[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

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  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                                                              
                                                                                                                

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  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,
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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.
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                                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%
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\1\Includes Administration's proposed adjustments to 1996 continuing resolution levels.                         

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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.
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  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
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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.