[Budget of the U.S. Government]
[VI. Investing in the Common Good: The Major Functions of the Federal Government]
[13. International Affairs]
[From the U.S. Government Publishing Office, www.gpo.gov]
13. INTERNATIONAL AFFAIRS
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Table 13-1. FEDERAL RESOURCES IN SUPPORT OF INTERNATIONAL AFFAIRS
(In millions of dollars)
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Estimate
Function 150 1996 -----------------------------------------------------------------
Actual 1997 1998 1999 2000 2001 2002
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Spending:
Discretionary Budget Authority... 18,122 18,109 22,974 20,079 19,095 18,811 18,762
Mandatory Outlays:
Existing law................... -4,840 -4,744 -4,433 -3,963 -3,839 -3,655 -3,487
Proposed legislation........... ......... ......... 37 ......... ......... ......... .........
Credit Activity:
Direct loan disbursements........ 1,674 2,150 1,900 2,191 2,162 2,013 2,023
Guaranteed loans................. 8,418 12,692 12,059 13,093 13,736 13,702 14,000
Tax Expenditures:
Existing law..................... 6,520 6,980 7,565 8,165 8,790 9,445 10,125
Proposed legislation............. ......... 10 -820 -1,408 -1,484 -1,674 -1,773
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The International Affairs function, for which the Administration
proposes $23 billion for 1998, encompasses a wide range of activities
that advance American interests through diplomacy, foreign assistance,
support for American exports, and the activities of international
organizations. Certain tax provisions also support American business.
The conduct of foreign relations is inherently a governmental function,
which explains the need for sustained Government activity and budgetary
support.
Diplomacy
The State Department and its overseas operations are at the heart of
international affairs activities and programs, and they consume $2.7
billion, or 14 percent, of the resources. These funds finance the
salaries and related operating expenses of the Foreign Service and other
Department personnel, and the costs of overseas facilities. The
Department carries out foreign policy planning and oversight in
Washington, conducts diplomacy, and represents the United States at over
250 overseas embassies and other posts. Overseas posts also provide
administrative support to about 25 other Federal departments and
agencies.
The major achievement of American diplomacy over the past half
century was creating and sustaining the alliances, notably NATO, that
successfully countered the Soviet bloc's threat to world security. More
recently, diplomatic objectives include establishing viable democracies
in formerly totalitarian countries such as in Eastern Europe and the
former Soviet Union, curbing regional instability in areas of importance
to U.S. security such as Bosnia, promoting the American economy through
trade negotiations and the support of U.S. businesses, and addressing
transnational issues such as the environment through multilateral and
bilateral negotiations. American diplomacy also has been critical over
the past 20 years in promoting peace and reconciliation in the Middle
East. Finally, the Department has the continuing responsibility to
protect and assist U.S. citizens abroad.
Foreign Assistance
The largest single part of international affairs spending--$13.7
billion, or 74 percent of the total--goes for a wide variety of overseas
assistance programs traditionally cat-
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egorized as security assistance,
development aid, and humanitarian assistance.
Security Assistance: International Security Assistance comes mainly
through the Foreign Military Financing program (FMF, which the State
Department oversees and the Defense Security Assistance Agency manages)
and the Economic Support Fund (ESF, which State oversees and the U.S.
Agency for International Development manages). Over the past 50 years,
security aid helped support the military establishments of friendly
countries, mainly around the perimeter of the Soviet Union, and helped
ease the economic strain of their defense forces. On the whole, these
countries played a critical role in containing the Soviet Union.
The FMF program finances the transfer of military goods and services
to eligible countries, using grant funds and a small loan program. The
ESF program provides only grant funding. Currently, these two programs
devote an overwhelming share of their resources to supporting the Middle
East peace process. For a number of years, over $5 billion a year has
gone for this purpose. This funding demonstrates strong U.S. support for
the actions that regional leaders are taking to advance the peace
process. Most of the remaining funds support the transition of Eastern
European countries to NATO membership, the establishment of democracy in
countries such as Angola, Cambodia and Haiti, and the training of
foreign military personnel, primarily from developing countries.
Development Assistance: Development assistance is carried out through
a range of programs:
The Treasury Department manages contributions to multilateral
development banks. A major portion of them support the World
Bank group of institutions, which make development loans both
at near-market rates and on highly-concessional terms, and
which provide financing and investment insurance for private
sector activity in the developing world. Contributions also go
to four regional development banks for Africa, Asia, Europe
(lending to Eastern Europe and the New Independent States of
the former Soviet Union), and Latin America. All but the
European bank have concessional loan programs. Two special
programs also receive U.S. contributions: the Global
Environment Facility, which supports environmental activities
related to development projects; and the North American
Development Bank, which was established in conjunction with
the North American Free Trade Agreement and which supports
environmental projects along the U.S.-Mexican border.
The bilateral development assistance programs of the U.S.
Agency for International Development (USAID) target five
sectors: broad-based economic growth, population (for which
the United States is the leading donor worldwide), health, the
environment, and democracy building. In recent years, USAID
has significantly restructured its program to focus on
countries most likely to adopt economic reforms, in order to
encourage free markets along with improvements in democratic
governance. USAID has developed performance measures to help
it allocate resources, and has made major internal management
reforms to improve its effectiveness and cut costs.
State, USAID, and other agencies (the U.S. Information Agency,
Export-Import Bank, Peace Corps, and Overseas Private
Investment Corporation) also carry out grant and lending
programs similar to development assistance to support the
transition to free market democracy in Central Europe and the
New Independent States.
Encouraging economic development has proven a difficult task,
requiring far more time for success than policy makers assumed in the
early 1960s when they initiated many of the current programs.
Nevertheless, a number of developing countries have shifted from grants
and highly concessional loans to near-market rate loans, and a few
countries have graduated from the ranks of foreign assistance
recipients. Some early recipients of U.S. bilateral assistance in East
Asia are now among the world's most dynamic economies, and the major
Latin American countries no longer require large-scale grant aid.
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Humanitarian Assistance: Humanitarian assistance programs also
encompass various activities:
USAID manages two food aid programs under Public Law 480,
first enacted in 1954. The agency makes humanitarian food
donations, under Title II of the law, through U.S. voluntary
agencies and the United Nations World Food Program, and
directly to foreign governments. Depending on the
circumstances each year, about half of this program goes to
disaster relief--with recent large donations in such areas as
central Africa and Bosnia--and half to longer-term development
projects. Under Title III, USAID provides food to governments
that sell it, then use the proceeds to carry out agricultural
reforms.
State and USAID also manage funds for refugee support and
disaster assistance. State manages humanitarian refugee relief
funding --mainly grants to international agencies such as the
United Nations High Commissioner for Refugees and the
International Committee of the Red Cross. USAID manages the
Office of Foreign Disaster Assistance, which provides grants
to deal with natural and human disasters overseas. In a
crisis, these two programs and Title II of Public Law 480 are
closely coordinated.
The United States continues to lead the world in responding to
humanitarian crises, due to Americans' support for such assistance and
U.S. voluntary agencies' unequaled capacity to implement relief programs
quickly and effectively. This humane concern and excellent program
delivery has, over the years, countered world food shortages, alleviated
the impact of major droughts in particular countries, managed surges of
refugees, and dealt with man-made disasters such as genocide in Rwanda.
Export Promotion
While U.S. diplomacy and foreign assistance promote open markets and
export opportunities for U.S. business, three other international
affairs agencies more directly support or finance American exports. The
Export-Import Bank provides short- and long-term loans and loan
guarantees and insurance to support U.S. exports, primarily exports of
capital goods. Bank support is designed to remedy imperfections in
private capital markets, and to counter financing by the official export
credit agencies of other countries. The Overseas Private Investment
Corporation provides loans, guarantees, and insurance for U.S. business
investment overseas. The Trade and Development Agency provides grant
financing for feasibility studies on major infrastructure and other
development projects abroad. These agencies' activities generate
considerable payoffs for U.S. exports.
A series of tax preferences also benefit U.S. trade activities.
Americans working abroad, for example, often may exclude $70,000 of
income and a portion of their housing costs from taxes. In addition,
U.S. exporters who work through Foreign Sales Corporations may exempt
significant portions of their income from U.S. taxes. U.S. exporters
also may allocate more of their earnings abroad (and thereby reduce
their tax obligations). Finally, earnings from U.S.-controlled foreign
corporations benefit from a tax deferral--they are not subject to U.S.
taxes until they are received by U.S. shareholders as dividends or other
distributions.
International Organizations
The United States promotes its foreign policy goals through a wide
variety of international organizations, to which it makes both assessed
and voluntary contributions. While our global leadership is most clear
in the United Nations, other organizations are important to U.S.
interests.
The International Atomic Energy Agency, for example, strongly
supports America's non-proliferation goals, while the World Health
Organization pursues our goal of eradicating disease. NATO advances our
national security goals in Europe. We support our development assistance
goals as a leading contributor to the United Nations Development
Program. Finally, our assessed contributions to U.N.-supported
peacekeeping operations, and our voluntary contributions to such
peacekeeping efforts as the Multilateral Force in the Sinai, support
peace-keeping in regions that are important to our interests.