    [Budget of the U.S. Government]
    [V. Creating Opportunity, Demanding Responsibility, and Strengthening Community]
    [9. Supporting America’s Global Leadership]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 117]]

                   9.  SUPPORTING AMERICA'S GLOBAL LEADERSHIP

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

      The challenge before us plainly is two-fold--to seize the opportunities for more people to enjoy peace and
    freedom, security and prosperity, and to move strongly and swiftly against the dangers that change has produced.
                                          President Clinton
                                          September 24, 1996

      ----------------------------------------------------------------------
      This budget fully supports America's global leadership and advances
    our national goals--protecting our vital strategic interests and
    expanding the reach of democratic governance, ensuring our influence in
    the international community, promoting sustainable development and the
    expansion of free markets and American exports, and responding to new
    international problems and humanitarian emergencies that can undermine
    our security.
      ----------------------------------------------------------------------

                                    Table 9-1.   INTERNATIONAL DISCRETIONARY PROGRAMS
                                     (Budget authority, dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent   Percent
                                                       1993        1997         1998      2002     Change:   Change:
                                                      Actual   Estimate \1\   Proposed  Proposed   1993 to   1997 to
                                                                                                    1997      2002
    ----------------------------------------------------------------------------------------------------------------
    International development and humanitarian
     assistance...................................     8,900        6,644       7,712      6,978      -25%       +5%
    International security assistance.............     6,148        5,928       5,959      6,041       -4%       +2%
    Conduct of foreign affairs....................     4,300        3,890       4,164      4,026      -10%       +3%
    Foreign information and exchange activities...     1,247        1,098       1,087      1,070      -12%       -3%
    International financial programs..............    12,662          549       4,052        647      -96%      +18%
      IMF programs................................   (12,063)  ............    (3,521)  ........        NA        NA
                                                   -----------------------------------------------------------------
    Total, International discretionary programs...    33,257       18,109      22,974     18,762      -46%       +4%
    Total, excluding IMF programs.................    21,194       18,109      19,453     18,762      -15%       +4%

    ----------------------------------------------------------------------------------------------------------------
    NA = Not applicable.

    \1\ Consistent with changes in the 1996 Farm Bill, the P.L. 480 Title I direct credit program has been
      reclassified from International Affairs programs to Agriculture programs starting in 1996.

      ----------------------------------------------------------------------
      Protecting America's key strategic interests remains a timeless goal
    of our diplomacy. As we move toward the 21st Century, we have a great
    opportunity to expand the scope of democracy, further ensuring that our
    interests remain unthreatened. Facing the dilemmas of peacekeeping,
    regional crises, and economic change, the international community needs
    the United States as a leader and a full partner, meeting its
    international commitments. Advancing U.S. interests in a global economy
    brings expanded missions to our diplomacy and trade strategy. A less-
    orderly world also creates new challenges to our security--from regional
    and ethnic conflicts, the proliferation of weapons of mass

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    destruction, international terrorism and crime, narcotics, and environmental
    degradation.
      With such a broad agenda for leadership, America must not withdraw
    into isolationism and protectionism or fail to provide the resources
    required to carry out this mission. The budget proposes $19.5 billion
    for ongoing international affairs programs. While this request is seven
    percent above the 1997 level, it constitutes only slightly over one
    percent of the budget and 0.25 percent of Gross Domestic Product.

    Protecting American Security and Promoting Democracy

      The first goal of America's international strategy must be to promote
    and protect our interests in regions that historically have been
    critical to our security. The Administration's record is encouraging.
    Through skilled diplomacy, the judicious use of military force, and
    carefully targeted bilateral and multilateral economic assistance, the
    United States has advanced the peace process in Europe and the Middle
    East, reducing threats to our interests in these key regions. Through
    diplomatic leadership, economic assistance, and trade negotiations, we
    have maintained our leadership in Asia. Our goals are to secure these
    achievements, advance the peace process, and deepen regional cooperation
    in the future.
      Perhaps the most serious national security threat facing the Nation
    today hinges on the course of events over the next few years in the New
    Independent States (NIS) of the former Soviet Union. We have made
    substantial progress in helping encourage the emergence of free markets
    and democracy in the NIS. In particular, our relations with Russia are
    strong. The United States has provided unwavering support for the
    emergence of democracy in Russia, leading this past year to the first
    free presidential reelection in Russian history. Some other NIS
    countries are progressing more slowly toward democracy and free markets,
    but overall regional progress has been remarkable.
      Nevertheless, the June 1996 Russian elections represent not only a
    success but a warning--the latter embodied in the large vote for
    President Yeltsin's opposition, an opposition that derived its strength
    from Russia's severe economic distress. The Administration believes it
    is absolutely critical, at this turning point, to demonstrate our
    continuing support for democratic reform and free markets in Russia and
    throughout the NIS; the ultimate success of this process is vital to our
    national security. Moreover, we must begin to shape our assistance
    program in ways that support the mature trade and investment
    relationship that is starting to emerge between the United States and
    the countries in this region. Thus, the budget proposes $900 million for
    NIS funding, a 44-percent increase over 1997. The increase includes a
    Partnership for Freedom initiative, designed to initiate a new phase of
    U.S. engagement with NIS countries focused on trade and investment,
    long-term cooperative activities, and partnerships.
      The region at the heart of the Cold War conflict--Central Europe--has
    made enormous progress toward institutionalizing free markets and
    democracy. It is no longer a threat to American and European security;
    it is starting to be a partner in the transatlantic community. The
    economies of the Northern tier countries, such as Poland, the Czech
    Republic, and Hungary, are largely free and privatized; they are moving
    from direct assistance, which soon they will no longer require, to
    significant economic integration with the United States and Western
    Europe. At the same time, countries in this region are reshaping their
    security relationships with the West as they move toward potential
    membership in NATO.
      Central European countries in the Southern tier also have made great
    progress. U.S. leadership has been critical in ending the bloody
    hostilities in Bosnia, establishing new governments through free
    elections, and beginning economic reconstruction. The pace of
    reconciliation and recovery remains gradual, and the need for continued
    American leadership is great. The other countries in the southern part
    of this region also look to the United States to remain committed to
    their struggle to create democratic governments and free, open markets.

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      The budget proposes to increase funding for economic assistance in
    Central Europe to $492 million--including the final $200 million
    installment on the U.S. commitment to Bosnian reconstruction. While
    programs for the Northern tier are phasing down, we must continue to
    support implementation of the Dayton Peace Accords and to sustain the
    emergence of free market democracies in the Southern tier. In addition,
    the budget seeks to increase support for foreign military financing for
    the countries of Central and Eastern Europe through the President's
    Partnership for Peace initiative, which will facilitate their efforts to
    meet the conditions for membership in NATO.
      Our strategic interest in peace in the Middle East is as strong as
    ever. The peace process has achieved much already. The need for
    reconciliation remains urgent, and America continues to play a
    leadership role in the effort to craft a durable, comprehensive regional
    peace. The budget proposes $5.3 billion for military financing grants
    and economic support to sustain the Middle East peace process. The
    proposed increase of nearly $100 million includes $52.5 million for an
    initial U.S. contribution for the Bank for Economic Cooperation and
    Development in the Middle East and North Africa, which will play a key
    role in promoting regional economic integration. The budget also
    provides additional security assistance to Jordan, recognizing that
    country's needs and its important contribution to the peace process.
      The rest of our economic and security assistance programs are designed
    to support peace and democracy in countries and regions where our
    leadership has helped those processes emerge: consolidating democratic
    gains in Haiti; supporting reconciliation and peace in Guatemala and
    Cambodia; and strengthening the capacity of African governments to
    provide regional peacekeeping on that troubled continent.

    Ensuring America's Leadership in the International Community

      Following World War II, the United States assumed a unique leadership
    role in building international institutions to bring the world's nations
    together to meet mutual security and economic needs. It took an alliance
    to win the war, and it clearly would take an alliance to ensure the
    peace. We sponsored and provided significant funding for the United
    Nations, the International Monetary Fund, and the World Bank, along with
    specialized and regional security and financial institutions that became
    the foundation of international cooperation during the Cold War.
      To ensure financial stability for this international community, the
    members of many of these organizations entered into treaties or similar
    instruments committing them to pay shares (or ``assessments'') of the
    organizations' budgets. Congress ratified these agreements, making them
    binding on us. For international financial institutions, like the World
    Bank and its regional partners, the United States has made firm
    commitments to regular replenishments, subject to the congressional
    authorization and appropriations processes.
      Now, America's leadership in this international institutional network
    is threatened. In recent years, Congress has not fully appropriated the
    funds needed to meet the treaty-bound assessments of international
    organizations or our commitments to the multilateral banks. As a result,
    U.S. arrears now total over $1 billion to the United Nations and other
    organizations, much of it for peacekeeping operations, and over $850
    million to financial institutions. Congress has raised some legitimate
    concerns about how these organizations operate, but America's failure to
    meet its obligations has undercut our efforts to achieve reforms on
    which the Administration and Congress agree. Today, our ability to lead,
    especially in the process of institutional reform, is being seriously
    undermined.
      The Administration believes that we must end the stalemate this year--
    and that we can do so consistent with our goal of institutional reform.
    With new leadership in the United Nations, we have a unique opportunity.
    The budget proposes to fully fund the 1998 assessments for the United
    Nations, affiliated organizations, and peacekeeping, and to pay $100
    million of our arrears. It also seeks a one-time, $921 million advance
    appropriation for the balance of U.N. and related organiza-

    [[Page 120]]

    tion arrears, to become available in 1999. The release of these appropriated arrears would depend on the adoption of a series of reforms in the coming year, specific to each organization, that should reduce the annual amount that
    we must pay these organizations, starting with their next biennial budgets. These reforms would include a reduction in the U.S. share of organizational budgets, management reforms yielding lower organizational budgets, and the elimination of, or U.S. withdrawal from, low-priority programs and organizations.
      The Administration wants to work closely with Congress to shape this
    package, lowering out-year funding requirements while maintaining strong
    U.S. leadership in organizations and programs important to our national
    interests. Enacting the advance appropriation is an essential step in
    achieving these objectives. It would show that we recognize our legal
    obligations and are determined to maintain the sanctity of our treaty
    commitments as we press for changes in the organizations. It would give
    us the leverage to mobilize support from other nations for the reforms
    we seek and for the lowering of our future assessments. Failure to
    arrive at an agreed-upon solution this year will put U.S. international
    leadership at risk in the next century.
      We are equally committed to restoring our leadership in, and
    reforming, the multilateral development banks (MDBs). Our commitments to
    them represent America's full-faith pledge. Moreover, the MDBs already
    have undertaken significant reforms in response to Administration and
    congressional concerns, including cuts in administrative expenses. The
    budget would eliminate our arrears over the next three years while
    meeting ongoing commitments that were negotiated down by 40 percent from
    previous funding agreements. The budget also includes funds to eliminate
    all arrears to the World Bank's International Development Association
    affiliate that lends to the world's poorest countries, many of them in
    Africa. Future budgets would seek to eliminate all of the arrears, while
    continuing our success in lowering the level of future U.S. commitments.
      Our leadership in international institutions also has been critical in
    preventing international financial crises. As the Mexican peso crisis
    demonstrated, the increased interdependence of our trading and monetary
    systems means that a monetary crisis in any major trading nation affects
    all nations. Consequently, the G-10 nations and a number of other
    current and emerging economic powers have negotiated the New
    Arrangements to Borrow (NAB), in order to provide a credit line for the
    International Monetary Fund (IMF) in cases when a monetary crises in any
    country could threaten the stability of the international monetary
    system. The budget proposes a one-time appropriation of $3.5 billion in
    budget authority for the U.S. share, but it will not count as an outlay
    or increase the deficit; the United States will receive an increase in
    its international reserve assets that corresponds to any transfer to the
    IMF under the NAB.

    Promoting an Open Trading System

      The Administration remains committed to opening global markets and
    integrating the global economic system, which has become a key element
    of continuing economic prosperity here at home. Achieving this goal is
    increasingly central to our global diplomatic activities.
      We are helping to lay the groundwork for sustained, non-inflationary
    growth into the next century by implementing the North American Free
    Trade Agreement and the multilateral trade agreements concluded during
    the Uruguay Round. We are conducting a vigorous follow-up to ensure that
    we receive the full benefit of these agreements. At the December 1996
    World Trade Organization ministerial meeting in Singapore, for example,
    negotiators reached agreement on lowering many of the remaining barriers
    to trade in information technology, which will significantly benefit
    U.S. firms and workers. We are finalizing our anti-dumping and
    countervailing duty regulations, which implement commitments made in the
    Uruguay Round.
      To promote other, mutually-beneficial trade relationships, the
    Administration will propose legislation for ``fast-track'' authority to
    nego-

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    tiate greater trade liberalization.\1\ It also will propose to
    extend the authorization of the Generalized System of Preferences for
    developing countries beyond its current expiration date of May 31, 1997
    and to give the eligible countries of the Caribbean Basin Initiative
    expanded trade benefits.
    ---------------------------------------------------------------------------
      \1\ Fast track is a procedure designed to expedite congressional
    approval of trade agreements between the United States and other
    nations.
    ---------------------------------------------------------------------------
      We are more closely integrating the Government's trade promotion
    activities through the Trade Promotion Coordinating Committee (TPCC),
    creating a synergy among agency trade programs that will significantly
    improve American business' ability to win contracts overseas, and
    creating export-related jobs at home. The budget puts a high priority on
    programs that help U.S. exporters meet foreign competition, and TPCC
    agencies are developing rigorous performance measures to help ensure
    that programs in this area are effective.
      As discussed earlier in this chapter, U.S. assistance is important in
    encouraging the emergence of free market economies in Central Europe and
    the NIS, where our programs increasingly focus on facilitating a mature
    trade and investment relationship with the United States.
      Over time, our bilateral development assistance, provided through the
    U.S. Agency for International Development (USAID), likewise promotes the
    emergence of growing market economies in developing countries by
    supporting market-friendly policies and key institutions. Economic
    growth and market-oriented policy reforms in the developing world create
    growing demand for U.S. goods and services as well as investment
    opportunities for U.S. businesses. On a larger scale, the multilateral
    development banks also promote economic growth and increased demand for
    our exports. The budget proposes that our bilateral development
    assistance and contributions to the multilateral development banks grow
    by 25 percent--from $2.6 billion to $3.3 billion.
      Three smaller agencies provide U.S. Government financial support for
    American exports. The Export-Import Bank is a principal source of export
    assistance, offering loans, loan guarantees, and insurance for exports,
    primarily of capital goods. To assure that its programs operate as
    economically as possible, the Bank is considering raising some fees,
    thereby lowering net spending in 1998 while maintaining a strong overall
    level of export support. The Overseas Private Investment Corporation
    (OPIC) provides political risk insurance for, and finances, U.S.
    investment in developing countries, leading to greater U.S. exports. The
    budget proposes to maintain 1998 OPIC funding close to the 1997 level.
    The Trade and Development Agency (TDA) makes grants for feasibility
    studies of capital projects abroad; subsequent implementation of these
    projects can generate exports of U.S. goods and services. The budget
    increases funding for TDA over the 1997 level. With the new emphasis on
    trade and investment in the NIS, the Export-Import Bank, OPIC, and TDA
    may well become important channels for further funding directed at this
    region.
      Along with the Government's financial support for U.S. exports, the
    Commerce Department's International Trade Administration (ITA) promotes
    U.S. trade through its network of Export Assistance Centers and overseas
    offices. These centers and offices provide export counseling to the
    American sector. The budget proposes a slight increase for ITA compared
    to 1997.

    Leading the Response to New International Challenges

      Another fundamental goal of our international leadership, and an
    increasing focus of our diplomacy, is meeting the new transnational
    threats to U.S. and global security--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. We also must sustain our leadership in
    meeting the continuing challenge of refugee flows and natural and human-
    made disasters.
      In 1997, the Administration will seek Senate ratification of the
    Comprehensive Test Ban Treaty and the Chemical Weapons Convention, both
    critical to our long-term security and to preventing the spread of
    weapons of mass destruction. The budget supports the implementation of
    these agreements. U.S. diplomacy and law enforcement activities are
    playing

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    a key role in preventing the spread of such weapons to outlaw states such as Libya, Iraq, Iran, Syria, and North Korea. The Defense Department's Nunn-Lugar program and the State Department's Nonproliferation and Disarmament Fund help support these efforts. (For more information on the Nunn-Lugar program, see Chapter 10.) In addition, U.S. support for such organizations as the International Atomic Energy Agency and the Korean Peninsula Energy Development
    Organization is critical to meeting our non-proliferation goals.
      U.S. bilateral assistance programs are also critical to tackling other
    important transnational problems. Our international counter-narcotics
    efforts are making real progress in drug-producing countries. After
    several years of deeply cutting the Administration's budget requests for
    counter-narcotics purposes, Congress provided the full requested amount
    for 1997, permitting the United States to intensify its efforts to curb
    cocaine production in the Andean countries by offering growers
    attractive economic alternatives. The budget proposes $230 million for
    the State Department's narcotics and anti-crime programs, eight percent
    more than in 1997, with most of the increase focussed on programs in
    Peru.
      In addition, USAID development assistance and U.S. contributions to
    international efforts, such as the Global Environment Facility, support
    large and successful programs to improve the environment and reduce
    population growth. The United States is the recognized world leader in
    promoting safe and effective family planning projects.
      Disasters, humanitarian crises, and refugee flows are certain to
    remain central challenges to our leadership. The budget continues our
    historically strong commitment to refugee and disaster relief, proposing
    $1.7 billion, which sustains these programs at the 1997 level. This
    assistance, which reflects the humanitarian spirit of all Americans, has
    long enjoyed bipartisan support.

    Conducting Foreign Affairs

      An effective American diplomacy is the critical foundation for meeting
    our foreign policy goals. The budget supports a strong U.S. presence at
    over 250 embassies and other posts overseas, promoting U.S. interests
    abroad and protecting and serving Americans by providing consular
    services. These activities include the basic work of diplomacy--the
    reporting, analysis, and negotiations that often go unnoticed but that
    allow us to anticipate and prevent threats to our national security as
    well as discover new opportunities to promote American interests. The
    budget proposes $2.7 billion for the State Department to maintain its
    worldwide operations, modernize its information technology and
    communications systems, and accommodate security and facility
    requirements at posts abroad.
      The budget also proposes two significant innovations in State
    Department management.
      One would make about $600 million in immigration, passport,
              and other fees, which now go to the Treasury Department,
              available to finance State Department operations directly.
              Improvements in how these State Department operations perform
              will, thus, be directly linked to the receipts they generate.
      The other innovation restructures the management of the
              diplomatic platform to support the overseas activities of
              other Federal agencies. This reform recognizes the magnitude
              of the State Department's overseas administrative workload,
              the need to carry it out efficiently, and the need to allocate
              the costs of overseas support fairly among agencies. With
              approval of the President's Management Council, the various
              agencies represented abroad have designed a new overseas
              administrative arrangement--the International Cooperative
              Administrative Support Services program. The Administration
              will propose to fund this new arrangement in a budget
              amendment that it will send to Congress shortly after
              transmitting the budget.