[Budget of the United States Government]
[V. Preparing For the 21st Century]
[9. Advancing United States Leadership in the World]
[From the U.S. Government Publishing Office, www.gpo.gov]
9. ADVANCING UNITED STATES LEADERSHIP IN THE WORLD
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Nations are now setting the international ground rules for the 21st Century,
laying a foundation for security and prosperity for those who live within them,
while isolating those who challenge them from the outside. This system will
develop and endure only if those who follow the rules of peace and freedom
fully reap their rewards. Only then will our people believe that they have a
stake in supporting and shaping the emerging international system.
President Clinton
September 1997
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Americans have a tremendous stake in world events. The establishment
of democracy and market economies in the former Soviet bloc, the safe
disposal or storage of weapons of mass destruction in Russia and
elsewhere, the identification and control of deadly tropical diseases in
Africa, and the maintenance of healthy economies in Asia and Latin
America--all of these are important to the security, health, and
prosperity of the American people.
American diplomacy, implemented through international affairs
programs, is the means by which the United States leads abroad on many
important issues. For several years, the resources that Congress
provided were inadequate to ensure that leadership. In 1998, however,
the Administration and Congress worked successfully to build major
bipartisan support for an increase in international affairs spending,
including special legislative provisions to facilitate support of
international financial institutions and the United Nations (UN) and
other international organizations.
Despite welcome congressional action on international affairs
programs, an unfinished agenda remains in areas critical to U.S.
national interests. Most striking, the Federal Government must provide
more resources for key programs. To support continued U.S. economic
growth, Congress should continue to support the decisive action of the
International Monetary Fund (IMF) and U.S. leadership in that
institution by providing the supplementary contingent IMF funding that
the Administration sought and replenishing the IMF's basic financial
resources. For the UN, whose Security Council deals with security issues
from Iraq to Bosnia, and for related international organizations dealing
with such issues as health and labor conditions, Congress should take
steps to pay $1 billion in U.S. arrears on treaty-mandated
contributions. Congress should also continue to pay off arrears to the
multinational development banks and the Global Environment Facility
(GEF), which total $638 million.
In the area of trade, where the growth in exports has been so critical
to our recent economic prosperity, Congress should give the President
traditional negotiating authority to help fuel our surging exports into
the next century. Congress also should enact legislation promoting trade
with Africa and the Caribbean Basin. The Administration proposes more
export financing to take advantage of opportunities emerging in regions
such as the New Independent States (NIS) of the former Soviet Union and
to match the government financing offers of other countries. The
Administration also proposes to maintain or expand programs that support
democracy and free market economic systems in the former communist
countries and in Africa by encouraging trade and investment, not only
for America's security but also for creating sources of future export
demand.
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In providing $19.6 billion for regular international affairs programs
and $502 million for arrears, the budget proposes an activist approach
to advance U.S. leadership around the world (see Table 9-1). It would
complete last year's unfinished business and target funding increases to
the most effective programs to achieve foreign policy objectives,
rejecting outmoded activities and poorly-performing projects. This
request would strengthen U.S. leadership and benefit the American
people, while costing just a third of one percent of our national
income.
Protecting American Security and Promoting Democracy
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 has
generally been unable to act effectively without the United States as a
leader and a full partner. Advancing U.S. interests in a global economy
brings expanded missions to our diplomacy, our trade strategy, and our
assistance programs. A less-orderly world also creates new challenges to
our security--such as the proliferation of weapons of mass destruction,
international terrorism and crime, narcotics, and environmental
degradation.
Developments in the NIS will prove important to U.S. national
security. Progress in most of those countries toward democracy and free
markets has been steady, but sometimes slow and uneven. In Russia, the
key to regional security, a freely elected government is gradually
creating the legal framework and governmental infrastructure for
democracy and a sound economy. Across the NIS, America's continued
leadership will be key to maintaining international support for this
crucial transition.
The budget proposes $925 million for assistance to the NIS, 20 percent
above the 1998 level. These funds will advance work under the
Partnership for Freedom program
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Table 9-1. INTERNATIONAL DISCRETIONARY PROGRAMS
(Budget authority, dollar amounts in millions)
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Dollar Percent
1997 1998 1999 Change: Change:
Actual Estimate Proposed 1998 to 1998 to
1999 1999
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International development and humanitarian assistance \1\..... 6,494 7,036 7,427 +391 +6%
International security assistance............................. 5,980 6,044 6,159 +115 +2%
Conduct of foreign affairs \1\................................ 3,890 3,741 4,146 +405 +11%
Foreign information and exchange activities \2\............... 1,116 1,134 1,134 ........ ........
International financial programs.............................. 670 619 782 +163 +26%
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Subtotal, International discretionary programs................ 18,150 18,574 19,648 +1,074 +6%
Multilateral Development Bank arrears....................... ........ 360 502 +142 +39%
International Organization arrears \3\...................... ........ 100 ........ NA NA
=================================================
Total, including Arrears...................................... 18,150 19,034 20,150 +1,119 +6%
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ANA = Not applicable.
\1\ Excluding arrears payments.
\2\ Pursuant to Section 309(g) of the Foreign Relations Authorization Act, 1994 and 1995, the President hereby
determines that continuation of funding for Radio Free Asia for 1999 is in the interest of the United States.
\3\ The Administration will transmit its request for arrears later.
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to use trade and investment measures, private sector partnerships, and
cooperation with non-governmental organizations to stimulate free market
economic growth. One new activity is the Presidential Management
Training Initiative, to which Presidents Clinton and Yeltsin recently
agreed, that will enable NIS business managers to receive training and
internships with U.S. firms, benefitting the managers, the firms, NIS
economies, and U.S. foreign policy.
After nearly a decade of U.S. and international support, the
transition to democracy and free markets in Central and Eastern Europe
has been remarkably successful. Our assistance to the governments of
most of the countries in the northern portion of the region has ended,
or will soon. These countries are moving toward economic integration
with the United States and Western Europe. Last year's highlight was
NATO's decision to accept three countries--the Czech Republic, Hungary,
and Poland--as members. As a result, the budget will provide over $100
million in security assistance to help integrate these countries'
military forces and to aid other potential candidates for NATO
membership. In addition, this budget projects increases in NATO's three
common-funded budgets for the coming years to reflect certain costs
associated with NATO's enlargement. In December, NATO estimated that the
costs of enlargement that it will bear within these three budgets will
be about $1.5 billion over the next 10 years, of which the United States
will pay about one-quarter, or less than $40 million a year on average
during this period, from Defense Department funds.
The budget proposes $465 million in economic aid for Eastern Europe
and the Baltic States, $225 million of which would support the firm U.S.
commitment to see the Dayton Accords fully implemented for Bosnia.
Assistance to Bosnia will complement the continuation of U.S. troops in
that troubled nation, particularly by financing training and other
support for local police to foster effective, fair, and professional
public safety forces. Economic assistance will strengthen the emergence
of a vital private sector. The Bosnians are beginning to realize the
benefits of free markets, and we must strongly foster their nascent
prosperity to demonstrate that a return to hostilities will hurt all
Bosnians.
For the other southern-tier countries of Eastern Europe, U.S.
assistance will apply the lessons learned elsewhere in the region to
accelerate economic reform, particularly in Romania, where the United
States has offered a reform-oriented partnership with the newly elected
government. During the Cold War, private civil institutions in Eastern
Europe eroded greatly, and fully reconstructing them within the short
time since then has not been easy. Thus, the budget proposes to create
an innovative $100 million Civil Society Trust Fund, financed half by
Federal funds and half by private contributions, mainly from
foundations. In countries where our official aid has ended, the Fund
will foster grass roots political activity and viable non-governmental
organizations.
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 unique
leadership role in the effort to craft a durable, comprehensive regional
peace. The budget proposes $5.3 billion for security assistance to
sustain the Middle East peace process. The assistance program provides
$100 million for the third year of a Middle East Peace and Stability
Fund that will provide aid mainly to Jordan in recognition of that
country's needs and King Hussein's important continuing contributions
toward peace and reconciliation.
The rest of our security assistance programs are designed to support
peace and democracy in countries and regions where our leadership has
helped those processes emerge. Under the budget, economic support
funding for Haiti would double, to $140 million, to ensure the success
of that country's hard-won democracy. The budget also would support
reconciliation and peace in Guatemala and strengthen the capacity of
African governments to provide regional peacekeeping on that troubled
continent.
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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, economic, and humanitarian needs. We
sponsored and provided significant funding for the UN, NATO, the IMF,
and the World Bank, along with other specialized regional security and
financial institutions that became the foundation of international
cooperation during the Cold War.
To ensure financial stability for this international community,
members of many of the UN and related international organizations (IOs)
entered into treaties or similar instruments committing them to pay
specified shares (or, ``assessments'') of IO budgets. Congress ratified
these agreements, making them binding on the United States. For the
multilateral development banks (MDBs--that is, the World Bank, its
regional development bank partners, and the GEF), the developed
countries, including the United States, make firm commitments to regular
replenishments of their resources, in our case subject to the
congressional authorization and appropriations processes.
By 1997, America's leadership in this international institutional
network had seriously eroded due to past congressional cuts in
appropriations needed to meet our assessments and commitments. The
resulting arrears to the IOs had accumulated to almost $1.5 billion, and
arrears to the MDBs were nearly $900 million. In the 1998 budget, the
Administration proposed to pay off the bulk of our arrears on
assessments over two years if the IOs undertook budget and management
reforms, including lowering the U.S. annual assessment percentage in the
future. It also proposed to pay off MDB arrears over three years in
light of program and management reforms already under way.
As part of last year's bipartisan budget agreement, Congress provided
room in the budget resolution to pay most of the accumulated arrears
while still funding ongoing international affairs programs at an
adequate level. Under this arrangement, Congress cleared over a third of
the Nation's MDB arrears. The Administration and Congress also developed
bipartisan support for authorizing legislation to clear many of the
assessment arrears over three years in return for specified IO reforms,
and Congress passed an initial 1998 appropriation of $100 million,
subject to enacting the authorization. But the legislation stalled, thus
undermining U.S. diplomatic efforts to achieve budgetary reforms and
leading to a serious loss of U.S. credibility in the UN and other IOs.
With the U.S. failure to address its sizable arrears, the UN General
Assembly in December 1997 established assessment rates for the next
three years without reducing the U.S. percentage. Due to a major U.S.
diplomatic effort, however, UN members agreed to reconsider the three-
year decision in June 1998--provided that the United States resolves its
arrears situation. To effect UN rate changes, the Administration and
Congress must enact legislation by May 1998. The Administration will
shortly transmit a proposal that seeks early legislative action to pay
over $1 billion of the $1.5 billion of accumulated arrears. The proposal
will give the Administration the statutory flexibility it needs in June
to reduce our assessment rates and achieve other key reforms over the
next two years. The Administration is prepared to work with Congress to
shape the legislation. In addition, Congress must appropriate $931
million to meet 1999 assessments--more than would have been required if
Congress had passed last year's authorizing package.
In addition, the budget proposes $502 million to continue the planned
payoff of MDB and GEF arrears and $1.15 billion to pay current
commitments to these institutions, which provide most of the assistance
to those poor countries around the world that are undertaking promising
economic reforms. The United Sates has convinced the MDBs to do more,
while asking less from the American taxpayer. As a result of recent
negotiations, U.S. commitments for all the MDBs have been cut by 40
percent and are now below what we once paid for the World Bank's
International Development Association affiliate alone.
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Supporting International Monetary Programs
As the world becomes more economically integrated, the smooth
functioning of its monetary system becomes more critical to every
nation's economy. Severe disruptions in Asian economies demonstrate the
world-wide impact of crises in major economies. Even the U.S. economy is
not immune, despite its size, strength, and depth. The Administration is
having urgent consultations with Congress on the most effective means to
foster an early, tenable return to more stable international monetary
conditions.
For 1998, the Administration proposed a one-time appropriation to a
special international facility, the New Arrangements to Borrow (NAB).
With credit commitments from 24 other nations, including most
industrialized countries and several emerging market economies, NAB
would provide a set of contingent credit lines to supplement IMF
resources, if necessary, when a monetary crisis in one or more countries
threatens the entire system. Congress did not enact the appropriation.
These funds are urgently needed as a reserve in case the emergency
demands on IMF quota resources deplete the IMF's liquidity so much that
it cannot maintain international monetary stability.
As the global economy and capital markets expand, the IMF's basic
(quota) resources must rise so that it can carry out its ongoing
responsibilities to promote monetary stability and healthy economies.
Since its inception in 1945, the IMF has played a major role in
fostering the unprecedented growth in world prosperity. Recent IMF
programs to provide crisis assistance in Asia have drawn heavily on the
Fund's quota resources. The United States needs to provide its share of
the IMF's proposed $87 billion increase in regular resources so that the
IMF can continue to meet members' anticipated demands while coping with
additional exceptional calls under current crisis conditions should they
arise. In consultation with Congress, the Administration expects to
request a 1998 supplemental appropriation of $14.5 billion for a U.S.
quota increase for the IMF and of $3.4 billion for the U.S. credit
commitment to the NAB. Because they are monetary exchanges, neither the
quota increase nor the credit commitment to the NAB would entail budget
outlays.
Increasing American Prosperity Through Trade
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. This goal is
increasingly central to America's diplomatic activities. The
Administration is 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. Specifically, the Administration is
working hard to ensure that America receives the full benefit of these
agreements, as recently illustrated by the December 1997 conclusion of a
key agreement on financial services.
To promote more mutually-beneficial trade relationships, the
Administration last year proposed fast track legislation to give the
President authority to negotiate trade agreements on which Congress
would get a simple up-or-down vote, without amendments that would
require renegotiation. Such trade agreements would further promote U.S.
export growth, creating high-wage jobs for Americans. Congress should
give the President this traditional negotiating authority.
The Administration also will propose to extend the Generalized System
of Preferences, which cuts tariffs on many imports from the developing
countries, beyond its current expiration date of June 30, 1998, and to
give expanded trade benefits to the eligible countries under the
Caribbean Basin Initiative. Also, as part of a larger trade and
investment initiative for Africa, the Administration will propose
special trade benefits to African countries that are reforming their
economies to encourage economic growth.
As various trade agreements offer opportunities for exports, the
demand for trade finance and investment support increases. The main U.S.
trade finance agency, the Export-Import Bank, has expanded its direct
and guaranteed loans and export insurance to countries that
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Investing in Trade Promotion
Trade plays a growing role in the U.S. economy. A third of America's economic growth of the last five years
has come from trade, while exports of manufactured goods, high-technology products, and agricultural goods have
risen by over 40 percent. Exports grew to 11.4 percent of Gross Domestic Product (GDP) in 1996, compared to 4.8
percent in 1960, while imports grew to 12.6 percent in 1996, compared to 4.3 percent in 1960. Today, exports
support over 11 million U.S. jobs--including one in five manufacturing jobs--and have generated nearly two
million new jobs in the past four years alone.
But the Nation has huge opportunities for further growth. While America accounts for 22 percent of the world's
wealth, it has only four percent of its consumers. The greatest export opportunities lie in the emerging market
economies of Latin America, Asia, the Middle East, Africa, Central and Southern Europe, and the New Independent
States of the former Soviet Union. Middle- and lower-income countries accounted for 80 percent of the rapid U.S.
export growth of the past eight years.
Trade barriers in these new markets often remain high, however, while some developed nations provide export
subsidies to their home-grown businesses. U.S. trade promotion programs are designed to open foreign markets,
combat foreign subsidies, finance and insure U.S. trade and investment where the private sector does not,
provide information, develop foreign markets, and provide government-to-government advocacy.
This budget invests heavily in trade promotion. It provides substantial increases for the Export-Import Bank,
which finances U.S. exports, and funds the Overseas Private Investment Corporation, which insures U.S.
investments abroad. In addition, the budget proposes increases for the Commerce Department's International Trade
Administration, which promotes U.S. trade through its Export Assistance Centers and overseas foreign commercial
offices. The multi-agency Africa Initiative and higher funding for the Agency for International Development will
help foster growing economies and future trading partners. Also, the budget proposes to extend the Generalized
System of Preferences and to provide expanded trade benefits for Caribbean Basin Initiative countries.
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cannot get import financing at reasonable terms and to match the
government export financing offers of other industrialized countries.
The Bank expects particularly heavy demand from the NIS for exports that
will benefit both the U.S. and the countries that receive them, and
contribute to economic and political reform across the NIS. The budget
proposes $825 million for the Bank, 18 percent above the 1998 level. It
also continues support for the investment insurance and finance programs
of the Overseas Private Investment Corporation, which also increase
exports, and for the Trade and Development Agency's (TDA) grants for
feasibility studies of capital investments abroad that can generate
follow-on exports. A special TDA program will focus on creating trading
opportunities in China. In addition, the budget provides an 18-percent
increase, to $20 million, for the Commerce Department's Market Access
and Compliance Unit, whose members monitor trade agreements and identify
compliance problems.
Supporting Development Assistance
Development assistance through the MDBs and, bilaterally, through the
U.S. Agency for International Development (USAID) helps many of the
poorest countries give their peoples more effective governments and
higher living standards. This assistance, including projects that create
the conditions for economic growth, promote democracy, enhance human
health, and provide basic education, serves long-term U.S. interests and
diminishes the need for short-term crisis intervention.
The Administration has streamlined USAID lending as well, focusing it
on countries most vigorously committed to the reforms that will generate
sustainable development. The budget proposes $1.8 billion for USAID's
development assistance programs. Along with ongoing African aid
programs, the budget proposes $30 million of special development
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aid programs to support the broader trade and investment initiative for
the continent. In addition, the budget proposes $35 million in special
debt relief to African countries eligible for the initiative.
Complementing these programs, another $35 million of security assistance
will go to the Great Lakes region in the interior of Africa to promote
the rule of law and conflict prevention among the warring parties there,
thus creating political conditions favorable to achieving the economic
growth that the area so badly needs.
The Peace Corps has helped spur the development of many countries
while promoting better understanding among nations, and the American
people strongly support the program. The budget proposes $270 million,
20 percent more than in 1998, to enable the agency to begin increasing
the number of volunteers abroad--with the goal of 10,000 volunteers by
the year 2000.
Leading the Response to New International Challenges
Another fundamental goal, 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.
In 1997, the Administration sought and obtained Senate ratification of
the Chemical Weapons Convention, which will begin imposing controls on a
class of destructive weapons not well regulated in the past. Congress
has not ratified the Comprehensive Nuclear Test Ban Treaty, which the
Administration transmitted in September 1997 and which is so important
to our national security. U.S. diplomacy and law enforcement activities
are playing a key role in preventing the spread of weapons of mass
destruction to outlaw states such as Libya, Iraq, Iran, Syria, and North
Korea. 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 critical to tackling other
important transnational problems. Our international counter-narcotics
efforts are making continued progress in drug-producing countries. After
several years of cutting deeply the Administration's funding proposals
for counter-narcotics, Congress has begun providing the requested
increases in order to cut the supply of illegal drugs, particularly
cocaine. The budget proposes a 20-percent increase in anti-drug funding,
to $255 million, which will permit the United States to intensify its
efforts to curb cocaine production in the Andean countries by offering
growers attractive economic alternatives.
In addition, USAID development assistance and U.S. contributions to
international efforts, such as the GEF, support large and successful
programs to improve the environment and reduce population growth. The
GEF works closely with the MDBs, promoting sound responses to climate
change, depletion of the ozone layer, and the extinction of species. The
United States is the recognized world leader in promoting safe,
effective family planning projects.
Conducting and Administering Diplomacy
Effective 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. The
basic work of diplomacy at these posts--the reporting, analysis,
negotiations, and other efforts that often go unnoticed--are at the core
of all U.S. foreign policy achievements, allowing us, among other
things, to anticipate and prevent threats to our national security as
well as discover new opportunities to promote American interests. The
overseas posts also serve as the administrative platform for the many
other U.S. agencies with personnel abroad, from USAID to the Departments
of Defense, Justice, and the Treasury.
In 1997, the Administration took two major steps to improve the
management of our diplomacy. First, a new management system, the
International Cooperative Administrative Support Services, will more
fairly allocate--
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among all agencies with an overseas presence--the administrative costs
that the State Department used to bear on its own. Agencies, in turn,
will be able to use the administrative services that most suit them.
Second, the State Department will reengineer its procurement system,
eliminating cumbersome procedures, providing services much quicker, and
significantly cutting costs.
The budget proposes $2.8 billion for the State Department to maintain
its world-wide operations, take major steps to modernize its information
technology and communications systems and ensure year 2000 compliance,
and accommodate security and facility requirements at posts abroad. It
proposes two major initiatives--construction of a new embassy building
in Berlin, where U.S. personnel have been in temporary facilities since
their move to the new German capital, and an embassy and related
facilities in Beijing, where current arrangements are inadequate to
house the representation appropriate to diplomacy with an important
world power and to ensure security.
Finally, the Administration expects Congress to enact legislation in
early 1998 to implement its proposal to consolidate the Arms Control and
Disarmament Agency and the U.S. Information Agency into the State
Department, thus better integrating arms control and public diplomacy
into the mainstream of foreign policy.