.S.
    arrears have now grown to roughly $1 billion. The Administration
    recognizes the need for serious reform in the United Nations and related
    organizations and is leading the effort. The budget seeks full funding
    for our current obligations to these institutions, as well as a down
    payment on clearing the arrears, linked to accomplishing needed reforms.
      The United States also makes voluntary contributions to a variety of
    international organizations principally involved in development,
    population, and environmental programs, such as UNICEF, the U.N.
    Development Program, the U.N. Population Fund, and the program created
    under the Montreal Protocol to protect the ozone layer. Because our
    leadership is critical to the success of
    [[Page 43]]
    these organizations, the budget
    proposes a 14 percent increase in funding.

    Providing Humanitarian Assistance

      Finally, humanitarian and disaster relief remains a major
    international need, especially in areas with regional conflict. The
    budget proposes $1.7 billion to continue our global role, which has
    enjoyed bipartisan support, in providing American humanitarian relief
    for the victims of natural and man-made disasters.
      Disaster relief programs in USAID and humanitarian feeding under
    Public Law 480 would continue slightly above 1996 spending levels.
    Funding for refugees would fall by three percent, to $700 million, due
    to the end of the refugee problem in Southeast Asia and the expected
    return of several million refugees and displaced persons to their homes
    in Bosnia under the peace settlement. The budget proposes to keep large-
    scale assistance available for the continuing refugee needs in Africa
    and the Near East.