[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                        APPROPRIATIONS FOR 1998

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

SUBCOMMITTEE ON FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS

                    SONNY CALLAHAN, Alabama, Chairman

JOHN EDWARD PORTER, Illinois         NANCY PELOSI, California
FRANK R. WOLF, Virginia              SIDNEY R. YATES, Illinois
RON PACKARD, California              NITA M. LOWEY, New York
JOE KNOLLENBERG, Michigan            THOMAS M. FOGLIETTA, Pennsylvania
MICHAEL P. FORBES, New York          ESTEBAN EDWARD TORRES, California
JACK KINGSTON, Georgia               
RODNEY P. FRELINGHUYSEN, New Jersey  

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

 Charles Flickner, William B. Inglee, and John Shank, Staff Assistants,
                     Lori Maes, Administrative Aide
                                ________

                                 PART 2
                                                                   Page
Secretary of State................................................    1
Secretary of Treasury.............................................  121
Security Assistance...............................................  199

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

41-767 O                    WASHINGTON : 1997


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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director








      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                        APPROPRIATIONS FOR 1998

                              ----------                              

                                      Wednesday, February 12, 1997.

                         U.S. STATE DEPARTMENT

                                WITNESS

HON. MADELEINE K. ALBRIGHT, SECRETARY, U.S. DEPARTMENT OF STATE

                    Mr. Callahan's Opening Statement

    Mr. Callahan. Good morning, Madam Secretary, and welcome to 
our subcommittee. We will call the subcommittee to order to 
receive testimony from our new Secretary of State. I want to 
note that this is Mrs. Albright's first appearance before the 
subcommittee as Secretary of State. This is also our first 
opportunity to welcome some new Members to our subcommittee, 
Jack Kingston of Georgia and Rodney Frelinghuysen of New Jersey 
and Tom Foglietta of Pennsylvania. Mr. Ambassador, it is nice 
to see you here.
    Madam Secretary, I personally welcome your appointment by 
President Clinton. You have enthusiastic bipartisan support 
here on Capitol Hill and I know every member of the 
subcommittee joins me in welcoming you this morning, and 
particularly I thank you for taking time from a very hectic 
schedule to be here. This will greatly facilitate our schedule 
and enable the committee to report a bill by the end of May.
    First, I would like to ask your indulgence to go over some 
material provided by the State Department to justify the budget 
proposal by the President last week. I would like to put into 
an appropriations context six underpinning objectives from the 
American foreign policy laid out in that material.
    Appropriations for two of those objectives, providing 
humanitarian assistance and promoting American employment 
through trade and investment abroad, come from this 
subcommittee. In recent years, the committee has fully funded 
administration requests for refugees and disaster assistance, 
but this year may bring discussion of Ex-Im Bank or OPEC. These 
objectives consume about 15 percent of the committee's funds.
    Most appropriations for our third and widely accepted 
objective, securing peace, come from the National Defense 
Subcommittee, yet this subcommittee does its part by reserving 
at least 42 percent of its fund to support the peace process in 
the Middle East. As you know, the region's leaders know by now 
that we can't provide more than the $5.3 billion for the Middle 
East without inflicting grave damage on your Department's other 
objectives. I should note that 4 percent of our budget supports 
peace in other regions, such as Bosnia.
    A fourth objective, advancing diplomacy and diplomatic 
readiness, is funded by the Commerce, Justice, and State 
Department Subcommittee. That subcommittee also provides much 
of the funding for a fifth objective, and that is building 
democracy. Although as much as 3 percent of our subcommittee's 
funding is dedicated to that end, it is difficult and 
contentious. The sixth foreign policy objective, fostering 
sustainable development is what takes up much of our time and 
up to 36 percent of our resources. This is what most people 
consider to be foreign aid.
    There is some question whether this is a reasonable 
objective for the Federal Government. Many suggest that our 
efforts can make a positive impact only in a limited number of 
countries whose leaders are genuinely interested in helping 
their people, and almost everyone has different ideas on how to 
do this.
    For my part, I would focus on a clear and simple goal that 
is enthusiastically endorsed by my colleagues and encourage the 
people in the Government of the United States to do everything 
we can to help children born in poor countries survive. Each 
child needs access to health care and basic education. Only 
then will any country have the opportunity to move forward to 
more democracy and a market economy. That is what I would 
consider to be sustainable development.
    I am very disappointed that the budget drops the Child 
Survival Fund that I crafted on a bipartisan basis. I am even 
more disappointed that your budget cuts the Child Survival and 
Disease Fund by nearly $40 billion.
    Madam Secretary, having laid out many areas of agreement 
and a few concerns, let me reiterate I have a few disagreements 
with the increases you propose in this budget, although we 
recognize it doesn't fully yet reflect your own special talents 
and your own special personality. We look forward to the review 
of the foreign affairs agencies, changes are overdue, though no 
fault of yours.
    We want to work with you, and you know that we will be able 
to do so. Like you and the Secretary of the Treasury, I want to 
keep promises to international organizations and to the 
multilateral development banks that were made before we assumed 
our current positions. We appreciate your determination to 
reform the United Nations' systems and we appreciate Secretary 
Rubin's commitments to reduce future commitments to the 
multilateral banks.
    Like you, I want to protect and promote American strategic 
priorities. In addition to Central Europe and the former Soviet 
Union, I would join our friend, President Clinton's special 
envoy to the region, Mack McLarty, in adding an equal emphasis 
on Latin America and to the Caribbean. Economic cooperation 
with the East and Southeast Asia, too, is vital to American 
interests.
    Like you, I want to ensure adequate flexibility to meet 
crises abroad. That is why the House has declined to set aside 
earmarks for specific countries or regions. That is why we 
didn't restore a separate account for Africa. That is why we 
have resisted pouring scarce but flexible economic support 
funds into Haiti when ample other forms of assistance were 
available. We have no problems if you consider these your 
priorities.
    Our problem is that the President and the Congress are 
trying to balance the budget in 5 years, which we should. Under 
those circumstances, the subcommittee is unlikely to receive a 
big enough allocation to accommodate all of your priorities or 
mine. Even if such an allocation were available, I am not sure 
if a 10 percent increase in foreign aid would pass either this 
committee or the House.
    Madam Secretary, as far as I know, you did not join our 
friend and former Secretary Christopher in successfully 
appealing to the President for this additional $1 billion. You 
know by now that I would give you a check for almost all of the 
$12 million available to this subcommittee if I could. I would 
let you decide how to spend it as long as you promised to spend 
enough on child survival and for Latin America. But there are 
14 other ladies and gentlemen here who bring their own 
priorities and together we will conform to the administration's 
request based on our allocations.
    We are prepared to make those choices, but we welcome your 
suggestions today and for the future. Before you begin your 
testimony, Madam Secretary, I would like to notify the Members 
that you have a meeting, I think, with the Speaker at noon 
today and you are going to have to leave shortly before noon. 
First, I would like to yield to the Chairman of our full 
committee, the gentleman from Louisiana, Mr. Livingston.
    Mr. Livingston. Thank you very much, Mr. Chairman. 
Actually, in the interest of time I would defer my questions to 
the normal order, but first welcome the Secretary, congratulate 
her again on a formal basis for her appointment. We are 
enthusiastic about your appointment and wish you lots of 
success, both personally and professionally, and look forward 
to working with you, and hope that our differences will be few, 
but that together we will come up with the right solutions to 
some of the very difficult problems that face us.
    Secretary Albright. Thank you, Mr. Chairman.
    Mr. Callahan. Thank you. Now, I would like to recognize the 
Ranking Democrat for the first time in that official capacity, 
but a long time Member of this committee and a very well-
respected Member of the Congress and certainly my friend, 
Congresswoman Pelosi.

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman. Thank you 
for your leadership on child survival and other issues before 
this subcommittee, as well as your strong leadership in 
subjecting all of our spending to the harshest scrutiny. I 
think the Chairman of the full committee, has set out the 
appropriate challenge for us to work together to find solutions 
to the problems, even though we could find problems for 
solutions, too, around here. Our challenge is great in terms of 
the limitations of the sources.
    I listened attentively to your opening statement and I see 
it as our plan for the next few months. I can't think of a more 
appropriate way for us to begin than this very, very auspicious 
way, under these auspicious conditions with our new Secretary 
of State. We are all very, very proud of you, Madam Secretary, 
and I am very pleased to welcome you here today.
    It is a pleasure to work on this committee as the Ranking 
Democrat, and I want to congratulate you on your overwhelming 
confirmation in the Senate. We look forward to working with you 
in passing a bipartisan foreign aid bill. There are many 
challenges ahead, but I am hopeful that we can build a 
bipartisan consensus foreign policy that is backed up with 
adequate financial resources to ensure continued strong U.S. 
leadership throughout the world.
    The administration's budget request for fiscal year 1998 
contains increases in several accounts, including the U.N.'s 
programs, the international banks and aid to the New 
Independent States. While we are talking about funding, our 
colleague, our Chairman, has said that he would write the check 
for you now, but he has to deal with the rest of us. I want to 
assure you, Mr. Chairman, that I will support you all the way 
for as much funding as is necessary to protect our investment 
in peace.
    We have probably spent over $1 trillion during the Cold War 
period, and we now have peace. The situation is still fragile 
in the New Independent States, and I think it is important to 
make continued investments to protect the original huge 
investment in peace, which is so important to our country.
    In most cases, the increases requested, whether in U.N. 
programs or international banks, are to pay arrears owed by the 
United States for past commitments. The growth of our arrears 
both to the international banks and to the U.N. have the 
potential to seriously weaken policy objectives in these 
institutions. I don't know that has happened yet, but the 
arrearages have eroded our ability to lead. They may impede our 
ability to lead in critical areas.
    More importantly, if we do not address these issues our 
strength in these institutions will continue to erode. Everyone 
is aware of the tight budgets we face, but providing adequate 
resources for a strong foreign policy is essential to preserve 
our national security. As you know, the House will soon vote on 
the release of international family planning funds. The 
continued withholding of these funds will have an extreme 
effect on women and children throughout the world, and I hope 
that you will address these issues in your remarks. In fact, 
the text that I have seen demonstrates that you will.
    In closing, Madam Secretary, may I say that last night we 
were at the White House for a celebration of the life of Thomas 
Jefferson, our first Secretary of State. And in the 
presentation it was described how he came to write the 
Declaration of Independence, with a large focus on, ``We hold 
these truths to be self-evident, that all men are created equal 
and endowed by their creator with certain inalienable rights. 
Among those life, liberty and the pursuit of happiness,'' the 
credo of our great Nation.
    How proud Thomas Jefferson would be, I am sure, to have you 
committed to that credo following in his footsteps as Secretary 
of State. In that spirit I am pleased to welcome you here and 
wish you very much success.
    Mr. Callahan. Thank you, gentlelady.
    Madam Secretary, I guess we had better let you give your 
side of the issue, and this may be the last time we permit 
that. But nevertheless, we will ask it, if you will give your 
opening statement at this point.

                 Secretary Albright's Opening Statement

    Secretary Albright. Thank you very much, Mr. Chairman, and 
Chairman Livingston and Congresswoman Pelosi, thank you very 
much for all those kind statements. With the idea that you have 
just said that this may be the last time I can speak, my 
statement is a little bit longer than usual because I would 
like to lay out where we are going at the beginning of the 
second term.
    There is no doubt that together we have a very important 
job to do, and I think that will be evident as I go through 
this and from your questions. By giving careful consideration 
and approval to the President's request for funding for foreign 
operations, this subcommittee can give us the tools we need for 
sustained American leadership around the world. You can help 
promote peace and keep America strong and secure. You can help 
to safeguard our people from the continuing threat posed by the 
weapons of mass destruction. You can help to build our 
prosperity at home by opening new markets and creating new 
jobs.
    You can help emerging economies to build on past progress 
and grow in ways that are equitable and sustainable and that 
will create new trading partners for the United States. You can 
lend a hand to those from around the world, from educators to 
entrepreneurs who have been inspired by American ideals and who 
seek to build democracy in their own countries, and you can 
help to care for those who are in desperate need of 
humanitarian aid.
    Mr. Chairman and members of the committee, let us be clear 
at the outset. The purpose of American foreign policy and the 
purpose of our investments in internal programs is to keep 
America strong and respected. Our goal is to protect the 
interests of our citizens in an age when national borders are 
porous, markets are global, and many of the threats to our 
security cannot be dealt with by any one nation acting alone. 
Those American interests are not abstract, but real. Spending 
for foreign affairs is roughly 1 percent of our budget, but 
that 1 percent may well determine 50 percent of the history 
that is written about our era, and it effects 100 percent of 
the American people.
    For example, when we help to fund the U.N. Special 
Commission, we do more than ensure that Saddam Hussein's 
efforts to obstruct, evade and deceive international inspectors 
will fail. We make it less likely that soldiers from Fort Polk 
and fliers from Maxwell Air Force Base will again be sent into 
harm's way in response to Iraqi aggression.
    When we support exchange programs, we give students from 
around our country their first glimpse of the wider world in 
which they will compete after graduation. When we help other 
nations to grow, we expand the system of market democracies in 
which our own Nation has the largest stake. We also create 
opportunities for units and businesses here at home.
    For example, close to 80 percent of USAID contracts and 
grants go directly to American firms. To take one state at 
random, Mr. Chairman, more than 100 million in grants and 
contracts went to Alabama in 1995. These contracts create--it 
was at random.
    Ms. Pelosi. Alphabetical.
    Secretary Albright. These contracts create markets and 
contacts that will be valuable long after aid programs have 
ended. Mr. Chairman, as I have said, our international programs 
serve a wide range of interests. For the purpose of our budget 
presentation, we have separated them into several categories.
    The first, most extensive, and most important is the 
promotion of peace and security. Although the Cold War has 
ended, the threat posed to Americans by weapons of mass 
destruction has not. Arms control and nonproliferation efforts 
remain a key part of our strategy to keep America safe. The 
arms control agreements of recent years, the removal of nuclear 
weapons with Belarus, Kazakstan and Ukraine, the negotiation of 
a Comprehensive Test Ban Treaty and a Chemical Weapons 
Convention, the indefinite extension of the Nuclear 
Nonproliferation Treaty, have all enjoyed bipartisan support.
    You can help us to sustain our momentum by approving our 
request for funds for the International Atomic Energy Agency, 
the IAEA, which verifies compliance with the Nuclear 
Nonproliferation Treaty in more than 820 locations in 61 
countries. We also ask your support to fund America's share of 
the Korean Peninsula Energy Development Organization, or KEDO. 
This organization was created to implement the 1994 agreed 
framework between the United States and North Korea that froze 
that country's dangerous nuclear weapons program.
    Our earlier commitment helped to jump start KEDO and 
generated contributions from Japan and South Korea that will 
ultimately dwarf our own. KEDO now has 10 members and we will 
bring in at least three more this year to share the burden. But 
we must keep our commitment, $30 million for 1998, to make sure 
that others keep theirs.
    Mr. Chairman and members of the committee, our citizens are 
threatened not only by dangerous arms, but by dangerous drugs 
and criminals as well. This is a battle we must fight at home, 
but also overseas where illicit goods are produced and ill-
gotten gains are hidden away.
    Under the President's leadership, we have moved 
aggressively and with results. With our support, coca 
production in Peru has been reduced to its lowest level in 10 
years. Drug kingpins and money launderers from Latin America to 
Africa to Europe to Asia are feeling the pressure.
    A consensus is building that corruption and crime are 
global security threats and that decent people from around the 
world must close ranks, share information and take cooperative 
action. To do our part, we have requested a $17 million 
increase in funding for antinarcotics programs. When we support 
overseas arms control and anticrime efforts, we make Americans 
safer than they otherwise would be.
    The same is true when we help end conflict and respond to 
crises abroad. Neither our resources nor our responsibilities 
are unlimited. We must be careful in our commitments and 
selective in our actions. Nevertheless, we recognize that 
occasions will arise when our interests and those of our allies 
require an active American role.
    Today, we stand ready to play a continuing or increased 
role in helping to reduce tensions in such strategic regions as 
Cyprus and the Aegean, South Asia, Nagorno-Karabakh and 
Northern Ireland. In each case, however, our role will be 
influenced heavily by the party's desire for our assistance and 
their commitment to achieving a peaceful resolution of 
differences.
    In the Middle East, American diplomacy was essential in 
producing an agreement on Israeli redeployment in Hebron. That 
agreement has helped to create a new confidence and trust 
between the sides, restored momentum to the process, and 
provide a road map for the future.
    To maintain this momentum, we have a three-part agenda. We 
will support continued progress between the Israelis and 
Palestinians. We will search for ways to stimulate negotiations 
between Israel and Syria and Israel and Lebanon, and we will 
encourage other states to broaden the peace process by 
expanding ties with Israel.
    To support our diplomacy, we must maintain appropriate 
bilateral assistance to the parts that continue to participate 
in the process. As you know, Prime Minister Netanyahu and Chairman 
Arafat will visit Washington this month and President Mubarak and King 
Hussein will meet with President Clinton in March.
    As Secretary of State, I will assure them and I assure you 
that America will continue to stand with the peacemakers and 
against the bomb-throwers in this strategic region. That is in 
America's interests. It is consistent with the commitments we 
have made, and it reflects the kind of people we are and it is 
right.
    Of the many conflicts and disputes around the world this 
past year, the interrelated conflict in Central Africa has been 
the most deadly. Today in Rwanda there remains the challenge of 
reintegrating returned refugees into society and helping an 
overburdened justice system to cope with the aftermath of 
genocide.
    In Burundi, the task is to spur meaningful political 
dialogue that will open the door to reconciliation and to 
needed international assistance. In Zaire, the problems are 
even more daunting: to encourage a halt to factional violence, 
ensure respect for human rights and create stability based on 
democratic principles. The stakes are high. Zaire is a country 
of 41 million people that borders nine other countries.
    We have already seen that violence in the Great Lakes 
region spreads with alarming ease and grave consequences. If 
the situation here should spin out of control, we face the risk 
of years of violence, a massive outflow of refugees and 
emergency humanitarian costs in the billions of dollars. As we 
pursue preventive steps diplomatically, we need your help in 
supporting our requests for aid funds to cope with the short 
term, and we need your backing for our plan to establish an 
African Crisis Response Force to increase the capacity of 
African governments to respond to future outbreaks of violence 
in their region.
    As we work with others to resolve problems such as civil 
conflict and proliferation, we need strong partnerships with 
other leading nations. These are the bonds that hold together 
not only our foreign policy, but the entire international 
system. By acting together, we are able to elevate standards of 
international behavior, spur economic and social progress and 
strengthen the rule of law. We also leverage resources far 
beyond our own.
    Next week I will visit key capitals in Europe and Asia to 
build on the relationships I inherited from my predecessor, and 
he from his. I will explore the prospects for deeper 
cooperation on many of the critical issues of our day and many 
of the initiatives for which the President has requested funds.
    Today, for example, in Europe, American soldiers and their 
counterparts from NATO and 17 non-NATO states are cooperating 
in SFOR, giving Bosnia the breathing space it needs for 
economic reconstruction and political healing. As we help the 
Bosnian people establish a stable military balance and better 
judicial and legal institutions, the need for an international 
military presence will diminish.
    I hope that this subcommittee will support our SFOR forces 
by approving the President's supplemental request for Bosnia 
and that you will, on a related matter, also endorse our 
request for continued financial support for the Internal War 
Crimes Tribunal, to which we are the largest contributor. The 
same countries that are working to implement peace in Bosnia 
are also striving to build lasting stability through NATO's 
partnership for peace.
    This year, we have requested $70 million in military 
assistance for partner countries. This is an increase of $10 
million over last year and will help our partners to 
participate more fully in NATO activities. Mr. Chairman, peace 
and security are the paramount goals of our international 
programs, but promoting economic prosperity is another top 
priority, and here, too, our record is good.
    During the past four years, the Clinton administration has 
had extraordinary success in helping the economy grow at home 
by opening markets abroad. Our exports have grown by 34 percent 
since 1993, generating 1.6 million new jobs, and we have laid 
the groundwork for free and open trade in our hemisphere by the 
year 2005 and in the Asia-Pacific region by 2020.
    But we cannot rest on our past accomplishments. Our future, 
in an ever more competitive global marketplace, depends upon 
strong export promotion efforts and a vigorous State Department 
presence around the world. I am committed to helping American 
business and labor compete and win in a global market that is 
open and fair.
    This subcommittee can help, as it has in the past, by 
supporting our request for the Export-Import Bank and the Trade 
and Development Agency. These programs not only serve to build 
American exports in jobs, they are a fundamental tool of 
American foreign policy.
    Mr. Chairman, many of America's fastest growing markets are 
in developing countries. The transition to an open economic 
system is underway, but incomplete. Many of these countries are 
held back by high interest rates of population growth, lack of 
access to health care and education, a scarcity of natural 
resources or ethnic strife.
    That is why our sustainable development programs are a 
sound investment in American security and well-being. In 
Africa, for example, more than three dozen countries have begun 
democratic reforms, many with our help or technical advice. One 
result is that U.S. trade with the region rose more than 23 
percent in 1995 alone.
    One of the most important ways we contribute to sustainable 
development is through our support for international family 
planning. By stabilizing population growth rates, developing 
nations can devote more of their scarce resources to meet the 
basic needs of their citizens. Moreover, our voluntary family 
planning programs serve our broader interests by elevating the 
status of women, reducing the flow of refugees, protecting the 
environment and promoting economic growth.
    This week the House of Representatives is scheduled to 
decide whether to agree to the President's decision to release 
USAID's fiscal year 1997 population funds. The President has 
determined that a further delay would cause a tragic rise in 
unintended pregnancies, abortions and maternal and child 
deaths.
    I urge you to endorse the President's position. I ask your 
support as well the for President's request for funding our 
voluntary contributions to the U.N. Development Program and 
UNICEF. These programs, both of which are directed by 
Americans, are at the front lines of the world's effort to 
broaden economic opportunity and save children's lives. The 
dollars we contribute also leverage the resources of other 
donors and allow us to accomplish far more together than we 
could by acting alone.
    This year the President is requesting money to restore full 
current funding and begin to pay our arrears to the 
multilateral development banks and the International 
Development Association. Over the past few years, our effort to 
reform these institutions have prospered. For example, the 
World Bank has increased accountability and transparency, while 
cutting its administrative budget by 10 percent, and the 
African Development Bank has tightened its lending rules, cut 
staff by 20 percent, and appointed external auditors.
    I would hope that we would now be able to meet our own 
obligations so that the banks can provide loans which spur 
global economic growth, and which, by the way, result in more 
contracts for American firms than those of any other nation.
    Mr. Chairman and members of the committee, America's global 
leadership is not possible unless we are true to American 
ideals. Since early in our history, we have extended a helping 
hand to others striving to build democracy in their own lands, 
just as we do today through the Economic Support Funds, the 
SEED Program and the National Endowment for Democracy. I would 
call your attention more specifically this year to the 
President's proposal for a new Partnership For Freedom 
initiative as a component of our $900 million request for 
assistance to the New Independent States.
    This request reflects an evolution in our approach towards 
the region. For years, we have been providing technical advice 
on how to achieve political and economic reform. Our focus now 
will be on cementing the irreversible nature of those reforms. 
The initiative will concentrate on activities to promote 
business, trade, and investment, and on those that would 
strengthen democracy and more fully establish the rule of law. 
Our effort here is a priority because the democratic 
transformation of this region is of vital and historic 
importance to us and the ultimate victory for freedom in this 
part of the world is not yet assured.
    Mr. Chairman, I know that supporting foreign assistance is 
not the easiest vote for a Member of Congress to make. 
Americans, all of us, are deeply concerned about problems here 
at home, about the budget, about the quality of schools, and 
about crime. No one understands better than the President that 
we cannot hope to lead abroad unless we are first strong at 
home. That is precisely why he has placed his primary emphasis 
on building a strong and growing domestic economy. But the 
Administration also knows that neither our history nor our 
character nor our self-interest will allow us to withdraw from 
the center stage of global political, and economic life.
    In today's world, domestic policy and foreign policy are no 
longer separable. There is, after all, no more immediate or 
local an issue than whether our sons and daughters will some 
day be called upon to do battle in big wars because we failed 
to prevent and contain the small ones. There are few more 
significant economic issues than whether we find ourselves 
forced into a new arms race because of setbacks in the former 
Soviet Union, or because nuclear weapons have fallen into the 
wrong hands. There are few goals more important to our workers 
than opening new markets for American goods overseas.
    There are few matters more urgent for our communities than 
reducing the flow of drugs across our borders, and there are 
few questions more vital for our children than whether we will 
bequeath to them a world that is relatively stable and 
respectful of the law, or one that is brutal, anarchic or 
violent.
    A half a century ago, a great American generation led by 
President Truman and supported by Members of Congress from both 
parties rose above the weariness of war's aftermath and the 
temptation of isolation to secure the future. Working with our 
allies, they made the investments and built the institutions 
that would keep the peace, defend freedom, and create economic 
progress through five decades.
    Members of the subcommittee, it is up to us in our time to 
do what they did in their time, to support an active role for 
America on the world stage, to protect American interests, to 
keep American commitments, and to help where we can those from 
around the world who share our values. In that effort, I pledge 
my own best efforts as Secretary of State, and I earnestly 
solicit your help. Thank you very much, and I now would be very 
pleased to answer questions, Mr. Chairman.
    [The information follows:]

[Pages 11 - 24--The official Committee record contains additional material here.]


                             Budget Request

    Mr. Callahan. Thank you, Madam Secretary. I am going to 
make certain that within the allocated time with you today, 
that every member of the subcommittee has an appropriate amount 
of time to ask any questions they might have. But at the same 
time, recognizing we are not going to have a sufficient amount 
of time to discuss all of the world's problems and all of your 
jurisdiction, I would inform the committee that they can have 
until Friday or even Monday of next week to submit written 
questions to you, and we would appreciate upon receipt of those 
questions that you expeditiously respond to those questions 
that Members might have, and the subcommittee staff, as well, 
can submit questions, or submit them to the subcommittee staff.
    Your statements were certainly more eloquent than my 
opening statements, but now it is time to get down to the wire 
and talk seriously. You are asking this committee to give you a 
9 percent increase in appropriations for fiscal year 1998, and 
I don't think there is any secret, Madam Secretary, with all 
due respect, that that is going to be a very difficult mission to 
accomplish for this committee.
    You must keep in mind that regardless of what our views are 
personally and how knowledgeable we may be on some of the 
issues that are facing you as our spokesman worldwide, we do 
have a mission now that the President has even requested that 
we balance the budget by the year 2002. Yet a 9 percent 
increase in foreign affairs has been requested, and at the same 
time we are going to have to very seriously reduce domestic 
spending in other areas, so politically it is going to be 
difficult to achieve an increase.
    And while I am not slamming the door on you and telling you 
that it is not going to take place, I am informing you that it 
is going to be very, very difficult for us to even sustain the 
level of appropriations of 1997, much less the 10 percent 
increase. But we are open-minded and we will work with you to 
achieve whatever moneys are necessary for you to be the 
effective foreign policy spokesman for this country and to make 
certain that we, as a country, fulfill any obligations you make 
or any obligations that past State Department people have made 
with respect to commitments of this country.
    I will have some questions about KEDO; I am concerned about 
it. I have reluctantly supported it for the past couple of 
years, but we will have some questions about the progress we 
are making in KEDO and how the money is being used, and if, 
indeed, the other nations that are participating in the KEDO 
project are fulfilling their commitment that was made several 
years ago. I am concerned and I talked with you yesterday about 
this and I think you shared that concern and I mentioned it in 
my opening statement about affairs in this hemisphere which we 
seem to be neglecting or which previous administrations have 
seemingly started to neglect in favor of the Middle East, in 
favor of Africa or some other continent. I think it is 
extremely important as we enter into this era of trade policies 
with Mexico and consider the possibility of expanding the free 
trade area farther south, that we also recognize we have some 
very serious problems in this hemisphere that should be 
addressed and also to remind you that there are other nations 
in this hemisphere other than Haiti, because there are many who 
feel on this committee that we are concentrating too many of 
our limited resources that are available for this hemisphere on 
Haiti. And while we want to do everything we can to facilitate 
the administration and help Haiti achieve some degree of peace 
and democracy, at the same time, our moneys are short and we 
think that we should look at other nations as well.
    I might tell you and the subcommittee that we intend or I 
intend, sometime between now and the July 4th recess, to visit 
some of these countries in this hemisphere. We have some 
concerns in Guatemala. We have concerns in Nicaragua. We have 
concerns in other parts of this region, and I want to give the 
members of this subcommittee the opportunity to see firsthand 
and to meet with the representatives of the USAID and the State 
Department in these countries to get a firsthand view of what 
we will face.
    I have explained to you and once again in my opening 
statement, I think this committee has been extremely 
responsible in trying to afford you the opportunity to 
effectively run the State Department. We are not members of the 
administrative branch of government. We do not earmark, we do 
not specifically tell you how money is going to be spent or 
should be spent.

                                Earmarks

    We suggest in report language our views and sometimes push 
you all towards a certain position, but I think that we do the 
responsible thing in the House of Representatives by not 
earmarking monies. Unfortunately, our colleagues in the Senate 
have a different philosophy of politics and they feel like they 
ought to earmark a great deal of our money, and I am certain 
that the philosophy of the Senate is not going to change.
    I don't think this committee is going to earmark this year 
either. They are certainly going to do it over my objections, 
but I don't think they want to. But I want to encourage you to 
begin work in the Senate, to tell them to let you be the 
Secretary of State, to remind them that the Constitution gives 
the administrative branch the charge of foreign policy, not the 
Congress of the United States, not the legislative branch, and 
certainly not the appropriations part of this process. So you 
are going to have problems, I am sure, crop up when you go to 
the Senate.
    Please encourage them to follow our lead and not to earmark 
every cent and not give you the discretionary flexibility of 
negotiating peace and democracy with your hands tied. I don't 
think that you are going to be real successful, but 
nevertheless, I would encourage you to encourage them to do 
that. So in the essence of time, I am going to submit to you my 
written questions between now and next Monday, and at this time 
allow the committee members to pose to you any questions they 
may have.
    Mrs. Pelosi.
    Ms. Pelosi. Thank you very much, Mr. Chairman. I wish to 
associate myself with your remarks regarding the earmark. I 
think that with the enormous task that our new Secretary has 
and the challenges our countries faces internationally, maximum 
leverage is called for, and so I agree with you on the issue of 
earmarking. I know certain earmarks are inevitable, but that we 
should have so many and so many constraints on you is something 
we should seriously reconsider when we go to conference. The 
House does its part, thanks to the leadership of our Chairman.

                         New Independent States

    Thank you, Madam Secretary, for your excellent and 
comprehensive testimony. As you have said in many different 
ways this morning, the success of the New Independent States is 
critically important to the national security of the United 
States and the well-being of our country. Indeed, nothing has 
had probably more impact on our country and our budget 
priorities and how we view our spending than the fall of the 
Soviet Union. However, as I said before, we still need to 
protect our investment in peace.
    Could you speak a little more specifically about the 
initiative and how the increased funds would be spent and what 
they are designed to achieve? The budget contains an increase 
of $275 million for assistance to the New Independent States, 
up from $625 million in fiscal year 1997 to $900 million in 
fiscal year 1998.
    The framework for assistance is also to be changed with 
more emphasis on investment, partnerships, and exchanges. Can 
you comment first on your assessment of the overall stability 
of the Yeltsin government in Russia, and then address the need 
for increased assistance? I will have some follow-up questions.
    Secretary Albright. Yes, thank you very much, Congresswoman 
Pelosi, and also, Mr. Chairman, thank you very much on your 
discussion about flexibility. I am very happy to absorb that 
message myself and take it across the Capitol. I think it is 
very important for us to have that kind of flexibility and we 
are very grateful to you and your committee for the way that 
you approach this.
    On the issue of the new initiative for the New Independent 
States, I think our goal is the following: We have, in fact, 
been giving some technical assistance to the New Independent 
States in previous years, but believe that we are potentially 
now in a new phase where we can solidify some of what has 
happened there. We are much more interested now in economic 
growth, investment, trade, and the ability to work with them on 
environmental, energy, those kinds of programs dealing with a 
level of partnership rather than just technical assistance.
    We think it is very important to move into this new phase 
with them, help them on legislation dealing with trade and, a 
whole series of much more specific acts that show that we are 
recognizing them as more important players within the 
international, economic, and environmental system. It is very 
important, I am sure, that you know this, when people come to 
you to do something to get them to reform their fiscal and tax 
policy to work more on their privatization, on the legal 
aspects of that, so we will be looking more towards that. And I 
think you will find that that money is very well and carefully 
spent among the States in order to promote this.

                           Russia's Stability

    We will have much more for you in detail, but to answer 
your question about Russia's stability, I think that obviously 
the fact that there was an election for President Yeltsin is 
very key to the progress as far as Russia is concerned, but we 
also all have been reading about additional problems to do with 
that. We consider this absolutely essential to support 
democracy and the reform movement in Russia. We believe that 
President Yeltsin is very much in a position to move that 
process forward.
    President Clinton will be meeting with President Yeltsin, 
whose recovery is moving along, and as you all know, the 
personal relationship between the two Presidents is very 
strong. At the same time, it is important for us to work across 
the board with the Government of Russia and develop a lot of 
relationships at other levels.
    Frankly, one of the reasons I like this new initiative is 
it allows for much greater contact of Americans with a whole 
host of new Russian officials and private people in businesses 
so that we will be able to develop a much greater network. But 
I think it is very important to underline the very good and 
important relationship between our two Presidents.

                                 China

    Ms. Pelosi. Thank you, Madam Secretary. You have addressed 
some of my other questions in your response and I will submit 
others on that subject for the record.
    In your written statement, Madam Secretary, you mentioned 
China. You probably knew I was going to ask about it. You are 
probably a mind reader on top of it all. I agree with you that 
this is a very important relationship. Indeed, I preface all of 
my remarks on China saying we look forward to a brilliant 
relationship with China, diplomatically, politically, 
economically, and culturally.
    I come from a place that is blessed with a huge Chinese-
American population and we look forward to a very positive 
relationship with China. The question of whether we should be 
engaged with China has never been a question in my mind. We 
definitely should. The question is what is that engagement, how 
is it constructive? With all due respect to you, Madam 
Secretary, I do not think that the Clinton administration 
policy has been that constructive in the three areas of major 
concern to the Congress, human rights, trade, and 
proliferation. The human rights situation has, for example, 
deteriorated further. Every dissident is in jail, in exile or 
in a prison labor camp, or silenced.
    In terms of trade, the trade deficit has doubled since the 
President took office. Since we started this debate in 1989, it 
has increased 15,000 percent, from $3 billion to over $40 
billion. And the proliferation of weapons of mass destruction 
to unsafeguarded countries still goes unsanctioned by our 
country.
    Everyone in the Administration says we should have 
multilateral initiatives instead of unilateral or bilateral 
initiatives. So my question is one unilateral forum that we 
have, which is the U.N. relates to please comment on what the 
plans are for the Administration to proceed with a resolution 
at the U.N. Human Rights Commission and what your hopes are for 
that. I am also very concerned about what is happening in Hong 
Kong, and I think a signal from the U.S. about democracy, where 
it exists in China, is an important one.
    Secretary Albright. Maybe we should put it down to women's 
intuition that I knew that you were going to ask that.
    Ms. Pelosi. I know that will hold you in good stead, among 
your other great attributes.
    Secretary Albright. Let me say, to put this into context as 
you have, that our relationship with China as we move into the 
21st century is clearly one of the key relationships that we 
are going to be establishing and strengthening because we 
understand the very large role that China can play regionally 
as well as globally in a positive sense. So it is important for 
us to work on what we are now calling a multifaceted 
relationship with China.
    There are many aspects we will have to work on, including 
the ones that you have discussed that are of great importance 
to us: human rights, trade, and the proliferation issues. I 
think that it is important for us to press on all those issues 
across the board where we make very clear our views that human 
rights are a significant element of American foreign policy, 
that access to markets is very important for us, that 
controlling weapons of mass destruction is what our safety and 
that of our citizens is about in the future. But at the same 
time, that we not hold our relationship hostage to any one 
issue.
    I can assure you, that in my trip to Beijing, I will make 
all those points very clear. I do think that we need to 
understand that our interests are with a China that we engage 
with, as you have stated, but not at risk to our own principles 
and policies. I think that that is an approach that we will be 
taking.
    We have, by the way, I think, improved our market access in 
China. I think we should be proud of that, and we have found 
areas in which there is great cooperation with the Chinese. I 
am not saying they are giving us a gift on these subjects, but we have 
found that we have areas in common where they have signed on the 
Nuclear Nonproliferation Treaty and, the Test Ban Treaty. They have 
been helpful, for their own purposes as well as ours, with North Korea 
and Cambodia. And I just cite those as examples of the fact that this 
is a wide-ranging relationship.
    Ms. Pelosi. And the U.N. Commission?
    Secretary Albright. On the U.N. Commission, we are going to 
be working with the Europeans on looking at a resolution.
    Ms. Pelosi. In closing, Madam Secretary, I welcome your 
statement that our policy with China will not be held hostage 
to any one issue and I hope that that will include trade. I 
offer my cooperation to you to give you time to make your own 
mark on this very important issue.
    Mr. Callahan. Thank you.
    Madam Secretary, joining us since we made the introductions 
this morning, we have new members of the subcommittee, Mr. 
Kingston of Georgia, Mr. Forbes is not a new member, but he 
wasn't here when we first began, nor were Mr. Knollenberg, Mr. 
Wolf, and Mr. Packard, and also Representative Nita Lowey of 
New York who have joined us since your opening statement. And I 
would also like to at this time, recognize some guests we have 
today.
    They are the new members of the Mongolian Parliament who 
are with us today. The democratic victory in Mongolia was 
very----
    [Applause.]
    Mr. Callahan. We would like to welcome both of you to our 
hearing, and I would also like to remind everybody but Nancy 
Pelosi, who pays no attention to what I say, that we have many 
Members and each of them want to be heard, and we are going to 
have to respectfully request that you limit your questions by--
--
    Secretary Albright. I would be happy to cooperate by not 
answering.
    Mr. Callahan. That is your prerogative. Mr. Porter.
    Mr. Porter. Madeleine, I can't think of anything that 
delights me more than to call you Madam Secretary of State. 
There is no one who represents more clearly the values and 
ideals of the American people and no one who has fought 
throughout her lifetime for those ideals as you have, and we 
are absolutely delighted that you will provide the American 
leadership that I believe will change the world in the way you 
described in your statement.

                           deficit reduction

    No one in Congress, or at least in the House of 
Representatives, is more committed to deficit reduction than I 
am. I think I have proven that over and over again, but I would 
say to my Chairman that this subcommittee has contributed more 
as a function of government to deficit reduction than any other 
one, by far. And I believe that we are now through the muscle 
and into the bone of American leadership. We are starving that 
leadership and we need funds to provide you with the 
opportunity to do those things that you have described, and I 
will say right now that I am committed to giving you the 
resources you need to do your job.

                               hong kong

    Now, let me pick up on a question that Nancy raised. Hong 
Kong is a place of human freedom and has been throughout its 
recent history. It is now, by agreement, going to go under the 
control of a place of authoritarian repression and this, I 
believe, will begin with the huge press focus that will be on 
it leading up to July 1st to capture the imagination of the 
people of this country and across the world about the 
differences in systems and what that means in the lives of 
people.
    I imagine that you will be going to Hong Kong on July 1st, 
perhaps as part of our official delegation. You have a trip 
planned to Asia already, very soon. I would like to ask how the 
United States is going to deal with the future of Hong Kong, 
and whether you see this, as I do, as a place where perhaps we 
can set the tone for our relationship with China.
    In my deepest heart, I feel that the spirit of freedom in 
Hong Kong will, in fact, do more to change China than China 
will be able to do to change Hong Kong, but it seems to me a 
great deal hangs in the balance in this change in relationship, 
and that it ought to be a very, very high priority for this 
administration.
    Secretary Albright. Thank you very much, Congressman, for 
your kind words about me and about the budget.
    Mr. Chairman, if I might just take a minute, I hope you see 
this not so much as an increase but as our attempt to dig 
ourselves out of a hole. We have been basically in a position 
where funds have been decreased and have, in fact, been cut 
over the past years, and what we are trying to do is get back 
up to a level that is commensurate with the power of this great 
country.
    Mr. Porter. May I interject something? We are talking about 
a budget of $1 billion out of a budget of $1,700 billion. 
Certainly we can afford that for American leadership.
    Secretary Albright. On the issue of Hong Kong, and I am 
sorry that I didn't address it when Congresswoman Pelosi asked 
it, I think we have an obligation to watch what is going on in 
Hong Kong very, very carefully. It has had a very special kind 
of a life, one that has been very productive, not only for the 
people of Hong Kong but for those who are associated with it. 
And when I go to Beijing, I can just assure you that I will 
remind them that personal and political freedom is intertwined 
with the success of Hong Kong.
    I think that the issue here is one where they need to 
understand that they should not kill the goose that laid the 
golden egg. I think they need to be made much more aware 
themselves of what the opportunities are for China with a Hong 
Kong that is able to function in a way where political and 
human rights are preserved.
    Mr. Porter. Thank you, Madam Secretary.

                                 cyprus

    A year and a half ago, maybe almost 2 years ago, Richard 
Holbrook came to the Greek American and Cypriot American 
community and said that this administration was going to 
provide a special initiative on Cyprus, and in return he wanted 
their support for Turkey's entry into the Customs Union with 
Europe.
    I said at the time that in my judgment this was putting the 
cart before the horse; that we should insist upon Turkey being 
forthcoming in reuniting Cyprus as a nation before we support 
the entry of Turkey into such relationships with the economy of 
Europe, and, unfortunately, in my judgment, we went ahead and 
provided that support.
    Cyprus is exactly where it was 2 years ago, although they 
have had terrible violence recently, and I would ask what you 
plan to do with regard to the reunification of Cyprus and how 
high a priority this will be for your administration?
    Secretary Albright. Let me say that I myself spent quite a 
lot of time last year looking at the issue of Cyprus and 
Turkish-Greek relations about Cyprus. I do think that there has 
been an increase in tension in Cyprus, in the past months which 
is most unfortunate, and a cycle that I think is dangerous to 
the stability of the region. We have to watch this very, very 
carefully.
    At the U.N., we dealt with this for large portions of time 
as that mandate was renewed. I think there is a time of 
opportunity now that we need to somehow work on but not give 
away anything, if I might put it in the context where you are 
coming from.
    I think with the potential accession of Cyprus to the EU 
that this does provide some way of dealing with the problem. We 
should use that period, and we are going to be examining that. 
I think that it is an area which is strategically important to 
us, where we have to use some American influence in terms of 
getting the process moving. But I was very upset myself about 
the deterioration of conditions along the Green Line and the 
instability that has been created by the sides being too close 
to each other, as we saw this fall and this summer in terms of 
shootings and various incidents that took place.

                                 turkey

    I think we also need to look very carefully at how we are 
dealing with Turkey these days. I think Turkey is a NATO ally 
of great importance to us, strategically located geographically 
in areas that are of great import to us, and yet there are 
things going on there which we do not approve of, certainly in 
the area of human rights and also generally in some of their 
approaches in more than policy.
    I have met with Prime Minister Erbakan. I have made clear 
that we feel it vital that Turkey remain a secular state. But 
we have vital interests there; we will be talking to all of you 
more about Turkey-Cyprus issues because they are very much on 
our plate.
    Mr. Porter. If I might----
    Mr. Callahan. Mr. Porter, you are into your ninth minute 
and we only have 40 minutes left. I would like you to be as 
brief as possible so the other Members have an opportunity, 
also.
    Mr. Porter. I will finish with one last question. On the 
other border of Turkey is Armenia and Azerbaijan and Nagorno-
Karabakh. At stake there is the blockade and, the relationship 
between the two former Soviet Republics being a very important 
one, and the question of an oil pipeline being built from Baku 
through Armenia. I wonder what the United States should be 
doing to bring the parties together to settle differences over 
Nagorno-Karabakh and stabilize that situation, which has been 
in civil war but is now in cease-fire, and to promote normal 
relationships between both Azerbaijan and Armenia and with 
Turkey? Perhaps you could comment on that.
    Secretary Albright. Congressman Porter, we understand, 
again, the importance of getting those relationships dealt with 
in an appropriate way over Nagorno-Karabakh and because of the 
strategic importance of the Caspian. I think this is a long, 
complex issue. Having been a professor I have a tendency to 
answer in 50-minute segments, and I will try not to do that, 
and we should talk about this more. This is very complex and 
the U.S. is going to become more involved in that.
    Mr. Callahan. Mr. Yates.
    Mr. Yates. Thank you, Mr. Chairman. I, too, want to 
congratulate the Secretary on her appointment. I think it is an 
excellent one for the United States.
    I want to associate myself with my colleague, John Porter, 
in the encomiums he placed upon you, and to assert that I, too, 
believe that you bring qualities in many measures greater than 
those possessed by former Secretaries of State, policies 
involving personal experiences that they did not have to go 
through. I think it bodes well for our country.
    We spoke about long tenures and foreign aid stemming from 
the time of Thomas Jefferson. My tenure on this committee 
doesn't go back quite that far, but I began my association or 
my membership on this committee at the time of Harry Truman, at 
the time that the Marshall Plan had just been inaugurated by 
the previous Congress, and I was a member of the Marshall Plan 
appropriations subcommittee of this committee, and every 
Foreign Operations Subcommittee since that time, except one 
when I was not a Member of Congress. And in 1949 I saw 
firsthand by a trip to the countries of Europe the devastation 
that the war had wrecked upon those countries and the effect 
the Marshall Plan was having in bringing them to an economic 
restoration. And so I have long been a supporter of foreign 
aid. I don't know that it has been as effective in other 
countries as it was in the countries of Europe, but it has had 
a very beneficial effect when used properly in other countries.

                              middle east

    I want to invite your attention to the Middle East, if I 
may. I found it very helpful what I thought was the personal 
intervention of President Jimmy Carter, at the time when Egypt 
and Israel were brought together in the first step of the peace 
process in the Middle East, and it began the long process.
    He, I know, was personally interested and did involve 
himself in bringing Sadat and Begin together for conferences at 
Camp David and he was there. I have the impression that 
President Clinton doesn't quite do that. I think technically he 
ought to leave such contacts to the Secretary of State, but 
there is no doubt in my mind that a President can do more than 
a Secretary of State. And I have the impression that that is 
not quite succeeding in the peace process now being undertaken 
in the Middle East.
    I am a little bit disappointed, frankly, in the way Egypt 
has conducted itself during the peace process. Rather than the 
Cold War that existed previously between Egypt and Israel, you 
now have a cold peace, and I was quitedisappointed in what 
President Mubarak has done since the advent of Prime Minister Netanyahu 
in Israel.
    I am a firm supporter of the peace process, I want to make 
that clear, and I don't think much of the actions of Prime 
Minister Netanyahu in that respect. But I think that his 
actions with respect to Hebron and other parts of the peace 
process have been very helpful, and so I commend him for that.
    But I wonder whether President Clinton could not have done 
more as far as--I don't know that there is a word that you 
should use like admonishing, but persuading perhaps is the 
word, Mr. Mubarak, not to associate himself as closely with one 
side as he seemed to do in that, and I have the impression that 
his actions recently would bring him more closely to the Arab 
position than the Israeli, than the relations he had had with 
Israel.
    The fact still remains that peace treaties haven't been 
signed between the Arab states and her Arab neighbors, except I 
think in the case of Jordan. I think a peace treaty was signed 
in the case of Jordan. But in the case of Saudi Arabia and all 
of the other countries of the Middle East, I think technically 
a state of war still exists, and I think that personal 
intervention by the President might be much more helpful. What 
is your feeling about this?
    Secretary Albright. Well, I think it is important for 
people to know the amount of time that the President has spent 
on these issues with his personal intervention in the fall of 
1993 with the Declaration of Principles and with the number of 
times he has been in the region.
    I also think in the next month we will have all four 
leaders of the region here and bilateral meetings with the 
President at a time when we will be able to build on the 
momentum of the Hebron agreements. Without going into what is 
inappropriate detail about the amount of Presidential 
intervention during that very difficult Hebron period, I can 
just assure you that the President is involved in this.
    We clearly had gone, I think, through a fairly difficult 
period following the Rabin assassination and the whole stirring 
up of problems as a result of a new government in one place, 
and just generally the trauma that the Israeli nation had gone 
through, but Hebron provides a very important benchmark now and 
an ability to move on the Israeli-Palestinian track, also to 
press forward on the Israeli, Syrian, and Israeli-Lebanese 
tracks. We see this as a moment where it is possible, with the 
visits of the Prime Minister and President Mubarak and King 
Hussein and Chairman Arafat.
    Mr. Yates. I have the impression from the Chairman's 
opening statement, and I want to assure the Chairman that I, 
for one, think he has done an excellent and outstanding job as 
Chairman of this subcommittee, but I gather from, at least an 
implication from what he said, that he wasn't supportive of the 
funding that might be necessary for the Middle East in carrying 
out the peace process. I don't know whether my impression is 
correct.
    Mr. Callahan. Your impression is incorrect and I will 
elaborate.
    Mr. Yates. Okay.
    Mr. Callahan. I just said I didn't see any possible way to 
increase last year's funding for the Middle East programs. We 
didn't say anything about a decrease, nor has the 
administration asked for an increase.
    Mr. Livingston.
    Mr. Yates. Mr. Chairman, I just wanted to ask the Secretary 
how important the funding was for the Middle East, if I may 
follow up on your comment.
    Mr. Callahan. Very briefly, Madam Secretary.
    Secretary Albright. Yes, Mr. Chairman. It is very important 
because it underlies the whole peace process.
    Mr. Callahan. Thank you. Mr. Livingston.
    Mr. Livingston. Thank you, Mr. Chairman, and I am 
frustrated because this is a wonderful opportunity and so 
little time.
    A couple of quick points. One, an incident dealing with 
Jordan and the F-16 agreement about a year ago when a 
representative of the Defense Department, Kenneth Bacon, 
Assistant Secretary of Defense for Public Affairs, on behalf of 
the administration made an announcement that they didn't have 
to notify us ahead of time and discuss moves by the 
administration with congressional leaders.

                                 turkey

    I just want to say for the record that I disagree with Mr. 
Bacon, and I certainly anticipate that that won't be your 
method of operation. You needn't comment on that.
    I share the concern by Mr. Porter and others who have 
talked about Turkey, and I appreciated your comments; I thought 
they were very judicious. I am concerned, frankly, that actions 
of this House of Representatives in the Congress, in general, 
has tended sometimes to imply that we take sides between the 
disputes between Turkey and Greece or Armenia, or Armenia and 
Azerbaijan, and I think that that is a mistake. These are all 
our friends and we should adhere to the old political rule that 
I have friends on both sides and I am with my friends.
    I really don't think that we contribute to the stability of 
these respective regions when we take actions that give the 
appearance that we might favor one side over the other. So I 
encourage your efforts to try to tone down the rhetoric and 
encourage both sides not to employ weapons that might escalate 
into an arms problem that neither they nor we can control.
    But finally, because my time is so short, rather than 
getting too heavily into specific areas, I would like to make a 
comment about foreign assistance in general, because history 
has shown, in fact I believe, that U.S. foreign assistance 
rarely helps the poor. Unfortunately, only 30 percent of our 
foreign aid money actually makes it to foreign countries. 
Roughly, 70 cents on every foreign aid dollar goes to funding 
our foreign aid bureaucracies, be they government or civilian. 
Of the 77 countries with the most repressed economics in the 
world, 34 have been receiving U.S. aid for periods ranging from 
35 to 52 years. Of these 34 countries, 13 are poorer today than 
they were in 1965 and 10 others are just as poor as they were 
three decades ago.

                            family planning

    In your opening statement, Madam Secretary, you mentioned 
that family planning was important because of population 
growth, and countries were poor because of their overpopulation 
and because of their scarcity of resources. I would only remind 
you that Taiwan is a nation of no natural resources, a heavy 
population, but because they are, they have provided a system 
of economic freedom. Their people have prospered beyond 
anyone's imagination or expectation in the last 30 years or 
more of their existence.
    El Salvador was a country torn by war only 10 years ago and 
now is growing at a rate of 10 or 11 percent a year because 
they have brought economic freedom to their people.

                                somalia

    The administration has argued that cutting aid would only 
produce more Somalias. Somalia has received nearly $1 billion 
in United States assistance in the last 41 years, in addition 
to all of the money that was expended in the frustrated U.N. 
effort a few years ago, and that was $3 or $4 billion at least. 
Yet, I dare say Somalia has not benefited from U.S. assistance. 
Their gross domestic product went from $123 per capita in 1965 
to $111 in 1993.

                                 haiti

    In addition to the, again, $3 or $4 billion that has been 
pumped into Operation Restore Democracy in Haiti, Haiti has 
received at least $1 billion from the United States in foreign 
aid and the administration is requesting $110 million again for 
Haiti for fiscal year 1998. I dare say Haiti has not benefited 
from our foreign aid. Their gross domestic product has gone 
from $360 per capita in 1965 to $225 per capita in 1994.
    So I guess my contention that I would ask you to respond to 
is that only economic and political freedom can truly help the 
poor. The countries that we continue to help year after year 
after year and do not prosper and benefit from it owe thanks 
only to their repressive governments, not the inability to 
unleash the ingenuity of the individual and to free up their 
private markets. So, Madam Secretary, would you tell me, 
please, what steps is the administration taking to assure that 
our foreign assistance money is used in the manner that helps 
developing nations discover true economic and political 
freedom?
    Secretary Albright. Mr. Livingston, we could have a very 
good, long discussion about this, and I hope that we will. I 
believe that a lot of the foreign assistance that we have given 
has, in fact, brought about the successes that you are talking 
about. Taiwan and El Salvador at certain stages, and I think 
that we need to make sure that people don't think of foreign 
aid as a giveaway program.
    I am not sure that aid, foreign aid is the right word for 
all this. I think this is a way that we help in certain 
countries so that they can provide a better world, in many 
ways, for American citizens, and some of the countries that 
have been in bad shape and have gotten foreign assistance have 
now graduated into a category where they provide huge markets 
for the United States, and I think we need to look at it in 
that particular way.
    Let me say that I agree with you fully that the best way 
for these countries to evolve is with political and economic 
freedom, and a lot of the assistance that goes into countries 
now is, in fact, a way to teach them so that they can use their 
God-given abilities to develop their own countries. This new 
initiative that we are talking about for the New Independent 
States, as I was answering Congresswoman Pelosi's, question has 
to do with creating those kinds of systems.

                              bureaucracy

    I can also quickly tag on to this that we are going to be 
looking at the foreign aid bureaucracy and machinery as we move 
forward in organizing ourselves for the post-Cold War era. We 
cannot keep doing business the way we have for 50 years where 
everything was aimed toward fighting communists when now we 
have an entirely different opportunity and challenge before us, 
but we will spend a lot more time on that.
    Mr. Livingston. Can you, and it is really a core question 
because it goes to the heart of our program. If we simply give 
money to countries without any requirements that they use it 
towards loosening up the reins and controls, then, in fact, we 
are probably not helping the poor, we are probably simply 
helping the leaders. Thank you very much.
    Mr. Callahan. Ms. Lowey, we have 30 minutes left, ten 
speakers.

                            family planning

    Mrs. Lowey. I get it, Mr. Chairman. Thank you, Mr. 
Chairman, and I want to join my colleagues, in expressing our 
great pride in your appointment. We know you will provide 
brilliant leadership and this committee wants to assist you in 
any way possible.
    Following up on other items mentioned by my colleagues, I 
want to thank you and the administration for your strong 
support of international family planning. And following up on 
the statement of the Chairman and Chairman Livingston, I am 
particularly pleased that you framed your discussion of family 
planning in the context of economic development and the 
importance of stabilizing families in the world so that, these 
countries can free up their own resources to help families.
    We just returned from the Middle East where we visited a 
maternal and child care clinic and saw the importance of 
teaching these women family planning. We saw the important 
immunization services, prenatal, and postnatal assistance, that 
are provided. In a country like Egypt where the literacy rate 
of women is just about 30 percent, these services are vital so 
these women can be independent and can pursue their own future. 
So I thank you for that and we understand the importance of 
this vote tomorrow.

                              middle east

    And I am pleased that you made it very clear that this is 
not an abortion issue. Abortion is illegal in most of these 
countries. Secondly, following up on my colleague, Sid Yates' 
comments regarding the Middle East, I would hope that when 
President Mubarak visits, and we also met with him during our 
trip, that you would stress again, as I know you will, the 
important role Egypt plays in this process. I would hope that 
you would question Mr. Mubarak, as we did, about the statements 
of Foreign Minister Moussa and the Ambassador to the United 
Nations. And the anti-Israel and anti-Semitic statements in the 
opposition press, and in the Egyptian-controlled press. 
President Mubarak stated to us that he was being constructive 
in moving the process forward, but these kinds of statements 
create a negative atmosphere that, in our judgment, will not 
move the process forward. Perhaps I won't waste a question 
because I know you will consider this.
    The question I would like to ask you is on the Lebanon-
Syrian track, could you give us some insight into where that 
process is moving. You have stated many times, and our policy 
has been that Lebanon should function as a sovereign nation. 
Perhaps you could give ussome insight into where that process 
is moving.
    Secretary Albright. On the first point you made, I think it 
is very important to understand the population issue as an 
economic issue that Chairman Livingston was talking about. We 
have a tendency to divide these issues, and yet the ability of 
societies to dig themselves out of the economic hole has a lot 
to do with the ability of women to have some control over their 
lives.
    On the issue that you have asked, I think that part of the 
discussions that are on going with the four leaders as they 
come is to see how the process can be moved forward, not only 
on the Israeli-Palestinian track, but on the others. We are 
trying to seek a way for them to develop a formula for dealing 
on the Israeli-Syrian track. They have to look at their road 
map and develop a formula for their further actions.
    We cannot press them beyond where they, the parties, want 
to be pushed. Same on Lebanon and that track. So we are using 
the Hebron momentum, if I may call it that, to pursue actions 
in these two tracks.
    On the Egypt issue, let me say, we spend time and we will 
continue to do so, reminding Egypt of the crucial role that 
this played initially in why the peace process has been going 
on, that their approach to this was a very good approach at 
that time, and I think the message then becomes clear as to 
what we think at the moment.
    Mrs. Lowey. Mr. Chairman do I have one minute or two?
    Mr. Callahan. One second.

                        terrorist organizations

    Mrs. Lowey. I will submit the other questions for the 
record, but I would be interested in knowing why it has taken 9 
months for the State Department to release the list of 
terrorist organizations that may not raise funds in the United 
States. We understand that it is the Treasury, State, and 
Justice Department's working together, but we are very 
concerned about organizations like Hamas raising funds in the 
United States. Perhaps you can give us a quick progress report 
on the momentum in releasing the names of these organizations.
    Secretary Albright. I have to look into that, 
Congresswoman.
    Mrs. Lowey. Thank you.
    Mr. Callahan. Mr. Wolf.
    Mr. Wolf. Thank you. I share the other viewpoint, that I 
want to welcome you. I know you will do an excellent job. I 
have three questions and I will wrap them up into one.

                                bulgaria

    I am less concerned with your answers today, I just want to 
sensitize you and maybe talk to you about them later. One, in 
Bulgaria. The people in Bulgaria are starving today. Thirty 
percent are living on $1 or $2 a month. Our Ambassador is back 
here in the United States, Mrs. Bohlen, talking about 
orphanages there is no medicine, no food, and there is now a 
democratic president of Bulgaria. Hopefully, the democratic 
forces will win in the democratic election.
    I would urge you to do something very quick to demonstrate 
to the Bulgarian people that the move toward democracy has made 
a difference helping to provide, and so food and medicine on a 
quick basis, either from Turkey, from Greece, the surrounding 
neighborhoods in exchange would be very, very helpful.

                               east timor

    The second thing is East Timor. I was in East Timor 2 weeks 
ago. I visited with Bishop Belo. Congressman Hall and I 
nominated Bishop Belo for the Nobel Peace Prize. The situation 
in East Timor is terrible. There is a reign of terror. I went 
and talked to villagers when we could break away from the 
government, and they are afraid. They are afraid of another 
Santa Cruz massacre.
    At nighttime they are taking young people out at 1:00 and 
2:00 in the morning and arresting them. Their mothers don't 
know where they are. We were talking to mothers that lost two 
kids in the Santa Cruz massacre. They can't find them. Another 
was taken away a week before we got there.

                               indonesia

    We have a good relationship with the Indonesian Government, 
but I would urge our government, working with the Indonesians, 
working with certainly Portugal, perhaps involve Germany 
because they have a very good relationship with Germany, also 
people from East Timor to begin the process to see how this can 
be resolved. I think it is a drain on the Indonesian 
Government. I think they would be better off if there could be 
some resolution.
    And lastly, and not to be controversial, but there are some 
people out there who raise the issue of the Lippo connection 
and the Riady Bank with maybe there was not the interest in 
resolving this. I think there is the interest in this 
administration and the Congress. I would urge you because of 
the reign of terror out there to make this a priority and have 
the United States work with the U.N. but also, because of our 
credibility and good relationship with the Indonesian 
Government and Bishop Belo, to try to bring together a process 
to develop the ends.

                       persecution of christians

    Lastly, there is more persecution of Christians today than 
any other time, I think, in the history of this country. Where 
people of the Book, the Old Testament and the New Testament, 
those of Jewish faith and the Christian faith, when they are 
persecuted around the world, it puts a fear in moderate Muslims 
and others. I would urge you to speak out on these issues.
    There is persecution of Christians in China, and I was 
pleased to hear your comment, Catholic priests in jail. In 
Sudan, the reign of terror against the church, Catholic, 
Protestant, is terrible. Persecution of Bahais in Iran. Tibet. 
Even in countries that are supposedly friends of the US like 
Pakistan. It is very difficult to be a Christian in Pakistan. 
So if you would, as you go around the world, as you speak out, 
encourage our ambassadors to make this a priority. Our finest 
hour is in the nineteen eighties when we stood with those of 
the Jewish faith being persecuted in Russia. We should continue 
to do that all over of the world.
    So one, Bulgaria, to help; two, East Timor, to engage; and 
three, to, not only you, but also our ambassadors to speak out 
on the issues of persecution against those people of whatever 
faith. And with that, if you have an answer, fine, and if you 
could think about it, I would love you to talk about it and you 
care very, very deeply about it.
    Secretary Albright. Well, I do have answers on most of 
these, but let me say that I accept what you are saying. I 
think in all three of those areas we need to be more sensitive 
to what is going on. We are looking at a Balkan initiative more 
in the economic field and we will be looking at Bulgaria and 
East Timor.
    I can assure you every time I have met with an Indonesian, 
as has the President, we have raised this subject at the 
highest level and we can talk more about actions we are 
pursuing through the United Nations in getting the parties to 
talk and deal with a very sensitive problem.
    On the persecution of Christians, it is clearly a subject 
of major import. There is an advisory council meeting that I 
had on this and I am going to be meeting with the people 
involved in it. I think I can testify that persecution for any 
reason against anyone for whatever religion is outrageous and 
intolerable. It has created wars among people before, and is 
something we must seriously address.
    Mr. Callahan. Thank you.
    Mr. Foglietta. I thank you, Mr. Chairman, and Madam 
Secretary, I want to join the Chairman and my other colleagues 
in welcoming you to the committee today. I know of your career 
and your background, and I am delighted that you will be 
guiding this Nation's foreign policy.
    I know your experience and vision will help us to maintain 
a strong U.S. diplomatic presence as we move into the next 
century. I know that my colleagues and I both have been very 
closely following the administration's objective to consider 
allowing new member nations to join NATO.
    As one of President Clinton's Cabinet Members, I know we 
will have many opportunities to discuss this in the future, so 
I am not going to go into it now. However, I was interested in 
Mr. Porter's questions concerning the expansion and how it is 
going to effect the Cyprus situation. And I was happy with your 
answer, but I think we need to go into that further also. So I 
would like to just, if I may, tell you that I was interested in 
your answer to Ms. Pelosi's questions concerning China and 
human rights violations there, and the other questions that you 
answered.

                            korean peninsula

    President Clinton recently said that we must look to the 
East no less than we do to the West, and throughout my career I 
have been working to bring peaceful change and true democracy 
to the people of South Korea. Tensions on the Korean Peninsula 
persist as a very strong threat to peace of all of Asia. The 
Clinton administration has achieved a hard-won yet tenuous 
North Korean nuclear freeze.
    Now, despite North Korea's sabre rattling and deep 
suspicions between north and south, there is new talk of 
renewed efforts to persuade North Korea to participate in the 
four party talks involving the United States, North and South 
Korea and China.
    Madam Secretary, what is your position on how the United 
States can maintain our historically sound relations with South 
Korea while gaining better results toward lasting peace from 
North Korea, and ultimately achieving the goal of both Koreas, 
namely reunification of that Peninsula. Further, what is your 
view on offering food and energy and assistance to North Korea 
as a means of encouraging them to come to the table for the 
talks with the four nations?
    Secretary Albright. Again, we are very concerned with the 
developments on the Korean Peninsula. South Korea is an ally of 
ours. I will be going there on my trip, and we believe it is 
very important that there be a north-south dialogue. We want 
these four party talks to go forward because they are a way to 
try to achieve what we want and the South Koreans want, which 
is the dialogue that is necessary to move forward in order to 
make sure that the Korean Peninsula is not a more dangerous 
region for all of us.
    We also think that it is important for us to give some food 
assistance to North Korea through the food program, because 
instability in North Korea is not to anybody's advantage. It is 
important for there to be dialogue between the two Koreas and a 
movement towards a peaceful resolution of this issue. It is 
very much something that we have on our mind, and as I said, I 
made a deliberate effort. I have to say I am doing something 
that other Secretaries have not done, which is to go to Asia on 
the first trip, and I wanted to go to both Europe and Asia to 
underline the importance of both to us.

                                 haiti

    Mr. Foglietta. Thank you, Madam Secretary. However, Mr. 
Chairman, I must comment on the fact that I very, very 
respectfully and strongly, however, disagree with our Chairman 
Livingston concerning his viewpoint on foreign aid, especially 
as it concerns the Nation of Haiti. I have been deeply involved 
in the operations of Haiti and if you remember, just a few 
years ago, it was a repressive, horribly oppressive 
dictatorship which overran the rights of those people there. In 
the last 2 years that we have been giving aid to Haiti it is 
becoming a more developed nation. They are making tremendous 
strides in economic development in that country, and I would 
hope, you might want to comment very briefly on what we hope to 
do in Haiti in the near future. I would appreciate that also.
    Mr. Callahan. Yes, Mr. Foglietta, but I imagine based on 
what I have heard, that your interest very shortly might change 
from concern so much about Haiti to a more European philosophy.
    Mr. Packard.

                              middle east

    Mr. Packard. Thank you, Mr. Chairman, and congratulations 
on your recent appointment and your past service, which we are 
deeply grateful for, and welcome to the committee. I 
accompanied the Chairman to the Middle East recently and one of 
the things that seemed to permeate from the Chairman was that 
the portion of the pie, the foreign assistance pie to the 
Middle East will not increase.
    We heard that over and over again, and I believe that that 
is the intent of the Chairman and most of the members of the 
committee. And yet in your budget submittal, we see that the 5 
billion plus to Israel and Egypt will continue, and there will 
be an increase to Lebanon, Jordan and the PLO in your budget 
request, as well as the administration's proposal to fund $52 
million to the Middle East Development Bank, MED Bank, out of 
the Economic Support Fund rather than out of the Middle East 
portion of the pie. This is an increase.
    Would you like to comment on the whole concept of keeping 
the Middle East piece of the pie stable or the same and what 
these increases would do?
    Secretary Albright. Let me get back to you on the details 
of all this, but let me just give you a rationale for what we 
are doing. I really do believe that having stability in the 
Middle East is something that is essential to us as Americans. 
One, because we care about the countries there and also 
strategically the area is important to us.
    We know that it takes up a large portion of the pie, and we 
would like the pie to be larger. I think that what is important 
here, is that it is a small amount for what we are trying to do 
in support of American foreign policy, and I think that there 
is no reason to cut down the size of what we give to the Middle 
East in the way that we are distributing it this go-round. But 
I do think it is important for us to understand why we have 
alarge proportion for the Middle East, and, two, that we really are 
operating with a minimal amount in this particular area.
    I think, as Congressman Porter said, we are cutting now 
into the bone. This is not fat of any kind, and we want to work 
with you very closely in looking at the allocations.
    Mr. Packard. But close to 50 percent of the budget goes to 
that.
    Secretary Albright. I understand.

                                 russia

    Mr. Packard. So increasing the pie, that portion is of 
concern, I think, to the committee. One last question I would 
have would be with Russia. Where Russia is continuing its 
nuclear dealings with Iran and Cuba and also recent missile 
sales to Cyprus and routing some missile technology to Iran, 
and then to give them a 50 percent increase, I think many of us 
would agree that the new Independent States, maybe we need to 
maybe give additional assistance, but a 50 percent increase to 
Russia is of concern. Would you respond to that?
    Secretary Albright. Let me say, first of all, we obviously 
have concerns about the subjects that you have raised and I 
will be discussing them in Moscow, but I think we need to 
understand that getting Russia to be a reliable democratic 
country with a market economic system is not a gift to Russia, 
it is important for us. It is important for the way that the 
world looks, the problems that we have to deal with, and I 
think the whole issue here is it should not be seen as a gift 
to Russia, but a gift to stability and security for American 
citizens and others in the world.
    We believe that the money is a small amount compared to the 
trillions of dollars that we spent during the whole Cold War 
trying to protect ourselves from a nuclear Russia and an 
aggressive Russia so we can deal with a Russia that is 
comfortable within its own borders and comfortable with a 
democratic form of government and market system.
    Mr. Packard. I don't think we disagree with the concept of 
where we want Russia to be. The concern is they will still be a 
nuclear power and proliferating nuclear technology and systems 
throughout the world and that ought to be tied to our 
discussions as we think about our assistance package.
    Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Torres.
    Mr. Torres. Thank you. Madam Secretary, let me simply echo 
the comments by my many colleagues about your being here today. 
It is indeed a pleasure and honor to have you before us. You 
mentioned your statement was longer than usual. It was very 
eloquent and comprehensive to say the least, but you said it 
was long because you wanted to elaborate where our Nation was 
going in the field of foreign policy. And, indeed, your 
comments covered just about every part of the globe on American 
diplomacy and, indeed, you talked a bit about your own 
itinerary, forthcoming itinerary to capitals. But yet not a 
word about Latin America except to cite coca leaf eradication 
in Peru.

                             latin america

    Madam Secretary, in the last several years there has been a 
steep decline in funding for Latin America. Last year, our 
committee, including the comments today by our Chairman, Mr. 
Callahan, expressed concern about this decline and asked the 
administration to pay more attention to Latin America.
    The response usually is we are providing trade, not aid. I 
don't think that is really a sufficient answer. Development aid 
that helps to alleviate poverty and tackle the problems of 
persistent inequality in the system in the region must be a 
part of the solution, and I would just note that substantial 
funding, for example, for the peace process and the peace 
accord implementation in Guatemala, and Guatemala's 
breakthrough in this, is a vital part of this package, and I 
would implore upon you if we could do anything there.
    My question to you, Madam Secretary, is what are the 
administration's goals and objectives for the region and how 
does the administration propose to assure adequate funding for 
programs that concern Latin America, the most important part of 
our own hemisphere?
    Secretary Albright. Congressman Torres, thank you very 
much, and I in no way wish to slight Latin America. My first 
meeting with a foreign minister was last Saturday when I was in 
Houston, and we had a very intensive discussion about U.S.-
Mexican relations, and the President will going to Latin 
America.
    A great deal of emphasis that is going to be put on 
developing better trade and economic relations with Latin 
America, following up on the Summit of the Americas. I have to 
tell you after my years at the United Nations that we are 
really missing a bet in terms of having a more productive 
relationship with Latin America. I think, that we need to talk 
about the importance of the solidarity of the Americas because 
we are in a world where there is increasing regionalization on 
a set of issues. We have a strong and vibrant hemisphere where 
the movement is towards democracy, not away from it, and I 
think that you are going to see that this second term of the 
administration is going to emphasize Latin America a great deal 
more than we have in the past.
    As Ambassador to the U.N., I was down not long ago meeting 
with the Rio group, something that an American had not done 
previously. Even though there was not enough mention in my oral 
statement on this subject, it is very muchon our minds and we 
will be doing something a little different, I think, in trying to deal 
with Latin American countries as partners in respect for the evolution 
in both democracy and market systems in Latin America.
    Mr. Torres. I thank you for your clarification on my 
question.

                                 unesco

    You mentioned your capacity as U.S. Ambassador to the 
United Nations. You and I have had the pleasure of discussing 
on a number of occasions, what I regard as one of the more 
puzzling aspects of our relationship with the United Nations 
and the question of U.N. reforms, and yet our very deliberate 
choice to avoid formal affiliation with one of the most 
specialized U.N. agencies which has been at the forefront of 
U.N. reform. I am referring to the United Nations' Educational, 
Scientific, and Cultural organization, UNESCO.
    Madam Secretary, the President continues to reiterate that 
joining UNESCO remains a goal of his administration, but that 
currently we are not in the position because of the lack of 
funds. Given your own knowledge of the U.N. system, can you 
discuss for us the costs of not belonging to UNESCO, and do you 
expect to see any change in that relationship during this 
administration's tenure?
    Secretary Albright. I do think that membership in UNESCO 
would add a great deal to our possibilities of working with 
other countries on issues that have to do with all the issues 
of sustaining an international community that the American 
citizens feel comfortable with, but we can't afford it at the 
moment. We are talking about $65 million, and we don't have it.
    And so I think that is the issue for us, and that is one of 
the reasons I wish we had a bigger pie. There are lots of 
things that we are not doing because it is viewed as though we 
can't afford it when, in fact, it is penny-wise and pound-
foolish.
    Mr. Torres. Thank you.
    Mr. Callahan. Mr. Knollenberg.
    Mr. Knollenberg. Mr. Chairman, thank you, and Madam 
Secretary, welcome. Ninety-nine to nothing isn't bad. That is 
pretty good, so we support that.

                                  kedo

    I want to probe a little bit, I don't have much time, I am 
submitting some questions in writing, but KEDO, the North 
Korean Peninsula, that whole situation concerns me and we have 
to deal with that in this committee.
    As you know, the administration has asked for $30 million 
for the administration of--KEDO I would just remind everybody, 
and I know you know this, that we already spend something like 
$2 billion annually just to handle the troops, to support the 
troops that are there. And with respect to KEDO, I know it is 
the implementing agreement of the actual framework which was 
negotiated in 1994.
    My concern is a recent GAO study as to precisely what KEDO 
is and, how is it effective. For example, the inspections have 
been delayed. We don't know yet what kind of plutonium has been 
produced by North Korea. They are actually accepting nuclear 
waste of some kind, whatever level we are not sure about, from 
Taiwan. They have delayed the inspections, peace talks are off 
track, and there is a question by GAO of the enforceability of 
this agreement.
    I am going to quote briefly, you can comment, this may be 
the opinion of others. I have a concern about this myself. And 
it comes down to the deal, so-called, is a nonbinding political 
agreement that is not enforceable under either U.S. or 
international law. And in this study it further notes that the 
deal was constructed in a way so that the administration is not 
required to seek congressional approval. In fact, the North 
Korean deal can have the effect of pressuring Congress to 
appropriate money for an agreement that they have no real 
fingerprints on. Or you might say, very little.
    Now, we have to deal with this matter pretty quickly, and I 
just wonder if you would comment on it in the brief time you 
have of the enforceability of that agreement. Is it something 
that with these other facts taking place out there, with these 
other events taking place, and, frankly, right now it is a 
little touchy, I know, so I was just wondering if you would 
comment on our concern about the enforceability of that 
agreement? It appears that some things aren't happening which 
were a part of the original idea.
    Secretary Albright. Let me just say this is obviously a 
very complex subject, but I believe fully that the framework 
agreement is one of the best things that the administration has 
done because it stopped a nuclear weapons program in North 
Korea.
    Mr. Knollenberg. Do we know that?
    Secretary Albright. Yes, we do. It is not KEDO but the IAEA 
that is, in fact, the verifying agency on this, and KEDO is 
actually set up in order to provide the heavy fuel oil and the 
building of the light water reactor.
    I think the issue here is that everything in the world is 
not perfect, but I can assure you that stopping the nuclear 
program in North Korea and getting them ultimately to provide 
the history of their nuclear program and then closing down 
their reactors is something we should be very proud of.
    We want to talk to you more about what KEDO does, I need to 
look at this report, but from the work that I did on this 
before, I just feel that this is a really good deal. The 
evolution of a North Korean nuclear program had not been 
watched well enough, and I think we have some control over it 
now that we did not have before and it is because of the IAEA.
    Mr. Knollenberg. I would like to discuss that further, and 
I will submit some questions.
    Mr. Callahan. Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman and Madam Secretary; I 
share my enthusiasm with my colleagues, and look forward to 
your tenure with the State Department. I just wanted to mention 
two issues. I know time is short.

                              middle east

    The first issue, pertains to the Middle East. There is a 
universal feeling that we must have stability and peace in the 
Middle East, and I applaud the administration for helping to 
move the Hebron protocol forward. However, I would again 
suggest that there is a great concern that the PLO still has 
not done its job in getting the onerous portions of the charter 
removed that calls for the destruction of Israel. I know that 
is something that many in the administration share a concern 
about. I would hope that as we move toward the expiration of 
the Middle East Peace Facilities Act that we pay particular 
notice to that onerous portion that still remains in the 
charter.

                                 cyprus

    The second issue references something that my colleague, 
Mr. Porter, alluded to. I would like to expand on the issue of 
the stability in this eastern Mediterranean area. The 
heightened tension exists, frankly, I think, with all due 
respect to my Chairman, because of, the change in government in 
Turkey, increased violations of airspace over Cyprus, and the 
prospective sale of 10 Seahawk attack helicopters in Turkey at 
a time when there is trouble, in the blending of civilian and 
military targets.
    So I was greatly encouraged, by your remarks in your 
statement that the administration does want to focus greater 
attention on resolving the Cyprus question. I would just 
suggest, perhaps it may even take a summit equal to what has 
been done in the Middle East, the Administration to encourage 
the parties to sit down so that we can once and for all end 
what I think has been a troubling situation in that part of the 
world.

                                 turkey

    Secretary Albright. I just take note of what you are saying 
and I just want people to know that the evolution of Turkey is 
very important to us, and I think that it is important for it 
to continue being a secular country. We are looking where 
Turkey is beginning and also the subject you have raised. I 
just take note of that, Mr. Chairman and Congressman Forbes.
    Mr. Callahan. Mr. Kingston.
    Mr. Kingston. Madam Secretary, what I will do is submit 
some questions because of the time crunch here. However, let me 
go ahead and say what some of them will be, because it might 
stimulate some thinking.
    On page 2, you talked about how approximately 80 percent of 
U.S. aid goes to contracts in America. I don't know that we 
have ever looked into exploring in legislation something that 
requires that a certain amount be returned back to America. 
Maybe we have. If we have, if you could just tell me. If we 
have not, tell me why that may or may not be a good idea.
    I would be hesitant to say you have to spend 50 percent of 
it here, but, it would make foreign aid a lot easier to sell 
back home.
    Then on page 3, you talked about the dropping off of the 
drug kingpins in Latin America, and I would be very interested 
to know specifically how we are doing that and what has been 
done. You said in the last 10 years a lot has happened in Peru 
and so forth.
    On page 4, you talked about energizing Israel, Syria, and 
Israel-Lebanon negotiations. We are looking for ways to 
energize those. I would like to know what ways those are.
    Then on page 6, Bosnia, this is certainly out of the realm 
of this committee, but maybe just a little update on Bosnia and 
could the Bosnian peace last as soon as we pull out, and in 
what time frame would you see us pull out.
    And then two other questions, more philosophical in nature. 
Chairman Livingston's question about Taiwan and El Salvador. I 
know that as a businessman, I worked for a corporation, we had 
a branch office that wasn't making money, the personnel was 
wrong, the profit was wrong, just whatever wasn't going right, 
and you never know how long you should keep investing money and 
at what point you should cut it off.
    Clearly, there are countries that we are pouring a lot of 
money into and they are not coming around to our way of 
thinking and not developing and so forth. Whatever thoughts you 
have on how we could in some instances put in time lines for 
countries to become ``Taiwanese success stories.''
    And finally, I am going to put this under the category of 
nitpicking, perhaps, on page 1 you say that American power and 
prestige comes from three sources, the economy, the might of 
our military, and our diplomacy. I don't know if that is just a 
specific comment geared toward this committee, but I would 
certainly hope that diplomatically around the globe we are 
saying that our source of power comes from our form of 
government and value system far more than our great military 
and great economy and so forth.
    I assume that statement is only a statement for this type 
of hearing, but if it is sort of a mission statement or blanket 
statement, then I think we really should emphasize to the 
countries that the reason why we are giving aid instead of 
receiving it is because of our form of government.
    Again, I am just going to submit that for the record and 
look forward to hearing from you on it.
    Secretary Albright. Thank you.
    Mr. Callahan. Mr. Frelinghuysen.
    Mr. Frelinghuysen. It is high noon, Mr. Chairman; I will 
try to be brief.

                                 Reform

    Madam Secretary, good morning. Congratulations. A recent 
report by the Council on Foreign Relations and the Brookings 
Institution made several recommendations for reform including 
administrative reform, stricter aid criteria, consolidation and 
reengineering of administrative support functions, eliminating 
duplication in policy and program functions. In fact, the 
report recommends measures that they say could save billions of 
dollars. I know that the report also recommends spending more 
money, but I am wondering whether you have reviewed this report 
and whether you have any comments on some of the 
recommendations in terms of reforming your agency.
    Secretary Albright. Yes, let me say I certainly accepted 
the last point and, from my past experience, having been on the 
job for two weeks now, I am kind of looking at what the options 
are for some of our reorganization aspects. Obviously, that 
report provides a great deal of information, and I have an open 
mind on how, in effect, to make our foreign policy machinery 
more effective, and we will be back to you.
    Mr. Frelinghuysen. Thank you, Madam Secretary. Thank you.
    Mr. Callahan. Madam Secretary, I know you are going to be a 
little bit tardy for your meeting with the Speaker, but if you 
want, I will give you a note.
    Secretary Albright. Yes, please.
    Mr. Callahan. But I might offer to you an explanation of 
what you can do. You might tell him that this particular 
subcommittee doesn't always give you everything you ask for, 
but nevertheless, it is the committee that gives you everything 
you get. That is a David Obey philosophy.
    A couple of points before you leave. Just let me say that 
we are well pleased with the professionalism of your staff. We 
sometimes disagree with them, but they are very particular, 
especially Barbara Larkin and Marianne O'Sullivan and Carl 
Raether. They are good spokesmen for your area of government 
and we are pleased to see them here with you today.
    You have mentioned the only $1 billion figure and it has 
been mentioned by a couple of my colleagues here today, but $1 
billion is a lot of money. And we don't want to be 
irresponsible, but I think it is time that the world 
recognizes, number one, that our strong national defense should 
be a great security and should be considered foreign aid to 
many of our allies, because it must give them a sense of 
security knowing that the strength of our defense and our 
willingness to protect their boundaries should they be invaded 
is, in a sense, in itself, a form of foreign aid. So we must 
take that into consideration and you must convey that message 
as you make your travels around the world.
    Representative Kingston is right, you and I have discussed 
this privately about the opinion that people have of foreign 
aid, the misconception that it represents 15 percent when in 
reality it is only 1 percent, and I think you have done an 
outstanding job in delivering that message. We hope that you 
will continue to convince the American people of the importance 
of our involvement in foreign aid. So with that----
    Ms. Pelosi. Mr. Chairman, would you yield for a second, 
just a second?
    Mr. Callahan. You don't know what a second is.
    Ms. Pelosi. I didn't say a nanosecond, I said a second.
    Mr. Callahan. Yes.
    Ms. Pelosi. I think your point was a very important one, 
that these countries should consider that part of our foreign 
cooperation, if not aid. And I think that many people in the 
United States, when they complain about the size of foreign 
aid, take that into consideration, too.
    So when we say it is 1 percent and they are saying it is so 
much more, I think we have to make that distinction, and that 
kind of assistance that we provide is in our national interest 
to do.
    So I am glad that you made that point, because I think as 
we make our presentation to the American people about the 
importance of foreign assistance, that they have to understand 
how small the amount of it is that comes out of this committee 
and how necessary this 10 percent increase is.
    Mr. Callahan. I thank the gentlelady.
    Let me just send you on your merry way, Madam Secretary. I 
didn't coin the phrase, but it came from a colleague of mine, 
Henry Hyde, when he introduced one of the female Members of the 
Congress to the conference one day. He referred to her and I 
will refer to you as a flamingo in the barnyard of politics. We 
thank you, Madam Secretary.
    Secretary Albright. Thank you so much. I appreciate having 
had this time with you, and I would like it noted that I would 
have happily stayed longer. Thank you so much.
    [Questions and answers for the record follow:]

        Questions for the Record Submitted by Chairman Callahan

                             latin america
    Question. Although funding for international affairs programs is 
dramatically increased in the President's fiscal year 1998 budget 
request, funds for certain Latin America countries (particularly 
Central America and the Caribbean) would be reduced. Why?
    Answer. Although restrictions on overall assistance levels restrict 
our ability to provide for all requests in the region, levels of 
foreign assistance to Central America and the Caribbean have basically 
remained the same as FY 1997 enacted levels. Additionally, the 
Administration is actively pursuing programs specifically designed to 
foster economic growth and regional integration in Central America and 
the Caribbean. As well as increasing our democracy-related funding for 
new initiatives in the Dominican Republic and Mexico.
    Question. The Administration is proposing to respond to the peace 
agreement in Guatemala by cutting development assistance funding in 
both fiscal years 1997 and 1998. In addition, only $17 million of the 
$25 million pledged to that country from the Economic Support Funds has 
been identified. On the other hand, $70 million is requested for Haiti 
for fiscal 1998. Why is the administration responding to the historic 
peace agreement in Guatemala by restricting funds for that country, 
compared to the efforts to pour funds into Haiti?
    Answer. We are in no way restricting funds to Guatemala. In fact, 
the Administration has placed Guatemala and the implementation of its 
peace accords at the top or our priority list for ESF and DA assistance 
in the region. Development Assistance will be slightly increased in FY 
1998 in Guatemala over previous FY 1997 levels. With regard to ESF, we 
have identified the remaining $8.0 million from prior year unallocated 
funds for Guatemala. This will enable the Administration to make good 
on our pledge of a total ESF allocation of $25 million. Our $70.0 
million ESF program level for Haiti is critical in maintaining our 
activities to strengthen Haitian civil society and provide the 
necessary economic assistance.
                  south balkan development initiative
    Question. On page 24 of the Congressional Presentation for Foreign 
Operations, there is a reference to the ``South Balkan Development 
Initiative.'' What is it? Are funds allocated for this initiative? If 
so, identify such funds for fiscal years 1997 and 1998.
    Answer. The South Balkan Development Initiative (SBDI) is a $30 
million, multi-year, Presidential initiative aimed at developing and 
coordinating the transportation systems of Albania, Former Yugoslav 
Republic of Macedonia, and Bulgaria while promoting regional 
cooperation among the three countries. Support for East European 
Democracy (SEED) funding of $7 million has been allocated for fiscal 
year 1997. An additional $7 million has been proposed for FY 1998.
                                romania
    Question. The Administration is responding to the establishment of 
the new, democratic, free-market oriented government in Romania by 
maintaining a freeze in funds allocated for that country.
    Is the Administration modifying its assistance program to Romania 
in light of recent developments? If so, in what way?
    Answer. We have made a number of modifications to our assistance 
program to respond to the opportunities offered by recent developments 
in Romania. Immediately after the elections, USAID Assistant 
Administration Thomas Dine travelled to Romania to get a first-hand 
understanding of the needs of the new government.
    In response to requests from the new Romanian government, we are 
providing several advisors to assist in the implementation of the 
revitalized privatization program and to improve bank supervision. In 
addition, a long-term advisor has been placed in the office of 
President Constanisescu to help organize the office, streamline 
functions, and improve communications with other agencies. Similarly, 
technical assistance is being provided to the Romanian National 
Security Advisor's office. Finally, we are developing a program to 
provide technical assistance to the Chamber of Deputies and Members of 
Parliament.
    Question. The Administration is responding to the establishment of 
the new, democratic, free-market oriented government in Romania by 
maintaining a freeze in funds allocated for that country.
    What democracy and governance programs currently exist in Romania? 
Specifically, what are the plans for such programs in the immediate 
future, especially programs and projects to provide technical 
assistance to the new government?
    Answer. Several democracy and governance programs are underway in 
Romania. The Democracy Network provides subgrants, technical 
assistance, and training assistance, and training to non-governmental 
organizations. The professional media program provides training to 
journalists and media outlet managers. Other ongoing projects provide 
technical assistance to local governments and support legislative 
reform.
    We are initiating several new democracy and governance programs to 
provide technical assistance to the new government. A long-term advisor 
has been placed in the office of President Constantinescu to help 
organize the office, streamline functions, and assess/improve 
communication with other governmental entities. We are also providing 
technical assistance to the Romanian National Security Advisor on the 
functions, organization, and staff development of his office. Finally, 
we are developing a technical assistance package to the Romanian 
Chamber of Deputies and Members of Parliament.
    Question. 5c. Is the United States Ambassador to Romania objecting 
to the establishment or extension of further democracy and governance 
programs in that country? If so, what is the rationale for objecting to 
such programs?
    Answer. The United States Ambassador strongly supports continuation 
of USAID/USG-funded democracy and governance programs in Romania. Our 
mission in Bucharest is working closely with the Romanian parliament on 
programs that will further strengthen the legislative capacity of that 
body. Our USAID and USIS programs in Romania continue to provide 
technical advisers to assist the new government in areas where it has 
requested assistance. Through contractors, our programs support the 
continued development of a free press and the extension of a mature 
civil society, especially in the form of focused, self sustaining NGOs.
    It is a fact that the U.S. mission has moved beyond some past 
democracy programs that have successfully realized their goals, 
including those focused on the electoral process and watchdog NGOs. 
Free and fair elections, and the subsequent smooth transition to a new 
government, offered ample proof that these programs had run their 
course and had, as any successful development program must, worked 
their way out of a job.
    Question. Can democracy and governance programs for Romania be more 
quickly and more effectively delivered in that country through 
organizations other than the United States Agency for International 
Development given the misgivings about such projects on the part of 
Embassy Bucharest?
    Answer. The Ambassador and the U.S. Mission in Bucharest continue 
to support democracy and governance programs that address the current 
needs in Romania. USAID's programs in this area have proved to be 
effective and, with the continued support of the Ambassador, will 
remain effective.
                     international criminal justice
    Question. The Administration is proposing to reduce funding for the 
``International Criminal Justice'' component of International Narcotics 
Control from $20 million to $16 million in fiscal year 1998. Why?
    Answer. The FY 98 INC budget request of $230 million represents $17 
million more than the FY 97 funding level of $217 million approved by 
Congress. The figure for FY 98 is less than was requested in FY 97, but 
it is sufficient to effectively build upon USG efforts to counter the 
full range of transnational crimes. We find that law enforcement 
training and other programs designed to upgrade foreign judicial 
sectors in accord with democratic principles are particularly cost 
effective. By emphasizing these programs, we believe that we can do 
more with less.
    At the same time, the Administration has designated international 
crime control as a top foreign policy concern which, increasingly, is 
woven into the everyday fabric of our international relations. Through 
diplomatic initiatives, we urge countries to recognize the 
international crime problem and to do more on their own, and encourage 
other allies--particularly in Europe--to increase their own support in 
this important area.
    Question. On page 69 of the Congressional Presentation document for 
Foreign Operations, it is stated, ``ICJ will also establish a regional 
law enforcement academy modeled on ILEA in Budapest, Hungary.''
    a. What is the status of this proposal? Where would the academy be 
located?
    b. Would the United States construct such an academy, or provide 
on-going operational costs? If so, what are the anticipated costs of 
such an academy to the American taxpayer in fiscal years 1997, 1998, 
and on an annual basis?
    c. Why is such an academy necessary, given the proximity of Latin 
America to programs already operating in the United States, such as the 
FBI Academy at Quantico, Virginia?
    Answer. The Department (INL/ICJ) continues to review the 
feasibility of this proposal. Treasury and Justice agency 
representatives have endorsed the need for a specialized academy in the 
Hemisphere that would promote regional and international cooperation in 
the fight against international crime. No decisions have been made nor 
have we decided where such an academy might be located.
    We have not yet determined what an academy in this Hemisphere would 
cost this year and in future years. We would anticipate using a site 
with existing facilities, as we did in Budapest. Costs would depend on 
the readiness of other foreign governments, the government of the 
country where the academy is located, and participating Latin American 
governments to share the costs of running and sending officials to the 
academy.
    The Department looks to maximize international participation in the 
development and cost sharing of an academy whether it be in Central 
Europe, in Latin America, or East Asia. No academy in the U.S. is 
likely to win international partnership and financing. Locating the 
academy in the region also promotes local ``ownership'' of the 
commitment to fight transnational crime on a cooperative basis.
                         partnership for peace
    Question. The Administration is proposing to support NATO expansion 
through the Partnership for Peace and other initiatives. In addition, 
it is proposing a new ``Partnership for Freedom'' in the New 
Independent States of the former Soviet Union. However in the area 
where NATO will expand first--Central Europe--the Administration is 
proposing to reduce funds through the Support for East European 
Democracy (SEED) program. Why is that?
    Answer. From its inception in 1989, the SEED program has always 
been envisioned as a vehicle for transitional economic and political 
assistance. SEED was designed ``. . . to provide cost-effective 
assistance to those countries of Eastern Europe that have taken 
substantive steps toward institutionalizing political democracy and 
economic pluralism''. It is not a coincidence that those countries 
likely to be offered membership in NATO in 1997 are also the ones that 
are furthest along in the transition to political pluralism and a 
market-based economy. Indeed, it is a highly positive development for 
us to be speaking realistically with several states--particularly those 
in the Northern Tier--about both an end to assistance and a beginning 
to the full range of security and economic integration with the West. 
Graduation from SEED is an indication that a country is ready to move 
from an assistance-based relationship with the United States to more 
normal relations based on trade and common political interests.
                         global change funding
    Question. Please provide funding levels and descriptions for all 
climate and global change programs, projects, and activities (including 
those in support of, or connected with, climate and global change 
objectives) within the budget 150 appropriations accounts. Include 
research activities, and any funds allocated to other agencies (or 
allocated from other agencies) through the use of administrative 
transfers such as section 632(a) of the Foreign Assistance Act. Include 
funds provided in fiscal years 1995, 1996, and 1997, and proposed for 
fiscal year 1998.
    Answer. Within Budget Function 150, there are a number of sources 
of funds for climate change and other global change programs (including 
those to combat ozone layer depletion), projects and activities.
    As the table below indicates, the amount listed for the 
Department's Bureau of Oceans and International Environmental and 
Scientific Affairs (OES) covers personnel, travel, interagency 
transfers, and contributions from the OES Environmental Fund related to 
the climate change and ozone depletion issues. The transfers to the 
Department ($1.185 million for FY 1995 and FY 1996) were made by EPA, 
NOAA, NSF, and NASA in support of the Intergovernmental Panel on 
Climate Change (IPCC) and the UN Framework Convention on Climate Change 
(UNFCCC); the Department has transferred no funds to other agencies.
    In line two, the Climate Stabilization Fund encompasses the 
Department's voluntary contributions to the IPCC and UNFCC from the 
IO&P account. The FY 1995 figure is considerably lower, as the UN 
regular budget covered most of the UNFCC expenses until it became an 
independent entity when the Climate Convention came into force. The 
additional increases over the years reflect the increase in demands 
placed on the UNFCC Secretariat as the Convention Partiesnegotiate a 
follow-on treaty. In the FY 1998 request, we have anticipated the need 
for the Parties to assume their own conference servicing expenses, and 
that these will cease to be paid from the UN regular budget.
    USAID spends approximately $150 million per year in 44 countries 
worldwide on climate change-related projects. The vast majority of 
those include sectoral efforts in energy and forestry. Many of these 
projects involve collaboration with the U.S. private sector.
    The Global Environmental Facility devotes approximately 40 percent 
of its resources to climate change projects (other recipients fall into 
categories for mitigating ozone layer depletion, preserving 
biodiversity, and protecting oceans). The FY 1998 request reflects an 
attempt to bring U.S. contributions in line with our pledged share.
    Funds for the Montreal Protocol Multilateral Fund and that portion 
of the UNEP Secretariat, which administers the Vienna Convention and 
Montreal Protocol, are listed in the penultimate two lines of the 
table.

[Page 53--The official Committee record contains additional material here.]


                        international narcotics

    Question. Please provide a list and description of the unobligated, 
and obligated but unexpended (by fiscal year) balances for the 
appropriations account ``International Narcotics Control''. Include 
funds that were appropriated in other accounts, but are under the 
operational control of the Bureau of International Narcotics and Law 
Enforcement Affairs.
    Answer. We are providing, as requested, the attached chart which 
identifies funds appropriated to the Bureau of International Narcotics 
and Law Enforcement Affairs (INL) for narcotics control and funds 
transferred to INL from other appropriations for anticrime programs. 
The funds available to INL include appropriations under International 
Narcotics Control (INC), Freedom Support Act (FSA), Support for Eastern 
European Democracy (SEED), Economic Support Funds (ESF), and 
Peacekeeping Operations (PKO). Note that all FY 1995 and FY 1996 
funding was completely obligated. Most unexpended balances for these 
years are due to undelivered orders and pending liquidations. FY 1997 
funding is currently under the obligation process which includes: (1) 
negotiating and signing U.S./host government bilateral agreements for 
narcotics control or anticrime programs, (2) signing reimbursement 
agreements with other U.S. implementing agencies, and (3) obtaining the 
appropriate contract services.

[Page 55--The official Committee record contains additional material here.]


            Questions for the Record Submitted by Mr. Porter

                                albania

    Question. The current economic crisis in Albania, caused by the 
widespread collapse of heavily invested pyramid schemes, has called 
attention to the serious financial problems that have plagued this 
country for decades. After 40 years as one of the most isolated 
countries in the world. Albania's reemergence into the modern world has 
been painful and difficult. In the face of the recent crisis, the 
government appears to be backsliding on reforms that are important for 
Albania's future. Should we tie our assistance to Albania to continued 
adherence to democratic norms and continued progress toward open 
markets, and personal and political freedoms?
    Answer. As of September 30, 1996, the U.S. had contributed a little 
over 120 million dollars in SEED assistance to Albania. The SEED level 
for 1996 alone was 21 million dollars. Our assistance efforts have to 
date focussed on activities designed to shore up reform and create 
alternatives to statism. Indeed, our assistance program was carefully 
designed to interact with local government, non-governmental 
organizations, and the private sector wherever possible. Our assistance 
fosters economic restructuring, democratic institutions, and social 
sector reform.
    When it became clear that the government of Albania was not 
included to redress elections irregularities from last May's 
parliamentary elections, the U.S. was at the fore of international 
efforts to press for new elections. Among the bilateral steps we took 
were suspending police training programs and cutting military training. 
We also cut $3 million from our FY 97 bilateral assistance budget.
    Much has changed over the last months. The Government of National 
Reconciliation now seeks our help with the most basic elements of 
governance: re-establishing civil order and building democratic 
institutions. We believe that our interests will be well served by 
staying engaged and responding positively to credible Albanian requests 
for assistance in order to advance to our goal of promoting democracy 
and stability in Albania and the region.

                           armenia/azerbaijan

    Question. The ongoing conflict between Armenia, Azerbaijan and 
Nagorno-Karabakh over the future of this enclave threatens to 
destabilize the entire Caucasus and reignite widespread regional 
turmoil. Given the seriousness of this situation, what action is the 
Administration planning to take to reduce tensions in the area?
    Answer. The Nagorno-Karabakh conflict threatens basic U.S. 
interests in the region, including the stability and viability of new 
independent states in the region, U.S. security and economic interests 
and U.S. isolation of Iran.
    The U.S. has been an integral part of international efforts to end 
the conflict since the collapse of the Soviet Union. We were among the 
original members of the OSCE Minsk Group on Nagorno-Karabakh and have 
conducted vigorous diplomacy both in that context and in other 
channels.
    In February my deputy, Strobe Talbott, became Co-chair of the Minsk 
Conference. Russia and France hold the other two Co-chairs. This step 
has increased our direct involvement in negotiations.
    We will continue to promote regional cooperation and other ways to 
reduce tensions in the Caucasus.
    Congress, too, can contribute to lessening tensions in the region 
by repealing FREEDOM Support Act Section 907. This legislation's net 
effect has been to reduce U.S. effectiveness in seeking a solution to 
the Nagorno-Karabakh conflict.
    Question. Two of the three parties to the Nagorno-Karabakh 
conflict, Armenia and Nagorno-Karabakh, are strongly opposed to the 
current U.S. position which, rather than taking a neutral stance on 
this issue, pre-determines the political status of Nagorno-Karabakh. 
How do you intend to restore U.S. impartiality in these negotiations.
    Answer. The U.S. is impartial in this conflict.
    At the December, 1996 OSCE Summit in Lisbon the U.S. supported a 
statement on the Nagorno-Karabakh conflict by the OSCE Chairman-in-
Office.
    That statement called for a solution to the Nagorno-Karabakh 
conflict based on two universally acknowledged principles that are 
enshrined in basic OSCE documents: territorial integrity and self-
determination. The statement also called for guaranteed security for 
the people of Nagorno-Karabakh.
    The statement was impartial and based on both territorial integrity 
and self-determination. It calls for ``an agreement based on self-
determination which confers upon Nagorno-Karabakh the highest degree of 
self-rule within Azerbaijan,'' which incorporates both principles. Had 
it recognized only self-determination without territorial integrity it 
would have been partial and one-sided.
    52 countries joined with us in supporting this statement, which 
reflects the basic principles of the OSCE. Only one opposed.
    The U.S. seeks to maintain its position of impartiality on the 
conflict.
                      azerbaijan: nagorno-arabakh
    Question. The International Committee for the Red Cross has 
reported that it cannot meet the urgent humanitarian needs of the 
population of Nagorno-Karabakh. Current U.S. policy provides 
humanitarian assistance to Azerbaijan, and relies upon that government, 
which is hostile to Nagorno-Karabakh, to provide assistance to the 
people there. In the FY97 appropriations bill, we attempted to remedy 
this outrageous situation, but we were frustrated by State Department 
opposition. Can we expect similar resistance to efforts to correct this 
imbalance during the FY1998 cycle.
    Answer. To clarify, the United States Government is restricted 
under section 907 of the FREEDOM Support Act, from providing aid to the 
Government of Azerbaijan. Therefore, the U.S. does not rely on the 
Government of Azerbaijan to distribute U.S. humanitarian aid to the 
people living in Nagorno-Karabakh. The U.S. provided assistance to the 
people living in Nagorno-Karabakh through the International Committee 
of the Red Cross (ICRC). The U.S. provides 20 percent of ICRC's annual 
NIS appeal.
    Provision of U.S. Government humanitarian assistance is needs-
driven and focuses on addressing the most critical needs. The ICRC, 
which takes the lead in providing a humanitarian response in conflict 
areas, bases its humanitarian aid solely on observed needs. All 
available information indicates that currently there are no critical, 
unmet humanitarian assistance needs within Nagorno-Karabakh.
    We opposed language in FY97 foreign operations appropriations bill 
that conditioned aid to Azerbaijan to the Nagorno-Karabakh region of 
Azerbaijan based on an arbitrary ratio. The U.S. opposes any 
legislative efforts to condition, restrict or earmark aid. These 
actions only hinder U.S. efforts to provide aid based on need.
                                 burma
    Question. The 1996 Country Report for Burma cited a marked decline 
in the human rights situation there. In addition, recent statements by 
Aung San Sui Kyi have called for the United States and other countries 
to move ahead with strong sanctions against the SLORC regime. During 
the FY 1997 appropriation process, the Administration actively opposed 
tough sanctions on Burma. Now that Sui Kyi has called for sanctions and 
the SLORC has stepped up its repression, will the Administration 
continue to block efforts by the Congress to censure SLORC?
    Answer. I share your concern for Aung San Suu Kyi and her 
supporters in the democracy movement in Burma. I visited Burma in 
September 1995 and am the highest-ranking U.S. official to have met 
with Aung Suu Kyi. I was also proud to present the National Democratic 
Institute for International Affairs' Averell Harriman Democracy Award 
to her--through her husband--this past summer.
    The Administration has consulted closely with Congress regarding 
the best means to pressure the SLORC and we will continue to do so in 
the future.
    A key question is how we can best support the democratic movement 
in Burma. We continue to be concerned about the violations of human 
rights there, and we have firmly and consistently stressed that the 
rights of opposition members must be respected.
    We have taken steps to pressure the SLORC--downgrading our 
representation to Charge, implementing an arms embargo, suspending 
economic aid, withdrawing GSP, blocking assistance from international 
financial institutions, and imposing visa restrictions on SLORC 
members.
    We are engaged in vigorous multilateral diplomacy to encourage the 
EU, Japan and ASEAN to take similar steps. At our urging, the EU in 
November joined us in visa restrictions and has recently withdrawn GSP 
benefits. ASEAN, Japan and EU leaders have encouraged the SLORC to move 
towards dialogue with the NLD. We have also urged passage of tough 
resolutions condemning Burma's human rights record at the UN General 
Assembly, the UN Human Rights Commission, and the International Labor 
Organization. We will continue these active multilateral efforts.
    The Cohen-Feinstein legislation requires the President to impose a 
ban on new U.S. investment in Burma if he determines that certain 
conditions are met. We continue to monitor the SLORC's behavior closely 
and will impose such a ban if the President makes that determination.
    Question. Congress appropriated $2,500,000 for democracy building 
activities in Burma, on the Thai-Burmese border, and for activities of 
Burmese student groups and other groups outside Burma in FY 1997. It is 
my understanding that there have again been delays in administering 
these funds due to internal issues at State. Could you give us some 
idea of when we can expect these monies to be released and who will be 
administering them?
    Answer. There have been no delays in administering the Burma 
program funds. These funds are directly administered by the Bureau of 
Democracy, Human Rights, and Labor (DRL) of the Department of State.
    State did not receive the Burma earmark monies from AID until 
January 1997. Requests for proposals were sent out in February and all 
applications received on March 31. The Burma Earmark Committee will 
review all proposals, and decisions on funding will be made by mid-May.
    Question. Further, the President's budget proposal deletes the 
earmark for this program for FY 1998. Within the overall account, we 
are very interested to know the Administration's intentions as far as 
continuation of these programs in FY 1998?
    Answer. The Burma earmark was a Congressional initiative. We are 
still in the early stages of implementing this earmark and did not 
believe it appropriate to seek funding for FY 1998 until we have 
reviewed the experience of our FY 1997 program.
                                cambodia
    Question. Having recently returned from Cambodia, I was very 
pleased to see how we are leveraging a small amount of U.S. assistance 
into dramatic improvements in the lives of the Cambodian people, 
particularly in the areas of demining and infrastructure development. 
It is my understanding that we currently give around $3 million towards 
demining efforts in Cambodia. Ambassador Kenneth Quinn told me that at 
the current rate, it will take 100 years to demine Cambodia, even with 
the incredible work being done by the Cambodian Mine Action Committee. 
However, if the demining budget were doubled, the country would be 
cleared in a generation. Given this situation, I would like to know why 
the Administration has flat-lined FMF and IMET for Cambodia in FY 1998, 
the accounts which fund demining and infrastructure?
    Answer. We share your concern regarding the immense task facing 
Cambodia in removing landmines from its territory and have provided the 
principal assistance in enabling that country to begin to address the 
problem. Our assistance program has helped to establish a sustainable, 
indigenous demining capability in Cambodia, the Cambodian Mine Action 
Center. From FY 1993 through FY 1996, the U.S. spent a total of $9.419 
million on the Cambodia program, which has now entered the sustainment 
phase of actual demining operations in the field.
    We received $7 million in foreign assistance demining funds for FY 
1997 for our program in thirteen countries. We are requesting $15 
million for FY 1998. In addition to expanding the program to additional 
countries, we plan to increase the amount of assistance provided to 
Cambodia and other countries with ongoing programs, consistent with the 
indigenous capability to use such additional assistance effectively.
                            china/hong kong
    Question. I understand that you will be departing for an important 
trip to Asia soon, and I wish you well as you make this inaugural 
sojourn to meet with many of our key bilateral partners. While you are 
in China, will you take this opportunity to forcefully raise issues 
which have been neglected at high levels such as human rights, 
religious persecution and concern about the future of Hong Kong?
    Answer. During my visit to Beijing in February, I clearly and 
forcefully raised the full range of our human rights concerns, 
including the issue of religious persecution. I reiterated the concerns 
expressed many times by the President and by my predecessor, Secretary 
Christopher, and underlined that we seek more positive steps from China 
in the human rights area. I also discussed Hong Kong at length and 
underscored the importance that we attach to China's upholding its 
commitments under the Joint Declaration, including its commitment to 
grant a high degree of autonomy to Hong Kong and to preserve Hong 
Kong's civil liberties and fundamental freedoms.
    I will continue to raise human rights issues with China in the 
months ahead. Our comprehensive approach affords us with many 
opportunities to discuss these issues and work to expand areas of 
agreement and narrow our differences.
    Question. In light of recent actions which have raised grave 
concerns about Chinese intentions towards the future of Hong Kong, when 
can we expect the Administration to begin high profile expressions of 
disapproval about actions which threaten the future of Hong Kong? Are 
we pushing the British, who have standing under the Joint Declaration, 
to bring causes of action against the Chinese in international forums?
    Answer. China's handling of the July 1, 1997 reversion of Hong Kong 
is receiving heightened worldwide attention. The Administration has 
spoken up forthrightly and has made clear to the Chinese at the highest 
levels our interest in a smooth transition and the preservation of the 
civil liberties and basic freedoms crucial to maintenance of Hong 
Kong's way of life and high degree of autonomy. We attach great 
importance to China's actions in upholding its commitments for Hong 
Kong, as expressed in the 1984 UK-PRC Joint Declaration and the 1990 
Chinese Basic Law.
    We have frequently expressed our view that China's decision to 
replace the current elected Legislative Council with a provisional 
legislature on July 1 was unjustified and unnecessary. We have also 
expressed concern, both publicly and privately, over China's decision 
to amend the Bill of Rights Ordinance and annul laws on public order 
and societies. We oppose attempts to weaken civil liberties and basic 
freedoms in Hong Kong and have called on Beijing to allow the post-
reversion Hong Kong Government and courts to debate and decide the 
amendment and implementation of Hong Kong laws.
    I personally engaged the Chinese on these issues during my recent 
trip to Beijing in late February as did Vice President Gore during his 
late March trip. We will continue to convey our expectation that Hong 
Kong's autonomy, stability and prosperity be preserved under the Joint 
Declaration.
    Specific arrangements for Hong Kong's transition are matters 
between the British and the Chinese, although we play a strong 
supportive role to ensure protection of U.S. interests through a 
successful and stable transition. The British have proposed taking the 
matter of the Provisional Legislature to the International Court of 
Justice.
                                 cyprus
    Question. On several occasions last year, top administration 
officials said 1996 would bring a ``big push'' by the United States to 
solve the Cyprus problem. This initiative failed to materialize, while 
tensions on Cyprus rose to new levels. During your confirmation 
hearings, you indicated that the U.S. would play a ``heightened role'' 
in promoting a solution on Cyprus. Could you please provide us with 
more detailed information about this ``heightened role'' and the 
Administrations's timetable for embarking on this initiative?
    Answer. Despite our interest in a Cyprus settlement and our work to 
advance this goal in 1996, during the year the region faced a downward 
spiral or events, including the January Aegean islet crisis between 
Greece and Turkey, unsettled political situations in Athens an Ankara, 
and intercommunal violence on Cyprus (unprecedented since 1974) last 
summer and fall.
    I assure you that we remain committed to promoting a Cyprus 
solution. 1997 may be a promising year because EU accession talks for 
Cyprus are expected to begin in early 1998. The international community 
is examining options for intensified engagement. The essential 
requirement for success, however, will be no different in 1997 than it 
was in 1996: the desire of the parties themselves for an agreement. 
Given the worsened state of intercommunal relations on Cyprus, as I 
noted at my confirmation hearing, for any initiative to bear fruit, the 
parties need to agree to steps to reduce tensions and make direct 
negotiations possible. We remain hopeful the parties will be able to 
take such steps, including acceptance of a UN package of measures to 
reduce the risk of confrontation along the cease-fire lines.
    Prospects for a settlement were greatly complicated by the 
Government of Cyprus' recent decision to sign a contract for the 
purchase of SA-10 missiles, and the resulting threats from Turkey to 
respond militarily. In the wake of this unfortunate development, we 
worked very hard to defuse the crisis atmosphere which developed and 
succeeded in securing President Clerides' commitment not to import any 
missile system components for 16 months. We hope this will provide time 
to resolve this problem through peaceful means.
                    israel/middle east peace process
    Question. The U.S. has maintained the position that the Arab-
Israeli conflict must be resolved by the parties themselves, a policy 
which has so far been successful and has led to major breakthroughs in 
the peace process. Looking down the road, what are the biggest 
challenges to the relations between the U.S. and Israel?
    Answer. The record of the past few years clearly demonstrates that 
real progress between Israel and the Palestinians has come about when 
the two parties engage in direct negotiations. The United States has 
played a facilitating role in this process, and will continue to do so 
when necessary.
    Regarding other tracks of the peace process, the U.S. is actively 
seeking ways to move forward. Israel and Jordan continue to implement 
their peace treaty in a wide range of cooperative fields, such as trade 
and tourism. The Israel-Lebanon Monitoring Group, with active U.S. 
participation, is a proven forum for avoiding escalation of violence 
while we work to resume broader talks. The U.S. is in close touch with 
Israel and Syria with the goal of reducing tensions and resuming direct 
talks.
    Our relations with Israel are excellent. This Administration's 
commitment to enhancing the security and well-being of Israel is 
historically unparalleled. The United States remains absolutely 
committed to maintaining Israel's qualitative edge in military 
capacity. For example, we have funded and developed the Nautilus 
program to provide Israel with a defense against Katyusha rockets, and 
helped Israel to develop the Arrow anti-tactical ballistic missile 
system. We have provided Israel with advanced aircraft like the F-15I 
and the F-16I. We have also increased counter-terrorism assistance in 
response to terrorist actions in Israel. We are proud to be Israel's 
largest trading partner and we have put the best and brightest of our 
nation's minds together in the U.S.-Israel Science and Technology 
commission.
    Question. Recent violence, in violation of the Oslo Agreements, has 
raised concerns about the Palestinians' commitment to implementation of 
the peace accords. How can the United States reinforce its position 
that such violence is unacceptable on all sides, and encourage 
effective implementation of the agreements by all parties:
    Answer. There was indeed a serious breakdown in Palestinian command 
an control, significant violence, and casualties on both sides last 
September.
    The Palestinian authorities have told us and the Israelis that the 
incidents in September did not reflect Palestinian Authority (PA) 
policy.
    Chairman Arafat has publicly committed and has taken concrete steps 
to ensure that such incidents will not happen again. He has, for 
example, imposed strict limits on the use of firearms by the 
Palestinian police.
    The Israelis themselves have, over more months, complimented 
Palestinian cooperation with Israeli security services in combating 
terrorism against Israel.
    It is significant that the shooting of Palestinians in Hebron by a 
deranged Israeli on New Year's Day did not unleash violence of the kind 
we saw last September. Instead, Israeli and Palestinian security forces 
cooperated quickly and closely in handling the incident.
    Regarding more recent outbreaks of violence, we have made clear to 
the Palestinians that a resort to violence is unacceptable and that 
issues between Israel and the Palestinians must be resolved through 
negotiation. We continue to press Chairman Arafat to sustain a 100% 
effort to counter terrorism and violence, and to maintain cooperation 
with Israel on security issues.
    Question. By signing the Hebron agreement, Prime Minister Netanyahu 
has again demonstrated Israel's willingness to take risks for peace and 
commitment to the peace process. As a result of our strong support of 
the peace process, the U.S. currently gives in excess of one-third of 
its foreign aid budget to Israel, Egypt, Jordan and Lebanon. As 
assistance for these countries becomes an even larger piece of the 
shrinking foreign assistance pie, we will be faced with the choice of 
cutting this support or eliminating other vital foreign aid functions. 
How does the Administration expect to deal with this looming crisis 
without harming our commitment to peace in the Middle East?
    Answer. The President's FY 98 budget request provides for a modest 
increase in overall foreign assistance resources from FY 97 
appropriated levels, an increase that if enacted by Congress, would 
enable our Middle East peace process assistance levels to comprise a 
smaller percentage of our overall foreign assistance budget than was 
the case in FY 97. I strongly believe that full funding of our FY 98 
budget request is the best way to ensure U.S. leadership in the peace 
process and avoid the difficult scenario that you lay out above.
                                 syria
    Question. Syrian President Asad continues to refuse to join the 
peace process, despite your predecessor's tireless efforts. How will 
your approach differ toward efforts to bring Syria to the table.
    Answer. In 1990, President Asad made a decision to participate in 
the Middle East Peace Process. Since then, Syria participated in the 
Madrid Conference, joined the Gulf War coalition against Iraq, and 
engaged in direct negotiations with Israel.
    In the Wye Plantation takes Israeli and Syrian military and 
diplomatic officials engaged in serious negotiations. The Wye talks 
were suspended in 1996.
    However, both Israel and Syria have expressed their interest in 
resuming these negotiations. We have been in contact with both parties 
in an ongoing effort to renew these talks.
                                 turkey
    Question. In the 1996 Country Reports on Human Rights, the State 
Department again expressed concerns about the situation in Southeast 
Turkey where the government is waging a brutal campaign against the 
Kurdish population. Forced evacuation, extrajudicial killings, torture, 
disappearances and prolonged periods of incommunicado detention 
continue unabated. Despite promises to the contrary, the Government 
continues to use the Anti-Terror law to wage war on journalists and 
human rights activists. In light of these findings, how can the 
Administration support making Turkey the third-largest recipient of 
U.S. assistance?
    Answer. Encouraging Turkey to improve its human rights record 
remains one of the Administration's top priorities with Turkey. We do 
not share your assessment that the Turkish government ``is waging a 
brutal campaign against the Kurdish population.''
    The Turkish government is trying to defend the country against the 
attacks of a vicious terrorist group, the Kurdistan Workers' Party (the 
PKK) that has waged a violent campaign against civilians and the army 
for 14 years. Serious human rights abuses against civilians in the 
southeast, many of whom are Kurdish, have taken place in the process of 
the fighting between the PKK and the army. Both the Turkish Government 
and the PKK have been responsible for abuses.
    Our limited aid program with Turkey is specifically geared to 
support tangibly Turkey's efforts to improve its human rights. We fund 
two AID programs in Turkey, one to support a population planning clinic 
and one to indirectly support the creation of centers to treat torture 
victims. Both programs are limited in time, geared to support local 
Turkish NGO's get programs up and running. We also provide ESF funds 
for Turkey that support economic reform measures and enable the Turkish 
government to undertake programs in southeastern Turkey. The only other 
aid that the USG provides Turkey is $1 million in military education 
programs (IMET), which includes human rights curricula.
    Question. It is my understanding Turkey is now reconsidering its 
rejection of $22 million in FY 97 ESF. When there are many deserving 
countries vying for scarce U.S. foreign aid dollars, why does the 
Administration insist on making this assistance available for a country 
which has repeatedly refused it and has shown an utter disregard for 
the human rights concerns that Congress has articulated on several 
occasions? Further, how does the Administration justify requesting that 
we more than double ESF for Turkey in FY 98?
    Answer. The Turkish government had previously rejected ESF for FY 
97 because of conditions the House sought to place on ESF related to 
Armenia. The Administration strongly opposed those conditions. When 
those conditions did not pass the Congress, the Government of Turkey 
withdrew its objection.
    Although our $50 million FY 98 ESF request for Turkey is greater 
than the FY 97 request, the FY 98 request more closely resembles 
previous ESF levels. As recently as FY 93, we gave Turkey $120 million 
in ESF.
    Turkey continues to face a daunting set of challenges it needs to 
address to ensure that its economy will remain strong. These include 
privatization of up to a third of the economy that remains in state 
hands, reforming its tax system and overhauling the social security 
system to make it financially sound. Turkey has made some progress on 
privatization with the approval of more than $900 million in projects 
in December and January. It has also made progress in reforming its tax 
and social security system.
    However, these reforms cost money. Our ESF program helps the 
government sustain those programs without having to cut other programs, 
including development in the southeast. ESF provides important short-
term support to the Turkish government which allows it to undertake 
longer-term structural economic reforms. The current government has 
made important strides on privatization, in particular, in the past few 
months.
    Provision of ESF is also an important bilateral signal that we 
support the Turkish government's efforts to address these economic 
reforms. It is tangible evidence of the value we place on continued 
close ties with Turkey.
    Question. Turkey, in conjunction with Azerbaijan, continues to 
blockade the loadlocked country of Armenia, effectively cutting off 
land transport of U.S. assistance into Armenia. Congress has 
overwhelming passed the Humanitarian Aid Corridor Act (HACA) in an 
effort to address this situation. Last year, the President waived this 
provision for Turkey, without notifying Congress or concerned members 
of his own party. As a result, a new reporting requirement was added to 
the HACA. Do you anticipate that President Clinton will continue to 
ignore overwhelming support for this law, and ignore Turkey's illegal 
and immoral blockade of Armenia, and again waive the HACA for Turkey?
    Answer. The closure of the land border between Turkey and Armenia 
does not greatly constrict the flow of U.S. aid to Armenia. There is an 
extensive port, road and rail network through Georgia that effectively 
provides Armenia with goods, including aid. Most of the Shipments that 
reach Armenia come through the Turkish Straits with the active 
cooperation of the Turkish Government authorities.
    Turkey kept its land border with Armenia open until March 1993, 
when ethnic Armenian forces attacked and occupied Kalbajar province, in 
western Azerbaijan. Turkey closed its land border to protest this 
offensive, and has conditioned the reopening of the border on progress 
towards peace in the Nagarno-Karabakh conflict. Since the closure of 
the land border, Turkey has undertaken several multilateral and 
bilateral efforts to facilitate a resolution of the N-K conflict. 
Armenia imports significant amounts of Turkish goods, which are 
transported to Armenia on Turkish trucks to Georgia. In 1995, Turkey 
reopened the air corridor between Armenia and Turkey, and regular bus 
service now runs from Yerevan through Georgia to Turkey.
    I anticipate that the President will again exercise his right to 
waive the provisions of the Humanitarian Aid Corridor Act (HACA) in 
accordance with the provisions of that law.
    Question. The Clinton Administration led efforts to gain Turkish 
entry into the European Customs Union. What is the Administration's 
response to Turkey's threats to hold NATO expansion hostage until it is 
given an invitation to join the European Community, even though Turkey 
falls far short of the minimum requirements for membership?
    Answer. The expansion of NATO is in the common strategic interest 
of both Turkey and the United States. We have made clear to the Turkish 
Government our expectation the Turkey will not block the enlargement of 
NATO. At the same time, we have made it clear to Turkey that we support 
a closer relationship between Turkey and the European Union. 
Nevertheless, we recognize that it is up to the European Union to 
decide whether any country, including Turkey, meets its requirements 
for membership.
                                demining
    Question. It is my understanding that the Administration has 
requested an increase of $8 million dollars for the FMF demining 
account. Given the enormity of the problem faced by eligible countries 
and the Administration's resistance to a worldwide ban on landmines, do 
you believe that $15 million is sufficient?
    Answer. The politically charged issue of landmines is not new to 
U.S. foreign policy. In 1993, the U.S. Government formed an Interagency 
Working Group (IWG) on Demining and Landmine Control to coordinate and 
administer U.S. policy. Since that time, the Bureau of Political-
Military Affairs has coordinated a number of U.S. initiatives to 
increase mine awareness and sensitivity to the landmine problem. The 
objective of the U.S. demining assistance program is to develop an 
indigenous capability to stop or reduce civilian casualties caused by 
landmines, and return previously mined areas to productive use.
    The policy announced by the President provides a strong commitment 
to expand efforts to train and assist other countries in developing 
their own demining capabilities, and to develop and share mine 
detection and clearing technology. The Administration's request for an 
increase in funding of $8 million for a total of $15 million for 
humanitarian demining in FY 98 is consistent with this guidance.
    The U.S. program is currently established in fourteen countries; we 
are considering several additional countries. The $15 million in FMF 
will be used primarily for to sustain ongoing demining operations. 
Funding level consideration, per each country, is based on program 
scope and stage of development. It is also based on the host country's 
ability to absorb the funds. In this regard, the $15 million requested 
in FY 98 is appropriate and adequate to support current demining 
activities and to develop projected new programs.
                                 sudan
    Question. It recently became public that a U.S. company was 
permitted to bid for a contract in Sudan, despite prohibitions on U.S. 
companies doing business in countries which have been certified as 
sponsors or havens for terrorists. The Administration has maintained 
that no exception to the Anti-Terrorism Law as necessary for this bid 
to move forward. Do you feel that Congress needs to close this loophole 
in the law? If not, how does such activity by U.S. companies affect our 
ability to persuade our European allies not to deal with rogue states 
such as Iran and Libya?
    Answer. Sudan has been on our list of countries which sponsor 
terrorism since 1993. That designation does not establish a 
``prohibition'' on U.S. companies having business dealings in Sudan. It 
does entail significant sanctions, including curbs on the export of 
dual-use items, and it renders Khartoum ineligible for economic and 
military assistance.
    The 1996 Anti-Terrorism regulations expanded our capacity to 
sanction state sponsors of terrorism by prohibiting certain financial 
transactions between these governments and U.S. persons. These 
regulations were considered with care by the State Department's Office 
of the Legal Advisor and its Economic Bureau, and the Department 
determined that the regulations did not establish a blanket prohibition 
on U.S. companies bidding on contracts in Sudan.
    We continue to assess Sudan's behavior on terrorism and other 
issues and are prepared to consider adopting or proposing additional 
measures if we determine such steps might advance our interests.
    We are actively engaged with key European governments on how best 
to focus multilateral pressure on Sudan. Differences between our 
treatment of Sudan and other terrorist list countries, which reflect 
additional Congressional sanctions on those governments, have not in 
any way diminished our position or moral leadership in combatting 
international terrorism. To the extent that we do calibrate our 
policies toward terrorist list states, we do so to induce change in 
state behavior on terrorism, not to gain commercial advantage.
                     international family planning
    Question. Over the past two years, the U.S. Congress has imposed 
strict restrictions on the U.S. population assistance program. Isn't it 
correct that since 1973, under the Helms Amendment to the Foreign 
Assistance Act, no U.S. funds have gone to support abortion or abortion 
services? If this is true, has the U.S. Agency for International 
Development (USAID) which implements this program ever been found in 
violation of this statute by an independent auditor?
    Answer. A ``wall of separation'' exists between family planning and 
abortion in USAID programs. It is correct that since 1973, under the 
Helms Amendment, the USAID population program has been legally 
prohibited from supporting or promoting abortion as a method of family 
planning. Specifically, as a matter of longstanding law and policy of 
this and previous Administrations, USAID funds cannot be used: to pay 
for the performance of abortions as a method of family planning or to 
motivate or coerce any person to have an abortion; to lobby for or 
against abortion; to purchase or distribute commodities or equipment 
for the purpose of inducing abortions as a method of family planning; 
and to support any biomedical research which relates, in whole, or in 
part, to methods of, or the performance of abortions as a method of 
family planning.
    Based on USAID experience, safeguards to assure that foreign 
private organizations do not use USAID funds for prohibited abortion-
related activities have been more than adequate. Since 1973, no 
internal or independent oversight investigators have found violations. 
In 1990, a study was conducted of the implementation of the abortion 
restrictions then in place. The review included site visits to both 
USAID cooperating agencies (CAs) and subcontracting non-governmental 
organizations (NGOs) in developing countries. The team concluded that 
``Both therecipients of assistance (U.S. cooperating agencies) and 
their subgrantees (foreign NGOs) were found to be in complete 
compliance with the requirements of the Mexico City policy.'' \1\ The 
same review found that, if anything, USAID subgrantees were 
``overcautious'' in their interpretation of the policy and avoided even 
activities that would be permitted under the policy, such as emergency 
treatment of women with complications of unsafe abortions or data 
collection.
---------------------------------------------------------------------------
    \1\ John Blane and Matthew Friedman, ``Mexico City Policy 
Implementation Study,'' (Arlington, VA: Population Technical Assistance 
Project, Report No. 89-058-114, under USAID Contract no. DPE-3024-Z-00-
8078-00, 1990), p. 25.
---------------------------------------------------------------------------
                    international environment issues
    Question. Last spring, your predecessor, Secretary Christopher, 
expressed the Administration's determination the environmental issues 
need to be put where they belong: ``in the mainstream of America's 
foreign policy.'' Christopher initiated preliminary steps towards 
implementing this policy but the environment is far from the 
``mainstream'' of U.S. foreign policy.
    In the Washington Post op-ed last month, you briefly agreed with 
your predecessor on this issue: What initiatives are you planning on 
taking to implement a stronger U.S. international environmental policy? 
One of the core components of a strong international environmental 
policy is U.S. support for the International Conservation Programs--
IUCN, Ramsar and CITES. If you are planning on making the environment a 
pillar of U.S. foreign policy, will these programs, specifically IUCN, 
be used to achieve this goal?
    Answer. I plan to continue and strengthen the environmental 
initiative that Secretary Christopher began last year. We are already 
making strong progress in putting environmental issues in the 
mainstream of U.S. foreign policy:
    In our relations with Asia, we have made a particular effort to 
raise the profile of environmental issues. Under APEC, we are promoting 
three environmental initiatives, for sustainable cities, cleaner 
production, and a sustainable marine environment. In China, the Vice 
President recently inaugurated a Forum on Environment and Development 
Forum which will address issues of greatest environmental concern.
    Environmental issues will be on the agenda of high-level meetings 
throughout the year, including the Denver Summit of the Eight, the 
President's visit to Latin America, and the summit meeting with the EU.
    Regionally, we are proceeding with our Regional Environmental Hub 
program. The HUBs, staffed by Foreign Service Officers, will work with 
governments and NGOs in each region on specific transboundary 
environmental problems, promoting regional cooperation as the best way 
to solve such problems. In this way, we can help advance regional 
stability while improving the world's environment. Six Hubs will open 
this summer, in our embassies in Addis Ababa, Ethiopia; Amman, Jordan; 
Bangkok, Thailand; Kathmandu, Nepal; Tashkent, Uzbekistan, and San 
Jose, Costa Rica. Six more hubs will open in the summer of 1998.
    As the year progresses, we will increasingly place environmental 
issues at the center of our diplomacy:
    The Department will pay particular attention to three key global 
issues this year: developing support for our position for the meeting 
of the Intergovernmental Panel on Climate Change in Kyoto this 
December; convincing countries of the need to implement programs to 
achieve sustainable forest management, while avoiding the unproductive 
use of international resources to negotiate an international forestry 
convention; and reform of UNEP, as part of our overall attention to UN 
institutional reform.
    In my own meetings with foreign leaders, I will be looking for 
opportunities to raise environmental themes as an integral part of our 
overall foreign policy approach.
    As we move forward with our efforts on the environment, USG support 
for International Conservation Programs must continue. The Department 
strongly supports full funding for the IO&P account, of which these 
programs are a part. Our FY98 budget request includes funding for 
International Conservation Programs (IUCN, Ramsar, and CITES) at FY95 
levels, which were significantly cut in the FY96 allotments.
    Within the context of our overall approach to United Nations 
reorganization, we must maintain the strength of these non-UN 
institutions that provide important services to UN environmental 
initiatives, in addition to their excellent independent work on global 
environmental issues IUCN, in particular, offers considerable 
opportunity for useful collaboration on environmental issues that are 
U.S. priorities and we wish to better integrate the exchange of 
expertise and information between IUCN and the USG.
    The State Department, in 1996, hosted a conference on wetlands that 
celebrated the 25th anniversary of the signing of the Ramsar 
Convention. We continue to believe that USG investment in the work of 
Ramsar provides global dividends.
    CITES is a vitally important mechanism for global conservation of 
endangered species, and we fully support its goals. The U.S. has played 
a critical role in CITES efforts worldwide , and U.S. leadership within 
CITES has furthered these goals. Our engagement in CITES issues grows 
as we prepare for USG participation in the Tenth Conference of the 
Parties in Harare, Zimbabwe, this June.
    Question. Regarding the international conservation programs within 
the International Organizations and Programs Account, what is the 
breakdown of funds for these programs (IUCN, Ramsar and CITES) and how 
do they complement one another? If I recall correctly, ITTO was 
supposed to be zeroed out after FY 1997. Why is ITTO still included in 
this account?
    Answer. In FY 1997, a total of $4.05 million was allocated to 
international conservation programs, broken down as follows: CITES, 
$1.3 million; IUCN: $1.0 million; Ramsar: $0.75 million; ITTO: $1.0 
million. In FY 1998, a total of $3.75 million has been proposed for 
this account. The suballocation among the four programs will be 
determined after the FY 1998 appropriations bill for foreign operations 
is enacted. The breakdown will depend on our perception of need and the 
kinds of activities our contributions can support, in order to ensure 
that priority is given to those we feel to be most pertinent and likely 
to be effective.
    ITTO originally received voluntary funding support as a separate 
line item in the IO&P account. In FY 97, it was included in the group 
account for ``International Conservation Programs'' to better reflect 
the Administration's support for these activities. There is no 
intention to zero out this program.
    The four programs included under the item ``International 
Conservation Programs'' each serve distinct, but complementary, 
purposes:
    The International Union for the Conservation of Nature and Natural 
Resources (IUCN) works at local, national, and international levels to 
foster conservation of species and sustainable economic development. 
IUCN assists countries to survey their biological diversity, provides a 
database of environmental law and practice, and supports and conducts 
scientific research (one example of IUCN's output is the well-regarded 
``Red Book'' of endangered species, used by governments as a data 
source for CITES implementation). Because of its unique membership 
(governments, government agencies, zoos, foundations, and environmental 
organizations), IUCN provides a channel for scientific and public input 
into the government decisionmaking process. IUCN also hosts the 
secretariat for the Ramsar Convention, and serves as a scientific and 
technical advisory body for other international organizations, 
including CITES and the UN Environment Program.
    The Ramsar Convention on Wetlands of International Importance 
supports efforts to protect wetlands around the world that are 
important habitats for migratory waterfowl and other wildlife. Programs 
are cooperative efforts, with the secretariat providing scientific 
advice to 92 contracting party governments on data gathering and use, 
assisting with inventories and outlining conservation options, as well 
as raising public awareness, training and help with fundraising.
    The Convention on International Trade in Endangered Species (CITES) 
is the vehicle through which governments regulate the import and export 
of threatened or endangered species. CITES brings together experts in 
the conservation requirements for selected species in a way that 
reflects economic reality. CITES does not address habitat preservation 
or domestic trade in endangered species; those issues are addressed 
nationally or through other conventions, such as Ramsar (for wetlands). 
Domestically, CITES is implemented by the U.S. Fish and Wildlife 
Service.
    The International Tropical Timber Organization supports projects 
and programs that support sustainable forest management in order to 
both ensure a long-term source of supply of tropical timber for 
international trade and achieve environmental objectives such as carbon 
sequestration to combat global warming and conservation of forest 
biodiversity.

             Questions for the Record Submitted by Mr. Wolf

                            nagorno-karabakh
    One of my staff members recently returned from a visit to Armenia 
and Nagorno-Karabakh and I visited the region in August, 1994. You were 
there at the same time.
    I believe that all the parties want to resolve this conflict 
quickly. Armenia is suffering because of the blockade of Turkey and 
Azerbaijan. Karabakh is suffering. Azerbaijan is suffering and is not 
able to develop its rich oil resources. Meanwhile, Russia and Iran are 
increasing their influence in the region each day this conflict goes 
unresolved. All parties want the United States to put its diplomatic 
muscle behind the negotiations.
    I have been urging the Administration to convene a Dayton-like 
conference in the United States whereby each of the parties can come 
together, face-to-face, for a specified period of time to work out 
their differences. The State Department response is ``it's not the 
right time.''
    Madame Secretary, why is this not the right time. What factors 
would need to exist to make it the right time? How will the United 
States make resolving this conflict a higher priority under your 
leadership?
    Answer. I agree with you on the harm this conflict does to the 
countries of the region and to U.S. interests.
    The parties come together face to face in two channels. One is the 
OSCE Minsk Group, in which international mediators have been trying to 
secure agreement by Azerbaijan, Armenia and the Nagorno-Karabakh 
Armenians to a political settlement to the conflict.
    The other channel is a direct dialogue between representatives of 
the presidents of Azerbaijan and Armenia.
    We have fostered both channels. Recently, we became Co-Chairs of 
the OSCE Minsk Group, along with Russia and France. This has involved 
us directly in the negotiating process.
    As Co-Chairs of the Minsk Group, we will be hosting some sessions 
in the United States. They will not be in a Dayton format--we will not 
deploy a U.S.-led NATO force of the sort that made Dayton possible. 
However, they will be face to face negotiations and will have U.S. 
diplomatic muscle to back them.
                      azerbaijan: nagorno-karabakh
    Question. What would be wrong with allowing USAID to provide 
humanitarian assistance into Karahakh through NGO's? Are there any 
other regions where we do not provide humanitarian assistance to people 
in need because of political concerns?
    Answer. The United States provides humanitarian assistance to the 
people living in Nagorno-Karabakh through grants to the International 
Committee of the Red Cross (ICRC), consistent with the restrictions on 
assistance to Azerbaijan under section 907 of the FREEDOM Support Act. 
The U.S. provides 20 percent of ICRC's annual NIS appeal. United States 
provides humanitarian aid based on need, wherever those needs may be.
                                bulgaria
    Question. Is there more we can do to meet the needs of the people 
there? Can the U.S. make this a priority in the next few months?
    Answer. We have already made this a priority. Through the Support 
for East European Democracy (SEED) program, we have allocated $2.5 
million to provide humanitarian assistance to Bulgaria consisting of 
$2.1 million in pharmaceutical supplies and $400,000 in response to an 
appeal from the International Red Cross. We have also offered Bulgaria 
$25 million in agricultural credit guarantees to help them import vital 
foodstuffs. We presently are exploring the possibility of providing 
additional food aid through the Food for Peach program.
                               indonesia
    Question. How can the United States be more involved in East Timor?
    Answer. We share your concerns about the human rights situation in 
East Timor and believe that achieving a comprehensive, internationally 
accepted settlement is the best way to obtain lasting improvements. We 
strongly support the resumption of direct discussions, facilitated by 
United Nations Secretary General (UNSYG) Kofi Annan, between Indonesia 
and Portugal and are encouraged by the Secretary General's decision to 
appoint a special representative to focus on East Timor. As an early 
step, we hope that Portugal and Indonesia will agree to open interests 
sections in their respective capitals.
    We also strongly support the continuation of the UN-sponsored All-
inclusive Intra-Timorese dialogue, which provides a forum for the 
Timorese to advance their own ideas on reaching a solution. We have 
advocated informal discussions between the Timorese and the Indonesian 
government on ways to give the Timorese greater control of their 
political and economic life, in recognition of East Timor's unique 
history and culture.
    We agree that reducing the military presence in East Timor would be 
a positive step in lowering tensions there and have urged Indonesia's 
civilian and military leaders to do this. We have called on them to 
exercise restraint in dealing with civilian demonstrations and have 
stated that the International Committee of the Red Cross should have 
access to all Timorese detainees. The U.S. also strongly supports the 
protective and human rights monitoring function carried out by the 
ICRC.
    We continue to urge Indonesia to keep East Timor open to visits by 
internationally recognized human rights groups and journalists, and on 
behalf of Ambassador Roy, I encourage more of your Congressional 
colleagues to follow your example by visiting East Timor while in 
Indonesia.
    We have urged the Indonesian government to provide a full 
accounting of those still missing after the tragic events in Dili in 
1991, and to the reduce the sentences of civilian demonstrators, or 
grant amnesty or clemency.
    USAID projects in East Timor, which expand economic opportunities 
for the East Timorese and strengthen civil society, have totaled over 
$25 million since 1979. We currently have eight activities there, with 
budgets of almost $16 million. The U.S. is the largest donor in East 
Timor, a role we plan to continue in the future.
    With regard to your proposal to appoint a high-level U.S. official 
to focus on East Timor, we will certainly explore all possibilities 
which might lead to a solution acceptable to all sides. However, at 
this time we believe it best to focus on Secretary General Annan's 
initiative to reinvigorate the direct talks between Indonesia and 
Portugal, for which both those countries have expressed support.
                                romania
    Question. Madame Secretary, I know you understand the significance 
of this recent election and the promise it holds for Romania. What can 
the U.S. do to maximize our assistance to this new government in 
Romania? Have new assistance programs been discussed at the State 
Department and USAID that will address the needs of the new 
government's agenda? Is there more we can do to embrace this new 
government diplomatically?
    Answer. We have made a number of modifications to our assistance 
program to respond to the opportunities offered by recent developments 
in Romania. Immediately after the elections, USAID Assistant 
Administrator Thomas Dine traveled to Romania to get a first-hand 
understanding of the needs of the new government.
    In response to requests from the new Romanian government, we are 
providing several long-term advisors to assist in the implementation of 
the revitalized privatization program and to improve bank supervision. 
In addition, a long-term advisor has been placed in the office of 
President Constantinescu to help organize the office, streamline 
functions, and improve communications with other agencies. Similarly, 
technical assistance has been provided to the Romanian National 
Security Advisor's office. Finally, we are delivering a program which 
provides technical assistance to the Chamber of Deputies and Members of 
Parliament.
    On the diplomatic front, our Embassy in Bucharest is following 
closely the Romanians efforts to integrate with the West, including 
their applications to NATO and the European Union. Romania's 
participation in Partnership for Peace has deepened our military-to-
military contacts. Finally, in the past several months we have received 
a series of visits to Washington by high-ranking Romanian officials, 
including the Ministers of Foreign Affairs, Finance, Economic Reform, 
and Defense.

           Questions for the Record Submitted by Mr. Packard

                                 turkey
    Question. Madam Secretary, I note that the Administration has 
included $50 million in ESF for Turkey. In light of what happened on 
the floor of the House last year with some unacceptable conditions put 
on that aid, so much so that Turkey refused to accept that aid, how do 
you intend to prevent that from happening again? Do you intend to 
actively lobby on the importance of the U.S.-Turkish relationship 
because quite frankly, I believe that Administration left Turkey out to 
dry last year and by requesting this amount again, it seems like it is 
poised to do so again.
    Answer. The Administration will stand by its request for $50 
million in ESF for Turkey in FY 98 budget. We continue to strongly 
support this program for Turkey as a tangible sign of our strong 
bilateral relationship.
                                 cyprus
    Question. Remaining in the region, I have some serious concerns 
about Cyprus' recent buy of Russian anti-aircraft missiles. Since those 
missiles have the range to reach Turkish sovereign airspace, it seems 
to me that their deployment would upset the balance of power. Turkey in 
fact has threatened to take preemptive military action. Having visited 
Cyprus, I understand the importance of achieving peace on the island 
and especially the easing of tensions it would bring to our two close 
NATO allies Greece and Turkey. What plans do you have to resolve the 
crisis on Cyprus? Are there better ways to spend the $15 million that 
currently goes to Cyprus? I understand that bi-communal projects are 
largely ineffective and the rest of the money goes toward Fulbright 
scholarships.
    Answer. The United States remains committed to promoting a Cyprus 
solution. In recent months, we have worked hard toward this end and 
toward reducing the potential for confrontation in the region. With the 
U.N., we support efforts by the two Cypriot communities to negotiate a 
bizonal, bicommunal federation, a goal they agreed to in the late 
1970's. We and the international community are examining options for 
intensified engagement on Cyprus this year. The essential requirement 
for success, however, will be the desire of the parties themselves for 
an agreement. Given the worsened state of intercommunal relations on 
Cyprus, as I noted at my confirmation hearing, for any mediation to 
bear fruits, the parties need to agree to steps to reduce tensions and 
make direct negotiations possible. We remain hopeful the parties will 
be able to take such steps, including acceptance of a UN package of 
measures to reduce the risk of confrontation along the cease-fire 
lines.
    Prospects for a settlement were greatly complicated by the 
Government of Cyprus' recent decision to purchase the SA-10 missiles, 
and the resulting threats from Turkey to respond militarily. In the 
wake of this unfortunate development, we worked very hard to defuse the 
crisis atmosphere which began to develop and succeeded in securing 
President Clerides' commitment not to import any missile system 
components for 16 months. We hope this will provide time to resolve 
this problem through peaceful means.
    Our bilateral assistance programs to Cyprus is intended to develop 
intercommunal links to support an eventual political settlement. 
Annually, we devote $10 million to development aid projects and $5 
million to student scholarships. Cooperation and dialogue in the 
planning and implementation of development projects, which benefit the 
entire island, should contribute to normalization of relations between 
the two communities. Although we can improve the effectiveness of our 
program--and are trying to do so--we believe its underlying objectives 
are important and worthwhile.
                                 russia
    Question. I note that the administration has created the 
Partnership for Freedom for the New Independent States. I must say that 
this seems to me this is a bold undertaking especially given Russia's 
continuing nuclear dealings with Iran and Cuba, its recent missile 
sales to Cyprus and the recent reports of it routing missile technology 
to Iran. Why should Congress approve such a large increase in support 
to Russia in light of the fact that we have not been able to prevent 
Russia from pursuing its goals which are contrary to U.S. national 
interest? What is the status of Russia's dealings with Iran? Have they 
stopped providing them with nuclear technology? Finally, how do you 
propose this subcommittee sell this partnership (Partnership for 
Freedom for the New Independent States) with these issues outstanding?
    Answer. We are obliged to disagree with the premise that overall 
U.S. interests in Russia, which has thousands of deployed nuclear 
weapons and is otherwise a critical factor for our own security, should 
be regarded as a function of Russia's cooperating with Iran on nuclear 
power development.
    At the same time our opposition to such cooperation is clear and 
categorical.
    The Administration has actively and at very high levels sought to 
dissuade Russia from proceeding with nuclear reactor sales to Iran. We 
have been engaged for some time in a multilevel dialogue, including 
through the Gore-Chernomyrdin channel, with the Russians on their 
nuclear cooperation with Iran and have given this issue top priority on 
the bilateral agenda.
    The Vice President raised this issue with Russian Prime Minister 
Chernomyrdin during their meeting in Washington in February. Most 
recently, President Clinton expressed our concerns about Russia's 
relationship with Iran directly with Russian President Yeltsin during 
their March meeting in Helsinki.
    The Administration has strongly reiterated its position that no 
form of nuclear cooperation should be pursued with Iran, since any such 
cooperation could contribute over time to a nuclear-armed Iran. We also 
have conveyed the view that Iranian possession of nuclear weapons would 
pose a major threat not only to U.S. security interests and global 
stability, but also to Russian security interests as well.
    President Yeltsin and other high-level Russian policymakers are 
cognizant of the proliferation aspects of nuclear cooperation with 
Iran, and we believe our dialogue has been beneficial in reducing the 
scope and pace of this cooperation.
    We still believe that given Tehran's nuclear ambitions, any Russian 
nuclear cooperation with Iran is ill-advised. We will continue to make 
that point strongly to the Russians.
                                  kedo
    Question. The United States spends roughly $2 billion annually on 
the Korean Peninsula to assure the security of the region. Yet the 
Administration has repeatedly come to this subcommittee to ask for 
increases in the amount we contribute to the Korean Peninsula Energy 
Development Organization when at its inception, the State Department 
assured us that our costs would be minimal. Now you are asking for $30 
million. What is the status of finding other international donors to 
help relieve our burden of these costs? Will our contribution ever go 
down?
    Answer. Then-Secretary Christopher, testifying before the Senate 
Foreign Relations Committee in January 1995, stated that the U.S. 
annual contribution to KEDO would be approximately $20-$30 million. We 
believe this is a modest contribution in comparison to the billions of 
dollars our KEDO partners, South Korea and Japan, will contribute.
    The U.S. has mounted a global campaign, since the signing of the 
Agreed Framework, to secure additional funding for KEDO from the 
international community. As a result of our efforts, 20 countries 
besides the U.S., as well as the European Union, have contributed or 
pledged to contribute nearly $100 million to KEDO through 1997. 
Moreover, seven countries from five continents have joined the U.S., 
Japan, and South Korea as members of KEDO, and several others have 
expressed their intention to join.
    KEDO's funding prospects for 1997 and beyond have improved as a 
result of our success in encouraging the European Union to join KEDO. 
The EU will soon become a member of KEDO's Executive Board (joining the 
U.S., Japan, and South Korea) once KEDO and the EU conclude current 
negotiations on the terms and conditions of the EU's membership. The EU 
plans to contribute 15 million ECU (approximately $18 million at 
current exchange rates) annually to KEDO for the next five years. In 
March, Australia and Canada also contributed $1.6 million and $1 
million, respectively, to KEDO for 1997.
    Nevertheless, KEDO will continue to require additional 
contributions to finance its activities, particularly the purchase of 
heavy fuel oil (HFO). Thus, continued significant U.S. contributions to 
KEDO remain necessary. U.S. contributions also demonstrate U.S. 
leadership and commitment to the Agreed Framework, ensure that KEDO 
fulfills its obligations, and supplement and encourage KEDO 
contributions from other countries. Without ongoing U.S. financial 
support, KEDO will be unable to operate or carry out its objectives, 
which will weaken the credibility of U.S. leadership, jeopardize Agreed 
Framework implementation, and contribute to rising tensions on the 
Korean Peninsula.
    Therefore, concurrent with our efforts to promote international 
support for KEDO, we expect to continue to seek Congressional 
authorization to expend funds as may be necessary for our own 
participation in KEDO. We strongly believe that U.S. funding for 
activities in support of KEDO and the Agreed Framework promotes U.S. 
interests in regional security and global non-proliferation and 
represents a wise investment given the dangers posed by an unfrozen 
North Korean nuclear program.
                             child survival
    Question. I am greatly disappointed at the administration's lack of 
care in not providing funding for the Chairman's Child Survival and 
Disease account. This was a special initiative of our chairman much 
like the administration's Partnership For Freedom which addressed one 
of the most basic functions of this bill, saving children's lives. Yet 
not only did you choose not to address it but from what I understand, 
it is funded throughout the bill in a smaller amount than last year. 
Can you explain this? Why is sending more money to Russia more 
important than saving the lives of children or eradicating diseases 
from the face of the Earth??
    Answer. USAID's development assistance request for funding child 
survival and disease programs in FY 1998, at just under $456 million, 
is $44 million less than the FY 1997 appropriation. Of this amount, 
funding for HIV/AIDS programs is maintained at the FY 1997 level, child 
survival programs are decreased by only $28 million with the remainder 
of the decrease occurring in basic education and other health programs. 
But development assistance is not the only source of funding for theses 
programs. Indeed, an additional $45-$50 million for child survival 
programs will come from the disaster assistance account, Economic 
Support Funds, SEED and NIS accounts in FY 1997, and a comparable 
amount is expected in FY98 as well. The modest decrease in development 
assistance funds for child survival in FY98 does not signal a loss of 
interest or commitment. Indeed, the decrease is more than offset by 
additional funds for a program that is an essential complement to our 
child survival efforts, namely food security.

                           ida replenishment

    Question. What is the status of the negotiations on the Interim 
Fund for the latest IDA replenishment? Will U.S. businesses be able to 
participate in procurement?
    Answer. At meetings February 6-7, IDA deputies agreed to seek 
approval from capitals on an agreement that would allow US firms access 
to funds remaining in the IDA's Interim Trust Fund. IDA expects that 
SDR 700 million, or about $1 billion, will remain in the fund at the 
end of the World Bank's fiscal year in June. That money will be frozen 
until sometime later this year, when IDA deputies will vote on its 
return to the IDA general account. This plan was approved on a no 
objection basis by the World Bank Board on March 7. If the money is 
returned to the IDA general account, as planned, U.S. firms will be 
able to participate in procurement as part of programs paid for out of 
these funds.
    The Treasury Department submitted a report on this agreement to 
Congress prior to Secretary Rubin's testimony before the House 
Appropriations, Subcommittee on Foreign Operations on February 27. The 
FY 1997 $700 million U.S. contribution to IDA-10 was paid March 31.
    The U.S. remains $234 million in arrears to IDA-10. The President's 
FY 1998 budget includes a request that covers these arrears, and 
provides full funding for the U.S. 1998 IDA-11 contribution.

         Questions for the Record Submitted by Mr. Knollenberg

                              north korea
    Question. The Administration has asserted that an increase to $30 
million for KEDO is necessary to carry out U.S. obligations under U.S.-
North Korea Agreed Framework of October 21, 1994. Under this Framework, 
the U.S. agreed to provide North Korea with a package of benefits in 
return for the termination of development of North Korea's nuclear 
program, as well as a promise to engage in dialogue with the South to 
make progress toward tension reduction. As of yet, however, North Korea 
has refused to accept proposed four-party talks involving Washington, 
Beijing, Seoul, an Pyongyang. In addition, although not included in the 
Agreed Framework, North Korea has refused inspection of its fuel 
storage sites and nuclear fuel rods.
    Given the current state of relations on the Korean Peninsula, can 
we expect to extract any concessions from North Korea in return for 
this $30 million package of benefits? What guarantees do we have that 
North Korea will make good on its promises to restart substantive and 
direct peace talks with the South? Do you foresee the administration 
pursuing a U.S.-North Korea agreement which will address once and for 
all the issue of categorizing the amount of weapons-grade plutonium, 
and other materials, possessed by North Korea prior to 1994?
    Answer. The Agreed Framework has proven to be a viable mechanism 
for strengthening peace and security on the Korean Peninsula. It 
addresses U.S. and international concerns about the DPRK's nuclear 
weapons program and requires the DPRK to come into full compliance with 
its NPT and IAEA safeguards obligations. Through its implementation, it 
has also created and continues to create many occasions for direct 
North-South contact and opportunities for addressing other issues of 
U.S. concern, such as DPRK missile proliferation. Full funding and 
continued support for KEDO and its activities are critical to the 
viability of the organization and the nuclear accord.
    As a direct result of the Agreed Framework, the freeze on the 
DPRK's graphite-moderated nuclear reactors and related facilities has 
remained in place since November 1994. Construction has stopped at the 
DPRK's 50- and 200-megawatt nuclear reactors, and all activity has 
ceased at its fuel fabrication facility, reprocessing plant, and 5-
megawatt experimental research reactor. In addition, the IAEA has 
maintained a continuouspresence in North Korea since the signing of the 
Agreed Framework and has verified that the nuclear freeze remains in 
place. Over 70 percent of North Korea's spent nuclear fuel has been 
safely canned under IAEA monitoring and will be placed under IAEA 
safeguards. The DPRK has also engaged in bilateral talks with the U.S. 
designed to address its missile proliferation and accounting of U.S. 
servicemen who are missing in action as a result of the Korean 
conflict.
    Moreover, the DPRK attended a joint briefing on the Four Party 
Peace proposal presented by the U.S. and South Korea on March 5, 1997. 
We hope the DPRK will agree soon to participate in the Four Party 
talks, and we will continue to encourage DPRK compliance with its 
commitments to engage in North-South dialogue, as it is committed to do 
under the terms of the Agreed Framework. We will also continue to urge 
the DPRK to take the necessary steps to preserve information related to 
its past nuclear activities that the IAEA will require in the future to 
determine the accuracy and completeness of the DPRK's initial nuclear 
inventory.
    Question. What guarantees do we have that the Agreed Framework 
succeeded in ``freezing'' North Korea's nuclear program, when North 
Korean authorities have repeatedly evaded special inspection by the 
International Atomic Energy Agency?
    Answer. Since the signing of the Agreed Framework, the IAEA has 
maintained a continuous presence at the Nyongbyon nuclear facility in 
North Korea and has continued with inspection activities related to 
implementing safeguards and verifying and monitoring the nuclear freeze 
in the DPRK. These activities have allowed the IAEA to determine that 
North Korea is complying with the freeze provisions of the Agreed 
Framework. In addition to IAEA monitoring activities, the United States 
has its own National Technical Means which give us further confidence 
that the DPRK is complying with these provisions of the agreement.
    At present, North Korea is not required by the Agreed Framework to 
come immediately into full compliance with its safeguards agreement. 
This means that so-called IAEA ``special inspections'' are not required 
until later. Under the terms of the Agreed Framework, full DPRK 
compliance is not required until ``a significant portion of the light-
water reactor project is completed, but before delivery of key nuclear 
components.'' That point will not be reached for some years.
    Question. On October 1996 Accounting Office report on the Agreed 
Framework characterized the deal as a ``non-binding political 
agreement'' that is not enforceable under either U.S. or international 
law. Further the deal was constructed so that the Administration is not 
required to seek Congressional approval. Thus, the report continues, 
the deal ``can have the effect of pressuring Congress to appropriate 
moneys to implement an agreement with which it has little 
involvement.'' This is precisely what the Administration is asking 
Congress to do in funding KEDO. How do you respond to the claims of the 
GAO?
    Answer. In negotiating the Agreed Framework, the Administration 
chose to sign a political document with the DPRK rather than enter into 
an international agreement because it would have been contrary to U.S. 
interests to accept an internationally binding legal obligation to 
provide nuclear reactors and heavy fuel oil (HFO) to North Korea. Such 
an obligation on the U.S. would have been the outcome had we entered 
into a treaty or an executive agreement with North Korea. It was our 
intent at the time we were negotiating the Agreed Framework, and it 
remains our intent today, to arrange for the provision of the rectors 
and HFO through the Korean Peninsula Energy Development Organization 
(KEDO), an international organization charged with implementing many 
elements of the Agreed Framework.
    Moreover, the political nature of the commitments in the Agreed 
Framework provides us the flexibility to take into account the full 
range of North Korean policies and actions as we take the steps called 
for in the Agreed Framework. We believe this flexibility is critical in 
dealing with North Korea. Treaties and executive agreements, by their 
nature, do not provide the same degree of flexibility.
    While the Agreed Framework does not specifically require us to make 
any expenditures related to KEDO, we firmly believe it is in the 
national interest of the United States to support the organization both 
politically and financially in implementing the Agreed Framework. 
Although the international community, and South Korea and Japan in 
particular, will provide most of the support for KEDO activities, 
including the financing of the multi-billion dollar light-water reactor 
project, significant U.S. contributions are necessary to demonstrate 
U.S. leadershipand commitment to the Agreed Framework, to ensure that 
KEDO fulfills its obligations, and to supplement and encourage KEDO 
contributions from other countries.
    Without ongoing U.S. financial support, KEDO will be unable to 
operate or carry out its objectives, which will weaken the credibility 
of U.S. leadership, jeopardize Agreed Framework implementation, and 
contribute to rising tensions on the Korean Peninsula. We strongly 
believe that U.S. funding for activities in support of KEDO and the 
Agreed Framework promotes U.S. interests in regional security and 
global non-proliferation and represents a wise investment given the 
dangers posed by an unfrozen North Korean nuclear program.
    We will continue to consult closely with Congress on the Agreed 
Framework and related issues and keep Congress well informed. The 
Administration plans to continue to support KEDO's activities and will 
seek Congressional authorization to expend such funds as may be 
necessary for our participation.
                              russia/iran
    Question. I understand the Administration has requested a $275 
million increase in aid to the former Soviet Union, in part to fund the 
new Partnership for Freedom initiative. In the meantime, Russia has not 
backed down in its active policy of exporting nuclear technology. While 
Russia and the U.S. are already at odds over the Russian decision to 
sell a nuclear reactor to Iran, it was reported in the New York Times 
on February 6, 1997 that Russia is now planning to sell two nuclear 
reactors to India.
    How can the U.S. government increase its foreign assistance to a 
country which has actively violated the Nuclear Non-Proliferation 
Treaty by exporting nuclear materials to Iran? If the Partnership for 
Freedom is the ``carrot'' in the administration's policy, do you 
envision a complementary ``stick'' which will serve to press upon the 
Russian government our concerns with the effect of these policies on 
international efforts to stem the spread of nuclear weapons?
    Answer. We became aware of Russia's intention to sell two VVER-1000 
nuclear reactors to India in 1993 and continue to oppose the transfer 
because our understanding is that no binding Russia (USSR)-India 
contract exists which predates Russia's 1992 commitment to the Nuclear 
Suppliers' Group Full-Scope Safeguards as a condition of supply. 
Nonetheless, Russian officials continue to argue that the agreement 
with India on reactor construction predates their NSG commitment. 
However, no transfer has yet occurred because of multiple financing 
problems. We oppose the sale because it is inconsistent with a policy 
that was freely adopted by all NSG members, including Russia.
    Similarly, we have engaged Russia in an intensive dialogue about 
Russia's plans to build a nuclear reactor for Iran. While we have not 
reached a mutually satisfactory resolution of the issue, we will 
continue to engage Russian leaders on this subject.
    However, we disagree with the assertion in the question that Russia 
has violated the Nuclear Non-Proliferation Treaty. We have no reason to 
believe that any Russian transfers have violated that treaty. In 
addition, our two countries worked successfully with many other nations 
to achieve the indefinite extension of the NPT in May 1995. Moreover, 
with the broadening of our non-proliferation agenda to include such 
items as regional issues, we agreed to create a formal Bilateral 
Working Group on Non-proliferation. The agenda and structure for this 
group has been finalized, and the first full session took place in 
1996.
    To this end, we believe that several of our assistance activities 
have been effective ``carrots'' in many areas, including non-
proliferation. We have seen significant progress in related U.S. 
government non-proliferation programs with Russia, including the 
Department of Energy's nuclear material protection, control and 
accounting activities; our participation in the International Science 
and Technology Center and DOE's Initiatives for Proliferation 
Prevention, which create employment and redirect former Soviet weapons 
of mass destruction scientists and engineers; and DoD's Cooperative 
Threat Reduction program.
    The basic rationale for the assistance we provide to support the 
transition to a market economy and a democratic form of government is 
that this assistance is in our national interest; that a democratic, 
market-oriented Russia is much less of a security concern and a more 
valuable partner in world affairs than the alternative of the past.
    The converse, of use of a ``stick'' in reaction to these 
activities, is clearly not in our interest. Any non-proliferation 
program we conduct with Russia reduces the nuclear threat to the United 
States as well. Withdrawing from these in protest, would threaten to 
leave nuclear materials unprotected and weaken our joint non-
proliferation policies. Nonetheless, as noted above, at all 
opportunities we continue to object to specific Russian activities and 
believe that a policy of engagement on these differences is the most 
likely to succeed.
                iran's efforts to obtain nuclear weapons
    Question. Regarding Iran, could you provide an update on the 
country's ongoing efforts to obtain nuclear weapons? What is the status 
of nuclear cooperation between Iran and Russia? Did this issue come up 
in last week's meetings with Prime Minister Chernomyrdin?
    Answer. Iran is pursuing a determined effort to acquire nuclear 
weapons. Since the mid-1980s, Iran has had an organized structure 
dedicated to acquiring and developing nuclear weapons. Tehran is 
seeking the capability to product both plutonium and highly enriched 
uranium--the critical materials for a nuclear weapon. We are aware of 
this through a variety of data, including information on Iran's 
procurement activities that are clearly at variance with a purely 
peaceful nuclear program.
    Iran's program remains at a fairly rudimentary stage. This is due 
largely to the fact that Iran is heavily dependent on foreign suppliers 
and has been frustrated it its efforts to acquire key facilities and 
assistance. The U.S. has led efforts to persuade nuclear suppliers not 
to cooperate with Iran's nuclear program. Our efforts have met with 
some success: virtually all suppliers--with the exception of Russia and 
China--have adopted policies of not assisting Iran's nuclear program.
    Russia began preliminary construction activities at the site of the 
first nuclear power reactor at the Bushehr complex in December 1995. It 
is likely that financial and technical difficulties will delay 
completion of the reactor which, according to the Russian timetable, is 
expected to be about three years from now. While Moscow has discussed 
the completion of three additional power reactors at the same site, 
Russian officials have noted publicly that construction of those 
reactors will not begin until the first unit is complete.
    This Administration has continued to engage senior Russian leaders 
on the dangers of nuclear cooperation with Iran. The Vice President has 
continued his discussions of the issue with Russian Prime Minister 
Chernomyrdin, making clear U.S. opposition to any form of nuclear 
cooperation with Iran. The Russians are not insensitive to the 
proliferation aspects of nuclear cooperation with Iran and have said 
they will not provide Iran with any militarily useful nuclear 
technologies, such as a uranium enrichment facility. However, the 
Russians have declined to halt all such cooperation with Iran on the 
grounds that Iran is an NPT party with a full-scope IAEA safeguards 
agreement.
                              russia/india
    Question. Regarding Russia's proposed sale of nuclear materials to 
India, how will India's acquisition of this technology affect the 
current balance of power in the precarious relationship between India 
and Pakistan? What, if anything, does the Administration plan to do in 
response to the proposed sale?
    Answer. We became aware of Russia's intention to sell two VVER-1000 
nuclear reactors to India in 1993 and continue to oppose the transfer 
because our understanding is that no binding contract exists between 
the two countries which predates Russia's 1992 commitment to the 
Nuclear Suppliers' Group Full-scope Safeguards condition of supply. 
Russian officials continue to argue that the agreement with India on 
reactor construction predates their NSG commitment. However, no 
transfer has yet occurred because of multiple financing problems and 
other technical requirements.
    The U.S. has discussed the proposed sale with Russia on numerous 
occasions. In these discussions, the U.S. has made clear that we oppose 
the sale because it is inconsistent with a policy freely adopted by all 
NSG members, including Russia.
    These reactors would be under IAEA safeguards and would not pose a 
proliferation risk in India. Should the sale eventually be completed, 
it would have no effect on the balance of power between India and 
Pakistan. This transfer would not advance India's capability to produce 
a nuclear device. India conducted its sole test of a nuclear device in 
1974.
    Relations between India and Pakistan, historically difficult, 
recently have shown signs of improvement. The United States encourages 
both countries to continue talks toward an eventual resolution of their 
differences. India and Pakistan resumed dialogue at the Foreign 
Secretary level in late March 1997 after a hiatus of three years, and 
have indicated that the next meeting will occur soon. The two Foreign 
Ministers are expected to meet April 9, just after the Non-Aligned 
Movement meeting in New Delhi.

           Questions for the Record Submitted by Mr. Kingston

                 source of american power and prestige
    Question. I am disturbed by a portion of your testimony stating 
that ``American power and prestige derive primarily from three 
sources--the strength of our economy, the might of our military, and 
the vigor of our diplomacy.'' I am disturbed because I believe that 
America's strength lies primarily in much deeper sources; it comes from 
our values as a nation and our resolve to protect and maintain them. It 
also comes from the firmly democratic character of our government. I do 
agree that these other factors are important to our ability to 
perpetuate our values and protect our freedom, but I do not believe 
them to be the primary source of our prestige, and I am disappointed 
that our Department of State may see it differently. Will you please 
respond to this concern. What messages are we sending to the world 
about what is our central value as a nation?
    Answer. I agree, and I am sorry if the formulation I used in the 
speech you cited has caused a misunderstanding. I have stated many 
times in many speeches my belief that America's strength rests, as 
well, on American values, including our support for democracy, our 
belief in freedom and our respect for the rights and dignity of every 
human being. It is not only our power, but the power of our example, 
that makes American leadership not just needed around the world, but 
welcome.''
                    time limits for u.s. foreign aid
    Question. Many of my constituents have the impression that much of 
foreign aid money goes down a ``rat hole'', that it goes to many 
countries which take little action to make the adjustments necessary 
with the help of our aid to ever pull themselves out of the state of 
dire need. In spite of years of assistance, they never successfully get 
their feet under them. On the other hand, some states, like Taiwan, 
Singapore, etc., have taken the helping hand they needed and gone on to 
prosper economically to the point where U.S. aid was no longer 
necessary. What are the merits of the idea of establishing time limits 
for development assistance? Should we place more emphasis in insuring 
timely results from our assistance? To adapt an old saying, how many 
fishing poles should we pass out before we ask that they fish for 
themselves.
    Answer. The underlying premise for the ideas of time limits and a 
focus on results--that we should provide aid to countries only if they 
are making serious efforts to help themselves--is absolutely valid. The 
perception that most aid has gone down ``ratholes'' is grossly 
distorted.
    USAID places major emphasis on programming for results, and 
tracking results of our assistance. USAID's Annual Performance Report 
documents recent country and program performance, and USAID's program 
reviews examine the expected results of our assistance. By the end of 
this fiscal year USAID will have in place a Strategic Plan and an 
Annual Performance Plan that will further embody a focus on concrete, 
timely results.
    On the other hand, we think that a general practice of establishing 
time limits for development assistance is not the best way to link 
assistance to performance. Instead, USAID takes policy performance and 
commitment into account in determining the level and scope of country 
programs, while also taking into account need and level of development, 
foreign policy concerns, program performance and expected results, and 
other important criteria. In some cases we have closed missions or 
otherwise curtailed programs because recipients were poor development 
partners.
    On the issue of ``ratholes'' and graduates, USAID recently reviewed 
the development record of ninety countries accounting for three billion 
people. These countries comprised most of the non-communist developing 
world in the 1960's as perceived by donors, and they received the bulk 
(about $120 billion) of U.S. assistance to countries over the 1962-90 
period. Eighty per cent of the 3 billion people live in countries that 
have made clear development progress--countries that can be classified 
as graduates (e.g. Korea, Tunisia, Thailand, Costa Rica); middle-income 
prospective graduates (e.g. South Africa, Jamaica, Morocco, 
Philippines); or still poor but making clear progress (e.g. India, 
Bangladesh, Uganda, Bolivia). These countries received over 85 percent 
of the assistance covered in the review. Much of the remainder went to 
countries that are poor and have made intermittent progress, e.g. 
Kenya, Honduras, Ethiopia, and Nicaragua. Only about 6 or 7 percent of 
the aid went to countries that could reasonably be called development 
failures, e.g. Sudan, Zaire, Somalia, and Liberia. With the end of the 
Cold War, pressures to allocate economic assistance to such countries 
have declined sharply, although they still are candidates for 
humanitarian aid.
                                 bosnia
    Question. Please define for me the most current Administration 
plan/policy with respect to the removal of U.S. peacemaking troops in 
Bosnia.
    What is the status of our withdrawal?
    What is you prognosis for lasting peace once our troops have gone?
    Is that prognosis dramatically different than it would be if we had 
never gone?
    By what criteria will we later evaluate the success of the U.S. 
intervention?
    Answer. As the President stated November 15 when he announced the 
SFOR mission, ``every six months we will review whether stability can 
be maintained with fewer forces. By the end of 1997, we expect to draw 
down to a much smaller deterrent force, about half the initial size, 
and we will propose to our NATO allies that by June of 1998 the 
mission's work should be done and the forces should be able to 
withdraw.''
    Our NATO allies agreed in December 1996 to the President's proposal 
for six-month reviews, working toward the goal of June 1998. The first 
NATO review of the SFOR mission is scheduled to be held on June 26, 
1997. We continue to believe that SFOR's mission should be completed by 
June 1998 and that conditions can be established by then that would 
permit peace to be maintained without the presence of a NATO-led 
peacekeeping force in Bosnia.
    All of our efforts remain focused on ensuring that the conditions 
exist in Bosnia for our forces to draw down this year and to be 
withdrawn by June 1998.
    We therefore find ourselves in a fundamentally different position 
now because of NATO's deployments to Bosnia; in all likelihood, we 
would otherwise probably still be discussing an ongoing war in the 
Balkans instead of discussing the implementation of peace. There would 
have been countless more refugees and dead in Central Europe, and no 
nation of Bosnia and Herzegovina today, had there been no Dayton Peace 
Agreement or no deployment of U.S. forces in the IFOR. But through U.S. 
political and military leadership, the war was ended and the Bosnian 
nation has been stitched together, however imperfectly.
    The short-term criterion for evaluating the success of the IFOR/
SFOR deployments is the extent to which the NATO-led forces were able 
to ensure compliance with the military provisions of the Dayton Peace 
Agreement. By this measure, the deployments have been undeniably, and 
overwhelmingly, successful. In the longer-term, success will be 
measured by the creation of conditions that permit a self-sustaining 
peace.
    It is important to note in this context that the U.S. role in 
Bosnia goes beyond the presence or absence of U.S. troops. In order to 
assure that the peace does indeed become self-sustaining, the United 
States will remain engaged--politically, economically, diplomatically--
in Bosnia even after SFOR withdraws.
        korean peninsula energy development organization (kedo)
    Question. Part of the strategy to maintain and implement KEDO 
listed in the written presentation is for the United States to continue 
to use diplomatic means to secure additional finances for the 
organization from other states. Will you please evaluate the success of 
the strategy over the past year and list all additional donor countries 
that have been enlisted as a result of U.S. effort and the amounts 
contributed in 1996. Please list those countries who have increased the 
level of their contributions on a percentage basis.
    Answer. The U.S. has mounted a global campaign, since the signing 
of the Agreed Framework, to secure additional funding from the 
international community for KEDO. As a result of our efforts, 20 
countries besides the U.S., as well as the European Union, have 
contributed or pledged to contribute nearly $100 million to KEDO 
through 1997. Moreover, seven countries from five continents have 
joined the U.S., Japan, and South Korea as members of KEDO, and several 
others have expressed their intention to join. Much work remains to be 
done, however.
    In 1996, other than the United States, 17 countries and the EU 
contributed a total of nearly $45 million to KEDO. Of that amount, $19 
million was provided by Japan to facilitate HFO borrowing by KEDO. The 
EU also pledged an additional $11.5 million in 1996, which it will 
release to KEDO as soon as it formally joins the organization, which is 
expected shortly.
    Below is a chart outlining all 1996 international contributions to 
KEDO:

------------------------------------------------------------------------
                                                              Increased 
                  Country                         1996        in percent
                                              Contribution    over 1995 
------------------------------------------------------------------------
Japan......................................      22,500,000          287
South Korea................................       8,700,000          383
EU.........................................   \1\ 6,300,000        (\2\)
France.....................................       2,000,000        (\2\)
Australia..................................       1,000,000        (\2\)
Germany....................................       1,000,000        (\2\)
Canada.....................................         736,000        (\2\)
New Zealand................................         699,000          109
Brunei.....................................         424,000        (\2\)
Indonesia..................................         325,000        (\2\)
Netherlands................................         290,000        (\2\)
Norway.....................................         250,000        (\2\)
Argentina..................................         200,000        (\2\)
Philippines................................         150,000        (\2\)
Finland....................................         123,000           32
Switzerland................................         118,000        (\2\)
Singapore..................................         100,000        (\2\)
Greece.....................................          25,000        (\2\)
                                            ----------------------------
      Total................................      44,940,000          167
------------------------------------------------------------------------
\1\ The EU has also pledged, but not yet released, an additional 1996   
  contribution of $11.5 million.                                        
\2\ Not applicable.                                                     

    KEDO's funding prospects for 1997 and beyond have improved as a 
result of our success in encouraging the EU to join KEDO. The EU will 
soon become a member of KEDO's Executive Board (joining the U.S., 
Japan, and South Korea) once KEDO and the EU conclude current 
negotiations on the terms and conditions of the EU's membership. The EU 
plans to contribute 15 million ECU (approximately $18 million at 
current exchange rates) annually to KEDO for the next five years. 
Moreover, contributions from South Korea and Japan--which will share 
the multi-billion dollar cost of the light-water reactors to be built 
in the DPRK--will also increase dramatically in the near future.
    Despite these additional sources of income, KEDO will continue to 
require additional contributions to finance its activities, 
particularly the provision of heavy fuel oil to the DPRK. Annual HFO 
deliveries are expected to cost between $55-65 million, depending on 
oil prices and other factors. We will therefore continue to urge other 
countries both to contribute financially to KEDO and to join the 
organization.
                         new independent states
    Question. How has the Russian legal system changed recently to make 
the country more friendly and inviting for foreign investment?
    Answer. Since the re-election of Boris Yeltsin in mid-1996, the 
international markets have demonstrated considerable interest in 
Russia. The evidence can be seen in the upward trend in the Russian 
stock market (up 66 percent this year), the ability of the Russian 
Government to sell multibillion dollar bond offers on the international 
markets and the creation of new investment funds both in Russia and 
abroad. These are positive signals. Nevertheless, investment potential 
is still substantially unfulfilled in Russia. According to the World 
Bank, only 2.3 percent of international funds available for investment 
in 1996 went into the Russian market.
    Some of the reasons for this unfulfilled potential are clear. Among 
the broad investor base, stories about sagging revenue collections and 
political difficulties contribute to generally high risk assessments of 
the Russian economy. Of the major U.S. firms, many have entered the 
Russian market with place-holding investments, but have refrained from 
following up. Our contracts tell us that tax difficulties, deficient 
accounting standards, the lack of legislation on resource exploitation 
and a generally poor commercial legal system hinder investment flows.
    Unfortunately, the past several months have seen little improvement 
in this situation. The distractions of parliamentary and presidential 
elections, followed by the political drift associated with President 
Yeltsin's ill health, led to little or no forward movement towards the 
creation of an investment-friendly environment in Russia.
    As of quite recently, however, the situation does appear to have 
changed for the better. President Yeltsin is reinvigorated and has 
appointed a new, reformist government team. In his State of the 
Federation message of March 6 and during the Helsinki Summit with 
President Clinton, President Yeltsin pushed for legislative changes 
that, if enacted, will do much to improve the present investment 
climate in Russia. In all its contacts, the U.S. Government is 
encouraging this process. For example, in Helsinki, Presidents Clinton 
and Yeltsin came to an agreement on the necessity of the Russian 
Government to seek near-term action on tax reform, production-sharing 
legislation for the promotion of joint-venture exploitation of mineral 
resources, Russian enactment of our Bilateral Investment Treaty, 
enactment of measures to further the rule of law, and other measures.
    Our assistance programs also target this problem. We are supporting 
the creation of a more equitable and efficient tax system in Russia--
one that will offer incentives to investments, rather than punitive 
assessments. U.S. Government-funded advisors are working with the 
Russian Finance Ministry and Tax Services on tax legislation, 
intergovernmental tax policies, and tax collection reforms with the aim 
of creating a stable and transparent tax system that supports 
investment and growth while simultaneously addressing Russia's revenue 
needs.
    U.S. advisors are also working with Russian counterparts on 
Russia's commercial legal framework, including the establishment of a 
sound body of laws necessary for the effective operation of a market 
economy, procedures to ensure due process, and a functioning court 
system to resolve disputes. In addition, advisors from the U.S. 
Securities and Exchange Commission (SEC) and the Department of the 
Treasury are working closely with the Russian Federal Commission for 
the Securities Market on improving Russia's securities market. Other 
U.S. advisors are working on such issues as banking and financial 
reform, economic crimes and corruption and other key commercial issues.
    Question. To what degree, if any, is organized crime disrupting the 
benefit of U.S. foreign aid in Russia?
    Answer. Organized crime and systematic corruption have been 
recognized as significant barriers to the further promotion and 
sustainability of democratic and economic reforms which we seek to 
promote through our assistance program. Global economic and 
democratization trends are beginning to expose crime and corruption as 
well as their full economic and political costs. Training at the 
International Law Enforcement Academy in Budapest and other criminal 
justice programs carried out as part of our assistance program are 
important elements of our strategy for combatting the negative effects 
of Russian organized crime. Civil society programs fostering the rule 
of law and empowering non-government watchdog and advocacy groups to 
promote citizen demand for anti-crime and anti-corruption measures are 
also important to create an environment favorable to achieving our 
foreign aid goals. We are making good progress in these initiatives, 
although we continue to be concerned about the pervasiveness of crime 
and corruption in Russia.
    We do not believe our assistance program is itself vulnerable to or 
disrupted by organized crime. As presently structured, our assistance 
programs emphasize funding for exchanges, technical advice, education 
and training. Direct payments are given to contractors to provide this 
assistance. Organized crime groups do not appear to view U.S. 
assistance as a lucrative or attractive target.
    Question. In that ways has the Administration cooperated with the 
Russian government to combat the mafia's grip on the Russian economy?
    Answer. In 1994, President Clinton and President Yeltsin pledged 
U.S.-Russian cooperation in combatting organized and financial crime. A 
robust cooperative program involving U.S. and Russian law enforcement 
and regulatory agencies is now in place.
    Commercial crime not only impedes democratic, free market 
development in Russia; it is harmful to international trade and 
investment. U.S. officials from the Federal Reserve Board, the Office 
of the Comptroller of the Currency and the Department of Commerce have 
shared their expertise with Russian counterparts. Joint programs were 
begun in response to growing concern within the U.S. Government about 
the soundness and security of financial institutions and the potential 
for links with organized crime; and also to specific Russian requests 
for expanded cooperation to address financial fraud and money 
laundering. In support of the Gore-Chernomyrdin process, we have also 
funded an expansion of the Department of Commerce-led interagency 
program to combat commercial crime.
    These programs are producing results. NIS bankers and regulators 
are increasingly aware of their vulnerability to corruption and 
organized crime. A series of bank frauds, failures, and discoveries of 
counterfeit currency have prompted urgent requests for help from the 
Federal Reserve, the FBI and the U.S. Secret Service. NIS criminal 
justice and regulatory agencies embrace active bilateral cooperation 
against transnational crime, including financial crimes and money 
laundering. U.S. programs in these areas are being introduced into the 
curricula of Russia's Ministry of Internal Affairs (MVD), Customs 
Service and other Russian law enforcement training centers.
    Criminal justice training programs organized at the International 
Law Enforcement Academy (ILEA) in Budapest are also an important 
element of our strategy to combat the effects of Russian organized 
crime. While ILEA training focuses on the transnational aspects of 
organized crime, it also enhances professionalization of law 
enforcement officers and agencies to deal more effectively with 
criminal elements at home. Programs stressing the need for rigorous 
internal controls, professional development, and oversight contribute 
substantially to Russia's ongoing efforts to combat the mafia.
                                 africa
    Question. Can you briefly describe the status of the process to 
establish the role of the African Crisis Response Force? For example, 
has agreement been reached regarding command and deployment authority?
    Answer. We are vigorously pursuing our diplomatic efforts, with 
both potential donors and troop contributors, to achieve our objective 
of establishing the ACRF. France, for example, has recently expressed 
an interest in consulting with the U.S. regarding the possibility or 
merging the assorted individual initiatives on enhancing African 
peacekeeping capabilities into a single multilateral effort. We are 
encouraged by progress to date and will continue to press ahead.
    As far as our African partners are concerned, thus far, Ethiopia, 
Uganda, Mali, Senegal, Ghana, and Tunisia have committed in principle 
to provide troops for the ACRF. In response to consultations with 
potential donor countries, the UK, the Netherlands, Belgium and Ireland 
have formally indicated their willingness to make modest contributions 
to the ACRF--as have several other potential donors (Brazil, Canada, 
Italy, Norway and Sweden) on an informal basis.
    The ACRF would operate only under the aegis of the UN Security 
Council in coordination with the Organization of African Unity and 
appropriate African sub-regional institutions. We do not intend to 
alter the existing political and legal basis of peacekeeping 
deployments. Command and control arrangements would depend upon the 
nature of the peacekeeping operation, i.e., whether deployment of the 
ACRF is part of a UN mission or a Multi-National Force (MNF).
    Question. Are these fundamental issues close enough to resolution 
to be ready to almost double the appropriation and begin training and 
arming the force?
    Answer. The objective of the ACRF initiative is to enhance the 
capabilities and capacities of selected African militaries to respond 
collectively to requirements for humanitarianassistance and 
peacekeeping operations in Africa. We will do so by providing 
supplemental training and equipment to those African military units. 
Substantial costs will, however, remain following expenditure of the 
FY97 funds, including additional training and equipping as well as 
joint exercises of trained units.
    EUCOM, accompanied by Italian and U.K. military personnel to Addis 
Ababa and Kampala respectively, has sent pilot teams to Ethiopia, 
Uganda and Senegal to review the training and equipment requirements of 
the battalions each has committed to the ACRF. Training for these units 
will begin later this year. Pilot teams will travel to Mali, Ghana and 
Tunisia in April/May. The Administration's request for FY98 funds for 
the ACRF is to continue the training and equipping of participating 
African military units that begins later this year.
                       middle east peace process
    Question. In your testimony you said the United States is 
investigating ways to energize the peace process and maintain its 
momentum. I am very interested in this effort. What ideas are you 
coming up with?
    Answer. The United States is actively working to restore momentum 
to the Israeli-Palestinian negotiating process and we have made it 
clear that to move forward there must be a red light on terrorism. As 
part of our efforts, the President has met in recent weeks with Israeli 
Prime Minister Netanyahu, Egyptian President Mubarak, Chairman Arafat 
and with Jordan's King Hussein. The Special Middle East Coordinator, 
Dennis Ross, recently met with Prime Minister Netanyahu and Chairman 
Arafat in the region. We are in the process of developing approaches 
based on the Oslo principle of mutual commitment to security and 
political progress that will give new momentum to the peace process.
                  usaid contracts with american firms
    Question. You mentioned that close to 80 percent of USAID contracts 
and grants go directly to American firms. Can you tell me how much of 
U.S. foreign aid of all kinds stays within the United States? Has there 
ever been a requirement that a certain percentage or formula-driven 
amount of aid go to United States contractors and agencies? Will you 
please outline any history behind this idea and the potential benefit 
for its establishment in the future?
    Answer. USAID already requires that all of its foreign aid programs 
consider first using U.S. goods and services. There is no way of 
knowing with absolute certainty how much foreign aid stays within the 
United States. Generally, under contracts and grants with U.S. 
organizations for work overseas, most of the costs of the contract will 
stay within the United States. Costs that would not benefit U.S. firms 
or organizations would be for items such as local support staff, 
overseas housing for U.S. employees, and other local support costs.
    Programs involving significant amounts of commodity purchases are 
generally limited to purchasing from U.S. sources. While cash transfers 
are not related to specific procurements, they usually require an 
agreement that the recipient country will procure an equivalent amount 
of goods from the United States.
    There has never been a requirement for a percentage or formula-
driven amount of aid to go to U.S. contractors or agencies because we 
recognize that there will sometimes be the need to fund local support 
costs, and there will be instances where U.S. goods (and less 
frequently U.S. services) will not be available to meet the needs of 
the program.
    Within our current requirements and restrictions, it has 
consistently been the case that a sizeable majority of USAID-funded 
procurement has been from the United States. We see no benefit to 
establishing any additional requirements; indeed, it could cause 
problems for some programs where appropriate U.S. goods and services 
were not available.
                  cocaine eradication and interdiction
    Question. I am pleased to hear that in the past year our support 
for cocaine eradication helped greatly to reduce the coca production in 
Peru. I think this is an extremely important effort. Please provide me 
with detailed information explaining exactly how we are succeeding in 
Peru. What exactly is the Administration doing to combat drug 
production in Peru and other key states such as Colombia and Nigeria?
    Answer. USG support to Peruvian counternarcotics efforts helped 
bring about an 18% reduction in the total amount of coca hectarage 
cultivated in Peru. That reduction was the result of the successful 
Peruvian effort to intercept trafficking aircraft moving money and 
cocaine base between Colombia and Peru, as well as its efforts to 
eradicate coca seedbeds and young plants. The USG is also working with 
the Peruvian Government to implement an alternative development program 
in all coca growing areas. We believe that this latter program is the 
key to making further inroads into Peruvian coca cultivation, by 
providing economic alternatives for coca farmers, while law enforcement 
efforts dismantle trafficking organizations.
    We have an intense aerial drug eradication program in Colombia. The 
Colombian National Police, assisted by US civilian contract pilots, 
spray herbicide on coca and opium poppy crops. In 1996, the size of the 
crop was estimated at 67,200 hectares of coca and 6,300 hectares of 
poppy, a 32% increase in coca cultivation over the previous year. Last 
year, we spayed about 16,000 heactares of coca, and should have shortly 
an estimate of actual eradication. In addition, the Colombian Police 
and the military combine their efforts to destroy drug production 
facilities.
    Nigeria is the focal point for West Africa narcotics trafficking. 
Nigerian trafficking organizations ship marijuana--the only illicit 
drug produced in Nigeria--to West Africa and Europe. Nigeria is a 
transshipment point for drugs destined to the U.S. and Europe, carried 
by Nigerian courier networks. Discussions with the Nigerian Government 
to control narcotics trafficking, money laundering, and to extradite 
their nationals have gone nowhere. Nigeria has been denied 
certification since 1993.

        Questions for the Record Submitted by Mr. Frelinghuysen

                         reform of foreign aid
    Question. A recent report by the Council on Foreign Relations and 
the Brookings Institution made several recommendations for reform--
including administrative reforms, stricter aid criteria, consolidation 
and reengineering of administrative support functions, eliminating 
duplication in policy and program functions. In fact, the report claims 
that by taking these steps we could find savings of $1 billion.
    Have you reviewed this report and what comments do you have on its 
findings? Where do you believe we can achieve savings in the conduct of 
our foreign policy and programs and how would you quantify the 
potential savings?
    Answer. On March 12, 1997, I had a very fruitful discussion with 
former Congressmen Steve Solarz and Mickey Edwards, the co-chairpersons 
of the task force which prepared the Council on Foreign Relations and 
Brookings report. I second completely the report's conclusion that the 
decline in spending on international affairs since the 1980s has 
significantly eroded our ability to promote the foreign policy 
interests of the United States. I also fully endorse the report's view 
that this trend must be reversed and funding for international affairs 
spending must be increased. The President's FY 1998 request of $19.45 
billion in budget authority for international affairs, while less than 
the $22 billion in budget authority and $21 billion in outlays 
recommended by the report, is consistent with the report's thesis that 
an increase in resources is imperative if the United States is to 
maintain its role as the world's preeminent superpower.
    In addition to the need to bolster the international affairs 
budget, I also accept the report's findings that gone is the day when 
we can go about our day-to-day affairs with a ``business as usual'' 
attitude. We are very much aware that the current resource environment 
demands that we do things smaller and smarter.
    In this vein, the Department has cut in recent years almost 2,500 
positions and has closed more than 30 posts overseas. We have also 
embarked upon a logistics reengineering effort aimed at providing 
material and services to our missions abroad in a more efficient and 
less costly fashion. Furthermore, we have developed an Overseas 
Staffing Model designed to ensure that our Foreign Service missions are 
staffed in a manner which reflects our consular and administrative 
workloads and the bilateral and regional importance of the host 
country. Lastly, the International Cooperative Administrative Support 
Services System (ICASS), a Department initiative which will become 
fully operational with the onset of FY 1998, is a new approach to 
providing administrative support to all U.S. Government agencies 
operating abroad. We believe that in due course this system will ensure 
the delivery of such services in the most transparent and cost-
effective manner possible.
    With respect to the report's advocacy of ``some restructuring of 
the foreign affairs agencies,'' I have, as I indicated at my 
confirmation hearing, an open mind and would be more than willing to 
work with the Congress to devise a mutually acceptable approach to this 
matter.
                           foreign aid budget
    Question. With regard to the five year projected expenditures for 
International Affairs spending, please describe the budget factors and 
the programmatic assumptions that account for the fluctuations in 
proposed spending levels for the following accounts: 151 International 
Development and Humanitarian Assistance, 152 International Security 
Assistance, 153 Conduct of Foreign Affairs, and 155 International 
Financial Programs.
    Answer. While the President's International Affairs budget request 
for FY 1998 contains projected expenditures for future year 
discretionary programs, the Administration will determine future year 
requests year-by-year based on International Affairs strategic 
priorities and goals, changing international circumstances, and a 
continued commitment to reduce further the federal budget deficit. The 
following are the most significant elements accounting for the 
fluctuations you have noted.
    For Subfunction 151, the Administration plans to include funding 
requests in FYs 1999 and 2000 to complete clearance of U.S. arrears to 
the Multilateral Development Banks (MDB). Once arrears, which will be 
$862 million at the end of FY 1997, are cleared, we anticipate that 
annual funding requests for U.S. contributions to the MDBs will 
stabilize at $1.2 billion annually. Future funding requests will also 
reflect the continuing evolution of U.S. assistance to the New 
Independent States of the Former Soviet Union and the countries of 
Central Europe. The Administration has proposed a phaseout of funding 
provided under the FREEDOM Support Act by FY 2002 and a phasing down of 
assistance provided pursuant to the Support for Eastern European 
Democracy Act. On the other hand, the FY 1998 request includes the 
Partnership for Freedom trade, investment, and anti-crime initiative, 
for which funding will be requested through FY 2002. The 
Administration's future year expenditure projections for several 
Subfunction 151 accounts, including Development Assistance, Refugee 
Assistance, International Narcotics Control, the Peace Corps, and P.L. 
480 Title II Food for Peace, reflect annual inflationary adjustments 
upward.
    For Subfunction 152, the Administration's plan is to hold steady in 
nominal terms funding requests for Foreign Military Financing, Economic 
Support Funds (ESF) for the Middle East, voluntary Peacekeeping, 
International Military Education and Training, and the Non-
Proliferation and Disarmament Fund. We project inflationary increases 
in requests for non-Middle East ESF because of the importance of this 
account in dealing with unanticipated contingencies.
    For Subfunction 153, the FY 1998 request contains a $100 million 
downpayment on U.S. arrears to the United Nations and for assessed 
United Nations peacekeeping and a $921 million advance appropriation 
for FY 1999. Congressional approval of these two requests would enable 
the Administration to clear U.S. arrears to the United Nations and 
other International Organizations, including the U.S. share of assessed 
UN peacekeeping. The Administration is likewise committed to reduce 
U.S. payments to International Organizations through budgetary reforms 
and negotiations of a reduction in U.S. assessment rates. The 
Administration proposes to increase slightly in nominal terms the 
budget request for State Department Operations and the Arms Control and 
Disarmament Agency.
    For Subfunction 155, The President's FY 1998 request includes 
$3.521 billion in budget authority as a one time request for U.S. 
participation in the New Arrangements to Borrow (NAB) of the 
International Monetary Fund (IMF). The NAB is a series of credit lines 
that could be made available to the Fund to supplement its current 
resources in dealing with serious stress to the international financial 
system. Approval and activation of U.S. participation in the NAB would 
have no outlay impact nor increase the Federal budget deficit. Any 
funds made available to the IMF under the NAB would result in the IMF 
providing the United States with an interest-bearing asset of equal 
value. The possible Administration request for participation in an IMF 
quota increase of as yet undetermined magnitude would be treated 
similarly in budgetary terms. The Subfunction 155 request will increase 
slightly through FY 2002 as the Administration proposes to meet its 
remaining commitment of $75 million to the IMF's Enhanced Structural 
Adjustment Facility. Funding for the Export-Import is the only other 
account included in Subfunction 155.
                          middle east funding
    Question. In a recent issued by the Council on Foreign Relations 
and the Brookings Institution, serious concerns were raised about 
planned expenditures for foreign affairs.
    I am particularly concerned about a conclusion reached in the 
report that the ``magnitude of cuts proposed through the year 2002 
would make it impossible to avoid significant cuts in support of the 
Middle East peace process and development aid.''
    Please comment specifically on the long-term outlook for Middle 
East programs under your 5 year budget plan?
    Answer. First is important to note that the funding levels 
projected in the FY 1997 President's Budget--upon which the Council on 
Foreign Relations/Brookings report you cite were based--were increased 
in the FY 1998 budget.
    In working with OMB to prepare the budget we were careful to ensure 
that the funding amounts in the President's FY 1998 Budget represent 
adequate levels of funding for International Affairs.
    However these are projections based on key assumptions.
    Our Budget assumes Congress will provide full funding of our FY 
1998 request, including early action on the $921 million advance 
appropriation request for arrears payments.
    Our outyear projections include no provision for events or crises 
which would require increased funding. For example, we might seek 
substantial funding increases to support a democratic transition in 
Cuba.
    It is my expectation that we will continue to provide assistance to 
Israel and Egypt at the current levels.
                              plo charter
    Question. What steps are you taking to ensure that Chairman Arafat 
makes good on his agreement to remove from the PLO Charter any and all 
references to elimination of harm to the State of Israel?
    Answer. On April 24, 1996, the Palestinian National Council (PNC) 
amended the charter by canceling the articles inconsistent with its 
commitments to Israel. It also tasked its legal committee to redraft 
the Palestinian national charter for presentation to the Palestinian 
Central Council.
    We believe these acts honor the Palestinians' important commitment 
to approve the necessary changes to the covenant and demonstrate the 
PLO's general determination to honor its commitments.
    The Israeli government at the time took a similar position on these 
Palestinian actions.
    During the recent Hebron negotiations, Chairman Arafat reaffirmed 
to us and to the Israelis his commitment to complete the process of 
revising the Palestinian National Charter.
                              south africa
    Question. It is my understanding that South Africa currently 
receives $85 million in U.S. assistance. Recent reports regarding South 
Africa's intention to enter into a weapons technology deal with Syria 
have raised serious concerns.
    Because the United States considers Syria a state sponsor of 
terrorism, isn't it true that such a deal is in violation of the U.S. 
Counter-Terrorism Act and thus makes South Africa ineligible for U.S. 
assistance? At what point would the State Department make such a 
determination and recommend the withdrawal of aid?
    Answer. We have communicated to the South African Government in 
frank terms our deep concerns about the serious implications for our 
bilateral relations of the possible sale of a tank fire control system 
to Syria. In fact, this issue was discussed at senior levels of the 
South African Government during the recent Binational Commission 
meetings in February in South Africa. The South African Government well 
understands our position on the tank fire control system sale. We will 
continue to pursue this issue with South Africa as appropriate through 
diplomatic channels.
    In the absence of any actual arms sale or hard evidence that such a 
sale is in the offing, we believe any determination to cut off aid to 
be not only inappropriate but probably counterproductive.
    Question. Equally important, should this proposed deal move 
forward, what is the State Department's analysis on its impact on the 
balance of power in the Middle East and its adverse effect on the peace 
process there?
    Answer. It is not possible to answer such a case. We have no 
information that such a sale will ever be carried forward or finalized 
and any further judgments we might make would be premature.
    Question. Finally, are you concerned by any other such pending arms 
sales that would impact the balance of power in this region?
    Answer. We have no specific information on any other pending arms 
sales concerning South Africa in the Middle East. We are confident the 
South African Government fully understands the concerns of the Untied 
States.
                                  cuba
    Question. It is my understanding that the Administration has 
recently announced that they will seek access for U.S. news agencies in 
Cuba. Please comment on this action and whether or not it is part of 
any other new actions regarding Cuba.
    Answer. On February 12, the Administration announced approval of 
licenses to allow 10 U.S. media organizations to open news bureaus in 
Cuba including CNN, ABC, CBS, the Miami Herald, Dow-Jones, the School 
for Advanced International Studies at John Hopkins which publishes a 
newsletter on Cuba, Univision, the Chicago Tribune, the Sun-Sentinel of 
South Florida, and the Associated Press. All of these organizations has 
license requests pending at the time. Since then, other qualified U.S. 
news organizations have received Treasury licenses allowing them to 
establish a presence in Cuba.
    To our knowledge, only one organization--CNN--has received 
permission from the government of Cuba to establish an office in Cuba. 
Other U.S.-licensed news organizations are in contact with the 
appropriate Cuban government authorities regarding their interest in 
opening an office in Cuba. We hope that they will soon be allowed to do 
so.
    This action by the Administration is in keeping with the measures 
announced by President Clinton in October 1995 to-increase people-to-
people contacts and the flow of accurate information to, from, and 
within Cuba. This policy is in keeping with the 1992 Cuban Democracy 
Act which allows for strengthening Cuban civil society through 
increased support for the Cuban people. This continues to be a key 
component of our overall policy towards Cuba to promote a peaceful 
transition to democracy.
                  african crisis response force (acrf)
    Question. You make reference in your testimony to ``our efforts to 
increase peacekeeping capacities in African nations through an African 
Crisis Response Force.''Please provide additional detail on this effort 
including the following: under what auspices would such a force be 
created, how would it be funded, under what authority would it operate 
and be supervised, what would be the role of the United States, either 
direct or indirect, in its operations, and who would have authority 
regarding deployment of such a force.
    Answer. The objective of the ACRF initiative is to enhance the 
capability and capacities of selected African militaries to respond 
collectively to requirements for humanitarian assistance and 
peacekeeping operations in Africa. We will do so by providing 
supplemental training and equipment to those African military units. 
The ACRF would not serve as a standing African response force. It would 
build upon existing African military capabilities which would remain 
trained and ready, and resident in their home countries. A decision to 
deploy forces earmarked for the ACRF would remain a sovereign decision 
of each participating government, a practice consistent with the 
existing political and legal basis of peacekeeping deployments.
    The ACRF would operate only under the aegis of the UN Security 
Council in coordination with the Organization of African Unity and 
appropriate African Sub-regional institutions. We do not intend to 
alter the existing political and legal basis of peacekeeping 
deployments. Command and control arrangements would depend upon the 
nature of the peacekeeping operation, i.e., whether deployment of the 
ACRF is part of a UN mission or a Multi-National Force (MNF).
    The United States will not attempt to meet all ACRF requirements on 
it own; we consider early involvement of other donor countries in the 
assessment process essential to securing their support and 
contribution. In response to consultations with potential donor 
countries, the UK, the Netherlands, Belgium and Ireland have formally 
indicated their willingness to make modest contributions to the ACRF--
as have several other potential donors (Brazil, Canada, Italy, Norway 
and Sweden) on an informal basis.
    Follow-on visits to potential donor capitals were conducted in 
January, and as a result we are actively discussing creation of an 
informal coordination mechanism that would include both donors and 
troop contributors. An option currently under consideration is 
designation of a lead nation (perhaps the Netherlands) to chair the 
mechanism, The U.S. would participate as a member of the mechanism. An 
informal mechanism is being discussed because the UN Department of 
Peacekeeping Operations (UNDPKO), while supportive of the ACRF concept, 
has advised us that it is not prepared to assume a lead role in the 
initiative. The mechanism would work to merge the ACRF with similar 
initiatives already underway (WEU, France/U.K., the Netherlands, 
Denmark) and/or coordinate independent pursuit of these complementary 
undertakings. In addition, the mechanism would refine appropriate 
African participation in the ACRF, and determine and coordinate the 
extent of potential donor assistance.

            Questions for the Record Submitted by Ms. Pelosi

                       middle east peace process
    Question. What are your expectations for the extent of Israeli 
troop withdrawal from the West Bank in the first stage, and how do you 
see the remainder of the process on troop withdrawal unfolding?
    Answer. The Israeli Cabinet announced its decision to carry out 
further redeployment, as called for in the Interim Agreement, on March 
6, 1997.
    We believe the Israeli decision on redeployment was a demonstration 
of Israel's commitment to the peace process. This decision on the first 
phase of further redeployment represents a serious expansion of 
Palestinian Authority. It is only the first step in a three-phase 
process and we hope the Government of Israel will do more in the second 
and third phases.
    Question. The Congress did not provide funding for the Middle East 
Development Bank in FY 1997. It is my understanding that the 
Administration is contemplating using available ESF funds to initiate 
the first U.S. contribution to the Bank during FY 1997. This request 
would come to the Committee in the form of a reprogramming request. 
What is the status of this request? Will you wait until FY 1998 for the 
initial funding?
    Answer. In our FY 1997 budget request, the Administration sought 
full funding for our initial contribution to the capital of the Middle 
East Development Bank. Congress authorized U.S. participation in the 
Bank in the FY 1997 Omnibus Bill but did not provide appropriations for 
the U.S. contribution to the bank. The Administration is now seeking 
$52.5 million in FY 98 appropriations for our contribution to the 
Bank's capital. We continue to view the Bank as an important Middle 
East peace process priority that deserves full funding from Congress in 
order to demonstrate U.S. leadership in the peace process.
    Question. What is the status of the plans of other countries, 
particularly European countries, to join the Middle East Development 
Bank?
    Answer. The Administration continues to invite broader European 
participation in the Bank for Economic Cooperation and Development in 
the Middle East and North Africa. Italy, Russia, the Netherlands, 
Greece and Austria have already been allocated shares. A number of 
other European countries have indicated that they do not have problems 
with the mandate and structure of the Bank and that they would expect 
to join once the Bank's financing has been secured. Several have 
indicated that their main concern in this regard is whether the 
Administration and Congress reach agreement on funding for the U.S. 
capital contribution to the Bank. European countries also look for 
continued demonstration that the key regional parties to the peace 
Process strongly support creation of the Bank.
                        united nations programs
    Question. The Administration has requested over $1 billion to pay 
arrears to the UN and to various UN organizations. Most of this 
funding, $921 million, has been requested for inclusion in the FY 1997 
Supplemental, as an advance appropriation for FY 1999. Essentially you 
have asked that the appropriation be made now so that you can pursue 
reforms at the UN in the context of their upcoming biennial budget 
review process this spring.
    What specific reforms can Congress expect to achieve at the UN in 
exchange for these funds?
    Answer. The Administration is working with Congress on reform plans 
for the UN and its affiliated agencies. We have proposed that the UN 
achieve specific reform measures in the areas of budget, personnel, 
oversight, management, and peacekeeping before actual payment of U.S. 
arrears occurs. These measures include:
    Reduced U.S. assessment rates, budget cuts and budget freezes in 
the UN system to reduce U.S. total obligations.
    A cap of 25% on U.S. peacekeeping assessments.
    Creation of a ``contested arrears'' account for UN charges which 
the U.S. disputes.
    A code of conduct for UN employees.
    Further UN staff reductions.
    Strengthening the Office of Internal Oversight Services and other 
oversight mechanisms, particularly in the major UN specialized 
agencies.
    Improving UN effectiveness by restructuring and prioritizing, 
especially in the economic and social areas.
    Further improving management of peacekeeping operations by:
    Implementating a uniform, transparent, less costly Contingent-Owned 
Equipment reimbursement standard;
    Negotiating more contingency contracts to support and expedite 
deployment of peacekeeping operations;
    Improving recruitment and training of civilian police.
    On March 17, the Secretary General announced ten specific UN reform 
measures for immediate implementation, including a reduction of $123 
million in the regular budget for 1998-99, a merger of three 
departments in the UN Secretariat, and a code of conduct. We strongly 
support these efforts, and look forward to a second phase of reform 
proposals by mid-year.
    Question. Can we expect a decrease in the U.S. assessed share?
    Answer. The administration is seeking a reduction in the U.S. rate 
of assessment for the UN regular budget from 25% to about 20% with 
corresponding adjustments of the rates of assessment in major UN 
specialized agencies that base their scales of assessment on the UN 
scale. With the leverage of a credible U.S. commitment to pay its 
arrears to the UN and the specialized agencies, the Administration 
believes it will be possible to negotiate agreement on a significant 
reduction in the U.S. rates of assessment for the regular budgets of 
the UN and major specialized agencies.
    Question. Will we be attempting to reduce the overall budget of the 
UN and its affiliated organizations?
    Answer. Budgetary restraint in the UN system can be achieved by 
setting firm budget caps and by negotiating reduced or stabilized 
budget levels for the UN and major specialized agencies. The 
Administration is pursuing a combination of these in an effort to 
reduce overall U.S. financial obligations, but we need the leverage of 
a credible commitment to pay U.S. arrears in order to bring these 
multiple negotiations to successful conclusions.
    On March 17, the Secretary General announced ten specific UN reform 
measures for immediate implementation, including a reduction of $123 
million in the regular budget for 1998-99, compared to 1996-97. This 
would constitute a real reduction in the UN regular budget.
                          un personnel system
    Question. What changes do you feel are needed in the personnel 
system?
    Answer. Improvements are needed to make the UN personnel system 
more transparent, less complex,and more responsive to the 
organization's needs. This should extend from changes in individual 
practices themselves, for example the recruitment and promotion 
processes, to the staff regulations and staff rules that implement 
them. Although some efforts have been made over the years toward 
improving the personnel system, for example a new performance appraisal 
system has been implemented, much more needs to be accomplished.
    Flexibility needs to be infused into the system. For example, 
managers should have available to them more options, within established 
parameters, for dealing with various issues. Flexibility could even 
extend to providing staff with a variety of benefits from which to 
choose depending on their circumstances, at no extra cost to the UN. 
This would first entail a review and potential restructuring of the 
current benefit system.
    In tandem with these changes, managerial and other skills of 
current staff need to be improved and a culture needs be instilled in 
which managers and staff are held accountable for their actions. All 
this would foster a more effective, efficient and economical personnel 
system.
    Question. What are your views of the Congress placing legislative 
conditions on the release of these funds?
    Answer. The initial view of the Administration was that no 
legislative conditions should be attached to the release of funds to 
pay U.S. arrears to the UN, inasmuch as these are treaty obligations. 
Based on some early consultations, however, we concluded that there was 
insufficient support in the Congress for this approach. We are 
presently engaged in talks with a Congressional leadership group to 
agree on a series of UN reforms whose achievement would lead to 
disbursement of funds to pay our arrears.
    Question. How far can Congress go without being counterproductive 
to reform efforts?
    Answer. Reform benchmarks must be clearly achievable and focused on 
the goal of a more effective and efficient United Nations system that 
is responsive to U.S. interests. Reforms that do not lie within the 
Secretary General's authority must be painstakingly negotiated with the 
other member states, some of whom favor realistic, moderate reform and 
some of whom are resistant to change. It would do neither us nor the UN 
any good to set reform targets that command no support among other 
member states.
    It is important also that the Congress and the Administration reach 
agreement as quickly as possible on the essential elements of a reform/
arrears package. Negotiations are already underway within the UN system 
on setting budgets for the 1998-99 biennium, and if we are to secure 
adoption of the major budgetary reforms we are pursuing we will need 
early and powerful diplomatic leverage to overcome resistance to 
change. A signal promptly given by the Congress and the Administration 
that we are committed to paying our arrears in full would provide us 
this essential leverage.
                         new independent states
    Question. How will this aid package improve the investment climate 
in Russia for American companies, and what strategies do you have to 
deal with organized crime in Russia?
    Answer. The business environment for U.S. companies in the NIS is a 
volatile one. Although we encourage investment in the NIS, at the same 
time we are careful to point out the risks of doing business in what is 
still a very uncertain legal and regulatory environment.
    We have targeted a significant portion of our assistance budget to 
strengthening the rule of law in Russia, Ukraine, and elsewhere in the 
NIS through a variety of judicial and legislative training programs, 
and assistance on legislative drafting.
    With our assistance, the Russian new civil code, which is akin to 
ours, is now in force. The U.S. and the World Bank are now providing 
them assistance on their stepped up efforts to develop all of the 
related commercial laws. Also, we are providing ongoing assistance on 
their work to reform the tax code, banking and securities systems.
    We are also working through the Gore-Chernomyrdin Commission to 
address barriers to trade and investment.
    The Overseas Private Investment Corporation (OPIC) and the Trade 
and Development Agency (TDA) have programs in the NIS which assist 
American investors in making their way in a foreign market.
    We have also signed bilateral investment treaties, which are 
specially designed to protect American investors, with several NIS 
countries; in the case of Russia, the Duma is now reviewing the BIT.
    We meet periodically at the policy level with the Russians to 
discuss bilateral anti-crime cooperative efforts and criminal justice 
programs. Programs to combat commercial crime are part of the agenda.
    While in the country, U.S. companies should contact the U.S. 
embassy and work closely with its staff, particularly the members of 
the U.S. Foreign Commercial Service, in assessing the risks and rewards 
to their ventures. If they experience serious difficulties, they can 
rely on representation by the U.S. embassy and by the U.S. government 
at large to help them.
                               population
    Question. Madame Secretary, as you know tomorrow the House will 
vote on the release of FY 1997 international family planning funds. If 
the resolution on the President's finding does not pass, all 
international family planning funds will remain withheld. The impact of 
a continued cut-off will be more unintended pregnancies, more 
abortions, and a slowing in our efforts to help poor women and children 
throughout the world achieve a healthier life. Madame Secretary, could 
you outline for us more specifically the impacts of a continued cut-off 
of population funds.
    How many organizations in how many countries will be cut off from 
funding, if the Resolution does not pass?
    Answer. A four-month delay in FY97 funding from March to July would 
translate into a reduction of $123 million in funds available during 
FY97 out of the $358 million total appropriated by Congress for 
population assistance programs. At least 17 bilateral and worldwide 
programs will have urgent funding needs in the March-June period, 
amounting to at least $35 million more than will be available from 
remaining FY96 funds. If FY97 funds are delayed, these programs would 
need to suspend, defer, or terminate family planning service delivery 
and other critical supporting services.
    Worldwide programs affected would include the critical service 
delivery programs of private voluntary organizations (PVOs) such as 
those of CARE, Pathfinder International, and AVSC International (Access 
to Voluntary and Safe Contraception).
    Individual countries whose programs would be most seriously and 
immediately affected by the four-month delay include Bolivia, Haiti, El 
Salvador, Guatemala, the Dominican Republic, Mexico, Russia, Ukraine, 
the Philippines, Egypt, Jordan, Turkey, Mozambique, Uganda, and 
Zimbabwe. In all these countries, U.S.-funded family planning programs 
play a central role in meeting the demand for contraception. For 
example, in Russia, data for 1990-1994 show an increase in 
contraceptive use from 19 to 24 percent, while abortions--which have 
historically been the major means of preventing unwanted births--have 
dropped from 3.6 million to 2.8 million. Two of the largest 
organizations providing support for these efforts would run out of 
funds if the funding is delayed, jeopardizing the access of 1.7 million 
couples to family planning and reproductive health services. And in 
Egypt, USAID's technical and financial support for national family 
planning programs would be severely curtailed, negatively affecting a 
program crucial to the future development and stability of that 
country.
    Subsequent to the hearing, Congress approved joint resolution (H.J. 
Res. 36) to release funds for population assistance programs beginning 
March 1, 1997.
    Question. Those who oppose the release of these funds have argued 
that there are no safeguards on the use of these funds and that 
organizations receiving funds promote abortion as a method of family 
planning.
    Would you clarify the existing restrictions currently in law 
regarding the use of funds for abortion and the restrictions on the use 
of funds to promote abortion?
    Answer. As matter of longstanding law and policy of this and 
previous Administrations, U.S. Agency for International Development 
(USAID) funds may not be used either to fund abortions as a method of 
family planning or to motivate any person to have an abortion--and we 
abide faithfully by that law. Close technical monitoring and annual 
independent audits by nationally recognized accounting firms of USAID 
programs ensure that funds are used for intended activities and not for 
prohibited purposes.
    Let me say that both the Congress and the Executive Branch want to 
decrease the incidence of abortions, and voluntary family planning is 
the single most effective strategy to achieve this goal.
    Subsequent to the hearing, Congress approved joint resolution (H.J. 
Res. 36) to release funds for population assistance programs beginning 
March 1, 1997.
                         new independent states
    Question. Madame Secretary, the budget contains an increase of $275 
million for assistance to the New Independent States from $625 million 
in FY 1997 to $900 million requested for FY 1998. The framework for the 
assistance is also to be charged with more emphasis on investment, 
partnerships and exchanges. Can you comment first on your assessment of 
the overall stability of the Yeltsin government in Russia, and then 
address the need for the increase in assistance.
    Do you envision the role of USAID diminishing in the implementation 
of the new aid package?
    Answer. We are encouraged by the Russian government's recent 
intensified commitment to economic and political reform. President 
Yeltsin's new cabinet contains some of the country's most accomplished 
practitioners of reform, including the governor of Nizhne Novgorod 
oblast, Boris Nemtsov, who is highly respected in the region because of 
his innovative policies. Despite the inevitable hardships accompanying 
the transition to free-market democracy, the Russian electorate voted 
last year against a return to the past. The Yeltsin government is now 
taking steps (e.g. reform of the tax system that should increase 
government resources) to ensure that reform translates into improving 
material conditions for Russian citizens.
    We have assessed the progress of each country of Central Europe and 
the NIS in making the transition from communism to market democracy. 
That analysis shows us that the NIS countries still have a considerable 
way to go before their economic and political reforms go as far as 
those of the northern tier countries of Central Europe. We are 
encouraged by the recent progress of some NIS countries--particularly 
Russia, Kyrgystan, and Moldova--in restructuring their economies and 
developing democratic institutions. But these reforms are still 
incomplete and vulnerable. The strategies importance of the NIS 
requires a U.S. assistance commitment of greater magnitude and duration 
than we had first hoped would be necessary.
    The Partnership for Freedom (budgeted at $516 of this request for 
the NIS region) will focus on promoting economic growth and the 
development of democratic institutions. The roles of the NIS 
Coordinator and USAID will remain as they are now.
    The Coordinator, in consultation with the implementing agencies, 
will determine budget allocations among the NIS recipient countries and 
among the USG agencies charged with developing and implementing 
assistance activities. USAID will remain the single largest 
implementing agency for assistance to the NIS.
    Question. What role should our aid program play in the health 
sector in the New Independent States?
    Answer. USAID plays and will continue to play a small but important 
role in helping leaders in the NIS develop options for transforming 
their underfunded, yet wasteful, health systems into more cost-
effective, market oriented systems that are responsive to the needs of 
citizens.
    USAID's reform agenda is being pursued in: health financing and 
service delivery reform, vaccine and pharmaceutical security, 
surveillance and control of infectious diseases, health partnerships, 
and women's reproductive Health.
    In some NIS countries, local and oblast-level experience gained 
from this assistance is already being replicated more broadly, and 
USAID assistance is increasingly focused on revising practices, 
policies, and laws at the national level. However, the magnitude of the 
problems greatly exceeds USAID's resources, and our emphasis will 
remain on low-cost, innovative pilot activities, which, if successfully 
replicated, can have high impact.
                         russia family planning
    Question. What level of resources should be devoted to family 
planning programs in Russia?
    Answer. USAID has provided $7.6 million to Russia since 1994, under 
the NIS Women's Reproductive Health Program ($32 million), to reduce 
the high morbidity and mortality related to the use of abortion for 
fertility control and outdated maternal care practices. Russia has 
expended $5.4 million to date and will receive an additional $700,000 
in 1997, providing $2.9 million for 1997 activities. This funding will 
be expended by early 1998.
    The Russian Women's Reproductive Health Program has established 
model training clinics in 14 training institutions in 4 oblasts in 
Western Russia and in Novosibirsk in Siberia, and Vladivostok in the 
Far East, for training in contraceptive technology, maternal care and 
management of reproductive health centers.
    Over 1480 physicians, nurses and midwives have received training in 
contraceptive technology, maternal care and breastfeeding, 300 
physicians have been trained in advanced clinical contraceptive and 
counseling skills.
    Additional activities support public media messages and information 
on the safety and efficiency of modern family planning methods, 
contraceptive marketing training programs for pharmacists, the 
development of policy support for contraceptive programs, and a 
reproductive health survey.
    In 1996 and 1997, $1.186 million is being provided to the AIHA 
Hospital Partnerships Project to develop and support 6 Women's Health 
Centers and 18 clinics in Russia to further extend FP services.
    Recent survey data from the Centers for Disease Control (CDC) 
Reproductive Health Survey in Russia indicate that 70 percent of women 
are using a contraceptive method, and 60 percent of these women are 
using modern methods such as the IUD (39 percent), orals (12 percent), 
and condoms (18 percent). IUD usage, in particular, has increased, 
compared to 1989 USSR data which reported 20 percent IUD usage. 
Preliminary data indicate that numbers of abortions are decreasing in 
areas where USAID has provided training in family planning counseling 
and contraceptives. Though modern contraceptive usage has increased, 
more than 40 percent of women still use unreliable contraceptive 
methods or no method. All hormonal methods continue to be viewed as 
having high health risks and much more education is required for wider 
acceptance of modern contraceptives.
    USAID/Moscow plans to provide $700,000 in 1998 to assist in wider 
dissemination of contraceptive services and information in Russia to 
further reduce dependence on abortion.
                              global aids
    Question. As you know, the AIDS pandemic is one of the great 
challenges facing humankind at the end of the 20th century. The World 
Health Organization estimates that by the end of last year nearly 30 
million people had been infected with HIV. What is your perspective on 
the AIDS pandemic, its impact on global stability and economic growth, 
and U.S. interests worldwide?
    Answer. In the modern world of international transportation and 
commerce, HIV/AIDS is a strong example of an infectious disease that is 
out of control and knows no borders. Since the beginning of the 
pandemic, close to 30 million people are thought to have been infected 
with HIV, and the number of new infections continues to increase. As 
HIV moves from its latent stage to active disease (AIDS) in an 
increasing number of people, worldwide we can expect to see greater 
social, economic, and political impacts on communities. Because AIDS 
strikes adults during their economically productive years, the epidemic 
could deplete critical sectors of the labor force and have a powerful 
negative economic effect on countries. Clear examples of the negative 
impact of AIDS on national economies are best understood among those 
countries where the epidemic has been raging for some time. HIV is 
spreading rapidly to India's rural areas through migrant workers and 
truck drivers, as has happened in many countries. Surveys of some truck 
driver populations in India show that 5% to 10% are infected with HIV, 
with an estimated 3% to 4% in some rural populations. In Tanzania and 
Zambia the life expectancy will be reduced 25 years by the year 2010. 
The copper industry in Zambia has lost as much as 10% of its work force 
to AIDS. Labor costs to the sugar estates in Kenya are expected to 
increase as much as 65% by 2005 because of AIDS-related deaths. Profit 
losses of 15% to 25%, due to AIDS-associated direct and indirect costs, 
are anticipated in many business sectors such as lumber processing in 
Kenya. The AIDS epidemic also imposes large costs, both direct and 
indirect, on those infected by HIV, their families and the communities 
in which they live. In Bombay, over a very short period of time, the 
HIV prevalence rate is 2.5% among pregnant women attending clinics for 
prenatal care. The situation is similar in Thailand where the 
prevalence in women attending prenatal clinics has continued to rise 
steadily, from 0% in 1989 to 2.3% in 1995. In addition an estimated 
6,400 Thai children are infected annually; accounting for more than 
one-tenth of all new HIV infections. Between 3 and 5 million children 
in East and Central Africa will lose their mothers to AIDS this decade. 
Child mortality will increase nearly threefold in Zambia and Zimbabwe, 
and double in Kenya and Uganda by 2010. Rural households in several 
East African countries already spend the equivalent of an individuals 
annual income on AIDS-related costs, including treatment and funerals.
    The resulting productivity losses will reverse the hard-won gains 
in child survival, education, economic development, and depress the 
annual per capita income growth rates. Already, more that half of some 
government's total annual spending on health is now consumed by AIDS; 
and, the gross domestic product (GDP) of some countries could be 
reduced by 14% by 2005 and per capita income could decline by as much 
as 9%. In Thailand, the estimated per patient health care costs for 
people with AIDS in 1991 was between $658 and $1,016. These are 
daunting figures considering that the 1991 national average GDP per 
capital was approximately $1,270.
    The HIV/AIDS pandemic also represents a potential security threat 
in many countries because of high rates of HIV transmission among 
military personnel. HIV/AIDS can severely weaken force strength through 
loss of trained soldiers and officers. In Zimbabwe, for example, half 
of the country's 50,000 soldiers are thought to have HIV or AIDS. The 
prevalence of the virus in military populations has implications for a 
range of international operations, including spreading the infection to 
a larger society. For example, HIV/AIDS was reportedly the second most 
prevalent disease among soldiers returning to Cuba after serving in 
Angola.
    Question. In July of 1995, the State Department issued the ``United 
States International Strategy on HIV/AIDS'', a comprehensive report on 
U.S. policy regarding the AIDS pandemic. In that document, the 
Administration committed itself to a series of specific actions to 
implement its strategy. What actions have been undertaken, and what 
tasks have been completed of the twenty specific action items that the 
State Department committed to in that document?
    Answer. The U.S. International Strategy on HIV/AIDS contains a 
series of actions divided along three thematic lines to meet U.S. 
foreign policy goals; (1) prevent new infections; (2) reduce personal 
and social impact; and (3) mobilize and unify national and 
international efforts. The implementation of the Strategy is a 
coordinated, multi-agency effort. We are actively working with USAID, 
CDC, NIH, FDA, and the White House Office on National AIDS Policy among 
others, to discuss the international calendar and to develop common 
approaches on HIV/AIDS issues through a variety of fora.
    Some foreign governments disavow HIV/AIDS as a problem and prohibit 
public discussion of the disease, which in turn leads to public denial, 
anxiety and continued transmission. We have provided briefings on HIV/
AIDS for U.S Ambassador designates and the Department's regional 
bureaus, focusing on not only in-country HIV/AIDS prevalence and 
epidemiology, but also to encourage Ambassadors and USG representatives 
to work with host country representatives to increase public awareness 
and the political and economic commitment by foreign leaders to stem 
the spread and mitigate the impact of HIV/AIDS.
    The AIDS pandemic imposes large costs on individuals and their 
families that will be translated into aggregate costs that could become 
large enough to create a national economic crisis. In fact, gains in 
U.S,. and global donor assistance to developing countries threaten to 
be lost with the advent and impact of HIV/AIDS. We are working with 
other donor countries and international organizations to shoulder a 
greater share of the technical assistance burden for HIV/AIDS. In 
cooperation with the Department of Health and Human Services and the 
White House Office of Science and Technology Policy, we have included 
HIV/AIDS issues as an agenda item at the upcoming G-\7/8\ Denver 
Summit.
    The growing threat of HIV/AIDS and other sexually transmitted 
diseases (STDs) has changed the world in which family planning programs 
work. Increasingly, family planning programs worldwide are seeking to 
incorporate activities to address HIV/AIDS and other STDs. The State 
Department is supportive of the International Conference on Population 
and Development (ICPD) held in Cairo in September, 1994, which endorses 
the principle that family planning should be provided within a context 
of broader reproductive health. The ICPD Program of Action accords 
special emphasis to the links between family planning and STD services, 
in particular focusing on HIV/AIDS and STD prevention, detection, and 
counseling, especially in women and youth.
    As indicated above, women, children, and youth are predisposed to 
become infected with HIV. We are also working to focus world attention 
on the special needs of these high at-risk groups through formal 
briefings, cables to posts, and presentations to non-government 
organizations, business groups, and community organizations. Senior 
level State Department officials, including Deputy Secretary Strobe 
Talbot, also have raised these issues in various meetings and 
conferences.
                                 burma
    Question. During your 1995 visit to Burma, you delivered a tough 
message to the SLORC. Since then, unfortunately, human rights in Burma 
have deteriorated seriously. What is the U.S. doing to increase the 
pressure on the SLORC? What should we be doing: What is your view on 
the imposition of the sanctions called for in the Cohen-Feinstein 
amendment?
    Answer. I share your concern for Aung San Suu Kyi and her 
supporters in the democracy movement in Burma. As you mention, I 
visited Burma in September 1995, and I am the highest-ranking U.S. 
official to have met with Aung San Suu Kyi. I was also proud to present 
the National Democratic Institute for International Affairs' Averell 
Harriman Democracy Award to her--through her husband--this past summer.
    We continue to be concerned about violations of human rights in 
Burma. We have firmly and consistently expressed our views to the 
Burmese military regime that the basic human rights of the Burmese 
people, including the right of all Burmese to peacefully express their 
political views, must be respected.
    The human rights abuses in Burma are deeply disturbing. One of the 
key ways we have worked to increase pressure on the State Law and Order 
Restoration Council (SLORC) is by urging others in the international 
community to join us in calling on the SLORC to end human rights 
abuses, to allow Burmese to exercise their right to free expression, 
and to enter into a dialogue with the National League for Democracy 
(NLD) and the leaders of the ethnic minorities. The Europeans have 
responded by releasing an EU common position statement condemning human 
rights abuses in Burma, by imposing visa restrictions similar to ours, 
and by withdrawing GSP benefits on human rights grounds. We will 
continue to speak out strongly against the SLORC's actions and will 
work to maintain strong international pressure on the regime.
    We have already applied a full range of severe sanctions against 
Burma, including suspension all U.S. assistance, withdrawing GSP, 
imposing an arms embargo, and opposing assistance to Burma from 
international financial institutions. We are represented in Burma at 
the charge level, rather than by an Ambassador. In October the 
President imposed a ban on visas for senior Burmese government 
officials and their families. In light of Burma's abysmal performance 
in the counternarcotics area, we have also denied certification of 
Burma as a country that cooperates with the United States against 
narcotics production and trafficking. These sanctions have increased 
the pressure on the SLORC. As you note, the Cohen-Feinstein legislation 
requires the President to impose a ban on new U.S. investment in Burma 
if he determines that certain conditions are met. The Administration is 
monitoring the SLORC's behavior closely and will impose such a ban if 
the President makes that determination. In deciding on our next steps, 
we want to make sure that our actions advance our goals of promoting 
democracy and human rights in Burma.
                               indonesia
    Question. Violations of worker rights are a growing problem in may 
countries in Asia, including export-driven economies like Indonesia and 
China, which are major trading partners of the U.S. How can the 
Administration effectively use this trade leverage to promote worker 
rights? For example, should the review of Indonesia's worker rights 
practices by the United States Trade Representative which was suspended 
in 1994 be resumed?
    Answer. Worker rights criteria in U.S. trade legislation, such as 
that governing the GSP and OPIC programs, are incentives for 
beneficiary countries to live up to their international worker rights 
obligations. Our legislative criteria, however, provide only limited 
leverage in encouraging our trading partners to improve respect for 
internationally recognized worker rights.
    Notwithstanding the suspension of the formal GSP worker rights 
review of Indonesia and the several lapses of GSP authority, we have 
continued to conduct a dialogue with the Government of Indonesia on 
worker rights issues. The early stages of this dialogue produced a Plan 
of Action by the Indonesian Minister of Manpower to undertake a number 
of reforms, although it did not address some of the most basic freedom 
of association problems. Recently, a USTR staff member had extensive 
discussions in Indonesia in early February and Assistant Secretary of 
State John Shattuck visited Indonesia in March. Worker rights was one 
of the principal items Assistant Secretary Shattuck discussed with 
Foreign Minister Alatas, Justice Minister Oetoyo, and a wide range of 
other knowledgeable people inside and outside of the Indonesian 
Government during his visit. The United States has made clear its 
unequivocal opposition to the unfounded charges brought against 
independent trade union leader, Muchtar Pakpahan, and our displeasure 
with the fact that he is being harassed by the Government of Indonesia 
for the basic human right of freedom of expression.
    The Administration is currently examining the question of a formal 
resumption of the GSP worker rights review of Indonesia which was 
initiated in 1992 and suspended in 1994. The issue is complicated by 
the fact that GSP authority has only been renewed for short periods 
since 1993 and is currently due to expire again on May 31, 1997.
                         bosnia: war criminals
    Question. What is the United States doing to assist in the 
apprehension of indicted war criminals in Bosnia?
    Answer. We are not satisfied with the record to date on 
apprehension of war criminals. The United States remains firmly 
committed to the work of the International Criminal Tribunal for the 
Former Yugoslavia (ICTY) and to ensuring that those responsible for war 
crimes be punished. We have provided significant material, personnel, 
and intelligence support to the Tribunal. The determination of the 
international community on this issue was underscored late last year at 
meetings of the Bosnia Peace Implementation Council in London and its 
Steering Board in Paris.
    SFOR has continued IFOR's Policy to detail indictees when 
encountered in the course of its duties and when operationally possible 
to do so. The primary responsibility for the arrest and transfer to the 
ICTY of war criminals remains with the parties.
    We have established a clear linkage between compliance with Dayton, 
including cooperation with the ICTY, and provision of economic 
assistance. We continue to work with our allies to apply increased 
diplomatic pressure on the Dayton parties. While we have seen and 
helped foster substantial progress on other areas of Dayton 
implementation, we have made clear to the parties that we consider the 
Dayton war crimes provisions an integral part of the peace settlement 
that must also be met.
    We are currently reviewing other options should political and 
economic pressures fail to deliver indicted persons. These include 
consideration of options for providing and encouraging enhanced 
international support for the Tribunal.
                           former yugoslavia
    Question. It is my understanding that U.S. law requires the U.S. 
Executive Directors to the World Bank and other international financial 
institutions to oppose loans to countries harboring indicted war 
criminals. What is the U.S. position with regard to loans to Croatia in 
the World Bank and other financial institutions, in light of that 
government's failure to apprehend and extradite some ten indicted war 
criminals living in or transiting Croatia or the Croatian-controlled 
area within Bosnia?
    Answer. Section 568 of the 1997 Foreign Operations Appropriations 
Act authorizes (but does not require) the Secretary of the Treasury to 
instruct the U.S. Executive Directors of international financial 
institutions to work in opposition to, and vote against, any extension 
of financing or technical assistance to any country which knowingly 
grants sanctuary to indictees of the International Criminal Tribunal 
for the Former Yugoslavia (ICTY) for the purpose of evading 
prosecution.
    The U.S. abstained from voting on Croatia's application for IMF 
assistance on March 12. This action--significant for the U.S.--reflects 
the concerns underlying section 568. We have raised the issue of ICTY 
cooperation repeatedly at the highest levels of the government of 
Croatia and will continue to press for improved Croatian compliance. In 
particular, we have expressed concern over delays in the extradition of 
one indictee now in custody and Croatia's willingness to provide 
information sought by the Tribunal. There have been numerous 
allegations in past months of the presence of other indictees on 
Croatian territory, but these allegations remain unconfirmed and some 
have recently been denied by Croatian officials.
    In coordination with the Treasury Department, we will keep the 
issue of Croatia's compliance with the ICTY and cooperation in the 
apprehension and transfer to The Hague of indictees under active 
review. Compliance with the Tribunal is an essential part of Dayton 
Agreement efforts to consolidate peace in the region. Cooperation with 
the Tribunal is also potentially indicative of the government of 
Croatia's commitment to the rule of law and the principles of good 
governance.
                      international criminal court
    Question. A group of ``like minded'' nations at the United Nations 
is pushing for an early date for negotiations for a treaty for an 
International Criminal Court. This group strongly supports an 
independent court, capable of initiating prosecution without the prior 
approval of the Security Council. What is your position regarding the 
independence of the International Criminal Court?
    Answer. Negotiations on a draft statute for a permanent 
international criminal court are underway this year in the United 
Nations following two years of preliminary discussions. The United 
States has been fully engaged in all of these discussions. The UN 
General Assembly, by consensus, already has targeted mid-1998 for a 
diplomatic conference on a treaty.
    The U.S. believes that there can and should be an appropriate role 
for the Security Council in the work of the Court. This is not 
incompatible with the judicial independence of the Court. The Security 
Council has a necessary and primary role under the U.N. Charter with 
respect to certain questions and matters, such as the determination of 
aggression and the responsibility for maintaining international peace 
and security. The Security Council therefore should have an appropriate 
role in deciding what overall situations the Court would deal with, 
just as it has with the two ad hoc War Crimes Tribunals for Yugoslavia 
and for Rwanda. However, in such cases the prosecutor should be fully 
independent in deciding which individuals to prosecute, when and for 
what.
                             child soldiers
    Question. It is my understanding that the U.S. opposes a protocol 
to the Convention on the Rights of the Child which would set the 
minimum age of eighteen both for participation in hostilities and 
voluntary military recruitment. The U.S. position favoring a lower age 
for military service is sharply at odds with most of our allies. In 
light of the fact that the protocol is optional and to a convention 
that the U.S. has not even ratified, is the U.S. undertaking any action 
to oppose actively this protocol? If so, what is the Administration 
doing?
    Answer. In recent years rebels, militias, and in some cases 
government forces, have relied on child soldiers, some of whom are not 
even teenagers. We deplore this abhorrent practice and support putting 
an end to it.
    For example, we support Article 38(2) of the Convention on the 
Rights of the Child, which, like Additional Protocol I to the Geneva 
Conventions of 1949, provides that State Parties should take all 
feasible measures to ensure that persons who have not attained the age 
of 15 years do not take a direct part in hostilities, and that they are 
not recruited into the armed forces.
    The optional protocol, which sets a higher standard, is still under 
negotiation. The U.S. has participated actively in these negotiations. 
We have supported establishing the minimum age of enlistment at 17 
years and imposing an obligation on states to take ``all feasible 
measures to ensure that persons under 17 years of age do not take a 
direct part in hostilities.'' Such a requirement would be consistent 
with current U.S. law, which permits enlistment of 17 year-olds with 
parental consent.
    Other countries have supported an 18-year age limit. We believe 
that a 17-year age limit would achieve wider support in the UN General 
Assembly because it is more consistent with the laws of many states, 
including the U.S.
                              torture fund
    Question. The United Nations Voluntary Fund for Victims of Torture 
provides much-needed assistance to projects working with victims of 
torture. Survivors International, based in San Francisco, is one such 
project. The International Rehabilitation Council for Torture Victims 
(IRCT)--a non-governmental organization based in Copenhagen--estimates 
the financial need for such treatment centers in 1997 to be $36.5 
million. I understand that the Administration is requesting level 
funding of $1.5 million for our contribution to the U.N. Fund for 
Victims of Torture for FY 98. What are the prospects for an increase, 
given the many urgent needs? Also, presently only 28 countries 
contribute to the Fund. What initiatives is the Administration taking 
to encourage other countries to contribute to the Fund?
    Answer. The UN Voluntary Fund for Victims of Torture is an 
important and worthy cause. The U.S. has maintained a strong commitment 
to the Fund, even while reducing our level of commitment to other 
causes, and eliminating contributions entirely in some cases. Our 
budgetary resources are limited, even for the worthiest causes. 
Increasing our contribution to the Fund would depend upon our budgetary 
flexibility in the years ahead. Ambassador Richardson and I intend to 
encourage other donors strongly to increase their contributions to the 
Fund. But our personal appeals to current donors and potential 
contributors to the Fund will be credible only as long as the U.S. 
continues to set a strong example.

            Questions for the Record Submitted by Mr. Yates

                        jewish agency for russia
    Question. In 1996, the Jewish Agency for Israel experienced 
difficulty renewing the accreditation in Russia. This is an area of 
great concern for me. It is crucial for the Jewish Agency to be able to 
operate unimpeded, since it is the organization on which the Jewish 
community in Russia relies to enable freedom of emigration to Israel. 
Are you confident that the Jewish Agency will be allowed to continue 
its operations? Is there a contingency plan if these vital operations 
are curtailed by the Russian government?
    Answer. On April 4, 1996, the Russian Ministry of Justice revoked 
the accreditation of the Jewish Agency (JA), a quasi-governmental 
organization which assists Jews from the former Soviet Union to 
emigrate to Israel, effectively suspending the Agency's legal right to 
operate in Russia. JA operations were not interrupted in practice and 
there were no reports of any Jewish emigres being prevented from 
leaving Russia. Following consultations with the Russian authorities, 
JA officials and Russian Jewish community leaders reestablished the 
Jewish Agency of the Russian Federation (JARF), essentially giving the 
JA the legal status of a Russian organization rather than of a foreign 
one. After a series of delays, this process was completed in October 
1996.
    From the time the accreditation of the JA was revoked until it was 
restored, we remained in touch with the Russians. President Clinton, 
Vice President Gore and other senior officials urged the Russians to 
restore accreditation.
    We are not in a position to guarantee that the JARF will not 
experience difficulties in the future. However, since its accreditation 
was restored last fall, there have been no indications that the JARF 
has not been able to operate successfully as it had in the past. We 
will continue to work to ensure that the JARF is able to operate 
without interference.
    Question. In order to facilitate travel to Israel, the Jewish 
Agency maintains numerous transit facilities in Russia and Eastern 
Europe. Partial funding for these centers is contained in the Foreign 
Operations, Export Financing, and Related Programs Appropriations bill. 
Do you foresee any difficulty in providing funds for these facilities?
    Answer. Since 1973, the Department of State has provided almost $1 
billion to the United Israel Appeal (UIA) and its operating partner, 
the Jewish Agency for Israel, for resettlement of Jewish emigres in 
Israel. Since 1992 the grant has been earmarked by Congress at $80 
million.
    The grant supports a variety of activities including the operation 
of 33 transit centers in the former Soviet Union and eastern Europe. 
These centers provide a variety of services which help facilitate the 
emigres' departure. In 1995, the State Department's Office of the 
Inspector General conducted an audit investigation of the UIA grant in 
order to ensure that grant funds were being properly expended on 
activities related to emigre travel and short-term resettlement 
assistance. One of the Inspector's conclusions was that in a number of 
transit centers USG grant funds were being used to support emigration 
promotion and recruitment programs. The Inspectors deemed these 
activities inconsistent with the grant's purpose and asked that the 
State Department work with UIA to ensure that USG funding not support 
these programs, but instead help defer expenses related directly to the 
actual departure of emigres. The Department is continuing these 
discussions with UIA.
    In FY97, the USG has provided $80 million to UIA--$12.5 million for 
the operation of transit centers. The Administration has requested $80 
million for UIA in FY98.
    Question. The United Israel Appeal is the recipient of United 
States government aid (which it then transfers to its operating agency, 
the Jewish Agency for Israel). How would you characterize the working 
relationship between the State Department and the United Israel Appeal?
    Answer. The United Israel Appeal (UIA) and the State Department 
enjoy an excellent working relationship.
    Since 1973, the Department of State has provided almost $1 billion 
to the UIA and the Jewish Agency for Israel for resettlement of Jewish 
emigres in Israel. Since 1992 the grant has been earmarked by Congress 
at $80 million.
    In 1995, the State Department's Office of the Inspector General 
conducted an audit investigation of the UIA grant in order to ensure 
that grant funds were being properly expended on activities related to 
emigre travel and short-term resettlement assistance. One of the 
Inspector's conclusions was that the Department should engage in a more 
regular dialogue with the UIA and the Jewish Agency concerning the 
overall management of the grant, as well as the development of specific 
fiscal year funding proposals. All three parties are now engaged in 
very regular and constructive discussions on these issues.
    Question. We have made great strides in the emigration process in 
the Russia and the NIS, and the vast number of Jews desiring emigration 
to Israel are able to leave. However, in most of the republics of the 
former Soviet Union, including Russia, legislation is still flawed and 
inadequate, and the flow of emigration stems largely from the good will 
of individuals within these governments. One very serious concern is 
the new Russian legislation, passed in the Duma in July 1996, which 
gives the Ivanov Commission (which reviews individual cases) the power 
to extend a secrecy refusal beyond the original five-year limit, to a 
maximum of ten years.
    In that this tends to be beyond the universally excepted norm, and 
that it can be carried out in an arbitrary fashion, what support will 
the Administration give to encourage the repeal of this measure? What 
steps will the Administration undertake to reinforce legislation and 
judicial reform in the process concerning emigration. What can the 
United States Congress do to facilitate the process of bringing Russia 
and the NIS up to the norms of the international community of nations?
    Answer. Since the break-up of the Soviet Union in 1991, the Russian 
Federation has made steady progress in establishing and implementing 
legal guarantees of the right to emigrate, a right which is enshrined 
in Russia's 1993 Constitution. In 1996, this right was addressed by the 
law on ``Procedures for Departing and Entering the Russian 
Federation,'' which was signed by President Yeltsin on August 15, 1996. 
This law reaffirms Russia's policy of allowing all of its citizens to 
exercise freely the right to travel abroad and to emigrate. It also 
details the procedures for obtaining travel documents, such as 
passports, and elaborates the circumstances under which the state can 
limit the freedom of travel.
    However, the law would restrict for a period of up to ten years the 
right to emigrate of Russian citizens who have worked with certain 
sensitive national security information. This travel restriction must 
be explicitly agreed to by the employee in his employment contract. We 
have made our concerns known to senior levels of the Russian government 
regarding the issue of the new ten-year waiting period for emigration. 
The Russian government stressed that the ten-year requirement applies 
to all Russian citizens, not just Jewish citizens, and that the 
requirement applies only to the most sensitive cases. We will follow 
closely the implementation of the new law and voice our concerns to the 
Russian government.
                           russia and the nis
    Question. Recognizing that economic stability in the Republics of 
the former Soviet Union, or New Independent States (NIS), is necessary 
for promoting democratic reform, and helping to safeguard the security 
of its citizens, the Congress has passed legislation supporting 
financial and technical assistance to the NIS. This legislation 
contains not only economic assistance, but also strong human rights 
provisions. What are the Administration's plans for the continuation of 
promoting democratic reform, with the inclusion of a human rights 
agenda, for the NIS?
    Answer. Promoting the development of democratic and civic 
institutions and respect for human rights remains central to our 
overall policy of engagement of Russia and the other New Independent 
States. We recognize that it is in our vital national interests to 
continue to promote progress on these issues. For that reason we are 
spearheading a new NIS assistance initiative called Partnership for 
Freedom, which is designed to advance U.S. national interests directly 
with the people of Russia and the NIS.
    Partnership for Freedom is one of our top three funding priorities 
for FY 98. The program will refocus our cooperative activities to 
support trade and investment, economic growth, and the development of 
civil society. It is intended to enhance our support of non-
governmental organizations in the NIS that promote further 
democratization and observance of human rights in their respective 
countries. The new program emphasizes cooperative people-to-people 
rather than state-to-state activities. We believe that continuing to 
encourage the reform process and transformation of these countries, 
which is already underway, is a critically important investment in our 
own security.
    Question. Anti-Semitism continues to be a major threat to Jews in 
Russia and the NIS, especially so because of the rapidly deteriorating 
economy, rise in popularity of hardline conservatives, and growing 
ethnic tension and nationalism. Areas in Russia, Ukraine, Belarus and 
Central Asia show heightened anti-Semitism, and many factions in 
opposition to Russia President Yeltsin include anti-Semitism in their 
ideology. In your capacity as Secretary of State, how will you continue 
to incorporate this serious concern into your dialogue with Russian and 
NIS leadership? How can the United States government assist the leaders 
and other emerging democratic governments in the region with their 
efforts to protect minority rights?
    Answer. In Russia and the other NIS Jews continue to encounter 
societal discrimination and government authorities have been criticized 
for taking insufficient action to counter such incidents. Last year in 
Russia, Belarus and Ukraine there were several incidents of vandalism 
directed at Jewish cemeteries and synagogues. In each case, our 
government has sought to obtain all of the relevant facts an to urge 
the authorities to conduct thorough investigations.
    On the positive side, the top government leaders in both Russia and 
Ukraine have consistently supported the principle of religious 
tolerance and have condemned anti-Semitic acts. The United States and 
Ukraine have established a Joint Commission on Cultural Heritage which 
is facilitating cooperative efforts to protect and restore significant 
cultural monuments, including several Jewish cemeteries. In Belarus, 
meanwhile, the overall human rights situation has worsened markedly in 
the last two years and, in March, the government expelled an 
independent journalist, underscoring his Israeli citizenship.
    In Central Asia and the Caucasus, independence has brought greater 
freedom of religion and cultural development. While many Jews have 
emigrated, Jewish education and cultural programs are flourishing for 
those who remain, with synagogues functioning openly in countries such 
as Uzbekistan and Georgia.
    During my discussions with officials from Russia and Ukraine, 
including my recent meetings in Moscow, I have emphasized the high 
priority U.S. places on the development of open, tolerant societies 
which respect religious freedom.
                     swiss banks and holocaust fund
    Question. It has been 52 years since the end of World War Two and 
the Nazi atrocities committed against the Jewish people. Yet the crimes 
of the Holocaust continue to exist in Europe. By crimes I am referring 
to the Swiss banks and the undisclosed and unaccounted funds of Jewish 
depositors during the Holocaust. What is the Administrations (sic) 
position on this matter?
    Answer. This is an issue about which the Administration cares very 
much. Last year, the State Department, both in Bern and in Washington, 
urged the Swiss government and Swiss banks to reach a mutually 
acceptable arrangement on heirless and dormant accounts with 
organizations representing Holocaust survivors. The World Jewish 
Congress, the World Jewish Restitution Organization and the Swiss 
Bankers Association reached agreement last May on establishing what is 
now called the Volcker Commission. The Volcker Commission, chaired by 
former Federal Reserve Board Chairman Paul Volcker, includes 
representatives of major Jewish groups and of the Swiss Banks. We 
welcome and fully support this effort. We will continue to monitor the 
efforts of Swiss banks and the Volcker Commission to resolve this 
matter.
    Question. When will Under Secretary of State (sic) Stuart 
Eizenstat's report on the Swiss banks and the Holocaust funds be 
completed?
    Answer. Under Secretary Eizenstat is coordinating an interagency 
historical review of US and Allied efforts to recover and restore gold 
and other assets stolen or hidden by Germany during World War II. The 
report is expected to be released soon.
    Question. Will this report and related documents used in writing 
the report be made public?
    Answer. The report will be released to the public and it will be 
made available on the Internet. It will include a guide to the hundreds 
of thousands of documents on this and related subjects which have been 
declassified and are now in the public domain.
    Question. Does the Administration intend to follow up on these 
findings in concrete ways through political, legal or international 
channels?
    Answer. The Administration already is very active with our friends 
and allies on these issues, and will continue this effort after the 
report's release. In January, Under Secretary Eizenstat had meetings in 
Switzerland. In March I met with Swiss Foreign Minister Cotti. We 
remain in a constant, constructive and cooperative mode with the Swiss 
Government and are encouraged by the progress so far. They have 
demonstrated commitment through the establishment of a government task 
force, and an historical commission to look at the whole range of 
related issues. The government has also proposed a 7 billion SFr (about 
$4.8 billion) humanitarian fund. I should also note that numerous other 
nations have begun historical investigations, including France, Spain, 
Sweden, the Netherlands and Portugal. Lastly, we are also working with 
our fellow Tripartite Gold Commission members, Britain and France, to 
determine the final distribution of gold held by the TGC.
    Question. Recently, Under Secretary of Commerce-designate Eizenstat 
attended the World Economic Forum in Davos, Switzerland. It is my 
understanding he held a series of meetings with Swiss government and 
banking officials on the Swiss banks and holocaust funds issue. Did 
these meetings lead to any new developments on pledges of cooperation 
on behalf of the Swiss government or banking officials?
    Answer. Since the meetings in Davos, Swiss banks announced the 
establishment of a Holocaust Memorial Fund. To date about 265 million 
SFr (about $182.7 million) has been pledged by banks, industry and the 
Swiss National Bank. Separately, Swiss students have raised 50,000 SFr 
(about $34,500), and Swiss churches another 250,000 SFr (about 
$172,500).
    On March 5, Swiss President Arnold Koller announced his 
government's intention to contribute to the Holocaust fund and to 
create a separate humanitarian fund (the Solidarity Foundation) that 
could draw upon $4.8 billion in funds from Swiss gold reserves. Koller 
stressed the government's commitment to face the past with ``merciless 
truthfulness.''
    Question. As Secretary of State, will you continue to utilize Under 
Secretary Eizenstat to coordinate the various efforts to trace the 
Holocaust funds? Will this remain an important part of his portfolio at 
the State Department?
    Answer. Under Secretary Eizenstat has done a superb job as the 
Department of State's Special Envoy for Property restitution in Central 
and Eastern Europe (since January 1995) and as coordinator for the 
Interagency Historical Review. I would be pleased if he would continue 
to pursue these issues once confirmed in his new position.
    Question. Will this search widen to other countries involved in the 
laundering and disposal of tons of looted Nazi gold, such as Sweden, 
Portugal and Argentina? Will there be similar United States 
investigations into these documented gold transports?
    Answer. The historical study is not restricted to Switzerland. 
Every country which received substantial assets from Germany is 
mentioned in the report, and we are in contact with many countries 
doing their own historical investigations.
    Question. Will you and Ambassador Madeleine Kunin, work to 
encourage the Swiss Government to open the records of the Swiss 
National Bank and the Basel-based Bank for International Settlements--
both known for close contacts with the Reichsbank and their laundering 
of Nazi gold during the war?
    Answer. The Department of State, in Washington and through Embassy 
Bern, has consistently urged a thorough and transparent review of Swiss 
financial transactions with Nazi Germany. The Bergier Commission was 
established to conduct such a review. The commission is composed of an 
international team of historians, including Sybil Milton of the 
Holocaust Museum. It is our desire that all pertinent documents be made 
available to the commission to allow it to do its work properly. The 
Swiss National Bank has already published a review of Swiss gold 
transactions with Allied and Axis countries from 1939 to 1945. The Bank 
of International Settlements (BIS) is based in Basel and is an 
independent international organization. It is our understanding that a 
BIS historical review will be released soon.
    Question. Recently, the ``Big Three'' Swiss Banks announced the 
creation of a so-called ``Humanitarian fund'' for Holocaust Survivors. 
At the same time, however, there was no admission of guilt or 
wrongdoing on behalf of the banks or government. While this move was 
praised by some as a good first step, what additional steps would you 
suggest to Swiss banking officials?
    Answer. As I have indicated in the other answers to these 
questions, the Swiss have taken a number of positive steps during the 
past year including the establishment of the Volcker Commission, a 
government task force, the establishment of a Holocaust Fund, and the 
proposal for a Humanitarian Foundation drawing on 7 Billion SFr ($4.8 
billion) in official Swiss gold reserves. The Bergier historical 
commission, established by Parliament and the Swiss Federal Council, is 
investigating Switzerland's role during the Second World War. The 
conclusions of this reexamination we hope will provide the Swiss people 
with tools to honestly reevaluate Switzerland's role and legacies from 
WWII. We believe the Swiss are on a good path in addressing 
forthrightly these troubling legacies. The important thing now will be 
for them to stay the course.
                         development assistance
    Question. The bilateral and multilateral development assistance 
accounts have been cut much more deeply than any other area of the 
Foreign Operations budget in the last two years--cut on average by more 
than 30 percent out of overall cuts of about 11 percent. These cuts 
have harmed a wide range of programs including family planning, 
microenterprise, IDA and UNDP, to name just a few. How do you and the 
Administration view these drastic cuts in development assistance? How 
does it effect, or undermine, the national interests of the United 
States? What is the effect on United States global leadership?
    Answer. I share your concern with the inordinately large cuts in 
development assistance.
    The governments of many developing countries are growing more 
committed to improving social and economic conditions for their people. 
USAID has been in the forefront of targeting development assistance to 
those countries willing to help themselves. These investments--in 
social sectors such as education and health, support for environmental 
protection and programs that promote private sector-led development, 
along with helping institutions that support democracy--enhance 
sustainable economic growth and thereby help assure the prospects for 
peace and stability. Such interventions also help prevent humanitarian 
and other complex crises, which if not stemmed, lead to much higher 
costs for the United States in terms of supporting peacekeeping forces 
or emergency relief operations.
    The United States has long been admired for our development 
programs in the field and has played a leadership role in promoting 
sustainable development. With many fragile new democracies seeking our 
help, we should not abandon that role. These fledgling democracies are 
beginning to develop their own economic base and will become new 
markets for U.S. goods. Development is an investment in America's 
future.
    Question. The foreign policy challenges and opportunities facing 
the United States on the eve of the twenty-first century require 
greater attention to and investment in developing countries than in the 
past. Is it in developing countries where issues such as rapid 
population growth, environmental degradation, food insecurity, ethnic 
conflict and widespread poverty must be addressed if we are to realize 
the goal of peace, democracy and prosperity through new export markets? 
Yet it seems that your predecessors traditionally have ignored or 
dismissed the role of development assistance in achieving foreign 
policy aims. In your role as Secretary of State, how are you planning 
to improve the linkages between the USAID and State portfolios? How 
will you ensure that the United States strengthens its commitment to 
helping the developing world?
    Answer. Development Assistance is a critical tool of U.S. Foreign 
Policy. The policies and programs supported by the Department of State 
and USAID that help stabilize population growth, protect the 
environment, promote food security and economic growth are indeed 
integral to the achievement of the broad objectives of peace, 
prosperity and democracy. I am already coordinating closely with the 
Administrator of USAID, Brian Atwood, and consider him a valuable 
member of my foreign policy team. In addition, there is extensive 
collaboration between State and USAID at virtually all levels, as is 
highlighted in the attached charts. I plan to continue to support 
actively, both publicly and within the Administration, the development 
mission and its centrality to U.S. Foreign Policy.

[Pages 97 - 98--The official Committee record contains additional material here.]


                         development assistance
    Question. Last year, Congress approved a dramatic increase in 
counternarcotics funding, which came at the expense of additional cuts 
in bilateral development assistance. The President's FY '98 budget 
request calls for yet another $17 million increase in the 
counternatcotics budget, yet the counternarcotics program has a highly 
questionable track record, lacking proven results and often going to 
support foreign military and policy involved in serious human rights 
abuses. How do you justify this increase? Is it an appropriate tradeoff 
to development assistance? Wouldn't logic tell you that if you increase 
development assistance and thereby provide a better standard of living, 
that such a commitment would better address the root causes of the drug 
trafficking problem?
    Answer. The increase in funds appropriated for International 
narcotics Control (INC) in FY-1997 did not come at the expense of 
development assistance. In accordance with the President's decision 
(PDD-14) of November 1993, a significant part of the increase is to 
support rural development activities specifically designed to reduce 
illicit drug crop cultivation (called ``alternative development''). In 
earlier years, these activities were supported by economic assistance 
(ESF) funds. In several drug source countries, notably Peru, this is an 
important and very cost-effective use of drug control assistance. As is 
recognized in the President's National Drug Control Strategy for 1997, 
the largest part of the further increase he proposed in INC funding for 
FY-1998 will also be directed to development-type programs for coca 
crop reduction in Peru.
    It is now generally recognized, by the United States and by drug 
source countries, that illegal drug production is in all ways 
antagonistic to economic growth, democratic institutions, environmental 
and other sustainable development goals. Our current use of INC funds 
is fundamentally complementary to, not competitive with, the broad 
sustainable development goals that our other economic development 
assistance is used to advance.
    We do not consider our drug control programs lacking in proven 
results. Our INC drug enforcement training has enhanced capacities of 
drug law enforcement, prosecutors and judicial officials throughout the 
world. U.S. drug law enforcement officers and agencies find a level of 
engagement and competence of counterpart agencies abroad that was non-
existent two decades ago, which we helped create. Most of our funding 
has gone for efforts to reduce production of coca leaf, the raw 
material for cocaine, in countries where it is produced, processed or 
shipped to the U.S. In Peru, we estimated coca cultivation in 1996 as 
94,400 hectares (20,900 hectares or over 18% less than in 1995; lowest 
since we began such estimates in 1986). Our INC assistance to Peru has 
supported, and will continue to support, a comprehensive plan to 
eliminate illicit coca through rural development programs specially 
designed to reduce coca cultivation, combined with action to control 
drug traffickers that export cocaine from Peru. We are supporting other 
approaches whose purpose is the same, to reduce coca cultivation 
sustainably and significantly, in Bolivia and Colombia. We consider 
prospects promising to very substantially reduce, and hopefully to 
eliminate, large-scale cultivation of coca destined for illicit drug 
production over the next decade. This is a substantial return for 
relatively modest investment in our INC and related programs.
    We know of no instance in which INC assistance has gone to support 
a foreign military or police element involved in human rights abuses. 
Abuse of human rights is fundamentally contradictory to the principle 
of rule of law on which effective drug control, and all law enforcement 
in a democratic state, must be based. We have long had the policy of 
promoting human rights in our INC programs, which are subject to end-
use monitoring regimes to document how assistance is used. For the FY-
1997 INC appropriation, Congress prescribed by law that no INC-funded 
assistance may be provided to any unit of the security forces of a 
foreign country involved in gross violations of human rights, with 
strictly limited exceptions. This new law is entirely consistent with 
our established policies relating to the INC program, and we have taken 
additional measures to provide the fullest possible assurance that it 
is being strictly observed.
                        counternarcotics funding
    Questions. Last fall Congress adopted a provision concerning 
counternarcotics funding which states: ``Provided further, that none of 
the funds made available under this heading may be provided to any unit 
of the security forces of a foreign country if the Secretary of State 
has credible evidence to believe such unit has committed gross 
violations of human rights unless the Secretary determines and reports 
to the Committees on Appropriations that the government of such country 
is taking steps to bring the responsible members of the security forces 
unit to justice.''
    This provision was intended to insure that counternarcotics funds 
are not wasted by being diverted and to insure that US tax dollars do 
not underwrite political murders. It prohibits aid to specific units on 
the basis of credible evidence and does not apply if the unit in 
question is policing itself and holding its members accountable. Yet, 
so far as I am aware, the Department of State has provided no 
information to the Congress about how it plans to implement this 
procedure.
    I am requesting that you inform all the members of the Subcommittee 
in detail how the State Department intends to implement this provision. 
Specifically, I am requesting you compile lists of units which are 
prohibited from receiving counternarcotics assistance until the 
required certification is provided and put in place monitoring 
procedures to insure that the law is followed.
    Will the Administration honor the intent of Congress by insuring 
that no excess defense articles are provided to units prohibited from 
receiving direct counternarcotics funding under this provision?
    It is my understanding that since this provision was adopted 
Amnesty International USA has released documents confirming that US aid 
to Colombia has been provided to security force units credibly alleged 
to be responsible for gross human rights violations. Please advise as 
to which Colombian units will be prohibited from receiving 
counternarcotics assistance under this provision?
    Furthermore, it is my understanding that the Administration plans 
to supply a large amount of excess defense articles to the Colombian 
military for counternarcotics purposes. How will you and the 
Administration insure that this equipment does not subvert 
Congressional intent by providing excess defense articles to the very 
unites which are prohibited from receiving direct counternarcotics 
funding? What would be your intentions should such a situation develop? 
Would you please spell out for the Subcommittee exactly what you and 
the Administration consider to be ``credible evidence. . . . such unit 
has committed gross violations of human rights. . . .''
    Answer. On February 13, 1997, the Department of State sent a 
telegram to all U.S. missions to ensure that they are aware of this new 
restriction on assistance funded under Section 481 of the Foreign 
Assistance Act, the International Narcotics Control program. Activities 
under this program are carried out in 85 countries. The U.S. mission in 
each country is required to know which official or unit will receive 
assistance, where items provided as assistance are, who is using them, 
and how. It is not practical for lists of recipient units for this 
entire assistance program to be submitted to Washington. Accordingly, 
it is the responsibility of each mission to correlate information held 
at post on recipients of INC-funded assistance with information on 
gross violations of human rights.
    All missions are required to report to the Department any instance 
in which it appears that information exists that could require a 
determination by the Secretary of State whether assistance to a 
particular unit can be provided consistent with the law. INC-funded 
assistance has long been subject to an end-use monitoring and reporting 
procedure, to monitor its use and impact. Posts with significant INC-
funded projects administered by Narcotics Affairs Sections must report 
at the beginning of each year the procedures established to implement 
end-use monitoring requirements in the coming year. Those posts also 
must now report on procedures established at the post to ensure that 
this new human rights restriction is observed.
    The Department of State has instructed all missions abroad to 
promptly report any instance of a unit of the government's security 
forces that may receive counternarcotics assistance funded from a 
source other than the INC program involved in gross violations of human 
rights. This is to be done in the same manner as if the assistance were 
INC-funded. As a matter of policy, we do not intend to allow 
counternarcotics assistance funded from sources other than the INC 
program to be directed to units that could not under the law receive 
assistance funded under the INC program.
    The specific allegations to which Amnesty International referred 
related to units of the Colombian Army. The limited amount of INC-
funded assistance provided to units of the Colombian Army is strictly 
restricted to counternarcotics purposes such as protection of drug crop 
eradication activities, and is closely monitored. Any such assistance 
is subject to correlation of information on recipient units with 
information available to the U.S. mission concerning units which have 
committed gross violations of human rights. As in the case of INC-
funded assistance to other elements of the security forces of the 
Government of Colombia, any instance in which information concerning 
gross violations of human rights by units of the Army exists will be 
reported promptly to the Department for consideration in accordance 
with the law. Regarding counternarcotics assistance funded from sources 
other than the INC program in Colombia, procedures specific to that 
country have been defined and are described in response to another 
question.
    The American Embassy in Bogota and the Colombian Ministry of 
Defense have agreed to end use monitoring (EUM) terms for United States 
defense articles to be provided pursuant to the FY-96 506(a)(2) 
drawdown, which includes assistance for both the Colombian Police and 
armed forces. This EUM system represents an improved screening and 
monitoring process which is intended to ensure that equipment goes to 
units supporting counternarcotics operations, and which is intended to 
prevent us from inadvertently giving assistance to known human rights 
abusers. Under the agreement, no equipment will be provided to units 
whose personnel have credible reports of serious human rights 
violations since 1994. The only organization about which concerns have 
been expressed at this time is the Colombian Army.
    I would note that there have been no new FMS cases opened for the 
Colombian Army since 1994. The Colombian Government's Attorney General 
for Human Rights has given our Embassy in Bogota a list of Colombian 
Army personnel with outstanding cases of reported human rights abuses, 
dating back to 1994. If serious human rights violations are reported to 
have been committed by the members of a recipient unit, either before 
or after 1994, personnel alleged to have been involved will be 
transferred out of the unit without prejudice and in accordance with 
Colombia law, while charges are investigated. No equipment transfers 
will be made which do not comply with EUM provisions. The Ministry of 
Defense will provide the Embassy with reports on use of the equipment 
to ensure that, as has been agreed, it is being employed for 
counternarcotics, as has been agreed, it is being employed for 
counternarcotics purposes. The Ministry of Defense will facilitate 
periodic EUM visits by the U.S. MilGroup to units which have received 
the equipment.
    With regard to the aspect of your question concerning what would 
constitute ``credible evidence'', the relevant guidelines are 
prescribed by the Department's established reporting procedures 
relating to human rights. These guidelines convey that these 
conclusions need to be drawn from all the information available and 
based on the totality of the circumstances leading to a reasonable 
judgment that gross violations have occurred. The Department 
understands that human rights reporting is often fraught with 
ambiguity--that while reporting must be based on facts, it is often 
difficult to ascertain what the facts are. With regard to any specific 
instance, posts are directed to make a conscientious effort to report 
what the available evidence shows and, where it is ambiguous, to report 
that.
    The Congress recently enacted a prohibition on assistance provided 
under Section 481 of the Foreign Assistance Act to units of the 
security forces of a foreign country that have committed gross 
violations of human rights. In any specific instance in which this 
prohibition may apply, the specific nature, extent, corroboration and 
all other pertinent aspects of information reported to the Department 
relating to that specific instance would be carefully considered by the 
Secretary of State before making any determination concerning 
continuation of assistance required by the law. In the case of 
counternarcotics assistance funded from other funding sources, 
including excess defense articles, this new provision does not apply as 
a strict matter of law. However, the Department would be similarly 
guided by its established practices and procedures relating to human 
rights in evaluating whether information would constitute ``credible 
evidence'' of a situation in which, as a matter of policy, the 
Administration would not permit assistance to proceed.
                              human rights
    Questions. Both the United Nations and the Organization for 
Security and Cooperation in Europe have proved to be very successful 
vehicles by which governments are made to be accountable for the 
treatment of their citizens. How do you envision utilizing these two 
bodies in the area of human rights?
    Answer. The UN and the OSCE play a vital role in the protection and 
promotion of human rights. They are the world's principal fora for 
discussion of these issues and they support with their advice and 
involvement international standards of democracy, human rights and 
justice.
    The Human Rights Commission is currently meeting in Geneva, as it 
does every year. During the Commission, the nations of the world gather 
to debate resolutions that advance the cause of human rights by 
establishing universal standards and by focusing world attention on 
situations in specific countries. The Commission condemns human rights 
violations, recommends improvements, offers assistance and appoints 
special rapporteurs to investigate and report where necessary. Besides 
pursuing its own human rights agenda, the Commission follows through on 
resolutions made in the UN General Assembly and the Security Council. 
The United States will continue to participate vigorously in the 
Commission.
    The United States is a strong supporter of the UN High Commissioner 
for Human Rights and the UN Human Rights Center, seeking especially to 
reinforce the role of field operations established by the Center to 
monitor human rights in countries such as Rwanda, Burundi and Colombia. 
These operations have proved useful in promoting stability and ensuring 
observance of international standards. We think an expanded monitoring 
capability should be available for deployment in future human rights 
crises or at the request of governments.
    The UN Mission in Haiti and its successor, the UN Support Mission 
in Haiti (UNSMIH), have contributed greatly to the marked improvement 
in the overall human rights climate in Haiti since the departure of the 
de facto regime in 1994, although further progress is needed. UNSMITH 
provides an international military contingent and civilian police force 
for human rights. We continue to support these efforts.
    Finally, the U.S. has worked closely with the UN in breaking new 
ground in the areas of reconciliation and accountability through the 
creation of the International Criminal Tribunals for the former 
Yugoslavia and Rwanda. We have supplied funding and field staff as well 
as staff support from Washington for these important institutions.
    The OSCE has similarly been vitally active in protecting human 
rights among its members. It closely watches developments in the new 
democracies of Europe and the former Soviet Union, sending missions to 
observe and assist with elections, promote ethnic and religious 
reconciliation and ensure the application of Helsinki principles of 
freedom and democratic government. The most notable recent success of 
the OSCE has been its establishment of a mission in Bosnia and 
Herzegovina, which monitors human rights and elections. The United 
States sees a continuing central role for the OSCE in aiding the 
democratic transformation of countries formerly under Communist 
domination.
    Question. I understand you have met with Foreign Minister Ciller. 
What human rights concerns did you raise? Do you plan to take steps to 
encourage the Government of Turkey to increase its human rights 
awareness? What is the Administration's position on the situation in 
southeastern Turkey?
    Answer. I have met Mrs. Ciller both as Ambassador to the United 
Nations and as Secretary of State. In both capacities, I have stressed 
the importance that the United States places on Turkey improving its 
human rights record.
    We welcome recent legislation that Turkey has passed that limits 
pre-trial detention periods, expands access of attorneys and limits the 
jurisdiction of State Security Courts. While these are welcome 
developments, Turkey still has much to do to satisfy domestic and 
international concerns. We will continue to press Turkey to implement 
further reforms. We are encouraged that Mrs. Ciller has recently 
outlined a number of steps that Turkey plans to take to eliminate 
torture, and will closely follow her government's efforts to introduce 
these steps, including implementation and enforcement of these newly 
adopted laws.
    As the Department recently outlined in the 1996 Annual Report on 
Human Rights, the situation in the southeast remains of particular 
concern. We continue to be concerned about disappearances, village 
evacuations and torture, although the level of violence has declined. 
In particular, the level of violence from terrorist attacks seems to 
have declined.
    Question. It has been reported and there seems to be evidence that 
suggests that United States weapons have been used by Turkish troops to 
commit atrocities. Do you support end-use monitoring of United States 
weapons transfers to Turkey? How would you implement such end-use 
monitoring?
    Answer. By law (the Arms Export Control Act), the USG may provide 
defense articles to foreign countries only for certain specified 
purposes. Pursuant to this requirement, as a condition for receiving 
weapons from the USG, countries agree that they will be used solely for 
these purposes. The Department is required to report to Congress 
promptly upon the receipt of information that a substantial violation 
of such an agreement may have taken place. This reporting is done 
through our Mission staff in Turkey.
    A large portion of the Turkish military inventory is either U.S.-
supplied or produced in co-production arrangements. The agreements 
under which the United States furnishes military equipment to other 
countries obligates them to use such equipment only for specified 
purposes, including self-defense and internal security. In response to 
Congressional concerns, the Department of State prepared a report on 
the use of U.S. arms in Turkish human rights abuses in 1995. We will 
prepare another for submission on May 1 updating our understanding of 
this issue.
    In addition to this reporting, the Administration conducts an 
extensive review of every arms sale or transfer to any country, 
including Turkey. If we believe that the proposed sale or transfer 
would be used in human rights abuses, we disapprove the case.
                                 china
    Question. Do you plan to separately monitor the human rights 
situation in Hong Kong, with the numerous dissidents living there, once 
it rejoins China? If yes, how do you plan to do this?
    Answer. We do plan to continue to monitor the human rights 
situation in Hong Kong closely. My decision to visit Hong Kong on July 
1 is meant to send a clear signal of our continued support for Hong 
Kong democracy and autonomy. In keeping with the Hong Kong Policy Act 
of 1992, we will continue to do a separate report on Hong Kong's human 
rights practices for inclusion in the annual Human Rights Report. The 
presence of the U.S. Consulate General there will provide a means to do 
so. We look to China to ensure a smooth transition and honor its 
commitments under the 1984 UK-PRC Joint Declaration and the 1990 
Chinese Basic Law to provide Hong Kong a high degree of autonomy and 
preserve its way of life, including basic freedoms and the rule of law.
                               indonesia
    Question. Do you plan to visit Indonesia? Do you plan to meet with 
Megawati Sukarnoputri? Do you intend to press the Indonesian government 
on the issue of human rights and the riots during the summer of 1996? 
Do you believe expanded IMET only has been helpful in the Indonesian 
military?
    Answer. While I hope to visit Indonesian again, there is not a trip 
scheduled at this time. I last visited Indonesia, as UN Ambassador, in 
August 1995. In addition to very constructive discussions on UN reform 
and other issues, I emphasized the Administration's strong concerns 
about human rights, especially in East Timor. In addition, Assistant 
Secretary for Democracy, Human Rights and Labor John Shattuck has just 
returned from a wide-ranging trip to Indonesia during which he visited 
East Timor.
    We have conveyed to the Indonesian Government in the strongest 
possible terms our concerns about the arrest of political dissidents 
and crackdown that followed the July 1996 riots in Jakarta. We have 
stated our expectation that the Indonesian Government will ensure 
protection of the freedom of speech guaranteed by the Indonesian 
constitution, and will guarantee due process of law for those on trial.
    With regard to IMET, I believe the record of IMET graduates in 
Indonesia speaks for itself, and I strongly support full IMET. We have 
seen indications that the importance of respect for human rights and 
accountability by the military is taking hold. Hostage crises in Irian 
Jaya, and recent demonstrations and rioting in several areas of 
Indonesia, were resolved without resort to violence by the military and 
police. Shooting into crowds of civilians is no longer considered an 
acceptable response to unrest and several soldiers have been court 
martialed and held accountable for their abuse of power. The human 
rights manual circulated to troops in Irian Jaya in early 1996 was 
proposed and written by an IMET graduate.
    Respect for human rights continues to evolve in the Indonesian 
security forces. Full IMET is the most effective way in which the 
United States can support and encourage that evolution and I ask your 
help in passing such authorization.
                           victims of torture
    Question. This Subcommittee, under both Democratic and Republican 
leadership, has urged both Republican and Democratic administrations to 
give increased support to treatment centers for victims of torture. The 
Subcommittee recognized that multilateral as well as bilateral 
assistance could serve both humanitarian and strategic purposes: 
providing care for those persecuted for their defense of human rights; 
and providing healing necessary for countries to achieve stable 
democracies.
    During the last Congress, this Subcommittee included report 
language that stated the following: ``The Committee urges USAID to 
incorporate support for treatment of torture as an integral part of its 
promotion of human rights and development. In identifying appropriate 
countries in which to provide such services, USAID should give special 
consideration to the State Department's Country Reports for Human 
Rights Practices. The agency should also work with organizations such 
as the United Nations Voluntary Fund for Victims of Torture and Center 
for Victims of Torture.''
    Please inform the Subcommittee, being as specific as possible, what 
projects USAID undertook to carry out this recommendation? Do you 
foresee any new initiatives in FY '98?
    Answer. In September 1995 the USAID Center for Democracy and 
Governance (G/DG) initiated a project with the Center for the Victims 
of Torture with a budget of $250,000. This project, which was recently 
completed, focused on Turkey, a key NATO ally. The project had three 
components:
    (1) In cooperation with the Turkish Medical Association three 
workshops were conducted on forensic methods, human rights curricula 
for medical schools, and medical ethics. The Turkish Medical 
Association translated, published and widely distributed the U.N. 
Protocol on investigations of deaths under mysterious circumstances. A 
formal protocol on proper procedures of investigation was drafted and 
adopted by the Turkish Forensic Doctors Association (a sub-group of the 
Turkish Medical Association). Turkish forensic doctors were also 
supplied with cameras for forensic purposes and instructions on their 
use.
    (2) In cooperation with the Human Rights Foundation of Turkey the 
clinical capacities to provide psychological support for victims of 
torture were enhanced. This was achieved through a series of workshops 
and case consultations.
    (3) The third component consisted of an effort by both 
international and Turkish organizations to develop a new human rights 
paradigm based on treatment of torture victims, as a complement to the 
universal, legalistic ``report and denounce'' model. This effort is now 
being continued independently of USAID.
    USAID currently foresees no further activity in this sector at the 
present time due to resource constraints. Should resources become 
available, future USAID interventions might include participation in 
the establishment of a new model for human rights promotion through 
treatment for victims of torture, and support for regional clinical 
treatment centers.
                              torture fund
    Question. Last year the Subcommittee called on the Administration 
to support the Fund ``at a level at least equal to the budget request 
($1.5 million).'' It is my understanding that the United States is 
pledging that amount for FY 97 and requesting the same for FY 98. For a 
country of our wealth, doesn't this amount seem small? The European 
states are contributing $6 million to treatment centers through the 
European Union in addition to their individual contributions to the 
Fund. Is it possible that we can increase the United States 
contribution to the Fund for FY 98?
    Answer. The United States believes the UN Voluntary Fund for 
Victims of Torture is an important and worthy cause. At a time when we 
are reducing our level of commitment to other causes, and even 
eliminating contributions entirely in some cases, we have continued to 
maintain a strong commitment to the Fund. But our budgetary resources 
are limited, even for the worthiest causes. Increasing our contribution 
to the Fund would depend upon our budgetary flexibility in the years 
ahead.
                                 syria
    Question. What is the current status of the negotiations between 
Syria and Israel? Since the election in Israel and all the recent 
terrorist troubles, do you believe, as your predecessor did, that ``. . 
. both countries are still anxious to find a basis for a long-term 
resolution?''
    Answer. Both Israel and Syria have expressed an interest in 
resuming a process of peace negotiations. Achieving a just and 
comprehensive Middle East peace remains a paramount U.S. foreign policy 
goal, and we continue to be in close touch with Israel and Syria to 
discuss a basis for renewing peace negotiations.
    Question. What is your position on the possibility of United States 
troops being stationed on the Golan Heights? Under what conditions, if 
ever, would you recommend this option?
    Answer. Security is a critical component of any Israeli-Syrian 
peace agreement. Should the parties eventually express a mutual desire 
for a third party presence, such a presence likely would be only part 
of the agreed security arrangements, not a substitute for these 
arrangements. The parties have made no such request.
    We are prepared to support an Israeli-Syrian peace agreement and to 
consider, subject to consultations with Congress, the use of U.S. 
personnel, possibly including troops, to support such a peace 
agreement. That said, we recognize that there can be no substitute for 
meaningful security arrangements worked out between the parties 
themselves.
                       middle east peace process
    Question. The events of the past year have changed the peace 
process so much that some have speculated that no further advancements 
will be made. Do you agree with this position? Please explain.
    Answer. We are clearly at a very difficult and sensitive juncture 
in the Middle East Peace Process. The continuing violence underscores 
the urgent need to calm the situation and to look for ways to 
reestablish the possibilities for progress in the negotiations between 
Israelis and Palestinians. We believe that both Israelis and 
Palestinians continue to accept that there is no alternative to the 
pursuit of peace and implementation of the Oslo accords. We have faced 
similar difficulties and crises in the past. We overcame them and will 
overcome them now.
    Question. What are the biggest challenges to the relations between 
the U.S. and Israel? What is your response to the rioting last 
September? How can we assure both the Palestinian's (sic) and Israel 
that resorting to violence is not an acceptable form of negotiation?
    Answer. There was indeed a serious breakdown in Palestinian command 
and control, significant violence, and casualties on both sides last 
September.
    The Palestinian authorities have told us and the Israelis that the 
incidents in September did not reflect Palestinian Authority (PA) 
policy.
    Chairman Arafat has publicly committed and has taken concrete steps 
to ensure that such incidents will not happen again. He has, for 
example, imposed strict limits on the use of firearms by the 
Palestinian police.
    The Israelis themselves have, over many months, complimented 
Palestinian cooperation with Israeli security services in combating 
terrorism against Israel.
    It is significant that the shooting of Palestinians in Hebron by a 
deranged Israeli on New Year's Day did not unleash violence of the kind 
we saw last September. Instead, Israeli and Palestinian security forces 
cooperated quickly and closely in handling the incident.
    Regarding more recent outbreaks of violence, we have made clear to 
the Palestinians that a resort to violence is unacceptable and that 
issues between Israel and the Palestinians must be resolved through 
negotiation. We continue to press Chairman Arafat to sustain a 100% 
effort to counter terrorism and violence, and to maintain cooperation 
with Israel on security issues.
    Question. Do you believe that maintaining aid to the Camp David 
countries at the current level is important for the future of the peace 
process? What type of connection do you see between United States aid 
and Israel's and Arab nations' ability to risk peace negotiations? 
Would you support a universal reduction in aid to Israel and Egypt? 
What if Israel and Egypt agreed to the reduction? Would you support the 
creation of a line item devoted only to the Middle East peace process?
    Answer. The commitment to Israel's security has been a cornerstone 
of U.S. foreign policy since the creation of the state of Israel in 
1948, and the U.S. remains firmly committed to supporting the Israelis 
in taking risks for peace in the region. U.S. economic assistance to 
Israel reaffirms our unshakable commitment to Israel's security and 
well-being and our national interest in securing a just, lasting, and 
comprehensive peace between Israel and all its Arab neighbors. Egypt, 
too, remains a pivotal country in the Arab world and a key U.S. ally in 
the Middle East. As the first Arab country to sign a peace treaty with 
Israel, Egypt continues to play a critical role in the Middle East 
peace process. The President's FY 1998 budget requests traditional 
amounts of bilateral economic assistance for Israel and Egypt to 
support the Administration's peace process objectives.
                          population programs
    Question. The House is set to vote tomorrow on whether to release 
the FY97 funding for the population assistance program. This funding--
which has already been delayed five months--has faced many restrictions 
over the last two years including monthly metering, delayed release, 
and substantial cuts. What impact have these restrictions had on access 
to family planning in the developing world and on the health of women 
and children in those countries?
    Answer. As President Clinton said when he submitted his 
determination to Congress on this issue, a four-month delay in FY97 
funding from March to July ``will cause serious, irreversible and 
avoidable harm.''
    However, as you point out, the program has already been severely 
affected by FY96 legislative restrictions which delayed access to newly 
appropriated funds for nine months. The restrictions further required 
that population funds be made available only in small monthly 
installments--known as ``metering''--beginning in July 1996. FY97 
legislation continues these restrictions.
    As a result of these funding restrictions, we have been able to 
fund only a limited number of programs each month. As a direct 
consequence, program managers have had to lay off service-related staff 
and avoid subcontracts and other long-term commitments--with negative 
impacts on access and quality of services Bulk purchases of equipment, 
commodities, and supplies have been reduced, with attendant higher unit 
costs for the U.S. government.
    Moreover, in describing the global and country level consequences 
of funding delays, it is far too easy to lose sight of the human 
dimension. Clearly, the consequences for the clients of the many 
service delivery programs affected by the restrictions are, indeed, 
very serious. The burden of these restrictions falls most heavily on 
impoverished women and men who rely on these services, often with no 
alternatives. For example, in Nepal, where women average more than five 
children each, many women walk miles every three months to meet mobile 
health workers for contraceptives. Millions more people like these 
women in Nepal depend on programs supported by the U.S.
    Ultimately, these restrictions in funding are severely threatening 
the health and well-being of women, men, and children who are the 
direct beneficiaries of U.S. assistance. Based on the well-established 
causal links between family planning and the health and survival of 
women and children, any reduction in access or quality of family 
planning services--which these restrictions you refer to, if continued, 
are threatening to do if--is likely to result not only in an increase 
in unintended pregnancies, but also in increases in abortions and 
maternal and child deaths. Even a temporary loss of services for women 
exposed to the risk of unintended pregnancy due to metering and funding 
delays brings lasting consequences.
    Subsequent to the hearing, Congress approved joint resolution (H.J. 
Res. 36) to release funds for population assistance programs beginning 
March 1, 1997.
                                 israel
    Question. The U.S. has very deep security interests in the Middle 
East, and Israel is our ally in the region. Can you discuss why the 
U.S.-Israel relationship is such a vital national security interest and 
how our annual aid package to Israel enhances this relationship?
    Answer. Our assistance program is a concrete expression of our 
unshakable commitment to Israel's security and well-being, a U.S. 
national interest in the region. It also serves another national 
interest: securing a just and comprehensive peace between Israel and 
its Arab neighbors.
    Question. The recent signing of the Hebron agreement has 
demonstrated Israel's continued commitment to the Middle East peace 
process. Throughout the peace process, the Israeli government has been 
willing to take very serious risks for peace. Can you discuss how U.S. 
aid to Israel furthers the peace process by helping Israel to take 
these risks.
    Answer. The Hebron agreement, Israeli redeployment from Hebron 
following shortly thereafter, further redeployment in early March, and 
the release of Palestinian prisoners all demonstrate Israel's 
commitment to peace.
    In addition to allowing Israel to take risks for peace, our 
assistance program is a concrete expression of our unshakable 
commitment to Israel's security and well-being, a U.S. national 
interest in the region. It also serves another national interest: 
securing a just and comprehensive peace between Israel and its Arab 
neighbors.
                      refugee resettlement program
    Question. As you know, the subcommittee has long been concerned 
with the plight of Soviet Jewry. I would like to congratulate and thank 
you for once again including the critical $80 million for the refugee 
resettlement program in your budget request. Some of my colleagues on 
this panel and I recently had an opportunity to visit the absorption 
centers in Israel that receive this assistance and I can tell you the 
program is really remarkable. Could you talk about how this program 
helps Jews resettle in Israel?
    Answer. Since 1973, the Department of State has provided almost $1 
billion to the United Israel Appeal (UIA) and its operating partner, 
the Jewish Agency for Israel, for resettlement of Jewish emigres in 
Israel. Since 1992 the grant has been earmarked by Congress at $80 
million.
    The grant supports a variety of activities including:
    The operation of 33 transit centers in the former Soviet Union and 
other countries of distress. These centers provide a variety of 
services which help facilitate the emigres' departure.
    Transportation costs to Israel and a relocation allowance for 
roughly 50,000 emigres per annum.
    Absorption centers and kibbutz in Israel which provide shelter, 
language study and job counseling.
    Special educational programs for emigre youth.
    In February 1995 the State Department's Office of the Inspector 
General recommended that the Department reassess the grant amount, 
taking into account declining immigrant numbers, the decreasing need 
for Jewish Agency services as more and more emigres opt for ``direct 
absorption'', and increasing Israeli government support for immigrants. 
The Inspectors were struck by the fact that while emigration from the 
former Soviet Union peaked in 1990 (185,200) and 1991 (147,800) and has 
declined since (58,000 emigres in 1996), the grant has remained at $80 
million. The Inspectors also recommended that the Department work with 
UIA to define better the population of grant beneficiaries and the 
duration of their eligibility for benefits. The FY96 grant was 
negotiated to include some of these limitations.
    The Administration has requested $80 million for the grant in FY98. 
Given changing circumstances in Israel, and the need for greater 
overall accountability and transparency in the grant, it is likely that 
some grant programs will be modified further during FY98.
                           lebanon and syria
    Question. As I stated previously, the U.S. has long maintained that 
Lebanon should function as a sovereign nation, out from under the 
control of Syrian President Assad. Do you support sending aid to 
Lebanon before it is free from Syrian control, a nation on the State 
Department's terrorism list?
    Answer. The United States has a long history of providing 
humanitarian assistance to Lebanon. For the most part, this assistance 
is targeted at helping Lebanon's recovery from civil war. A stable, 
economically viable Lebanon is clearly in our national interest and an 
important building block for a comprehensive regional peace.
    The U.S. assistance program is implemented through grants to U.S. 
private voluntary organizations and universities. None of our 
assistance is through bilateral grants to the Government of Lebanon. 
However, to further assure fiscal and program accountability for our 
assistance program, USAID has assigned a representative to Embassy 
Beirut for the first time since 1989. We are confident that our program 
will benefit only Lebanon.
                               jerusalem
    Question. I was surprised to learn recently that passports issued 
to U.S. citizens born in Jerusalem list their place of birth as 
Jerusalem only without listing a country of birth. Is it the position 
of the U.S. government that an American born in a hospital in West 
Jerusalem is born in disputed territory?
    Answer. The practice of showing Jerusalem in U.S. passports as the 
place of birth of U.S. citizens born in that city is of long-standing. 
Jerusalem is a highly sensitive issue for both Israel and the 
Palestinians; given their agreement to address Jerusalem through direct 
permanent status negotiations, the President has made clear that the 
United States will not take any action that might prejudice the outcome 
of those discussions.
                                  iran
    Question. Iran is the world's leading sponsor of international 
terrorism. Could you update us on the progress of the recently-enacted 
sanctions legislation on Iran? What can we do to strengthen our efforts 
to isolate Iran from the international community?
    Answer. The Iran and Libya Sanctions Act has inhibited investment 
in Iran's petroleum industry. We are currently evaluating cases in 
which the provisions of the Act may have been violated. I can assure 
you that these evaluations will be given higher-level attention.
    This Administration's policy of pressure on Iran is the toughest in 
the world. In addition to the Iran and Libya Sanctions Act, Executive 
Order 12959 forbids all U.S. trade with and investment in Iran. We also 
consistently urge our friends and allies to add elements of economic 
pressure to their policies toward Iran.
    We are not against any dialogue with Iran in principle. 
Consistently, we have said we are willing to engage in an 
authoritative, publicly-acknowledged dialogue with the Government of 
Iran as long as both parties are free to raise any issue of concern. 
Iran has not demonstrated a willingness to engage in such a dialogue.
                                 sudan
    Question. Another nation designated as a state sponsor of terrorism 
is Sudan. Recently, however, a portion of the sanctions against Sudan 
was waived to allow an American company to bid on an oil deal with that 
country. Could you explain why we would not impose the full weight of 
our sanctions against Sudan, which has one of the world's worst records 
on human rights and is a haven for terrorist training camps?
    Answer. No waiver or exemption was granted to an American firm to 
bid on an oil deal with Sudan. The company in question, Occidental, did 
not need or request a waiver to pursue business opportunities in Sudan. 
It is our understanding that Occidental is no longer pursuing business 
in Sudan.
    The regulations implementing the 1996 Anti-Terrorism law target 
financial transactions suspected or known to be linked to promoting 
terrorism. It is not our understanding that the law targeted legitimate 
commercial activities or enterprises.
    In 1993, the Clinton Administration placed Sudan on its list of 
countries which sponsor state terrorism. Inclusion on this list entails 
significant sanctions, including curbs on the export of dual-use items 
which could be used by the Government of Sudan in support of military 
or terrorist ends. It also makes Khartoum ineligible for economic and 
military assistance.
    The USG leads international efforts to decry Sudan's extremely poor 
human rights record and seek improvements from the Sudanese Government. 
A U.S.-introduced resolution at the 1996 UN Human Rights Commission 
gained the reentry to Sudan of the UN's Special Rapporteur for Human 
Rights in Sudan.
    We continue to assess Sudan's behavior on terrorism and other 
issues and are prepared to consider adopting or proposing additional 
measures if we determine such steps might advance our interests.
                          china--human rights
    Question. The recently released State Department Country Report on 
China said that in 1996, the PRC government ``continued to commit 
widespread and well-documented human rights abuses . . . All public 
dissent against the party and government was effectively silenced by 
intimidation, exile, the imposition of prison terms, administrative 
detention, or house arrest.'' This is hardly a glowing report. How are 
you going to address this critical issue during your upcoming trip to 
China?
    Answer. I addressed this issue forthrightly during my February 
visit to Beijing. As I have said before, this is a signature element in 
American foreign policy, and a major issue in our relations with China. 
Our views reflect our history, our ideas, universal values and our 
sense of what helps societies progress. I raised our serious concerns 
about Chinese practices which were described in my Department's recent 
Human Rights Report. I expressed clearly our concerns and underscored 
the importance the U.S. and the rest of the international community 
attach to China's adhering to internationally recognized standards of 
human rights, including the right to free expression of political and 
religious beliefs.
                        china nuclear technology
    Question. I am very concerned about China's transfer of nuclear 
technology to rogue states like Iran. Can you update me on the severity 
of this problem? What is the State Department doing to address this 
issue with the Chinese government?
    Answer. Chinese officials announced on May 11 that China would not 
provide assistance to unsafeguarded nuclear facilities. We believe the 
Chinese are taking this commitment seriously. With respect to China's 
cooperation with Iran, China has played an active role in that 
country's civil nuclear program since 1985 and is engaged in a number 
of projects there. China has sold several nuclear facilities to Iran, 
including small research reactors and related facilities. All have been 
subject to IAEA safeguards. We have no reason to believe that China 
would knowingly assist Iran to acquire nuclear weapons. Nonetheless, we 
regard any nuclear cooperation with Iran as unwise given Iran's history 
of seeking to procure goods that are unnecessary for its civil nuclear 
program but useful to a weapons development effort. Consequently, we 
have engaged in an active dialogue--at both senior and expert levels--
with Chinese officials on this issue, urging them to refrain from any 
nuclear cooperation with Iran. We can point to some examples of Chinese 
decisions not to pursue certain projects with Iran. China had, for 
instance, planned to sell Iran two nuclear power reactors but has said 
that the deal has been indefinitely suspended.
                               indonesia
    Question. Despite the awarding of the 1996 Nobel Peace Prize to two 
East Timorese activists, the Indonesian government continued to violate 
the human rights of the people of East Timor. In fact, the State 
Department Country Report for Indonesia released January 30 said there 
were ``further instances of killings, disappearances, torture and 
excessive use of force by the military and insurgents.'' Are these 
military personnel the same people who are participating in the U.S. 
funded IMET program? Should we be allowing the Indonesian military--
which is reportedly composed of some of the most flagrant human rights 
abusers in the world--to participate in the IMET program at all?
    Answer. The Department of State's Human Rights Report noted that 
while human rights abuses persist in Indonesia there have been some 
encouraging signs as well. These include increased police and army 
accountability for incidents where abuse has occurred, a decline in 
extra-legal executions, and greater access to prisoners.
    Indonesian military personnel who have participated in IMET program 
have not committed human rights abuses. When screening the prospective 
IMET candidates, we do not rely solely on the host government, rather 
we use all information available to the U.S. Government.
    With regard to IMET, we believe the record of IMET graduates in 
Indonesia speaks for itself, and we strongly support full IMET. We have 
seen indications that the importance of respect for human rights and 
accountability by the military is taking hold. Hostage crises in Irian 
Jaya, and recent demonstrations and rioting in several areas of 
Indonesia, were resolved without resort to violence by the military and 
police. Shooting into crowds of civilians is no longer considered an 
acceptable response to unrest and several soldiers have been court 
martialed and held accountable for their abuse of power. The human 
rights manual circulated to troops in Irian Jaya in early 1996 was 
proposed and written by an IMET graduate.
    Respect for human rights continues to evolve in the Indonesian 
security forces. Full IMET is the most effective way in which the 
United States can support and encourage that evolution.
    We share your concerns about the human rights situation in East 
Timor and believe that achieving a comprehensive, internationally 
accepted settlement is the best way to obtain lasting improvements. We 
strongly support the resumption of direct discussions, facilitated by 
United Nations Secretary General (UNSYG) Kofi Annan, between Indonesia 
and Portugal and are encouraged by the Secretary General's decision to 
appoint a special representative to focus on East Timor. As an early 
step, we hope that Portugal and Indonesia will agree to open interests 
sections in their respective capitals.
    Question. On the issue of IMET for Indonesia, why have you 
requested a 33% increase in this program? You have proposed to train 
the same number of Indonesians in FY 98 as FY 97, yet you have 
requested $200,000 more for the program. Why is that?
    Answer. The Administration is seeking full IMET for Indonesia. The 
33% increase would support Indonesian military attending U.S. 
professional military education courses, such as senior-level service 
schools, and Basic Officer and Advanced Officer schools. These courses 
are more expensive due to their length, on average 6-9 months long. 
Moreover, IMET overhead and tuition cost have increased about 8% 
annually due to inflation and a decrease in the size of the DoD 
training community. Although our FY 98 budget request indicated 
training an estimated 30 Indonesians, we project that the $600,000 in 
FY 97 will fund IMET for only 16 students. Consequently, we project 
that $800,000 will be required to fund training for the estimated 20 
students expected to participate in FY 98.
    The professional military education courses we propose best support 
our objective of providing the Indonesian military with the opportunity 
to be educated in the United States, to observe first-hand our 
commitment to international law and American values, and to acquire 
additional skills. The Indonesian IMET graduates currently working to 
improve the professional standards and respect for human rights in the 
Indonesian military are graduates of this kind of training that is not 
available under E-IMET restrictions.
    Question. Over the last several years, the Indonesian government 
has systematically violated the rights of the people of East Timor and 
cracked down on democratic movements throughout Indonesia. How are you 
planning to address these very serious issues with the Indonesian 
government this year?
    Answer. We share your concerns about the human rights situation in 
Indonesia. Assistant Secretary for Democracy, Human Rights and Labor 
John Shattuck has just returned from a wide-ranging trip to Indonesia, 
during which he visited East Timor. Our position on human rights is 
unequivocally clear to the Indonesians, and we will continue to press 
for progress on all fronts.
    We have conveyed to the Indonesian Government in the strongest 
possible terms our concerns about the arrest of political dissidents 
and crackdown that followed the July 1996 riots in Jakarta. We have 
stated our expectation that the Indonesian Government will ensure 
protection of the freedom of speech guaranteed by the Indonesian 
constitution, and will guarantee due process of law for those on trial.
    We have called on the Indonesian military to exercise restraint in 
dealing with civilian demonstrations and have stated that the 
International Committee of the Red Cross should have access to all 
detainees. The U.S. also strongly supports the protective and human 
rights monitoring function carried out by the ICRC.
    In East Timor, we believe that achieving a comprehensive, 
internationally accepted settlement is the best way to obtain lasting 
improvements. We strongly support the resumption of direct discussions, 
facilitated by United Nations Secretary General (UNSYG) Kofi Annan, 
between Indonesia and Portugal and are encouraged by the Secretary 
General's decision to appoint a special representative to focus East 
Timor. As an early step, we hope that Portugal and Indonesia will agree 
to open interests sections in their respective capitals. We continue to 
urge Indonesia to keep East Timor open to visits by internationally 
recognized human rights groups and journalists.
    USAID projects in East Timor, which expand economic opportunities 
for the East Timorese and strengthen civil society, have totaled over 
$25 million since 1979. We currently have eight activities there, with 
budgets of almost $16 million. The U.S. is the largest donor in East 
Timor, a role we plan to continue in the future.
                             united nations
    Question. No one knows better than you how important the United 
Nations is for advancing U.S. interests around the world. But the 
outstanding U.S. debt to the U.N. has imperiled our future leadership 
role in the organization. Could you explain why fulfilling our 
financial obligation to the U.N. is so important to maintaining U.S. 
leadership in the organization?
    Answer. Failure to meet our financial obligations to the UN is 
leading to growing resentment towards us among other member states, for 
whom payment of assessed contributions is a strict treaty obligation 
and who see our contribution level as fully within our capacity to pay. 
This widespread resentment, voiced literally on a daily basis in a 
range of UN fora, is making it more difficult for us to gain support 
for policies and programs that are important to us. Last fall we failed 
for the fist time ever to secure election to the Advisory Committee on 
Administrative and Budgetary Questions, almost surely a consequence of 
our deepening arrears.
    More directly, failure to pay our arrears is hampering our efforts 
to introduce meaningful budgetary and structural reforms in the UN 
system. Many of our friends and allies are eager to work with us to 
bring about the reforms that we need. But they insist, without 
exception, that as a condition for their support we promptly pay what 
we owe and undertake to avoid any future build-up of debt.
    Ultimately, if our arrears keep growing, we could find ourselves 
faced with loss of our vote in one or more of the important UN 
specialized agencies.
                             latin america
    Question. The Administration has generally played a constructive 
role in promoting stability in Latin America and reducing military 
tensions in the region. The Administration has actively supported 
principles of human rights and civilian control of the military in 
Latin American nations, and has reacted quickly to counter coup 
attempts in Paraguay and Guatemala. However, the reported consideration 
by the Administration to lift the ban on high-technology weapons sales 
to Latin America could seriously undermine these efforts to promote 
stability in the region. What is the status of this proposal?
    Answer. The USG has decided to authorize the issuance of marketing 
licenses to companies which wish to compete in Chile's selection of 
fighter aircraft, while making clear to both the GOC and to the 
companies involved that the licenses are for marketing information only 
and do not constitute approval for an actual sale. A decision whether 
to permit such a sale has not been made. This decision to issue 
marketing licenses was made so as not to disadvantage U.S. companies in 
the competition. These licenses allow these companies to provide the 
Government of Chile with technical data on advanced fighter aircraft.
    As you know, the Administration is reviewing U.S. conventional arms 
transfers toward Latin America in the context of the significant 
political, economic, and military changes that have been occurring in 
the past ten years. This review is ongoing. The welcome expansion and 
strengthening of democracy and democratic institutions in recent years 
makes it prudent for us to undertake this policy review at this time.
    Our policy worldwide is to consider pending arms transfers on a 
case-by-case basis. Our long-standing policy in Latin America is, and 
will continue to be, to address potential transfers in the context of 
restraint.
    Our enduring goals for the countries of Latin America are to 
enhance democracy, including civilian control of the military, to 
foster regional stability, transparency and confidential building, and 
to ensure that the weapons modernization decisions of these countries 
address legitimate defense needs within their existing economic 
resources.

          Questions for the Record Submitted by Mr. Foglietta

                      us taxpayers and foreign aid
    Question. Kindly supply me with the factual support to justify the 
argument to convince the American people that foreign aid dollars are 
an important and necessary investment of taxpayer dollars.
    Answer. The U.S. foreign assistance program amounts to some $12 
billion dollars--less than one percent of the Federal budget. Foreign 
aid advances U.S. interests by creating American jobs and exports, 
enhancing our national security, leading in international efforts to 
deal with global threats such as environmental degradation, 
overpopulation, crime, and terrorism, and alleviating the suffering of 
refugees and victims of disasters.
    Our health programs immunize three million children per year and 
fight infectious diseases such as the Ebola virus, HIV/AIDS, and 
malaria. Foreign aid funded the successful campaign against smallpox 
and pays for our current campaign against polio.
    Foreign assistance helped bring nuclear weapons in Belarus, 
Kazakhstan, and Ukraine under safeguard. This budget is also helping 
send North Korea's dangerous and destabilizing weapons research to the 
scrap heap.
    Bilateral assistance promotes economic growth overseas and that 
creates markets and jobs for American workers. Our exports to Latin 
America in one year alone, for example, were twice the amount of aid we 
provided in the previous 44 years. U.S. contributions to the 
Multilateral Development Banks likewise benefit American companies. 
U.S. firms received $1.5 billion in procurement contracts on World Bank 
projects in FY 1995. Foreign aid provides significant benefit to the 
American farm sector. More than half of America's agricultural exports 
go to the developing world. Forty-three out of the 50 largest buyers of 
American farm goods today are former recipients of U.S. food aid.
    American leadership and modest amounts of funding for health and 
family planning programs can make a real difference in global 
population levels, a quality of life issue for Americans. Our efforts 
could lead to global population stabilizing at 7.9 billion people by 
2050, instead of 11.9 billion people crowding the earth. This 
Administration is redoubling efforts to contain and reverse 
environmental degradation. Foreign assistance is important in 
international efforts to reduce greenhouse gas emissions, protect plant 
and animal species, preserve the ozone layer, clean up energy 
production practices, and fight pollution. These efforts protect 
Americans from threats like increased incidences of skin cancer, 
shifting agricultural zones and rising sea levels, and the extinction 
of species that may contribute to advances in science, medicine and 
agriculture.
    The foreign assistance budget provides funding for anti-terrorism 
efforts worldwide. These efforts cost the American taxpayer about ten 
cents per year, a minuscule price to pay if the results of these 
efforts prevent even one terrorist incident in the United States. 
Ninety percent of the illegal drugs used in this country come from 
overseas. The foreign assistance budget funds the effort to interdict 
drug trafficking, including strengthening source country capabilities 
to destroy drug cultivation and provide alternatives to drug 
cultivation and processing for local populations.
                  impact of country specific earmarks
    Question. I am concerned that specific country earmarks of foreign 
operations funding have limited the ability of the Secretary of State 
and other agencies to achieve U.S. policy objectives. It is my hope 
that our committee will be able to resist further efforts to earmark 
funds in the FY 1998 bill to provide you with the flexibility you will 
need to accomplish our many missions overseas. Could you share with me 
some of the impact these country specific earmarks may have had on on-
going projects and activities?
    Answer. I appreciate and share your concern.
    Our primary difficulty with country specific earmarks is that they 
deprive us of the flexibility we need to tailor assistance programs to 
meet changing circumstances. Sometime changes during the course of the 
fiscal year make it advisable to shift funding between countries. 
Frequently such changes take place during the course of the fiscal year 
and cannot be foreseen during the authorization and appropriations 
process.
    Another difficulty with country specific earmarks is that 
cumulative impact of numerous earmarks combined with lower overall 
funding levels combine to cause deep funding reduction in unearmarked 
priorities. For example, in FY 1997 heavy earmarking of the New 
Independent States account resulted in disproportionate cuts in funding 
for Russia, arguably our highest priority for NIS funding.
                              u.n. arrears
    Question. I am fully supportive of the Administration's budget 
request to bolster U.S. leadership in the international community by 
providing the funds necessary to fulfill U.S. obligations to the United 
States and other international and multilateral institutions. However, 
securing this funding is going to be difficult within the budget 
constraints Congress is grappling with, notwithstanding the strong 
objections of many of my colleagues will have to fulfilling these 
obligations. Have you and your staff explored creative alternatives to 
filling any gaps in funding that may arise if we are not successful in 
securing the full amount of funding necessary to fulfill the full 
amount of the arrearages?
    Answer. Congressman Foglietta, we very much appreciate your support 
for our funding request for the United Nations and other international 
organizations. Our arrears funding request of $1.021 billion is $400 
million short of what the international organizations say we owe. The 
$400 million represents legislative and policy withholding that the 
United States has taken over the years. We will be working with the 
organizations and member states on how best to handle these 
withholdings. Given this situation, we have not devised any alternative 
funding scenario in the event of a Congressional funding shortfall. We 
continue to believe that the entire amount requested, $1.021 billion, 
should be appropriated.
                       haiti human rights abuses
    Question. Could you share with me your views on the situation in 
Haiti relating to police abuses and any additional, more recent 
information about the Haitian government's response to these serious 
human rights problems?
    Answer. The Haitian National Police (HNP) are providing a difficult 
and very important public security function in a broadly competent and 
steadily-improving manner. Nonetheless, we are concerned that some HNP 
and security personnel have engaged in human rights abuses and other 
acts of misconduct. Our 1996 Human Rights report on Haiti documented 
instances of abuses, and we have raised our concerns with appropriate 
Haitian government officials. We believe that those who abuse basic 
human rights should be separated from the force and prosecuted in 
accordance with Haitian law.
    The Inspector General of the HNP has demonstrated independence and 
firmness in taking disciplinary action against rogue officers. To date, 
a total of 203 HNP personnel have been separated from their previous 
positions due to misconduct. Another 10 officials of other security 
entities have been suspended from regular duty while the Haitian 
government investigates allegations of misconduct and determines 
appropriate action. The HNP Inspector General has referred cases of 32 
former HNP officers to the prosecutor's office, and we hope that the 
Haitian government will now prosecute these individuals, the crucial 
next step in creating a lasting atmosphere of personal accountability. 
Our Administration of Justice program is providing training and 
technician assistance designed to strengthen Haiti's judicial system.
    Created in 1995, the HNP is Haiti's first civilian, apolitical 
police force and an important guarantor of long-term stability and 
democratic development. Overall, it is a young, inexperienced force: 
most of its officers are under the age of 30, and its most seasoned 
officers have less than 2 years of police experience. With the 
exceptions noted above, HNP officers have conducted themselves in a 
manner consistent with principles of human rights and public service, 
which are an integral part of the training they receive at the police 
academy administered by ICITAP with assistance from Canada, France and 
the UN. We hope that, with additional training (emphasizing respect for 
human rights) and experience, instances of HNP misconduct will 
diminish. HNP developmentshould also be viewed in the context of recent 
Haitian history. As stated in a recent UN/OAS report, the overall human 
rights situation has improved dramatically since the restoration of 
democracy in 1994. Prior to the formation of the HNP, thousands of 
people were the victims of human rights abuses committed by Haitian 
security forces. This is in stark contrast to what has been achieved 
today.
    The U.S. has contributed 36 Creole-speaking police to the UNSMITH 
CIVPOL mission to advance international efforts to provide on-the-job 
field training to HNP personnel: an additional 14 U.S. officers should 
arrive in Haiti by the end of April. Our CIVPOL contingent's 
willingness and ability to provide quality mentoring to Haitian police 
has brought positive results such as improved stationhouse operating 
procedures, community policing pilot program, and a more proactive 
approach by the HNP to target and arrest high profile criminals. CIVPOL 
assistance is crucial to the development of an effective and just law 
enforcement system which will help ensure that past abuses are not 
repeated.
    Question. What is your plan to utilize microenterprises as a tool 
for development in Haiti?
    Answer. We concur that microenterprises are valid tools for 
expanding production and generating employment in Haiti. We support 
activities designed to facilitate the creation and expansion of 
microenterprises. For example, USAID has established Haitian financial 
intermediaries which provide credit to high risk agribusinesses and 
microenterprises. USAID activities often serve as a catalyst for 
increased lending to microenterprises. For example, SOFIDES, a 
financial intermediary established by USAID funding, has received a $6 
million loan from the European Union to provide credit for 
microenterprises. USAID has also finalized negotiations with local 
commercial banks and the Haitian Industrial Fund to allow outreach 
services to microenterprise borrowers--a first in Haiti's history. 
USAID is expanding its own microenterprise lending program to Haiti's 
southern region.
    Economic reform measures such as the deregulation of the banking 
sector are key to the success of microcredit programs. We are urging 
the government of Haiti to move ahead on banking reform, including the 
privatization of two state-owned banks.
    In addition to increasing microenterprise access to credit, USAID 
is helping microenterprises market handicrafts by identifying potential 
US markets for trial shipments. Peace Corps volunteers are providing 
technical assistance to USAID-sponsored coffee growers to improve 
production and marketing.
                              haiti policy
    Question. I am concerned that U.S. policy on Haiti has been 
impacted by highly partisan debate and political rancor. Can you tell 
me how you will be working to promote the mission in Haiti while 
working to reduce the rancor on this important mission?
    Answer. We will continue in our efforts to assist the 
democratically-elected Haitian government in reforming its policy and 
judiciary, strengthening democratic institutions, promoting stability 
and human rights, and adopting a market-based economy which increases 
job opportunities and inhibits economic-based migration.
    We intend to continue our dialogue with all Members of Congress who 
have concerns about Haiti to ensure broad support for our common 
objective of a stable, democratic and prospering Haiti.
                              north korea
    Question. Rhetoric has cooled, but tensions remain in the issues 
involving the defection of a prominent North Korean official this week. 
Do you think that recent events will have any impact on the prospects 
of persuading North Korea to participate in Four Party talks involving 
the U.S., North and South Korea and China? Further, these recent events 
have raised real questions about how we can move towards gaining better 
results to establish a lasting peace with North Korea and ultimately 
achieving the goal of unification. In light of the current situation, 
and the resumption of food aid to North Korea, where do we go from here 
in our relations on the peninsula?
    Answer. On March 5, 1997 in New York, the U.S. and South Korea 
briefed the DPRK on our joint proposal for Four Party peace talks. 
These talks, proposed by Presidents Clinton and Kim in April 1996, will 
constitute the framework within which the U.S. and South Korea will 
address, with North Korea and China, major issues regarding the Korean 
Peninsula: mutual confidence-building measures, economic cooperation 
with the North, and, above all, a lasting peace arrangement to replace 
the 1953 Armistice Agreement that ended hostilities in the Korean War.
    An indispensable element for the success of these endeavors will be 
a significantly expanded North-South dialogue. The Four Party talks 
will facilitate such direct dialogue, even as the U.S. plays a full and 
active role in these talks. Our longstanding policy has been to 
facilitate and encourage North-South contact. This policy reflects our 
position that the problems on the Korean Peninsula must be resolved 
primarily by the Korean people themselves.
    North Korea has not yet responded formally to our joint briefing of 
March 5. The North Koreans attach priority to finding a solution to 
their food shortage. Our common position with South Korea is that we 
will continue to respond to purely humanitarian calls for food aid to 
North Korea by international relief agencies. We are also prepared to 
discuss the structural problems in the North's agricultural sector--and 
other DPRK concerns--within the context of the Four Party Talks, and 
have urged the North Koreans to agree to the talks as soon as possible.

            Questions for the Record Submitted by Mr. Torres

                        counternarcotics funding
    Question. Last fall Congress adopted a provision concerning 
counternarcotics funding which states: ``Provided further, that none of 
the funds made available under this heading may be provided to any unit 
of the security forces of a foreign country if the Secretary of State 
has credible evidence to believe such unit has committed gross 
violations of human rights unless the Secretary determines and reports 
to the Committees on Appropriations that the government of such country 
is taking steps to bring the responsible members of the security forces 
unit to justice.''
    This provision was intended to insure that counternarcotics funds 
are not wasted by being diverted and to insure that US tax dollars do 
not underwrite political murders. It prohibits aid to specific units on 
the basis of credible evidence and does not apply if the unit in 
question is policing itself and holding its members accountable. Yet, 
so far as I am aware, the Department of State has provided no 
information to the Congress about how it plans to implement this 
procedure.
    (1) Please inform the Subcommittee in detail how the Department of 
State intends to implement this provision. Specifically, I assume that 
the Department intends to compile lists of units which are prohibited 
from receiving counternarcotics assistance until the required 
certification is provided and to put in place monitoring procedures to 
insure that the law is followed. Please confirm that this is the case 
and provide details.
    (2) Can you assure the Subcommittee that the Clinton Administration 
will honor congressional intent by insuring that no excess defense 
articles are provided to units prohibited from receiving direct 
counternarcotics funding under this provision?
    (3) To deal with a specific case, I understand that since this 
provision was adopted Amnesty International USA has released documents 
confirming that US aid to Colombia has been provided to security force 
units credibly alleged to be responsible for gross human rights 
violations and that the Department's own human rights report was very 
critical of the human rights record of the Colombian government. 
Regarding Colombia, which units will be prohibited from receiving 
counternarcotics assistance under this provision?
    (4) I understand that the Administration intends to supply a large 
amount of excess defense articles to the Colombian military for 
counternarcotics purposes. How will the Clinton Administration insure 
that it does not subvert Congressional intent by providing excess 
defense articles to the very untis which are prohibited from receiving 
direct counternarcotics funding?
    Answer. (1) On February 13, 1997, the Department of State sent a 
telegram to all U.S. missions to ensure that they are aware of this new 
restriction on assistance funded under Section 481 of the Foreign 
Assistance Act, the International Narcotics Control program. Activities 
under this program are carried out in 85 countries. The U.S. mission in 
each country is required to know which official or unit will receive 
assistance, where items provided as assistance are, who is using them, 
and how. It is not practical for lists of recipient units for this 
entire assistance program to be submitted to Washington. Accordingly, 
it is the responsibility of each mission to correlate information held 
at post on recipients of INC-funded assistance with information on 
gross violations of human rights.
    All missions are required to report to the Department any instance 
in which it appears that information exists that could require a 
determination by the Secretary of State whether assistance to a 
particular unit can be provided consistent with the law. INC-funded 
assistance has long been subject to an end-use monitoring and reporting 
procedure, to monitor its use and impact. Posts with significant INC-
funded projects administered by Narcotics Affairs Sections must report 
at the beginning of each year the procedures established to implement 
end-use monitoring requirements in the coming year. Those posts also 
must now report on procedures established at the post to ensure that 
this new human rights restriction is observed.
    (2) The Department of State has instructed all missions abroad to 
promptly report any instance of a unit of the government's security 
forces that may receive counternacotics assistance funded from a source 
other than the INC program involved in gross violations of human 
rights. This is to be done in the same manner as if the assistance were 
INC-funded. As a matter of policy, we do not intend to allow 
counternarcotics assistance funded from sources other than the INC 
program to be directed to units that could not under the law receive 
assistance funded under the INC program.
    (3) The specific allegations to which Amnesty International 
referred related to units of the Colombian Army. The limited amount of 
INC-funded assistance provided to units of the Colombian Army is 
strictly restricted to counternarcotics purposes such as protection of 
drug crop eradication activities, and is closely monitored. Any such 
assistance is subject to correlation of information on recipient units 
with information available to the U.S. mission concerning units which 
have committed gross violations of human rights. As in the case of INC-
funded assistance to other elements of the security forces of the 
Government of Columbia, any instance in which information concerning 
gross violations of human rights by units of the Army exists will be 
reported promptly to the Department of consideration in accordance with 
the law. Regarding counternarcotics assistance funded from sources 
other than the INC program in Colombia, procedures specific to that 
country have been defined and are described in response to another 
question.
    (4) The American Embassy in Bogota and the Colombian Ministry of 
Defense have agreed to end use monitoring (EUM) terms for United States 
defense articles to be provided pursuant to the FY-96 506(a)(2) 
drawdown, which includes assistance for both the Colombian Police and 
armed forces. This EUM system represents an improved screening and 
monitoring process which is intended to ensure that equipment goes to 
units supporting counternarcotics operations, and which is intended to 
prevent us from inadvertently giving assistance to known human rights 
abusers. Under the agreement, no equipment will be provided to units 
whose personnel have credible reports of serious human rights 
violations since 1994. The only organization about which concerns have 
been expressed at this time is the Colombian Army.
    I would note that there have been no new FMS cases opened for the 
Colombian Army since 1994. The Colombian Government's Attorney General 
for Human Rights has given our Embassy in Bogota a list of Colombian 
Army personnel with outstanding cases of reported human rights abuses, 
dating back to 1994. If serious human rights violations are reported to 
have been committed by the members of a recipient unit, either before 
or after 1994, personnel alleged to have been involved will be 
transferred out of the unit without prejudice and in accordance with 
Colombian law, while charges are investigated. No equipment transfers 
will be made which do not comply with EUM provisions. The Ministry of 
Defense will provide the Embassy with reports on use of the equipment 
to ensure that, as has been agreed, it is being employed for 
counternarcotics purposes. The Ministry of Defense will facilitate 
periodic EUM visits by the U.S. MilGroup to units which have received 
the equipment.
                             latin america
    Question. I do not believe that the Administration has seriously 
addressed the need to rethink the kinds of military training offered in 
Latin America. I continue to question the need for a school devoted to 
training Latin American militaries in the art of war. The disclosure of 
manuals used at the School of the Americas has certainly not yet been 
adequately addressed. As we call on Latin American leaders to hold 
their militaries responsible for human rights violations, shouldn't we 
also demand accountability for the production, use and failure to 
exercise oversight regarding these manuals?
    What steps will the Administration take to rethink the nature and 
purpose of military training for Latin America? What steps will you 
take to make our policies towards military issues in Latin America more 
consistent?
    Answer. The School of the Americas is managed, staffed and funded 
by the U.S. Department of the Army's Training and Doctrine Command. 
Specific questions regarding the School and course curriculum, 
including training manuals, should be directed to the Department of 
Defense, as it has primary responsibility for the School. We agree that 
accountability on human rights must be practiced by all. However, we 
are convinced that the Department of Defense has taken appropriate and 
thorough corrective action to prevent any recurrence of the manuals 
problem.
    The Department of State and the Department of Defense regularly 
review the nature and purpose of our military training programs in 
Latin America and, in fact, have just completed such a review in 
preparing our FY 1998 Budget request. U.S. training programs are fully 
consistent with our policy goals for the region, including respect for 
human rights, appropriate civil-military relations, and a focus on 
training for new military missions, such as international peacekeeping.
    Latin America has undergone dramatic changes in the past 15 years 
as democratic governments have displaced military dictatorships and 
civilian control over military establishments have become the norm. It 
is safe to assume that U.S. military training has positively 
contributed to this transition. Continued proper military training and 
exposure to U.S. military doctrine is essential to improving a foreign 
military's professionalism and respect for civilian rule, democracy, 
and human rights. We believe we are on the right track in our approach 
to military issues in the region.
    Question. As part of its FY 1998 budget request, the Administration 
has announced its intention to propose an expansion of the Caribbean 
Basin Initiative. Specifically, the Administration stated it will seek 
authority for a program that provides ``expanded trade benefits mainly 
on textiles and apparel to Caribbean Basin countries that meet new 
eligibility criteria to prepare for a future trade agreement with the 
U.S.'' Caribbean and Central American leaders have long urged enactment 
of such a program to place their exports on a level playing field in 
the U.S. market with similar Mexican products. Many U.S. firms have 
also expressed a need for such a policy, primarily because the 
Caribbean Basin is a major consumer of U.S. goods and services. Can you 
provide us further details on this proposal and give us a sense of when 
the Administration plans to formally submit it?
    Answer. In general, the Administration proposal would eliminate 
duties on those products which are currently excluded from duty-free 
treatment under the Caribbean Basin Initiative. The most important such 
product is apparel. Products of CBI beneficiary countries which meet 
qualifying rules of origin would become eligible for full duty-free 
benefits once these countries take certain actions to help prepare them 
for the Free Trade Area of the Americas (FTAA). As you know, the 34 
democratic leaders of the hemisphere in the 1994 Summit of the Americas 
agreed to complete negotiations of the FTAA by the year 2005. An 
initial draft bill to this effect (the Caribbean Basin Trade 
Enhancement Act--CBTEA) has been written. However, some of the details 
of the CBTEA are still subject to change, since the Administration has 
not yet completed its consultations with Congress and other interested 
parties.
                  multilateral agreement on investment
    Question. The State Department is playing a leading role in the 
negotiation of a Multilateral Agreement on Investment (MAI) with the 
member nations of the Organization for Economic Cooperation and 
Development (OECD). has the Department, or any agency of the Executive 
Branch, conducted an analysis of the impact of this proposed agreement 
on employment and wages in the United States? Has an environmental 
impact assessment been conducted?
    Answer. We believe the MAI is most likely to have a positive impact 
on U.S. employment and wages. We know, for example, that foreign 
subsidiaries and affiliates of U.S. companies are the primary customers 
for U.S. exports--over one-fourth of U.S. merchandise exports go to 
them each year. Those exports account for more than 2 million of the 8 
million U.S. jobs supported by overall U.S. merchandise exports. Also, 
according to data from the Commerce and Labor Departments, foreign 
investors in the U.S. support nearly five million American jobs at an 
average monthly wage nearly 26 percent higher than the average wage for 
workers at all U.S. businesses. Thus, to the extent that MAI, through 
enhanced investor protections and the removal of barriers, leads to new 
investment, it is likely to increase the number of U.S. jobs, and to 
boost wages.
    Although we are not required by law to do so, we are considering 
preparing a report on environmental issues related to the MAI, as was 
done for the NAFTA and the Uruguay Round of the GATT.
    Question. The USTR's Advisory Committee for Trade Policy and 
Negotiations describes the MAI as ``an important effort, broader in 
both scope and coverage than other investment liberalization 
initiatives that the United States has taken part in over the past 
several years.'' NAFTA was extremely controversial. If the MAI is 
``broader in scope and coverage'' than NAFTA, does the public not 
deserve a thorough debate over the pros and cons of the agreement? If 
so, why, a few months before the scheduled completion of negotiations 
in May, is the very existence of these negotiations unknown to all but 
a handful of the American people? What efforts has the State Department 
undertaken to inform and solicit input on the MAI from members of the 
public and representatives of non-governmental organizations other than 
industry groups? Specifically, what role did environmental 
organizations, labor unions and consumer groups play in helping the 
State Department and other agencies develop our negotiating position 
prior to the beginning of negotiations in 1995 and subsequently.
    Answer. The Administration supports a thorough discussion of the 
merits of the MAI, and has engaged in a substantial outreach effort to 
a broad range of affected interests. Senior officials from State, USTR 
and other agencies have featured the MAI prominently in addresses to 
town meetings and other audiences. For example, Deputy U.S. Trade 
Representative Jeff Lang participated in a panel discussion of the MAI 
on a nationally-broadcast radio program.
    Environment and labor interests have been consulted through the 
USTR Advisory Committee for Trade Policy and Negotiations. Labor 
interests have also been briefed and consulted through the Labor 
Advisory Committee for Trade Negotiations and Trade Policy and the 
State Department Advisory Committee on International Economic Policy. 
Environment and labor interests have provided their views on 
significant issues in the MAI since the beginning of negotiations. We 
also consult with these groups regularly on an informal basis. The U.S. 
has also promoted and participated in OECD-sponsored outreach 
activities aimed at these groups. For example, regular discussions have 
been held with the OECD Trade Union Advisory Committee, and OECD-
sponsored discussions have been held with environmental and consumer 
NGO's.
    We have also consulted closely with representatives of the National 
Governors Associations, National Association of Attorneys General, and 
National Conference of State Legislatures, to assure that the interests 
of our states are taken into account.
    It now appears likely that the negotiation of the MAI will be 
extended at the May OECD Ministerial at least until the end of the 
year, and possibly longer. We intend to take advantage of the 
opportunity the extension gives us to undertake additional public 
outreach activities.
    Question. Will the MAI require the United States, and state and 
local governments, to eliminate all restrictions on foreign ownership 
of broadcast facilities and licenses, agricultural land, and financial 
institutions?
    Answer. No. The U.S. has already proposed taking reservations for 
specific existing federal laws inconsistent with MAI commitments; for 
all existing non-conforming measures of all states and local 
governments (including Puerto Rico and the District of Columbia); and 
for future federal, state and local laws in a few specified sectors. 
This is the NAFTA approach, which we are pressing the others in the 
negotiations to accept. In negotiations we will be certain to protect 
existing restrictions on foreign ownership of broadcast facilities and 
licenses, agricultural and other land, and financial institutions. For 
example, a number of western states have restrictions on foreign 
purchases of land. We intend to grandfather these measures.
    Nor will the MAI require that the United States change its banking 
or securities laws, at the federal or state levels. It should be noted 
that the U.S. federal government and the states generally do not impose 
limits on foreign ownership of banks or securities firms. Foreign 
investors are generally permitted to have 100 percent ownership of such 
financial institutions.
    Question. One of the targets for deregulation in the MAI are so-
called performance requirements which condition the establishment or 
expansion of an investment on certain corporate behaviors. Can you 
assure us that restrictions on performance requirements will not 
undermine, now or in the future, community reinvestment requirements 
for financial institutions? (The draft text, which prohibits the 
conditioning of the ``expansion'' of an enterprise on the maintenance 
of certain investment levels, would appear to run afoul of CRA).
    Answer. Yes. We are confident that the MAI will not undermine 
community reinvestment requirements for financial institutions (the 
Community Reinvestment Act). We are working to ensure that the 
performance requirements provisions do not interfere with the CRA. 
Should it become necessary, the United States will take an exception or 
reservation to protect CRA provisions.
    Question. Can you assure us that the MAI's requirement of National 
Treatment will not prevent cities and states from pursuing economic 
development strategies that earmark public funds for locally-based 
businesses. (Any such earmarking would appear to violate National 
Treatment since it would deny foreign investors equal access to 
development funds).
    Answer. Generally speaking, cities and states do not discriminate 
against foreign-owned investments in their economic development 
programs, because they regard such investments as key contributors to 
the local economy. Nonetheless, the U.S. has already proposed an 
exception to the national treatment obligation so that federal, state 
and local governments can adopt or maintain any measure relating to 
subsidies or grants, including government-supported loans, guarantees 
and insurance.
    Question. Why is the United States not seeking the inclusion of 
binding language concerning the responsibilities of investors vis-a-vis 
labor rights, human rights, and unfair business practices? Since 
limitations on government action and protection of the rights of 
investors will be enforceable in the agreement, why are 
responsibilities for corporations and rights for workers, consumers and 
small-businesses not enforceable?
    Answer. Under the MAI, investments are subject to national laws 
concerning such issues as labor rights, human rights and competition 
policy. The MAI, like our bilateral investment treaties, is intended to 
ensure that when U.S. investors invest overseas, they are not 
discriminated against on the basis of nationality, and their 
investments are protected. The issues of labor rights and human rights 
are also addressed in a variety of other international instruments 
dedicated to those purposes. The OECD has established a set of 
guidelines for Multinational Enterprises, which supports the objectives 
of many of these other international instruments. We intend to have the 
MAI reaffirm these Guidelines, and to annex them to the agreement. 
Further more, we intend to have the MAI reaffirm our commitment to core 
labor standards, and to provide that such standards should not be 
lowered to attract investment.
    Question. The MAI will apparently ban any restrictions on capital 
flows. What will be the impact of this provision on the stability of 
world financial markets and on future efforts to discourage 
irresponsible financial speculation. Aren't there, in some cases, good 
reasons to impose some limits on, for example, how rapidly investors 
can turn over financial instruments?
    Answer. The MAI will not ban all restrictions on capital flows. In 
particular, domestic and international financial regulations already in 
place--such as SEC and banking regulations--will remain in force. The 
MAI will not undermine the authority of financial regulators to act for 
prudential reasons and to guarantee the sound operation of financial 
markets. This type of activity is recognized and accepted by all MAI 
countries.
    Several international organizations already monitor international 
capital flows, and make recommendations on how best to assure stability 
in world financial markets. These include the IMF, the Group of Ten, 
the OECD committee on financial markets, and the OECD Committee on 
Capital Movements. They will continue their work when the MAI is in 
force.
    We believe that the MAI will have a favorable impact on the 
stability of financial markets. We expect that the MAI will permit a 
signatory to introduce restrictions warranted by potentially 
destabilizing capital inflows or a balance of payments crisis. These 
restrictions would be subject to review and approval by either the IMF 
or the MAI's governing board. Also, the MAI covers only inward flows of 
foreign investment and related capital outflows such as repatriation of 
profits, i.e., countries could maintain restrictions on their 
nationals' acquisition of foreign assets.
    Question. The MAI will apparently incorporate a dispute resolution 
mechanism granting standing to private investors to bring cases against 
laws that they consider to be in violation of the agreement. Existing 
international agreements primarily rely on state-to-state dispute 
resolution which requires a corporation to obtain the support of its 
government before a case can be brought. By requiring government 
participation, a state-to-state dispute resolution system discourages 
precipitous or frivolous action. What is the benefit of removing the 
safeguard? What will stop corporations from, for example, threatening a 
future suit against a government that is considering the passage of a 
regulation as a means of influencing that government's legislative 
process?
    Answer. More than 900 contemporary investment agreements, including 
our bilateral investment treaties and the investment chapter of the 
NAFTA, give individual investors the right to submit a dispute against 
a host state about an alleged violation of the provisions of the treaty 
to binding international arbitration. U.S. investors consider this 
right one of the most important elements of investment protection, 
because it helps to assure that foreign governments live up to their 
obligations not to discriminate. The availability of investor-state 
dispute settlement helps to depoliticize investment disputes, by 
enabling investors to obtain redress for their grievances without 
having to involve their home governments. It improves the leverage of 
our investors in seeking to resolve their disputes with foreign 
governments. Indeed, experience suggests that this leverage may be the 
major benefit, as relatively few formal arbitrations have resulted from 
the many bilateral investment treaties world-wide that include such 
provisions.
    The dispute settlement provision applies to an alleged violation of 
the provisions of the treaty. These obligations include, in simplest 
terms, the obligation not to discriminate against any investment simply 
because of the nationality of the investor (national and most favored 
nation treatment); the obligation to permit investors to transfer funds 
related to an investment; and the obligation to pay prompt, adequate 
and effective compensation in the event of an expropriation. The MAI 
does not preclude a signatory from adopting and enforcing other 
regulations which are otherwise consistent with its obligations. MAI 
dispute settlement panels will not have the power to compel a change in 
any member country's laws and regulations.
    Question. What are the implications for U.S. state sovereignty of a 
dispute resolution mechanism in which foreign companies can sue the 
U.S. government before an international tribunal--which would have the 
power to impose sanctions if it determined that the law being 
challenged was in violation of the agreement?
    Answer. The MAI will not force the U.S. or its states to lower 
standards, and it will not prevent us from regulating the behavior of 
companies in the United States, including their activity related to 
labor, environmental, consumer and safety interests, competition, etc., 
although the MAI does constrain our ability to discriminate against 
investors simply because of their nationality, or to expropriate 
without prompt, adequate and effective compensation, or to preclude 
transfers related to an investment. In this regard, the current draft 
text of the MAI is modeled largely on the investment chapter of the 
NAFTA and the U.S. bilateral investment treaties. We do not give up our 
ability or authority to regulate companies in those agreements, and we 
will not do so in the MAI.
    As with the WTO and the NAFTA, we are not agreeing to dispute 
settlement procedures that can result in an order to change U.S. or 
state law. Awards will be limited to a declaration of whether a measure 
is consistent with the agreement, and monetary damages where specific 
harm or loss to a specific investor is proven.
    Question. Will the dispute resolution process involve any 
proceedings that will be conducted in secret?
    Answer. MAI dispute settlement procedures will be open to 
participants but not to the general public. Other parties to the MAI 
will be informed and there will be opportunity for them to present 
views and, where they have an interest in the dispute, to join it. 
Copies of final awards will be provided to all parties to the 
agreement. The award will be a publicly available document--a feature 
not commonplace in arbitration. Parties and other participants in MAI 
dispute settlement proceedings will be required to protect any 
confidential or proprietary information which may be revealed in the 
course of those proceedings.
    Question. Can you assure us that the MAI's National Treatment 
requirements will not result in the restriction or prohibition of 
minority set-aside programs in local, state and federal contracting?
    Answer. Yes. As in the NAFTA, the U.S. will take an exception to 
the relevant MAI obligations for minority set-aside programs. The U.S. 
also intends to ``grandfather'' all existing state and local measures 
that do not conform to the MAI.
    Question. What has the State Department specifically, and what has 
the Administration in general, done to educate members of Congress on 
the MAI?
    Answer. Representatives from State, USTR and Treasury have met 
regularly with staffs of the Senate Foreign Relations Committee, Senate 
Finance Committee, Senate Banking Committee, House International 
Relations Committee, House Banking Committee, and House Ways and Means 
Committee to brief them on the MAI negotiations. In the coming months, 
we intend to expand these activities to include briefings of interested 
members.
    Question. OECD and American officials have made it clear that 
efforts will be undertaken to bring non-OECD countries into the 
agreement. Indeed, non-member nations have been briefed on the 
negotiations. Given that one of the stated purposes of the MAI is to 
encourage foreign investment, what steps are being taken in the 
negotiations to ensure that the agreement does not ultimately encourage 
the relocation of American production facilities to low-wage countries?
    Answer. We are closely examining the interrelationship between 
investment, trade and jobs. Our examination has led us to conclude that 
investment agreements, such as our BITs, the investment chapter of the 
NAFTA, and the MAI, do not cause the flight flight of jobs and 
production from the United States. On the contrary, we believe that the 
lowering of barriers to investment achieved through the MAI will have a 
positive employment impact in the U.S. All signatories to the MAI will 
need to accept its provisions, including those related to environmental 
and labor standards.
    Question. Will the MAI be a Treaty or an Executive Agreement. Will 
Fast Track authorization be sought. What is the soonest we can expect 
the MAI to be before Congress?
    Answer. This decision has not yet been taken. The Administration 
may submit it as a treaty to the Senate for its advice and consent, or 
to both houses for approval, as has been the practice for many trade 
agreements. The availability of Fast Track authority will be a 
consideration in our decision. We will consult with the appropriate 
House and Senate committees before determining how best to submit the 
agreement, once signed, to Congress. It is likely that the upcoming 
OECD Ministerial will decide to extend the negotiating timetable for at 
least another six months. The MAI is unlikely to be signed prior to the 
OECD Ministerial in May or June 1998, and we anticipate that it would 
not be submitted to Congress until some time thereafter.
    Question. The MAI will potentially run counter to a number of 
existing laws in the U.S. at the federal, state and local level. What 
specific exemptions is the State Department seeking to the agreement to 
ensure that existing laws will be protected?
    Answer. Negotiation of country-specific reservations to the basic 
commitments of the MAI has barely begun. The list of proposed 
exceptions to the MAI submitted by the U.S. delegation follows closely 
the exceptions we took to the investment chapter of the NAFTA, 
including a ``grandfathering'' of all existing measures at the 
subfederal level. We will continue to consult with Congress and with 
officials at the state and local level throughout the negotiation to 
assure that we protect all measures that reflect vital national, state 
or local interests. It should be noted, however, that the United 
States, as a matter of general policy, does not discriminate against 
foreign investors or foreign-owned investments except in a few specific 
areas generally related to our national security interests.
    Question. Whom in the State Department should members of the public 
contact in order to obtain information about the MAI. What public 
education materials are currently available?
    Answer. The State Department and the Office of the United States 
Trade Representative have joint responsibility for the negotiation of 
the MAI. Assistant Secretary of State for Economic and Business Affairs 
Alan Larson is a Vice Chairman of the MAI Negotiating Group, and shares 
leadership of the U.S. delegation with Assistant U.S. Trade 
Representative for Services, Investment and Intellectual Property Wendy 
Cutler. The Office of Investment Affairs in the State Department's 
Economic Bureau, and the Office of Services, Investment and 
Intellectual Property in the Office of the U.S. Trade Representative 
support them in this task, and are the best sources for current 
information about the MAI. A fact sheet on the MAI has been distributed 
to Senate and House staffers, and is available to members of the 
public.
                                     Thursday, February 27, 1997.  

                       SECRETARY OF THE TREASURY

                               WITNESSES

HON. ROBERT RUBIN, SECRETARY OF THE TREASURY

                      Chairman's Opening Statement

    Mr. Callahan. Good morning, Mr. Secretary. The subcommittee 
welcomes you once again this year to explain your request and 
the administration's request for your areas of jurisdiction.
    I have a formal statement that I will just submit for the 
record, but I will not ask you to indulge me reading through 
it.
    Before highlighting some of the points of my written 
statement, I would just like to start off by saying you, along 
with the administration, made some fairly healthy requests for 
increases, which it is going to be very difficult for this 
committee to comply with.
    As you know, the President has now agreed and the 
leadership of the House and the Senate have both agreed that we 
are going to balance the budget by the year 2002; and it does 
not mean that we are going to wait until the year 2002 to 
decide how to balance the budget. So we are going to be under 
some very serious restraints with respect to the ability to 
have the necessary money to facilitate your request.
    We will give you a fair opportunity of hearing. We will 
give you audiences at any time during this process of passing 
this bill through the House and Senate and the conference 
committee, but it is going to be very difficult for this 
committee to come forward with the amount of money the 
administration has requested.
    More than likely, the committee is going to be allocated 
somewhere in the vicinity of $12 billion. We are willing to 
divide that and work with the administration, to let the 
administration establish their priorities and to give you every 
opportunity to be a part of the establishment of the 
priorities. But going to the extent that the administration in 
requesting billions of dollars of increase is not in the cards. 
We are not going to be able to do that.
    But, once again, we respect your position. We respect you 
as a very talented and responsible member of the President's 
Cabinet, and we will be happy to work with you in that regard 
to try to reestablish some of the priorities or redivide some 
of the approximately $12 billion that no doubt is going to be 
the figure that the budget allocates to this subcommittee.
    In any event, we can't resolve all of those things today. 
There are a number of questions I am sure some of the members 
of the subcommittee will have today, but there are some areas I 
would like you to touch on, one of them being some of the 
``corporate welfare'' agencies, as labeled by some Members of 
the House. I certainly disagree with that label. But I don't 
see any real exuberance or any indication from the 
administration that they are doing anything to assist this 
committee.
    I think most all of us agree that the EXIM Bank, as well as 
OPIC, are crucial for our involvement in the world economy. If 
we are going to be a player in the new world economy, we are 
going to have to have the facilities of EXIM Bank and OPIC to 
make certain that our businessmen and our companies that are 
bidding on these projects in other countries play on a level 
playing field with France and Germany and all of the other 
industrialized nations.
    But the administration is not making, as far as I know, a 
real definite or visible effort to emphasize to the Congress 
how important these two agencies are, and this committee can't 
do it alone.
    So if indeed you want the continuance of OPIC, if indeed 
you want the continued viability of EXIM Bank, then the 
administration must aggressively begin to get this message out. 
Because, as you know, on the Floor of the House last year with 
respect to OPIC, it received a very unfavorable vote, and it 
was only through this committee's efforts that we even were 
able to extend their existence for an additional year.
    So it is important to me, I think; and in our private 
conversation you indicated it is important to you. But this 
committee cannot do it alone.
    With respect to the budget increase, this committee must 
also take this entire foreign operations bill to the Floor and 
convince a majority of our colleagues of the necessity of any 
foreign aid program. As you know, it is not a popular issue 
politically. Most Americans misunderstand it, and they don't 
have any idea of the real good it does, and it is getting 
increasingly difficult to pass a foreign operations bill 
through the House. That is one reason I do not think we will be 
able to facilitate the total request of the administration for 
the increases.
    We want to hear from you about what the multilateral banks 
are contributing to child survival. This committee has 
expressed a sincere interest in child survival worldwide, and 
we think the multilateral banks especially can make great 
contributions towards child survival.
    One other area of concern to me and I think to many members 
of this committee is the apparent neglect of Latin America, our 
neighbors in this hemisphere. All of the concentration seems to 
be in the Middle East or in Africa or in Russia or in other 
countries, and seemingly there is a downside on the interest of 
assisting our neighbors to the south. I think this is crucial 
and that a lot of our emphasis should be placed in that 
direction.
    This committee is planning to begin some extensive travels 
to some of the countries in Latin America and South America. 
Once we have the opportunity to visit these countries, such as 
Guatemala, Haiti, Jamaica, Nicaragua and Chile, I think this 
committee no doubt is going to be sold on the importance of 
taking care of our affairs within this hemisphere and giving 
them the same type of priority we do with other areas of the 
world.
    So, once again, Secretary Rubin, we are happy to have you 
here. I don't think the full committee chairman could be with 
us today, but we are happy to recognize at this point the 
gentlewoman from California, who is the ranking Democrat on our 
subcommittee, who is well known to you.
    We are also going to have to recognize that the 5-minute 
rule applies today. We have a lot of members of this 
subcommittee, and all of them are interested in being heard and 
hearing from you about their specific questions. So the 5-
minute rule is going to be rigidly enforced.
    Once the sand gets to the bottom of the glass--at least it 
is not those offensive types of lights that come on and blink. 
But I watch the sand, and when it gets to the bottom of the 
glass, there will be no further questions allowed during that 
cycle, but you will be able to respond in whatever time you 
need to respond.
    We will now recognize Ms. Pelosi from California.
    [The statement of Chairman Callahan follows:]

[Pages 124 - 127--The official Committee record contains additional material here.]


                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman.
    I am not surprised that you don't have any rude lights 
going on and off. The gentleman from Alabama is always a 
gentleman. Oh, you already have the sand going. I didn't know 
you meant me.
    In any event, Mr. Chairman, I want to join you in welcoming 
the Secretary here this morning. We are very pleased to have 
you here, Mr. Secretary, to discuss the fiscal year 1998 
request for Multilateral Development Banks.
    As you are well aware, Mr. Secretary, I have a number of 
specific concerns which I hope to discuss later this morning, 
including workers' rights and child labor practices throughout 
the world, the future of Hong Kong and China's intentions there 
as the G-7 might be involved, prison labor and continued human 
rights problems in China, the global AIDS pandemic, and 
procedures within the banks on compliance with environmental 
regulations and guidelines.
    I want to associate myself with the concern expressed by 
our Chairman about the importance of child survival and the 
role that the multilateral development banks might play on that 
issue. I also want to express support for the Administration's 
request for the Fund for Special Operations, which can play an 
important role in Latin America, a region that our Chairman has 
expressed is important; and I agree with him.
    While I intend to pursue these topics later, I want to 
spend a few moments putting your request for $1.55 billion in 
fiscal year 1998 in context.
    During the Bush Administration, the United States pledged 
an annual contribution to IDA's 10th replenishment of $1.25 
billion per year. IDA is by far the largest provider of 
development resources for the world's poorest countries, 
lending almost $7 billion during 1996; and I have always been a 
strong supporter of providing the needed resources.
    I think the Clinton Administration is to be commended 
because its pledge of $800 million per year for the 11th 
replenishment of IDA is a reduction of 36 percent below the 
previous U.S. commitment. There are a variety of factors for 
this reduction, but I think it is important work on the part of 
the Administration, for which you should be commended.
    Similarly, in the Asian Development Fund, the U.S. reduced 
its commitment by 41 percent, from $680 million in the 1992 to 
1996 period over 4 years, to $400 million over the 4-year 
period beginning in 1998. Overall, U.S. commitments to 
international financial institutions have been reduced by 40 
percent in the past 2 years.
    These reductions have been promoted and insisted upon by 
the U.S. in the context of numerous international negotiations 
on a host of institutions. They are sought because of budget 
realities here at home, and also because the U.S. has pursued 
reforms within the institutions, enabling them to manage better 
the reflows from prior lending, to succeed in getting new 
donors among countries who have graduated as loan recipients, 
to reduce internal cost of doing business, and to insist on the 
transfer of resources from hard loan windows to soft loan 
windows.
    Taken together, these reforms have enabled the U.S. to 
lower its contribution level. They have not, however, resulted 
in a reduction of the level of overall lending in these 
institutions.
    Again, the Administration deserves credit for these 
achievements. Not all of our allies share our perspective on 
these reforms. In fact, the U.S. is often the only country at 
the table insisting on many of these changes.
    It is in that context that we should review the fiscal year 
1998 request. We have been asked to fund $1.2 billion for 
ongoing commitments and $315 million to pay arrears.
    The request for arrears is part of a 3-year effort to pay 
off total existing U.S. arrears of $862 million. The request 
represents a responsible approach to provide for reduced levels 
of U.S. contributions to the various multilateral institutions 
and to begin to pay off arrears. I support this request.
    As I have stated, I do have several specific concerns which 
I will pursue in my questions, but I wanted to commend the 
Administration for the good work that you have done in this 
area and to put the request in perspective of your achievements 
in reducing the request.
    With that, I will yield back the remainder of my time and 
welcome the Secretary to our committee.
    Mr. Callahan. That in itself is historic. Thank you, Ms. 
Pelosi.
    Secretary Rubin.
    Secretary Rubin. Mr. Chairman, thank you very much.
    Let me start by saying that I think contextually we come at 
this in the same way. As you correctly said, the President and 
leadership on both sides of the aisle and the Congress are 
committed to reaching balance by 2002. It was our judgment 
that, within that context, because of the enormous importance 
of these institutions to reform and growth around the world and 
the importance of growth and reform to our national security 
interests, we should make an allocation that resulted in the 
request that we made. So our request very much shared your 
general goal, with respect to balancing the budget. Then it 
became a question of what our priorities should be within the 
context of balancing the budget.
    As the President said many times, and I certainly have 
experienced this in my own meetings with finance ministers 
around the world, we really are today the only country in the 
world that can provide effective leadership on issues of the 
global economy and the issues of our interdependent world more 
generally.
    It is my belief, Mr. Chairman, that if we are going to 
continue to effectively exercise that role, which is so 
enormously in our interest, we are going to have to be fully 
paid-up citizens of the world community. This means paying our 
arrears to the institutions of the world community and then 
participating on an ongoing basis in their funding and their 
activities.
    I also believe, as I said a moment ago, that these 
institutions contribute enormously to our economic self-
interest and our national security self-interest, and that is 
the basis of our commitment and our funding requests to you in 
this budget.
    We have worked very hard, as directed by the Congress, to 
bring our funding requirements down. If you go through the 
various institutions, institution by institution, on average, 
from the last replenishment, we have come down. Our ongoing 
requirements are about 40 percent less than what they used to 
be. I think that was a very substantial accomplishment, and I 
believe that we have done it in a way that will be consistent 
with maintaining our influence on the activities of these 
institutions.
    If we take the multilateral development banks in toto, they 
loan about $46 billion a year in both the hard dollarwindows 
and the concessionary windows. With the $1.2 billion of contributions 
that we expect to need to make on an ongoing basis over and above 
paying arrears, we have, we believe, an enormous influence on the 
direction of that $46 billion. And by having that influence, we have 
the ability to promote the things that we believe in--democracy, human 
rights, environmental protection, market-based economies, open markets. 
It is an enormous opportunity for us to promote our ideals and our 
economic self-interest to the world.
    For their part, the international financial institutions 
are reducing their overhead. They are becoming--have become--
far more sensitive to our view of what needs to be done in the 
global economy. They have become agents for the development of 
market-based economies in the developing and transitional 
countries.
    However, our arrears to the international financial 
institutions are now something over $1.5 billion, when you 
include the $700 million that has not yet been released from 
last year's budget. We are the world's largest and richest 
economy. We are, nevertheless, the largest debtor to the United 
Nations and the only major country in arrears to the World Bank 
and, for that matter, the multilateral development banks in 
general.
    I believe that has begun to seriously erode--or at least it 
threatens to erode--our position in the institution. I don't 
think it has had the effect yet. But it threatens to erode our 
ability to influence the very large grants, and loans, that 
they make every year.
    Our budget request is for $1.6 billion. That includes 
roughly $300 million for arrearage payments, which is the 
beginning of a 3-year program by the end of which we would have 
paid all of our arrears. We would then simply have to fund our 
requirements on an ongoing basis, and we believe that would be 
about $1.2 billion a year.
    I think, Mr. Chairman, as we discussed yesterday, we are in 
a critical period. I can't say one year is any more or less 
critical than another. But I do believe we are in a critical 
period.
    My very strong view, based on discussions with other 
members of the G-7 and finance ministers around the world, is 
that people are looking to us to see whether we really are 
going to continue to remain actively involved in these 
institutions. If we do not, I believe what will happen in time 
is that, number one, our influence will diminish enormously.
    But, secondly, the institutions themselves will suffer 
tremendously, because I think a lot of countries would not mind 
pulling back into a mode of bilateral aid. If they do we 
obviously will lose our ability to influence the direction of 
that aid.
    I also think that in many countries bilateral aid will 
become tied to trade relations with the donor countries which, 
in general, I think would be very much to the detriment of our 
interests.
    The bottom line is we cannot lead with other people's 
money. If we are going to maintain our position within these 
institutions, we have to play our fair role with respect to 
burden sharing.
    Let me say that, on an issue that you raised in your 
opening comments, Mr. Chairman, these institutions have played 
an enormous role in the economic renewal of Asia, Latin 
America, and a part of the world that is now most troubled, 
which is Africa. But with respect to the multilateral 
development banks, the area of the world that receives the 
largest portion of those loans is Latin America.
    I believe, as you stated in your opening remarks, Latin 
America is an area of the world that is of enormous interest to 
our country; and it is very important that we continue to 
support the role the international development banks and IMF 
play in Latin America.
    Let me tell you briefly about one particular country and 
what happened there and the role that the international 
financial institutions have played. That is Poland.
    Poland is a remarkable success story in Eastern Europe. It 
is really a model for what other countries can accomplish if 
they commit themselves to reform and if the rest of the world 
supports that commitment.
    Polish political leadership adopted a bold program which 
was politically courageous. It had strong support from the 
Polish people. But this would not have succeeded without 
bilateral aid and the support of the international financial 
institutions.
    David Lipton, who is our Assistant Secretary and will be 
happy to respond to questions, is with me and was very much 
involved in the development of Poland, as well as having been 
involved in Bosnia and Haiti and other parts of the world with 
respect to the economic component of the United States 
involvement.
    The United States was the largest contributor to the Polish 
stabilization fund. We also provided additional aid through 
USAID. The IMF helped Poland cure its hyperinflation, without 
which Poland could not have had the economic growth it has had; 
and the World Bank followed up with support for structural 
reforms.
    Together, the IMF and World Bank provided $5 billion of 
loans to help Poland through the harsh years of the adjustment 
process that then set the stage for the economic revival that 
Poland has had. Exports have tripled since 1990; and from the 
time when the Polish economy stopped declining, real economic 
growth has now been something over 27 percent. Private capital 
has begun to flow back into Poland, and in fact is larger, than 
official sources of finance. Poland has repaid the $1.5 billion 
of IMF loans.
    Developing countries now account for over 40 percent of 
United States exports. U.S. firms exported more than $25 
billion worth of goods and services to the 79 very poor 
countries that are eligible for IDA assistance--this is in 
1995--and roughly $60 billion to IDA graduates.
    In 1995, U.S. businesses also benefited directly by 
receiving something over $3.2 billion in direct business from 
the multilateral development banks.
    As I mentioned earlier in my remarks, at the direction of 
Congress we have worked very closely with the international 
financial institutions with respect to reform; and I believe a 
great deal, as Ms. Pelosi suggested, has been accomplished.
    Let me particularly comment on the World Bank. It has long 
been a target for criticism, but there is no question it has 
become more open. It has cut its administration budget in 
inflation-adjusted terms by over 10 percent in the last 2 
years, and it has now proposed a major reform program that is 
responsive to the criticisms the Congress and others have had 
with the World Bank for a long time. But that program has a 
steep price tag.
    We are reviewing the program at the present time, Mr. 
Chairman, since we all just received it in the last few days, 
and we have not had time to reach our own conclusions. But I 
think it is an enormous tribute to President Wolfensohn that he 
is addressing the kinds of problems you and we have raised for 
so long.
    The IMF has also controlled its administrative budget, 
allowing it to rise only 1 percent in the last 3 years. It has 
made substantial progress in transparency and has strengthened 
its capacity to both protect financial crises and, when they 
occur, to deal with them.
    Let me mention two other items, if I may, before 
concluding.
    First, I submitted a report yesterday detailing our efforts 
to deal with the issue of procurement restraints on the 
substitution for what otherwise would have been the first year 
of IDA-11, and that is the ITF. The ITF donors have recommended 
that about $1 billion, or about one-third of the total 
contributed to the ITF, be set aside for a decision yetto be 
made with respect to American participation in procurement.
    I can tell you I personally and we in the Administration 
have worked very, very hard to deal with an issue I know you 
care a lot about, and we care a lot about. I think, given the 
obstacles, that we accomplished more than I expected, although 
certainly not everything we would have liked to have 
accomplished. I believe it is, without question, the best we 
could have accomplished under the circumstances.
    Second, we have made a request for $3.5 billion for the New 
Arrangements to Borrow. You will be hearing a lot more about 
this as we work together. But, fundamentally, the New 
Arrangements to Borrow is an additional emergency fund to deal 
with systemic risk. That $3.5 billion, although requiring 
budget authority, would not be an outlay, and would not 
contribute to the deficit. This is because if the funds are 
called down, we receive an offsetting asset. The Congressional 
Budget Office would not score this exchange of assets as 
resulting in an outlay. This is exactly the same sort of thing 
that Congress approved and President Bush signed in 1990, and 
there was a similar arrangement in the early 1980s.
    We are also talking with the IMF about the possibility of a 
quota increase. Obviously, both on the NAB and the quota 
increase, we will work very closely with this committee.
    Let me conclude, Mr. Chairman, by saying that we believe 
the international financial institutions are critically 
important to our own economic well-being and our national 
security interests. Large numbers of workers and businesses are 
highly dependent on a thriving global economy and the export 
opportunities that that thriving economy creates for this 
country. Every day our national economic interests and our 
national security interests become more intertwined with the 
global economy, and that is what our request is all about.
    The international financial institutions have had 
bipartisan support for 50 years for good reasons that I said a 
moment ago are rooted in our interests. We look forward to 
working with you and trying to implement the proposal that we 
have brought before this committee today.
    Thank you very much, Mr. Chairman.
    Mr. Callahan. Thank you, Mr. Secretary.
    [The statement of Secretary Rubin follows:]

[Pages 134 - 142--The official Committee record contains additional material here.]


                            budget committee

    Mr. Callahan. I just might comment that you rationalized 
balancing the budget and your request for an increase at the 
same time. Unfortunately, there is another factor involved. You 
have the Congress, you have the administration, and you have 
the general public.
    I don't see any indication coming from anybody which would 
tell me that the Budget Committee is going to go along with 
your request. Number one, I think the President's budget for 
the next fiscal year increased the level of deficit spending. 
But, in any event, when the Budget Committee allocates us our 
$12 billion, we are not going to be able to violate that. I 
think that you might be prepared for that reality and work with 
us, along with the Secretary of State, to divide the $12 
billion. It is not going to be any more.
    Secretary Rubin. We, obviously, Mr. Chairman, would be 
delighted to work with you. We can try to work with the Budget 
Committee to see if we can help you get more.
    Mr. Callahan. Well, good luck. While you are at the Budget 
Committee, you might also bring up OPIC.
    Secretary Rubin. I met with the Chairman yesterday, and he 
raised OPIC yesterday. I raised it at the White House 
yesterday, and I think your point is well taken. We are clearly 
strong supporters of both OPIC and Ex-In Bank. You are correct 
that we have not reiterated that enough, and we are going to 
remedy that.
    Mr. Callahan. Mr. Wolf.

                                 sudan

    Mr. Wolf. Mr. Secretary, welcome to the committee.
    In the interest of 5 minutes, I want to bear on one point 
and that is the article which I have written you about: ``U.S. 
eases law on terrorism to aid oil firms. Exemption led 
Occidental to seek major deal in Sudan.''
    The administration has closed the embassy in Sudan because 
of fear for the American personnel there. In Sudan, you could 
have an international conference of terrorism in downtown 
Khartoum, and nobody would have to come in from outside the 
country. Abu Nidal is there, Hamas is there, all of the groups. 
The Iranians are there. They have somewhat been implicated in 
potential bombings in the United States. We expelled one of 
their people because of a bombing potential up in New York 
City.
    They were involved in the potential assassination of 
President Mubarak, the President of Egypt. They have killed 1.5 
million Christians, black Christians from the south. They are 
persecuting Muslims in the north.
    There is real slavery in Sudan where they literally come 
into villages--I have been there three times. They come into 
villages, take the women and children away and kill the men. 
They have opposed the Middle East peace process in every way 
they possibly can.
    Bill McCollum said, with regard to your interpretation--
Bill McCollum, Chairman of the House Crime Subcommittee that 
handled the antiterrorism act--said he was unaware of 
Occidental's negotiations in Sudan and was disappointed at the 
administration's broad interpretation of the antiterrorism act. 
Allowing U.S. companies to invest in Sudan appears to be 
something that violates our intent and sets a precedent, 
McCollum said. It was our intent that U.S. companies would not 
do business as usual.
    How did you ever allow this thing to even be signed? 
Assuming that there could have been a misinterpretation, one, 
you should have gone to the Congress and talked to Mr. McCollum 
and the ranking Democrat about this.
    But, secondly, knowing of all the abuses in Sudan and 
knowing the good work that your administration has done for the 
Middle East peace process, didn't a bell go off and somebody 
say, hey, these are not the good people?
    So we are going to tell Occidental Petroleum, you ought not 
be doing business there. Because the deal was $930 million, 
which would have given the Sudanese government additional money 
to hold on whereby they could continue to kill Christians and 
put people in slavery and operate their terrorist activity.
    Can you tell me today that never again that the word will 
go forth, if any company comes in, whether it be to the State 
Department or your office, with regard to Sudan, you will say, 
no way, we discourage you, you ought not be doing business 
there?
    Secretary Rubin. Mr. Wolf, my understanding of this--and I 
think I am aware of the issue that you are talking about, and I 
think we need to get back to you and maybe with the people in 
the State Department to sit down with you. Because it is my 
understanding--correct me if I am wrong, David--where there are 
sanction regimes in place, then we have to grant specific 
licenses to OFAC. And regarding the terrorist nations, as you 
know, I think we have been very rigid on that.
    In this area, it really is a question of State Department 
policy as to what we do. This is a matter of foreign policy 
within the province of the State Department. It is not within 
the discretion of the Treasury Department to deal with this.
    Mr. Wolf. You administer the act; and the act says that, 
except as provided in regulations issued by the Secretary of 
the Treasury in consultation with the Secretary of State, 
whoever being a United States person knowing or having 
reasonable cause to know that a country is designated under 
Section 6, that is the Export Administration Act, as a country 
supporting international terrorism, engages in a financial 
transaction with the government of that country,shall be fined 
under this title and imprisoned for not more than 10 years.
    Secretary Rubin. I am actually quite familiar with that.
    Mr. Wolf. And the findings deal with the administration. 
The findings in the bill say the President should continue to 
undertake efforts to increase the international isolation of 
state sponsors of international terrorism, including efforts to 
strengthen international sanctions, and should oppose any 
future initiatives to sanctions on Libya or other state 
sponsors of terrorism. You guys should have at least spoken out 
and said, no way; this is wrong.
    Secretary Rubin. Let me make a suggestion, Mr. Wolf, if I 
may. We have, as you know, in fact, prevented, not just 
opposed, loans to Iraq and Iran and other nations that we have 
deemed to be terrorist states.
    My understanding with respect to Sudan--but I really think 
we ought to get somebody from the State Department and Treasury 
come visit with you--is that their situation is different from 
Iran, Iraq and some of the others.
    Mr. Wolf. In some respects, it is. In some respects, it is 
worse. They have killed 1.5 million people. They have not 
allowed Operation Lifelinesudan to come in. From a moral point 
of view, I thought you guys would say, hey, this is wrong. The 
bells should have gone off.
    Secretary Rubin. I am not arguing with you. Your comments 
about Sudan are extremely well taken. I wasn't distinguishing 
the factual situation. The legal situation with respect to 
Sudan is different than the states that already have sanctioned 
regimes in place. Let me suggest I would come visit with you.
    Mr. Wolf. I would like you also to tell us, too, you would 
support putting them in the same category as the others, 
whereby no business could be done with them.
    Secretary Rubin. I--truly, you are in an area that I don't 
want to talk about.
    Mr. Wolf. The Middle East peace process, Khartoum, Hamas.
    Secretary Rubin. I don't want to make a commitment sitting 
here about something I haven't had a chance to sit down and 
discuss with the State Department.
    Mr. Wolf. When you come by, if you would be able to answer 
that question.
    Mr. Callahan. I am happy to have Mr. Obey back with us 
today, who has been out a couple of weeks with a minor surgery, 
but he is sporting a thinner waistline and new beard.
    Mr. Chairman, if your health is as good as your appearance, 
you are in good shape. We are glad everything is all right. We 
would recognize you at this time for any questions you might 
have.
    Mr. Obey. Thank you, Mr. Chairman.
    Nothing startling. As the Secretary knows, I just had 
surprise hernia surgery. I will ask you not to make me sneeze 
or laugh.
    Mr. Secretary, I would just like to ask two things--one 
within the purview of this committee and one which doesn't have 
a damn thing to do with the jurisdiction of this committee.

                                  IDA

    First, I assume that you have discussed with the committee 
the situation with respect to IDA and the 3 billion fence off 
that we faced last year. Have you explained what the new 
arrangement is in terms of potential access?
    Secretary Rubin. I alluded to it but didn't explain it, Mr. 
Obey.
    Mr. Obey. I think it would be useful if you did.
    Secretary Rubin. In a word, as I said in my testimony, we 
agree with the position of the committee that this should never 
have happened. On the other hand, a lot of nations that have 
much worse deficit situations than we have had problems with 
their own parliaments, and that is how this all came to pass.
    Having said that, I personally have spent a lot of time on 
this, as have we as an Administration. Where we wound up--and, 
frankly, although it is not everything I would have liked, it 
is a better place than I thought we would be, we have $1 
billion that is now segregated. In answer to your question of 
yesterday, Mr. Chairman, they have to make a further decision 
with respect to that $1 billion.
    Assuming they decide favorably, our American businesses 
will have access to that $1 billion with respect to 
procurement.
    Mr. Obey. Let me say I congratulate the administration for 
getting some movement on that issue, although I must say, 
frankly, while I certainly don't like the fact that U.S. 
corporations are fenced off from that or have been up until the 
new agreement, I must say that I think the Congress has to ask 
itself what did we really expect. I don't think we should be 
surprised if we fall hundreds of millions of dollars in arrears 
or behind, in arrearages, to an institution like IDA. I don't 
think we should be surprised that other countries who have let 
their agreements decide that people who are paying up are the 
folks who ought to experience the benefit of that paying off.
    Secretary Rubin. Mr. Obey, subsequent to this situation we 
had replenishment negotiations with both the African fund and 
the Asian development bank. I think Congress had a real impact 
on what happened. Even though we are in arrears with one and we 
didn't provide any funding to the other because of our concerns 
over conditions, in neither one was there a condition placed.
    Mr. Obey. I am happy we did. I will simply say while I 
certainly wanted to keep total U.S. access to these sales, I 
think Congress as an institution has to understand that people 
are going to react to a lack of action on our part. I don't 
think we should be surprised by it.
    One other question--not so much a question but a comment. I 
am wearing this beard because I am waiting for the Packers to 
win their second Super Bowl in a row. But, you know, it is my 
experience when you play in a football game, you don't just 
play your whole game between the hash marks, you use the whole 
field.

                           deficit reduction

    I get very frustrated by the discussions that take place in 
this town with respect to deficit reduction, because I think we 
are being asked by an awful lot of players in this town to play 
the deficit reduction game on only half the field or to play it 
only within the hash marks rather than using the whole width of 
the field.
    By that I mean that there seems to be a determination on 
the part of a lot of people not to review any potential source 
of help on the revenue side in meeting our need for deficit 
reduction.
    I know it is considered crazy to even bring it up in either 
party, but I would simply make this point--and I do this simply 
because I got irritated again by what the Post said this 
morning. It was the 25th time that they wrote an editorial 
lecturing policymakers on the need to cut social security.

                              tax benefits

    I think it would be very interesting if people take a look 
at some of the tax benefits in the Code, some of the loopholes 
some people would describe or some of the special privileges 
that we have in the Tax Code for very high income people.
    The Post said this morning, we ought to cut social 
security, but we ought to be careful not to cut those at the 
very low end. I would point out the maximum collection that you 
can have from social security if you have had two maximum 
earners, as I understand it, is $29,900. That is not exactly 
rich.
    If the Post is asking that we consider non-social security 
income in determining what we do on the social security front, 
I would simply point out that we did that when the 
administration raised the percentage of income that would be 
subject to taxation for the richest 12 percent of seniors; and 
we had our heads handed to us for doing that by a lot of people 
in this country and in this Congress.
    I would simply bring to your attention that before we start 
talking about the need to exercise compulsivestatesmanship by 
cutting social security benefits, I think that we ought to take a look 
at some other benefits and take a look at the distribution of those.
    Example: The poorest 12 percent of the people in this 
country, who make less than $10,000 a year, got a grand total 
of $5 million in tax benefits from the mortgage deduction--$5 
million. That is .001 percent of the entire $40 billion-plus 
benefit of the mortgage deduction. Yet the 7 million households 
who are the richest 7 percent, who make more than $100,000 a 
year, got $19 billion out of that baby, 49 percent of the total 
benefits--48 or 49.
    If you take a look at the average tax benefit for a family 
making less than $10,000 a year from the mortgage deduction, 
they got an average 41 cent benefit from that deduction. 
Families making $100,000 a year got an average $2,750 benefit 
from that tax deduction.
    Medical deductions--again, if you take a look who really 
gets the benefit of medical deductions, you see a huge amount 
for the highest income people in this country versus table 
scraps for people of very moderate means.
    If you take a look at the deferral of capital gains on 
principal residence, you see that families who earn less than 
$300,000 a year got a grand total benefit of $200 million from 
that, or 1.8 percent, versus families who make more than 100 
grand a year getting $7.5 billion out of that package.
    So it would seem to me that before we have to endure yet 
another lecture from the Post or anybody else about the need to 
cut social security, we ought to keep in mind that social 
security delivers more assistance, four times as much 
assistance to low income people, as all of the other Federal 
programs on the books combined.
    Before we get so much in a hurry to put social security 
beneficiaries making $30,000 a year at risk for a COLA cut, it 
seems to me we ought to take a look at what the folks who make 
more than $100,000 a year are getting by way of loopholes, tax 
deductions, tax benefits and all the rest, or else we ain't 
never going to get to the super bowl in terms of getting a real 
handle on the deficit.
    Don't even comment on that.
    Secretary Rubin. I have about a 30-minute address I could 
deliver.
    Mr. Callahan. I was going to an ask, what title are we on 
now? I have looked all the way through the bill.
    Mr. Obey. I just take my chances, any time he is here.
    Mr. Callahan. They shoved this pro-life thing in our face. 
Don't tell me they are shoving social security, too.
    Mr. Obey. I just wanted to get that off my chest, given the 
Post's approach on that.
    Mr. Callahan. Ms. Pelosi.
    Ms. Pelosi. As a Forty-niner fan, it is going to be a very 
long beard, Mr. Obey.
    Mr. Obey. We beat you three times in a row.
    Ms. Pelosi. Thank you, Mr. Chairman.

                      fund for special operations

    I briefly just want to revisit a comment I made in my 
remarks, Mr. Secretary, about your request for $21 million for 
the Fund for Special Operations at the IDB. This fund helps the 
poorest countries in Latin America achieve economic growth in 
the context of reform. Unfortunately, despite the strong 
support of our Chairman for resources to help Latin America, we 
could only afford $10 million of the $21 million requested last 
year. Can you comment on the need for the full request this 
year, especially how it might affect countries like Guatemala 
in Latin America?
    Secretary Rubin. My recollection is there are five 
countries now that are, in our judgment, appropriate 
beneficiaries of that money. They are the poorest of the poor.
    You say we can only afford $10 million. I don't agree with 
that. You actually only appropriated $10 million.
    Ms. Pelosi. That was diplomatic.
    Secretary Rubin. Okay. I will be like Mr. Obey. I will be 
less diplomatic. I think we could have afforded more and should 
have spent more. I think, as the Chairman said, we have an 
enormous stake in the success of the poorest countries in our 
own hemisphere. I believe we should appropriate the $21 million 
for that reason. As I say, there are five countries that we 
think are appropriate recipients of FSL money.

                    annual report on worker's rights

    Ms. Pelosi. As you know, Treasury is expected to submit an 
annual report on workers' rights. This is required by the 
fiscal year 1995 Foreign Ops bill, and was due September 30, 
1996. Hopefully, this report is forthcoming. Will it contain 
some concrete examples of how analysis of labor and workers' 
rights issues is being systematically included in policy papers 
and the policy dialogue of the World Bank with countries like 
China and Indonesia that have major worker rights problems?
    Secretary Rubin. I have not read the draft yet. It is late, 
but it will be coming in 2 to 4 weeks. I am told by those who 
read it, it is a very serious analysis of workers' rights 
issues and labor standards. I am also told that it shows that 
progress has been made on the one hand, but there is still a 
good deal to do.
    David, do you want to expand on that?
    Mr. Lipton. After our conversation the other day, the 
principal reason it is being delayed is to include an account 
of discussions of the WTO in December that touched upon the 
subject in order to fully explain all of the steps that are 
being taken so far.
    Ms. Pelosi. Thank you.

                          hong kong reversion

    Mr. Secretary, the reversion of Hong Kong to China's 
sovereignty on July 1 takes place less than 2 weeks after the 
G-7 summit meeting in Denver on June 22nd. Do you believe that 
it would be useful to discuss China and Hong Kong at the G-7 
and to try to get common agreement on benchmarks for China's 
compliance with international norms on human rights, trade, and 
proliferation during the post-Deng transition? Will the U.S. 
encourage the G-7 to issue strong language in the final 
communique about China's obligations toward Hong Kong as 
spelled out in the Basic Law and Joint Declaration?
    Secretary Rubin. Let me give you a two-part answer, if I 
may. I don't think there is any question but that China--and 
this is our view at least, as well as mine personally--that 
China has an enormous self-interest in maintaining rule of law 
and basic freedoms in Hong Kong. But I think for it to remain a 
capital center, which is very much in China's interest, it 
isn't going to be sufficient simply to have free markets. You 
are going to have all the freedoms around those free markets, 
which basically means the rule of law and fundamental human 
rights.
    Ms. Pelosi. But I was hoping the communique from the G-7--
--
    Secretary Rubin. Let me go to the second part, all right?
    I don't know the answer to that. We are in the process 
still in the administration of thinking through what we think 
the agenda should be for the G-7 leaders and what the 
communication should be. I will certainly bring that thought 
back to the people, who are involved in thinking about this 
issue. But I don't know the answer to that.
    Ms. Pelosi. I hope so. Because the Administration has 
encouraged multilateral approaches. This is one very important 
one. What happens in Hong Kong in terms of democratic freedoms 
is important to the industrialized world.
    Secretary Rubin. Yes, I would agree with that.
    As you know, first we have to decide what we think, and I 
guess I would be relatively sympathetic to what you say. We 
have to get the others to agree.
    Ms. Pelosi. There is no question. It is about leadership. 
That is what I am asking, for the U.S. to take that leadership.
    I also have some concerns about international AIDS issues 
which I hope would also be on the agenda of the G-7. We have 
been encouraging that along the way because aids does have an 
economic impact in many of the countries throughout the world.
    In terms of environmental concerns, Congress was 
instrumental in the creation of the Inspection Panel at the 
World Bank in 1994.Its purpose is to investigate instances 
where environmental impacts on pending loans may not have been 
adequately dealt with. To date, the panel has received only seven 
requests, has recommended only three full investigations, and has only 
one recommendation for a full investigation endorsed by the Bank Board.
    Do you think this is a defensible record and why shouldn't 
the reach of the inspection panel be extended to the IFC?
    Secretary Rubin. David?
    Mr. Lipton. Well, we are not fully satisfied with the 
inspection panel process. We are trying to improve that.
    I think it is important that the World Bank be functioning 
better. We have still some qualms about the extension of it to 
the private sector windows. We are looking into that question, 
and we would like to see some improved transparency at those 
institutions. But we consider that they are qualitatively 
different because of the involvement of the private sector and 
we need to make sure that whatever is done is consistent with 
doing the business of the institution.

                                  ifc

    Ms. Pelosi. I think I am supposed to yield back the balance 
of my sand here, but if I may follow up on that, two points: 
One is my fear has always been that the Bank would use the IFC 
to hide some projects or to divert some activity to the IFC in 
order to avoid the environmental assessment process. As you are 
looking into this, I hope that you will look to into the 
Yacyreta dam project in Argentina.
    Thank you, Mr. Chairman.
    Secretary Rubin. Could I make one just correcting comment, 
Mr. Chairman, that occurred to me?
    On the question of Hong Kong I happen to agree with your 
fundamental views, as does the administration. The question of 
whether G-7 is the right place--I am not saying it is or 
isn't--but, that is something we have to think through.
    If we conclude it is not, then that is one thing. If we 
conclude it is, then there is the question of getting the 
others to agree with us.
    Ms. Pelosi. If I may, Mr. Chairman, the reason I brought it 
up is it was my understanding this was part of the discussion 
at last year's meeting in Lyon. It became less timely because 
of some emergency issues that intervened. But now the timing is 
such that Hong Kong can be an emergency.
    Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Packard.

                       new arrangement to borrow

    Mr. Packard. Thank you, Mr. Chairman.
    I have some concerns about IDA, but I know those questions 
will be asked by others, so I am going to dwell more on your 
request for the New Arrangement to Borrow. I am not clear on 
your explanation in your testimony, written or verbal, as to 
really what your intentions are here and why there is such a 
need. My understanding is that the general arrangement to 
borrow has worked quite successfully.
    I am not sure how you work it out as far as the scoring 
problem is concerned. $3.6 billion, of course, if it is scored, 
would suck up so much of the $12 billion that I don't know that 
it would even be possible to consider it. But you say it is 
offset by liquid assets; and yet, to me, that is a very risky 
way to offset. Normally, you won't loan to countries where they 
don't need it. It will go to countries that have financial 
problems like Mexico's situation was. And even though Mexico 
has done quite well in payback, many times in these loans, we 
may not have the confidence that they will payback. Therefore, 
how can you really use the note as a liquid asset?
    Secretary Rubin. Well, I may have misspoken slightly.
    The claim that we would have is not against the donee 
country but against the IMF. What would happen is that as they 
would draw down; and we could get a claim against the IMF. The 
claim we would have would not be against Mexico but against the 
IMF, and we would have the full faith and credit of the IMF 
behind it.
    The IMF has about $40 billion in gold, as you know, in its 
asset base, so I think it is impeccably, unquestionably good 
credit.
    By the way, this is not our scoring; this is the 
Congressional Budget Office's. That is why the CBO was ready to 
say, when President Bush proposed the quota increase, which 
receives the same treatment here, that it would have no effect 
on the outlays or the deficit.
    Mr. Packard. But, in essence, your request for a New 
Arrangement to Borrow is simply to expand what you now have.
    Secretary Rubin. That is right.
    You ask a good question. We spent a lot of time talking 
about it before we went to the enormous effort we have gone to 
to try to put this together.
    Mexico was a big lesson to all of us. The capital markets 
have increased so enormously in size that it can expose us to 
risks that affect our interests of a magnitude none of us 
would--I wouldn't have when I was in the private sector--
thought about 5 or 10 years ago. The GAB is a very important 
mechanism but is not large enough any more in our judgment to 
deal with the kinds of problems we hopefully won't have to 
face, but might conceivably face, in the vastly larger markets 
that now exist.
    Mr. Packard. Are you aware of any pending crisis that would 
justify or demand additional funding?
    Secretary Rubin. I could speculate about things that can go 
wrong. I don't think I want to. I don't know of anything 
specific. This is a general reserve mechanism in effect to back 
up the IMF.
    Mr. Packard. To enlarge the reserve.
    Mr. Lipton. If I could also add, Congressman, the one 
difference--and I think an important difference--with the NAB, 
in addition to the augmentation of resources, is that where the 
GAB had 11 countries participating, the NAB will have 25. We 
will have a broader burden sharing around the world of 
countries that will be participating and helping to shore up 
the international financial system.
    Mr. Packard. It looks as though we have a call for a vote.
    Mr. Yates. No, the House is coming back, I think, after the 
recess.
    Mr. Packard. Thank you.

                            budget planning

    Let me close on a positive note. I am very pleased to see 
you projecting your planning process to 3 years. I think that 
is a very, very good move.
    I am asking all of the agencies under my jurisdiction and 
my subcommittee to plan for 5 years, to start a 5-year plan 
that will help us to build more continuity and a better 
budgeting process. I certainly applaud you in that area and 
hope you will follow through with it and maybe even expand that 
to where we have--I am not suggesting a multiyear budgeting, 
but I certainly think that multiyear planning for budgeting 
purposes is very worthwhile, congratulations on that.
    Secretary Rubin. Could I say one more thing just to make 
sure it is crystal clear? The $3.4 billion to the NAB is over 
and above the Committee's allocation--the Chairman refers to it 
as $12 billion; and we requested $13.3 in the area. So, 
whatever that number turns out to be, if the scoring for the 
NAB were different, we would have a very different situation.
    Mr. Packard. That is why I needed to have some 
clarification. I could see it was incompatible with what we are 
trying to do with the budget. Thank you.
    Mr. Callahan. Mr. Yates?
    Mr. Yates. Mr. Chairman, at my age I don't like to have my 
attention called to hourglasses.
    Mr. Callahan. With your tenure and respect, Mr. Yates, we 
won't even time you. You take all the time you want.
    Mr. Packard. Just keep it under 5 minutes.
    Mr. Yates. Mr. Secretary, I welcome you to the committee.

                   restitution to holocaust survivors

    I offered language that was accepted by the conferees on 
last year's foreign operations appropriations bill, and I 
invite your attention to page 986 and to the following 
language: The managers agree it shall be the policy of the 
United States to, one, assist survivors of the German Nazi 
horror to achieve full restitution for property and 
assetsseized by the former Nazi regime. You are aware of that 
provision?
    I want to expand that to include the Swiss. Now, what is 
Treasury doing about persuading the Swiss banks to make 
restitution, full restitution, on the claims of survivors and 
their decedents?
    Secretary Rubin. Mr. Yates, we have worked with Stu 
Eizenstat, the lead person in the United States government on 
this.
    Mr. Yates. I knew that Stu was doing it.
    Secretary Rubin. Right.
    Mr. Yates. I didn't know what Treasury was doing. I think 
it is an equal responsibility.
    Secretary Rubin. We do. We actually have a group at 
Treasury that has been working with him. I can't answer your 
question, unless David knows. We will have to get back to you.
    Mr. Lipton. I don't have the details. We will get an answer 
to you.
    Mr. Yates. If I may say so, for 50 years we haven't been 
able to answer that question. I think it is very important that 
you really move into this question, because I think the Swiss 
have been very derelict in how they have been handling these 
claims over the years.
    I don't know that they are much better at the present time. 
They impose limitation on the amounts they want to pay the 
survivors, and I don't think that is fair. I think that they 
ought to try to make a bona fide effort to find out what the 
total amount they received for deposits, as well as the amount 
they received from Nazis who haven't made a claim so they can 
turn them over to the survivors as well. I think pressure 
should be brought on the Swiss in order to do that.
    You made reference to meetings of the G-7. Why isn't this 
an appropriate subject for the agenda of the G-7 in order to 
bring pressure on the Swiss banks?
    Secretary Rubin. Well, it is a thought, Mr. Yates.
    Mr. Yates. It is a thought. I wonder why it isn't 
appropriate.
    Secretary Rubin. I wasn't saying it isn't. It truthfully is 
not something I have heard discussed.
    Mr. Yates. I don't think it has been either, but I don't 
know why it shouldn't be. Because certainly the United States, 
at least now, is trying to bring pressure, I assume, on the 
Swiss banks. It would seem to me that the United States should 
try to bring in the other major banks.
    Secretary Rubin. It may be--and I just truly don't know. It 
may be that Stewart Eizenstat in his efforts has in fact been 
working with the other nations to try to exert pressure. I 
don't know the answer to that.
    Mr. Yates. Even if that is true, why is it not an 
appropriate subject for the major banks themselves of the 
world? I would think that, just as the United States wants to 
bring some help to these people who suffered these insufferable 
pains and discrimination at the hands of the Nazis and by the 
Swiss themselves, I think that there ought to be pressure 
brought by Treasury as well as by the Department of State.
    Because you have some influence. As I remember your 
testimony, you have enormous influence on banks in the bill.
    Secretary Rubin. That was in reference to the World Bank 
and other banks.
    Mr. Yates. I know it was. Now, do you not have enormous 
influence on the banks that make up the G-7?
    Secretary Rubin. The G-7, as you know, are the financial 
ministers and central banks.
    Mr. Yates. I know who they are. I get the impression from 
what you are saying now that they would have little interest in 
this subject.
    Secretary Rubin. No, no, you shouldn't--you shouldn't infer 
anything. I honestly don't know since I haven't discussed it 
with them. Your point is obviously well taken. The only answer 
I can give you is the people participating in the Denver 
summit, one of which is us, obviously----
    Mr. Yates. When is that?
    Secretary Rubin. In June.
    Mr. Yates. Can you prepare for that? Can you make a real 
bonified effort to try to persuade them?
    Secretary Rubin. We could. The question I can't give you an 
answer to--I don't have enough personal knowledge--is, A, what 
we have done; and, B, what the considerations might be.
    Mr. Yates. Can I persuade you to look at it a little more 
personally?
    Secretary Rubin. I would be delighted to look at it 
personally, because I think it is something very much worth 
looking at, and I will get back to you personally.
    Mr. Yates. I would appreciate that very much.
    I see that the hourglass has run its time.
    Mr. Callahan. No, I didn't turn the hourglass over.
    Mr. Yates. Thank you.
    Mr. Callahan [continuing]. Out of respect and deference to 
you, Mr. Yates.
    Mr. Packard. I only used half of mine. I will give you my 
pound of sand but will probably take a pound of flesh later.
    Mr. Yates. I appreciate very much the courtesy and 
generosity of the Chairman.
    Mr. Callahan. Mr. Knollenberg?
    Mr. Knollenberg. Mr. Secretary, welcome again.
    I heard Mr. Obey refer to the social security side of 
things. That is a concern, obviously, when you come to 
balancing the budget.
    But also on the issue of foreign aid, particularly I want 
to refer to some remarks that you made that we cannot lead with 
other people's money. I respect that, but at the same time I 
would also suggest that--with respect to the arrears to the 
IFIs, I think that was the reference that you were making, we 
haven't exactly, as you well know, been dormant when it comes 
to having a presence in the world in terms of defense; and that 
is over the last 50 years since World War II, if we just look 
at that time frame. Defense now and previous is immense.

                          foreign aid spending

    I think maybe what the suggestion is, if there is some 
challenge going on here and some oversight, is that we want to 
make sure that every dollar of this foreign aid is spent 
wisely. I know you do, too. In many ways, it may be hard to get 
your hands around some of the problems, particularly with 
respect to the fact that 40 percent of IDA funding already goes 
to Africa. There is a lack of control that is a part of that. I 
see now there are severance packages being developed by Mr. 
Wolfensohn in terms of the restructuring of that situation.
    But my real question gets down to a statement that was I 
think put together by a Mr. Johnson, who was doing some 
analysis for Heritage, who came up with the fact that of the 66 
less-developed countries that have received loans from the 
World Bank for longer than 25 years, 37 are no better off today 
than they were before they started receiving these loans. 
Actually, of these 37--this is maybe the most damaging thing, 
according to the study--20 are actually poorer than they were 
before.
    Maybe as an additional spike we should look at this 
statement that, for example, two out of every three recipients 
of U.S. foreign aid vote against the U.S. in the U.N. a 
majority of the time.
    I think it compels us to look very closely at this funding 
with respect to Africa. I wanted your comments on whether we 
getting our arms around, our hands around this thing. Because I 
know, in times past, we were making loans with no control, and 
in many instances--and it is still a continent that requires 
help, but help has to, of course, be registered. I think, if we 
are giving help, where is the success rate? I just think if it 
is broken, it does need fixing.
    Your comments please?
    Secretary Rubin. I guess the thing that most strikes me in 
the developing world today, as compared to, say, 7 to 10 years 
ago--when it first struck me, I was in the private sector, 
maybe there was a financial opportunity there--is how 
manycountries are doing well. And I don't know who Mr. Johnson is, but 
that is a debate we would be happy to have.
    I think one of the most striking things about what has 
happened in the world over the last 10 years, although there 
are certainly developing countries that are not doing well and 
some doing terribly, is how many of them have taken hold, 
number one. And, number 2, how many of them now have market-
based economies or are fundamentally oriented toward what we 
would call free enterprise or capitalist economies and are 
moving at least towards democracy. So I think the 
accomplishments have been enormous.
    Having said that, your point is extremely well taken. I 
think we need to continue to work very vigorously with these 
institutions to make sure the money is spent well. In Africa, 
Subsahara Africa, there are enormous problems. Also, to an 
extent, you could argue it is the greatest development 
challenge we now face.

                        African Development Fund

    Last year we recommended zero funding for the African 
Development Fund. The reason was we thought there were 
management problems that needed to be sorted out before we 
could spend money there. We think they have done a lot, so we 
are recommending funding.
    But I think that the development banks have made a lot of 
progress. I think they need to do a lot more. Our ability to 
influence them is a function of our remaining engaged, paying 
our arrears and continuing on an ongoing basis and so forth.
    In terms of the severance packages, that is one of the 
things we need to look at. I think Jim Wolfensohn has done a 
heck of a job in not just trying to but actually making a 
difference in that institution. But we have to look at this 
program and make a judgment on its merits.
    Mr. Knollenberg. Somebody said, if I am not mistaken, that 
some of the $60 million is for severance packages. Am I 
misquoting that, out of the 250?
    Secretary Rubin. The buyouts are something we need to look 
at.
    Mr. Knollenberg. Restructuring is one thing, and buyouts 
are something else. It may be in the end we are going to be 
paying for these buyouts for some time in the future. I don't 
think I am misleading you about that figure.
    Secretary Rubin. I think you are in the right area. All I 
can tell you is, on the one hand, I have enormous respect for 
what he is doing there. On the other hand, just as you are 
going to look at it, we have to look at it.
    Mr. Knollenberg. I would just cite that $60 million is one 
concern I had in particular to his overall request for $250 
million. We may be paying for something we ought to really be 
looking at very, very closely.
    Has my sand gone, Mr. Chairman?
    Mr. Callahan. Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary. I join my colleagues in praise, 
and we thank you for appearing before us today.
    First of all, I would like to associate myself with the 
remarks of Mr. Wolf with regard to Sudan and terrorism; and I 
look forward to further information on that issue.

                      Middle East Development Bank

    With regard to the Middle East Development Bank, I am very 
pleased that you have again requested funding for that bank. I 
have always felt that true peace in that region will only come 
through regional economic development. Our committee just 
recently returned and we see that so much has been done in that 
regard, but there is so much more that remains.
    Perhaps you could share with us why you believe that the 
bank is so vital to the region. How does it contribute to the 
peace process? What level of support is there in the region for 
the bank?
    Secretary Rubin. You know, I originally had sort of an 
uncertain view about the bank when I first heard about it, and 
then Shimon Peres came in and spoke to us--or actually met with 
us privately. The comment he made that has stuck in my mind 
ever since is that it is an institution that quite a number of 
the countries in the region who are at odds with each other 
want to create together.
    I thought that was really an interesting insight, that this 
was something they wanted to create together; and it was a 
place, a forum, where they could work together, even if they 
were hot on many other issues.
    So I came to the view that this was really something that 
was very much worth doing in terms of supporting the peace 
process, and I continue to think so. As you said, we are 
putting in for funding again this year.
    On the question of the countries that are supportive of it 
in the region, it is the countries involved in the peace 
process.
    Mrs. Lowey. Thank you.

                          Micro Credit Lending

    Another area where you have been supportive is the whole 
area of micro credit and micro credit lending. I think there is 
agreement that these loans are vital and have brought thousands 
of people out of poverty.
    The World Bank has done a good job recently in placing more 
of an emphasis on micro credit projects, and several of us have 
met with Jim Wolfensohn on those projects. It seems to me they 
need to develop a clear strategy to focus more of their efforts 
on micro credit. I wonder if in your conversations with bank 
President Jim Wolfensohn about micro credit, have you raised 
this issue? Could you give us an update? And is there a 
strategy between Treasury, the multilateral development banks, 
and USAID, to work together to promote micro credit lending? 
For a very small amount of money, you get enormous impact.
    Secretary Rubin. I agree with your general comment. I do 
believe the InterAmerican Development Bank has done the best 
job with it, haven't they, David? Yes, the InterAmerican Bank 
in Latin America really has done the best job. As you know, 
this concept started in Bangladesh.
    But I actually have talked to Jim Wolfensohn about it. You 
have yourself. You have your own sense. My sense is he is very 
supportive of it.
    We have been working with Brian Atwood at USAID in terms of 
our own cohesive strategy, and we will continue to promote 
this. Because we agree with you that it is capitalism on a very 
personal basis. We believe in it and will continue to promote 
it.
    In terms of the strategy, it is not only a question of 
money, it is also a question of technical and educational help 
and assistance. And then it is a question of what I would call 
the surrounding policy context, to make sure you have a policy 
context that is conducive to small businesses being successful.
    Mrs. Lowey. We look forward to further discussions in that 
area.
    My colleague, Mr. Yates, referred to the assets seized by 
the Nazis. It has been the United States tax policy that 
reparations paid by the German Government to Holocaust 
survivors are excluded from calculations of taxable income or 
eligibility for Federal benefits. Will it be our policy to 
treat in the same manner funds received by U.S. citizens as a 
part of any Swiss bank account agreement?
    Secretary Rubin. I don't know the answer to that because I 
haven't heard the question raised. There may be people at 
Treasury who have focused on that. If they have, I haven't 
gotten it on my desk yet.
    Mrs. Lowey. One other area, so I would just like to pose 
the question and then talk to you at some future time----
    Secretary Rubin. We will get back to you on this one, too.
    Mrs. Lowey. Thank you.
    I recently heard a briefing, in fact as recently as this 
morning, by Dr. Peter Redway, who was a professor at George 
Washington University, a specialist in Russia. The report was 
depressing, to say the least. Certainly, in many articles we 
receive, we understand that you and your officehave really 
become the center of many foreign policy issues, and in particular 
working with the President and Vice President in developing a strategy 
for Russia.

                          Corruption in Russia

    It seems everything is collapsing. The corruption is 
widespread. The top part of the population is reaping enormous 
benefits. The middle part of the population is serving the 
elite. The bottom part of the population is in poverty. My time 
is up, but I would be interested in really talking to you about 
your view and your strategies to see what we can do, because 
the reports we got are that the monies from the IMF are 
justified programs. I don't know if you want have the Secretary 
respond.
    Secretary Rubin. I will give you a one-sentence response.
    Mr. Callahan. The Secretary can take all the time he wants 
to respond. There can be no further questions.
    Mrs. Lowey. Okay.

                             Reform Efforts

    Secretary Rubin. I will be very brief. The administration's 
efforts with respect to Russia are actually organized around 
Strobe Talbott at the State Department and have been over the 
past 4 years. I have my own impression, which is that the 
circumstances in Russia are on the one hand difficult, and on 
the other hand, when you think about the little bit of time 
they have been involved in reform efforts, they have done a 
lot. On the other hand, there is a lot to do, as you correctly 
suggest. And I certainly think the best course of action for us 
is to support the reform, recognizing there is an awful lot 
that needs to be better than it is, rather than not support it.
    Mrs. Lowey. Thank you for indulging me, Mr. Chairman. 
Perhaps we can continue the discussion.
    Mr. Kingston. Mr. Chairman, let me yield to Mr. 
Frelinghuysen right now.
    Mr. Frelinghuysen. Thank you.
    Mr. Secretary, when you speak, the markets listen and 
react.
    Secretary Rubin. That is why I don't speak too much.

                              Bully Pulpit

    Mr. Frelinghuysen. That is really what is the basis of my 
question. The Function 150 Treasury International Programs, 
compared to what Secretary Albright was in here for a couple of 
weeks ago, your programs are actually asking for more money. I 
think the heart of the question is--if we have these vital 
investments in multilateral development banks and institutions 
which are essential to our Nation, to our global well-being, it 
seems to me that you are in a perfect position to use your 
``bully pulpit'' to talk more about why these programs and 
institutions are important. I do not get a feeling, starting my 
second term, that Congress and the American public are 
sufficiently well educated. Certainly this committee is and 
other committees are, but I do feel not only Congress needs to 
be properly lobbied and educated, but I think you have an 
enormous obligation to speak to the American public.
    Why should the Congress, when we go home for town meetings, 
get beat up on foreign aid and these types of programs? Where 
is the administration, where is Robert Rubin using his bully 
pulpit to talk about why these programs are so essential?
    Secretary Rubin. You know, I actually think you have raised 
a profound point, and I raised it this morning with the 
business council who I spoke to. I do try to speak about it a 
lot, but one of the things I have learned as Secretary of the 
Treasury is you can only do your best. In fact, with the 
enormous amount of noise that is out there in the world, it is 
very hard to have an impact. The President in his State of the 
Union Address, as you noticed, referred to the World Bank and 
the Multilateral Development Banks and the United Nations and 
their importance. He has spoken to it. But it is very hard, in 
the midst of all the noise that exists in the world, to have an 
impact. I think you are right.
    Mr. Frelinghuysen. The markets relate to you, they relate 
to Alan Greenspan; when you say something, they react.
    I do think that this part of the budget is one where 
increases, you are saying, are absolutely essential. I don't 
get a feeling here that Congress is getting enough assistance. 
We can be skeptical about the way the money is spent for a lot 
of these areas. Personally I think these are some pretty good 
investments, but I think they literally need to be explained.
    Secretary Rubin. I don't disagree there. I think the 
question is how can we do it effectively. I really do speak to 
it quite a bit. It is hard to break through. The President has 
spoken to it a remarkable amount when you consider everything 
he has got to do. But I think your point is well taken. I 
agree.
    Mr. Frelinghuysen. Mr. Chairman, I had some other 
questions. I didn't want to miss an opportunity to vote. If you 
can put me on again, I did feel this was a point I wanted to 
emphasize.
    Mr. Callahan. There are 8 minutes left to vote. I intend to 
stay, but I know that other Members might have some questions, 
so we will have to just sort of idle our time. So why don't we 
just stand in recess for about 5 minutes. If you want to stay, 
Jack, that is fine with me.
    Mr. Kingston. Mr. Chairman, I do want to ask one question.
    Mr. Callahan. Let me just say that you are the acting 
chairman of this committee, so you control your own time.
    Mr. Kingston. So I can miss the vote if I want.
    Mr. Callahan. You can miss the vote if you want. When you 
finish, recess the committee for 5 minutes.
    Mr. Kingston [presiding]. Okay. Mr. Secretary, I am going 
to run over there, but I do want to ask, in terms of the 
multilateral development bank financing that you mentioned 
benefits American workers to the tune of $3.2 billion, do you 
know, do you have that broken down by State; representing 
Georgia and needing something to take back to the folks back 
home, as Mr. Frelinghuysen said, please give me some reasons 
why a Georgia worker should be concerned about it or not?
    Secretary Rubin. David says we might be able to get you 
information on that. You make an interesting point that never 
occurred to me until this moment. That is a good idea. We will 
see if we can get it for you. We will try to get some numbers 
on the amount of exports to the developing world from each 
State, because that is a big number. The developing world is 
about 42 percent of our exports now.
    Mr. Kingston. That would be great.
    Secretary Rubin. Then we can also try to get you the 
breakdown on the $3.2 billion.
    Mr. Kingston. We used to say a billion in export was worth 
something like 19,000 jobs domestically. Is that still a rule 
of thumb?
    Mr. Lipton. That is the best estimate that the Exim Bank 
has been able to put together, yes.
    Mr. Kingston. Then the follow-up question would be without 
these subsidies, without this seed money, how much would our 
exports fall, and how many jobs would be lost? That would be 
good ammo for all of us.
    With that, why don't we take a 5-minute recess.
    [Brief recess.]
    Mr. Callahan [presiding]. Mr. Foglietta, are you ready?
    Mr. Foglietta. I most certainly am, Mr. Chairman.
    First of all, I would like to thank you, Mr. Chairman, for 
the opportunity to be here today. I am one of the new Members 
of this committee, and I want to join with my colleagues in 
welcoming you and thanking you for your presentation today.
    Much has been said about the policies that you and the 
President have implemented which have done so much to jump-
start the economy of this Nation. We are now talking about 
helping other nations jump-start and move their economies 
ahead, which will in effect help our economy ahead even 
further. So you can look forward to my support in working those 
things out.

                                 Haiti

    Let me say, if I may, that I have been an active supporter 
of this administration's mission in Haiti. I believe that we 
have many real benchmarks to cite evidence of success in 
building democracy and economic opportunity in that nation. 
Out-of-control inflation has deterred the economy is being 
brought under control. The economy is growing, however slowly. 
Privatization is slowly moving from a concept pushed by policy 
makers to a reality.
    I would like you, if you can, to provide this committee 
with your views on the progress in Haiti, as well as your views 
on the role that the United States and the international 
financial institutions will have in playing a role in 
continuing the progress of that nation.
    Secretary Rubin. Let me do this, if I may, Congressman. 
David Lipton, our Assistant Secretary, was at a meeting on 
Haiti just the other day and is really the point person on the 
economic issues of the United States Government. Let me ask 
David if he would comment.
    Mr. Lipton. I think we share the assessment that Haiti has 
made progress, but we also recognize that Haiti's democracy is 
very young. It faces many difficulties and challenges, security 
challenges included, that the economy remains operating at a 
very low level. So there is really quite a lot remaining to be 
done.
    In the context of this hearing, I would like just to add 
the IMF and World Bank and the InterAmerican Development Bank 
have been involved in trying to help Haiti move forward, 
helping them design budget restraints, structural reforms, 
privatization programs, and trying to do it in a constructive 
way, by offering money only as progress is made.
    There have been commitments made, but disbursements are 
meted out only as progress is made.
    Mr. Foglietta. But you are satisfied that progress is being 
made in Haiti at this time?
    Mr. Lipton. We are satisfied.
    Mr. Foglietta. You have some information, some statistics, 
showing the growth pattern in that nation, the reduction of the 
deficit, and other factors which I think indicate a development 
of their economy?
    Mr. Lipton. Yes. They have arrested a very serious decline 
and stopped what might have been a financial explosion. There 
is now growth in Haiti, though, as you said, at a very low 
level--and the prospect that growth could achieve a level that 
would be more palatable to the people of Haiti in the coming 
few years if they continue on the path they are on.

                              human rights

    Mr. Foglietta. Also one of the most compelling events to 
occur in recent months, and probably in maybe recent 
generations, is the death of Deng in China. I respect and 
applaud the work of my colleagues Nancy Pelosi and Frank Wolf 
relating to the human rights violations of that nation. I also 
understand there are genuine economic issues which relate to 
hopefully encouraging improved relations with China and their 
attempts to create better human rights.
    However, no one can challenge, I believe, the economic 
strides made under Deng in China. I know it is early, but what 
will be your analysis of the impact of the transfer of power in 
China, the impact of the changes in the economic policy that 
they would have on the Koreas, and how would it affect Hong 
Kong? I know that could be a book that you could write on. If 
you can give us a brief opinion on some of those issues, I 
would certainly appreciate it.
    Secretary Rubin. Let me give a two-part answer, if I may, 
one part of which isn't going to be very long.
    On the first part, we have had now for the better part of 4 
years, policy that links human rights and economic issues. It 
is our view that over time, the way to make progress in both is 
through engagement, and that has been our policy and continues 
to be our policy.
    I don't have an answer for you on the question of the 
effects of the death and transfer of power. I have discussed it 
with people at our place, I have been part of discussions with 
people elsewhere in the administration, and I think I really 
don't have great wisdom. It is something we are all going to 
have to evaluate and judge over time.
    I guess something I can say, it seems to me that our policy 
should be the same; that engagement, vigorous advocacy of human 
rights that underlie our own society, are the essential 
ingredients of that policy, and I think that should continue.
    Mr. Foglietta. The economic changes that we foresee or 
possibly foresee in Hong Kong, as well as throughout China 
itself, possibly again, what effect would that have on some of 
the Pacific Rim nations? Would it affect Korea, would it affect 
Taiwan economically and other nations in the Pacific Rim 
nations?
    Secretary Rubin. Do you mean the growth of China?
    Mr. Foglietta. And maybe the possibility of curtailing 
activities in Hong Kong. Will the deprivation of some of the 
human rights in Hong Kong reduce their power economically from 
that area, and will that power possibly transfer to other 
nations?
    Secretary Rubin. We believe--and I mentioned this a bit 
ago--that if Hong Kong is going to remain the capital market 
center it has been, that it is going to require that not only 
free markets be maintained, but also law and respect for human 
rights and the press. I think it is enormously in China's 
interest that that happen. If it doesn't happen, and if our 
judgment is right that you can't have a capital market center 
that doesn't have those components, presumably the capital 
market activity in Hong Kong might in some measure move 
elsewhere.
    But my hope would be that since it is so much in China's 
interest that Hong Kong remain a vital capital market center, 
that Hong Kong will retain the basic freedoms that we think are 
required for that.
    More generally, I think economic growth in China is one of 
the most significant events of the years and decades ahead, and 
it is something that we all have to factor into our planning 
and thinking.
    Mr. Foglietta. I would like to carry on with you at another 
time, but I see my time has run out. I thank you, Mr. Chairman.
    Mr. Callahan. Mr. Torres?
    Mr. Torres. Thank you, Mr. Chairman.
    Welcome, Secretary Rubin, and also I welcome your Assistant 
Secretary for his first hearing in his new capacity.

                    north american development bank

    Mr. Secretary, since my discussion pertaining to the North 
American Development Bank earlier this year with you, I am 
pleased to learn of the progress that has been made on project 
financing as we move into the final year of its authorization. 
As you know, this year's funding will complete the 
capitalization of the bank and will reach the agreements that 
Mexico and the United States had for cleaning up the border 
area and helping the community development. So I am happy to 
acknowledge your succinct commitment to that bank, and I look 
forward to our continuing dialogue on this question.

                      Fund for special operations

    Mr. Secretary, I also want to associate myself with the 
comments by my colleague Ms. Pelosi on the importance of the 
Fund for Special Operations of the InterAmerican Development 
Bank. As our Chairman so aptly put it earlier, at a time when 
U.S. bilateral assistance to Latin America and the Caribbean is 
being dramatically reduced, the modest U.S. contribution to the 
Fund for Special Operations is an essential, even wise, 
investment in reducing poverty and protecting the environment 
and laying the groundwork for democracy and sustainable 
development in the poorest countries in this hemisphere.
    I would like to urge you, Mr. Secretary, to work hard with 
us to provide the full $20.6 million that will be a 
contribution to the FSO requested for fiscal year 1998. Because 
the U.S. contribution has only been $10 million over the past 
two years, I would urge that we get caught up in our arrears.
    I was happy to note that you placed great emphasis on the 
United States meeting its arrearages to the Banks.
    Turning to another subject, Mr. Secretary, I want tothank 
you for your participation in the recent microcredit summit. It is 
commendable that you were there. I am a strong supporter of 
microcredit, and I encourage Treasury to continue to take a lead in the 
role in the efforts to achieve the summit's goal of reaching 100 
million of the world's poorest families with credit in the next decade.
    So probably in line with the question that Ms. Lowey asked 
you earlier, do you see an opportunity to raise the issue of 
expanding microcredit for the poorest and achieving the 
summit's goal, which you were at, with other finance ministers 
at the G-7 meeting or possibly the IMF World Bank annual 
meetings?
    Secretary Rubin. Oh, yes. I would think that it is very 
likely to be discussed at both. In fact, my recollection is 
that at the G-7 in Berlin, even though it was not on the 
agenda, the G-7 finance ministers' meeting, somewhere during 
the development portion of the agenda, did raise the question 
of microenterprises. I think there is broad-based support for 
it among the donor countries.
    The answer is yes, I am sure we will continue to discuss it 
in G-7 and IMF-4 bank meetings. I guess they are in Hong Kong 
this year. Aren't they? That is right, in September.
    Mr. Torres. Thank you, sir.
    My second question relates to the Inter-American 
Development Bank. At the Summit of the Americas, the 
InterAmerican Development Bank pledged to provide half a 
billion dollars for microenterprise. They were participants in 
the microcredit summit, the one I just mentioned, and have been 
strong in their stated commitment to small enterprise 
development and in helping programs that make linkages with the 
financial sector.
    Perhaps it could play even a greater role in reaching the 
poorest of Latin America with credit and effectively supporting 
nongovernmental organizations which do some of the most 
effective and innovative work in microenterprise.
    My question again to you is, how can you help ensure that 
there is progress in these areas? Can we get a status report on 
the InterAmerican Development Bank's progress in these areas?
    Secretary Rubin. Yes. We have, as you know, an Executive 
Director. Treasury is the place in the United States Government 
where the United States Government is represented in the 
InterAmerican Development Bank, and we can get status reports.
    From having discussed this with our people, I have a 
feeling the Inter-American Development Bank has got itself in 
very good shape in terms of promoting microenterprise 
development. We can get a status report, if you would like.
    Mr. Torres. I would appreciate that.
    Mr. Chairman, I have other questions that I will submit in 
writing. So at this time I would ask unanimous consent to do 
so. I yield back my sand.
    Mr. Callahan. Well, I appreciate that.
    I wanted to make several comments. I know the Secretary has 
indicated he has to leave very shortly, but I don't want to 
deny any Members the opportunity to ask some brief questions or 
either to submit them in writing. Do you have something you 
would like to ask? I have a few minutes, and I imagine Nancy 
also has a few minutes she would like to close up.
    Mr. Frelinghuysen. I would like to submit some questions in 
writing, if that is all right.
    Mr. Knollenberg. Likewise, I have a couple of questions I 
would like to submit for your response. Thank you.
    Mr. Callahan. Let me just say, Mr. Secretary, we naturally 
appreciate your coming in and your cooperation with this 
committee in trying to resolve the many issues that are your 
responsibility. I can't emphasize to you, Mr. Secretary, how 
important Latin America, our neighbors, are. We are very 
serious about that, and yet we see, not from you necessarily, 
but from the administration, an indication that the only thing 
of any significance or importance in this hemisphere is Haiti, 
and I take a great disagreement to that.
    I want to emphasize to you that we want the administration 
to know this committee is very serious about economic 
development and assistance to nations within this hemisphere.

                                  IDA

    Let me just touch briefly on IDA. I know yesterday you 
delivered to me the report we had requested, and we have not 
had time to fully analyze it yet. But there is one thing in 
there I did see that I am not satisfied with, and that is the 
indication that this issue is not going to be resolved until 
the end of this year.
    With respect to the procurement percentages, I don't know 
that necessarily I am satisfied with the $1 billion factor of 
it, but it is a step in the right direction. But I am not 
satisfied with them informing us they are going to make a 
decision after our markup. I would like for that decision to be 
given some more attention and come back to us with something 
more than we are going to look at it 12 months from now. That 
is insufficient, and it is sort of holding us hostage.
    You have asked for a tremendous increase and another 
appropriation for the World Bank, a significant percentage of 
our overall budget, and yet you are telling us the primary 
problem we had last year is being worked on, but is not going 
to be resolved until after we give you another $1 billion.
    So it is important that you emphasize to Mr. Wolfensohn 
that we have got to have a response to that question long 
before December of 1997.
    Secretary Rubin. Mr. Chairman, we will do our best. I 
think, as you know, I have the same view you have. I don't 
think there should have been a procurement restriction. I think 
they have enormous problems in their own parliaments but we 
will do our best.
    Mr. Callahan. Just tell them we are going to do our best to 
include some monies in there for him, but we are not going to 
do our best until we get some more definite response on that 
portion of the procurement.
    I don't necessarily fault Mr. Wolfensohn. I think he is a 
very talented individual. We have a great deal of respect for 
him. We would like to do anything we can to facilitate. We want 
to emphasize to him that we don't want any more procurement 
agreements such as this in the future. But we have got to have 
a quicker answer.

                      middle east development bank

    The Middle East Development Bank, I notice that it was not 
anything you expressed an interest in your statement to us 
today, and I know that someone on the subcommittee brought it 
up today. We had a CODEL of this subcommittee that visited four 
nations in the Middle East just last month, and not one of the 
leaders we met with, the Kings and the Presidents of all of 
these nations, the finance ministers of all of them, not one 
individual on the entire trip, except some guy that I met at a 
cocktail party one night, who was going to work for the new 
Middle East Bank, expressed any interest at all.
    I notice that the administration is not requesting through 
Treasury the money to fund the Bank, they are requesting it 
through the State Department, through the economic support 
monies.
    I just get the impression that there is not a great deal of 
interest in that Bank, yet every time you mention it to 
someone, they say, oh, yeah, it is very important.
    So is this a priority?
    Secretary Rubin. Mr. Chairman, the only reason I didn't put 
it in my statement was because, as you said, it is not part of 
our budgetary request. I tried to limit myself to what we are 
doing. Actually, as I said in my comments before, it is a very 
good thing to do, and we should do itfor the reasons I said 
here.
    Mr. Callahan. If you think it is a very good thing to do, I 
think it falls sort of under your jurisdiction.
    Secretary Rubin. Well, it was our view that it was really 
more a function of the peace process and the foreign policy 
involvement of the State Department. We talked with them about 
it and decided to fund it that way.
    Mr. Callahan. In our conversations, we were over there 
talking about the peace process, and not one individual brought 
it up during the entire time. So even the leaders of the 
nations are not giving us any indication that this is something 
of high priority to them.
    In any event, if that is what the administration wants to 
do, that is fine with me. We have already established that we 
are going to limit the size of the slice of the pie to a 
certain percentage for the Middle East. If they want to take it 
from someplace else in the Middle East, it is fine with me.
    This committee authorized it in our bill last year, not 
against my wishes, but it certainly wasn't my desire to 
authorize it, but Secretary of State Warren Christopher urged 
us to do that, and we did that out of deference to the 
administration. But with respect to the money part of it, we 
are not going to, or at least I am not going to, write any bill 
that creates a new pot of money for any multilateral 
development bank or any other regional bank.
    I just wanted to bring that up, that not one person on that 
entire trip that we met with in the Middle East even brought it 
up.

                             latin america

    In mentioning CODELs, I mentioned that we are planning to 
have a CODEL in the near future to visit some Latin American 
countries. In our conversation you mentioned we ought to 
include some projects of the World Bank, and we will be happy 
to do that. As a matter of fact, we will be happy to invite you 
to accompany us on one of these CODELs to some Latin American 
countries, and admittedly one reason I am so willing to invite 
you is I am having difficulty getting an airplane, and I think 
that you could be very beneficial in that respect.
    Secretary Rubin. When I was a kid, in baseball that is why 
I got invited to play. So I get the idea.
    Mr. Callahan. In any case, we would like to facilitate the 
administration. We would like to look at some of the World Bank 
activities, the InterAmerica Bank activities, but we have no 
way to get there. So if you can help us get there. I invited 
Mack McLarty, who is sort of overseeing the Latin American 
activities, to go with us as well, and we would invite you or 
members of your staff to go.

                               hong kong

    With respect to Hong Kong, I think Nancy and others brought 
it up. I have reservations about the developments that are 
going to make Hong Kong such a crucial part of China. The 
wealth of China is in Hong Kong. You have other areas in China 
that have wealth, but a great portion of the economic wealth 
revolves around Hong Kong.
    And the Chamber of Commerce and the Governor of Hong Kong 
indicated to me that they weren't concerned about it, that the 
Chinese Government had promised them there would be no new 
taxes, there would be no sharing of the wealth. I reminded them 
that George Bush told us that when he was elected President, 
and that I fear they are going to have problems in this 
transition, and that the taxation of the wealth is going to 
come a lot more rapidly.
    But I am not going to worry about that. If they are not 
worried about it, why should I worry about it?
    But, Nancy, with that, I am going to close and certainly 
remind you that the Secretary has to leave at 12:25.
    Ms. Pelosi. Five minutes ago.
    Well, Mr. Chairman, if I may just take 1 minute to thank 
you for this hearing and the Secretary for his testimony today. 
I would like to submit some questions for the record, if that 
is your pleasure, Mr. Chairman, and request some specificity in 
the responses from the Secretary and from the Department.
    Ms. Pelosi. I would just note though, that the concerns 
about Hong Kong go beyond the tax issue, and certainly the 
Governor of Hong Kong has very serious concerns about what is 
happening there in terms of the diminishing of the Bill of 
Rights.
    As you said when I was out voting, my understanding Mr. 
Secretary is that you mentioned the rule of law being essential 
to the economic success. As we have discussed and everyone 
knows, the free flow of information is essential and 
information in real time, I don't have to tell you, is 
critically important to people doing business. So the economic 
viability of Hong Kong certainly depends on the continuation of 
basic freedoms there, in addition to which, of course, the 
freedom for all of the people there is a concern to us.
    So I would reiterate my interest in the G-7 doing something 
in the communique.
    With that, I will submit the balance of my questions for 
the record, Mr. Chairman. I am very eager to hear the itinerary 
of this trip to Latin America, and seriously, I think it will 
go a very long way to impress upon Members of the committee the 
importance of our commitment to the Multilateral Development 
Banks. The facts, I think, will speak for themselves when we do 
that.
    Once again, Mr. Chairman, thank you for your leadership for 
making the Latin American region so important in our 
deliberations.
    Thank you again, Mr. Secretary.
    Secretary Rubin. Mr. Chairman, thank you.
    Mr. Callahan. Thank you, Mr. Secretary.
    [Questions and answers for the record follows:]

            Questions for the Record Submitted by Mr. Porter

                      global environment facility
    Question. Secretary Albright, in her written testimony before this 
Subcommittee, highlighted the importance of the Global Environment 
Facility or the G.E.F. This institution is unique in its assistance to 
countries for programs that protect the global environment. The 
assistance that the G.E.F. provides complements other multilateral and 
bilateral assistance organizations. I have noticed that the President 
has requested full funding in the amount of $100 million (the same as 
last year) for the G.E.F. Is receiving full funding for this 
institution a priority issue for your Department.
    Answer. Full-funding for the GEF is a high Administration policy. 
U.S. support for and leadership in the GEF is a critical element of 
U.S. foreign policy on global environmental issues. Fulfilling our GEF 
financial commitments is important both for progress in addressing 
global problems and for maintaining U.S. strength and credibility in 
international environmental negotiations.
    The GEF has a unique mission: to protect global environmental 
resources by redirecting developing countries toward economic 
development alternatives that are both pro-environment and pro-growth, 
taking longer term interests into account. Our productivity, our food 
supplies, and our health depend on global resources the GEF works to 
protect--the atmosphere and climate, the ozone layer, biological 
diversity, and the oceans.
    The GEF helps demonstrate the benefits of development 
alternatives--like renewable energy--and mainstream these into 
approaches used by countries and by the development institutions that 
support them. It also seeks to show the profitability of environmental 
technologies thereby boosting private investment in these sectors. It 
is already leveraging hundreds of millions in new public, multilateral, 
and private funding for environmentally sustainable economic 
development.
    Our scientists are clear that these resources are increasingly 
threatened, and our development specialists know that mis-directed 
development efforts are a primary source of the threat.
    The GEF offers us a relatively low-cost response in the present to 
global problems that could generate huge costs for us in the future. 
The U.S. pledged $430 million for the current four-year replenishment 
beginning in FY 1995 but we are not behind in our commitments almost 
$133 million dollars. It is vital to obtain full funding this year and 
to continue to provide leadership to an institution we were 
instrumental in creating.
                 multilateral and bilateral cooperation
    Question. In the past, the multilateral and bilateral assistance 
organizations have operated very independently of each other at the 
policy level. However, in the field, project implementors tend to work 
together. Considering the reduced budgets that all foreign assistance 
organizations are working with right now, is their an effort to combine 
efforts at the administrative level between these organizations?
    Answer. The U.S. has stressed to the multilateral agencies that, in 
a time of budget constraints, donors must ensure that their efforts are 
complementary and take full advantage of information gathered and 
activities already undertaken by other donors, both multilateral and 
bilateral. There has always been a good level of cooperation and 
collaboration between USAID and the multilateral development banks, 
particularly in the field. This cooperation has been extended at the 
policy level in recent years as the World Bank and other multilateral 
development banks (MDBs) have placed increasing emphasis on developing 
comprehensive lending strategies for individual countries. A critical 
element of any strategy is an overview of how the operations of that 
particular MDB in a given country are coordinated with the operations 
of other major donors, including USAID.
    AID staff in the field have been encouraged to discuss country 
strategy documents with their MDB counterparts. AID, as well as State 
and other U.S. Government agencies, also participate in USG reviews of 
MDB country strategies. We believe that by enhancing and expanding the 
use of country strategies we can achieve a stronger commitment form the 
MDBs to work closely with other donors.
    An example of AID/MDB collaboration at the policy level is in a 
recent Philippine Country Program paper put out by the World Bank. The 
paper notes that USAID and the World Bank are working together on a 
water sector strategy. USAID is providing the Philippine Government 
with legal expertise, and the World Bank is providing regulatory and 
technical expertise.
    Another example of donor collaboration is the World Bank's recent 
sector loans in Africa, in which an attempt is made to obtain an 
agreement between a set of donors and the borrowing country on key 
policy and development aims in a particular sector. The donors then 
divide among themselves responsibility for funding individual aspects 
of the reform program. This process ensures that there is no wasteful 
overlap or competition among donors.
                        social impact statements
    Question. Over the past few years, this Subcommittee has urged the 
World Bank to complete environmental impact assessments for their 
projects that are considered in the approval process. As the Bank has 
heightened their attention to the environmental impacts of their 
projects, what does the Bank do to assess the social impacts and are 
these considered in the approval process?
    Answer. The Bank has several major existing policies that require 
significant social impact analysis, including its policies on 
environmental assessment, indigenous peoples, consultation with 
affected peoples, and resettlement. According to these policies, any 
project with the potential for major environmental or social impacts 
will receive an assessment, which includes analysis and mitigation of 
any negative social impacts. Indigenous peoples development plans and 
resettlement plans are required for any project that affects indigenous 
peoples or includes involuntary resettlement. In addition, the Bank is 
planning to develop social assessment guidelines for all its projects 
by July of next year; we will be working closely with the Bank on their 
development.
    In addition to these existing policies, the Bank is taking steps to 
incorporate social assessment and public participation more broadly 
into its projects. President Wolfensohn has identified a number of 
``flagship'' participation projects where the Bank is piloting new 
approaches to public participation in its projects.
                           strategic compact
    Question. On February 20th, President Wolfensohn proposed to the 
Board a bankwide initiative titled ``The Strategic Compact.'' This 
initiative hopes to overhaul the Bank's bureaucracy and management. To 
implement this, Wolfensohn plans to spend $250 million in training, 
staff transfers and information systems. First, has the U.S. had a 
chance to review this initiative and do you think it will be effective? 
In addition, what impact will this initiative have on the Bank's 
approval process? Will it continue to expand transparency and 
communications with the grassroots organizations that represent people 
who are affected by Bank projects.
    Answer. Treasury has spent considerable time reviewing the Bank's 
proposal, and we continue to work World Bank management and staff on 
specific aspects of the Compact. We support the Bank's objective of 
revitalizing the institution in order to increase its development 
effectiveness and support the Compact's moving forward.
    The Bank has made a number of proposals for changes in its 
operations that, if implemented fully, should lead to a more effective 
institution, with better performing loans and a stronger impact on 
poverty reduction. These include proposals to get closer to the people 
most directly affected by the Bank's programs by moving more staff and 
managers to the field, involving them more closely in the formulation 
and monitoring of its projects, and by expanding the Bank's network of 
contacts with a wide range of groups, including those in the private 
sector. The Bank plans to further improve project quality through more 
thorough country and sector analyses, better project supervision and 
procurement procedures. It also plans to establish an innovative system 
for disseminating and analyzing information and lessons learned from 
its past projects and programs that will allow it to learn from its 
mistakes as well as its successes when designing new programs, and to 
share this information not only within the Bank but also with its 
borrowers and others. In all of these respects, we believe the Compact 
will directly affect the Bank's project design and approval process in 
very constructive ways.
    If the Strategic Compact is approved by the Bank's Board of 
Directors, the key to ensuring that the changes outlined are carried 
out in a cost-effective manner will be a constant series of reviews by 
the Board of Directors, and a year-by-year review of the budget. We 
will also follow closely the review of the Bank's cost-effectiveness 
which is being carried out by the auditing firm KPMG.
    We share your interest in ensuring that the Bank continue to become 
more transparent to and more closely involved with those most affected 
by its projects. This is one of the stated goals of the Compact, and 
one which we will follow closely to ensure that it is achieved.
                          ida loan repayments
    Question. I noticed in your justifications that the International 
Development Agency or IDA receives a majority of funding from periodic 
replenishments from donor countries but that loan repayments are an 
increasing source of IDA resources. What is the percentage of loan 
repayments that contribute to IDA funding? As the U.S. contribution to 
IDA declines, is increasing the percentage of repayments that make up 
funding a bigger priority for the Bank?
    Answer. IDA loan repayments are an increasing source of funding for 
new IDA loans. In FY97, IDA repayments are estimated at approximately 
$630 million which is slightly less than 10% of expected lending. In 
the future, IDA repayments are expected to grow dramatically to an 
estimated $1 billion in FY2000, $2 billion in FY 2005 and $4 billion by 
FY2012. At this point they would represent nearly 60% of IDA lending 
(assuming current lending levels). Over the long term, this trend 
toward higher repayment levels is likely to reduce the need for new 
donor funding. The Bank is currently undertaking a study of medium and 
long-term funding trends and has put a high priority on maximizing its 
use of reflows.
    Question. The Ex-Im Bank has received, and is poised to approve, a 
loan application for airplane purchases by an airline in occupied 
northern Cyprus. The United States does not recognize the so-called 
government of northern Cyprus. The airline's loan application was made 
by, and is backed by the credit of, a Turkish entity in order to get 
around possible problems with the Chafee requirements for Ex-Im loans. 
This arrangement has enabled the application to meet the objective 
criteria for Ex-Im lending, but I believe that it violates the spirit 
of our bi-lateral lending objectives in a broader policy context.
    Can you explain how a state-run enterprise in an unrecognized and 
illegal state was able to apply for, and apparently will receive, Ex-Im 
financing?
    Further, are there additional safeguards which can be put in place 
to prevent such occurrences from happening in the future?
    Answer. The following answer has been provided by Ex-Im Bank.
    Today, March 21, 1997, the Export-Import Bank of the United States 
(Ex-Im Bank) received a Final Commitment application from McDonnell 
Douglas Corporation requesting Ex-Im Bank support for the proposed 
acquisition by Kibris Turk Hava Yollari (``KTHY'') of three (3) 
McDonnell Douglas MD-90 aircraft with an aggregate cost of $136.3 
million. The aircraft are scheduled to be delivered to KTHY during the 
first half of 1997. Based upon the information Ex-Im Bank has received 
to date, currently KTHY (i) is a Turkish company, (ii) has its 
headquarters in Istanbul, Turkey, and (iii) is majority owned by 
Turkish Airlines (the Turkish government owned national flag carrier).
    Ex-Im Bank, as established by its Congressionally mandated Charter, 
is not a foreign policy instrument of the United States Government. As 
such, political considerations are not among the criteria upon which 
Ex-Im Bank is legally permitted to base a lending decision. Congress 
has also mandated that the President of the United States may invoke 
the so called ``Chafee Amendment'' and stop any transaction that would 
be counter to U.S. national interest, as described in greater detail 
below. The President has designated the Secretary of State as the party 
responsible for making this determination. Congress also has the 
prerogative of terminating a transaction, such as this one, by passing 
legislation to that effect.
    Upon receipt of an earlier preliminary application, Ex-Im Bank 
asked the Department of State whether it had any objections to the 
requested Ex-Im Bank support due to (i) political or human rights 
issues or (ii) any other reasons related to the ownership, business or 
operations of KTHY. On January 7, 1997 the Department of State 
confirmed to Ex-Im Bank that, based upon political or human rights 
concerns, it had no objections to the requested Ex-Im Bank support. In 
addition, on February 12, 1997, Ex-Im Bank received a letter from the 
Department of State stating that it was ``aware of no legal impediment 
to Ex-Im Bank financing of this transaction, and believe[s] that, as 
the Export-Import Bank Act of 1945, as amended, requires, this 
transaction should be considered solely on its economic merits.'' In 
addition, in response to a letter from Representative Engel, the 
Department of State also communicated its position on this issue to 
Representative Engel and the opinion of the Department of State that 
the requested Ex-Im Bank support in ``the proposed transaction did not 
fall within the scope of the Chafee Amendment to the Export-Import Bank 
Act of 1945''. The Department of State went on to add, ``[w]e believe 
that the threshold established by Congress of invoking Chafee only 
where such action would `clearly and importantly advance United States 
policy in such areas as international terrorism, nuclear proliferation, 
environmental protection and human rights' has not been met in this 
case. Please see the attached documents.
    Ex-Im Bank also understands that McDonnell Douglas conducted its 
own due diligence to determine if there were any statutory or 
regulatory provisions, or any United Nations sanctions or embargoes, 
that would restrict or prohibit a U.S. company such as McDonnell 
Douglas from doing business with a Turkish company that conducts 
business in Turkish-occupied Northern Cyprus--the so called ``Turkish 
Republic of Northern Cyprus'' (the ``TRNC'') or, for that matter, with 
companies located in the TRNC or in which the TRNC (or any agency or 
instrumentality thereof) may have an interest and concluded that there 
were none. Ex-Im Bank understands that no such restrictions or 
prohibitions were found (other than normal export control regulations 
applicable to exports to Cyprus and a Department of State notice that 
no licenses or other approvals to export or otherwise transfer defense 
articles or defense services to any of the armed forces on Cyprus would 
be issued). Finally, Ex-Im Bank conducted its own legal due diligence 
and was not able to identify any United States statutory or regulatory 
provisions prohibiting Ex-Im Bank support for the proposed transaction.
    Accordingly, even though KTHY flies to, and has operations in, the 
TRNC and KTHY's other minority shareholder is the North Cyprus Pension 
Fund (which we have been informed is an agency of the Government of 
Turkey that has some role in the ``social security'' and retirement 
system for workers in the TRNC) Ex-Im Bank believes it is required to 
review, and is currently reviewing, the proposed transaction to 
determine whether the proposed transaction demonstrates a ``reasonable 
assurance of repayment'' thereby satisfying Ex-Im Bank's credit 
requirements. No such credit determination has been made, and Ex-Im 
Bank cannot, at this time, prejudge the outcome of that analysis.

          Questions for the Record Submitted by Mr. Livingston

                            funding request
    Question. The Administration is requesting $1.516 billion for 
Multilateral Development Banks (MDBs). This is higher than last year's 
level of $958 million but lower than the FY 96 level of $1.153 billion. 
The Administration is also requesting $1.557 billion for International 
Financial Institutions. This is higher than last year's level of $1.012 
billion. Note: This amount includes debt relief for Jordan of 
approximately $13 million.
    History has shown that U.S. foreign assistance rarely helps the 
poor. And, unfortunately, only 30 percent of our foreign aid money 
actually makes it to foreign countries. Roughly 70 cents on every 
foreign aid dollar goes to funding our foreign aid bureaucracies.
    Of the 77 countries with the most repressed economies in the world, 
34 have been receiving U.S. foreign aid for periods ranging from 35 to 
52 years. Of these 34 countries, 13 are poorer today than they were in 
1965 and 10 others are just as poor as they were three decades ago.
    The administration has argued that cutting foreign aid would 
produce more Somalias. However, Somalia has received nearly a billion 
dollars in U.S. assistance in the last 41 years. How has Somalia 
benefited from U.S. assistance? Their gross domestic product went from 
$123 per capital in 1965 to $111 in 1993.
    Haiti has received more than a billion dollars from the U.S. That 
does not include the funds spent on operation ``Restore Democracy'' or 
the $110 million request for Fiscal Year 98. How has Haiti benefited 
from this assistance? Their gross domestic product went from $360 per 
capita in 1965 to $225 in 1994.
    Only economic and political freedom can truly help the poor. What 
steps are the Administration taking to ensure that U.S. assistance is 
used in a manner that helps developing nations discover economic and 
political freedom?
    Answer. Economic and political freedom are not simply matters of 
political will. They also depend on institutional capacity, which in 
turn depends (partly) on human resources. Where these are weak and 
underdeveloped, even the best-intentioned and most authoritative 
political leaders cannot, by issuing decrees establish the rule of law; 
administer an efficient tax system; regulate financial markets 
effectively; or otherwise create many of the conditions for high levels 
of economic freedom.
    It is the low-income developing countries that have the weakest 
human resource base and weakest institutions, and therefore tend to 
score relatively low on economic freedom. Developmental foreign aid is 
focused on the neediest developing countries. Consequently, many 
countries with relatively low scores on economic freedom receive 
foreign aid; and many higher income countries with advanced 
institutions and human resources--and high scores on economic freedom--
do not, including many aid graduates.
    U.S. foreign aid supports human resource development, strengthens 
basic political and economic institutions, and promotes policy reforms. 
All of those contribute to enhanced economic and political freedom. 
U.S. foreign aid has been associated with considerable success in terms 
of greater economic and political freedom and other aspects of 
developmental progress.
    The CATO Institute (in cooperation with the Fraser Institute in 
Canada, and others) has developed scores on economic freedom for 1975 
and 1995 for sixty-four devloping countries, all current or former aid 
recipients. In fifty countries economic freedom improved, and in only 
nine countries did it worsen.
    Similarly, Freedom House has scores on political freedom for 1975 
and 1996 for eighty-six developing countries, all current or former aid 
recipients. Political freedom increased in fifty-two countries and 
declined in twenty-four. Thirty-one countries had large improvements 
(three points or more on a scale of two to fourteen), and only eight 
had large declines.
    U.S. foreign aid has also been associated with considerable success 
in terms of economic growth, poverty reduction, and other improvements 
in peoples lives.
    USAID has reviewed the experience of some ninety countries, 
comprising 3 billion people, that were considered developing countries 
in 1965 and were aid recipients. Forty of these countries, comprising 
over 2.1 billion people, achieved significant positive growth in real 
per capital income over the 1965-90 period, with average annual growth 
rates ranging from 1.3 to 8.4%. An additional sixteen countries (270 
million people) achieved growth rates in the range over the 1985-94 
period. Together these countries account for 80% of the group 
population.
    Further, the available data linking poverty and growth--covering 
some thirty-three countries, comprising about 2 billion people--
demonstrate that economic growth has almost always been associated with 
declines in the proportion of the population in poverty.
    Progress in terms of social indicators has been virtually 
universal. Even in the poorest countries, where growth performance has 
been most disappointing, we have seen widespread improvements in life 
expectancy, infant mortality, fertility, etc. For some 40 very poor 
countries the average improvement from 1965 to 1990 in life expectancy 
was from 43 to 52 years and in infant mortality from 159 to 99 deaths 
per thousand.
    This includes Somalia and Haiti. Over the 1965-90 period, life 
expectancy in Somalia improved from 39 to 49 years, infant mortality 
declined from 165/thousand to 121/thousand; and fertility declined from 
7.0 to 6.7 births per woman. In Haiti, life expectancy improved from 46 
to 55 years; infant mortality dropped from 158/thousand to 86/thousand; 
and fertility declined from as well. Literacy rose from 22% to 43% in 
Haiti. For Somalia data on literacy are not available.
    The USAID 90-country review also looked at the allocation of 
economic aid across countries over the 1962-90 period. Of the $120 
billion in economic aid to those countries over that period, about 6 
per cent went to a group that includes Haiti, Somalia, Sudan, Liberia, 
Zaire, Afghanistan, Nigeria, Zambia, Chad, Burma, Yemen, Sierra Leone, 
Rwanda, and Central African Republic. That is not an unreasonable share 
given Cold War pressures and legitimate room for uncertainty about the 
scope for development progress. (At various times prospects looked 
bleak or worse in Korea, Indonesia, Bangladesh, Uganda, and Ethiopia to 
name just a few). Over 75% went to countries where we have seen clear 
development progress. Further, while much of the aid was grants, some 
was loans. The U.S. is receiving about $1 billion annually in principal 
repayments on an outstanding stock of about $60 billion in 
concessional, long-term USAID loans.
    Finally, the USAID budget in FY96 and FY97 was around $5.7 billion 
after deducting transfers and without counting food aid. Less than 10% 
of this was for USAID operating expenses, foreign service retirement, 
and IG operating expenses.
                     multilateral development banks
    Question. Last year, the subcommittee discussed the lack of 
evaluation of the role of multilateral development banks. It is my 
understanding that since that time the Administration has conducted a 
review. Can you tell me:
    To what extent do MDBs promote private sector growth?
    Do the MDBs focus on regions vital to the U.S.?
    To what extent do MDBs support American business interest? Note: 
American businesses are denied access to IDA resources.
    Answer. The goal of the MDBs is to encourage sustainable, private 
sector-led growth and poverty reduction among its borrowers. Specific 
entities within the MDBs such as the International Finance Corporation 
(IFC) and the IDB's Multilateral Investment Fund (MIF) are specifically 
devoted to providing direct funding to private sector projects. The 
World Bank's Multilateral Investment Guarantee Agency (MIGA) also 
supports private sector projects by providing political risk insurance. 
Certain MDBs are also particularly focussed on the private sector. The 
EBRD for example devotes 70% of its lending to private sector projects.
    The IFIs are also helping create the institutional framework for 
private sector-led growth and development. Through loan conditionality, 
technical advice, and support for privatization, the Banks have 
promoted vital, but politically difficult, economic reforms. They have 
also induced borrowing governments to redirect wasteful public 
expenditures to areas that will provide longterm economic benefits and 
attract foreign investment.
    The MDBs support U.S. foreign policy in areas of critical U.S. 
interest. MDBs are almost always the largest financing source to 
address post-crisis reconstruction and provide long-term economic 
support in volatile regions which prevent new crises from erupting.
    Bosnia: The World Bank has taken a lead role in coordinating a $5.1 
billion assistance program over the next 3-4 years by multilateral and 
bilateral donors. Together the Bank and the EBRD contributed $440 
million to Bosnia Reconstruction in FY96, the vast majority to ethnic 
Bosnian areas.
    Latin America: The World Bank and the IDB, in addition to the IMF, 
provided key support for the U.S.-coordinated financial stabilization 
effort to the Latin America region following the Mexico peso crisis.
    Haiti: Following the restoration of Haiti's democracy, MDBs 
supplied $375 million in Emergency funding.
    Former Communist Bloc Countries: In FY96, World Bank funding to 
former communist countries totaled $4.2 billion--20% of their overall 
lending. Both the Bank and the EBRD have provided critical economic and 
environmental assistance to transitioning economies (including 
supporting efforts to close the Chernobyl reactor) and supported 
projects to attract private investment. Over the last 5 years the ERBD 
has used $10 billion of investments to leverage an additional $40 
billion in co-financing to the region.
    Middle East: The Banks have sponsored jobs programs in the West 
Bank and Gaza and have made loans to moderate states such as Tunisia, 
Jordan, Morocco and Turkey. The MDBs do not lend to Iran or Iraq.
    The MDBs are vital to opening up new markets in developing 
countries which account for 42% of U.S. exports. Exports to developing 
countries are increasing at twice the rate of exports to developed 
countries. Given that approximately 40% of U.S. economic growth in the 
last five years has come from the export sector, growth in the 
developing world is an important element of U.S. prosperity.
    Priviate investment in developing countries has skyrocketed--a five 
fold increase from 1990 to 1996--but many countries have been left out. 
80% of private investment flows went to only 12 developing countries. 
The MDBs provide funding and leverage to encourage more countries to 
undertake the market-building reforms necessary for private-sector led 
growth. IFI activities improve prospects for American investors and 
exporters by helping countries improve their legal systems, reduce 
corruption, build capital markets and lower tariffs. MDBs also help 
open markets where U.S. firms are particularly competitive. For 
example: deregulating the Pakistani telecom market, rationalizing the 
Argentine banking sector, developing the private power generation 
market in the Philippines, building capital markets in Russia, and 
underwriting privatization in Hungary. In the longer term, MDB projects 
to improve health, education and basic infrastructure lay the ground 
work for growing markets in the future.
    Overall U.S. firms receive about $3.0 billion per year in business 
financed by the MDBs. Of this about $2.0 billion is in direct 
procurement on MDB contracts and $1.0 billion is MDB investments in 
U.S.-led private sector projects. This is more than double our annual 
scheduled payments to the MDBs. However, direct procurement is not the 
only yardstick for judging the benefits of IDA or an MDB. The goals of 
these institutions are to assist countries in achieving sustainable 
development, broad-based economic growth, and poverty alleviation. This 
in turn creates stable trading partners for the United States and heads 
off crises requiring U.S. resources.
    IDA graduates purchased $61 billion in U.S. exports in 1995, up 
from $47 billion in 1994, and had Eximbank exposure of $10.7 billion. 
Current IDA borrowers purchased $26 billion in U.S. exports in 1995. 
Growth in IDA borrowing countries has also been accelerating. Growth 
doubled from 4% in 1990-1991 to 8% in 1994-1995. For IDA borrowers in 
Sub-Saharan Africa, the growth increase during the period was from 1% 
to 4%.
    The procurement restrictions in IDA's Interim Trust Fund do not 
affect projects funded by ``regular'' ISA resources. Consequently, $19 
billion--85%--of the $22 billion in IDA lending over the next three 
years is open to U.S. procurement. If the $1 billion recently set aside 
by the ITF donors is rolled into IDA-11 funds, the total amount of 
funding available for U.S. procurement would be $20 billion or 90% of 
total IDA lending during that period.
              international development association (ida)
    Question. This year, the administration is requesting $1.034 
billion, which fully funds the $800 million scheduled commitment to 
IDA-11 and our remaining $234.5 million arrears to IDA-10.
    Last year, the Congress provided $700 million for payment to IDA--
the same amount as provided in FY 96. This leaves approximately $234 
million that the U.S. still owes. The U.S.--who was instrumental in 
creating IDA--has provided contributions ranging from 20 to 42 percent 
of IDA's budget over nearly three decades. U.S. contributions have also 
been greater than U.S. procurements on IDA projects. There is serious 
concern about denying American companies access to initial procurement 
under IDA-11.
    Mr. Secretary, you were directed by Congress last year to secure an 
agreement with IDA-11 donors to suspend or cancel the procurement 
restrictions. Have the procurement restrictions been lifted or eased?
    Answer. The IDA Interim Trust Fund (ITF) donors have taken action 
which has the potential to open up \1/3\ of the trust fund to U.S. 
procurement. Their decision was to set aside $1 billion of the $3 
billion trust fund so that it could eventually be made open for U.S. 
procurement. The final decision on whether to fold these funds into 
IDA--thereby opening them for U.S. procurement--will be made by the end 
of the calendar year.
    This decision was not easily reached. There were very strongly held 
views on both sides. Several countries gained approval for their 
contribution to the ITF from their parliaments based on the existence 
of procurement restrictions. The principle of limiting procurement to 
donors and borrowers--which applies in IDA and in all other 
concessional windows--is one which many ITF members take very seriously 
and which the U.S. government has supported in the past.
    While this outcome is not everything we wanted when we began, it 
required a vigorous effort by the Administration. Given the obstacles 
we faced when we began our efforts, I believe that this is the best 
result we could achieve.
    I recently submitted a report to Congress detailing the 
Administration's effort on this issue.

           Questions for the Record Submitted by Mr. Packard

                                  ida
    Question. Mr. Secretary, I share with many of my colleagues a great 
concern over the continued lending practices of IDA. I applaud your 
efforts and those in the Treasury Department who recognized that we are 
facing increasingly tight budgetary times and negotiated a decreased 
U.S. commitment to IDA-11. My question concerns reflows. Does our 
negotiated reduction reflect solely our budgetary constraints or has an 
increase in reflows also reduced the need for such a large contribution 
to IDA? Also, do you foresee a time when IDA can begin to realize 
enough reflows that there might not be a need for these annual 
replenishments?
    Staying with IDA, I too have lingering concerns about the 
procurement situation and about the overall effectiveness of IDA 
lending. I understand that 40% of IDA's resources go to Africa. In 
light of this substantial commitment, how do you justify a $50 million 
request for the African Development Fund and a bilateral assistance 
request of $700 million for the Development Fund for Africa?
    Finally, I would like to know the effect our not being able to meet 
our IDA-10 commitments on time has had on IDA projects? Specifically, 
are there things that IDA was not able to do because of our arrears? 
What would they be?
    Answer. IDA loan repayments are an increasing source of funding for 
new IDA loans. In FY97, IDA repayments are estimated at approximately 
$630 million which is slightly less than 10% of expected lending. In 
the future, IDA repayments will grow dramatically to an estimated $1 
billion in FY2000, $2 billion in FY2005 and $4 billion by FY2012. At 
this point they would represent nearly 60% of IDA lending (assuming 
current lending levels.)
    Growing reflows have been a significant factor in allowing IDA to 
maintain its funding level in the face of reduced U.S. contributions. 
Over the long term, this trend toward high repayment levels will 
substantially reduce the need for new donor funding. World Bank has in 
fact been analyzing this question of self sustainability. However, in 
the foreseeable future it appears that the greater reflows will reduce 
but not eliminate the need for future donor resources.
    IDA focuses on priority infrastructure and social sector projects, 
and on policy reform. Its technical expertise is highly valued in 
recipient countries, and, with its substantial resources, it often 
takes the lead in multi-donor funded sector adjustment and policy 
reform programs. These reforms, in turn, set the stage on which small, 
free-standing projects can succeed.
    The African Development Fund (AFDF) offers advice and investments 
from a ``home grown'' institution, and emphasizes smaller projects. 
Operating in close coordination with IDA and other donors in policy and 
sector reforms, it (1) leverages its funds better; (2) gains a seat at 
the policy table of the host country where its identity as an African 
institution gives it special influence; and (3) acquires valuable 
experience in project design and implementation. In addition, the Bank 
is committed to a more intensive focus on--and collaboration with--the 
private sector (e.g., co-financing infrastructure), and lending with a 
grass-roots focus, such as to micro-enterprises, primary health care 
and basic education.
    Two years of intensive efforts by the U.S. and others, which 
conditioned new funding on achieving fundamental change in the 
institution, have culminated in a far-reaching and comprehensive 
restructuring and reform program at the African Bank. Reforms have 
included restricting market rate loans to credit worthy borrowers, term 
limits for senior officials, 20% staff cuts, external audits, and 
commitment to implementing a full range of U.S. policy priorities for 
economic development. The Administration's request for the AFDF 
reflects our confidence that with important reforms in place, the Fund 
is ready to fulfill its mandate and play an important role in African 
development.
    The Development Fund for Africa permits USAID to play a leadership 
role among bilateral donors. It is focused on institutional 
development, implementation, strengthening local capacity, and building 
reform minded local constituencies. Its field presence gives USAID a 
comparative advantage in these staff intensive activities and reflects 
shifting USG priorities: basic human needs and women in development in 
the 1970s; policy reform, institution building and the private sector 
in the 1980s; and democracy, governance and the environment in the 
1990s. Further, they can reflect USG views in areas IFIs may find 
politically sensitive, such as democracy and governance.
    Because the U.S. is the only major donor with substantial arrears 
to IDA and because IDA carries a certain amount of liquidity, the World 
Bank has some capacity to manage its resources to compensate for U.S. 
arrears. In addition, a greater emphasis on effective implementation 
during IDA-10 has caused some projects to be delayed and lending to 
some poor performing countries curtailed. Thus, during the period 
covered by IDA-10, U.S. arrears did not have the effect of forcing 
cancellation of IDA projects.
    When IDA-10 ended in 1996 with the U.S. nearly $1 billion in 
arrears, it was clear that the U.S. could not participate in a new 
replenishment if it was also going to pay down its IDA-10 commitment. 
IDA did not have sufficient resources to continue its planned lending 
program without new resources. In order to avoid causing the 
cancellation or disruption of IDA projects, the other IDA donors 
created the Interim Trust Fund (ITF), to which the U.S. did not 
contribute, to provide the necessary funds. This allowed IDA lending to 
be maintained at planned levels. Thus, while U.S. arrears have not 
caused major disruption in IDA project lending, this is the case only 
because other donors chose to make a contribution when the U.S. did 
not.
    The longer our arrears to IDA persist the more likely is the chance 
that lending will have to be curtailed. Other donors will not 
indefinitely cover for U.S. shortfalls. In fact, preliminary 
discussions of the issue of adjusting share allocations have already 
taken place, reflecting other donors' frustration with the U.S. having 
a greater share in the institution than its recent contributions.

         Questions for the Record Submitted by Mr. Knollenberg

                 international development association
    Question. While the administration requests more and more funding 
for multilateral assistance, many questions have arisen regarding the 
benefits of these programs. This is especially true with respect to 
Africa, which receives over 40% of IDA funding, in addition to the 
assistance it receives from the African Development Bank Group. Of the 
66 less developed countries in the world receiving loans from the World 
Bank, over 50% are no better off today than they were before they 
received those loans. What kind of tangible positive effects can you 
detect in the countries of Sub-Saharan Africa as a result of World Bank 
assistance? Are these programs the most efficient way to give less-
developed countries hand up?
    Answer. Africa is an enormous and diverse continent and there are 
both successes and failures. Overall, in all of the poorest countries, 
including most of Sub-Saharan Africa, there have been dramatic 
improvement in basic social indicators in the lasts twenty years:
    Fertility rates and infant mortality rates are both down 40%.
    The number of children enrolled in secondary schools has nearly 
doubled from 22% to 42% and primary school enrollment has increased 
36%.
    Literacy rates have risen 33%.
    Life expectancy has increased from 54 to 62 years.
    The percent of people with access to safe drinking water has risen 
from 22% to 69%.
    These advances in human potential and well-being would not have 
happened without IFI support. IDA programs in education, sanitation, 
health and population control in Africa have had tangible benefits. In 
the past, projects have, for example, delivered millions of textbooks 
to primary school pupils and increased contraception use by up to 50% 
in high population areas. Current IDA Africa projects include building 
1,600 new classrooms in Malawi for the 1.3 million children who have 
enrolled in school since 1993; increasing primary school enrollment of 
rural girls from 29% to 42% in Guinea; and significantly reducing cases 
of riverblindness (Onchocerciasis) which afflicts 20 million Africans, 
and threatens another 80 million.
    Equally important to the IFI's mission is helping create the 
institutional framework and economic policies that spur private sector-
led growth. To provide incentives for poor countries to undertake 
economic reform, IDA is increasingly concentrating its resources on 
good performers. 84% of IDA lending over the last your years went to 
countries rated average or above on economic reform. This selectivity, 
along with IDA adjustment loans and technical assistance, is beginning 
to pay off. Overall growth in Africa has increased from 1% to 4% since 
1991. Among the good performers, Uganda has been growing at 10% and 
Ghana, Cote D'Iviore, Senegal and Ethiopia have had growth in the 6% 
range.
    Finally, the IFIs are an extremely efficient way for the U.S. to 
assist countries without access to private capital. Overall our $1.5 
billion in scheduled IFI commitments supports over $46 billion in 
development lending, a 1:38 ratio. In IDA, where concessional lending 
requires greater donor resources, our leverage ratio is still nearly 
1:9.
                   world bank and private investment
    Question. The flow of private investment to emerging markets has 
increased dramatically in recent years. Just one decade ago, capital 
flows to developing countries--including direct investment, equity, and 
loans--amounted to less than $40 billion a year. In 1996, this number 
was $250 billion, and this year it will be even higher. A recent 
Business Week article posed this question: If the capital market is 
perfectly capable of identifying worthy projects and readily financing 
private investment and public budgets around the world, and if the 
trend is turning increasingly away from government-financed ventures 
and toward dynamic private investment opportunities, then what useful 
contribution can the World Bank and other global lending bodies makes 
in the developing world? How do you respond to this question?
    Answer. The huge increase in international capital flows to the 
developing world and the transition countries in recent years is 
bringing enormously beneficial results. We must not, however, lose 
sight of the fact that foreign direct and portfolio investment is 
largely concentrated in about one dozen developing and transition 
nations, and--within these countries)--is heavily focused on a few 
sectors, primarily electric power and telecommunications. In most Sub-
Saharan African nations, for example, foreign investor interest remains 
extremely limited.
    The challenge and the need is to broaden the number of countries 
and sectors which can attract foreign investment. This will require 
sweeping macro-economic and sector reforms--including privatization--
and changes in trade, investment and foreign exchange regimes. The MDBs 
are contributing significantly to this process, via policy advice and 
lending, co-financing with private investors, and the provision of 
political and other types of risk insurance. Finally, there are many 
sectors--such as primary health care, basic education, rural roads, and 
peasant agriculture--which are unlikely to attract major foreign 
investment in the near or medium-term, but are essential to 
development.
           Question for the Record Submitted by Mr. Kingston
                            export financing
    Question. Mr. Secretary, I too thank you for appearing today. As 
you know, I am a new member of the subcommittee, and partly for this 
reason I'd like to start off with what may be an age old, fundamental 
question, but I'd like to hear your response anyway. Maybe it's useful 
to come back to the basics sometimes. What evidence do we have--how 
does the Treasury Department demonstrate--that our export financing 
programs truly provide an overall benefit to our citizens and economy 
in the long run rather than only shifting prosperity from one group to 
another? I'm really not trying to make any kind of statement with this, 
I just wanted to hear your response.
    Answer. Eximbank's mandate is to provide export financing to: 1) 
neutralize foreign official export credit competition; and 2) act as a 
lender of last resort'' when private capital markets overestimate the 
real risks involved in lending for sound projects in developing 
countries and do not provide the necessary financing. Eximbank's 
programs are focused on ensuring that U.S. industry and labor's 
inherent competitive advantages in the production of goods and services 
are not undermined by outside political or other forces that circumvent 
market forces. These programs, therefore, encourage the efficient 
allocation of resources within both the U.S. and world economies. The 
efficient allocation of resources, in turn, helps the U.S. economy to 
realize its growth and job-creation potential.
    In sum, rather than shifting prosperity from one group to another, 
Eximbank promotes the efficient operation of the market and helps 
create an economic environment in which all groups benefit.
     international monetary fund--new arrangements to borrow (nab)
    Question. Please explain for the record under exactly what 
circumstances any portion of the $3.5 billion in budgetary authority 
for the NAB would become an outlay from the general U.S. Treasury.
    What is the likelihood of this event?
    It is my understanding that the General Arrangements to Borrow 
(GAB) has functioned adequately and respectably. On what basis do you 
anticipate a need to establish the NAB? In other words are there 
specific looming contingencies which precipitate this need?
    How many times in the past has the IMF needed a NAB-type mechanism 
to complement the GAB?
    Answer. The worst-case--and extremely unlikely--scenario under 
which a portion of the $3.4 billion might become an outlay would occur 
if the United State made an advance under the NAB and the IMF then 
became insolvent and unable to meet the claims of creditor countries. 
An estimate of the uncollectible portion of the U.S. advance, with 
related interest cost, would then be scored as an outlay. Our claims on 
the IMF are backed by the Fund's strong financial position, including 
large gold reserves. In round terms, the IMF's loan portfolio 
(excluding those loans separately financed through the Enhanced 
Structural Adjustment Facility) is presently $51 billion, while 
reserves and gold (valued at the market rate) are about $38 billion. 
About 97 percent of the loan portfolio is current in terms of 
repayment. It must be stressed that the circumstances under which the 
IMF could become insolvent are exceedingly unlikely, and would imply 
very severe conditions in the entire global economy and financial 
system.
    It should also be noted that, although transfers of funds to the 
IMF under the NAB would not be scored as outlays when extended, there 
are some subsequent budget entries that would be scored as positive or 
negative outlays. This derives from the fact that the resulting U.S. 
claim on the IMF is denominated in Special Drawing Rights (SDRs), 
giving rise to periodic valuation adjustments. The gains and losses 
from these routine variations are scored as negative and positive 
outlays, respectively, but in the past they have been negligible and 
have tended to cancel out over time.
    The global economy has grown substantially since the GAB was last 
expanded in 1983. Global GDP and international trade have more than 
doubled, the volume of cross-border investment flows has risen 
dramatically, and many more economies now have access to international 
capital markets. All of this has rendered the GAB disproportionately 
small in relation to potential needs, and it is now potentially 
inadequate to the task of containing destabilizing financial crises 
that can materialize very quickly in contemporary markets. This would 
be especially true if multiple crises were to occur simultaneously or 
in rapid succession.
    There are a number of conceivable scenarios that could give rise to 
a call on the NAB, but no specific looming contingencies that 
precipitated our request. In fact, it is the very inability to foresee 
such contingencies accurately that makes it so imperative, in our view, 
that we have sufficient resources at the ready to respond effectively 
and expeditiously if and when contingencies do arise.
                               world bank
    Question. Why should the subcommittee be truly confident that the 
World Bank will be successful enough in revitalizing and restructuring 
its organization and even on a basic level becoming sufficiently 
effective to warrant the huge sum we are considering?
    Answer. The Treasury Department shares your concern regarding the 
cost of the World Bank's reform and revitalization program, as set out 
in President Wolfensohn's ``Strategic Compact'', and we are working 
closely and with success with Bank management and staff to identify 
ways in which the cost of the proposed reforms can be reduced and 
additional savings identified.
    We have agreed that the Bank will set up a process in which the 
reform plan will be reviewed every six months to ensure that its goals 
are being met and that the costs are not excessive. Furthermore, the 
budget for the Compact will be examined on a yearly basis, thus the 
Board will have a chance to revise the budget figures if it decides 
that the program is not being effectively implemented or that its 
objectives are not appropriate.
    We agree with the need for a revitalization of the Bank, and agree 
with the goals stated in the Strategic Compact to improve loan quality, 
address in a more comprehensive manner the full range of issues that 
affect the development process (e.g., the environment, corruption, good 
governance), and to concentrate on those needs that are not likely to 
be met through private capital flows. Some of the specific actions 
being proposed by the Bank, which we believe will help increase its 
effectiveness, include: (a) becoming more closely involve those most 
directly affected by the Bank's programs by moving more staff and 
managers to the field, by involving them more closely in the 
formulation and monitoring of its projects, and by expanding the Bank's 
network of contacts with a wide range of groups, including those in the 
private sector; (b) more thorough country and sector analyses, better 
projected supervision, and improved procurement procedures and (c) much 
greater selectivity in lending operations. The Bank also plans to 
establish an innovative system for disseminating and analyzing 
information and lessons learned from its past projects and programs 
that will allow it to learn from its mistakes as well as its successes 
when designing new programs, and to share this information not only 
within the Bank but also with its borrowers and others.
                        economic impact--georgia
    Question. You said American workers and businesses are directly 
benefitting through Multilateral Development Bank financing by the 
amount of $3.2 billion. How much of that total went to workers and 
businesses in Georgia?
    Answer. Total recent MDB procurement for Georgia is $28.1 million. 
Additional information has been supplied separately to Mr. Kingston's 
office.
                         economic impact--u.s.
    Question. You touched on the great return of these expenditures for 
the U.S. taxpayers. This is very important, of course. I wanted to 
clarify one point for myself in trying to quantify this. At one time it 
was estimated that for each additional one billion dollars worth of 
goods and services the U.S. exports, 19,000 jobs are created in the 
United States. Is that figure still accurate?
    In the Treasury Department's estimate, how much lower would our 
gross exports be (in dollars) if we had no export subsidation?
    Answer. In the past, the rule of thumb used by the Commerce 
Department was that approximately 14,000 jobs are created by every $1 
billion in exports. However it is important to remember that this 
number is affected by productivity growth, shifts in the composition of 
exports, and other factors. It should be used only as the roughest 
measure of the effect of exports on jobs.
    Since the Export-Import Bank is designed to be the export-financier 
of last resort, one could assume that, without the Bank, all or nearly 
all of Ex-Im supported exports deals would not happen. This would 
amount to approximately $15 billion annually in lost exports.
              measurement of foreign commitment to reform
    Question. I thought you raised a very good point in your example 
regarding Poland's development success: that it was based on the 
necessary condition of that government's strong commitment to reform. 
What mechanisms are used to measure this commitment in other states?
    What direct effect does this measurement have on the strength and 
duration of the IFI's and other aid institution's investment on their 
behalf?
    Answer. The World Bank evaluates its borrowers on macroeconomic 
stability, structural reforms, and the quality of the portfolio under 
implementation to come up with its annual performance rating.
    Under macroeconomic stability, the Bank, together with the IMF, 
looks at the country's efforts to contain inflation, manage debt, and 
maintain fiscal and external balances at sustainable levels. To judge 
progress on structural reforms the Bank looks at a large number of 
factors including savings and taxation policy, trade policy, 
privatization of state-owned enterprises, public expenditure, social 
safety nets, and environmental policy. Finally, to evaluate portfolio 
progress, it looks at the percentage of problem projects in the 
country.
    Based on its evaluation, the Bank rates countries by quintile from 
highest to lowest and then uses this information to adjust lending 
programs. During the IDA-10 period (1994-96), 84% of IDA funds went to 
countries in the top three quintiles.
    The EBRD also adjusts its lending to take account of progress on 
economic reform. As part of its charter, the Bank will only operate in 
countries that are making progress toward greater democracy and 
increased economic freedom. In the Ukraine, for example, the EBRD last 
year scaled back its operations because of disappointing progress on 
reforms. The Bank has made it clear that increased investment will 
require that the country make progress on its reform program.
                       private sector development
    Question. What progress has been made in the IFI's to reorient them 
toward private sector development?
    Can you give me a brief overview of the recent efforts of the 
institutions to increase their efficiency through internal 
restructuring?
    Answer. The MDBs directly support private sector activities by 
providing guarantees, encouraging cofinancing, engaging in direct 
lending to the private sector, and urging borrowing countries to adopt 
pro-private sector policy reforms.
    This advice often consists of support for privatization, lower 
trade barriers, more liberal foreign exchange regimes, and greater 
receptivity to foreign direct investment. Additionally, MDB activities 
which improve health, education, and basic infrastructure also 
encourage private sector development.
    The International Finance Corporation (IFC) of the World Bank 
Group, for example, makes debt and equity investments without 
government guarantees in sound private sector projects in its 
developing member countries, and provides important policy advice 
regarding capital markets development, privatization, and foreign 
investment. The IFC has played a key role in the development of private 
small businesses and land privatization in Russia. The Foreign 
Investment Advisory Service (FIAS), which is a joint operation of the 
IFC and the IBRD, is also a significant source of policy advice, 
especially to Sub-Saharan African nations.
    During the IFC's most recent fiscal year, it approved 264 new 
projects, and made investments for its own account of $3.2 billion. The 
estimated total size of these projects is $19.6 billion. This means for 
every dollar invested by the IFC for its own account, other investors 
and lenders put up over five dollars. IFC is striving to increase its 
developmental impact, and to do more in countries which have not in the 
past been very open to private sector activities.
    The Multilateral Investment Guarantee Agency (MIGA), which is part 
of the World Bank Group, and the European Bank for Reconstruction and 
Development (EBRD) are also playing vital roles in promoting private 
sector development. During MIGA's most recent fiscal year, 68 political 
risk insurance contracts were issued, involving maximum contingent 
liabilities of $862 million. American investors are heavy users of MIGA 
services.
    President Wolfensohn's ``strategic compact'' has a vision of a 
leaner, more efficient, more responsive, and more private sector 
oriented World Bank. Although many details remain to be worked out, we 
strongly support these goals.
                            u.s. leadership
    Question. It is my understanding that the U.S. provides much more 
assistance to most aid recipients via the various multinational 
institutions. Part of the reason for this is that we are able to 
leverage even more assistance in this way--we get a bigger bank for our 
bucks. My question is, how much influence, if any, do you think the 
U.S. may sacrifice or forfeit among the developing nations in taking 
this route as opposed to placing more emphasis on direct aid? Or is it 
better to protect our influence in the ``First World'' by remaining so 
engaged in the multinational approach because we know we cannot afford 
to have it both ways?
    Answer. It is true that our contributions to multilateral 
institutions are highly leveraged and that the development funding 
provided by the MDBs is much larger than what we can provide 
bilaterally. It is also true that our funding to the MDBs has a direct 
impact on our relations with other developed countries with whom we 
share the burden of providing development assistance. However, both 
multilateral and bilateral assistance serve American interests and 
complement each other. MDBs have a comparative advantage in using their 
leverage for broad economic reform and human capital development which 
the entire donor community can support, while bilateral programs are 
able to focus on more specific American development objectives.
    To say that we cannot afford to do both is a false dilemma. Overall 
international spending has been among the most severely cut parts of 
the budget and now is less than \1/2\ of what it was in the mid-80's as 
a percentage of the US budget. Both multilateral and bilateral programs 
have reduced costs and the Administration's request for international 
spending is significantly below prior year enacted levels. Within this 
envelope, this Administration has reduced US ongoing commitments to the 
MDBs by 40%. We cannot afford to sacrifice either bilateral or 
multilateral programs as both are essential to America's international 
leadership.

        Questions for the Record Submitted by Mr. Frelinghuysen

              american interest in foreign policy funding
    Question. Secretary Rubin, you are an extremely visible and 
articulate spokesperson for the Administration. You have credibility in 
the world and national stage.
    Why aren't you selling your goals and objectives to the American 
people? Within our budget for foreign affairs, you are asking for the 
bulk of the increases for spending on multilateral institutions.
    If U.S. investments in multilateral banks and institutions are 
essential to our national and global well being, why aren't you and 
President Clinton using your ``bully pulpit'' to speak out to the 
American people and our constituents?
    As esoteric as some of these issues are to some, it is incumbent 
upon the Administration to explain their importance. For instance, why 
is the issue of ``arrears'' so critical?
    Answer. The Administration is putting a high priority on its 
international affairs request and more specifically its request to fund 
the multilateral institutions. The President specifically discussed the 
need to fund our arrears to the World Bank in his State of the Union 
Speech. Secretary Rubin has discussed the IFIs in much of his 
Congressional testimony and has spoken of the importance of clearing 
arrears to the IFIs to various outside groups including a joint press 
conference with Secretary of State Albright. The White House is also 
including the IFIs prominently in its efforts to raise the visibility 
of the need for international funding in general.
    Our arrears matter because when we fail to keep our promises we 
erode our leadership in the international community. Arrears reduce our 
ability to determine how $46 billion in annual multilateral development 
assistance is directed. We have already had restrictions put on U.S. 
procurement because of our arrears and our voting shares in the 
institutions are under close scrutiny. With 42% of our exports now 
going to developing countries, the U.S. has a critical interest in 
seeing that MDB lending is used to build open free-market economies 
which can become our trading partners of the future. The internal 
reforms which the MDBs have undertaken to be more efficient and private 
sector focused have come about largely as a result of American 
influence.
    The MBDs continue to provide extraordinary support for U.S. foreign 
policy objectives in places like Bosnia, the Former Soviet Union, 
Haiti, Mexico, and the Middle East. If we do not meet our commitments 
to the multilateral banks, other countries will shift their assistance 
to bilateral funding mechanisms which will exclude American procurement 
and won't support American international priorities.
    In assessing the potential damage from continuing to fail to live 
up to our commitments, it is important to remember that, while each 
institution has its own set of issues and challenges, we deal with the 
same set of donors at all of the IFIs. Because of this, disengagement 
at one institution impacts our credibility and influence at the other 
institutions and in our bilateral relations. We cannot continue to reap 
the commercial and political benefits afforded by the hard loan windows 
in high growth areas if we are not willing to share the costs of the 
soft loan windows.
    This advice often consists of support for privatization, lower 
trade barriers, more liberal foreign exchange regimes, and greater 
receptivity to foreign direct investment. Additionally, MDB activities 
which improve health, education, and basic infrastructure also 
encourage private sector development.
    The International Finance Corporation (IFC) of the World Bank 
Group, for example, makes debt and equity investments without 
government guarantees in sound private sector projects in its 
developing member countries, and provides important policy advice 
regarding capital markets development, privatization, and foreign 
investment. The IFC has played a key role in the development of private 
small businesses and land privatization in Russia. The Foreign 
investment Advisory Service (FIAS), which is a joint operation of the 
IFC and the IBRD, is also a significant source of policy advice, 
especially to Sub-Saharan African nations.
    During the IFC's most recent fiscal year, it approved 264 new 
projects, and made investments for its own account of $3.2 billion. The 
estimated total size of these projects is $19.6 billion. This means for 
every dollar invested by the IFC for its own account, other investors 
and lenders put up over five dollars. IFC is striving to increase its 
developmental impact, and to do more in countries which have not in the 
past been very open to private sector activities.
    The European Bank for Reconstruction and Development (EBRD) is also 
highly focused on direct support for private sector investment in 
Eastern Europe and the Soviet Union. To date over 70% of total 
commitments have been to private sector projects. Consistent with U.S. 
priorities, the Bank promotes the privatization of state-owned 
enterprises and the development of small and medium-sized enterprises. 
The Bank also actively promotes development of domestic financial 
institutions in the region.
    The Multilateral Investment Guarantee Agency (MIGA), which is part 
of the World Bank Group is also playing vital roles in promoting 
private sector development. During MIGA's most recent fiscal year, 68 
political risk insurance contracts were issued, involving maximum 
contingent liabilities of $862 million. American investors are heavy 
users of MIGA services.
    The Global Environment Facility (GEF) has a unique and important 
mandate to address worldwide environmental problems. Although the GEF 
seeks to work with the private sector whenever possible, it is focused 
relatively less on private sector development than are other components 
of the multilateral development bank system.
                       private sector development
    Question. In the past two years, this subcommittee has listed in 
its report a number of criteria by which we would judge U.S. investment 
in multilateral development banks and institutions.
    I believe the most important criteria is the focus on private 
sector growth. Which of these institutions stands out in your mind as 
having the best record on promoting private sector growth? Does one 
stand out for having failed to focus on private sector growth and 
development?
    Answer. All of the multilateral development banks (MDBs) have moved 
aggressively in recent years to increase their efforts to encourage 
local private sector led development. The MDBs directly support private 
sector activities by providing guarantees, encouraging co-financing, 
engaging in direct lending to the private sector, and urging borrowing 
countries to adopt pro-private sector policy advice.
                                reforms
    Question. Reviewing the Treasury's budget submission, I noted in 
each of these institutions a somewhat mixed bag of reforms.
    In some, we have negotiated lower U.S. contributions, others are 
aiming for self sustaining operations, and still others are 
concentrating on better management and more focus on private sector 
based projects in their portfolio.
    How do we ensure that these reforms are actually made and made 
consistently in each of these institutions?
    Answer. We provided the Congress with a representative sample of 
some of the reform efforts being undertaken by the multilateral 
development banks. In actual fact, all the Banks are in the process of 
undertaking further measures in all of these areas:
    Better use of internal financial resources, with the long-run 
objective of self-sustainability in all the institutions; the U.S. has 
consistently reduced its level of commitment to the institutions by an 
average of 40% in the last set of replenishments negotiations;
    Improved management and more effective internal operations;
    Improvement of loan quality through better economic and sector 
work, better involvement of affected groups, and improved project 
monitoring;
    Better monitoring of the environmental aspects of projects;
    More focus on ways of encouraging private sector development, 
through direct operations with the private sector and through policy 
reforms that improve the climate for the private sector;
    Greater selectivity in their operations, to focus on countries with 
strong macroeconomic policies and a commitment to development.
    Easing out of areas where adequate private sector financing is 
available; and
    Increased focus on issues that are increasingly recognized as being 
critical to the development process, such as good governance and the 
quality of fiscal choices, including spending on the military.
    This is by no means all of the reform commitments we have obtained 
in these institutions, and the progress in achieving them varies by 
institution. Many of these reforms are conditions attached to recent 
replenishment or capital increase agreements. Others are part of more 
general reform programs in the institutions. The United States ensures 
that the reform programs continue to be carried out through the efforts 
of our Executive Directors on the Board of Directors of the relevant 
institutions and through direct contacts with the staff and management 
of the institutions. These issues are also actively being discussed in 
meetings with our G-7 partners.
                      self sustaining institutions
    Question. Under the Asian Development Fund, your budget reflects 
the goal that ADF ``gradually reduce--and eliminate within half a 
generation (about 15 years)--the need for further donor 
replenishments''.
    Is that goal in reach for other funds and have we stipulated that 
as part of new or ongoing negotiations with other funds?
    Answer. Growing reflows have been a significant factor in allowing 
IDA to maintain its funding level in the face of reduced U.S. 
contributions. The increasing role of repayments as a source of IDA 
funding, reaching 60% of current lending in 15 years, will 
substantially reduce the need for new donor funding. It is conceivable 
that at some point, IDA could reach a point of self sustainability and 
the World Bank has in fact been analyzing this question. At a minimum, 
greater reflows will substantially reduce the need for future donor 
resources.
    The Fund for Special Operations (FSO) is the Inter-American Bank's 
soft window. Currently the FSO is able to lend at a self-sustaining 
rate of $350 million per year. It is the Administration's position 
that, given available internal IDB resources, there is not currently a 
need or a further replenishment of the FSO.
                           graduate countries
    Question. I note that in some rare instances, previous 
beneficiaries of these institutions have actually ``graduated'' and are 
now donors.
    In general, what is the success rate in graduating countries from 
assistance and then having them become donors?
    Answer. Twenty one countries have graduated from IDA and three--
Korea, Turkey, and Botswana--have become IDA donors. Korea is also a 
donor to the ADF. Other countries such as China are poised to graduate 
from IDA. In the Asian Development fund, three graduates--Malaysia, 
Thailand and Korea--are now donors. In the Inter-American Bank's FSO, 
all but five countries have graduated and Bolivia could soon graduate 
as well.
    Graduation rates vary by institution and in general the number of 
countries who have actually become donors is quite small. This should 
not be particularly surprising since concessional lending goes to 
countries with average per capital annual income of around $500.
                              bosnia/ebrd
    Question. With regard to Bosnia and the EBRD, there appears to be a 
shift in emphasis from reconstruction towards economic reforms. How 
confident are you that economic reforms can be achieved and under what 
reasonable timeframe?
    Answer. There has not been any shift in the EBRD's lending plan for 
Bosnia. The Bank continues to direct its lending to public sector 
projects to build roads and telecommunications, and to private sector 
projects in the financial sector and for equity funds. The EBRD may not 
do any structural adjustment lending.
                    new arrangements to borrow (nab)
    Question. With regard to the New Arrangement to Borrow (NAB), can 
you explain for me under what circumstances and procedures this 
authority is invoked? Would for instance the crisis in Albania 
constitute a threat? What is the exposure for the U.S. Treasury with 
this expanded authority? While Mexico's debt crisis, for instance, was 
managed successfully, what would happen under a worst case scenario? 
What would be the direct consequence to the U.S. Treasury?
    Answer. The NAB would operate as a kind of ``reserve tank'' to the 
general resources of the IMF. It would be activated in the event of a 
financial crisis that threatened the stability of the international 
financial system and that required additional resources to supplement 
the IMF's ordinary resources. Both the IMF Executive Board and the NAB 
participants would be required to approve activation, the latter by a 
vote of eligible participants representing 80 per cent of the NAB 
credit arrangements. With an almost 20 per cent share of the NAB, the 
United States would be able to veto activation if joined by just one 
other participant or possibly on its own.
    With respect to Albania, while no eventualities should be ruled 
out, it would seem very unlikely that events there would trigger an 
activation of the NAB. First of all, the crisis in Albania, while of 
dire consequence for many innocent Albanian citizens, poses no obvious 
threat to the international financial system. Secondly, the size of the 
Albanian economy and financial system suggest that, should the IMF 
decide to extend financial assistance, the IMF's general resources 
would be sufficient, not requiring recourse to the NAB's ``reserve 
tank.''
    The worst-case--and extremely unlikely--scenario under which a 
portion of the $3.4 billion might become an outlay would occur if the 
United States made an advance under the NAB and the IMF then became 
insolvent and unable to meet the claims of creditor countries. An 
estimate of the uncollectible portion of the U.S. advance, with related 
interest cost, would then be scored as an outlay. Our claims on the IMF 
are backed by the Fund's strong financial position, including large 
gold reserves. In round terms, the IMF's loan portfolio (excluding 
those loans separately financed through the Enhanced Structural 
Adjustment Facility) is presently $51 billion, while reserves and gold 
(valued at the market rate) are about $38 billion. About 97 percent of 
the loan portfolio is current in terms of repayment. It must be 
stressed that the circumstances under which the IMF could become 
insolvent are exceedingly unlikely, and would imply very severe 
conditions in the entire global economy and financial system.
    It should also be noted that, although transfers of funds to the 
IMF under the NAB would not be scored as outlays when extended, there 
are some subsequent budget entries that are scored as positive or 
negative outlays. This derives from the fact that the resulting U.S. 
claim on the IMF is denominated in Special Drawing Rights (SDRs), 
giving rise to periodic valuation adjustments. The gains and losses 
from these routine variations are scored as negative and positive 
outlays, respectively, but in the past they have been negligible and 
have tended to cancel out over time.

            Questions for the Record Submitted by Ms. Pelosi

                              child labor
    Question. It is my understanding that the World Bank has been 
discussing internally the problem of child labor and what it can do 
with governments and NGOs to address the issue constructively, i.e., 
with rehabilitation programs that provide income and educational 
alternatives. When will this policy be finalized by the Bank? What is 
the Administration doing to encourage the Bank to undertake joint 
initiatives with UNICEF and the ILO on the bonded labor and child labor 
issue?
    Answer. In part at our urging, the World Bank has focussed 
increasingly on child labor, and will circulate a paper specifically 
devoted to the issue in the first half of April. The focus of the paper 
is on the reduction of harmful forms of child labor and more active 
Bank engagement to combat the problem. The U.S. Executive Director has 
met with UNICEF, ILO and NGOs on this issue and has promoted further 
contacts and dialogue for enhanced cooperation in combating the 
problem. There seems to be a good working relationship among these 
actors on the issue. If the Bank paper does not discuss bonded labor, 
existing programs it can join to combat this problem, or suggest new 
joint initiatives, the U.S. Executive Director will urge staff to 
investigate and build on the activities of other expert organizations.
                          china and hong kong
    Question. The reversion of Hong Kong to Chinese sovereignty on July 
1 takes place less than two weeks after the G-7 summit meeting in 
Denver on June 22. Do you believe that it would be useful to discuss 
China and Hong Kong at the G-7, and to try to get common agreement on 
benchmarks for China's compliance with international norms on human 
rights, trade and nonproliferation during the post-Deng transition?
    Will the U.S. encourage the G-7 to issue strong language in the 
final communique about China's obligations toward Hong Kong as spelled 
out in the Basic Law and Joint Declaration, referring specifically to 
its commitments to maintain an independent judiciary, free press, civil 
rights, and an elected legislature?
    Answer. Clearly, the issue of Hong Kong's reversion to Chinese 
sovereignty is critical to China's future and we will be closely 
monitoring its compliance in with commitments on human rights and 
political freedoms. In the time leading up to the June G-7 Summit, we 
will be working with our Summit partners on the appropriate treatment 
for this very important issue.
                              prison labor
    Question. According to the State Department's 1996 Human Rights 
Report, under the 1996 MOU on prison labor, the U.S. Customs Service 
was given access to only one forced labor facility requested by Customs 
in all of 1996. Furthermore, the report said that ``repeated delays in 
arranging prison labor site visits called into question the 
Government's intention regarding implementation of the MOU.'' What does 
the Administration plan to do about this continuing problem? How is 
this issue being included in other talks with China, including those on 
trade matters?
    Answer. China is the only country which has signed a Memorandum of 
Understanding with the U.S. on providing access to prisons to inspect 
for alleged cases of prison labor exports to the U.S. The MOU was 
signed in 1992, and in March 1994 the U.S. and China signed an 
additional statement of cooperation outlining implementation 
procedures.
    An initial period of Chinese cooperation ended after an April, 1995 
visit by U.S. authorities. In the period that followed, Beijing denied 
repeated U.S. requests to visit suspected prison labor facilities. The 
U.S. Embassy in Beijing protested this lack of cooperation, as did 
representatives of the Departments of Treasury and State in meetings 
with Chinese officials. In late February 1997, however, the Chinese 
Ministry of Justice agreed to allow investigation of two new alleged 
cases of prison labor exports to the U.S. Although it is too early to 
tell whether this represents full cooperation on the MOU, the PRC 
appears willing to engage with the USG.
                              global aids
    Question. The World Bank's efforts to address the global AIDS 
pandemic are to be commended. As you know, the World Bank is now one of 
the largest sources of funding for global AIDS programs, having spent 
$700 million in this area over the last decade. Does the Bank have a 
formal strategy on AIDS for its future activities and what mechanisms 
are in place to ensure that these funds are well spent? What, if 
anything, is the U.S. doing to monitor the effectiveness of these 
endeavors? Is Treasury coordinating any efforts with others working on 
AIDS in the Administration to encourage/track the World Bank's projects 
on AIDS?
    Thank you for your leadership in ensuring that AIDS was placed on 
the agenda on the G-7 meeting last year, and for your work in including 
language on AIDS in last year's G-7 statement. Is anything being done 
to follow up on this statement?
    The U.S. is one of the founders of the new Joint and Cosponsored 
Programme on HIV/AIDS at the United Nations--UNAIDS. This effort to 
coordinate international AIDS programs can only succeed if the six 
cosponsoring agencies, WHO, UNICEF, UNDP, UNFPA, UNESCO and the World 
Bank make every effort to cooperate. What has the U.S. done to 
communicate to the World Bank the importance of improved coordination 
on global AIDS programs? How successful has the Bank been in supporting 
UNAIDS?
    President Clinton has repeatedly called for the development of an 
AIDS vaccine in recent months, including in this State of the Union 
address. Has the World Bank given consideration to what role it might 
play in the development and distribution of an AIDS vaccine?
    Answer. As you note, the Bank has committed about $700 million to 
projects aimed at preventing and controlling HIV/AIDS in developing 
countries. There have been more than sixty such projects, with most of 
the Bank's funding being provided through the IDA.
    The World Bank does not have an independent strategy on HIV/AIDS, 
but supports and adheres to the Joint United Nations Program in HIV/
AIDS (UNAIDS) strategy. This reflects the close international 
cooperation which exists on AIDS.
    The Bank has a close day-to-day working relationship with UNAIDS, 
and beginning on April 1, it will assume the chairmanship of the UNAIDS 
Committee of Consponsoring Organizations (CCO). The Bank has also 
awarded a $3 million grant to UNAIDS to support core activities and 
regional initiatives. The World Bank is among the participants--which 
includes the United States, twenty other countries, and NGO 
representatives--of the Program Coordinating Board which provides 
oversight and direction for UNAIDS projects. In December, at the 
suggestion of the U.S. Executive Director at the World Bank, Dr. Peter 
Plot of UNAIDS briefed members of the Bank's Board on the role of the 
Bank and UNAIDS.
    The Bank is also member of the International AIDS Vaccine 
Initiative and has provided grant funding to support its work.
                              environment
    Question. The pending case before the World Bank Board of Directors 
regarding an Inspection Panel investigation of the Yacyreta Dam project 
in Argentina is an important test of the Bank's commitment to 
accountability and of the Inspection Panel's effectiveness as a tool 
for citizens affected by Bank projects. What is the U.S. doing to 
reinforce the need for an Inspection Panel investigation of the 
Yacyreta Dam project? Will we give our Executive Director the support 
to call for a vote if needed on this project?
    Answer. On February 28th, the World Bank's Board asked the 
Inspection Panel to undertake a review of the Yacyreta project in the 
areas of environment and resettlement, and to provide the Board with an 
assessment of the adequacy of the action plan agreed between the Bank 
and the two countries to address the outstanding problems. The Panel 
will report back to the Board within four months.
    This decision was taken by consensus. Treasury and U.S. Executive 
Director Piercy were strongly in support of this decision. We look 
forward to receiving the Panel's report.
                                  ifc
    Question. The Inspection Panel does not extend to projects financed 
by the IFC. President Wolfensohn has reportedly demanded that an 
Inspection Mechanism be created to cover the IFC. The IFC is resisting 
this initiative and so are many members of the Board. In light of the 
fact that the IFC (and the Administration) has fought Congress 
statutorily expanding the Pelosi Amendment to cover the IFC, and has 
instead said that the IFC will voluntarily comply, what is the Treasury 
Department doing to get an effective mechanism established within the 
IFC? Will the U.S. support provisions in an IFC Inspection Mechanism to 
allow claims to be made throughout the life cycle of the project; to 
provide effective remedies for claimants; and, to allow claimants to 
have their identities protected? These provisions are all currently 
covered with the existing Inspection Panel.
    Answer. The United States will support provisions which ensure an 
IFC inspection mechanism that is independent, effective, and accessible 
to locally affected people who believe they have been harmed by a 
failure of IFC to follow its policies and procedures. We also will push 
to ensure that the inspection mechanism is workable and fair to IFC and 
MIGA's private sector borrowers. In particular, businesses need to know 
that the rules of the game will not change after a project has been 
approved if they are a good job implementing the agreed loan 
conditions.
    This inspection mechanism is still in the concept stage, and it is 
too soon to know what the final product will look like. Undoubtedly an 
IFC inspection mechanism will not be identical to the World Bank's 
inspection panel, given the differences between the private sector 
borrowers of IFC and MIGA and the World Bank's public sector borrowers.
                           world bank issues
    Question. What is the U.S. Government's position on the 
establishment of a mandatory social assessment policy at the World 
Bank?
    Will the U.S. support efforts to make the Bank's Country Assistance 
Strategy publicly available? If so, what is Treasury doing to encourage 
this effort? If not, why not?
    I commend the Treasury for its support of the plan adopted by the 
World Bank and IMF last October to relieve debt owed by the poorest 
countries to multilateral financial institutions. This is an important 
start, but there is concern that the plan is too broad and leaves too 
much room for interpretation. What is Treasury doing to ensure the most 
generous possible application of the terms of the plan for the poorest 
countries? Please include in your response specific information on 
Uganda.
    Answer. The Administration is supportive of the World Bank's 
efforts to develop a workable social assessment policy.
    The United States has strongly urged the World Bank, most recently 
at a Board seminar on country assistance strategies, to make the 
strategies public documents after they are approved by the Board. 
Unfortunately, this position has not received support from a majority 
of the Board of Directors. Many members are concerned about the release 
of sensitive information and also believe that making this information 
public will encourage self-censoring by Bank staff in the process of 
writing the strategy. We intend, nonetheless, to continue to push the 
Bank to adopt such a policy. We have argued that making the strategies 
public provides valuable information regarding the Bank's future 
program in a particular country that is of interest to a wide group, 
not least of which is affected populations. Publication would also help 
hold the Bank accountable to the objectives set out in the strategy.
    It is important to clarify that the HIPC Debt Initiative features 
debt reduction by all creditors, bilateral and commercial as well as 
multilateral, to those poorest countries in need of additional relief 
beyond other current mechanisms, in order to achieve debt 
sustainability. A case-by-case approach will be used to implement the 
Initiative of necessity, owing to the very wide range of country 
circumstances that obtain among the heavily-indebted poor countries. 
Guidelines will be used to guide creditors' deliberations in individual 
country cases. Two main measures of debt sustainability are being used 
to assess eligibility, namely the net present value of debt to exports 
ratio and the debt service ratio, but in addition, a variety of 
vulnerability factors will be considered when determining the amount of 
debt reduction needed to achieve sustainability. In the case of Uganda, 
for example, this approach is critical to delivering an appropriate 
amount of debt relief: while Uganda's debt service ratio does not 
suggest it has an unmanageable debt servicing burden, the country's 
marked vulnerability to swings in commodity export prices indicates 
that an unforeseen collapse in commodity prices on world markets would 
have a detrimental impact on Uganda's capacity to service its debt.
    With regard to the extent of relief being offered, the Treasury 
Department believes that the debt relief provided to countries 
qualifying under this Initiative should be sufficiently deep to ensure 
a true exit from the debt rescheduling process. This means that 
countries' external debts should be reduced enough to allow for a 
cushion against unforeseen external shocks and other problems that 
could cause problems with debt and debt servicing to re-emerge. In 
terms of the main measures of debt sustainability being used, 
including, Treasury supports providing enough debt relief to reduce 
these ratios to the lower ends of their target ranges, or below.
    The Treasury Department also seeks to ensure that the Initiative is 
implemented fairly across countries. The extraordinary degree of relief 
offered under this Initiative must be earned through a commensurate 
track record of reform. In most cases, we believe countries will 
require three years between the decision and completion points to 
ensure that a policy foundation has been firmly established to achieve 
sustained growth. The U.S. recognizes that in certain exceptional 
cases, countries with particularly strong records of performance may 
merit a shortening of that period. Uganda's extended track record to 
date makes it such a case, and the U.S. is prepared to be flexible.
    In order to ensure that participating countries obtain the full 
benefit of their efforts, the Treasury Department is actively pressing 
for interim relief to be provided by the multilateral institutions, 
comparable to that already provided by the Paris Club, so that the 
benefits from the Initiative can begin to be delivered soon after the 
decision is made that a country qualifies. The availability of interim 
relief is especially important for Uganda, because the debt service 
payments made using interim relief money would free up more domestic 
resources for use in that country's social sector programs.
    Finally, Treasury opposes any pull-back of relief promised at the 
decision point in the event that a country achieves a better than 
expected performance and therefore an even deeper cushion of debt 
sustainability. All the benefits of reform and improved performance 
should accrue in their entirety to the debtor country.

            Questions for the Record Submitted by Mr. Yates

                     swiss banks and holocaust fund
    Question. It has been 52 years since the end of World War Two and 
the Nazi atrocities committed against the Jewish people. Yet the crimes 
of the Holocaust continue to exist in Europe. By crimes I am referring 
to the Swiss banks and the undisclosed and unaccounted for funds of 
Jewish depositors during the Holocaust. I would like to read you an 
excerpt from the February 24th edition of TIME: ``For New Yorker Naomi 
Weisz Nagel, 56, the story began with precious coded letters 
miraculously smuggled out of Czechoslovakia by her parents in 1943. An 
aunt who survived the war showed her how the letters contained the 
numbers of a secret Swiss account disguised as a telephone number. But 
when she and her aunt tried to retrieve the money from a Basel bank 
after the war, officials said there were no records of the account. 
`Despite our specific identification of an account number at a specific 
bank, despite having hired a Swiss lawyer, the bank refused to return 
my family's money,' says Nagel.'' This is not an isolated case. The 
crimes of the Holocaust continue to exist. What are we doing about it? 
Are we going to wait for the survivors to die and hope the problem goes 
away? Are we going to continue the legacy of persecution that the Nazis 
carried out on the Jewish race? What is the Administration's position 
on this matter? What is your Department's position on this issue? What 
can you do to help with this matter?
    Recently, Under Secretary of State Eizenstat attended the World 
Economic Forum in Davos, Switzerland. It is my understanding he held a 
series of meetings with Swiss government and banking officials on the 
Swiss banks and Holocaust funds issue. Do you intend to hold such 
meetings with Swiss government and banking officials?
    What can the Treasury Department do to help recover the lost funds? 
Can you utilize Under Secretary of State Eizenstat's information and 
coordinate with Secretary Albright on the various efforts to trace the 
Holocaust funds? How would you conduct an investigation into these 
documented gold transports?
    Will you work with Secretary Albright, and Ambassador Madeleine 
Kunin, to encourage the Swiss Government to open the records of the 
Swiss National Bank and the Basel-based Bank for International 
Settlements--both known for close contacts with the Reichsbank and 
their laundering of Nazi gold during the war?
    Recently, the ``Big Three'' Swiss banks announced the creation of a 
so-called ``Humanitarian fund'' for Holocaust survivors. At the same 
time, however, there was no admission of guilt or wrongdoing on behalf 
of the banks or government. While this move was praised by some as a 
good first step, what additional steps would you suggest to Swiss 
banking officials? Is it appropriate to use your, and the vast 
influence of the United States Treasury, to persuade the Swiss 
government and banks into becoming more cooperative in this matter? 
Will you get personally involved in this matter?
    Answer. The issues you raise are not just Treasury issues--they 
affect all of us. And that is why President Clinton has played an 
active and key role. In January 1995, he designated then-Ambassador 
Stuart Eizenstat as Special Envoy for Property Restitution for those in 
eastern and central Europe who were denied any kind of post-war 
compensation, and then early in 1996, named Mr. Eizenstat to head the 
Inter-Agency study of the U.S. Government's role in identifying, 
seizing and distributing assets looted by the Nazis from other 
governments and Holocaust victims.
    Under Secretary Eizenstat has been an active Administration point 
man on the issues. He set up three inter-agency working groups that 
meet regularly to coordinate U.S. Government action and response to 
issues of this era. Treasury is involved in all three groups. As your 
question notes, Mr. Eizenstat has met with the Swiss government and 
banking people on these issues several times over the past year and has 
kept us informed. My Deputy has also met with the Swiss on these 
issues. You are aware that the Swiss Bankers Association and the Swiss 
Government have set up independent groups, including one chaired by 
Paul Volcker, to study their respective roles in the war era. Mr. 
Eizenstat and Ambassador Kunin maintain frequent liaison with the 
leaders of those projects too. Mr. Eizenstat expects to release before 
the end of March the Inter-Agency historical study mentioned earlier.
    Treasury has played an important and constructive role too. We sent 
all of our documents from the era to the National Archives and, in 
November, we declassified all of those Treasury-originated documents so 
that the public and historians can have full access to them. In 
December, Treasury hired a team of historians to review our records and 
to write a brief history of Treasury's role in the economic warfare 
waged against the Nazis. That report, which contains a road map to our 
records, has been given to the State Department's historian, who is in 
the process of merging our report into the broader inter-agency report.
    More recently, Deputy Secretary Summers and Chairman Greenspan 
urged colleagues in Paris and London to press for making public the 
records of the Tripartite Gold Commission (TGC). As you know, the TGC 
was created by the Allies to adjudicate and distribute monetary gold 
looted by the Nazis from other European countries. There have been 
claims that the TGC's gold pool is tainted with personal gold. We 
believe that the public release of these documents might help to bring 
closure to this issue.
                 role of multilateral development banks
    Question. It is my understanding that the evolution of the 
international financial system under United States leadership is a 
highly cost-effective way of promoting the interests of the United 
States in developing world markets. Please explain what role the 
Multilateral Development Banks (MDBs) play in an atmosphere of reduced 
funding in our International Affairs Budget? Why is this favorable to 
bilateral agreements?
    Who are the other major donors to MDBs? Is it true that the bulk of 
MDBs financing now comes from these other donors? What does this do to 
our standing in the world financial community? Are we still seem as 
credible partners? What are the current overdue commitments of the 
United States to MDBs? What are the biggest challenges to the relations 
between the United States and the other members of the G-7? What are 
the challenges facing the United States and the other major donors?
    Answer. Multilateral development is an extremely efficient way to 
spend limited U.S. development dollars. We are able to have a major 
influence on how $46 billion of international assistance with an annual 
scheduled cost of only $1.2 billion. The U.S. thus pays only $1 of 
every $38 of MDB financing. We are able to achieve this high ``bang for 
the buck'' because our contributions leverage much larger flows from 
other donors and borrowing from capital markets, and because the IFIs 
can tap international capital markets based on the pledges of 
participating countries.
    The United States is in a unique position to benefit from this 
leverage. Although we pay a small percentage of the overall lending 
amount, we have always been by far the most influential voice in the 
IFIs and have generally been able to set their development agenda. Our 
situation is analogous to that of a company where a minority 
shareholder exercises decisive influence by having the largest block of 
voting stock. America's global reach and intellectual leadership in the 
institutions translates directly into Bank support for our foreign 
policy and our global economic interests. This is a great deal for the 
U.S. which we can maintain by meeting our commitments to the 
institutions.
    Question. As you may have heard me say before, I have been a member 
of this Subcommittee since it was the Marshall Plan Appropriations 
Subcommittee. I remember when Paul Hofman would say: ``lets get Europe 
off our back and on its feet.'' We are the leaders of the world, and 
that includes being the financial leader. My question is, after more 
than a decade of successive annual cuts, are we still the financial 
leader we were when we helped rebuild Europe?
    As you know, this year the Administration requested a slight 
increase in spending on International Affairs budget. As the Treasury 
Secretary, please explain why foreign aid is so critically important to 
our position in the world community. What does foreign aid such as IDA, 
NAD Bank, GEF, ADF and IBRD (to name just a few) do for the United 
States? Can the United States continue to be a world leader without 
these programs?
    Many members of this Committee and the Congress have been concerned 
that countries who support terrorism may be receiving financial aid 
through MDBs. Is it your opinion that these concerns are not grounded? 
Do you think that the United States should allow nations trading in 
terror and disrespecting human rights to receive financial assistance? 
How could we encourage our European allies to stop dealings with such 
countries?
    Would businesses in the United States--who rely heavily on MDBs to 
create an environment favorable to them--be adversely affected by a 
diminished role of MDBs in the developing world? What would be the 
long-term economic impact of such scenarios?
    Answer. America is no longer the world's overwhelmingly dominant 
economy as it was at the end of World War II. At that time, many of our 
current allies had been physically and financially devastated by the 
war and the U.S. was the only country able to support global recovery. 
Because of our success with the Marshall plan and our leadership of the 
global financial system and multilateral institutions, Europe and Japan 
were able to return to prosperity, creating new opportunities for 
greater US economic growth. These countries now share the burden of 
funding development for the next generation of developing countries.
    While the U.S. is still unquestionably the leader in the global 
economy, our leadership is eroded when we do not carry our share of the 
international financial burden. We have dramatically reduced our 
commitments to the International Financial Institutions (IFIs), and 
asked that other donors carry more of the costs. But if we are 
unwilling to meet even our reduced commitments the perception that the 
U.S. will not bear its share of the development burden affects our 
capacity to lead in other international fora. There is a real danger 
that a loss of U.S. credibility in multilateral institutions could be 
viewed as part of a general U.S. retreat from internationalism and the 
post-war system that we created.
    Foreign aid, and specifically our participation in the IFIs, is an 
excellent investment for the United States. IFIs directly support U.S. 
foreign and economic policy in the world's most politically sensitive 
and economically promising regions. In places like Bosnia, the former 
Communist bloc, the Middle East, Haiti, and Mexico, the IFIs have 
provided critical support for American foreign policy when we needed it 
most. Long-term MDB investments are also helping to prevent future 
crises which might otherwise require a significant U.S. response.
    The IFIs' financial leverage, loan conditionality and technical 
expertise make them the primary instruments of basic economic reform. 
IFIs also have a comparative advantage in solving long term, resource 
intensive problems where burden sharing, and international consensus 
are key.
    With 42% of our exports now going to developing countries, the U.S. 
has a critical interest in seeing that development assistance is used 
to build open free-market economies which can become our trading 
partners of the future. Based on recent trends, currently developing 
countries will be largest customers for our exports in the next 
century.
    Stepping back from our traditional leadership role at the IFIs, 
either by failing to meet even our reduced commitments or by pulling 
out of the institutions altogether, would have serious foreign and 
economic policy ramifications. Losing commercial opportunities and our 
voice in setting development policy in much of the world would be only 
part of the fallout. The perception that the U.S. will not bear its 
share of the development burden affects our overall international 
leadership.
    It is the policy of the United States to oppose multilateral 
assistance to countries who support terrorism. We have worked hard in 
the institutions to make sure that countries identified as supporters 
of terrorism do not receive loans. For example, we have successfully 
prevented Iran and Iraq from obtaining access to World Bank resources. 
Unfortunately, many other donors do not feel as strongly as we do about 
the need to deny funds to such countries. It is crucial that we 
maintain our influence in these institutions to assure that supporters 
of terrorism continue to be excluded.
                 inter-american development bank (idb)
    Question. I understand that the IDB is the main source of 
multilateral assistance to Latin America and Caribbean Countries. What 
are our arrears at the end of FY'97? What type of influence does the 
United States have in the IDB? What impact do our arrears have on our 
ability to maintain support for those developing and transitioning 
countries committed to sound economic policy? What are the long-term 
economic and humanitarian interests in this region? How can IDB and the 
United States create a proper policy environment for trade and 
investment?
    Answer. Our arrears to the Inter-American Development Bank are 
currently $21.4 million. Our arrears to the Multilateral Investment 
Fund, the Bank window focussing most directly on private sector 
investment, are currently $178.8 million.
    Currently, the United States has a good deal of influence in the 
IDB. We are the largest single shareholder and hold over 30 percent of 
the voting power. We are also the largest single shareholder in the 
Inter-American Investment Corporation, where we hold over 25 percent of 
the voting power.
    Our large-scale arrears to the MIF, which lends to support market 
opening policy reforms, privatization, and microenterprise, will 
directly affect our ability to push for a greater private sector focus 
at the institution. The U.S. is the single most influential voice for 
the open, market-driven policies needed to underpin democracy and 
social ability in Latin America. Without a strong U.S. role, there 
would likely not have been a commitment to earmark 5% of the Bank's 
resources to direct private sector lending without government 
guarantees. Nor would there be the Inter-American Investment 
Corporation and the Multilateral Investment Fund, focussing on 
promoting private investment.
    The United States has a huge economic, financial and political 
stake in Latin America. U.S. exports to the region in 1995 were just 
under $100 billion and amounted to more than our sales to Japan and 
Germany combined. Our exports to the region grew 76.8% during the 1990/
95 period, more than twice as fast as exports to the industrial 
countries. Exports to Brazil alone now exceeds our sales to Italy.
    We are the dominant supplier to the region--Mexico is not only our 
third largest trading partner but our products now account for 80% of 
Mexico imports. We account for over 40% of imports for an additional 
ten countries, including Venezuela and Costa Rica.
    We are also the preeminent investor in the region; over 60% of 
Mexico's foreign direct investment inflows come from the United States 
and US foreign direct investment in the region was over $120 billion at 
end-1995--more than twice the amount in place in the developing 
countries of Asia.
    Prospects for even closer ties with the region are better than 
ever.
    Democracy has taken firm root in the hemisphere; an open press and 
effective communications system are making it stronger and more 
resilient each passing year. Better communications and a free press 
have also meant a broader sharing of goals, aspirations and values both 
within the region and with the United States.
    Solid economic policy makers, many U.S. trained, have brought about 
closer de facto harmonization of macro-economic management across the 
region and with the United States. The shared vision of what 
constitutes sound policy may well be greater in this region than in any 
other part of the world.
    For the most part, ties between the United States and Latin America 
and the Caribbean have grown closer and more complex outside official 
channels. Private investment, trade, tourism, and shared media 
communications are now the dominant dynamic of regional cooperation and 
integration rather than actions of officials agencies and governments. 
Another element affecting hemispheric relations is the growing 
importance of the Hispanic population in the United States.
    The extensive range of U.S. interests in Latin America and the 
Caribbean are best served by the presence of strong, broad-based 
democracies with strong market-based economies. These are the essential 
elements for making these countries resilient to the shocks and 
surprises--both internal and external--that seem to come by on a 
regular basis.
    The IDB and the United States can do a lot to support private 
sector activity and investment. They can catalyze private sector 
investment in countries and sectors where it can make a difference, 
using a variety of instruments including insurance and guarantees. They 
can support the second generation of reforms such as building legal and 
regulatory systems on which people can depend for fairness and 
efficiency. They can promote pension, tax, and financial sector reforms 
that encourage savings and broaden participation. Finally, they can 
help advance human capital through projects focussing on education, 
health and environmental needs which cannot be met by private markets 
alone.
                      middle east development bank
    Question. The Administration has included, in the Economic Support 
Funds section of the Department of State's FY '98 budget request, $52.5 
million to fund the Middle East Development Bank (MEDB). This regional 
development bank was one of former Israeli Prime Minister Shimon Peres' 
vision for a new peaceful and prosperous Middle East teaming with 
economic development and cooperation. As I am sure you know, the Bank 
was unsuccessful in its request for funding in FY '97. I am sure you 
are also aware that the authorization for the Bank was included in the 
1997 Foreign Operations Appropriations bill.
    What is the current status of the Bank? Why is the Bank so 
important to the peace process? Is there much support for the Bank in 
the region? Will all the lending be through a hard-dollar window? Will 
the lending be solely to Middle East countries? What will be the scope 
of the Banks activities? What type of funding have the Europeans and 
the Gulf States provided to the Bank? What types of restrictions will 
be placed on member, or donor nations? Can anyone in the region join 
the Bank? If so, what precludes loans being made to known terrorists 
states such as, Iran and Syria? Or, Arab nations opposed to peace or 
technically still at war with Israel? Are there any preconditions to 
joining the Bank? Could the goals of the Bank be achieved through a 
different vehicle?
    My Chairman has stated on many occasions that we are spending an 
inordinate amount of money in the Middle East and I can under his 
position. The year I was first elected to Congress, Israel became an 
independent State. I was still in Congress when the Camp David Accords 
were signed. President Jimmy Carter used to call me and some of my 
colleagues to the White House on Sunday afternoons to informally 
discuss the progress of the talks. At times, he used me as an 
unofficial go-between. But, there are those who say we have done 
enough. It could be argued that this was the main reason why the Middle 
East Development Bank failed to receive funding in FY '97.
    With this in mind, how do you justify our involvement to the 
critics of the Bank? How do you explain the need for such a Bank to 
those who say we spend enough on Israel? What is the importance of 
additional funding? How would you address those, who are opposed to 
creating another regional institution and bureaucracy? Should we create 
a separate account for the Middle East Peace Process and take the funds 
from it? Would the Administration be opposed to such a separate 
account?
    Answer. The Transition Team has begun its work program toward 
establishment of the Bank. An office has opened in Cairo with team 
members representing the United States, the Netherlands, Israel, Japan, 
and Egypt. Members representing Austria and Italy are expected to join 
them shortly. With regard to the Bank itself, five countries have 
signed the Articles of Agreement: the United States, Russia, Jordan, 
Italy, and Cyprus. We have encouraged other prospective members to sign 
and expect a number of them will do so in the near future, particularly 
after U.S. funding is secured. European membership currently includes 
Italy, Russia, Netherlands, Austria, Greece, Turkey, Cyprus, and Malta. 
We believe that, with the momentum from establishing the Bank, 
additional membership applications, and continued progress in the peace 
process, broader European Union and Gulf States membership will 
materialize.
    The Bank is the result of an historic joint proposal by the four 
core parties in the peace process: Egypt, Israel, Jordan, and the 
Palestinians. It will be a significant presence in the Middle East, 
helping to lock in the political commitment to peace and economic 
integration. In addition, the Bank will help provide the economic 
foundation for a lasting peace. The Bank will focus on leveraging 
resources and being a catalyst for private investment by assuming 
certain types of risk that the private sector would not or will not 
assume. The focus on regional projects is something that none of the 
existing multilateral development banks adequately address. There 
currently is no other vehicle that promotes economic cooperation and 
economic policy coordination in the region.
    We believe the regional members remain committed to seeing the Bank 
become a reality. Jordan has signed the Articles of Agreement and we 
expect others to do the same upon completion of their respective 
domestic procedures. Both Egypt and Israel currently have 
representatives on the Transition Team and Egypt is providing 
additional support for the Transition Team's activities in Cairo.
    There will be no concessional window at the bank. However, the Bank 
will be able to administer voluntarily contributed trust funds that 
could offer concessional rates. Projects eligible for funding would 
have to be in one or more of the regional members of the Bank. The Bank 
has three very specific objectives: to assist the private sector, to 
promote regional projects, and to advance regional economic policy 
dialogue. The first two objectives will be realized through the 
financial operations of the Bank. The third objective will be realized 
through a discussion forum.
    Bank membership is open only to parties that support the peace 
process. This principle is enshrined in the Articles which state that 
members are committed to achieving a comprehensive peace in the Middle 
East and supporting the peace process begun at Madrid in October 1991. 
New Members will be accepted subject to a special majority of 80%. 
Thus, the U.S. with its 21% share can block entry of unacceptable 
states. Countries such as Iran, Iraq and Libya clearly have no place in 
this institution unless there is a radical change in their policies.
    In the negotiations of the Bank's Articles of Agreement, we made it 
clear that the institution we create be ``lean and mean.'' It will have 
a relatively small capital structure, which will require it to leverage 
resources and act as a catalyst for private investment. It will be an 
institution which will have considerably fewer full time employees than 
any of the other regional development banks. It will also have some 
unique aspects, such as a non-resident board of directors, which will 
hold down the cost and increase the efficiency of its operations.
    U.S. participation in the Bank is critical and indicates our full 
support for the peace process and the economic development of the 
region. Without out support, the Bank will likely never operate. The 
Administration's budget proposal does not include a request for 
additional funding for the Bank. Rather, it requests a transfer of 
funds appropriated under the head, ``Economic Support Fund.'' At this 
stage it is most appropriate to use ESF to support the Bank because the 
mission of the Bank is closely linked to the political and economic 
objectives of ESF. The Bank originated as a joint proposal by the four 
core parties in the peace process--Egypt, Israel, Jordan, and the 
Palestinians--as part of their efforts to cement peace.
                               world bank
    Question. For several years, as a result of legislation supported 
by this Subcommittee, the World Bank has routinely carried out 
environmental impact assessments at an early stage of their loan 
process. Yet the Bank has been less attentive to the social 
consequences of its lending, even though all loans by definition will 
have a social impact. Is the Administration, or your department pushing 
the World Bank to adopt a policy of conducting mandatory social impact 
assessments, as well as environmental assessments, as a precondition 
for loan approval? Does our position within the world financial 
institutions allow for such a request? In other words, do we still have 
the juice to make such a request.
    The Media is paying a lot of attention to my good friend, Mr. 
Wolfensohn's ``Strategic Compact'' or his effort to overhaul the Bank's 
bureaucracy and management. Could you elaborate on what this overhaul 
would do to the Bank's efforts to increase participation and accelerate 
poverty reduction?
    The World Bank is putting increased emphasis on the ``country 
assistance strategy,'' the three-year plan for borrowing countries that 
sets the direction for both policy and projects. The Bank has also 
pledged to make the process of formulating the strategy more 
participatory. Yet, the document itself remains confidential. Will your 
Department push the Bank to release the document in draft form, with 
sufficient time to allow public comment?
    I must tell you that I commend you and the Administration for 
supporting the plan adopted by the World Bank and IMF to relieve the 
debt owed by the poorest countries to multilateral institutions. It is 
a good plan, but it is very broad and leaves considerable room for 
interpretation. What are you doing to insure the most generous possible 
application of terms for the poorest countries? Could you please 
specify with regard to Uganda? Is it still the Administration's 
position that Uganda demonstrates good economic performance before 
qualifying for debt relief?
    Answer. The Administration is pushing for the World Bank to adopt 
binding policy or procedures on social assessment. We will continue to 
work to achieve this important objective, which we believe would 
increase the development impact and sustainability of the Bank's 
projects.
    So far, however, Management and the Board have taken the view that 
the Bank should adopt non-binding social assessment guidelines, in 
large part because social assessment is still a relatively untested 
methodology. The Bank's social assessment guidelines should be ready by 
July 1998.
    A key objective of President's Wolfensohn's Strategic Compact is to 
increase project quality by putting more staff in the field and by more 
closely involving local groups and affected populations in project 
preparation and implementation. We intend to hold the Bank to these 
latter commitments, in particular to its intention to widen its efforts 
to foster grassroots participation.
    Poverty reduction is the centerpiece of the Compact, with the 
various components geared toward addressing this central objective of 
the Bank. Specific proposals for dealing directly with poverty 
alleviation include the hiring of additional staff to work on social 
sector and other issues directly related to poverty alleviation 
(including gender issues, indigenous people, resettlement), ensuring 
that social analysis and participation are integral components of all 
priority projects and the creation of guidelines which set out ``best 
practices'' in the social sector, as well as the sourcebook for social 
assessments which can serve as a basis for ongoing staff work. The Bank 
has also committed to providing a full treatment of social issues in 
Country Assistance Strategies.
    All of these changes will take time to implement, and could come 
into conflict with the Bank's goal of speeding project development and 
responding to the needs of the borrower (e.g. governments). We intend 
to propose ways that these endeavors can be strengthened at the outset 
of the Compact formulation, and will follow very closely the 
implementation of this aspect of the Compact in the coming months and 
years. We will also look at factors such as the criteria used in the 
evaluation of Bank staff which could affect their incentive in ensuring 
that participation, social factors and other poverty-related factors 
are sufficiently addressed in project formulation and implementation.
    The United States has strongly urged the World Bank, most recently 
at a Board seminar on country assistance strategies, to make the 
strategies public documents after they are approved by the Board. We 
believe that the documents contain little in the nature of confidential 
information, and that this information could be deleted before 
publication. Unfortunately, this position has not received support from 
a majority of the Board of Directors. Many members are concerned about 
the release of sensitive information and also believe that making this 
information public will encourage self-censoring by Bank staff in the 
process of writing the strategy. We intend, nonetheless, to continue to 
push the Bank to adopt such a policy. We have argued that making the 
strategies public provides valuable information regarding the Bank's 
future program in a particular country that is of interest to a wide 
group, not least of which is affected populations. Publication also 
helps hold the Bank accountable to the objectives set out in the 
strategy.
    It is important to clarify that the HIPC Debt Initiative features 
debt reduction by all creditors, bilateral and commercial as well as 
multilateral, to those poorest countries in need of additional relief 
beyond other current mechanisms, in order to achieve debt 
sustainability. A case-by-case approach will be used to implement the 
Initiative of necessity, owing to the very wide range of country 
circumstances that obtain among the heavily-indebted poor countries. 
Guidelines will be used to guide creditors' deliberations in individual 
country cases. Two main measures of debt sustainability are being used 
to assess eligibility, namely the net present value of debt to exports 
ratio and the debt service ratio, but in addition, a variety of 
vulnerability factors will be considered when determining the amount of 
debt reduction needed to achieve sustainability. In the case of Uganda, 
for example, this approach is critical to delivering an appropriate 
amount of debt relief: while Uganda's debt service ratio does not 
suggest it has an unmanageable debt servicing burden, the country's 
marked vulnerability to swings in commodity export prices indicates 
that an unforeseen collapse in commodity prices on world markets would 
have a detrimental impact on Uganda's capacity to service its debt.
    With regard to the extent of relief being offered, the Treasury 
Department believes that the debt relief provided to countries 
qualifying under this Initiative should be sufficiently deep to ensure 
a true exit from the debt rescheduling process. This means that 
countries's external debts should be reduced enough to allow for a 
cushion against unforeseen external shocks and other problems that 
could cause problems with debt and debt servicing to re-emerge. In 
terms of the main measures of debt sustainability being used, 
including, Treasury supports providing enough debt relief to reduce 
these ratios to the lower ends of their target ranges, or below.
    The Treasury Department also seeks to ensure that the Initiative is 
implemented fairly across countries. The extraordinary degree of relief 
offered under this Initiative must be earned through a commensurate 
track record of reform. In most cases, we believe countries will 
require three years between the decision and completion points to 
ensure that a policy foundation has been firmly established to achieve 
sustained growth. The U.S. recognizes that in certain exceptional 
cases, countries with particularly strong records of performance may 
merit a shortening of that period. Uganda's extended track record to 
date makes it such a case, and the U.S. is prepared to be flexible.
    In order to ensure that participating countries obtain the full 
benefit of their efforts, the Treasury Department is actively pressing 
for interim relief to be provided by the multilateral institutions, 
comparable to that already provided by the Paris Club, so that the 
benefits from the Initiative can begin to be delivered soon after the 
decision is made that a country qualifies. The availability of interim 
relief is especially important for Uganda, because the debt service 
payments made using interim relief money would free up more domestic 
resources for use in that country's social sector programs.
    Finally, Treasury opposes any pull-back of relief promised at the 
decision point in the event that a country achieves a better than 
expected performance and therefore an even deeper cushion of debt 
sustainability. All the benefits of reform and improved performance 
should accrue in their entirety to the debtor country.

             Questions for the Record Submitted by Mr. Wolf

             world bank loans to china--tarim basin project
    Question. Last year, several of us on the subcommittee were 
concerned about World Bank loans to China. In particular, we were 
concerned that a loan provided to the Tarim Basin project in Xinjiang 
Autonomous Region was benefiting forced labor installments in the 
province. Harry Wu, president of the Laogai Research Foundation and 
prominent Chinese-American human rights activist, made these 
allegations in 1995. You testified that the World Bank had launched an 
investigation into the Tarim Basin project and determined that ``there 
was no link between the project and forced labor and military farms'' 
and that the benefits of the project were ``going to the intended 
recipients--the 130,000 poor and most minority farmers in the region.''
    According to information provided to me by the Laogai Research 
Foundation, there are two governmental units in control in that region. 
The first is the Xinjiang Provincial government and the second is the 
Xinjiang Production and Construction Corps (XPCC). Who controls what 
and which unit has more influence in the region is not clear. We do 
know, however, that the XPCC runs forced labor camps (laogai), border 
defense operations, militia training and joint exercises with the 
People's Liberation Army. The Defense Intelligence Agency (DIA) has 
confirmed this. We also know that the XPCC has civilian operations. 
These facts were brought out during a hearing by the Senate Foreign 
Relations Committee in July of last year.
    At that hearing, David Lipton, assistant secretary for 
International Affairs, testified that the XPCC is a complex 
organization ``the nature of which we do not fully understand.'' He 
said that the World Bank's investigation into the Tarim Basin project 
concluded that, based on project records and sites, ``only civilian and 
commercial units of the XPCC has been involved in the project and that 
there was no evidence of any project benefit to a prison.'' He also 
said that the World Bank has first made sure that there are ``no 
ongoing projects where involvement of this agency is leading to direct 
support of prison or military activities, and second that the World 
Bank has decided that it will insist on further clarification of 
whether or not it is possible to separate it.'' He continued ``the 
World Bank has said it will enter into no new operations or 
undertakings with this organization unless and until it can be 
satisfied that can be done.''
    Last November, the World Bank approved a $150 million loan for 
another Tarim Basin project, referred to as the Tarim II project.
    Are any dollars from the project going to the Xinjiang Production 
and Construction Corporation? If so, how has the World Bank determined 
that these funds will not go to or directly or indirectly benefit the 
military operations of the XPCC? How has the World Bank documented that 
this project will not use forced labor? How did the United Statesvote 
on this loan? How did the Treasury Department evaluate this loan and 
reassure itself that it would not benefit the XPCC military operations, 
use forced labor or benefit the laogai camps in the Xinjiang region?
    Can the Treasury Department provide me with a report on the 
division of power between the XPCC and the Xinjiang Provisional 
government in the region, including a list of all the laogai 
detachments in the region and who controls them? If this information 
does not exist, I find it hard to believe that the World Bank or the 
Treasury Department has any basis on which to determine without doubt 
that the Tarim II project will not benefit the military operations of 
the XPCC.
    According to the testimony of Harry Wu before the Senate Foreign 
Relations Committee last July, in 1990, the XPCC was ordered to take 
control of all irrigation systems in Xinjiang. The Tarim Basin Project 
provides $125 million in loans to improve irrigation systems in the 
province. Mr. Wu alleges that the XPCC, made up primarily of Han 
Chinese, not the local minorities, determined who gets the water. Does 
the World Bank have accurate and independent information about which 
organization or governmental unit decides who gets the water from the 
Tarim Basin project? If not, do you feel confident that they can 
accurately determine that the water is indeed going to minority groups 
and not to prisons or soldiers?
    Answer. As Assistant Secretary Lipton testified before the Senate 
Committee on Foreign Relations on July 25, 1996, the World Bank's 
Executive Board approved a $125 million IDA credit for the Tarim Basin 
project. The Tarim Basin project was designed to improve the income and 
well-being of about 500,000 people in Xinjiang region. These poor are 
almost exclusively smallholder farmers of the Uygur ethnic minority.
    The World Bank has not approved a follow-on loan to the Tarim Basin 
project, referred to hear as Tarim II. The Bank is, however, in the 
very early stages of project identification and preparation of a Tarim 
Basin Poverty and Environment project.
                       world bank loans to china
    Question. I am concerned generally about the World Bank lending in 
China. Last year, in response to questions submitted for the record, 
the Treasury Department indicated that the World Bank would conduct an 
internal review into all World Bank projects in China (an estimated 
160) to determine whether they have links to the Chinese military or 
forced labor system.
    Has the World Bank completed this review? What did it conclude? 
Were any projects stopped as a result of this review? Were sources 
outside of the Chinese government consulted? Can you provide the 
findings of the World Bank review to Congress? Would you also provide a 
list of all the World Bank projects (including IDA, IBRD and the IFC) 
in China including information on when they were approved and the 
estimated date of completion?
    If the review has not been done, has the Treasury Department raised 
this with Bank officials?
    Has the Treasury Department made any changes to the way it reviews 
proposed World Bank loans to ensure that the projects do not have links 
to the Chinese military or the forced labor system?
    Answer. The World Bank completed a review of its China portfolio 
and possible links to forced labor and the military and released this 
to the public in December 1995. The review found no evidence of the use 
of forced labor on the Tarim Basin project or any other project in 
Xinjiang and the rest of China.

            Questions for the Record Submitted by Mrs. Lowey

              international development association (ida)
    Questions. If U.S. arrears to IDA are not erased, can we still 
expect IDA to be responsive to U.S. concerns about child labor, the 
environment, and the need to reduce corruption?
    How will other countries respond to our arrears?
    Answer. Continued arrears will erode our ability to push our reform 
agenda at the institutions. Much of the reforms that are now being 
implemented came as a result of American influence. We would lose a 
uniquely effective platform for our agenda on anti-corruption, military 
spending, environmental issues, and private sector based economic 
reform. We would also sacrifice the progress we have made in pushing 
for greater linkage between lending levels and performance, more 
transparency of documents and policies, and greater focus on borrowing 
governments' spending priorities.
    The MDBs continue to provide extraordinary support for U.S. foreign 
policy objectives in places like Bosnia, the former Soviet Union, 
Haiti, Mexico, and the Middle East. If we do not meet our commitments 
to the multilateral banks, other countries will shift their assistance 
to bilateral funding mechanisms which will exclude American procurement 
and won't support American international priorities. In addition, other 
donors are likely to want to reduce opportunities for U.S. business and 
U.S. voting rights. We have already had restrictions put on U.S. 
procurement because of our arrears and our voting shares in the 
institutions are under close scrutiny.
                               terrorism
    Question. As you know, the antiterrorism legislation enacted last 
April included a series of access and fundraising restrictions on 
terrorist organizations and their representatives in the U.S. These 
provisions are critical to preventing international terror groups from 
using this country as a safe haven to raise funds and coordinate their 
activities. When Secretary Albright was heard two weeks ago, I 
expressed my disappointment that the State Department has not yet used 
its authority under section 302 of the legislation to designate any 
foreign terrorist organizations. But the State Department is required 
to establish this list in consultation with the Treasury Department. So 
I issue the same concern to you. I think it's critical that this list 
is released and I would like you to do everything you can to expedite 
this process.
    Answer. The fight against terrorism is very important to this 
Administration, and the designations of foreign terrorist organizations 
will aid in that effort.
    Section 302 of the Antiterrorism and Effective Death Penalty Act of 
1996 (AEDPA) authorizes the Secretary of State to designate 
organizations as foreign terrorist organizations (FTOs) in consultation 
with the Secretary of the Treasury and the Attorney General. As part of 
this consultation process, officials at Treasury have been working very 
closely with their colleagues at the Departments of State and Justice, 
in addition to the FBI and the CIA, to help the State Department 
develop an administrative record for each organization to be 
designated. The process to develop the administrative record is labor 
intensive, involving extensive research and coordination with several 
other U.S. Government agencies, for a number of organizations. This 
process will be completed soon. I will do all I can to expedite this 
process within Treasury.
    During the pendency of the Secretary of State's notice to Congress 
of intent to designate an organization, Treasury may require U.S. 
financial institutions possessing or controlling any assets of the 
organization to block all financial transactions involving those assets 
until further directive from Treasury, act of Congress, or court order. 
Once a designation becomes final by Federal Register publication, 
except as authorized by the Treasury, any U.S. financial institution 
that becomes aware that it has possession of, or control over, funds in 
which the FTO or its agent has an interest must retain possession of or 
control over the funds and report the funds to the Treasury.
    In addition to the Antiterrorism Act, E.O. 12947 of January 23, 
1995, which President Clinton has extended for another year, designated 
12 organizations under the International Emergency Economic Powers Act 
(IEEPA) as terrorists who threaten to disrupt the Middle East peace 
process. E.O. 12947 bars U.S. individuals and companies from any 
commercial or financial dealings with those organizations identified 
under the Order, and blocks those organizations' assets in the U.S., or 
in the control of U.S. individuals or companies abroad. That program is 
administered by Treasury's Office of Foreign Assets Control (OFAC) in 
coordination with the Departments of State and Justice. In addition, 
Treasury has designated 21 individuals as Specially Designated 
Terrorists under E.O. 12947.
                       assets seized by the nazis
    Question. Under Secretary of Commerce, Stuart Eizenstat, is leading 
an 11-member inter-agency team that is reviewing document files in 
order to produce a report on the U.S. Government's role in identifying, 
seizing and distributing assets looted by the Nazis from Holocaust 
victims and the governments the Nazis overran.
    Because the Treasury Department played a key role in the economic 
warfare waged against the Nazis, it is making a major contribution to 
Mr. Eizenstat's inter-agency report. All Treasury documents of the WWII 
era are at the National Archives. Last November, Treasury declassified 
all Treasury-originated document relating to the era. We hired a team 
of historians to review Treasury's role and this report has been given 
to the State Department historian who is in the process of merging 
Treasury's report with his own comprehensive effort.
    Answer. There is an Inter-Agency Task Force led by Stuart Eizenstat 
looking into financial assets seized by the Nazis. This task force 
should be releasing a report on its findings. What is that status of 
this report?

          Questions for the Record Submitted by Mr. Foglietta

                           corporate welfare
    Question. Mr. Secretary, there is a significant movement in 
Congress and by the Administration to eliminate certain forms of what 
has been called ``corporate welfare.'' I have been interested in this 
issue. With others, I have developed the idea of creating a Commission, 
similar to the Base Closure Commission, to eliminate genuine forms of 
corporate welfare. But what is ``genuine''? There are various 
definitions of ``corporate welfare. What some may call ``corporate 
welfare,'' others consider valid, revenue-raising investments. This is 
true in some of our programs which encourage investment and economic 
development abroad, where we encourage U.S. businesses to make 
investments abroad. While I want to cut some forms of inappropriate and 
cost-defective tax benefits, I support your programs that others 
incorrectly criticize as corporate welfare. Could you provide the 
Committee with arguments in favor of the programs that some might 
wrongly call corporate welfare?
    Answer. The IMF benefits the American taxpayer by promoting what 
Republicans and Democrats agree on--trade liberalization, privatization 
and competition in other countries. By opening new markets and helping 
to prevent paralyzing financial crises, these programs create global 
economic conditions that permit the U.S. economy to grow through 
increased exports and investments flows, thereby creating jobs for 
American workers. The IMF helps avoid systemic economic meltdowns, 
which could end up costing U.S. taxpayers dearly. Because of the 
multilateral nature of the institution, the U.S. provides only a 
portion of the IMF's resources.
    Not only does the IMF provide numerous benefits to the U.S. economy 
and its workers, it does so at minimal budgetary cost to taxpayers 
because the resources provided through the U.S. quota subscription and 
participation in the GAB/NAB entail no outlays and therefore do not 
contribute to the budget deficit or displace other programs. (Any 
advances are matched by liquid, interest-bearing claims on the IMF, 
offsetting U.S. exposure for budgetary purposes.) The U.S. contribution 
to ESAF does constitute an outlay, but is a comparatively modest 
amount--the Administration request for FY98 is $7 million in 
appropriations and $75 million in authorization.
    We do not believe that the proposed New Arrangements to borrow 
(NAB) and the Enhanced Structural Adjustment Facility (ESAF) constitute 
``corporate welfare''. The United States strongly supports these and 
other IMF programs because it serves our national interest to promote 
global financial stability and economic growth through a multilateral 
institution of this type. The IMF combines the resources of 181 member-
nations to effect market reforms, build the macroeconomic foundations 
for peace in former crisis areas and improve economic prospects in the 
world's poorest regions.
                     u.s. international leadership
    Question. Over the past four years, I have been proud of the many 
accomplishments of the Clinton foreign policy team around the world. 
From the Middle East to Haiti to Bosnia, America has fulfilled its 
enduring place in the vanguard of establishing, maintaining and 
restoring peace, freedom and opportunity for the world. Despite our 
foreign policy successes, I do not believe that we have been successful 
in convincing the American people how world affairs impact them. This 
is especially true when we talk about our contributions to multilateral 
institutions. In order to ensure sustained or increased support for 
America's international leadership, I believe we must gain the support 
of the American people. Can you tell me about your efforts to use your 
office to assert the importance of these contributions, these 
arguments. How, together, do we convince the American people that 
foreign aid dollars are an important and necessary investment of 
taxpayer dollars?
    Answer. The Administration is putting a high priority on its 
international affairs request and more specifically its request to fund 
the multilateral institutions. The President specifically discussed the 
need to fund our arrears to the World Bank in his State of the Union 
Speech. I have discussed the IFIs in much of my testimony at other 
Congressional Committees and have spoken of the importance of clearing 
arrears to the IFIs to numerous outside groups including a joint press 
conference with Secretary of State Albright. The White House is also 
including the IFIs prominently in its efforts to raise the visibility 
of the need for international funding in general.
    As you know, these are difficult issues to explain in a sound-bite. 
The issue of US international funding continues to be widely 
misunderstood by the general public as evidenced by polls which 
indicate that most Americans think we spend far more on foreign aid 
than we actually do. I agree with you that we all need to make a strong 
effort to correct these misperceptions and to explain how international 
institutions benefit American security, economic growth and jobs.
   creative means of financing concessional lending at the world bank
    Question. I support your proposal to pay off U.S. arrears to IDA. 
However, on this Committee, we struggle to make tough decisions under 
the current budget constraints we face. There is a chance that we will 
not be able to provide the full amount of funds you have requested in 
this fiscal year to fund the important concessional lending at the 
World Bank. I am aware that there has been internal discussion to 
devise creative ways of raising concessional lending to the world's 
poorest countries at the Bank by using the Bank's internal resources. 
This would decrease pressure on donor countries to produce additional 
funds for replenishments. What are you doing at Treasury to try to 
encourage the Bank to facilitate this type of discussion and what are 
your views on this strategy?
    Answer. Non-donor resources are playing an increasingly important 
role in IDA. Each year since 1964, the World Bank's Board of Directors 
has agreed to transfer a portion of the net income of the non-
concessional window of the World Bank Group--the International Bank for 
Reconstruction and Development--to IDA. We intend to push the Board of 
Directors strongly to continue this trend. We expect transfers of $300 
million annually over the next two years.
    Another way in which we have found additional resources for IDA is 
through the reflows of IDA itself. Credit repayments are increasing 
rapidly, from $630 million in FY97 to $1 billion in FY2000. We have 
supported a policy permitting IDA to make ``advance commitments'' with 
projected credit disbursement matched with, and funded by, these future 
credit repayments. This enables actual commitment authority to exceed 
credit repayments.
   encouraging local and community outreach by international lenders
    Question. I am aware that the World Bank and other International 
Financial Institutions have been criticized for not engaging grassroots 
involvement on projects they support in countries around the world. 
Further, the success of some of these projects has been hampered 
because they did not have either the support or input from communities 
impacted by the project. Coming from Philadelphia, a City blessed with 
a very active community of activists and interested citizens, I have 
found their input invaluable and absolutely necessary to the success of 
any project undertaken by the State, City or federal government. Can 
you tell me your views on encouraging lenders to place a higher 
emphasis on developing this kind of consensus in countries where they 
fund projects?
    Answer. The United States has consistently been the leading 
advocate of local participation in MDB projects, and we will continue 
to be. We agree with you that support and input from local communities 
is essential to the long-term success of the MDBs projects and 
programs. Moreover, local participation in decision-making helps build 
capacity for democratic governance in the MDBs' developing country 
borrowers. The MDBs recognize these facts as well and are taking steps 
to increase participation in their projects.
                      fund for special operations
    Question. Like my colleagues I am concerned that we have fallen 
behind in our payments to our partners in the multilateral development 
banks. And I support your proposal to pay off our arrearages to the 
World bank. But I am concerned that this budget does not make any 
progress on paying off our arrearages to the Inter-American Development 
Bank's Fund for Special Operations. This fund provides concessional 
lending to Latin America's poorest counties. It is especially important 
that the U.S. provide support to our neighbors to the South. Progress 
is being made in Haiti, peace has been won in Guatemala. I am pleased 
that President Clinton will be visiting Latin America soon to 
underscore U.S. relations. But what better way to follow up the 
President's visit than to put our money where our mouth is. Can you 
share with the Committee your strategy for securing the full $20 
million requested for FY98 and your plan for making up the arrears?
    Answer. The Administration is committed to securing our full $20 
million request for the FSO and to fully clear all FSO arrears in FY99.
               technical assistance to russia and the nis
    Question. Over the past weeks, discussion on international affairs 
has been dominated by President Clinton's goal of enlarging NATO; and 
Secretary Albright's recent tour also highlighted this issue. In his 
budget he has requested a significant increase in funding for Russia 
and the Newly Independent States (NIS). One key component to 
stabilizing the Russian government and keeping them engaged must be 
helping them to get their own fiscal house in order. Can you tell us 
about Treasury's efforts to work with the Russian government to help 
them make the necessary structural adjustments to strengthen their 
fiscal system. Further, how will your efforts tie in with the new 
package of aid requested by the Administration. Will we see an increase 
in the amount of aid we are giving Russia for this type of technical 
assistance?
    Answer. Treasury is providing assistance to the Government of 
Russia in three technical areas: Tax Policy and Administration, Budget, 
and Banking Sector Policy. In the area of tax, the advisors have been 
working with the Ministry of Finance (MOF) to draft a comprehensive, 
modern tax code under the direction of Deputy Minister of Finance 
Sergei Shatalov. Although a draft was completed in December 1994, it 
has been under intense review and revisions, and many sections continue 
to be redrafted and updated. One advisor is working with the State Tax 
Administration to correct the tax arrears problem and to improve 
collections. In Budget, Treasury is providing advice to the Ministry of 
Finance on developing a Consumer Sentiment Index (CSI), and increasing 
the MOF's medium term forecasting abilities, plus training assistance 
to the Chamber of Accounts, and advising the Duma on standard of living 
statistics. Treasury is in the very early stages of helping The Central 
Bank of Russia (CBR) deal with a widely-insolvent banking system, and 
establishing a legal and regulatory system for rehabilitating the 
banking system.
    Treasury has seven full-time advisors for FY97. Three are budget/
macroeconomic advisors; three are tax advisors; and one will work on 
banking policy with the Central Bank. These advisors are supported by 
targeted short term assistance missions. Estimated FY97 budget: 
approximately $4 million.
    For FY 98, we expect to request funding to support the current 
program plus an additional budget advisor. This will increase the 
number of advisors to eight. Estimate FY98 budget: approximately $4.5 
million.
    The Treasury program augments its assistance efforts by providing 
short term advisors to support the work of the resident advisors.
    Advisors work with counterparts who are decision makers within the 
sponsoring ministry so that assistance is targeted and suits the needs 
and desires of the government.

            Questions for the Record Submitted by Mr. Torres

                           strategic compact
    Question. A good deal of attention has been paid lately to Mr. 
Wolfensohn's ``Strategic Compact'', the effort to overhaul the Bank's 
bureaucracy and management.
    What does the overhaul mean for the Bank's efforts to increase 
participation and accelerate poverty reduction? Several NGO's have 
expressed concern that the emphasis on the speed and efficiency of 
services to borrowing governments could undermine the quality of Bank 
lending, especially the often slow process to foster grassroots 
participation. Could you please comment?
    Answer. A key objective of President's Wolfensohn's Strategic 
Compact is to improve the services provided to borrowers, including 
offering a better range of projects and demonstrating more flexibility 
in changing the nature of these projects to meet borrower needs. This 
is the aspect of the Compact which we believe has caused concern for 
many NGO's, who believe that a focus on borrowers will mean a focus 
exclusively on the governments who are borrowing the Bank's funds. We 
would note that at the same time the Compact pledges to increase 
project quality through, inter alia, putting more staff in the field 
and by more closely involving local groups and affected populations in 
project preparation and implementation. We intend to hold the Bank to 
these latter commitments, in particular to its intention to widen its 
efforts to foster grassroots participation. We intend to propose ways 
that this endeavor can be strengthened at the outset of the Compact 
formulation, and will follow very closely the implementation of this 
aspect of the Compact in the coming months and years.
                      country assistance strategy
    Question. The World Bank is putting increased emphasis on the 
``country assistance stragegy''--its three year plan for borrowing 
countries that sets the direction for both policy and projects. It has 
also vowed to make the process of formulating the strategy more 
participatory. However, I understand that the document remains 
confidential.
    Will the U.S. Treasury push the Bank to release the document in 
draft form, in sufficient time to allow public comment?
    Answer. The United States has strongly urged the World Bank, most 
recently at a Board seminar on country assistance strategies, to make 
the strategies public documents after they are approved by the Board. 
We believe that the documents contain little in the nature of 
confidential information, and that this information could be deleted 
before publication. Unfortunately, this position has not received 
support from a majority of the Board of Directors. Many members are 
concerned about the release of sensitive information and also believe 
that making this information public will encourage self-censoring by 
Bank staff in the process of writing the strategy. We have argued that 
making the strategies public provides valuable information regarding 
the Bank's future program in a particular country that is of interest 
to a wide group, not least of which is affected populations. 
Publication also helps hold the Bank accountable to the objectives set 
out in the strategy.
                          ifc inspection panel
    Question. I understand that Treasury supports the establishment of 
an Inspection Mechanism for the International Finance Corporation 
(IFC), similar to the existing World Bank Inspection Panel.
    Is there a way to ensure that any Inspection Mechanism created to 
cover investments made through the IFC affords locally affected people 
the same protection and remedies which now exist through the IBRD/IDA 
Inspection Panel?
    Answer. We strongly support the establishment of an inspection 
mechanism for IFC and MIGA. Such a mechanism must be effective for 
locally affected peoples and also be workable and fair to IFC and 
MIGA's private sector borrowers. The inspection mechanism is still in 
the concept stage, and it is too soon to know what the final product 
will look like.
    Undoubtedly an IFC/MIGA inspection mechanism will not be identical 
to the World Bank's inspection panel, given the differences between the 
private sector borrowers of IFC and MIGA and the World Bank's public 
sector borrowers. Nevertheless, we will work hard to ensure that it is 
independent, effective, and accessible to locally affected people who 
believe they have been harmed by a failure of IFC or MIGA to follow 
their policies and procedures.
                                          Thursday, March 13, 1997.

                          SECURITY ASSISTANCE

                               WITNESSES

THOMAS E. McNAMARA, ASSISTANT SECRETARY OF STATE FOR POLITICAL-MILITARY 
    AFFAIRS
WALTER B. SLOCOMBE, UNDERSECRETARY OF DEFENSE FOR POLICY

                 Chairman Callahan's Opening Statement

    Mr. Callahan. Mr. Secretary, Mr. Secretary, it's good to 
have you both here this morning to appear before our Committee 
and explain the justification of your portion of the Foreign 
Operations Bill. I have an opening statement which I'm just 
going to submit for the record without boring you all, the 
Committee, with the reading. I'm a very poor reader. I will 
give some highlights. I would encourage you all to do the same. 
I'm a poor listener, too, but if you all would summarize your 
opening statements. We review those things, we really do. Just 
hit the highlights of yours and I'll hit the highlights of 
mine.
    [The information follows:]

[Pages 200 - 202--The official Committee record contains additional material here.]


                        administration's request

    Mr. Callahan. But we have some questions about the 
Administration's request, which I assume was written by you 
all? We need you to address several matters during this hearing 
today. Number one, we note that, whereas the President 
requested a 9 percent increase in foreign operations overall, 
he only requested 2 percent for FMF. I feel there's more 
opportunity for involving the United States in foreign affairs 
through military financing and military assistance than in 
economic support; and I think that I was a little disappointed. 
I've even considered the possibility of transferring the 
authority of this Committee to the Defense Committee.

                    public perception of foreign aid

    As you know, it's difficult to sell foreign aid to the 
general public. They don't understand it; they think it's give-
away; they think it's wasted money. They can't understand why 
we're asking people to cut back in every other facet of our 
life here in this country yet still continue to give money to 
countries overseas.
    It's becoming increasingly difficult to convince the 
American people of the reality, and that is that foreign 
operations is a very small percentage of our budget. They still 
think it's 15 or 20 percent, even though it's less than 1.
    So we've been toying with the idea of possibly transferring 
some of this military support to the Defense Committee, which 
has more jurisdiction and would create a different opinion of 
foreign aid by cutting it even lower, and yet giving us the 
opportunity, especially in the economic support area, to 
provide you with more discretionary monies.
    We weren't able to do that this year. We thought about a 
lot of reform for the Congress or this Committee. We even 
thought about transferring all of State Department over here 
and taking it away from Commerce and Justice; but Hal Rogers 
got upset about that so we agreed to wait until he decides to 
retire.
    But, in any event, we're thinking about doing that and we 
may even do some of that this year. But with respect to 
military assistance, the Committee went to the Middle East this 
year. We looked at some of the needs especially in Jordan, and 
I see the President has requested a slight increase for 
military assistance to Jordan. Our observation is that Jordan 
probably is more needy than is Israel or Egypt, yet, probably 
because of their involvement in the Gulf War, we've been 
neglecting their defense needs and I think--anyway, I'm 
disappointed with the budget request, and I think that military 
should have been higher and economic support lower.

                            middle east bank

    I notice that Middle East Bank is in this request, which in 
my opinion should be Treasury, not your department--I don't 
know how it got into this portion. You're requesting 52 million 
for the Middle East Bank, the first of a total payment of 260 
million. I'm not even in favor of the Bank, period. I think 
it's just another form of aid that can be better delivered to 
the countries that the Mid-East Bank would assist. It can be 
better delivered in other forms. You're creating another 
bureaucracy. You already have financial institutions that can 
handle any need they have.
    On our trip to the Middle East, we visited Israel, Jordan, 
Egypt, and Morocco, and not a single person mentioned the 
Middle East Bank, a single person in leadership. At a cocktail 
party one night, I think in Egypt, someone came up to me and 
said, ``I understand you're against the Middle East Bank,'' and 
I said, ``How can you say that? I gave you the authorization; I 
gave authorization to our administration to establish it if 
they wanted to.'' He was the only one, and I later found out 
he's instrumental in trying to establish the Bank. He was 
worried about his job.
    But the Prime Minister of Israel did not mention it, 
although he has mentioned it to me since that time. 
ThePresident of Egypt didn't mention it; the King of Jordan didn't 
mention it. So it was not even mentioned, and based upon what I've 
seen, I don't think they consider that one of their top priorities.
    The Partnership for Peace, you ask for a $10 million 
increase, and as I said, only a $15 million increase for 
Jordan. The demining activities, all of these enjoy broad 
bipartisan support on this Committee.
    With that, I'm going to at this time request that the 
ranking member of our Committee, Mrs. Pelosi, make any opening 
remarks that she might make, and I'm not going to implement the 
hourglass this morning, and I'm not ever going to implement the 
hourglass unless it becomes apparent that all of the members 
are not going to have the opportunity to at least make some 
comments.
    So--and I know you certainly will respect that.
    Ms. Pelosi. That's fair, Mr. Chairman, thank you, and I 
will take my lead from you without going into any long opening 
statement except to mention a few concerns that I will address 
in my questions.
    I want to join you in welcoming the two distinguished 
Secretaries who are here with us this morning. I look forward 
to their testimony and their answers to our questions.
    I have some concerns about the proliferation issue, and the 
policy that I heard about and would like to seek clarification 
on, the use of nuclear weapons in response to the use of 
chemical weapons.
    The IMET issue, as you know, last year the Committee delved 
into the issue of whether to provide IMET to Indonesia. There 
was considerable give and take and in the end the bill provided 
for expanded IMET only. We've recently been informed that the 
administration is considering a request by the Indonesians to 
purchase regular IMET. If this goes forward, Indonesia will get 
the same level of training contemplated before Congress acted, 
and Congress did specifically act to cut off regular IMET 
completely, so I'll have questions in that regard. Of course, 
I'll have questions regarding China and proliferation, and the 
land mine issue is a very important one on which I differ with 
the administration. Although I commend the President for moving 
forward on the treaty, I think there are still some serious 
concerns about his choice of the Conference on Disarmament. I 
share the concern of my colleague, Mr. Torres, on the School of 
the Americas. I know he will address that issue fully, but I 
just wanted to associate myself with it.
    Those subjects, and Turkey, and back to Indonesia, on the 
East Timor issue and also the issue of cash flow financing, I 
will try to address in my questions.
    This is just a menu of some of the concerns that I think 
the Congress will need answers to and in the spirit of my 
Chairman wanting to move on, I will yield back the balance of 
my time.
    Thank you, Mr. Chairman.
    Mr. Callahan. Thank you, Mrs. Pelosi. Mr. Secretary?

                    Mr. McNamara's Opening Statement

    Mr. McNamara. Thank you, Mr. Chairman. I'm pleased to be 
here on behalf of the Department of State to testify in support 
of the budget request. I have a longer written statement which 
I would request be included as part of the record and I will, 
again in the spirit of the meeting, will try and keep my 
remarks very brief.
    Last month Secretary Albright appeared before this 
Committee and discussed all of the State Department programs 
under the jurisdiction of this Committee, and she laid out six 
mutually reinforcing objectives, which formed the framework of 
our budget request this year.
    Those objectives are: the securing of peace; the promoting 
of U.S. prosperity through trade, investment, and employment; 
fostering sustainable development; providing humanitarian 
assistance; building democracy; and advancing diplomacy and 
diplomatic readiness.
    Today I would like to discuss two of those in greater 
detail, and those are securing peace and building democracy. 
The programs in these areas all increase the security of the 
American people, and that point is central to everything that I 
want to say here today. And I think it is in tune with what 
you, Mr. Chairman, have just said.
    The basic purpose of these programs is, indeed, to 
strengthen the security of the United States and of the 
American people. They also improve the security of our allies, 
and partners, and friends, and this, however, is a secondary 
benefit, which I think demonstrates the interrelationship of 
our security with the security of others. But the strongest 
reason to support these programs is that they support American 
freedom, American security.
    Rather than refer to this as our security assistance 
budget, I think it is much more accurate to refer to it as our 
security reinforcement budget. When we promote peace in the 
Middle East, we're promoting our own security. When we improve 
new security relationships with the states of Eastern Europe, 
we improve our own security. When we strengthen other 
democracies, we make our own democracy more secure; and if we 
can reinforce the nonproliferation norms and institutions 
around the world, then we reinforce our own security. I repeat, 
this is not security assistance for someone else. This is 
really security reinforcement for ourselves. I think it's 
reflected in the last few years in the way the accounts have 
been changing so that we have many more regional, global, and 
functional accounts, and many fewer country accounts, and that 
trend, I think, is probably going to continue.
    We are, in fact, functionally changing dramatically these 
programs from the way they were structured during the Cold War, 
and they do, as a result of those changes, reflect whatI would 
refer to as security reinforcement for the United States.
    I won't go into great detail on Middle East peace. I think 
it is an area that Secretary Albright mentioned as being of the 
highest priority to this administration. I think there is 
widespread support for this here on the Hill and with the 
American public. Our request includes the traditional economic 
and military support for Egypt and Israel, as well as the other 
countries that are joining the peace process, Jordan.
    Mr. Chairman, in the past you and other members of the 
Committee have expressed concern about the large piece of the 
pie which goes to support the Middle East process, and I can 
assure you that we in the Administration share that concern, 
especially as the overall discretionary funding drops, and 
therefore the proportion represented by the Middle East peace 
process rises. We think, however, that the amounts that we're 
requesting reflect the needs of the region and reflect 
accurately our role in the Middle East peace process.
    On European security, this has also been identified by the 
Administration, and Secretary Albright before this Committee 
identified it, as another area of prime focus in US foreign 
policy. The budget request of $204 million in military and 
economic support is to support our objectives in Europe. I 
won't go into the detail of how it's broken down. That's 
clearly laid out in our proposal and in my longer written 
statement, but we do have a long way to go in Eastern Europe, 
and Central Europe, and in the newly independent states of the 
former Soviet Union.
    We're committed to going that long route. We are committed 
to helping these countries build stable, integrated, democratic 
societies that will reinforce our security in the European are.
    The Partnership for Peace and the IMET programs, we think, 
will assist the partners, that is to say the PFP states, as 
they continue their active cooperation with NATO, as well as it 
will help those countries that wish to join NATO to better 
prepare for their NATO membership and to better integrate into 
the alliance.
    We also have requested $20 million in loan budget authority 
to provide approximately $402 million in low-cost loans for 
credit-worthy Central European nations to allow them to address 
infrastructure deficiencies. These deficiencies are as a result 
of their years on the other side of the line during the Cold 
War. The infrastructure changes that they have to undergo right 
now to rationalize their programs are dramatic, and we think 
that these loans will help them do that. In the end it should 
lead to a better, more stable defense infrastructure in these 
countries and countries that will be better able to seek and to 
participate as NATO members in the alliance.
    I want to mention our global programs very briefly. 
Peacekeeping, another very high priority, in the budget we are 
seeking $102 million in support of a broad range of non-UN 
funded, multilateral peacekeeping programs and operations. We 
think that the number of peacekeeping operations, which have 
been rising in recent years, as we all know--in fact, rising 
dramatically--will probably continue, and in regions such as 
Central and East Asia, Europe, Africa, Latin America, we can 
anticipate a number of such contingencies arising.
    We are trying to rationalize and, in fact, to spread the 
burden, in a sense, to multi-lateralize peacekeeping. There are 
requests for funds here that would lead us in that direction, 
making other countries more capable to assume some of the 
burden, and we can discuss that.
    This is another aspect of IMET that is very important. We 
place a heavy emphasis on using our education and training 
funds in the IMET program to reinforce capabilities that are in 
other countries somewhat weaker and need to be strengthened so 
that they can participate in peacekeeping, or in the case of 
the Central European states, to move closer to commonality with 
our NATO partners.
    De-mining is an area of utmost importance. It is, indeed, 
one of the most important initiatives that we have in this 
Administration. The removal of land mines is a major challenge 
requiring very long term commitment. It is not going to be 
done, given current technologies, in the short term. We have 
yet committed ourselves over the last few years to make a major 
effort there. We're going to have to commit to doing it for a 
number of years in the future.
    Nonproliferation. With the dissolution of the Soviet Union, 
the proliferation of weapons of mass destruction. Now poses one 
of the greatest threats to the United States and to the 
security of ourselves and our allies. Preventing the spread of 
dangerous weapons, particularly weapons of mass destruction, is 
a very high priority. We've been working diligently with the 
states of the former Soviet Union to help dismantle the 
arsenals that they have there, to prevent the proliferation of 
missile materials that make up part of those arsenals, and 
particularly the nuclear technology and other weapons of mass 
destruction that are present in the former Soviet Union.
    We have also worked with them, because with the breakdown 
of the old system, they have relatively weak and inadequate 
export control mechanisms in place, and we have been working 
with them through various funds that are in this section of the 
bill to strengthen their export control readings.
    There's also money in there that we're requesting for the 
KEDO program to prevent North Korea from developing a 
nucleararsenal that would de-stabilize the Northeast Asia region, and 
we can address that, if you wish, at greater length.
    Finally, building democracy. Building democracy is another 
way that we strengthen our own democracy. As I said at the 
start, over the past several years we have had increasing 
programs that aim towards developing democracies, strengthening 
human rights, and strengthening the institutions in otherwise 
weak or start-up democracies. Eastern Europe is a case in 
point, Haiti is another one, and in Asia, Cambodia, and 
elsewhere.
    In conclusion, let me return to the central point of my 
presentation, and that is: the funding that we are requesting 
in our overall security budget directly increases the security 
of the United States. United States' security depends upon 
promoting peace in the Middle East; building security and a new 
secure order in Europe; preventing the spread of weapons of 
mass destruction; and helping countries emerging from 
dictatorship or misrule as they transition to democracy.
    Those are our priorities and those are the areas in which 
we put the greatest amount of our funds. Thank you, Mr. 
Chairman.
    [The statement of Mr. McNamara follows:]

[Pages 209 - 228--The official Committee record contains additional material here.]


    Mr. Callahan. Secretary Slocombe?
    Mr. Slocombe. Mr. Chairman, how long is your hourglass now?
    Mr. Callahan. Well, we're not going to turn the hourglass 
up.
    Mr. Slocombe. Well, I thought I would try to----
    Mr. Callahan. A normal hourglass runs an hour but this one 
has no set time to run. I just turn it over when I get tired of 
hearing Nancy talking.
    Ms. Pelosi. You're much more generous than Nancy, then.
    (Asides.)
    Mr. Callahan. But let me re-emphasize to you that we will 
read your opening statement tonight, and we don't want to 
discourage it but at the same time we want to give members the 
opportunity to ask specific questions that they have.

                    Mr. Slocombe's Opening Statement

    Mr. Slocombe. It's a pleasure and an honor to be here again 
to represent the Department of Defense as this Committee begins 
its consideration of the security assistance request.
    In the Department of Defense, we view security assistance 
and, indeed, the 150 generally along with the 050 account, the 
money that comes directly to the Defense Department, as a part 
of an overall national strategy and national and international 
policy for international affairs.
    Security assistance plays a critical part in protecting 
American interests, and that has two important dimensions from 
the point of view of the Defense Department.
    The first is that the kinds of things which we do in 
security assistance, and to a considerable degree in other 
parts of the Foreign Operations budget, help with meeting 
problems, protecting our interests, dealing with crises or 
preventing them from happening, so that we're not put in the 
position where we have to seriously consider the use of 
military force, and that's an extremely important priority to 
the country and to the Defense Department.
    The second is that in cases where our military power has to 
be engaged, the security assistance often helps to ensure that 
we have friends and allies with the equipment, training, and 
infrastructure to work effectively with our own forces and 
thereby reduce the burden on us.
    This budget request, therefore, has the strongest backing 
of the Department of Defense. I want to focus primarily on 
security assistance technically defined that we administer 
directly, that is, chiefly foreign military sales programs and 
International Military Education and Training, but there are 
other parts of the request before you that are of direct 
interest to the Defense Department, and those include the 
counter-proliferation funds for KEDO and the NDF. Parts of the 
Economic Support Fund are important to security assistance and 
cooperation for our military forces; and, indeed, more broadly, 
other parts of the bill including general representation of the 
United States' interests abroad and economic efforts are part 
of our overall security policy.
    I also want to acknowledge that last year the Congress, and 
this Committee in particular, had been very supportive of 
security assistance. We all know the lack of public 
understanding for assistance programs, as you mentioned in your 
opening statement, Mr. Chairman, and of the constraints that 
the budget discipline placed on this Subcommittee and in every 
other part of the Congress in dealing with requests. 
Nonetheless, we do believe that the modest increase in security 
assistance funding that is being requested is fully justified.
    Mr. McNamara, in his statement, has covered most of the 
categories. Let me simply, very briefly, address them, and also 
some issues I think the Subcommittee will be concerned about.
    The first is IMET. I can say this in a single sentence. The 
Commanders in Chief of the Unified Commands, that is, our 
regional commands around the world, have consistently 
identified IMET as a key tool to enhanced political military 
relations with the various countries in their regions, and 
that's why we regard this as a very important and very cost 
effective program for United States interests.
    The bulk of the money, for instance, Foreign Military 
Financing, of which, as you pointed out, the overwhelming 
majority goes to Israel and Egypt--that is a longstanding 
practice of the United States and a longstanding commitment, 
and the importance of peace in the Middle East, which is in 
part underwritten by that appropriation, is obvious.
    We also strongly support the funding for Jordan. This is 
primarily, albeit almost exclusively, to complete the F-16 
program, and the numbers here are in-line with what was 
proposed when this initiative was started.
    In Central and Eastern Europe, as Secretary McNamara has 
said, both the Warsaw Initiative money, which goes for PFP 
activities, and the loans for Central Europe, are very 
important to our strategy for building a broad security base, a 
broad security architecture, if you will, in Europe.
    The funding for Greece and Turkey continues to support the 
values consistent with those from last year, and I want to 
address the issue of Turkey because I know it's of concern to 
the Committee. It's very much in our interest to continue to 
assist Turkey, even as we engage that country frankly and 
openly on the issues of concern to us, notably human rights and 
regional tensions. Turkey remains a close ally. It's playing a 
leading role in a number of critical American security 
interests in the Balkans, in Northern Iraq, in Central Asia, 
and otherwise. Moreover, it is an Islamic country that is also 
a democratic, secular, pro-Westernsociety at a juncture of 
several unstable regions and in a world where these qualities are all 
too scarce.
    Our security assistance program tangibly demonstrates our 
commitment to maintaining a strong bilateral relationship with 
Turkey, and maintaining that relationship is critical to our 
ability to influence Turkey when their actions do give us 
concerns, as in the areas I identified.
    Secretary McNamara has referred to the demining program. 
This is substantially increased in relative terms from last 
year and will help make a reality of President Clinton's 
commitment to strengthen global efforts to deal with the tragic 
consequences of land mine contamination around the world.
    Secretary McNamara also referred to two important 
initiatives to increase international peacekeeping 
capabilities, both generally through the so-called Enhanced 
International Peacekeeping Capabilities, and the Africa Crisis 
Response Force which, of course, focuses on Africa 
specifically. In each case, the idea is to try to provide in 
advance of crises, increased capacity for other countries to 
meet the requirements for troops to carry out international 
peacekeeping operations. Obviously, those operations will only 
take place if--the UN operations will take place if the US 
supports them, and the countries involved will only contribute 
the forces if they make the decision on a national basis to 
participate; but having improved capacity will reduce the 
burdens on the United States.
    There are also specific proposals of importance for East 
Africa, for Cambodia, and for the Caribbean, which are 
discussed in my statement.
    I want particularly to underscore the importance of the 
appropriation for the Korea Peninsula Energy Development 
Organization. One of our highest priorities, as you mentioned, 
is nonproliferation. Support for KEDO is critical for 
maintaining the implementation of the agreed framework which, 
for all the turbulence on the peninsula, is being executed and 
continues to freeze the North Korean nuclear program in ways 
which are very important to our broad proliferation interests 
and to our specific concerns about stability on the peninsula.
    With that, Mr. Chairman, I'll be happy to join Secretary 
McNamara in addressing your questions.
    [The statement of Mr. Slocombe follows:]

[Pages 232 - 238--The official Committee record contains additional material here.]


    Mr. Callahan. Thank you very much. What is--you say ``to 
paraphrase Clausewitz.'' What is that? What is Clausewitz?
    Mr. Slocombe. Clausewitz said that war is the continuation 
of policy by other means. I believe that the kind of programs 
which support our interests by nonmilitary methods that are 
involved in this bill are the expression of national strategy 
by other means. These are not handouts to foreign countries as 
an act of charity.
    Mr. Callahan. Well, you'll have to forgive me----
    Mr. Slocombe. I apologize for the analogy, which is 
obscure.
    Mr. Callahan. Well, I mean, I never heard of Clausewitz. 
Maybe I haven't studied my history sufficiently.
    Mr. Slocombe. Clausewitz was a German general who----
    Mr. Callahan. I figured that.
    Mr. Slocombe. The book, I have to say, is impenetrable, and 
I think the only part of it that is--that anybody mostly has 
ever read is the one line that ``war is the continuation of 
policy by other means.''

                                  kedo

    Mr. Callahan. Let's talk about KEDO. Where are we now on 
KEDO? What progress are we making with respect to KEDO?
    Mr. Slocombe. The agreed framework, as you will recall, 
requires that North Korea stop work on a couple of reactors 
which were under construction; stop reprocessing plutonium from 
the reactor which had been operating; turn off that reactor; 
and, importantly, allow what we call a ``canning'' operation, 
that is, to take the fuel rods which have the plutonium in----
    Mr. Callahan. Oh, I know. I know about the project but I'm 
saying----
    Mr. Slocombe. All of that----
    Mr. Callahan. We all agree with respect to the--what's the 
completion of the mission of KEDO?
    Mr. Slocombe. All of that, which is the part we want out of 
it, is absolutely on track and in compliance. With respect to 
KEDO itself, this is--the broad purpose of that organization, 
of course, is to build these light water reactors in North 
Korea. The money from that is going to come almost entirely 
from Japan and Korea. That is at a very preliminary stage 
because of delays in doing the surveys and so on to actually 
identify the sites and begin the work. That is--it is in our 
interest that the program go forward but when it is completed 
is primarily a subject of concern to North Korea because that's 
when the reactor is getting built. Our interest is in keeping 
the freeze in place, and the freeze is fully in place.
    Meanwhile, as you know, we are committed to deliver--we, 
the international community through KEDO--are committed to 
deliver heavy fuel oil to North Korea, at least nominally, in 
replacement for the power out of the reactors which----
    Mr. Callahan. You know, the other things that are 
involved--I mean, our involvement is in heavy fuel oil only, as 
I understand it.
    Mr. Slocombe. That's something--
    Mr. Callahan. And in helping the negotiations to take 
place, but are the other countries, Japan, South Korea, have 
they moved forward with the necessary monies being made to see 
some material capital improvement progress toward the creation 
of the new funds?
    Mr. McNamara. Maybe I can try and answer that, since we at 
the State Department have been spending a lot of time trying to 
collect the necessary funds--we call it informally ``tin 
cupping''--around the world to get others to participate with 
us. The modest contribution that the US makes, and it's truly 
modest when compared with what Japan and Korea are putting into 
it and will have to put into it in the future. Yes, Japan, and 
Korea, and several other countries, are living up to their 
commitments in this regard. But there are some countries that 
are somewhat reluctant to get involved, and we're finding some 
countries are delaying their contributions in such a way that 
there are some cash shortages in the KEDO operation requiring 
up to now some borrowing. But we expect that, for example, the 
European problem which has kept the European Union from 
contributingwhat it had pledged is, we hope, very soon to be 
resolved, and that money should come on stream for KEDO use.
    There is also an effort under way to get other Asian 
countries to contribute more. We've been somewhat disappointed 
in the contributions that have come out of Southeast Asia and 
from other Asian countries.
    Mr. Callahan. What contributions have you received?
    Mr. McNamara. We----
    Mr. Slocombe. I have been looking at the numbers.
    Mr. McNamara. Okay, that's----
    Mr. Slocombe. Twenty-one countries have donated about $120 
million, of which somewhat less than half is from the United 
States. They include Japan, and Korea, Canada, Australia, New 
Zealand. The EU has contributed a significant amount and it's 
pledged to do more, Germany, France, Brunei, Thailand, and 
Greece, Switzerland, Britain, Norway, Singapore, Malaysia, 
Argentina, the Philippines, the Netherlands, Indonesia, and 
Finland. Some of them are fairly small amounts and some are 
quite substantial.
    Mr. Callahan. Well, you know, our concern is----
    Mr. Slocombe. I want to distinguish, sir, between this 
amount, which is the--mostly for the heavy fuel oil for KEDO, 
and the large commitment to build the reactor, to which Japan 
and Korea will contribute on the order of----
    Mr. Callahan. Billions.
    Mr. Slocombe [continuing]. $3 or $4 billion.
    Mr. Callahan. Well, when it was first brought to us, I 
guess was 4 years ago, we were the peacekeepers trying to get 
nations together to eliminate the potential nuclear threat to 
that hemisphere.
    Our involvements, as I understood it then--what's his name? 
Gallucci?
    Mr. Slocombe. Um-hum, Mr. Gallucci.
    Mr. Callahan. Bob Gallucci. All they wanted from us that 
first year was $13 million. They said, ``Give us the $13 
million. We're going to provide heavy oil to use in the interim 
so they go forward with their nuclear activity, and they're 
going to negotiate this thing up.''
    The next year they came to us and wanted an increase from 
$13 million to $20 million, and now it's getting up to $30 
million a year. If you are including in the $120 million you're 
talking about worldwide contributions, now the United States is 
up to 30-something percent of the total contributions to this 
project, when that was not what this Committee was told. This 
Committee was assured that we were not going to build plants in 
North Korea; that we're just trying to create a peace making 
activity and to facilitate them, but in order to get them 
started so North Korea won't go forward they need some heavy 
oil. So we limited it to heavy oil.
    I think Gallucci told us at that time he needed $3 or $4 or 
$5 million for administrative expenses. We reluctantly, gave 
him that, and now here we are continuing to do this, and yet 
going up 30 percent per year in our request to provide fuel oil 
to North Korea. I don't imagine that we're going to resolve 
that issue today but I want you to know I'm concerned about it.
    Not a whole lot of progress has been made with respect to 
contributions. You're going to have to get the Secretary. I 
think we expressed that to her but she's going to have to get 
involved and get us out. I mean, we're past the stage where we 
should be participating anyway, if you go back to the original 
request that Gallucci made to us. We're already past that, and 
if--in fact, that was for 1 year that he originally came to us. 
``That just gets us started, and by the time we've finished 
spending this $10 million, everything's going to be resolved, 
and Japan's going to kick in a billion or two dollars, and 
South Korea's going to kick in a billion or two dollars.'' I'm 
getting increasingly concerned about this increase every year 
coming before this Congress when no real international progress 
is being made.
    So I just want to express that concern to you. We may not 
give you the full $30 million this year. If they got by with 
$10 million 3 years ago for heavy oil to run their plants, and 
they got by with $20 million last year, why do they need so 
much? Why do they need a 30 percent increase in heavy fuel? Are 
they producing 30 percent more electricity?
    Mr. Slocombe. The amount of fuel is fixed.
    Mr. Callahan. It's fixed.
    Mr. Slocombe. But basically I agree with your annoyance and 
irritation on this issue. We have been disappointed in the 
failure of other countries who have a strong interest to come 
forward with what are relatively modest amounts of money, and I 
take your point about the need to continue to press them, and 
we will do it. Mr. McNamara can address the role of the 
Secretary of State, but for Defense we will----
    Mr. McNamara. I'd like to point out that in her recent 
trip, Secretary Albright indeed put this right up front as a 
major issue with many of our friends and allies that she met 
with on that trip. Indeed, we are seeing some of the results of 
that. I think the fact that we are--that we really do believe 
that in the next few weeks, or a month or so, we will see the 
European Union portion, or commitment, released as a result of 
the conversations we've had with the Europeans, and which the 
South Koreans and the Japanese have had with them. It's an 
indication----
    Mr. Callahan. Well, hold on, let me just give you an 
overview here of how this is beginning to appear--that we are 
giving direct foreign aid to North Korea. That's what we're 
doing. We're giving more foreign aid to North Korea than any 
other nation, and that's not what we were told; that's not the 
direction we started out in. There's a concern there. You're 
not going to get the full $30 million. You're going to have to 
insist that if these other nations are going to be that slow, 
well, let them put up the heavy oil for a couple of years.
    And, secondly, we were visited by the Ambassador from South 
Korea just this week, extremely upset that North Korea is going 
to permit Taiwan to bury their nuclear waste 50 miles north of 
the DMZ. They're tremendously concerned about that.
    Now, I don't know how we can be over there trying to 
encourage the North Koreans not to do something that could be 
harmful from a military point of view or from an environmental 
point of view, and sitting here watching Taiwan ship tons of 
nuclear waste to be buried right on the border of South Korea. 
Someone in our administration has to talk to not only North 
Korea but to Taiwan as well.
    Mr. McNamara. We have talked to Taiwan and we'll be talking 
to North Korea. We've talked to South Korea, and I believe also 
Japan, about the issue of the waste. It is in accord with 
internationally accepted procedures. The IAEA and we do not 
evaluate this as being a military problem or a proliferation 
problem. The manner in which the--this was proposed was in 
accord with generally accepted practice
    Mr. Callahan. Well, I think--you know----
    Mr. McNamara. I'm not sure, in fact, that it's going to go 
forward.
    Mr. Callahan. I don't think North Korea has the technology 
to safely handle that type of storage. I don't know where they 
would have gotten the technology. That's a concern I wish the 
administration would address. South Korea is very concerned, 
also.
    Mr. McNamara. We're addressing that and I think we owe you 
some explanation about the status of this. It's not nearly as 
set and finished as it may have been portrayed to you.

                       imet training in guatemala

    Mr. Callahan. All right, one other question and then I'll 
turn to Nancy. The IMET training, what about Guatemala? Now 
that they've resolved all their internal problems--I see you 
have some request in your bill, I think, with some----
    Mr. Slocombe. 225,000.
    Mr. Callahan. 225,000 for IMET training in Guatemala?
    Mr. Slocombe. That's correct.
    Mr. Callahan. Did they ask for that money? Did they ask to 
participate in the IMET program?
    Mr. McNamara. They asked----
    Mr. Callahan. Did they request the assistance?
    Mr. McNamara. The request was--the request for that and for 
the other assistance to Guatemala was as a result of the 
conversations we had with the government of Guatemala, with the 
military and civilians in Guatemala, as to what would be the 
best and the most rational way that we could participate in 
strengthening the peace accord as well as the democratic 
institutions that are coming out of this peace accord.
    The entire program includes IMET training, I believe, was 
requested by Guatemala, but I think it was requested not in the 
abstract but as a result of very detailed conversations that 
we've had with Guatemalans about what types of programs they 
need and what types of programs would increase security, 
stability, and democracy.
    Mr. Callahan. Well, we're in support of that but I was 
surprised yesterday. The Minister of Defense of Guatemala came 
to us and he indicated he did not request it, and I was 
surprised that he said that. I asked him if they would be 
willing to participate in the expanded IMET program.
    Mr. McNamara. It's extended, as distinct from standard.
    Mr. Callahan. [continuing]. And he said that they would. 
Maybe there was an interpretation problem but I was somewhat 
surprised that he had not requested it.
    And let me just tell you, and then I'll turn it over to 
Nancy, that this Subcommittee is supportive of IMET, and I am 
totally supportive of it. But, last year at the last minute 
almost I had to call General Shalikashvili to lobby the 
Democrat leadership in order to get the votes to keep IMET 
training in some of these areas that they were so concerned 
about. Fortunately, he did. Fortunately, the Democratic 
leadership, the minority leadership, was able to be contacted 
in a short of period of time and they changed their priorities, 
but we're going to need some lobbying help on some of these 
countries that you're furnishing IMET to because I think it's 
important. I think Nancy and I disagree on a couple of 
countries but still and all I think it's a good program. I 
think it's great foreign policy, and I think it's great 
strategically to educate these countries on our methodologies 
of warfare and defense.
    Mr. McNamara. I agree, Mr. Chairman. I think it's dollar-
for-dollar the most important and the best program that we have 
in our security reinforcement budget.
    Mr. Callahan. Nancy?
    Ms. Pelosi. Mr. Chairman, would you yield?
    Mr. Callahan. Yes.
    Mr. Foglietta. I have to leave to go to a Transportation 
Subcommittee hearing which has been scheduled simultaneously 
with this one so if I could ask you then to consent to submit 
my questions in writing?
    Mr. Callahan. So ordered.
    Mr. Foglietta. Thank you.
    Mr. Callahan. Will the gentleman yield?
    Mr. Frelinghuysen. Sir, I would like to do likewise, Mr. 
Chairman.
    Mr. Callahan. So ordered.
    Mr. Frelinghuysen. Thank you.
    Mr. Torres. Mr. Chairman?
    Mr. Callahan. Yes?
    Mr. Torres. I'd like to remain?
    Mr. Callahan. So ordered. Nancy?

                                  imet

    Ms. Pelosi. Thank you, Mr. Chairman. I have a number of 
questions, in addition to the ones I spelled out earlier, 
springing from the testimony and answers to your questions. 
I'll take up the IMET issue in a minute. I just want to say 
that with your presentation, while there are so many things 
that we all support in there, speaking anyway for the Democrat 
side, at these hearings when you just have a small amount of 
time the focus usually is on those areas where there is some 
question or disagreement. Similarly, I know I agree with my 
Chairman on many, many issues but we do have some areas of 
disagreement.
    One of those areas is, I think, the importance of 
persuading the American people and educating the people to the 
need for an expanded role for the US internationally in 
maintaining peace and promoting democratic values, promoting 
economic interests as well, and, of course, addressing the huge 
issue of nonproliferation, which I think is the biggest issue 
of all, I think that all the heavy lifting shouldn't have to be 
done by our Chairman to sell this in his home district and 
region but that we have to have a stronger role on the part of 
the Administration. I'm very encouraged that Secretary Albright 
will make a major contribution in this area, but I think it has 
to come from the President himself that if this is important 
and we should be allocating a certain amount of resources to 
it, then the American people have to see it in perspective, and 
it needs the bully pulpit of the White House to do that.
    I'll get to IMET in a second. I just had one first question 
for Secretary Slocombe.

                            chemical weapons

    Mr. Slocombe, I had heard that you made a statement and I'm 
seeking clarification on that, about U.S. policy regarding the 
use of nuclear weapons in response to the use of chemical 
weapons. Could you elaborate on that, please?
    Mr. Slocombe. It is our position that if any country uses 
chemical weapons against the United States, they will be met 
with a prompt and overwhelming response.
    Ms. Pelosi. And does that include nuclear weapons?
    Mr. Slocombe. That is not limited with respect to any 
weapon in the arsenal. That's been a matter of public--our 
public position. It was our public position during the Gulf War 
and it remains our position.
    Ms. Pelosi. At what level of use of chemical weapons would 
this be triggered?
    Mr. Slocombe. The response, it would be a response to any 
use of chemical weapons against the United States interests. 
What it would be, would be determined at the time and in light 
of the circumstances.
    Ms. Pelosi. Okay. Sometimes I won't know it until after the 
fact. I don't know what triggers it. One example is, the 
Persian Gulf conflict and the implications about any chemical 
weapons. If we bomb a chemical weapon plant, does that trigger 
it? Is it the intention, or the storing of chemical weapons, or 
the development of chemical weapons? I'm very concerned about 
this because this is a serious trigger. I'm particularly 
concerned because of Iran's investment in chemical weapon 
development, and because of some of the assistance and 
cooperation it's receiving from countries like China, which we 
have tended to ignore.
    Mr. Slocombe. We obviously have a whole range of things we 
do to try to prevent countries from getting chemical 
capability, but we also regard it as important to make--to have 
a deterrent, that is, to make clear that they will not get any 
advantage by using chemical weapons. We have an active--passive 
defense of protective clothing, medical responses of 
vaccinations and immunizations. We have a policy of, which is 
largely diplomatic, of trying to control the spread of chemical 
weapons, and, indeed, as you know, it is a part of the policy 
of the administration, as it was with the two previous 
administrations, that the United States should adhere to the 
Chemical Weapons Convention, which will be a very, not perfect, 
but a very important instrument in spreading--in preventing and 
dealing with the spread of chemical weapons and their potential 
for use.
    Ms. Pelosi. I appreciate your answer. This is not the 
occasion to, nor am I equipped to, have this discussion with 
you about the merits of the policy; however, I will say that if 
that is the nature of our response, and it is one that is 
promulgated and out there, I think that I agree that use of 
chemical weapons is intolerable, biological weapons as well, 
and, in my view, nuclear weapons as well.
    Therefore, I think that in addition to having this policy 
clearly out there, we also should be doing everything in our 
power to deter the development of those weapons. That's why I 
have serious concerns when the administration ignores the 
cooperation that rogue states receive from a country like 
China. It's unthinkable that we would use a nuclear weapon, in 
my view, but if we have established what would trigger it, we 
have to make sure that that circumstance never happens.

                           nuclear deterrence

    What is the role of nuclear deterrence in the area of rogue 
nations? Perhaps Mr. McNamara could--is that----
    Mr. McNamara. I think the role of nuclear deterrence in the 
world today is significant. I think our nuclear deterrent is 
necessary.
    In terms of rogue states, I think the knowledge that we 
have nuclear weapons, that under certain circumstances they are 
available for use, I think should cause them to pause. There's 
some evidence that it has caused them to pause in policies and 
in actions that they might otherwise have taken, but it is a 
policy that, while it's out there, it's not the first line of 
defense.
    The first line of defense is, in fact, diplomacy, and I 
would argue very strongly that, first of all, we are not 
ignoring either China or anyone else that helps the rogue 
states. Indeed, we are heavily involved in trying to reduce and 
eliminate that assistance in all of its forms, and we have been 
making progress.
    Ms. Pelosi. But you are not successful.
    Mr. McNamara. We have been successful--no, I would argue we 
have been successful. We have not solved the problem.
    Ms. Pelosi. Yes, it continues.
    Mr. McNamara. But we are--but getting from point A to point 
B when the distance is very long takes some time.
    Ms. Pelosi. I understand that.
    Mr. McNamara. But we are more than a few steps along that 
road when one considers where China was in terms of 
nonproliferation 10 or 15 years ago, or 20 years ago when 
proliferation was considered by the Chinese government as a 
positive, not a negative. We now have them agreeingto, and to 
the best of our knowledge, adhering to NTCR guidelines, they have 
signed the nonproliferation treaty, they have signed the----
    Ms. Pelosi. Wait--while you're on that subject----
    Mr. McNamara. Yes?

                                 China

    Ms. Pelosi. What are you doing to ensure China's adherence 
to Article I of the NPT, which binds signatories not in any way 
to assist, encourage, or induce any non-nuclear weapons state, 
to manufacture or otherwise acquire nuclear weapons, or other 
nuclear explosive devices, or control over such weapons or 
explosive devices? Of course, Pakistan is one example of that.
    Mr. McNamara. We have talked to the Chinese, we have 
sanctioned the Chinese, we have threatened to sanction the 
Chinese in a number of areas having to do with missiles and 
nuclear cooperation.
    Ms. Pelosi. But we haven't really sanctioned them for the 
transfer----
    Mr. McNamara. We----
    Ms. Pelosi [continuing]. Of the technology to Pakistan. 
We've threatened to sanction. We had a sanction on briefly----
    Mr. McNamara. That's right.
    Ms. Pelosi [continuing]. And we lifted it. We----
    Mr. McNamara. And as a result of our threats of sanctions, 
China has modified it's programs and cooperation with Pakistan 
and Iran, not sufficiently to satisfy us.
    Ms. Pelosi. And it's still happening.
    Mr. McNamara. I agree that there is some activity still 
going on. It has--as I said, they have modified their behavior. 
They have not modified it to our full satisfaction but we are 
in the process of modifying it, and I think that our policy is 
designed to make sure that that progress continues. In the near 
future we can at least hope that China will end its 
cooperation. It hasn't ended all of its cooperation in all 
aspects yet, but it is modifying that cooperation, and we 
simply have to keep at it.
    Ms. Pelosi. Right. Mr. Chairman, my problem is the 
following. We give over $5 billion a year for Middle East 
peace. The rogue country in the neighborhood is Iran, and their 
advanced capability in all of the weapons of mass destruction 
is, obviously, of major concern to us. I respect diplomacy as a 
strong role, but I think we also have to be as unequivocal as 
we can be about deterring the development of these weapons. The 
alternative that Mr. Slocombe suggests is almost unthinkable.
    I have some other questions on this subject which I'll 
submit for the record.
    Mr. McNamara. Yes.

                               Land Mines

    Ms. Pelosi. On the land mines, obviously I'm disappointed 
that the President has not supported the Canadian Initiative. I 
appreciate the good spirit of going forward with the Conference 
on Disarmament, but our own negotiator has said, ``I don't 
think there's very much chance that we stand right now of 
getting a negotiation started in the near term.''
    If the Conference on Disarmament stays mired in this 
inertia, will the administration participate in and support the 
Canadian Initiative to set a ban treaty in place by the end of 
the year?
    Mr. McNamara. Let me state the policy because it varies 
somewhat from the way you've characterized it.
    First of all, it is not the case that we don't support the 
Canadian Initiative.
    Ms. Pelosi. Oh, I didn't realize that.
    Mr. McNamara. We have participated in the Ottawa 
Conference. We also participated in the Vienna Conference. We 
attended the Vienna Conference as observers, and we made some 
very positive statements with respect to what was going on, 
both in Ottawa and in Vienna.
    Our position is that in order to get a truly effective and 
global ban on land mines, it is necessary not simply to get the 
like-minded states together but to get the major suppliers and 
former suppliers and producers of these land mines to come to 
the conference and to negotiate the ban with us.
    Ms. Pelosi. Mr. Secretary, if I may. I guess where we're 
having a difference of opinion is when you say ``support the 
Canadian Initiative.'' What I'm talking about is to use that as 
the vehicle.
    Mr. McNamara. Right.
    Ms. Pelosi. I certainly know that we are not supporting it 
in the way--the implication of your remarks is that we are part 
of the Canadian Initiative. I mean, unless the US participates 
in the----
    Mr. McNamara. Our primary focus is in the CD----
    Ms. Pelosi. Right, but which----
    Mr. McNamara [continuing]. In the Committee on Disarmament 
in Geneva.
    Ms. Pelosi. Right, in which Russia and China oppose the 
limitations, and in which Mexico, Syria, Vietnam have blocked 
prompt actions to proceed----
    Mr. McNamara. Right.
    Ms. Pelosi [continuing]. And so I guess the answer is no--
--
    Mr. McNamara. I'm referring to----
    Ms. Pelosi [continuing]. We wouldn't be joining the Ottawa 
Initiative?
    Mr. McNamara. No. The answer is that we believe that the CD 
is the best and most appropriate forum to take a true--to take 
up the negotiation of a truly global land mine ban.
    Ms. Pelosi. Right, and if that failed----
    Mr. McNamara. And if that fails, then we--and it hasn't yet 
failed, although admittedly it's in difficulty. We would then 
have to reassess and we will do so. In the meanwhile, we are 
not unsupportive of the Ottawa Initiative, or the Ottawa 
program.
    When and if we have to reassess, we will also take another 
look at that, but for now we believe that the best way to get a 
truly effective and global ban is not to go, in effect, and 
preach to the converted, those like-minded states, but to get 
the states that are the major producers who do not support----
    Ms. Pelosi. No, I understand your principle. I just wonder 
when you realize that the other system is stymied to the point 
that nothing is happening----
    Mr. McNamara. Then if that happens, if that should occur, 
then we will reassess.
    Ms. Pelosi. And I think there's enough evidence even from 
our own negotiator that things are not happening.

                      IMET Training for Indonesia

    Anyway, I know my colleague, Congresswoman Lowey, will 
focus somewhat on Indonesia, and if she doesn't I will on the 
next round, but I do want to say that I disagree with our 
Chairman on the IMET issue to Indonesia.
    First of all, I don't even know why we're giving money to 
Indonesia with the wealth that exists there. The President's 
family itself is worth $30 to 40 billion, and then beyond that. 
Something is creating some wealth in Indonesia, so just in 
terms of the money I don't understand it, but in terms of the 
policy I have concerns that I mentioned in my statement.
    We voted for only expanded IMET last year. It was not my 
understanding that the administration would allow Indonesia to 
have full IMET, even if they participate with some of their own 
money. Could you comment on that? Is that yours, Mr. Slocombe?
    Mr. McNamara. I--let me start it, and I hope that Secretary 
Slocombe can join.
    The IMET program in Indonesia was especially for Extended 
IMET. Those who are eligible for Extended IMET are also 
eligible to purchase IMET training. We did not give the regular 
IMET to Indonesia. IMET to Indonesia as grant, or as a giving 
of IMET, was ended some years back, I think 6. I may be wrong 
on the exact date.
    What we did do was allow Indonesia to purchase IMET, and 
they purchased it at the rate that was appropriate for the IMET 
training that they were requesting. Now--so that is what's 
happened, and that is what we would like to see continued. That 
is to say, the Extended IMET programs Indonesia is eligible 
for, and it can purchase regular IMET training in addition, 
which it wishes to get, and which we are willing to give them.
    Now, the real question here, it seems to me, is whether or 
not there ought to be IMET training, and whether or not we get 
national security benefits out of IMET training for Indonesia, 
and without going into great detail I think there is a very 
strong case made, and I would like to make it briefly here for 
continuing to allow Indonesia to buy the IMET training, not to 
give it to them. And that what we have seen over the course of 
the last few years are some very beneficial developments in 
Indonesia among its military, particularly among officers who 
have had IMET training.
    IMET training for the Indonesian military is designed to 
make them more professional, make them understand the values, 
human rights values and democratic values, that they need to 
understand in order to allow Indonesia to evolve into a better 
and stronger democratic state. It also is necessary for them to 
understand how they should do things such as hostage rescue 
operations.
    There were two hostage rescue operations in Indonesia in 
which IMET graduates were the commanding officers. Those 
hostage rescue operations were performed and carried out in an 
exemplary manner, and they were--it was noted by foreigners, 
Americans, as well as Indonesians, and international 
organizations as having been exceptionally well-conducted 
operations.
    There have been riot control efforts by the Indonesians. 
One in particular was carried out under the command of an IMET-
trained officer. It was an exercise that received the 
commendation of international organizations including the Red 
Cross, I believe, and NGOs that observed it, and others.
    So we do see benefits. We do see--I believe, and NGOs that 
have observed, benefits. We see the Indonesian military 
changing their practices as a result of the training they 
received. And it shouldn't be surprising. Military officers are 
told to perform functions and to get the job done. If they have 
been trained to do the job the right way, then they can get the 
job done the right way. If they haven't been trained to do it 
the right way, they'll do it the old way, the wrong way.
    Now, IMET training is, in fact, contributing to a better 
human rights situation in Indonesia. It hasn't gotten all the 
way through the Indonesian military. It hasn't been totally 
pervasive. But, in fact, we are making progress. And, again, 
this is a long path that we are going to be following as 
Indonesia develops into a true, modern democratic, a strongly 
democratic state with strong democratic institutions.
    Ms. Pelosi. Wait a second, wait a second. I just want to 
make sure I understand what you're saying there. As Indonesia 
develops into a strong--how far down the road are we talking or 
are you characterizing the present situation?
    Mr. McNamara. I'm talking of an evolution, an evolution 
that is moving at a ever-increasing rate, although there is 
still a long way to go. We've come a long way and there's a 
maybe even longer way to go. But cutting off IMET is not going 
to make the human rights situation in Indonesia better, it's 
going to make it worse.
    Ms. Pelosi. Is it your position that cutting off IMET to 
Indonesia is the reason why human rights are violated in 
Indonesia?
    Mr. McNamara. No. All I'm saying is that if we now 
disengage IMET and prohibit Indonesia from getting IMET, we 
will not have improved the human rights situation in Indonesia. 
It will remain about where it is, probably, or maybe get worse. 
If we continue IMET, we can see progress and if you wish, I can 
go into detail on the cases where----
    Ms. Pelosi. No, not here. But, I would really like to see 
where the improvement in human rights in Indonesia has taken 
place because of the IMET training. I do think that we do some 
good things.
    Mr. McNamara. Well, I have five or six cases which I will--
--
    Ms. Pelosi. I do think that some of the development 
assistances to NGOs in Indonesia, has been helpful.
    Mr. McNamara. Well, I have, right here, five or six 
specific cases and names of officers that have received the 
IMET training and that have been involved in things like 
hostage rescue, riot control, publishing and implementing human 
rights training for Indonesian forces under their command, 
publishing a human rights manual for the Indonesian armed 
forces. I don't believe that those things would have taken 
place if those officers had not been trained under IMET. That 
doesn't mean the problem is over with. It simply means that the 
problem is being improved--that the difficulty in the human 
rights situation is being improved and one can cite specific 
examples of where IMET training, we believe, played a very 
important role.
    Ms. Pelosi. Can we get that for the record, Mr. Chairman?
    Mr. Callahan. Yes. Let me just follow-up now. Did you say 
that Indonesia is receiving IMET training instead of expanded 
IMET training, is that what you said?
    Mr. McNamara. No, no. I said I believe they are receiving 
both, but they are buying the IMET training. They are not 
receiving it, it is not being given to them.
    Mr. Callahan. Well, how do you separate the two?
    Mr. McNamara. One is our money and one is their money.
    Mr. Callahan. I understand that part. But, I'm saying, how 
is the training scheduled? I mean, the reason for the expanded 
training is to include human rights education.
    Mr. McNamara. Correct.
    Mr. Callahan. Do they go to class one day with our money 
and say----
    Mr. McNamara. These are different courses.
    Mr. Callahan. Well, I understand, but----
    Mr. McNamara. With different individuals coming.
    Mr. Callahan. Well, I know that. But this Committee last 
year passed only the expanded IMET training.
    Mr. Slocombe. But, as I believe has been the case for a 
long time, there is a lot of training sold through the regular 
FMS system in which the eligible countries have to be eligible 
to purchase it. But the countries buy it with their own funds, 
just as they buy other things through the FMS system. The 
expanded IMET courses are limited to a certain category.
    Mr. Callahan. Well, I understand, but you see----
    Mr. Slocombe. I don't understand the question.
    Mr. Callahan. Yes, but a number of members were against 
Indonesia receiving this training. The argument that I put 
forth on the floor against was that we were just providing 
expanded IMET training. The proponents of banning IMET training 
for Indonesia were arguing that we shouldn't even be selling it 
to them. And I was arguing that we were only participating to 
the point that they were buying the expanded program. But even 
if we were giving it to them, it was instructing the military 
or in the military training part of the classes that they were 
also teaching human rights. Well, why do they need the expanded 
then? If they have the capability and they can buy regular IMET 
training, why shouldn't we be including human rights there?
    Ms. Pelosi. That's right.
    Mr. McNamara. We do, but the training, there are many 
programs in IMET that are not part of the expanded IMET 
programs that do include human rights training and that, in 
fact, it permeates the program. The way we train people to do 
things in the most humane way, using minimum force, et cetera, 
is, in effect, a form of human rights training, particularly 
for third-world countries. I think the difference is that in 
the case of the expanded IMET, we focus especially on democracy 
building and human rights and we bring civilians into it. It's 
the only portion of the IMET program where we are allowed to 
bring civilians into the IMET program.
    Mr. Callahan. Well, we're going to have to get into that a 
little bit deeper before I'm able to fully commit. I was 
unaware that we were providing IMET training, in any form, 
without the inclusion of human rights education to Indonesia. I 
thought that we agreed we would give them expanded IMET 
training capabilities. Now, this is somewhat news to me. I 
support Indonesia, this is a body of compromise. I support 
Ireland and they give me $20 million for Ireland and in return 
I give Nita (Lowey) $3 billion for Israel. That's how I get it. 
I give Nancy Pelosi anything she wants and I get IMET, expanded 
IMET. But I'm concerned that----
    Ms. Pelosi. Sounds like a good deal to me.
    Mr. Callahan. I'm concerned about it and I need to get with 
you at some point because that's going to be a difficult 
argument to make. I was stopped on the elevator by Barney 
Frank, and he asked, ``where are you going?'' I said, ``I'm 
going to a Foreign Operations Hearing.'' He said, ``I'll see 
you on the floor with an Indonesia amendment.'' So, this is not 
something that just Nancy and Nita are interested in. There are 
other members, I think, 15 members at one point approached me 
last year with this amendment to deny them any assistance.
    If we pass a ban, which I certainly would not agree to, it 
would be problematic for the Defense Department. But I was not 
of the impression that they were receiving any training, 
whether they're paying for it or not. But as I understand what 
they're telling me, Barney, Nita, Nancy and others, is that 
they are probably going to come forth with an amendment that 
will ban the Department of Defense from selling IMET training 
to Indonesia. We better get our act together on that and you 
better give me some better methodology of justifying the 
administration's position.
    Ms. Pelosi. Mr. Chairman, thank you for clarifying the 
problem.
    Mr. Callahan. Okay. Mr. Packard.
    Mr. Packard. Thank you, Mr. Chairman. It's a pleasure to be 
with you again, with you and Mr. McNamara, welcome. My concern 
is twofold. One, the administration is requesting several 
increases and I see no offset. We're not in an increasing mode 
in this committee and I think it will be very difficult to 
increase the foreign aid package in any specific area without 
offset. You requested $55 million for security programs and I 
support security programs but, again, I don't see this 
Subcommittee anxious to increase the overall funding levels.

                              middle east

    That includes the funding level, the portion of the total 
funding or the total pie, to the Middle East. Again, I see a 
$52 million increase for the MED bank and $15 million for 
foreign military financing for Jordan. I have no problem, I 
believe Jordan deserves, and certainly can use the money, but 
I'm simply addressing the offset issue of where we get the 
money, and how will we redistribute the Middle East pie. That's 
an area that I don't see well addressed in your statement, nor 
in your budget submission.

                                  nato

    Let me start, however, with the NATO. You're proposing an 
expansion of NATO's operations in several areas. That may be 
needed. But I'm chairman of the Military Construction 
Subcommittee, and as I see NATO increase its responsibility and 
its operations, I see eventually this issue coming back to my 
subcommittee to help furnish housing and other physical 
facilities to support those increases. Yet, at the same time, 
the President and the administration has a submitted $1.6 
billion decrease overall for Military Construction.
    I don't understand the rationale, where you are increasing 
the responsibility that would require me to furnish additional 
funding for facilities and housing for the increased role of 
NATO, and at the same time, cutting my budget by $1.6 billion. 
Out of a $10 billion budget, that's a significant cut. How do 
you rationalize that whole question of increasing NATO's 
responsibility, expanding NATO and yet decreasing the budget 
that would support NATO?
    Mr. Slocombe. The MILCON budget, of course, depends onwhat 
our requirements worldwide and, importantly, in the United States. As 
we complete the drawdown, the fact is, and I know Secretary Cohen has 
focused very heavily on this, the cuts in infrastructure and the 
support base have not matched the cuts in the fighting forces and they 
need to get back into balance. As we close facilities, that means that 
the requirement for military construction is somewhat reduced and 
that's what produces a difference in the request. The amounts of money 
which would be MILCON, which would be associated with the NATO 
enlargement, would, I think, be very, very small indeed. They are not 
offsets as to each other.
    Mr. Packard. Well, housing is already in rather deplorable 
conditions for U.S. NATO personnel, our military personnel with 
NATO responsibility and that further impacts negatively, I 
think, an already difficult situation for quality of life.
    Mr. Slocombe. Well, I certainly agree that we need funding 
to improve housing in a lot of places, including in some 
overseas bases, and that is provided for in the request. But 
the total amount of MILCON is, and rightly has to be affected 
by the cuts in the overall overhead, if you will, of the 
Defense Department.
    Mr. Packard. On Jordan. Again, a $15 million increase 
request, is there--what is your intent of that? Is it to have 
this Committee develop its own offsets or are you prepared to 
offer offsets that would allow us to accommodate that increase?

                               150 budget

    Mr. Slocombe. It is the position of the administration and 
the President that with our worldwide responsibilities, the 
overall 150 budget should be increased, that is certainly the 
case, and this is one of the increases. And obviously that a 
need that will be discussed between the Executive Branch and 
Congress, and the Congress will make its final--as it always 
does. But it is--that is, as the Chairman said, that is a part 
of an overall request for an increase in the budget.
    The total amount of the overall budget, for the whole 
federal government, is within the guidelines, but there are not 
offsets for every increase within the 150 budget. Ted, this is 
more your----
    Mr. McNamara. Nor are there offsets within this subset of 
the 150 account for all the increases in this subset. It is 
rather that the 150 account is being increased and the offsets 
will be found in other portions of the budget. So that, as Walt 
said, the overall budget is within the parameters set by the 
budget committee.
    Mr. Packard. Along a different track, I see where you're 
increasing or starting new initiatives to enhance international 
peacekeeping forces, the EIPC accounts, by $7 million. Is this 
running parallel, counter, or is it duplicatory of your PFP 
efforts in the Central European countries and in NIS?

                              peacekeeping

    Mr. McNamara. It has some similar objectives, although its 
focus is with peacekeeping in areas such as Africa, Asia, Latin 
America. The countries that would be included in that program 
are those that have a capability within their own military and 
defense structures for assuming a greater role and 
responsibility for peacekeeping and have indicated a 
willingness, a political willingness, to join in peacekeeping 
operations. But they lack some essential elements for their 
full functioning when participating in those peacekeeping 
operations.
    These countries are, if you will, kind of the first level 
countries below those now doing most of the peacekeeping. What 
we'd like to do is to use this money to get them up to a level 
where their participation in peacekeeping would enable us and 
some other of the more developed countries that now perform 
such a heavy percentage of these operations to be able to pass 
off some of the duties and responsibilities to these other 
countries. One of the countries, for example, would be 
Argentina. I can give you a list of the first tier countries 
that we have in mind, Argentina, Uruguay, and Jordan; Poland 
and Czechoslovakia in Eastern Europe, would be a few of them. 
India, Nepal, Pakistan, Malaysia, and in Africa, Botswana, 
Ghana, Senegal and Zimbabwe. These countries have all, in the 
past, indicated both a willingness and a capability that is 
higher than the average among regional states. And we would 
like, in effect, to give them a better capability so that we 
can call on them more often, quite frankly, and expect them to 
perform better the tasks that would be assigned to them.
    Mr. Packard. We have a similar situation, I think, in 
Africa, your ACRF account.
    Mr. McNamara. Correct.
    Mr. Packard. Where you are increasing military activities 
in Africa. Is this a precursor to a UN army, and how many 
countries have we got to participate? I know France has 
indicated an interest in doing so, but it's difficult normally 
to find countries to participate with us. Where are we at on 
that?
    Mr. McNamara. Well, this initiative is still in its 
gestation phase. First of all, it is not a precursor to a 
standing army. Indeed, it is an attempt to establish a 
mechanism whereby there would not be, in effect, a standing 
army. Rather what you would have is a designated, or if you 
want, earmarked forces in various countries, particularly in 
Africa, that would have been trained and equipped to undertake 
operations. But they would remain in their home countries until 
such time as they were called upon to go and participate in the 
peacekeeping operation.

                                 haiti

    It's an idea that draws upon an experience we had in the 
Haiti operation, which was really quite beneficial for that 
operation. We went to the Caribbean states, and none of them 
have sufficient force individually that would be capable of 
participating effectively in the Haiti operation. Instead, we 
got each of them to contribute a bit and they formed what was 
known as the Caracom Battalion. This Caracom Battalion was 
actually trained and brought to Haiti, and it performed quite 
effectively in the Haiti operation. But none of those countries 
would have been able to participate in the Haiti operation 
individually. They were simply too small. None had an effective 
capability to bring to Haiti.
    If we take that experience and apply it to Africa, with 
certain changes and adjustments to the African situation and 
the countries involved, the idea would be that a small 
participation by a number of African countries, each one 
contributing from their own national forces, would be desirable 
in peacekeeping operations in Africa. The United States and 
France and Britain and Italy and, I believe, Spain, and I would 
have to get you the list of the countries that have agreed to 
consider participation in the ACRF as trainers and as 
contributing countries. But a number of the European countries 
andArgentina, Brazil and others have been asked and have 
indicated a willingness to at least consider participating.
    Mr. Packard. Are we looking at a whole new structure, then, 
similar to NATO or are we--who is leading and how is this to be 
managed?
    Mr. McNamara. Actually it would be done primarily 
bilaterally, where France would assist a couple of countries, 
we would assist a few countries. The British would assist some 
countries, and then by coordinating our assistances and the 
training, we would hope that at the end of such training, to 
have forces that would be capable of operating jointly with the 
developed countries that right now perform the great majority 
of the peacekeeping operations in Africa. It's an attempt to 
bring countries in that would not otherwise be able to commit 
to such peacekeeping operations, and to bring them in from 
Africa itself.
    Mr. Packard. Is this a whole new concept just being 
generated in this budget proposal or is there an existing----
    Mr. McNamara. It is new. I believe, this is the first time 
that we have asked for a specific budget allocation for it. It 
is a concept that we have been working on for the last few 
months.
    Mr. Callahan. Yes. You're taking too much time.
    Mr. Packard. I'm sorry, Mr. Chairman.
    Mr. Callahan. Why don't you go ahead and then you can 
designate the time.
    Mr. Packard. All right. I'd like to finish mine and we will 
go to----
    Mr. Callahan. Mrs. Lowey is next. And I'll run up and vote.
    Mr. Packard. And you'll go vote and come back. Okay, Mrs. 
Lowey, please.

                                  imet

    Ms. Lowey. Thank you very much, Mr. Chairman. I want to 
commend you before you leave. Actually, I am looking forward to 
further discussion about IMET and expanded IMET and I just 
wanted to express my appreciation to you for your sensitivity 
on this issue. Several of us have discussed this review and I 
think it's important that we clarify it. So now you may vote, 
but I want to thank you, Mr. Chairman.
    In fact, just a word about that and I look forward to the 
discussion. As I understand it, you're supposed to be screening 
the Indonesian participants to insure that they are not human 
rights abusers to give them any legitimacy. Now, I know you're 
getting assurances, I assume from the Indonesian government, 
that the participants are not human rights abusers, and I'd be 
very interested to know whether you receive any independent 
confirmation of that fact. In fact, as I understand it, the 
Indonesians will say that all the human rights abusers are in 
jail. So if you want to respond briefly or save that for 
another discussion, but I'm concerned that if we rely on the 
Indonesians to confirm that the people who participate in the 
program are not human rights abusers, I think there could be 
real concern about the accuracy of that information.
    So, again, I'm opposed to IMET for Indonesia. I share the 
Chairman's concern. I was not aware that they could buy IMET 
and it's my understanding that the senior officials are coming 
here, officers are coming here to be trained for IMET and the 
lower level personnel are receiving expanded IMET. So we can 
continue that discussion and I think many of us are interested. 
If you would like to respond to that now, that would be fine.
    Mr. Slocombe. On the issue of screening, the short answer 
is that we do not rely solely on the representation of 
Indonesia or any other country. There is a separate U.S. 
vetting or screening process conducted by the embassy using all 
the information that's available to the United States 
government to identify people who shouldn't be in the programs. 
We do not rely on----
    Ms. Lowey. Either IMET or expanded IMET?
    Mr. McNamara. Any training. And not just for Indonesia, for 
other countries also. The vetting is standard procedure, and 
that includes Indonesia and other countries.
    Ms. Lowey. I thank you, and again, I look forward to a 
discussion with you on that. I also see in the budget request 
that you have requested a 33 percent increase over last year in 
IMET for Indonesia, from $600,000 to $800,000. Yet, you propose 
to train the same number of students, could you explain to us 
why you need the increase?
    Mr. Slocombe. Let me ask Gen. Rhame. I do not have in my 
material, the number of people who could be trained, but it may 
have to do with the mix of courses, different courses have 
different----
    Mr. McNamara. And I think it's also the growing price. And 
one of the things that I eliminated from my oral statement at 
the beginning, with respect to IMET, was the increasing costs 
that results from not only inflation, but also the increase in 
per-student costs for IMET as a result of the downsizing of the 
U.S. military and therefore, U.S. military training for our own 
forces. This raises the per-unit or per-student cost for IMET 
students all over the world, not just Indonesia. Those two 
factors have resulted in a great increase in cost in the IMET 
program. With that said, it's hard to see why it should be 30 
percent, but we'll get you the answer.
    Ms. Lowey. So let's continue that discussion because we're 
all kind of talking quickly here. Last year the administration 
put on hold plans to sell excess planes to Indonesia and I was 
pleased that the sale did not go through, and I still oppose 
the sale. Does the administration have any plans to pursue this 
sale?
    Mr. Slocombe. We believe the sale would be in the national 
interests, but we also will only move on it when we know that 
that deal is sufficiently shared on the Hill that it can go 
forward. Obviously the Hill's view on this is very important.

                                 israel

    Ms. Lowey. Okay, and I'm sure that will be part of our 
discussions as well. To another area, our chairman mentioned 
the $3 billion to Israel, and I think it's important to state 
for the record, our concern that the benefits of military 
assistance to Israel stretch far beyond the borders of that 
country, in that the United States has a vital national 
security interest in keeping Israel stable and secure. And, in 
fact, our military assistance certainly helps achieve that 
goal. We were recently in the region of the world and there 
were discussions about that. Could you discuss, for us, how 
critical the military assistance is to the stability of the 
entire region?
    Mr. McNamara. I think the U.S. assistance to the peace 
process, and to Israel in particular, is absolutely essential 
for the continuation of the process, and without the process 
continuing to make progress, I think stability in the region is 
seriously undermined. Our commitment to assisting in that 
process and to assisting Israel with its defenses, legitimate 
defense needs and maintaining thequalitative edge, are 
undiminished. We have made that quite plain, particularly in recent 
weeks and months with visits from the region here to Washington 
visitors who come both from Israel as well as from Egypt and elsewhere.

                              middle east

    So it's simply a very clear and absolutely essential 
element in peace and stability in the Middle East. That's one 
of the reasons why we've given it such a high priority and 
also, quite frankly, a huge portion of the security programs 
that we're putting forward here. And just, again, for the 
record, let me note, because the Chairman mentioned before, I 
believe in his opening remarks, that he noted that there was 
only a two percent increase in the overall request level. But 
if one excludes the Middle East accounts, the overall increase 
in the other accounts in the request level, comes to about 30 
percent.
    So, in fact, we thought that we were, increasing the other 
programs more than would be suggested by the two percent 
figure.
    Ms. Lowey. I thank you very much. I just think it's 
important, given the amount of the allocation, to stress that 
the benefits of these dollars go beyond the benefits just to 
Israel, that it's important for the stability of the region.
    Mr. Slocombe. If I could, just to make the point, that the 
Department of Defense fully supports these proposals and the 
priority reflected, and also, that we stand strongly behind the 
commitment to Israel's quality today.
    Ms. Lowey. I thank you. The United States also has a great 
interest in insuring that Jordan, which has been a critical 
party to the peace process, maintain a credible military 
deterrent against potential threats from Syria and Iraq. How 
has our military assistance helped Jordan against threats, and 
what is the current status of Jordan's defense needs. Many of 
us have a strong interest in Jordan's economic aid as well, but 
in this particular forum I think it's important to stress the 
military assistance to Jordan.
    Mr. Slocombe. The United States has had a long practice of 
supporting Jordan and particularly this has become all more 
important with Jordan's decisive and courageous step to 
participate fully in the Middle East process, in spite of the 
recent difficulties and the exchange of letters yesterday. I 
know from my contacts with senior Israelis in the Ministry of 
Defense, that they believe that the, if you will, the warmest, 
the best of all of the peace agreements is the one with Jordan. 
And they also fully share your judgement that it is in the 
interests of stability and the solidity of the peace process 
that Jordan have a military able to deal with its own defense 
needs, paradoxical in some sense as that may sound, that Israel 
was interested in Jordan having a strong and capable military.
    The present program is focused almost entirely on the 
Jordanian F-16s which are necessary to modernize their air 
force, and the money which is requested for this year, will be 
devoted going forward with that program, which is on schedule 
and will result in the first F-16s being delivered in Israel 
in--I'm sorry, in Jordan in December of 1997. That is a very 
important program for the Jordanian Air Force. That is the 
highest priority of the Jordanian government. To be frank, 
there are also some problems about sustaining other parts of 
Jordan's military establishment. They are having to find the 
resources for that out of their own national funds. There are 
other demands on Jordan with respect to trying to close and 
seal their borders, particularly with respect to terrorists so 
that Jordan does not, both for its own sake, and because of 
Israel and other countries, doesn't become an avenue for 
terrorists.
    But you're absolutely right about the U.S. interest in 
seeing that this gets done.
    Ms. Lowey. Unfortunately. I thank you for your response to 
that.
    Mr. Callahan. Mr. Knollenberg.
    Mr. Knollenberg. Thank you, Mr. Chairman. Gentlemen, thank 
you for appearing before the subcommittee today. I wanted to 
focus one of my few questions on the situation with Egypt. I am 
well aware, as all of you are, of the economic assistance that 
we provide for both Egypt and Israel--and I commend the 
administration for recognizing that there has to be economic 
and military support in that area, and the economic 
improvements in prosperty that result, in order to bring about 
any kind of lasting peace in the region. We heard that on the 
recent trip that I took with the Chairman and others, about 
increasing the prosperity.
    Egypt, let me focus on Egypt. Despite the 815 million of 
assistance there, in my observation it seems that Egypt is 
still dragging its feet when it comes to privatization and 
lowering some of the penalties at the border with respect to 
trade. Capital goods coming into the country are still taxed at 
a very high rate. Now, there have been some improvements. We 
had communication with President Mubarak and I know the 
Chairman has spoken to him more recently, and I believe the 
rate of taxation has been reduced at the port of entry. But 
it's still very excessive and when you're bringing investment 
and capital goods into the country, it's a huge imposition on 
any business coming in.
    First of all, is it true that the reduction on Egypt's 
tariff rate was only a slight 10 percent, down from 40 percent 
to 30 percent? Secondly, what other pressure or encouragement 
is being applied to bring those down so that we can help Egypt, 
and others in bringing about greater economic liberalization. I 
think the main problem that we have is that they're not letting 
us through the door and other countries as well, and so we find 
that we're better off just turning away and going elsewhere. 
What is being done to encourage a lowering of those damaging 
trade barriers as well as increase the privatization, because 
airlines are still nationalized, the media is still, I believe, 
nationalized.
    Mr. McNamara. I'm afraid I don't know precisely what the 
figures are with respect to the lowering of those rates, and 
I'd have to--I'm not an expert on the Egyptian economy and what 
they're doing with respect to those rates. I do know that a 
very important element in our ESF program, as well as in other 
assistance in the economic front, not only to Egypt, but to 
other countries, is to stress privatization, liberalization of 
trade, and encouragement of capital markets and of foreign 
investment and particularly long-term capital investment in 
those countries. And we do, indeed, include those in the 
Egyptian program.
    I think, as you noted, there has been some progress in that 
regard. I would have to check but I'm fairly sure that we could 
trace some of that to the U.S. programs that are having an 
effect. The degree to which that progress is seen in Egypt, I 
don't think is something that you would, at this point, 
consider to be sufficient. But the fact----
    Mr. Knollenberg. I didn't get that statement.
    Mr. McNamara. To be sufficient, the degree of progress in 
the direction of liberalization of capital markets and such, 
more needs to be done. That would be my judgment, at this 
point.
    Mr. Callahan. Let me suggest, Joe, also, that you report 
back to the Committee in writing what your findings are with 
respect to capital goods for manufacturing capabilities. I did 
bring this up this week to President Mubarak. He told me that 
to the best of his knowledge, there was no import tax on 
capital goods for plants coming into Egypt.
    Mr. McNamara. For plants?
    Mr. Callahan. For machinery coming into Egypt. But it's 
Joe's understanding and thus my understanding that they are 
having problems with some particular industries who are not 
experiencing that. The American Chamber of Commerce people we 
met with in Egypt said this is one of the major problems that 
they have encouraging American companies to invest there and so 
did the Ambassador. He said this was a primary problem, so we 
need you all to find out where we are and when we can expect 
some relief. I don't think there ought to be any duty. And 
President Mubarak was of the impression that there was no duty. 
So if he's of the impression, it would appear to me they could 
make some immediate changes to relieve those problems. So if 
you could report back to us in a timely fashion.
    Mr. McNamara. We'll check that out.
    Mr. Callahan. If there is not a satisfactory resolve 
reached by the time of markup, then we'll put something in the 
report language, or maybe dual language, insisting that these 
efforts be made. We don't want to try to control a country on 
their duties, but it's ludicrous for a country receiving 
American economic support to discourage American business 
people from going there to help the privatization effort. Get 
back to us as quickly as you can on where we are and tell us 
what the administration has already done and what they intend 
to do and what the time table is on making this specific 
request on capital goods for new plants in Egypt.
    Mr. McNamara. Yes, Mr. Callahan, we'll do that.
    [The information follows:]

    Egypt's greatest challenges regarding the import of capital 
goods currently lie in import procedures, e.g. customs, quality 
control, health regulations, and transparency; not in statutory 
impediments. USAID and the Department of Treasury have been 
working with Egyptian officials to address these problems and 
speed implementation of new practices and procedures.
    Egypt has, in fact, made substantial strides in reforming 
its tariff schedule for imports. For example, in early 1995, 
the government slashed customs duties on a range of imported 
industrial machinery from variable rates of between twenty and 
seventy percent to today's flat ten percent rate. In early 
1996, it reduced the rate on other capital goods as well. 
Maximum tariff rates on all imports were lowered by fifteen 
percentage points in late 1996, from 70 to 55 percent, and 
further reductions are expected by 1998.
    A substantial expansion of free zones is being discussed. 
Companies operating within free zones are exempt from the usual 
schedule of taxes and fees. This simplified regime means that 
companies are subject to a one percent fee, assessed annually, 
on the value of goods entering or leaving the free zone. Under 
the new Investment Law 8 of 1997 signed May 11, U.S. and other 
foreign direct investors may benefit from a variety of tax 
exemptions outside free zones, as well.

    Mr. Knollenberg. Thank you very much, Mr. Chairman. I 
just--could I ask one quick question, and I do appreciate that 
very much and I look forward to your response.
    Mr. Callahan. Sure.
    Mr. Knollenberg. Just one quick question on the Russian 
sale of nuclear reactors to Iran and, as I just noted about a 
month ago, to India as well. And I guess Russia is also talking 
about doing something with Cuba, and there's some concern about 
the safety of exporting nuclear technology to Cuba, which lies, 
as you know, just 90 miles off the coast of Florida. I've heard 
several Floridians voice some of their concerns. What is your 
opinion of, or your information on the status of Russia with 
respect to the India situation and also Cuba?
    Mr. Slocombe. The India one I've heard about, the Cuban one 
I'll have to check on.
    Mr. McNamara. On the India one, we have gone to the 
Russians and expressed our concern that, although the 
assistance appears to be going to a safeguarded reactor, it is, 
in fact, the agreed policy of the Nuclear Suppliers Group not 
to assist or participate in civil nuclear reactors in countries 
that do not have full scope safeguards. India, although the 
reactor of concern would be safeguarded, India does not 
havefull scope safeguards on all of its reactors. Therefore we have 
expressed our concerns to the Russians and asked them to reconsider 
this and we'll be, I'm sure, discussing it with them in the coming 
weeks.
    I'm not familiar with the current status on Cuba. I know 
that that was a topic of discussion between ourselves and 
Russia but I'll have to get back to you on that.
    [The information follows:]

    Administration officials have consistently and at the 
highest levels raised with Russian officials U.S. concerns 
regarding Russian nuclear cooperation with Cuba.
    The U.S. would also view with concern any Russian plans to 
construct a power reactor in non-nuclear weapon states which do 
not have full-scope safeguards obligations, such as India or 
Cuba, and we have raised these concerns directly with Russian 
authorities as appropriate. We have also repeatedly made known 
our concerns about safety in connection with the potential 
completion of the Cuban reactors.

    Mr. Knollenberg. If you would, please. Thank you.

                         school of the americas

    Mr. Callahan. Mr. Torres, I'm going to implement a new 
policy with some exceptions, I'm going to exclude Nancy, 
exclude Sid Yates, simply because of his longevity on this 
committee. Exclude David Obey, exclude Bob Livingston, but from 
here on, we're going to start recognizing members based upon 
when they arrived. I appreciate your patience. You've been 
sitting here two hours and we're going to implement a new 
policy. It creates a problem on the part of the staff, but it's 
only right that those of you who come ought to be given some 
recognition of your----
    Mr. Torres. Thank you, Mr. Chairman. I would accept that 
with the condition you don't use the hourglass on me. I welcome 
the secretaries and thank them for providing such good 
testimony investigating both Secretary Cohen's and Secretary 
Albright's goals for our country, securing the peace and 
promoting democracy and giving humanitarian assistance. I would 
like to just home in on one specific aspect of your testimony, 
and that's the issue that you both cited, the IMET, and you did 
this indicating that it is an instrument of national security 
and foreign policy, and I'm citing from your testimony.
    It is a program that for relatively a modest investment, 
presents democratic opportunities to key foreign policy and 
civilian leaders, military included. I have some questions to 
ask the both of you and however you want to answer this today. 
You talked about modest investment. How much money in the FY 98 
budget will be used to send Latin American military personnel 
to the U.S. Army School of the Americas? And before you answer 
that question, if you'll allow me just to ask you some other 
questions as I cite this statement here. One of the questions 
before us is whether to approve IMET funds that are used in 
part to bring Latin American military personnel to train at the 
School of the Americas. As you know the Defense Department's IG 
report of this year, reporting on the production and the 
oversight of the training manuals that taught abusive 
techniques and which were used at the school, sort of took a--
we made a mistake attitude, and decided not to assign 
individual responsibility. Neither did the report seem to 
consider that there might be a systematic problem if, as the 
report indicates, numerous U.S. military personnel failed to 
recognize that teaching techniques violating human rights and 
democracy contradicted U.S. policy.
    How can there be neither individual nor collective 
responsibility for this kind of incident? It's like saying that 
I didn't know about the tax laws, therefore I'm exempt from 
paying taxes. Do you think there's something broken here and it 
should be fixed? And Secretary Slocombe, while the Pentagon has 
recognized that a dozen or so references in the manual to 
physical abuse, blackmail and execution are inappropriate, 
there's been little acknowledgement that these manuals 
essentially trained Latin American militaries to spy upon and 
infiltrate civilian groups like trade unions, students groups, 
opposition parties. In essence what these manuals taught, we 
know now that this was profoundly undemocratic.
    I want to know if they are still using similar manuals 
today. Did the army remove the 12 bad passages that--is there 
any version of these manuals still in the curriculum? How do we 
know that these methods are not going to be taught again?
    And lastly, the IG report states clearly that there has 
been little corrective action since 1992 to insure that 
training materials are properly reviewed, what are you going to 
do to correct this?
    Mr. Slocombe. Mr. Torres, the first point is that the fact 
that these objectionable materials were prepared or used at 
all, for any length of time, is unacceptable. When this was 
discovered by the Department of Defense, it was investigated 
and corrected and I would not, without commenting on the 
particulars of the IG report, I think it is important to 
understand that extensive corrective action was taken, not 
punitive action against individuals, but precisely to prevent 
and insure that the manuals used in this training, or any other 
training, are consistent with human rights principles.
    The action was--the problem was discovered by the 
Department of Defense in 1991 and investigated. The Department, 
the then Deputy Secretary of Defense asked the IG, in September 
of this year, to review that investigation. The IG found that 
the DoD report was inadequate for concluding that the IG report 
addressed the issue of the quality of, if you will, the 
accountability issues, but with respect--and that is a problem. 
But with respect to your other questions about current training 
manuals, no such materials are used to the knowledge of anyone 
who has made any effort to look at this, and a lot of people 
have looked very hard at it. Remember we are, of course, 
talking about literally thousands of manuals on every subject 
from tank mechanics to airplane navigation, so that the problem 
of certifying that there is not a sentence anywhere is a 
difficult one, but people have worked very hard to be sure that 
anything like this--it's not only that nothing like this is in 
the training, but that the opposite is in the training. That 
is, both that it is essential to observe sound human rights 
practices, but that it is perfectly possible to be effective in 
carrying out a set of missions consistent with those human 
rights practices.
    What happened in the past is deplorable. We have 
takenaction to insure that it doesn't happen in the future.
    Mr. Torres. Thank you. Mr. Secretary, would you care to add 
anything?
    Mr. McNamara. No. I think that Secretary Slocombe has laid 
it out quite cleanly and clearly. We do not believe that this 
type of material is rightfully in those manuals. It's been 
taken out. It should not be taught and will not be taught and 
we are opposed to seeing anything other than, as Secretary 
Slocombe just said, positive human rights reinforcement being 
put in the training. We do not want anything of the nature such 
as was found in there being taught.
    Mr. Slocombe. If I could, one of your specific questions 
was, was this just a matter of taking out a few sentences and 
leaving the rest. The manuals were physically destroyed and a 
handful of record copies to support investigations and 
inquiries were kept. Not only the offending passages, but the 
whole manuals have been withdrawn--not withdrawn from 
circulation, but physically destroyed, except for record 
copies.
    Mr. Torres. Perhaps one unanswered question is initially I 
made about the budget, do you have a figure for that?
    Mr. Slocombe. Yes. For current year, which is the only year 
we know about, in this sense we don't have the FY 98 numbers 
since the program hasn't been established yet. The Department 
of Defense would plan to spend a total of $815,638 for the 
training of international students at the School of the 
Americas. Of this amount, $256,439 has been expended as of 7 
March, which was a week ago, resulting in a balance of 
$550,199. As you know, those, if you will, the tuition costs, 
the physical running costs for the operation are borne out of 
the Army budget.
    Mr. Torres. Thank you. One more question, Mr. Chairman, if 
I may. I'll be quick. Last year the Congress passed the Foreign 
Operations appropriations bill, which included a counter-
narcotics human rights provision as part of this appropriations 
bill, that should prohibit counter-narcotics military aid to 
foreign military units that are implicated in gross human right 
violations. I have a question I would like to ask of this. 
Assistant Secretary Gelbard, in a hearing, stated that the U.S. 
Embassy in Bogota was working with the Colombians in putting 
together a list of military units in compliance with the 
counter-narcotics human rights provision that was passed last 
year. What can you tell us about the process in Colombia?
    Mr. Slocombe. The process in Colombia has been particularly 
intense, I'm told. Ambassador Gelbard would be much more 
familiar with it than I. But, in fact, as a result of the 
requirements, we have, in fact, instituted careful screening of 
all of the candidates that would be--and we have done it. That 
is to say, the Colombians do it and then our embassy personnel 
and the people in the country do it before the candidates are 
accepted into the programs. It's a very intense screening and 
we believe it has successfully avoided allowing any officers or 
individuals associated with gross human rights violations from 
entering the program.
    Mr. Torres. But again, you're answering something you may 
believe to be--and I'm not really speaking to that. I'm 
speaking to the military assistance that will be provided to 
the countries that violate human rights, military units that go 
into the village, let's say, and abuse people. Do we have a 
list of those types of units and are we promoting such 
activity, and I stated Colombia as a country in question?
    Mr. McNamara. Yes. We are collecting and have a program 
that collects information on units and officers including the 
units in Colombia that have been or might have been involved in 
human rights violations. That information, even if it's not 
about gross human rights violations, just human rights 
violations, that information has been gotten together by our 
government through our mission. Not only in Colombia, but in 
other countries also. You're right. I was confusing the 
individual officers with the units, and in this case, it 
extends beyond the individual officers to the units themselves.
    We have instructed our embassies in other countries to do 
likewise. For all counter-narcotics training, we pass all units 
that would receive such training, through a vetting process.
    Mr. Torres. Mr. Chairman, not to belabor the issue here. 
But I have a number of questions on this issue and I'd like to 
submit for the Secretaries to answer.
    Mr. Callahan. So requested. With respect to the School of 
the Americas, we've sent the staff to SouthCom and Guatemala, 
Argentina, Chile to review this. On the textbook situation, I'm 
told that the textbooks in question are no longer being used 
and they have been ordered to be destroyed, as a matter of 
fact. Now, I don't know if any more of them are still there or 
not, but we requested the Secretary of Defense to give us a 
report on January 15th of this year. Bill, has that come in yet 
or----
    Unidentified Subcommittee Staff. Not yet, Mr. Chairman.
    Mr. Callahan. When can we expect that report?
    Mr. Slocombe. We're impressing on the Army, who is actually 
doing the report, the importance of getting it done as quickly 
as possible. I hope that we have the report----
    Mr. Callahan. Well, you tell them that if they are 
interested in the School of Americas, that report better be 
here before we markup.
    Mr. Slocombe. That is a perfectly reasonable request. We 
will make sure that that's complied with.
    Mr. Callahan. Right. We had some recommendations. Their 
uniform policies should be developed and distributed to all 
U.S. embassies regarding the process and the selection of 
candidates. A uniform policy guide should be developed and 
distributed to all U.S. Embassies regarding the process for 
screening of candidates to make certain that the individual 
candidates have not been involved in past human rights abuses, 
and a post-training evaluation process should be developed to 
review the successes or failures of the training provided.
    So we're in the process. I think Bill is going back down 
there to review the progress and to report back to us. I think 
he's going to do that while we're sunning on the beach in 
Guatemala. There's no beach in Guatemala.
    Mr. Torres. Mr. Chairman.
    Mr. Callahan. Yes.
    Mr. Torres. Am I to understand that in your tour down to 
Central America you will look into some of these areas?
    Mr. Callahan. Yes, we will, right.
    Mr. Torres. Good.
    Mr. Callahan. And I know that you can't go with us, but I 
was hoping that you could.
    Mr. Torres. No, I lament that.
    Mr. Callahan. Do you have more questions on this?
    Mr. Torres. Just one, if I could just quickly attempt to 
get a response on this. It goes to the other side of the ocean. 
What is our State Department policy on--I know we don't 
recognize, but perhaps even providing a fair hearing to the 
Republic of Sahara, what is our position on that part of North 
Africa which we understand is in conflict with Morocco? There's 
a peacekeeping process in motion, but do we have any 
relationship with that republic and why don't we, if it's not 
detrimental to the Secretaries goals and objectives of securing 
peace and providing for democracy of a nation such as that?
    Mr. McNamara. I'm afraid, Congressman, I'm simply not well 
enough informed on that to give you a response, although I can 
get you one. I know that we have been deeply involved with the 
United Nations in trying to work out a satisfactory solution to 
the problem of the Polasario. I do not--I think we don't 
recognize them formally. I believe there is undoubtedly some 
contact, whether through the UN or otherwise. I would have to 
find out. So I think the best answer I can give you is that I 
will get you the answer to your questions.
    Mr. Torres. I appreciate that, sir. Thank you.
    [The information follows:]

    It has been our long-standing policy to support the efforts 
of the U.N. Secretary General to resolve the dispute over the 
Western Sahara in accordance with U.N. Security Council 
resolutions on the matter, including, most recently, UNSCR 1084 
adopted on November 27, 1996. In March 1997, the U.N. Secretary 
General appointed former Secretary of State James A. Baker as 
his personal envoy for the Western Shara with a mandate to make 
recommendations to facilitate a settlement of the dispute. Mr. 
Baker recently returned from a trip to the region and expects 
to travel again to North Africa in June. We have offered the 
U.N. Secretary General and Mr. Baker our full support.
    Over a period of several years we have had discussions with 
Polisario officials in New York, Algiers, and Tindouf. The 
level and frequency of these contacts ensure a thorough 
understanding of Polisario views among U.S. decision-makers and 
vice versa. Changing this existing pattern of contacts would 
not add substantively to our discussions, but would suggest an 
equality of relations that appears unwarranted at this time.
    Our official contacts with Morocco, a state with which the 
U.S. has had formal diplomatic relations for over two 
centuries, are both qualitatively and quantitatively different 
from those with the Polisario. This has not compromised our 
impartiality on the issue of the Western Sahara. To the 
contrary, both sides have expressed appreciation for our even-
handedness in supporting the MINURSO mandate. We do not believe 
changing our current policy of appropriate and effective 
contacts with all parties would further the Secretary General's 
efforts to implement the UNSC resolutions.

    Mr. Callahan. Mr. Secretary, let's discuss Guatemala. The 
administration, I think, in the process of working out this new 
peace agreement, pledged $25 million to be made available 
through the economic support fund for Guatemala, but only $17 
million of that has been forthcoming. We're going down there in 
two weeks. If we are asked, what are we to tell them about the 
other $8 million?
    Mr. McNamara. As I understand it, the $17 million that was 
allocated, the U.S. has moved forward with that and we have a 
high priority placed on getting the rest. We're hopeful that 
we'll be able to identify, from other programs, the $8 million 
that we need to----
    Mr. Callahan. Well, they already identified the source, 
that they're taking it out of money they were holding aside for 
Middle East Development bank. But Nancy and I sent a letter to 
the Secretary last week urging her to allocate the full $25 
million and, in fact, I'd like to go ahead and enter a copy of 
that letter into the record at this point. And we need to know 
about the other $8 million, what are the intentions and when is 
it going to be forthcoming, and we need to know relatively 
soon.
    With respect to the Economic Support Fund and the FMF, let 
me just ask both of your candid opinions. Is it sound policy to 
appropriate money to one country based uponwhat another country 
gets?
    Mr. McNamara. Not at all, I know that it's done.
    Mr. Callahan. Well, I know it's done, but I know the 
administration requests it, but let's just use Egypt and 
Israel.
    Mr. Slocombe. Or Greece and Turkey.
    Mr. Callahan. Or Greece and Turkey. How can we have a 
policy regardless of the fact that it's been done for years. 
What's the justification for having a policy that gives one 
country something based upon what another country gets? What if 
the needs of Israel were twice that of Egypt, should we give 
Egypt money whether they want it or not? And just the reverse, 
what if Egyptian needs were twice that of Israel? How can the 
administration continue to support a policy as ludicrous as 
giving one country economic support and military support based 
upon what another country gets? Don't we ever consider need, 
don't we have some long range goals?
    I can't understand. First of all, tell me when this policy 
came into existence and tell me how long you think it's going 
to continue regardless of what the justifications are?
    Mr. McNamara. It's my understanding that the policy is one 
that's related to regional security and regional balance.
    Mr. Callahan. Well, are we buying peace? Is that what we're 
doing?
    Mr. McNamara. We're spending resources to establish, it 
seems to me, political and military and security conditions in 
these regions; we are working to contribute to peace and it 
costs money to establish those conditions.
    Mr. Callahan. What if Mr. Arafat came along and said he 
wanted 70 percent and that's the only way you could have peace. 
What if King Hussein came and said, wait a minute, I'm involved 
in this peace process too, give me 50 percent.
    Mr. McNamara. Well, I think the--I don't contest that doing 
it solely on such a basis is simply----
    Mr. Callahan. That's what your administration requested--
need has never been submitted or justification has never been 
submitted. It was just a percentage.
    Mr. McNamara. Well, I don't know about that.
    Mr. Slocombe. Sir, I would argue that the full amounts 
which are requested are well justified. I don't think, in the 
case of all four cases or all two pairings, if you will, I 
think there's no question that the amounts are well justified. 
The relationship is, as a matter of historical fact, one which 
has been developed over a long period of time. These are both 
cases in which each country has some interest in a sense that 
it's being in a balanced way with the other. I wouldn't argue, 
I forgot what the percentage for Greece and Turkey is, or the 
ratio of 1.8 to 1.3
    Unidentified Speaker. 7:10.
    Mr. Slocombe. 7:10 or 1.8 billion for Israel and 1.3 for 
each are long-standing, and like a lot of things in politics 
and life they have a justification based on the interests of 
the people who are involved. However, I don't agree with the 
proposition that the amounts are--that what the money is spent 
on is not well justified. In all four, in all four cases, the 
numbers obviously--in all these cases, the numbers could be 
something different.
    Mr. Callahan. Is this policy in perpetuity or is this just 
one more year? How long is this going to last? Such 
irresponsible requests and irresponsible appropriations based 
upon a historical precedent of percentages. We visited Israel, 
we visited Egypt, we visited Jordan. You know, my observation 
is that on defense capability, Israel is about as protected as 
they could possibly be with the exception of some type of 
missile activity, which is a tremendous void and should be 
corrected by our Defense Department as quickly as we can to 
make certain we have some Star Wars capability. But Israel has 
the capability to provide for her borders. So does Egypt. An 
invasion by a bordering country is not possible. They're both 
sufficiently strong to defend their borders. Jordan is not.
    So, if we want peace, Jordan is sitting up there in a worse 
position that either Israel or Egypt with respect to a foreign 
invasion. And yet, we are ignoring Jordan's military and 
economic needs, and basing all of our contributions to Israel 
and Egypt on past history.
    Israel's needs might be 10 times what Egypt's are. And my 
point is that our $12 billion appropriation is not going to 
grow. Regardless of the merit and regardless of whether 
Madeleine Albright is able to convince that it's important, it 
is not going to grow in the foreseeable future. That share of 
the pie, of which approximately 45 to 50 percent goes to the 
Middle East, it goes to Egypt, it goes to Jordan, it goes to 
Israel, it goes to the PLO, it goes to everybody over there.
    And so there's not going to be more money, period. We are 
locked in at $3 billion for economic support, perhaps a little 
bit more, for the world. If it's not going to grow and progress 
is going to be made--say, more progress is made in Egypt than 
is made in Israel; say, privatization takes a grasp; say, their 
economic situations propels them to a position whereby they 
might not need economic support, but they might need military 
support; say, at the same period of time Israel's military 
support got to the point where they didn't need additional 
military support, yet they needed more economic support. Is the 
Administration locked in? I know the three administrations that 
have been here since I've been here were locked in on a 
ridiculous allocation of limited resources based not on need, 
based upon history, you're telling me, and based upon 
precedents that were established even before the last three 
administrations got here. Are you all locked into that? I mean, 
can I give Israel more money than I give Egypt and violate that 
percentage? Can I give Egypt more money than I give Israel and 
violate that agreement? Are we going to ignore the needs of 
Jordan?
    Jordan is extremely important to this peace process. I see 
now the King's upset at the Prime Minister of Israel and 
they're writing ugly letters to one another, and I hope that's 
resolved soon. But does the Administration feel that it's time 
to maybe look at prioritization of available monies since they 
must know that this pie and this share of this pie is not going 
to grow?
    Now, you're telling me you want, you want $55 million, $260 
million over the next 4 or 5 years to create the MED Bank. 
That's fine with me, but we're not going to takeit out of this 
share of the pie, we're going to take it out of the Middle East share 
of the pie. If it's that important, fine. You guys are the 
professionals. Let's create a MED bank, let's create a capability of 
borrowing for these countries. Let's do that. But it's not going to 
come out of here, it's not going to come out of the air, it's not going 
to come from an increased appropriation, it's not going to come from 
the Caribbean or Latin America; it's going to come out of this share of 
this pie.
    You guys have got to realize that someday someone has to 
look at that manner of requesting appropriations based upon 
percentages and get down to needs. Tell us, Israel, what are 
your needs, economic support needs? Israel what are your 
military needs? Egypt, what are yours? Here's a billion 
dollars, now tell us what your needs are. Of course, you can 
spend the money. Hell, you could spend the money in Alabama and 
you could do good for human rights, for all types of things. 
And you all have got to recognize that this share of this pie 
is not going to grow, period, and whatever we do now is going 
to be redistributing this money in some fashion.
    And when you come up with these new programs, that's fine 
with me. You guys run the administrative branch of government, 
we'll run the legislative branch of government. You establish 
your priorities, but establish them within the boundaries of 
the 1997 Appropriation Bill and utilizing that percentage of 
the monies that was available to all of the Middle East to do 
the best you can do to facilitate the peace process and 
economic prosperity in the Middle East.
    So, we are going to try to facilitate you, so we're going 
to come to you and say now, where do you want me to take this 
$55 million for the MED Bank, and you are going to tell me or 
you're not going to get the money. It's as simple as that. So, 
recognize this problem, recognize our willingness to work with 
the administrative branch of government, recognize that we have 
just as serious a concern about peace in the Middle East as you 
do in the administrative branch and that that's our goal, too. 
But we're not going to have any more money. And now you guys 
are coming up with these new programs. If these are crucial to 
the peace process, God bless you, we want peace, but tell us 
where to take the money from. Don't tell us you're going to 
take it away from Latin America, don't tell us you're going to 
take it away from Africa, don't tell us we're going to increase 
taxes and get new money, because we're not. Tell us how you 
want to redistribute the 1997 allocation for the Middle East 
and we will try to facilitate you as best we can. Do you have 
any more questions?
    Ms. Pelosi. Thank you, Mr. Chairman. Thank you. The--I 
understand the chairman's question and his insistence that on 
the small pie that we have, but I do want to commend the 
Administration for its leadership in the Middle East and hope 
that, that while we discuss our money problems that it's clear 
that our commitment is and has been a long term one. It's not 
the price, it's the money, as they say around here, and we have 
to have enough to do it.
    I had a couple more questions. I'll try to be very brief on 
each of them. One or two of them center around other areas of 
disagreement that we have, and that is on Turkey. Wait a 
minute. I'll go to another question. I had asked some questions 
earlier about proliferation in China and what I view as the 
soft approach the Administration has taken in terms of 
sanctions and waiving almost all of them.
    In one of the more recent instances, the Administration 
said it waived sanctions because it didn't think that Beijing 
was aware of the sale. Does the Administration believe that the 
Chinese Government controls the proliferation activities of the 
Defense Ministry and the People's Liberation Army?
    Mr. McNamara. Yes. I think generally--I'm not sure which 
case you're citing, where we----
    Ms. Pelosi. Well, the ring magnets for one. They said 
Beijing didn't know about the transfer of the technology, too. 
So, it was a transfer of nuclear technology. The evidence was 
there, and this has all been in the press. But, the 
Administration said they weren't sure that Beijing was aware, 
so that was the excuse in that instance. It's on the heels of 
the transfer of the missile technology where the sanctions were 
waived.
    Mr. McNamara. Right. As I said, generally, yes, we consider 
that to be the case. In the case----
    Ms. Pelosi. Generally, yes, you think it is the case that 
the authorities in Beijing control the proliferation activities 
of the Defense Ministry?
    Mr. McNamara. Are aware of the activities that are going on 
in the Defense Ministry. In the case of the ring magnets, it 
was our conclusion that it was a relatively small amount of 
money, relatively small operation, and it was carried out by a 
subdivision of a subdivision. Also, the ring magnets were not 
on the list that is generally referred to as items that require 
special control with respect to nuclear proliferation. And for 
a combination of those reasons, we were not therefore able to 
state with any degree of certainty that in fact this was an 
effort undertaken by the central authorities in Beijing to 
proliferate, to violate----
    Ms. Pelosi. But that has been said of the transfer of the 
missiles as well and that is, you would agree, a more serious 
transfer than the ring magnets, although I consider the 
capability that that gave to Pakistan to be significant in 
terms of military technology? But basically----
    Mr. McNamara. That's what we said about the missiles? I'm 
not sure that we've said the same thing about the missiles.
    Ms. Pelosi. So, basically, what you're saying to me is you 
think that the Beijing Government controls the activities of 
these organizations? And you're saying this is a subdivision of 
a subdivision. So, I just think this is a dangerous situation 
because if we have a nonproliferation policy in effect and we 
are--we haven't yet, but the business community wants a 
certification that China has certain nonproliferation 
credentials and, more importantly than that, that we want to 
end the proliferation of dangerous weapons technology.
    How, how do we reconcile all of this by saying yes, these 
are state-run industries; yes, the PLA and the Defense Ministry 
own this company, but the people in Beijing did not know about 
it? How can that be an excuse?
    Mr. Slocombe. Every day in the Pentagon things happen that 
we have nominal control over.
    Ms. Pelosi. Yeah, but this is not a centralized economy.
    Mr. Slocombe. The Pentagon is a pretty centralized 
operation.
    Ms. Pelosi. So, basically, you're saying that the Pentagon 
and the Beijing regime are an equation? I mean, I don't think 
you mean that.
    Mr. Slocombe. No, I'm saying that it is not impossible to 
say that the sale of, what, $100,000?
    Mr. McNamara. Something in the $100,000 range.
    Mr. Slocombe. Is made from a particular factory, was not 
something that came to the attention of the leadership in 
Beijing.
    Ms. Pelosi. Right, but if that happens to be the transfer 
of technology for weapons of mass destruction, which is a 
serious matter, then should we just eliminate the certification 
practice altogether because we're saying we cannot----
    Mr. McNamara. No. That's precisely the problem that we 
brought up with the Chinese, that the Chinese are a centralized 
government, centralized economy, centralized system. But as a 
result of changes in recent years, they're--and it's not 
dissimilar in some respects to the changes that have gone on in 
the former Soviet Union and in Eastern Europe. As a result of 
these dramatic changes, their ability to control in a 
meaningful sense many of these exports has diminished 
considerably. And we have talked to the Chinese about the need 
toreinforce and to develop and to create export control 
mechanisms which would bring to the attention of those central 
authorities precisely what are considered relatively small matters when 
those relatively small matters impact on things like weapons of mass 
destruction.
    The Chinese, we believe, because they've had conversations 
not only with us, but also with the British and Australians in 
addition, are beginning to understand that they don't have the 
types of controls that enable them to pinpoint problem areas 
such as ring magnets, and to take true control as opposed to 
nominal control. And that is another portion of the dialogue 
that we have insisted with the Chinese. That is control of 
exports, establishing a regime----
    Ms. Pelosi. Just in the interest of time, I appreciate the 
direction you're going. I just wanted to conclude then that 
promises and commitments made by the Chinese Government about 
the transfer of technology are not necessarily to be respected 
because they can't deliver on a promise.
    Mr. McNamara. No, what I'm saying is----
    Mr. Slocombe. No, that's not what we're saying.
    Ms. Pelosi. Well, if they don't have the proper mechanisms 
in place to be able to be aware of what is happening, then how 
can they make a commitment that it won't happen?
    Mr. McNamara. Ten or 15 years ago that was true of the 
United States.
    Ms. Pelosi. But I'm not talking about 10 or 15 years ago, 
I'm talking about right now when the technology is very deadly.
    Mr. Slocombe. Our objective is to obtain effective 
worldwide controls over this traffic.
    Ms. Pelosi. I absolutely----
    Mr. Slocombe. One of the problems, including in this 
country on rare occasions, in a lot of countries there is a 
problem of having the mechanism so that you have an export 
control system that identifies particular purchases and 
particular kinds of things and would otherwise just go through 
the normal commercial channel. That is one, that is one of the 
things which it is important to develop and which we're trying 
to get the Chinese to develop. Now, it won't be perfect----
    Ms. Pelosi. No, it isn't perfect, but theirs is a 
centralized economy where the businesses are frequently owned 
by the army and the Defense Ministry and, therefore, the 
centralized government. So, I don't see how you can make any 
equation between our government and theirs. Yes, we have a free 
enterprise system and export controls are necessary because it 
is a free enterprise system also.
    Mr. Slocombe. As Mr. McNamara has said, one of the things 
which is changing in China and in the former Soviet Union is 
that some of these systems, including some of the defense 
industries which are nominally still centralized, are in fact 
able to operate much more independently than a system of 
central control, which would have worked in the old days where 
everything had to go through the center----
    Ms. Pelosi. Yes. I appreciate what you're saying about 
Russia. China is still a centralized economy. So, what you're 
saying, that----
    Mr. Slocombe. Matter of fact----
    Ms. Pelosi. Okay, fine. Then may I conclude that what 
you're saying then is that the Administration does not believe 
that the Chinese Government controls the activities of these 
companies?
    Mr. Slocombe. We believe the Chinese Government can control 
them.
    Ms. Pelosi. Okay. So, I mean, it's either one thing or 
another. So----
    Mr. Slocombe. No, it's not one thing or another. It's a 
process that they're going through.
    Ms. Pelosi. But it can, but it can or does. So, you're 
saying----
    Mr. Slocombe. The Chinese Government undoubtedly has the 
legal right under Chinese law to control the activity of all of 
these organizations. It is the fact that as the Chinese 
economy, including the part that is nominally in the state's 
control, like the defense industry, is more and more in this 
sort of free form capitalist----
    Mr. McNamara. It's just quite--not quite the right word, 
but it's much more independent and decentralized than it ever 
was in the past. And one of the things which is very much in 
our interest to do is to get the Chinese to set up a system so 
that in these high priority areas where there is a relationship 
to weapons and mass destruction they do have control. They 
aren't going to control every ball bearing that gets sold, but 
they ought to control----
    Ms. Pelosi. We're not talking about ball bearings, we're 
talking about----
    Mr. McNamara. Exactly right. That is exactly right, but 
they ought to--they don't have to control every ball bearing 
that gets sold for an axle of a truck, but they have to control 
certain identified technologies, because of their connection 
with nuclear activities, like ring magnets which are close to 
being bearings for centrifuges and that's one of the things 
we're trying to work on.
    Ms. Pelosi. Thank you. The Turks continue to block the 
delivery of humanitarian assistance to Armenia despite progress 
on bilateral relations between the two countries and the fact 
that a good deal of commerce takes place between the two 
countries, despite the blockade. What can you tell us about the 
progress to lift the blockade?
    Mr. McNamara. We have gone to the Turks and discussed this, 
in reference to the Humanitarian Aid Corridor Act, I believe.
    Ms. Pelosi. Yes, yes. At the present date.
    Mr. McNamara. We will soon submit a waiver under that Act 
to enable us to provide the ESF to Turkey. Since the inception 
of the Nagorno-Kerobakch conflict, Turkey has played an 
important and a constructive role in fostering settlement of 
this conflict and, therefore, we expect to be submitting a 
waiver with respect to the Humanitarian Aids Corridor Act.
    Ms. Pelosi. Will you be notifying Congress officially of 
that, about the timing of the lifting of the waiver per the 
Foreign Ops bill last year? Do you know about the timing now?
    Mr. McNamara. It would be soon, but I don't have a precise 
time.
    Ms. Pelosi. One last question, Mr. Chairman, if I may. It's 
on a completely different subject. Mr. Chairman, as I look at 
it, I want to say that the reason I'm concerned about the 
proliferation issue is because the business community is 
putting together a very aggressive program to encourage the 
Administration to certify certain nonproliferation credentials 
to China. The point is not to stop things. The point is to have 
the framework in place so that the proliferation stops and the 
business can go on, not to ignore the proliferation or say 
nobody knew in Beijing although the consequences are there.
    This question is in regard to the arms exporters. Last year 
Congress and the Armed Services Bill did something that the 
Appropriations Committee has consistently refused to do, which 
is to provide a mechanism to waive research and development 
costs normally charged to customers as a part of foreign 
weapons sale. We've talked about this before. Typically, the 
price the foreign country pays for a weapon system includes an 
amount associated with R&D costs for the development of that 
weapon. The waiver could not be done if the arms sale is likely 
to be lost as a result of the R&D-added amount.
    And my question is what is the status of the loan guarantee 
program? Has the authority been used yet? Do you anticipate any 
actual sale from the national defense stockpile to promote arms 
sales by private companies?
    Gen. Rhame. Sir, to date, we have not processed----
    Mr. Callahan. For the record, this is Gen. Rhame. He's the 
director of DSAA.
    Gen. Rhame. We have not processed a defense export loan 
guarantee program. It is--department by our acquisition 
community. We have only had one country that has shown interest 
and they have not consummated a loan.
    Ms. Pelosi. I just have one more question. Have any 
countries agreed to pay the subsidy cost of such a loan, but 
you say only one has expressed----
    Gen. Rhame. Only one has shown any interest, ma'am. No one 
has consummated a loan.
    Ms. Pelosi. This was, you recall, Mr. Chairman, in order to 
offset the $700 million in lost revenue from this action in 
Congress. Actually, it was then-Senator Cohen's proposal, to 
authorize the sale of gems, precious metals and other materials 
currently held in the national defense stockpile.
    Gen. Rhame, thank you very much for your answer. Again, as 
I said, what is unfortunate is the limited amount of time we 
have. We spent so much time on the areas of dispute or 
disagreement, and I think the Administration deserves a great 
deal of credit for its leadership role in the Middle East, in 
Haiti, Bosnia, and other places, but we do have some 
disagreements and this is our opportunity to get answers. I 
thank the gentlemen for their testimony.
    Mr. Slocombe. Thank you. While we're, while we're 
exchanging compliments, I want to make clear that we appreciate 
the leadership shown by this Committee on what is a very 
difficult, a very difficult topic. It's difficult 
substantively. It raises, as you have both said, very important 
and difficult issues. But it's also a politically difficult 
one, as foreign aid is in any form, and it's not popular. And 
we look forward to working with the Committee as we develop the 
legislation, as you develop the legislation for this year.
    Mr. McNamara. And I want to join in that. I think the 
cooperation and the work of this Committee has been 
extraordinarily good.
    Ms. Pelosi. Thank you.
    Mr. Callahan. Thank you. Two points before we go. I'd like 
to just comment. One, when we went on our Middle East trip, we 
also visited Morocco. Like Jordan, we're trying to get the King 
of Morocco to re-engage in the peace process. And yet, we are 
ignoring the needs, military of Morocco, and it's similar to or 
even probably worse even those his needs are less, than we are 
to Jordan.
    And if we are going to expect the king to re-engage himself 
in these peace process negotiations that are taking place, I 
think that we ought to be a part of the entire slate, and that 
is any way we can assist him militarily that we ought to try, 
to assist. They have a very weak defense.
    You're interested in the peace of the Middle East, as we 
all are. Prime Minister Netanyahu has created a tremendous 
discussion that's taking place, and I know that five Israeli 
school children were killed this morning in a terrorist act. 
And that situation, the letter from King Hussein, and Mr. 
Mubarak was very upset about the Prime Minister of Israel's 
decision to build in this settlement area.
    What is the position of this Administration with respect to 
Prime Minister Netanyahu's decision to, in the words of 
President Mubarak and King Hussein, violate an agreed-upon 
peace settlement and build there? What's our position on that?
    Mr. McNamara. Mr. Chairman, since you've asked me to speak 
for the Administration on that specific point, I'm going to 
have to get an Administration position. I myself would hesitate 
to answer that question on behalf of the Administration since I 
am not myself directly involved in the negotiations, neither of 
the peace process nor of the specifics with respect to the 
subdivision in Southern Jerusalem that you're referring to. And 
I would respectfully request that I be allowed to get you the 
answer as opposed to try and--
    Mr. Callahan. I've read a capsule and it appears that the 
United States is encouraging the prime minister not to take 
that initiative at this point. He, on the other hand, I guess 
has some internal political problems that he must address, and 
I know that's thin ice. And, and while I have a great deal of 
respect and admiration for Mr. Netanyahu, it appears that world 
opinion is that he should withdraw that request at this point 
and re-establish a foothold.
    I don't know if politically he can do that, but now Mr. 
Arafat has requested that the United States participate in a 
summit where all of the nations of the Middle East are going to 
meet, with the exception of Israel. In your opinion and not the 
Administration's opinion, is that healthy for the peace process 
for all of the nations in the Middle East to be meeting with 
the exception of Mr. Netanyahu? What does that say to the peace 
process, in your own--if you want to comment. If you don't want 
to comment----
    Mr. Slocombe. One of the difficulties of a job like this is 
you don't have personal opinions on this peace process.
    Mr. Callahan. Well, one of the----
    Mr. McNamara. And the other difficulty is in the Middle 
East, it is a mine field of history, phrasing and terminology 
that can do more than just blow your leg off.
    Mr. Callahan. Well----
    Ms. Pelosi. Mr. Chairman, isn't--if I may----
    Mr. Callahan. Obviously, one of the problems we have is, is 
in Congress we all have personal opinions.
    Mr. Slocombe. I didn't say, I didn't say we didn't have 
any.
    Ms. Pelosi. But didn't, didn't Prime Minister Netanyahu 
downplay that initiative as if Chairman Arafat would be 
briefing his cohorts on what's happening? I don't think they 
took it as a slap, but I don't know. We'll have to find out 
more----
    Mr. Callahan. I don't know. As of last night, I had not 
heard that there had been any retraction. You know, I read the 
letter in the Washington Post from King Hussein, and I read his 
response, I talked with President Mubarak yesterday about it, 
and I don't see a single entity supporting Prime Minister 
Netanyahu in this.
    Ms. Pelosi. On the, on the----
    Mr. Callahan. On the settlement, yes.
    Ms. Pelosi. Oh, you're back to the settlement. But I think 
President Clinton was very straightforward in making it very 
clear that--I don't know what the word would be, his 
disappointment, his displeasure, his lack of support for that 
initiative at this time. And despite the vote at the U.N., the 
message from the U.S. was very clear that this was not viewed 
as a----
    Mr. Slocombe. That, I think, is certainly----
    Mr. Callahan. In any event, thank you very much for coming 
and all your responses. And if you will respond in writing to 
the questions that we've submitted, we would appreciate that. 
Thank you for your professionalism.
    [Questions and answers for the record follow:]

                     Submitted by State Department

           questions for the record submitted by mr. callahan
                     african crisis response force
    Question. The President's request includes $20 million for the 
creation of the African Crisis Response Force which would be charged 
with responding to peacekeeping requests in sub-Saharan Africa. The 
administration envisions this force being made up of 5,000 to 10,000 
African troops with training and equipment provided by the United 
States and other countries such as France. Funding for this undertaking 
would come out of FMF ($5 million) and PKO ($15 million) accounts.
    In some respects this idea appears to have merit. Preparing African 
nations to take part in peacekeeping activities on their own continent 
reduces the strain on our own peacekeeping resources while further 
strengthening the ability of these nations to determine their own 
destiny. At the same time, I believe that some members of Congress 
might be concerned if they discovered this was a back door way of 
providing the United Nations with a peacekeeping force of its own.
    The command authority for this force is somewhat murky. 
Administration spokesmen have told the subcommittee the ACRF will 
answer to the UN and not an African organization like the OAU. Is this 
accurate? Who will exercise operational military command over this 
force and who will approve the military rules of engagement for ACRF 
peacekeeping operations?
    Answer. In our discussions with European and African governments we 
have encountered universal opposition to the concept of an all-African 
entity that is not linked in some fashion to the UN. The precise nature 
of that link is still being actively discussion within the 
Administration and with prospective European and African participants. 
If the ACRF initiative is to be a multilateral undertaking, as we 
believe it must be in order to succeed, then the UN should be involved 
in some way, along with the OAU and African subregional organizations. 
However, the UN does not want to and will not play the lead role. As 
for the OAU, it is neither willing nor able to organize peacekeeping 
and humanitarian relief operations at this time, though we are 
consulting closely with it on the ACRF initiative.
    The ACRF initiative will not create a standing force. Rather, it 
seeks to train and equip selected African units for quicker, more 
effective participation in humanitarian and peacekeeping operations. 
African countries with military units participating in the ACRF 
initiative retain a sovereign decision on whether to participate in any 
given operation.
    Command and control and rules of engagement for operations in which 
ACRF units participate would depend on the operation. ACRF units could 
be deployed with units from other countries, African and non-African, 
in a UN-assessed operation. Under this scenario, command and control, 
force composition and rules of engagement would fall to the UN. ACRF 
units could also be deployed as part of a multinational force. The 
command and control, force structure, rules of engagement, and exit 
strategy of a multinational force would be determined by participating 
countries. For example, a steering group of troop contributor and donor 
countries could be formed to see these guidelines. One of the goals of 
the ACRF initiative is to develop broader command capacity among 
African officers, who would then be better able to operate in an 
international peace keeping force.
    ACRF units will be configured as light infantry with the capacity 
for adequate force protection in traditional Chapter VI peacekeeping 
operations and in facilitating the delivery of aid during humanitarian 
crises. ACRF units would not be capable of mounting offensive 
operations. This is a limited mission which we believe is realistic for 
the medium term.
                               guatemala
    Question. As you know, Guatemala ended almost forty years of 
conflict in late December by signing a peace agreement with rebel 
forces. The United States was a key force in the peace negotiations.
    However, the Administration has not been forthcoming in providing 
the funds necessary to help implement the peace agreement. Of the $25 
million we were told would be made available from the Economic Support 
Fund for Guatemala in FY1997, only $17 million has been allocated. If 
Guatemala were Haiti, the Administration would be proposing to pour 
money into the country.
    I know funds are available within ESF, because the Administration 
has been holding them for possible use for the Middle East Development 
Bank. The gentlelady from California and I sent a letter to the 
Secretary last week urging her to allocate the full $25 million for 
Guatemala. I'd like to enter that letter into the record at this point. 
Secretary McNamara, can you please report to us as soon as possible on 
the status of ESF funding for Guatemala?
    Answer. As we noted in our response last month to the letter from 
you and Congresswoman Pelosi, the Secretary recently approved the 
reallocation of prior year ESF funds for transfer to Guatemala. 
Guatemala is the Administration's top regional priority, after Haiti, 
for allocation of these funds. The total in ESF in FY 97 for Guatemala 
has been brought up to the notified amount of $25 million.
    With the reallocation of the $8 million in ESF, the following 
Guatemala Peace Accords programs will be expanded or initiated: 
vocational education programs for ex-combatants, refugees and displaced 
persons; support for legislative reforms needed to implement the peace 
accords; income generation activities in formerly conflictive zones and 
resettlement areas; justice sector reform; scholarships for indigenous 
leaders; tax and customs reform; and, implementation of bilingual and 
multicultural education programs.
    Let me add, Mr. Chairman, that I am very pleased that you had the 
opportunity to visit Guatemala March 31-April 2 to observe firsthand 
the historic changes that are taking place there, as well as the 
important role the U.S. Government has played in supporting these 
changes. The Secretary's visit to Guatemala May 4 will highlight U.S. 
Government recognition of and support for Guatemala's success in 
implementation of the peace accords.
                         kedo request for fy98
    Question. As you know, the subcommittee has monitored U.S. 
relations with North Korea very closely, particularly U.S. financial 
support for KEDO. This subcommittee recently received the KEDO report 
which we requested last year. I was pleased to see the administration 
is working hard to get other nations to share the burden of financing 
the heavy fuel oil program for North Korea. At the same time, the 
report states, ``Still, we have not received the kind of response we 
had hoped in soliciting contributions from the international community 
and will redouble our efforts in the coming year.'' I assume this 
explains why your request ($30 m.) this year is nearly three times what 
was requested for heavy fuel oil in FY96 ($10 m.).
    I hope that ``redouble your efforts'' means that Secretary Albright 
will become personally involved in getting other nations to share this 
global proliferation problem. She is incredibly capable and very well 
respected in the international community and I have no doubt she will 
be an extremely effective advocate for global burdensharing in the area 
of nonproliferation. In this regard, could you please outline for the 
subcommittee how you plan to ``redouble your efforts'' this year? Will 
the President and the Secretary of State be personally involved in this 
effort?
    In addition, could you provide the subcommittee with an estimate of 
the current heavy fuel oil shortfall?
    Answer. Since the U.S., Japan, and South Korea formed the Korean 
Peninsula Development Organization (KEDO) in 1995, we have mounted a 
global campaign to secure funding for KEDO from the international 
community. As a result of our efforts, 22 countries besides the U.S., 
as well as the European Union, have contributed or pledged to 
contribute over $100 million to KEDO. Moreover, seven countries from 
five continents have joined the U.S., Japan, and South Korea as members 
of KEDO, and several others have expressed their intent to join.
    KEDO's funding prospects will soon improve as a result of our 
successful effort to persuade the European Union to join KEDO--an 
effort that included personal appeals by both the President and former 
Secretary of State. The EU will soonbecome a member of KEDO's Executive 
Board once KEDO and the EU conclude negotiations on the terms of the 
EU's membership. In exchange, the EU will contribute 15 million ECU 
(approximately $18 million at current exchange rates) annually to KEDO 
for the next five years, which will place KEDO on much sounder 
financial footing. Moreover, contributions from South Korea and Japan--
which will share the multi-billion dollar cost of the light-water 
reactors to be built in the DPRK--should also increase dramatically in 
the near future.
    While the Administration's request for $30 million for KEDO for FY 
1998 does indeed represent an increase from the $25 million 
appropriated by Congress for FY 1997 and the $22 million appropriated 
for FY 1996, it is important to note that international contributions 
to KEDO have increased annually as well. From 1995 to 1996, 
contributions by other countries increased by 60 percent, and in less 
than four months in 1997, delivered or pledged contributions to KEDO 
have already exceeded 1996 totals.
    Nevertheless, more work needs to be done. The Administration 
remains committed to raising international support for KEDO, and we 
intend to take advantage of high-level bilateral contacts, meetings at 
international and regional fora, and, as needed, personal visits to the 
region by appropriate Administration officials to urge members of the 
international community to join KEDO and support the organization 
financially. The Secretary understands the seriousness of the issue and 
intends to become involved. We are therefore confident that the trend 
of increased third-country contributions to KEDO will continue.
    In the meantime, we believe significant U.S. contributions to KEDO 
remain necessary to demonstrate U.S. leadership and commitment to the 
Agreed Framework, to ensure that KEDO fulfills its obligations, and to 
supplement and encourage KEDO contributions from other countries. We 
strongly believe that U.S. funding for activities in support of KEDO 
and the Agreed Framework promotes U.S. interests in regional security 
and global non-proliferation and represents a wise investment given the 
dangers posed by an unfrozen North Korean nuclear program.
    With regard to KEDO's heavy fuel oil (HFO) funding shortfall, KEDO 
continues to carry debts for past oil deliveries to the DPRK that were 
purchased on credit or with short-term loans. In 1995, KEDO fell short 
of its HFO funding needs by approximately $2.7 million. The 
organization's 1996 shortfall increased to over $33 million (in part 
due to a 20 percent increase in HFO prices), bringing KEDO's total debt 
at the outset of 1997 to approximately $36 million. Of KEDO's current 
debt, $19 million is in the form of short-term loans backed by a 
special cash fund made available last year by Japan to facilitate KEDO 
borrowing for oil. KEDO intends to pay off its debts with anticipated 
contributions from the European Union, the United States, and other 
countries.
                      military assistance/morocco
    Question. The President's request for grant military assistance is 
a modest 2% increase of $50 million. Since Israel and Egypt will absorb 
$3.1 billion of the $3.274 billion administration request, this leaves 
about $174 million for the rest of the world. This is less than 2% of 
our bill.
    I support your efforts on behalf of Jordan and the Partnership for 
Peace countries and I am impressed with your demining efforts. However, 
is $174 million out of a $13 billion request really adequate to meet 
your military needs for the rest of the world? For example, I was in 
Morocco recently on a subcommittee trip to the Middle East and it was 
clear to me that our valued friend and ally could use U.S. help in 
upgrading its rather meager military. I believe this view was shared by 
our Ambassador there. Would you outline the types of military 
assistance we might provide this friendly nation which has played such 
a constructive role in the Middle East Peace Process?
    Answer. We believe that the FY 1998 request for $3.274 billion in 
the Foreign Military Financing (FMF) program represents a sensible 
compromise that meets both the need to balance the federal budget and 
the need to fund high priority programs such as the Partnership for 
Peace, demining, and the Jordan F-16 program. Although the requested 
increase of $56.25 million in FMF is small (less than 2%) in the 
overall context, it amounts to a 30% increase for programs in the 
account other than Israel and Egypt.
    Morocco has shared a long-standing, close military relationship 
with the U.S.; we hold joint military exercises and meet at regular 
Joint Military Commissions. In 1993, Morocco ``graduated'' from its FMF 
grant program. The U.S. continues to provide defense articles on a 
grant basis--offering nearly $28 million in FY 1996--through the Excess 
Defense Articles program to assist Morocco in sustaining and 
modernizing its military. We also maintain a substantial grant IMET 
program, providing an estimated $800,000 in FY 1997 and requesting 
$900,000 for FY 1998.
                turkey's fmf loan subsidy appropriation
    Question. The administration's FY 1998 request for Turkey's loan 
subsidy appropriation is $33,150,000 to support a loan program level of 
$175,000,000. Last year the same loan program level required 
$36,770,000 in loan subsidy appropriation, even though the FY 1997 
request was for $18,918,000.
    It is my understanding that Turkey's credit status in the private 
international financial markets has further deteriorated over the past 
year. In light of last year's doubling of the subsidy appropriation for 
Turkey, is the FY 1998 request level adequate to support the program 
level? Could you please provide the subcommittee with a detailed 
explanation of how the FY 1996 actual level, FY 1997 request level, FY 
1997 actual level, and FY 1998 request level for Turkey's subsidy 
appropriation were individually calculated? In addition, could you 
please provide similar information of Greece's subsidy appropriation 
for the same time frame. This information may be provided to the 
subcommittee on a classified basis if it is deemed necessary.
    Answer. Each year, an interagency group headed by the Office of 
Management and Budget (OMB) establishes a country's sovereign risk 
ratings, commonly referred to as credit rating, through the Interagency 
Country Risk Assessment System (ICRAS). The amount of subsidy required 
for each country's loans can then be calculated using (1) the country's 
ICRAS rating; (2) the terms of the loan; and (3) the cost of Treasury 
borrowing. These loan subsidy rates are then used to establish the 
amount of funds required to subsidize the gross obligation for the 
principal amount of a given loan. We use the same formula for each 
country to calculate required loan subsidy levels for the budget 
request, budget allocation, and before the loan is obligated:
    Principal Loan Amount  Loan Subsidy Percentage = Subsidy 
Required for the Loan.
    There are several variables that can affect the cost of a loan: a 
country's ICRAS rating can change, loan terms can and do vary, and 
Treasury rates fluctuate. Any change in these variables will result in 
differences between the estimated subsidy for a loan in the President's 
request and the required subsidy when a loan is actually obligated. 
This occurred, for instance, in FY 1996 when Turkey's credit rating was 
downgraded and additional funds were needed to finance the loan. These 
additional funds were obtained by charging a higher interest rate than 
Treasury rates of comparable maturity.
    In FY 1998, we plan to make a $175 million loan to Turkey based on 
the requested $33.15 million of subsidy. Taking into account the recent 
downgrading, we will still be able to offer the desired loans. They 
will be at a somewhat higher interest rate, but one that is comparable 
to the rate Turkey paid in FY 1996.
                                 jordan
    Question. There are indications that the executive branch is 
presently considering a request for Jordan, possibly as part of the 
FY1997 supplemental. I recently traveled to Jordan and was favorably 
impressed by Jordan's important role in the Middle East. However, the 
subcommittee's views on past initiatives to assist Jordan, such as 
Jordanian debt forgiveness and F-16 transfers, is very clear--we expect 
to be consulted with the administration in advance of such pledges 
being made. This is the subcommittee's version of the ``Livingston 
Rule''--no consultation, no appropriation.
    Could you please advise the subcommittee on the status of any 
pledge of assistance, as well as the details of such pledges, for 
Jordan which may be under consideration by the executive branch at the 
present time? This information may be provided to the subcommittee on a 
classified basis if it is deemed necessary.
    Answer. Given Jordan's important role in the Middle East, the 
administration keeps Jordan's defense needs under constant review. The 
only current plans for assistance to Jordan include completion of the 
$100 million drawdown with the delivery of 38 M60A3 tanks, 18 M110 
howitzers, 20 UH-1H helicopters (in non-flyable condition, to be used 
as spares), M113 spares, and howitzer ammunition; completion of the 
transfer of the 16 F-16s, which under current plans includes requests 
for $45 million in FMF in both FY1998 and FY1999; and provision of 
appropriate Excess Defense Articles as they become available.
            defense dept's drawdowns and special authorities
    Question. Could you please provide the subcommittee with a list of 
the DoD drawdowns authorized for FY 1996, FY 1997, and FY 1998 in 
support of foreign operations? In addition, could you please provide 
the subcommittee with a list of activities (including dollar value) by 
fiscal year, supported by the authorization contained in sec. 541(c) of 
P.L. 104-107 and sec 541(c) of P.L. 104-208?
    Answer.

                                           FY 1996 DRAWDOWNS FROM DoD                                           
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
               Authority                           Act              PD No.     Amount           Recipient       
----------------------------------------------------------------------------------------------------------------
Section 506(a)(1).....................  FAA.....................      96-53        $10  Sudan FLS (Ethiopia,    
                                                                                         Eritrea, and Uganda.)  
Section 506(a)(1).....................  FAA.....................      96-55          5  ECOMOG (Liberia).       
Section 506(a)(1).....................  FAA.....................      96-17         10  Israel Anti-Terrorism.  
Section 506(a)(2).....................  FAA.....................      96-57         75  Counternarcotics for    
                                                                                         Columbia, Peru,        
                                                                                         Venezuela, and Eastern 
                                                                                         Caribbean.             
Section 552(c)(2).....................  FAA.....................      96-52          3  Haiti Presidential      
                                                                                         Security Element.      
                                                                                         Commodities and        
                                                                                         Services from DoD,     
                                                                                         Justice, and Treasury. 
Section 552(c)(2).....................  FAA.....................      96-56         10  ECOMOG (Liberia).       
Section 552(c)(2).....................  FAA.....................      96-17         12  Israel Anti-Terrorism.  
Section 540(b)........................  FY 96 Foreign Ops             96-39        100  Bosnia--DoD articles and
                                         Appropriations Act                              Services.              
                                         (P.L. 104--107).                                                       
Section 535...........................  FY 96 Foreign Ops             96-42          3  POW/MIA drawdown from   
                                         Appropriations Act                              DOD for Vietnam.       
                                         (P.L. 104--107).                                                       
Section 535...........................  FY 96 Foreign Ops             96-50        151  POW/MIA drawdown from   
                                         Appropriations Act                              DOD for Cambodia.      
                                         (P.L. 104--107).                                                       
Section 572...........................  FY 96 Foreign Ops             96-11        100  Drawdown from DoD for   
                                         Appropriations Act                              Jordan                 
                                         (P.L. 104--107).                                                       
----------------------------------------------------------------------------------------------------------------


                                           FY 1997 DRAWDOWNS FROM DoD                                           
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
               Authority                           Act              PD No.     Amount           Recipient       
----------------------------------------------------------------------------------------------------------------
Section 506(a)(2).....................  FAA.....................       97-9        $37  Counternarcotics Asst.  
                                                                                         for Mexico.            
Section 552(c)(2).....................  FAA.....................      97-12          4  Peace Monitoring Force/ 
                                                                                         N. Iraq Kurds.         
Section 506(a)(2).....................  FAA.....................      97-14         10  Refugee Asst. for Kurds 
                                                                                         on Guam.               
----------------------------------------------------------------------------------------------------------------

                       FY 1998 Drawdowns From DoD

    Since drawdowns are authorized for use by fiscal year, and approved 
on an as-needed basis, no drawdowns have been authorized for FY 1998.

                         Use of FAA Section 451

    FY 1996, pursuant to the authorization in sec 541(c) of P.L. 104-
107:

                        [In millions of dollars]                        
------------------------------------------------------------------------
                      Recipient/Purpose                          Amount 
------------------------------------------------------------------------
ECOMOG/Peacekeeping activities in Liberia....................       $8.1
ECOMOG/Peacekeeping activities in Liberia....................         7.
Support for voluntary troops and CIVPOL participating in the            
 U.N. Support Mission in Haiti...............................     11,993
ECOMOG/Peacekeeping activities in Liberia....................       5.5.
------------------------------------------------------------------------

    FY 1996 Total Use of section 451: $32.593 million.
    FY 1997, pursuant to the authorization in sec 541(c) of P.L. 104-
108:

                        [In millions of dollars]                        
------------------------------------------------------------------------
                      Recipient/Purpose                          Amount 
------------------------------------------------------------------------
Peace Monitoring Force for Kurds in Northern Iraq............        $3.
Support for voluntary troops and CIVPOL participating in the            
 U.N. Support Mission in Haiti...............................     22.54.
------------------------------------------------------------------------

    FY 1997 Use of section 451 $25.54 million (current as of 4/23/97).

            Questions for the Record Submitted by Mr. Porter

                    international counter-narcotics
    Question. I am particularly concerned about infractions by 
countries which receive equipment as part of our international counter-
narcotics efforts, especially since such countries are often ineligible 
to receive other assistance due to human rights problems or other 
issues of non-cooperation with their governments. What special 
procedures are in place to monitor use of U.S. equipment in such 
countries?
    Answer. All monitorable aspects of assistance provided under the 
International Narcotics Control program are the subject of an annual 
formal report prepared by each post that received monitorable 
resources, including equipment. Each post is responsible for defining 
its own procedures to monitor use of equipment, and assess its impact. 
Equipment is monitored throughout its useful life, or until the project 
for which it was provided terminates. The report describes procedures 
used to monitor equipment, including on-site inspections, host 
government reports, periodic spot checks, the effectiveness of the 
procedures and the extent of foreign government agency cooperation. It 
must describe the location, use and condition of equipment, including 
how it is maintained and stored, and whether the level of maintenance 
is adequate. The post must report on the degree to which the assistance 
has aided the antinarcotics mission, and on any problems in the course 
of monitoring activities.
    Posts where large multi-year counternarcotics projects are managed 
by a separate narcotics Affairs Section (NAS) are required also to 
submit, at the beginning of each year, a report defining end-use 
monitoring procedures to be used during the year. This is reviewed and 
commented upon by the Department of State's Bureau of International 
Narcotics and Law Enforcement Affairs (INL). Posts must report the NAS 
employee designated as responsible for end-use monitoring; major 
equipment that will be the focus of end-use monitoring; how many and 
how often on-site visits for inventories are anticipated. Where local 
conditions do not allow periodic on-site inspections, other methods of 
assessing equipment status, including comparison of written records and 
computerized inventories with NAS records, must be described.
    The reports from individual posts are consolidated by INL into a 
single end-use monitoring report for each calendar year. Posts 
receiving equipment under Foreign Military Financing (FMF) and Section 
506(a)(2) drawdown authorities for defense articles to support 
counternarcotics activities are tasked with incorporating this military 
assistance equipment also into the post end-use monitoring program.
    Question. In past years, we have heard from your Bureaus that there 
will be no future requests for Foreign Military Financing for Greece 
and Turkey, yet these requests continue to appear in the budget year 
after year, and do not get any smaller. These past assurances have 
impacted decisions not to actively seek a cut in security assistance to 
Turkey, and there is a perception that these promises were not made in 
good faith.
    (a) What was the basis for those previous assurances?
    (b) Given Greece's stated willingness to forego FMF, Turkey's abuse 
of the privilege of U.S. security assistance, Turkey's ability to 
finance sustained, large-scale military operations (the campaign 
against the PKK and the occupation of northern Cyprus) and your 
agencies' previous position on continued FMF for Greece and Turkey, how 
do you justify continued requests for high levels of FMF for Turkey?
    Answer. Our FMF programs for Greece and Turkey support a number of 
important foreign policy goals, including helping regional allies meet 
legitimate defense needs. Turkey continues to face a number of 
significant security threats, including from Iraq, Iran, regional 
terrorism and instability in the Caucasus. Greece faces threats from 
instability in the Balkans.
    Turkey and Greece must continue to maintain their forces to meet 
commitments to NATO. Both countries have also worked closely with us to 
promote stability in the Balkans and Albania. Our FMF program helps 
Turkey and Greece accommodate our requests for their participation in 
these efforts.
    We have always presented FMF requests on the basis of our analysis 
of what was necessary to meet our foreign policy goals. These have 
changed over time. Unfortunately, we have had to face greater threats 
to regional stability in southeastern Europe than we had originally 
expected.
    Despite these serious threats, U.S. military assistance for Turkey 
and Greece has declined dramatically over the last five years. Our 
request for FY 98 FMF is only half of last year's for instance.
    We believe that Turkey must be able to counter the attacks of the 
terrorist PKK, an effort which supports U.S. interests in combating 
terrorism globally, which costs the Turkish government far more every 
year than we provide in assistance.
    Question. We have had numerous confirmed reports, some emanating 
from State and the Department of Defense, that U.S.-issue military 
equipment has been used in an unauthorized manner by several countries 
which receive Foreign Military Financing, International Military 
Education and Training and/or participate in the Excess Defense 
Articles program. This includes the use of U.S.-origin equipment by 
Turkey against its civilian population, as documented in a 1995 State 
Department report and the use of helicopters which were intended for 
counter-narcotics purposes by the Mexican army to transport troops 
during the Chiapas uprising.
    (a) Within the bounds of classification, what information can you 
provide us in cases of improper use of military equipment by 
participants in the aforementioned programs?
    (b) In light of these and other revelations, what steps have State 
and DoD taken to ensure better end-use monitoring of U.S.-issue 
military equipment so that such occurrences do not continue, and what 
sanctions or limitations have been placed on the offending countries as 
a result of these infractions?
    Answer. Human rights abuses have occurred against civilians in the 
southeast of Turkey, in the process of fighting the PKK, a separatist, 
terrorism movement. Both the Turkish government and the PKK share 
responsibility for these abuses. The United States is the largest 
supplier of military material to Turkey, a NATO ally, and has been so 
for many years. It has been, and remains, essential for us to support 
Turkey's ability to defend itself from a number of very real threats in 
the region. These include Saddam Hussein, Iran and Syria. Given our 
position as Turkey's primary arms supplier, it is logical to conclude 
that some of these abuses have involved U.S.-supplied equipment. We 
note, however, that many of the abuses involve local civil guard 
forces, which do not receive U.S. weapons, and the Jandarma security 
forces, which have received very little.
    The Department of State prepared a report on this issue in 1995 
outlining these conclusions. We will prepare another report shortly 
updating our understanding of the possible use of U.S. weapons in human 
rights abuses in Turkey.
    In the case of Mexico, it came to our attention that a small number 
of U.S.-supplied helicopters intended for counternarcotics use were 
used improperly to ferry troops in January 1994 during the early stages 
of the Chiapas uprising. We immediately protested, and the Mexicans 
ceased misusing our helicopters. We have not received any credible 
reports since that time that U.S. equipment transferred to Mexico for 
use in counternarcotics has been used for other than its intended 
purpose. We have established rigorous end-use monitoring procedures 
with Mexico to ensure that aircraft supplied for counternarcotics 
purposes are used for only that purpose. These procedures are working 
well.
    We are constantly seeking ways to better monitor the end-use of 
U.S.-origin military equipment throughout the world, within the 
constraints of our resources. We are committed to following up reports 
of misuse, assuring correction of the problem and preventing 
recurrence. Decisions on possible sanctions are made on a case-by-case 
basis, when deemed appropriate.
                          demining in cambodia
    Question. In Cambodia, U.S. security assistance is being leveraged 
by that government to make tremendous strides in demining that country. 
When I was there earlier this year, I was told by the Cambodian Mine 
Action Center (CMAC), that at their current rate--and they are an 
outstanding organization--they will demine Cambodia in 100 years. But 
if their budget was doubled, they could rid Cambodia of landmines in a 
generation. In the President's budget request for FY 1998, FMF for 
Cambodia is level funded at $1 million, and there is a small increase 
in the Demining account from $7 million to $15 million, part of which 
will go to Cambodia.
    (a) Is it possible to double the overall U.S. contribution to 
demining efforts in Cambodia under the President's budget request?
    (b) if not, what increase(s) in what account(s) or reallocation 
within an account(s) would make such an increase possible?
    Answer. (a) We have, in fact, proposed to more than double the 
amount of humanitarian demining assistance to the Cambodian Mine Action 
Center (CMAC) in FY 1998, assuming the requested global demining NADR 
(formerly FMF) account of $15 million is granted. In FY 1997, Cambodia 
was allocated $1 million in State foreign assistance demining funds; in 
FY 1998, the Demining Interagency Working Group (IWG) agreed to 
allocate $2.5 million to Cambodia, as the program nears indigenous 
demining capability.
    The DoD contribution in terms of the Train the Trainer demining 
program with CMAC continues to grow, seen in financial terms as going 
from $2.6 to $2.88 million from FY 1997 to FY 1998, when they expect a 
total global budget of $25 million. The two programs complement each 
other.
    Besides the U.S. contribution, the UNDP is very active in 
Cambodia's demining program and works closely with CMAC. Several other 
donor countries also contribute to the UNDP Trust Fund for CMAC, 
including Australia, Belgium, Canada, Denmark, Japan, Sweden, and the 
UK.
    Question. What is the U.S. policy on the provision of security 
assistance (including, but not limited to, FMF, IMET, EDA and military-
related counternarcotics assistance) to countries where high-level 
government officials have been implicated in the production, 
distribution and/or export of illegal drugs?
    Answer. United States' policy on the provision of security 
assistance to countries in such situations is controlled in the first 
instances by Section 487 of the Foreign Assistance Act of 1961, as 
amended (FAA). That provision requires the President to take all 
reasonable steps to ensure that assistance under the FAA and the Arms 
Export Control Act is not provided to or through any individual or 
entity that the President knows or has reason to believe has been 
convicted of a narcotics-related crime or has been an illicite 
trafficker in controlled substances (or has been a knowing assistor, 
abettor, conspirator, or colluder with others in such illicit 
trafficking). In any instance where a negative determination concerning 
a senior official of a foreign government is made on these grounds, the 
assistance is provided only if it can be structured in such a way as to 
exclude such official from the effective control of or benefit from the 
assistance.
    Implication of high-level government officials in narcotics-related 
crimes could also be a factor in denying certification under Section 
490 of the FAA for a major drug-producing or drug-transit country. If 
certification is denied, most forms of assistance under the FAA--except 
for most types of counternarcotics and humanitarian assistance--are cut 
off. Arms Export Control Act financing, Export-Import Bank financing 
and agricultural commodities other than P.L. 480 are also terminated. 
Under Section 490(e), funds for such assistance may not be obligated 
or, if previously obligated, cannot be expended. The USG is also 
required to vote against loans by six multilateral development banks 
for a country denied certification.

            Questions for the Record Submitted by Mr. Forbes

                             proliferation
    Question. What is your view on the changing threat environment 
which Israel faces, particularly proliferation issues such as the 
Russian sale of ballistic missile technology to the Iranians?
    Answer. We face several proliferation threats in the Middle East 
that concern us from both a global and regional security perspective. 
Iran has demonstrated a determined effort to develop weapons of mass 
destruction (WMD), ballistic missile capable of delivering them, and 
dangerous advanced conventional weapons.
    While the International Atomic Energy Agency and UN Special 
Commission have made great strides in identifying and eliminating 
elements of Iraq's WMD and missile programs, Iraq, continues to hide 
relevant materials from international inspectors and retains the 
personnel and expertise to reconstitute its military programs should 
the international community let down its guard. We are determined to 
prevent that from happening.
    WMD, missile, and advanced conventional weapons programs such as 
those in Iran and Iraq pose a threat to Israel's security as well as to 
the security of other states in the region. Preventing transfers 
relevant to these programs remains at the top of our foreign policy 
agenda.
    We are particularly concerned by reports of Iran seeking missile 
technology from Russian firms. We have pursued this issue at the 
highest levels of the Russian government and will continue to do so.
                                 jordan
    Question. Do you believe that U.S. security assistance to Jordan is 
adequate to its needs? What are Amman's additional defense needs and 
how does the U.S. propose to address them?
    Answer. The two top priorities of the Jordanian Armed Forces (JAF) 
are sustainment of existing equipment and enhancement of border 
security. Resources available to the JAF are inadequate to ensure that 
these priorities are fully met. The U.S. government continues to work 
closely with the Jordanians to identify priority defense needs and to 
try to find ways to improve the JAF. At the April 1997 meeting of the 
Joint Military Commission, the U.S. delegation announced that, in 
addition to the equipment delivered to Jordan last December, we will 
make a further delivery under the existing drawdown authority to 
provide 38 fully outfitted M60A3 tanks with spares, 18 M110 (8-inch) 
howitzers with spares, $4.75 million worth of 8-inch ammunition, $1 
million worth of M113 spares, and 20 UH-1H helicopters (in non-flyable 
condition, to be used as spares). The F-16 program is still on track, 
with the first aircraft due to the delivered by the end of this year.
                                 egypt
    Question. While Egypt remains formally at peace with Israel, Cairo 
has nevertheless amassed a substantial offensive military capability in 
recent years. According to U.S. government figures, we sold Egypt $1.42 
billion in military goods and services last year, more than to any 
other country. The government of President Hosni Mubarak has been the 
target of attack by radical Islamic terrorists for a number of years, 
calling into question the stability of the present regime in Cairo. 
Egyptian forces recently staged the massive ``Badr-96'' military 
maneuvers which included rehearsal of a crossing of the Suez canal into 
the Sinai to launch offensive operations against Israel.
    What is the security imperative that requires the U.S. to provide 
$1.3 billion per year to Egypt for the purchase of our most advanced 
weapons systems? What is the rationale behind Cairo's modernization 
program? What external threats does the country face? Is the massive 
U.S. FMF program for Egypt commensurate with the limited contribution 
Egypt would make to any future Gulf contingency? Is the U.S. moving 
ahead with the reported sale of advanced top-attack TOW-2B anti-tank 
missiles to the Egyptian army, and if so, how will we respond to the 
potential threat this weapon would pose to the Israeli armored forces?
    Answer. U.S. security assistance to Egypt, begun after Camp David, 
was intended to support the Egyptian government after the withdrawal of 
substantial Soviet and Arab assistance, to sustain Egyptian support for 
the peace process in the face of hostile Arab neighbors. Egypt is the 
second largest recipient (after Israel) of U.S. foreign military 
assistance. Egypt has used its military assistance to design a U.S.-
equipped and trained force that is capable of defending Egypt's 
borders, acting as a stabilizing factor in the Middle East and 
participating as a reliable coalition partner in peacekeeping and other 
regional contingencies. Since signing the peace treaty with Israel in 
1979 and as part of its modernization effort, Egypt has reduced its 
armed forces by more than one-third.
    As a result of its modernization efforts, Egypt was able to 
contribute two heavy divisions to the coalition effort in Desert Storm. 
The Egyptian military has been an effective partner in a vigorous joint 
exercise program with the U.S. Egypt is now able to contribute 2-5 
divisions and several F-16 squadrons as a coalition contingency 
partner.
    Badr-96 was a regularly scheduled, country-wide exercise that 
served as the capstone for the Egyptian military's training. Planning 
for Badr-96 began in 1994 and the scope of the exercise was discussed 
with U.S. officials in October 1995. The Suez Canal is a major source 
of revenue for Egypt, as well as a vital transit point for all nations. 
Egypt considers it essential that it be able to defend the canal. 
Bridging and crossing operations are a regular part of most exercises 
and are conducted along the Nile as well as over the canal. However, 
Egypt's sensitivity to perceive aggressive signals is underlined by the 
fact that President Mubarak personally ordered the military not to 
include a canal crossing demonstration in an October 1996 ceremony to 
mark the anniversary of the 1973 war.
    Egypt continues to maintain strong military-to-military liaison 
contacts with Israel to manage treaty obligations in the Sinai. It has 
continued cooperation in the search for bodies from previous wars, and 
it strongly supports the operation and continuation of the 
Multinational Force and Observers in the Sinai (MFO). Israeli Minister 
of Defense Mordechai last met with his Egyptian counterpart in December 
1996, at the height of the tensions over Hebron, and they remain in 
contact. The Egyptian Defense Minister has told us that he is ready to 
expand these contacts as soon as the situation in the region permits. 
In short, there is no evidence of hostile intent toward Israel by the 
Egyptian military.
    Both Egypt and Israel have demonstrated a strong commitment to 
their mutual peace treaty--even when political differences have created 
bilateral tensions--and we expect both states to remain committed to 
peace andstability. In late September when Palestinians and Israeli 
Defense Forces clashed along the Egyptian-Israeli border near Rafah and 
Egyptian police officer was killed and two were wounded by stray rounds 
from Gaza. Egyptian restraint and the cooperation of both parties in 
working through the liaison system to prevent a volatile situation from 
creating additional difficulties are indicative of the professionalism 
of liaison and the commitment to maintain the peace on both sides.
    Egypt has contributed military forces to peacekeeping operations 
including in Somalia and Bosnia. Egypt joined operation Restore Hope in 
Somalia at our request and remained a vital part of that operation 
after we withdrew. Egypt has contributed troops to IFOR in Bosnia and 
is a major contributor to Bosnia Train and Equip efforts. Egypt also 
expressed interest in the U.S. concept for an African Crisis Response 
Force and, on its own initiative, has set up a training center for 
African peacekeeping in Cairo that has provided training to 
peacekeepers throughout Africa.
    Egypt lives in a dangerous neighborhood. Both Libya and Sudan are 
on the U.S. list of state sponsors of terrorism. Iraq and Iran are only 
a slightly greater distance away. Iraq has already shown its potential 
as a threat to peace in the region. Possibly the greatest long-term 
military threat to Egypt and to the U.S. comes from Iran, either in the 
form of a direct threat through naval, missile or air forces, or 
indirectly by attack on key Gulf states. Iran has made clear its 
hostile intentions toward Egypt by its continuing support for terrorism 
against Egypt.
    While the government of Egypt has been the target of terrorist 
attacks by Islamic extremists for many years, with effective internal 
controls and military preparedness, the government of Egypt has for the 
most part reduced such attacks to a few traditionally extremist areas 
in Upper Egypt. Occasional attacks outside Upper Egypt cannot be ruled 
out, but we do not believe the extremists pose a threat to the regime 
of President Mubarak.
    The sale of the TOW-2B missile has not been licensed for Egypt. We 
continue to review carefully, on a case-by-case basis, all potential 
sales of military equipment to the region, with close attention to 
their effect on regional stability. We are confident that we continue 
to fulfill our commitment to preserve Israel's qualitative edge.
                           expansion of nato
    Question. Regarding the expansion of NATO, has DoD or State 
developed a long-term strategy, along with a cost analysis, of the U.S. 
financial commitment?
    Answer. The Administration prepared a detailed report on 
enlargement for Congress which included an assessment of enlargement's 
total costs and the anticipated costs to the United States. For the 
report, the Department of Defense estimated both the direct enlargement 
costs (e.g. for interoperability between the forces of current and new 
members and for extending NATO's integrated command, communications and 
air defense surveillance systems) and the costs of force improvements 
already being pursued by existing and new members which will also 
contribute to carrying out NATO's missions in an enlarged alliance. The 
direct enlargement costs are estimated to average $700-900 million 
annually for a total of around $9-12 billion between 1997 and 2009, the 
date by which the Alliance is anticipated to have reached a mature 
capability for collective defense with new members. The U.S. share of 
these costs, chiefly our share of the NATO budgets for direct 
enlargement costs, which largely be incurred in the ten years following 
formal accession in 1999, and would average about $150-200 million 
during that period.
    The study projects a security environment in Europe over the period 
1997-2009 similar to what exists today. In particular, the study notes 
that realistic threat estimates show that any direct conventional 
threat to new members is unlikely for the foreseeable future and would 
take many years to develop, if at all. If the security environment were 
to change significantly for the worse, the costs would certainly rise. 
We do not anticipate that happening.
    However, the costs in the report are estimates of costs to the 
military budgets and NATO infrastructure. They do not include costs to 
NATO's civil budget due to enlargement. NATO has had a zero growth 
civil budget, and we expect that there may be some increases required 
to take on the new members. However, we anticipate any such increases 
will be incremental to the overall enlargement costs. The Alliance is 
presently studying the issue.
    Question. By expanding NATO, what kind of expanded security are we 
guaranteeing for the U.S. that we do not already have with the current 
NATO alliance?
    Answer. The NATO Alliance's core mission must remain the collective 
defense of its member states. Since 1991 NATO has operated on the 
assumption that there is no threat of large scale conventional 
aggression against the Alliance and that any such threat would take 
years to develop. In that context, the Alliance has determined that it 
must also undertake additional efforts to address Europe's greatly 
changed security environment.
    NATO enlargement is one part of a much broader, post-Cold War 
strategy to help create a peaceful, undivided, democratic Europe which 
is very much in U.S. interests. The end of the Cold War presents a 
unique opportunity to build a more stable, secure and undivided 
transatlantic community. Twice in this century, instability and 
conflict in Central and Eastern Europe led to world wars. NATO 
enlargement offers this region unprecedented stability, in fact, the 
mere prospect of enlargement has already fostered democratic reforms 
and greater stability in the region, creating a better environment for 
trade, investment and economic growth. The prospect of enlargement has 
also encouraged an end to ethnic and border tensions in Europe, for 
instance, between Hungary and Romania. Enlargement will help all of 
Europe become a stronger partner for the U.S. in political, economic, 
and security affairs.
    The U.S. will not pursue enlargement at the expense of Alliance 
coherence. Enlargement will make the Alliance more coherent because the 
addition of new qualified members can add new assets for collective 
defense, enhance NATO's ability to address Europe's new security 
challenges, erase old divisions, promote regional harmony, spread 
NATO's burdens more broadly, and prevent the rise of a destabilizing 
zone of insecurity.
    Question. Does DoD or the State Department view the new NATO as 
primarily a political or military alliance?
    Answer. Too often the debate about NATO's future reduces the 
Alliance's past to a one-dimensional caricature that discounts its 
relevance to today's European challenges. NATO did much more during the 
Cold War than contain the Soviet threat. It provided the confidence and 
security shattered economies needed to rebuild themselves. It helped 
France and Germany become reconciled, making European integration 
possible. With other institutions, it brought Italy, Germany and 
eventually Spain back into the family of European democracies. It 
denationlized allied defense policies, and it stabilized relations 
between Greece and Turkey.
    A new NATO can do for Europe's east what the old NATO did for 
Europe's west: vanquish old hatreds, promote integration, create a 
secure environment for prosperity, and deter violence in the region 
where two world wars and the Cold War began. It provides a forum 
through which its members consult together on any issue they may choose 
to raise and take decisions on political as well as military matters 
affecting their security. Consultation and cooperation occurs in a wide 
range of areas, including economic, scientific and environmental 
affairs. Collective defense and the responsibilities embedded in 
Article V of the Washington Treaty remain paramount, but NATO also 
performs important political functions.
                              middle east
    Question. Has there been any negative impact on the Middle East 
peace process as a result of the Administration's recent criticism of 
Israel's plans to construct housing in the Har Homa neighborhood of 
Jerusalem?
    Answer. The United States Government has made clear that we believe 
the Israeli Cabinet's decision to proceed with construction undermines 
the trust which is essential to progress in the peace process. What is 
important now is to do everything possible to build confidence between 
the two sides and move the peace process forward. The United States 
will remain engaged in the effort to bring a just, comprehensive and 
lasting peace to the Middle East.

           Questions for the Record Submitted by Mr. Kingston

            korean peninsula energy development organization
    Question. How successfully can the United States verify that North 
Korea's nuclear program has halted in accordance with KEDO aid? What 
are the verification procedures? What has been learned through them?
    Part of the strategy to maintain and implement KEDO is for the 
United States to continue to use diplomatic means to secure additional 
finances for the organization from other states. Will you please list 
the amounts of the actual contributions received since this time last 
year and from whom they were received?
    Answer. We have high confidence that we can monitor North Korea's 
compliance in fulfilling the nuclear freeze provisions of he Agreed 
Framework. Inspectors of the International Atomic Energy Agency (IAEA) 
have maintained a continuous presence at the DPRK's Nyongbyon nuclear 
facility since 1994 and visit the nearby nuclear support facilities on 
a weekly basis. Moreover, a U.S. team also resides at Nyongbyon and 
works inside the nuclear facility in a joint project with North Koreans 
to place the spent nuclear fuel from the DPRK's reactor into safe, 
long-term storage, under IAEA monitoring. In addition, our National 
Technical Means can detect any significant activities at the 
construction sites where work on two nuclear power plants has been 
suspended in accordance with the Agreed Framework.
    Through these various means of monitoring and verifying North 
Korean compliance with the Agreed Framework, we have ascertained with a 
high degree of confidence that the DPRK is complying with the freeze 
provisions of the Agreed Framework. The DPRK's 5-megawatt nuclear 
reactor is not operating, and its reprocessing facility and fuel 
fabrication facility have also been shut down. The DPRK has also ceased 
construction at both the 50-megawatt reactor at Yongbyon and the 200-
megawatt reactor at Taechon.
    Regarding international support for KEDO, please see the attached 
chart for information concerning third-country contributions to KEDO in 
1996 and to date in 1997.

                   International Contributions to KEDO

1996:                                                       Contribution
    Japan............................................... \1\ $22,140,000
    South Korea.........................................       8,700,000
    European Union......................................       6,262,000
    Australia...........................................       1,590,000
    Germany.............................................       1,011,485
    Canada..............................................         735,565
    New Zealand.........................................         698,725
    Indonesia...........................................         325,013
    Netherlands.........................................         290,192
    Norway..............................................         250,000
    Argentina...........................................         200,000
    Philippines.........................................         150,000
    Switzerland.........................................         118,149
    Finland.............................................         102,810
    Singapore...........................................         100,000
    Brunei..............................................          70,897
    Greece..............................................          25,000
                    --------------------------------------------------------
                    ____________________________________________________
        1996 Total......................................      42,769,836
1997 (to date):
    European Union......................................   \2\29,100,000
    Japan...............................................       7,460,000
    South Korea.........................................       3,500,000
    Australia...........................................       1,600,000
    Italy...............................................       1,100,000
    Canada..............................................         906,436
    Czech Republic......................................         130,000
    Singapore...........................................         100,000
    Brunei..............................................          71,000
    Oman................................................          50,000
                    --------------------------------------------------------
                    ____________________________________________________
        1997 Total (to date)............................     $44,017,436

\1\ $19 million of Japan's 1996 contribution was in the form of a 
special cash fund to serve as collateral to facilitate borrowing by KEDO 
to purchase heavy fuel oil.
\2\ These 1997 figures represent amounts pledged but not yet delivered; 
actual amounts will vary depending on exchange rate fluctuations. 1997 
contribution figures for Japan and South Korea represent pledged 
contributions in support of KEDO administrative and operating expenses 
but do not include anticipated contributions to fund the light-water 
reactor project.

                         palestinian authority
    Question. What have been qualitative benefits of the ESF aid to the 
Palestinian Authority in the past year? Has the aid brought positive 
change for the economy?
    Answer. ESF has brought concrete economic and social benefits to 
the Palestinians. The U.S. has concentrated its resources in a number 
of strategic areas, namely water and wastewater resources, democracy 
and governance, and private sector promotion.
    Due to our support, thousands of Palestinians in the West Bank and 
Gaza have better access to drinking water and are no longer plagued by 
the harmful effects of wastewater improperly treated and stored or 
diverted. These benefits have been especially felt by residents of Gaza 
City, who in the past faced significant environmental risks resulting 
from blocked or non-existent sewer systems.
    In the area of democracy and governance, our assistance program 
contributed to the successful elections for the Palestinian Council and 
its executive head in 1996. The U.S. was a major contributor to voter 
education efforts, the production of election materials, and the 
observation of the elections themselves. Since the elections, the U.S. 
has financed a number of programs to improve the capacity of the 
Palestinian Authority--both its Legislative Council and Executive 
Authority--to serve its constituents. These programs help establish and 
train for the constituent relations operations of Legislative Council 
members and key elements of the Executive Authority.
    In the area of private sector promotion, our assistance has been 
directly responsible for higher incomes and more employment 
opportunities for thousands of Palestinians. By financing microlending 
programs, apprenticeships, small business support programs, and civil 
works campaigns, the U.S., working with other donors, has helped to 
mitigate a very negative economic climate.
    The Palestinian economy has been subject to a series of external 
factors which limit the effectiveness of foreign assistance programs 
and internal Palestinian economic capabilities. These external shocks 
include the significant degree of restriction--for security reasons--on 
the movement of Palestinians and Palestinian products between the West 
Bank and Gaza, between the West Bank and Gaza and Israel, and between 
the West Bank and Gaza and regional markets. These restrictions have 
been in effect to varying degrees since 1993. Another external factor 
limiting the effectiveness of foreign assistance programs is the impact 
of violence and political uncertainty on the investment climate in the 
region.
                east caribbean regional security system
    Question. Please provide more detail about the $1 million increase 
for the East Caribbean RSS. What operations were deferred?
    Answer. In FY 1998, we are requesting a $1 million increase in 
Foreign Military Financing (FMF) for the Eastern Caribbean Regional 
Security System (RSS), which will directly serve U.S. interests in the 
region. These include gaining the full cooperation and coordination of 
host governments in operations to counter international crime, 
including terrorism, narcotrafficking, arms trafficking, money 
laundering, illegal migrants and smuggling.
    Specifically, the additional funds will be used to support 
increased interoperability and standardization of Caribbean military 
forces with U.S. armed forces and law enforcement agencies. Support 
will go to the purchase of military equipment (e.g., communications 
equipment) to increase compatibility both among the RSS states 
themselves and with U.S. forces. Funding will also be used to support 
the operations and maintenance of Caribbean forces, especially of 
equipment previously provided under this and other U.S. programs, such 
as coastal patrol boats. This additional support is essential to 
maintain and enhance the high level of cooperation and joint activity 
between U.S. and Caribbean forces on issues of urgent U.S. interest, 
i.e., drug interdiction, arms smuggling and illegal migration.
    By serving to strengthen capabilities and interoperability, these 
funds will also help the Caribbean states respond to natural disasters 
and other humanitarian crises, and to work jointly with U.S. and other 
international peacekeeping forces, as the CARICOM nations did so 
admirably in Haiti from 1994-96.
    The request for a $1 million increase in FMF for the Caribbean 
region does not come at the expends of any other FMF programs.
                      regional airspace initiative
    Question. Will you please describe the Regional Airspace Initiative 
for the Baltic states? What is its purpose?
    Answer. During his July, 1994 trip to Riga, the President announced 
that the Baltic states would be eligible to participate in the White 
House's Regional Airspace Initiative (RAI). RAI was designed to develop 
more effective civil/military air traffic control and air sovereignty 
regimes in the region. The acronym ``Baltnet'' differentiates the 
Baltic RAI from other RAI programs.
    Baltnet is a practical, cost-effective means to address key 
elements of our Baltic policy: improving Baltic sovereignty and air 
safety, increasing Baltic interoperability with NATO, and creating 
significant opportunities for an expanded strategic U.S. commercial 
presence.
    We are helping to develop a single regional air surveillance 
coordination center (RASCC) serving national operations centers in each 
state at a cost of $10.4 million.
    The three Baltic states and we have agreed on a single initial 
RASCC site in Lithuania.
    Norway has agreed to coordinate other donor assistance, which also 
includes the Nordics, Germany, and the U.K.
    This center demonstrates the Baltic states' ability to work 
together to meet common needs. This is analogous to the joint 
activities engaged in by NATO allies and EU members.
    The RASCC will be staffed by personnel from all three Baltic 
states, providing unique training and operational activities that could 
support regional cooperation in other areas. This policy enjoys wide 
NATO member support.
                             nato expansion
    Question. Is the United States inclined (or already beginning) to 
prepare a treaty outlining NATO's relationship with Russia in order to 
allay Russian objections to expansion?
    Answer. As Secretary Albright said in February in Brussels: Our 
goal is an undivided Europe. We must ensure that every European 
democracy, whether it joins NATO sooner, later, or not at all, has a 
role. This includes Russia.'' At the Helsinki Summit, Presidents 
Clinton and Yeltsin committed themselves to work together and with 
others on a document that will establish cooperation between NATO and 
Russia as an important element of the new comprehensive European 
security system. This document would be an enduring commitment at the 
highest political level, not a legally-binding treaty. NATO Secretary 
General Solana and Russian Foreign Minister Primakov have had several 
rounds of talks on a proposed NATO-Russia document.
    Question. By extending NATO membership to the prime candidate 
states, will the United States gain significantly greater ability to 
prevent their further weapon proliferation to rogue states?
    Answer. New members will be full members of the Alliance, enjoying 
all the rights and assuming all the obligations under the Washington 
Treaty. This includes support for Alliance goals and objectives in non-
proliferation and participation in the Senior Political-Military Group 
on Proliferation (SGP) and the Senior Defense Group on Proliferation 
(DGP), created by Ministers in 1994 to expand NATO's political and 
military efforts against proliferation. Through the SGP and DGP, NATO 
seeks to support, without duplicating, work already underway in other 
international fora and institutions. We believe that participation in 
NATO proliferation fora will sensitize new members to the risks to 
common security posed by proliferation and help familiarize them 
further with the steps being taken by Western allies to address this 
threat.

        Questions for the Record Submitted by Mr. Frelinghuysen

                                 jordan
    Question. As you know, King Hussein of Jordan will be visiting the 
United States from March 18-20 to lobby for additional U.S. military 
aid to his country, in particular more M60 tanks, M113 armored 
personnel carrier upgrades and air defense improvements. What will be 
the Administration's position regarding King Hussein's prospective 
request?
    Answer. The two top priorities of the Jordanian Armed Forces (JAF) 
are sustainment of existing equipment and enhancement of border 
security. Resources available to the JAF are inadequate to ensure that 
these priorities are fully met. The U.S. government continues to work 
closely with the Jordanians to identify priority defense needs and to 
try to find ways to improve the JAF. At the April 1997 meeting of the 
Joint Military Commission, the U.S. delegation announced that, in 
addition to the equipment delivered to Jordan last December, we would 
make a further delivery under the existing drawdown authority to 
provide 38 fully outfitted M60A3 tanks with spares, 18 M110 (8-inch) 
howitzers with spares, $4.75 million worth of 8-inch ammunition, $1 
million worth of M113 spares, and 20 UH-1H helicopters (in non-flyable 
condition, to be used as spares). The F-16 program is still on track, 
with the first aircraft due to be delivered by the end of this year.
                       nato/partnership for peace
    Question. How do events in Albania reveal the shortcomings--if 
any--of the Partnership for Peace initiative? And what approach do you 
believe the Administration should take within the NATO/Partnership for 
Peace framework to stabilize the situation in Albania?
    Answer. The Partnership for Peace (PFP) is a program which enables 
NATO and its Partners to work together to develop a stronger 
consultative and cooperative relationship and to foster greater 
interoperability between Partner armed forces and NATO. The events of 
the last few months in Albania were largely a result of civilian 
discontent and did not involve the armed forces, cooperation with which 
is the focus of PFP. Nonetheless, through PFP, Albania has been able to 
request meetings at NATO to discuss ways of resolving the crisis. This 
has helped reduce tensions. As the situation stabilizes in Albania, PFP 
will offer an avenue to bring about needed reforms and restructuring of 
the Albania armed forces.
    Question. As more Partnership for Peace nations such as Romania, 
Bulgaria, the Baltic states and even some of the Newly Independent 
States make political, economic and military advances, will the 
Administration seek to expand the current Central Europe Defense Loan 
program? Do you have any estimates on what it might cost to expand this 
program to fifteen, twenty or even thirty nations?
    Answer. The Central European Defense Loans (CEDL) program provides 
Foreign Military Financing (FMF) loans to creditworthy Central European 
and Baltic states for acquisition of NATO-compatible equipment. The 
CEDL program supports, through equipment transfers, training and 
exchange programs, the reorientation of CE militaries to defensive 
postures, regional cooperation based on uniform standards of NATO-
compatible equipment, and expanded military cooperation with NATO 
forces both bilaterally and through the Partnership for Peace.
    Only a few Central European countries are eligible for the CEDL 
program because of their level of creditworthiness. As other CE and 
Baltic countries improve their financial situation sufficiently to lead 
to an upgrade in their requisite credit rating, we would envision them 
joining the list of eligible countries. However, not all the CE and 
Baltic countries, once eligible, may ask to participate in the program. 
Also, the cost of expanding the program would depend on the amount of 
loans available.
                                albania
    Question. Now that Albania is in a state of public chaos and the 
government and military rendered powerless in the capital city of 
Tirana, how does the Administration suggest to reallocate Partnership 
for Peace funds, as well as other forms of designated aid, dedicated to 
this mission?
    Answer. In response to the changing situation in Albania, the 
Administration took immediate steps to adjust programming to meet the 
new need to help stabilize Albanian society. Accordingly, 1.5 million 
of the total 1.6 million in Partnership for Peace-related FMF was 
reallocated to support OSCE peacekeeping and conflict prevention 
activities.
    IMET programs were shifted from their original programming to a 
case-by-case basis and continue at low levels.
    Assistance programs funded under the Support for East European 
Democracy (SEED) Act were suspended with the evacuation of our embassy 
in Tirana. During Prime Minister Fino's mid-May visit to Washington, we 
announced the resumption of $12 million of the $27 million assistance 
program. Projects that support democracy and elections, local municipal 
governance, and the agricultural sector have been restarted. After the 
upcoming elections, we will engage in a complete review of our SEED 
assistance program to identify those areas where our assistance can be 
most effective.
    Question. Does the Department of Defense or the State Department 
have any knowledge as to whether any ``rogue'' nations are fomenting 
strife in Albania, particularly by providing weapons transfers to anti-
government groups?
    Answer. We have not seen any credible evidence that other countries 
are engaged actively in fomenting violence in Albania. An estimated one 
million weapons are in circulation in Albania. Many were stolen from 
Albania armories. We are actively working through the OSCE and with our 
European partners to stabilize the situation and bring about political 
reconciliation in Albania through early elections this summer. We 
believe that prior to fair and free elections, it will be difficult to 
make such progress in bringing these weapons under Albanian government 
control. Together with our European partners, we are exploring steps 
that can be taken to reduce the risk of greater instability.
    Question. How do events in Albania reveal the shortcomings--if 
any--of the Partnership for Peace initiative? And what approach do you 
believe the Administration should take within the NATO/Partnership for 
Peace framework to stabilize the situation in Albania?
    Answer. The Partnership for Peace (PFP) is a program which enables 
NATO and its Partners to work together to develop a stronger 
consultative and cooperative relationship and to foster greater 
interoperability between Partner armed forces and NATO. The events of 
the last few months in Albania were largely a result of civilian 
discontent and did not involve the armed forces, cooperation with which 
is the focus of PFP. Nonetheless, through PFP, Albania has been able to 
request meetings at NATO to discuss ways of resolving the crisis. This 
has helped reduce tensions. As the situation stabilizes in Albania, PFP 
will offer an avenue to bring about needed reforms and restructuring of 
the Albanian armed forces.
                       nato/partnership for peace
    Question. As more Partnership for Peace nations such as Romania, 
Bulgaria, the Baltic states and even some of the Newly Independent 
States make political, economic and military advances, will the 
Administration seek to expand the current Central Europe Defense Loan 
program? Do you have any estimates on what it might cost to expand this 
program to fifteen, twenty or even thirty nations?
    Answer. The Central European Defense Loans (CEDL) program provides 
Foreign Military Financing (FMF) loans to creditworthy Central European 
and Baltic states for acquisition of NATO-compatible equipment. The 
CEDL program supports, through equipment transfers, training and 
exchange programs, the reorientation of CE militaries to defensive 
postures, regional cooperation based on uniform standards of NATO-
compatible equipment, and expanded military cooperation with NATO 
forces both bilaterally and through the Partnership for Peace.
    Only a few Central European countries are eligible for the CEDL 
program because of their level of creditworthiness. As other CE and 
Baltic countries improve their financial situation sufficiently to lead 
to an upgrade in their requisite credit rating, we would envision them 
joining the list of eligible countries. However, not all the CE and 
Baltic countries, once eligible, may ask to participate in the program. 
Also, the cost of expanding the program would depend on the amount of 
loans available.
                                 turkey
    Question. The political situation between Turkey's ruling Welfare 
Party and the Turkish military is becoming increasingly 
confrontational. I wondered if you would give us your thoughts on this 
situation, the possible ``Iranization'' of Turkey and the potential 
problems it poses for the region and for the NATO alliance?
    Answer. Turkish politics has become more polarized over the last 
year, reflecting difficult questions that Turkey faces including 
Turkey's international role and the role of religion in society. Prime 
Minister Erbakan entered office in July, 1996 with the stated goal of 
improving relations with Middle Eastern countries, including Iran, and 
of increasing the role of religion in daily life.
    It is worth noting that Erbakan came to power through democratic 
means and that the debate over these issues is taking place within 
Turkey's democratic organs.
    Turkey has been staunchly secular for over 70 years. That, combined 
with the traditional distrust of Iran that many Turks feel, makes it 
unlikely that Turkey will ever become an Iran. Despite high-profile 
visits and Erbakan's signing a large gas deal with Iran, there have 
been notable strains in Turkey's relations with Iran over the last 
year. In February, a speech by the Iranian Ambassador provoked strong 
military protests and led to his recall.
    Turkey's relations with Europe, including its participation in 
NATO, continue to enjoy wide support within Turkey. Even Erbakan's 
party, despite statements made while in opposition, has maintained 
Turkey's role within NATO since forming the government last July.
    Question. Mr. McNamara, last year, Under Secretary Lynn Davis 
testified before this subcommittee that the Administration was working 
with Turkey's then new Prime Minister, Mesut Yilmaz, to address a 
number of contentious issues in the Eurasian region including relations 
with Greece, the border with Armenia and the Kurdish issue. Would you 
please provide me and the subcommittee with an update on these issues 
since Prime Minister Necmettin Erbakan has been in office?
    Answer. The Administration has continued to work with Turkey on all 
three of these issues, along with a host of others. We continue to be 
concerned about the dangerous level of tensions in the Aegean, and have 
urged the current government to take steps to improve this situation. 
Since Erbakan assumed the office of Prime Minister, Turkey has made 
some progress on this issue, including observing a ban on military 
exercises in the Aegean through September last year and a series of 
recent mid-level discussions between Greek and Turkish officials. The 
Greek and Turkish militaries have also taken some preliminary steps 
towards discussions.
    Turkey has continued to play a positive role in the search for a 
resolution to the conflict between Armenia and Azerbaijan, including 
during the OSCE Ministerial meeting last December. Turkey has also 
opened a second air route with Armenia, which augments regular bus 
service that runs between Yerevan (Armenia) and Trabzon (Turkey) 
through Georgia.
    The Turkish government has recently announced that it has made 
significant progress in curtailing the ability of the terrorist PKK to 
attack civilian targets in Turkey's southeast. Prime Minister Erbakan 
announced a major new program of economic and social policies for the 
southeast in February, which he has begun to implement. The Turkish 
Government has also announed the formation of a human rights tribunal 
to examine incidents and enhance prevention of abuses, as well as 
measures to reduce the incidence of torture. We will continue to 
encourage the Turkish Government to pursue more than a strickly 
military solution to the southeast.
    Question. I see that the Administration is requesting $15 million 
for demining programs in a handful of nations that urgently need 
assistance in this area. But I would like to know, and I'm being more 
curious that critical, do you have any hard data to support the 
reported success of this program? I'd be interested in learning how 
many mines have been cleared, the reduction in the death and amputee 
rate caused by anti-personnel mines, and the acres of arable land 
returned to productive farming? I think this is an extremely important 
program. The situation is tragic in these countries and I want to know 
that this program is having a sustainable, positive effect.
    I would also like to formally request a comprehensive briefing by 
the Department of Defense on the development of its demining program.
    DoD/OSD/SO-LIC is aware of the request and will conduct the 
briefing when requested.
    Answer. We feel the humanitarian demining programs administered by 
the Interagency Working Group (IWG) on Humanitarian Demining are indeed 
having a sustainable, positive effect on the terrible global landmine 
situation. Since the President's announcement on landmine policy in May 
1996, the State Department has initiated efforts to determine 
``Measures of Effectiveness'' for the USG demining programs. It should 
be kept in mind that the U.S. is not the only country or organization 
involved in mine awareness and demining training in these nations 
infested with landmines.
    However, one significant element in the world-wide demining effort 
is U.S. leadership which has, in very many cases, served as a magnet 
for greater and combined international efforts. Therefore, specific 
results of U.S. successes, such as in training a central mine action 
office or demining platoon, for example, cannot always be 
differentiated from the involvement by UNDP, a Trust Fund, other donor 
nations and perhaps NGO's in providing demining training to the same 
entities in a given mined country.
    In July 1996, the State Department sent a cable to posts with 
demining programs (and geographic combatant commands) in an attempt to 
determine progress in those countries towards reaching goals of self-
sustainment and indigenous demining capacity. The cable requested as 
much information as possible on a series of ``Measures of 
Effectiveness'' in order to guide a well-coordinated interagency 
strategy and to set appropriate time schedules or deadlines for an exit 
strategy from that country.
    The most descriptive, preferred ``Measure of Effectiveness'' of a 
demining program is amount of area returned to cultivation and villages 
and roads returned to daily, productive use. For example, an area 
believed to be mined may be returned to civilian use either by 
certifying that it is, indeed, free of landmines, or by locating and 
removing all landmines on it. We try to stay away from counting the 
number of landmines removed, since it does not equate to amount of land 
returned to use. It takes nearly as much effort to demine an area with 
only three or four mines as it does one with hundreds. Some of the more 
notable factors received from posts include:
    Afghanistan (UNOCHA): Mine casualties reduced by 75-80%.
    Mozambique: Roads cleared: 6,133 km.
    Cambodia: Area cleared: 500-1000 m/day; 12 km/year.
    Namibia: Mine casualties reduced by 94%.
    Rwanda: Mine casualties reduced by 80%.
    Regarding renewed cultivation in hectares after demining:
    Afghanistan: 5,000 (plus cleared irrigation systems and residential 
land).
    Angola: 200 hectares total.
    Cambodia: 28 (priority to public areas).
    Ethiopia: 1,277 hectares.
    Honduras: 7.9 hectares.
    The above statistics do not include land returned to civilian use 
by verifying that it was not, in fact, mined.
    We will be pleased to provide a briefing by the Departments of 
State and Defense on the U.S. Government Humanitarian Demining Program 
and will be contacting your office to make specific arrangements.
    Question. It has been reported and there seems to be evidence that 
suggests that United States weapons have been used by Turkish troops to 
commit atrocities. Do you support end-use monitoring of United States 
weapons transfers to Turkey? What is the Administration's position on 
the situation in southeastern Turkey? How would you implement end-use 
monitoring of this equipment? What position will the Administration 
take should it be determined that excess defense equipment is used in 
human rights abuses?
    Answer. By law (the Arms Export Control Act), the USG may provide 
defense articles to foreign countries only for certain specified 
purposes. Pursuant to this requirement, as a condition for receiving 
weapons from the USG, countries agree that they will be used solely for 
these purposes. The Department is required to report to Congress 
promptly upon the receipt of information that a substantial violation 
of such an agreement may have taken place. This reporting is done 
through our Mission staff in Turkey.
    A large portion of the Turkish military inventory is either U.S.-
supplied or produced in co-production arrangements. The agreements 
under which the United States furnishes military equipment to other 
countries obligates them to use such equipment only for specified 
purposes, including self-defense and internal security. In response to 
Congressional concerns, the Department of State prepared a report on 
the use of U.S. arms in Turkish human rights abuses in 1995. We are 
currently preparing another for submission soon, updating our findings 
on this issue.
    In addition to this reporting, the Administration conducts an 
extensive review of every arms sale or transfer to any country, 
including Turkey. If we believe that the proposed sale or transfer 
would be used in human rights abuses, we disapprove the case.

            Questions for the Record Submitted by Ms. Pelosi

                        china and proliferation
    Question. The United States and China are both signatories to the 
Nuclear Non-Proliferation Treaty and both countries have nuclear 
weapons. What is the Administration doing to ensure China's adherence 
to Article I of the NPT, which binds signatories, ``not in any way to 
assist, encourage, or induce any non-nuclear-weapon State to 
manufacture or otherwise acquire nuclear weapons or other nuclear 
explosive devices, or control over such weapons or explosive 
devices.''?
    Answer. The obligation set forth in Article I of the NPT not to 
assist non-nuclear-weapon states to acquire nuclear explosives has been 
a key issue in our consultations with China on nuclear nonproliferation 
and peaceful nuclear cooperation. Over the past two years in 
particular, there have been extensive high-level and expert-level 
discussions with the Chinese government in which the Administration 
stressed the importance of ensuring that no assistance whatsoever is 
provided to non-nuclear weapons states that would assist the 
development of nuclear explosive devices.
    These consultations have included four rounds of discussion on 
peaceful nuclear cooperation, in which a key issue was Chinese nuclear 
cooperation with third countries, particularly Pakistan and Iran. We 
also held separate meetings with Chinese officials on the 
implementation of nuclear and dual-use export controls. In each case, 
we stressed the importance of the NPT's Article I obligations and the 
need for nationally applicable nuclear export controls that would apply 
to both civilian and military, governmental and private entities.
    As a result of our earlier consultations, China declared on May 11, 
1996 that it ``will not provide assistance to unsafeguarded nuclear 
facilities''--an important statement of Chinese nonproliferation 
policy. Since then, we have continued to consult closely with China to 
develop a common understanding on fully effective export control 
policies and practices and to strengthen national export control 
systems.
    Question. In light of the Administration's reliance on China's 
statements of its adherence to non-proliferation goals and regimes, 
could you please explain why the Chinese are still not a member of the 
Nuclear Suppliers Group? And, could you explain why China still sells 
nuclear reactors without ``full-scope'' safeguards?
    Answer. In our consultations with China on nuclear non-
proliferation and export controls, we stressed the importance of 
multilateral nuclear export control efforts, and in particular the work 
of the Nuclear Suppliers Group and the Zangger Committee (otherwise 
known as the NPT Exporters Committee). The Chinese response was that it 
was giving serious consideration to joining the Zangger Committee. With 
respect to the Nuclear Suppliers Group, the Chinese have said only that 
the issue would require careful study, since they were not a founding 
member of the NSG and did not participate in the drafting of the 
Nuclear Suppliers Guidelines. However, we assume that the difficulty 
for China with NSG membership at this time is the NSG's requirement for 
the application of full-scope safeguards as a condition of nuclear 
supply.
    Given the adoption of the full-scope safeguards requirements by the 
NSG in 1992, almost all of the world's major nuclear suppliers now 
require that all of a recipient state's nuclear activities be subject 
to IAEA safeguards as a condition of nuclear supply. While it is 
difficult to speculate ``why'' China has not adopted full-scope 
safeguards as Chinese policy, its reluctance thus far is likely linked 
to its ongoing supply of a safeguarded nuclear power reactor to 
Pakistan, a project which is consistent with its NPT obligations--
although inconsistent with the supply policy of the world's other major 
nuclear suppliers.
    Question. Given this lack of commitment by the Chinese government 
to these basic nuclear non-proliferation safeguards, what is the 
Administration's position on the push by the U.S. business community to 
resume full nuclear cooperation with China?
    Answer. While we understand the desire of the nuclear industry to 
resume full nuclear cooperation with China, there are certain 
legislative requirements that must be fulfilled before the U.S./China 
Agreement for Peaceful Nuclear Cooperation can be fully implemented. 
These requirements include a number of certifications and reports with 
respect to Chinese nonproliferation policies and practices which must 
be submitted by the President to the Congress.
    We have been holding a series of consultations with China on 
nuclear nonproliferation, export controls, and peaceful nuclear 
cooperation. In those consultations we have discussed with China the 
legislative requirements for certification and made clear the 
importance of a common understanding on nuclear nonproliferation policy 
and practice and on nuclear cooperation with third countries. We have 
also made clear to the nuclear industry that we will recommend to the 
President that the requisite certifications be made only when we are 
fully convinced that such a common understanding has been reached with 
China and that it is being implemented effectively.
    Question. On page 15 of your testimony, Secretary McNamara, you 
talk about the ``objectives of our nonproliferation programs,'' and 
``supporting other important U.S. interest including . . . economic 
interests in Asia and the Pacific. . .'' How does the Administration 
decide which of these objectives takes precedence when they may 
collide? Please include in your response a description-making process 
on nuclear technology, in light of the coordinated efforts by some U.S. 
companies, including Westinghouse and G.E., to set up a task force to 
press the White House to certify China's nonproliferation progress and 
allow the U.S.-China nuclear trade agreement to take effect.
    Answer. In practice, pursuit of our nonproliferation objectives 
does not collide with out economic interests. While the U.S. nuclear 
industry is understandably interested in resuming full nuclear 
cooperation with China, this can only happen when the President 
provides the necessary certifications and reports to the Congress 
regarding Chinese nonproliferation policies and practices. We will 
recommend to the President that he make these certifications only when 
we are sure that we have reached a common understanding with China on 
nuclear nonproliferation policy and nuclear cooperation with third 
countries and when we are sure that this understanding is being 
implemented effectively. The decision to make this recommendation to 
the President will be made in coordination with the other relevant 
agencies who are participating in our nuclear consultations with China, 
including the Departments of Energy, Defense and Commerce and the Arms 
Control and Disarmament Agency.
    With respect to the transfer of nuclear technology, the Tiananmen 
sanctions prohibit the approval of any new applications to assist the 
Chinese nuclear power program. In addition, no export of NRC-licensed 
nuclear reactors, fuel, or major nuclear components can take place 
until the President makes the necessary certifications.
    Question. US law contains strict licensing requirements for the 
export of nuclear dual-use goods. Regulations implementing this law 
require licensing officers to carefully review the nonproliferation 
credentials of the end-use country. Among these criteria are:
    ``Whether the actions, statements, and policies of the government 
of the importing country are in support of nuclear nonproliferation and 
whether that government is in compliance with its international 
obligations in the field of nonproliferation.''
    ``The degree to which the government of the importing country 
cooperates in nonproliferation policy generally . . .'' and
    ``Intelligence data on the importing country's nuclear intentions 
and activities.''
    In light of these requirements and in light of the record, could 
you explain the sheer volume (adding up to billions of dollars) and 
diversity of nuclear dual-use goods which have been and are being 
licensed to China?
    Answer. Actually, the total value of recent nuclear-controlled 
dual-use exports approved to China has been less than $50 million per 
annum. For example, in 1996, 132 licenses were approved for a total 
value of $32,365,603; 18 applications were denied for a total value of 
$4,857,342 and 18 were returned without action (for such reasons as 
loss of contract) for a total value of $4,843,121. Major dollar exports 
to China fell into nine categories:
    1. filament winding machines ($258,850 approved; $1,829,760 
denied).
    2. vacuum furnaces ($12,700,000 approved).
    3. fibrous material ($3,400,000 approved).
    4. piping and valves ($1,185,957 approved).
    5. numerical control units ($6,343,975 approved; $1,815,615 denied; 
$305,800 returned without action).
    6. spin forming machines ($601,240 approved).
    7. oscilloscopes ($5,774,505 approved; $790,261 denied; $557,741 
returned without action).
    8. computers ($1,696,186 approved; $949,580 denied).
    9. high speed cameras ($401,890 approved; $421,706 denied).
    All of the approved exports were for non-nuclear end-users and end-
uses. Of these items, the highest value items approved were furnaces; 
the highest value items denied were filament winding machines. 
Applications for export of oscilloscopes exceeded all other categories 
of technology by far (107 approved; 13 denied and 11 returned without 
action).
                                 turkey
    Question. This year's budget request for Turkey contains $50 
million in ESF and another $175 million in military loans. Over the 
years Congress has debated issues on Turkey primarily in the context of 
Cyprus, human rights and their relationship with Armenia. In that 
context the Administration has continued to provide significant levels 
of military assistance through both loans and sales. What has been done 
recently in our policy discussions to reduce their appetite for more 
arms, particularly in light of the fact that their creditworthiness has 
been downgraded by the U.S. to a very low level based on the state of 
their economy?
    Answer. Our FMF program for Turkey supports a number of important 
foreign policy goals. First and foremost, it helps a key regional ally 
meet its legitimate defense needs. Turkey continues to face a number of 
significant security threats, including from Iraq, Iran, regional 
terrorism and instability in the Caucasus.
    Turkey must modernize its forces to meet its commitments to NATO. 
Turkey has also worked closely with us to promote stability in the 
Balkans and Albania. Our FMF program helps Turkey accommodate our 
requests for their participation in these efforts.
    Our FMF program consists of systems that we have carefully 
evaluated, and believe are appropriate to meet Turkey's legitimate self 
defense needs and our broader foreign policy goals. We also carefully 
evaluate every transfer or sale to ensure that human rights concerns 
are met.
    Reflecting Turkey's changing security situation, as well as our own 
declining resources, U.S. military assistance for Turkey has declined 
dramatically over the last five years. Our request for FY 98 FMF is 
only half of last year's, for instance. Over this period, the basis of 
our FMF program for Turkey has changed from concessional financing to 
market-based financing.
    Question. What conclusions have been reached on the report on the 
end use of U.S. supplied equipment in Turkey, and what level of effort 
did the U.S. Embassy put into it this year?
    Answer. The report detailing our conclusions will soon be out. In 
Ankara and in Washington, both the State Department and other agencies 
have devoted a great deal of time and effort to making this report as 
comprehensive and detailed as possible, under circumstances in which 
accurate, unbiased information is often difficult to come by.
    Question. Update us on the confrontation between the Turkish 
military and the Islamist Prime Minister Erbakan's governing Refah 
party. My understanding is that the Turkish cabinet is to meet today to 
consider a set of pro-secular measures inspired by the military to stem 
the tide of Islamist control of various aspects of society. What are 
your expectations on the outcome of this meeting?
    Answer. At its regular end-of-the-month meeting on February 28, the 
Turkish National Security Council issued 18 recommendations for 
programs to adopt to maintain secularism. On April 28, the NSC again 
met to review the government's progress in implementing their measures.
    As you have noted, the differing agendas of the Islamist Refah 
party and the military, which under the constitution also has a strong, 
legitimate role in Turkish democracy, have led to political tensions 
and a lively debate on the nature of Turkish society. Although the 
April 28 NSC meeting was inconclusive in resolving the issues, it took 
place within the democratic political framework Turkey has established 
for itself, and we have publicly stated the value we place on Turkey's 
secular democracy.
                               indonesia
    Question. What is the precise status of the administration's 
intention to propose a sale of F-16s to Indonesia, and how will 
concerns about the human rights situation be considered.
    Answer. The Government of Indonesia has recently withdrawn its 
offer to purchase the Pakistani F-16s. We regret this decision and 
remain committed to support Indonesia's legitimate defense needs.
    We do have human rights concerns regarding Indonesia, and we have 
frequently raised them with the Indonesian government as well as in 
public. In keeping with our human rights concerns, our policy in not to 
provide Indonesia small arms, crowd control equipment, or other items 
that might be used to suppress dissent.
                               guatemala
    Question. What is your assessment of the drug transit situation in 
Guatemala in the context of military involvement in interdiction 
activities. Also address any recent problems with alleged military 
involvement in drug trafficking.
    Answer. A legislative restriction in the FY 97 Foreign Operations 
bill prohibits any U.S. counternarcotics funds being used for the 
Guatemalan military.
    All USG counternarcotics programs in Guatemala, both Department of 
State and Drug Enforcement Administration, support the work of the 
Department of Antinarcotics Operations (DOAN), a specially trained unit 
of the civilian Treasury Police. In the police reorganization mandated 
by the peace accords, the Treasury Police and the National Police will 
be merged to form a Civilian National Police. The DOAN will remain an 
independent organization within the new Civilian National Police.
    Guatemala's geographic position halfway between Colombia and the 
U.S. makes it particularly vulnerable to transshipment of both cocaine 
and marijuana. USG helicopters stationed in Guatemala since the late 
1980's enabled the GOG to significantly decrease the amount of cocaine 
transiting Guatemala by air. We are concerned that air transshipments 
will increase following the re-deployment of these helicopters early 
this year for very critical surge needs in Colombia. A successful 
private sector-financed port security program has, with USG support, 
been successful in deterring drug transit by sea through Guatemala's 
Caribbean port. The program is now being replicated on the Pacific 
coast.
    There is no evidence that any high-ranking Guatemalan military 
official is involved in drug trafficking. The military command under 
MOD General Balconi is firmly committed to rooting out corruption, 
including drug trafficking in the military. A colonel arrested in 1996 
on cocaine trafficking charges is currently out on bail awaiting trial. 
A second lieutenant arrested on February 26 on drug trafficking charges 
remains in custody pending his trial. Under a new 1996 law, military 
personnel charged with drug trafficking and other crimes unrelated to 
their military duties are now tried in civilian, rather than military, 
courts.
    Question. Have we any specific expectations on the downsizing of 
the Guatemalan army in the wake of the Peace Accords, and in the 
context of the possible resumption of IMET?
    Answer. We are pleased at the progress the Guatemalan Army has made 
in downsizing thus far, and are confident that it will reach the goal 
of reducing to a strength of 33,000 men by the end of 1997. Downsizing 
is being carried out in a phased manner, under a month-by-month plan 
developed by the army following the signing of the Accord on the Role 
of the Military in a Democratic Society in September 1996. In marked 
contrast to the past, the Guatemalan army has made public all its 
downsizing and reorganization plans.
    We sent notification to Congress April 23 that we intend to use the 
$225,000 allocated for Guatemala in FY1997 for several courses under 
the Expanded-IMET (E-IMET) program, which will help prepare military 
officers and personnel for their new role in peacetime democratic 
society. The E-IMET program proposed for Guatemala includes courses in 
civil-military relations, military justice, and resource planning and 
management.
    These courses will help military officials carry out their new 
responsibilities in a manner that is subordinate to civilian authority 
and respectful of the human rights of all Guatemalans.
                                colombia
    Question. Explain to the Committee your intention regarding the use 
of Sec. 614 authority to waive certain restrictions and provide 
Colombia with previously withheld FY 1996 military assistance funds, in 
the context of recent decertification of Colombia.
    Answer. The President is considering using his 614 authority to 
waive restrictions on the use of FY95 and prior year military 
assistance funds for Colombia with the intent that these funds would be 
used for counternarcotics purposes and training. The Administration 
believes that the type of assistance under consideration for Colombia 
is not only critical to the types of programs we must continue with 
elements of the Colombian government committed to counternarcotics 
efforts, but is also vital to the national security interests of the 
United States.
    The funds would be used to provide equipment to the Colombian 
National Police and those elements of the Colombian Armed forces with a 
counternarcotics support role. We are currently weighing carefully what 
types of equipment we might provide to selected military units with a 
CN support role.
    In addition, training would be provided using International 
Military Education and Training funds. This training would be designed 
to improve performance on counternarcotics activities, promote 
professional development, improve military justice and foster respect 
for human rights and civilian control of the military.
    Question. Last year the Foreign Operations bill contained language 
prohibiting any anti-narcotics funding to any unit of the security 
forces of a foreign country, if the Secretary has credible evidence 
that such unit has committed gross violations of human rights. This 
provision was clearly aimed at Colombia, and was significantly watered 
down from its original version as proposed by Senator Leahy. Its intent 
was clearly to get the State Department to investigate anew the 
allegations about human rights abuses committed by the Colombia 
military. Can you tell me if any investigative action has occurred in 
Colombia or any country for that matter as a result of this provision?
    Answer. On February 13, 1997, the Department sent a telegram to all 
U.S. missions to ensure that they are aware of the new human rights 
conditions on International Narcotics Control (INC) funds. The telegram 
instructed missions to correlate information on recipients of INC-
funded assistance with information on reported human rights violators. 
Posts are required to report immediately to the Department any 
information that could be relevant to a determination that assistance 
to a particular unit would not be consistent with the law. Where 
circumstances that invoke the restriction are present, posts are also 
required to provide information as to whether the host government is 
taking steps to bring the offenders to justice.
    In the case of Colombia, INC funds are directed primarily towards 
the Colombian National Police Anti-Narcotics Division (DANTI). Our 
letters of agreement with the Colombian Police include a provision on 
human rights. DANTI has a good human rights record and we have found no 
instances which necessitate investigation. FY1997 INC funds will not be 
provided to any unit of the security forces with whom we do not have an 
acceptable agreement vis-a-vis human rights, and disbursement 
procedures include a screening mechanism to ensure that assistance is 
provided only if consistent with the provision.
    Question. Please explain how your agencies resolve disputes between 
agencies over who has primary licensing authority over different types 
of sensitive exports. I understand that in the past there have been 
some disputes about telecommunications, and jet engines, for example. 
Are there any dispute still pending?
    Answer. A commodity jurisdiction determination of whether an item 
or service is under the jurisdiction of the International Traffic in 
Arms Regulations is made by the Department of State in consultation 
with the Department of Defense and the Department of Commerce under the 
Arms Export and Control Act and implementing Executive Branch 
procedures and regulations.
    Such determinations are based primarily on whether the item or 
service was specifically designed or modified for military application, 
whether it has predominant military applications, and whether it is has 
significant military or intelligence applicability such that control 
under the International Traffic in Arms Regulations is necessary. The 
process of making such determinations exists primarily as a service to 
the U.S. defense industry. Some 400-500 commodity jurisdiction requests 
are submitted annually by U.S. persons to the Department.
    On April, 1996, State, Defense and Commerce also agreed to new 
inter-agency procedures that provide each agency with the right to 
appeal determinations to senior political levels should it feel 
strongly about the proposed outcome in individual cases.

            Questions for the Record Submitted by Mr. Yates

                         fmf: egypt and israel
    Question. Egypt remains formally at peace with Israel although it 
has been a cold peace. In previous testimony before this committee, it 
has been stated that a substantive cut in aid to Egypt, `` . . . would 
undercut the commitment that Egypt sees we have in the peace process.'' 
With this in mind, last year we sold Egypt $1.42 billion in military 
goods and services. Additionally, the CIA and the State Department 
reported that Egypt purchased long-range SCUB missile from North Korea.
    What is the security imperative that requires the United States to 
continue and provide $1.3 billion annually to Egypt: What external 
threat does Egypt face? Do you believe the United States FMF program 
for Egypt is commensurate with the limited contribution Egypt would 
make to any future Gulf contingency? If we were to make substantial 
cuts to aid to Egypt at the same time making equal cuts to Israel, 
would this be acceptable to President Mubarak? Do you believe such 
action would put President Mubarak at risk to Islamic fundamentalists 
and extremists?
    Answer. Since the signing of the Camp David accords and the 
Egyptian-Israeli Peace Treaty, assistance to Egypt and Israel has been 
linked at a two-to-three ratio, based on Egypt's participation in the 
Middle East peace process. Egypt continues to be a critical part of 
that process, based on its own self-interest. However, our reasons for 
continuing security assistance to the Egyptian military goes far beyond 
our common interests in the peace process. It is unlikely that cuts is 
Egypt's security assistance would have a practical effect on the 
internal situation as the military is not used in the fight against 
terrorists. However, any indication that the United States was drawing 
away from Egypt (for instance, a cut in Egyptian assistance without a 
corresponding cut in Israeli assistance) would encourage radical forces 
in the region and embolden terrorist supporting states to strengthen 
their pressure on President Mubarak. In addition, such cuts would 
undermine our relationship with the Egyptian military on which we will 
continue to depend in case of aggression in the Gulf. An Egyptian 
contribution of two to five heavy armored divisions and air assets to a 
coalition military operation substantially would reduce the drain on 
our own resources, physical and financial. We would not consider this a 
limited commitment. In addition, we depend on Egypt for rapid naval 
access to the region through the Suez Canal and air access through 
Eyptian facilities. We cannot afford to lose that access or see it 
limited.
    Question. Do you believe that maintaining aid to the Camp David 
countries at the current level is important for the future of the peace 
process? What type of connection do you see between United States aid 
and Israel's and Arab nation's ability to risk peace negotiations? 
Would you support a universal reduction in aid to Israel and Egypt? 
What if Israel and Egypt agreed to the reduction? Would you support the 
creation of a line item devoted only to the Middle East peace process?
    Answer. The commitment to Israel's security has been a cornerstone 
of U.S. foreign policy since the creation of the state of Israel in 
1948, and the U.S. remains firmly committed to supporting the Israelis 
in taking risks for peace in the region. U.S. economic assistance to 
Israel reaffirms our unshakable commitment to Israel's security and 
well-being and our national interest in securing a just, lasting, and 
comprehensive peace between Israel and all its Arab neighbors. Egypt, 
too, remains a pivotal country in the Arab world and a key U.S. ally in 
the Middle East. As the first Arab country to sign a peace treaty with 
Israel, Egypt continues to play a critical role in the Middle East 
peace process. The President's FY 1998 budget requests traditional 
amounts of bilateral economic assistance for Israel and Egypt to 
support the Administration's peace process objectives.
                              middle east
    Question. What are the biggest challenges to the relations between 
the United States and Israel? What is your response to the rioting this 
past September? How can we assure both the Palestinian's (sic) and 
Israel that restoring to violence is not acceptable form of 
negotiation?
    Answer. There was indeed a serious breakdown in Palestinian command 
and control, significant violence, and casualties on both sides last 
September.
    The Palestinian authorities have told us and the Israelis that the 
incidents in September did not reflect Palestinian Authority (PA) 
policy.
    Chairman Arafat has publicly committed and has taken concrete steps 
to ensure that such incidents will not happen again. He has, for 
example, imposed strict limits on the use of firearms by the 
Palestinian police.
    Regarding the general issue of terror and violence, we have made 
clear to the Palestinians that a resort to violence is unacceptable and 
that issues between Israel and the Palestinians must be resolved 
through negotiation. We continue to press Chairman Arafat to sustain a 
100% effort to counter terrorism and violence, and to maintain 
cooperation with Israel on security issues.
    Question. The Jordanian military is still short of supplies. Do you 
believe that security assistance to Jordan is adequate to the potential 
threats from Syria and Iraq? The United States has provided Jordan with 
16 F-16 fighters and a variety of other excess defense equipment. What 
are Jordan's additional defense needs and how do we plan to address 
them?
    Answer. The two top priorities of the Jordanian Armed Forces (JAF) 
are sustainment of existing equipment and enhancement of border 
security. Resources available to the JAF are inadequate to ensure that 
these priorities are fully met. The U.S. government continues to work 
closely with the Jordanians to identify priority defense needs and to 
try to find ways to improve the JAF. At the April 1997 meeting of the 
Joint Military Commission, the U.S. delegation announced that, in 
addition to the equipment delivered to Jordan last December, we would 
make a further delivery under the existing drawdown authority to 
provide 38 fully outfitted M60A3 tanks with spares, 18 M110 (8-inch) 
howitzers with spares, $4.75 million worth of 8-inch ammunition, $1 
million worth of M113 spares, and 20 UH-1H helicopters (in nonflyable 
condition, to be used as spares). The F-16 program is still on track, 
with the first aircraft due to be delivered by the end of this year.
    Question. Do you still believe that linking assistance to Greece 
and Turkey enhances our ability to influence the situation in the 
Aegean and Cyprus? Wouldn't it be logical to treat these two as 
individual requests and provide assistance based on the assessed need 
of each nation? How has the linking of assistance advanced a peaceful 
solution to the Cyprus problem?
    Answer. The Administration recognizes the Congress' preference that 
U.S. security assistance for Greece and Turkey be maintained at a 7:10 
ratio. This is not done to advance a peaceful solution to Cyprus, but, 
as we understand Congress' intent, to maintain an approximate ratio of 
forces between Greece and Turkey to reduce the risk of an outbreak of 
hostilities.
    We believe it is important to maintain a close defense relationship 
with each country. To that end, we maintain a vigorous bilateral 
engagement with each separately on a broad range of issues. However, 
given that tensions in the Aegean and on Cyprus involve both parties 
and that solutions to the issues will require the cooperation of both, 
it would be unrealistic to seek to make arms transfer decisions 
separately for the two countries.
    Question. The events of the past year have changed the peace 
process so much that some have speculated that no further advancements 
will be made. Do you agree with this position?
    Answer. The Administration stands ready to help the parties in the 
Middle East in their quest to find a secure, lasting and comprehensive 
peace. It is essential that at this difficult moment in the peace 
process, the parties themselves take the decisions necessary to ensure 
that progress can be made. While this is unquestionably a difficult 
moment in the peace process, we believe it lies within the power of the 
parties themselves--with our help when needed--to overcome their 
differences.
                        excess defense articles
    Question. Last fall Congress adopted a provision concerning 
counternarcotics funding which states: ``. . . Provided further, that 
none of the funds made available under this heading may be provided to 
any unit of the security forces of a foreign country if the Secretary 
of State has credible evidence to believe such a unit has committed 
gross violations of human rights unless the Secretary determines and 
reports to the Committees on Appropriations that the government of such 
country is taking steps to bring the responsible members of the 
security forces unit to justice.''
    This provision was intended to insure that counternarcotics funds 
are not diverted and insure that United States tax dollars do not 
underwrite political murders. It prohibits aid to specific units on the 
basis of credible evidence and does not apply if the unit in question 
is policing itself and holding its members accountable. It is my 
understanding that the Administration has decided to apply this 
provision to Excess Defense Articles. Yet, so far as I am aware, the 
State Department has provided no information to the Congress about how 
it plans to implement this procedure.
    I am requesting, in detail, how the State Department intends to 
implement this provision with regard to excess defense articles.
    How will you ensure that units prohibited from receiving direct 
counternarcotics funding do not receive excess defense articles? How 
will aid that is already in the pipeline be affected by this provision? 
When will the End Use Monitoring Reports for 1995 and 1996 be 
published.
    Answer. The Department of State has established procedures to 
ensure that the new human rights condition which applies to funds 
appropriated under Section 481 of the Foreign Assistance Act, the 
International Narcotics Control program, is observed. The Department 
has further instructed all posts abroad to promptly report any instance 
of a unit of a government's security forces involved in gross 
violations of human rights that may receive counternarcotics assistance 
funded from a source other than the INC program, including Excess 
Defense Articles. This is to be done in the same manner as if the 
assistance were INC-funded. As a matter of policy, we do not intend to 
allow counternarcotics assistance funded from sources other than the 
INC program, including Excess Defense Articles, to be directed to units 
that could not under the law receive assistance funded under the INC 
program. Consistent with this policy, no excess defense articles, 
including material already in the pipeline, would be delivered to a 
unit of a foreign country's security forces if there is credible 
evidence that the unit has been responsible for gross violations of 
human rights, except under the same conditions as would apply if the 
assistance had been funded from the INC program.
    We are reviewing the consolidated End-Use Monitoring report 
prepared by the Department of State's Bureau of International Narcotics 
and Law Enforcement Affairs on assistance under the INC program. 
Traditionally, this report analyzes the condition and use of material 
previously transferred under the INC program in light of reports 
generated by U.S. embassy personnel. As an additional, systematic look 
at the issue, we believe this report will form a useful supplement to 
the requirement for prompt reporting cited above and will address the 
use of material transferred in prior fiscal years. The first occasion 
to make of this tool will be the report covering calendar year 1997 and 
prior years.
    Question. Last fall Congress adopted a provision concerning 
counternarcotics funding which states: ``. . . Provided further, that 
none of the funds made available under this heading may be provided to 
any unit of the security forces of a foreign country if the Secretary 
of State has credible evidence to believe such a unit has committed 
gross violations of human rights unless the Secretary determines and 
reports to the Committees on Appropriations that the government of such 
country is taking steps to bring the responsible members of the 
security forces unit to justice.''
    This provision was intended to insure that counternarcotics funds 
are not diverted and insure that United States tax dollars do not 
underwrite political murders. It prohibits aid to specific units on the 
basis of credible evidence and does not apply if the unit in question 
is policing itself and holding its members accountable. It is my 
understanding that the Administration has decided to apply this 
provision to Excess Defense Articles. Yet, so far as I am aware, the 
State Department has provided no information to the Congress about how 
it plans to implement this procedure.
    I am requesting, in detail, how the State Department intends to 
implement this provision with regard to excess defense articles.
    How will you ensure that units prohibited from receiving direct 
counternarcotics funding do not receive excess defense articles? How 
will aid that is already in the pipeline be affected by this provision? 
When will the End Use Monitoring Reports for 1995 and 1996 be 
published.
    Answer. The Department of State has established procedures to 
ensure that the new human rights condition which applies to funds 
appropriated under Section 481 of the Foreign Assistance Act, the 
International Narcotics Control program, is observed. The Department 
has further instructed all posts abroad to promptly report any instance 
of a unit of a government's security forces involved in gross 
violations of human rights that may receive counternarcotics assistance 
funded from a source other than the INC program, including Excess 
Defense Articles. This is to be done in the same manner as if the 
assistance were INC-funded. As a matter of policy, we do not intend to 
allow counternarcotics assistance funded from sources other than the 
INC program, including Excess Defense Articles, to be directed to units 
that could not under the law receive assistance funded under the INC 
program. Consistent with this policy, no excess defense articles, 
including material already in the pipeline, would be delivered to a 
unit of a foreign country's security forces if there is credible 
evidence that the unit has been responsible for gross violations of 
human rights, except under the same conditions as would apply if the 
assistance had been funded from the INC program.
    We are reviewing the consolidated End-Use Monitoring report 
prepared by the Department of State's Bureau of International Narcotics 
and Law Enforcement Affairs on assistance under the INC program. 
Traditionally, this report analyzes the condition and use of material 
previously transferred under the INC program in light of reports 
generated by U.S. embassy personnel. As an additional, systematic look 
at the issue, we believe this report will form a useful supplement to 
the requirement for prompt reporting cited above and will address the 
use of material transferred in prior fiscal years. The first occasion 
to make use of this tool will be the report covering calendar year 1997 
and prior years.
    Question. The Administration is seeking $53,900,000 in assistance 
for Colombia in FY' 98. This amount does not include excess defense 
articles. Furthermore, it is my understanding that since this provision 
was adopted Amnesty International USA released documents confirming 
that United States aid to Colombia has been provided to security 
forces/units credibly alleged to be responsible for gross human rights 
violations. Please advise as to which Colombian units will be 
prohibited from receiving excess defense articles under this provision. 
Which units have already received or are slated to receive such 
equipment?
    Furthermore, it is my understanding that the Administration plans 
to supply a large amount of excess defense articles to the Colombian 
military for counternarcotics purposes. How will you and the 
Administration insure that this equipment does not subvert 
Congressional intent by providing excess defense articles to the very 
units which are prohibited from receiving direct counternarcotics 
funding? What would be your intentions should such a situation develop? 
Would you please spell out what you and the Administration consider to 
be ``credible evidence . . . such unit has committed gross violations 
of human rights . . .''.
    Answer. Military units which may receive assistant would be those 
who are engaged in counternarcotics operations or provide support for 
the counternarcotics operations of the Colombian National Police (CNP). 
The personnel in these units would be referenced with information the 
Colombian Attorney General for Human Rights has on personnel who have 
committed gross violations of human rights. This procedure would be 
similar to the one in place to screen individuals for U.S. training 
programs. No excess defense articles will go to a unit whose members 
are reported to have committed such abuses.
    To date, none of the excess defense items have been given to any of 
the Colombian security forces. We are working with the Government of 
Colombia now to establish mechanisms to keep U.S.-provided equipment 
out of the hands of known human rights abusers. Until we are satisfied 
that we have accomplished this, we will not turn over this equipment.
    We will ensure that counternarcotics assistance will not be given 
to units whose members violate human rights--whether that assistance is 
funded from International Narcotics Control (INC) monies or other 
resources.
    On February 13, the Department sent a telegram to all U.S. missions 
to inform them of the new human rights conditions on International 
Narcotice Control (INC) funds. The telegram instructed missions to 
correlate information on recipients of INC-funded assistance with 
information on reported human rights violators, and to report any 
instances where there is a question as to whether the assistance can 
continue. Posts will make a conscientious effort to report what the 
available evidence shows and, where it is ambiguous, to report that. 
Posts are instructed that standards of evidence applied in their 
assessment of the facts should be consistent. The Department would then 
use established practices and procedures relating to human rights 
reporting to evaluate whether there is sufficient information to 
constitute ``credible evidence.'' If so, the Administration would not 
permit the assistant to proceed to that unit until steps are taken to 
remove the responsible individuals.
    Question. It has been reported and there seems to be evidence that 
suggests that United States weapons have been used by Turkish troops to 
commit atrocities. Do you support end-use monitoring of United States 
weapons transfers to Turkey? What is the Administration's position on 
the situation in southeastern Turkey? How would you implement end-use 
monitoring of this equipment? What position will the Administration 
take should it be determined that excess defense equipment is used in 
human rights abuses?
    Answer. By law (the Arms Export Control Act), the USG may provide 
defense articles to foreign countries only for certain specified 
purposes. Pursuant to this requirement, as a condition for receiving 
weapons from the USG, countries agree that they will be used solely for 
these purposes. The Department is required to report to Congress 
promptly upon the receipt of information that a substantial violation 
of such an agreement may have taken place. This reporting is done 
through our Mission staff in Turkey.
    We take this requirement very seriously. As we noted in the 1995 
end-use report, given the large portion of the Turkish military 
inventory that is either U.S.-supplied or produced in co-production 
arrangements, it is likely that some U.S. equipment has been misused. 
We are currently preparing another for submission soon, updating our 
findings on this issue.
    Although we look into all allegations we receive of misuse of U.S. 
equipment, it is notably difficult to get reliable, unbiased 
confirmations of misuse. There are also a number of practical 
difficulties involved in completing this reporting. Nevertheless, we 
have consistently conveyed the importance we attach to preventing 
misuse to the Turkish Government, and follow up on the reports we 
receive of specific incidents.
    In addition to this reporting, the Administration conducts an 
extensive review of every arms sale or transfer to any country, 
including Turkey. If we believe that the proposed sale or transfer 
would be used in human rights abuses, we disapprove the case.

            Questions for the Record Submitted by Mr. Torres

                counter-narcotics human rights provision
    Question. Last year, we passed a counter-narcotics human rights 
provision as part of this appropriations bill which prohibits counter-
narcotics military aid to foreign military units implicated in gross 
human rights violations. I have a series of questions that I hope you 
can be responsive to.
    We understand that a cable went out to all embassies asking for 
specific procedures for compliance with this provision. What 
specifically did the cable ask? Can you share this cable? How will 
embassy responses be evaluated? We would like to evaluate whatever 
proposal is thought adequate for compliance.
    Will embassies draw up lists of units prohibited from receiving 
assistance? Or will embassies first compile lists of units slated to 
receive assistance and then check their human rights record? Either 
way, we would like to see those lists and expect to be consulted before 
decisions are made on whether to give the aid or not.
    How is the Administration contemplating communication regarding 
compliance with the Committee? Perhaps we should arrive at an agreement 
on this before you unilaterally decide on what the best way is for us 
to communicate.
    I understand it is the Administration's intent to extend the 
coverage of the Provision to include Excess Defense Articles. Is that 
correct?
    Answer. On February 13, 1997, the Department of State sent a 
telegram to all U.S. missions to ensure that they are aware of this new 
restriction on assistance funded under Section 481 of the Foreign 
Assistance Act, the International Narcotics Control (INC) program. All 
missions are required to report to the Department any instance in which 
it appears that information exists that could require a determination 
by the Secretary of State on whether INC-funded assistance canbe 
provided to a particular unit of the security forces of the host 
government consistent with the law. INC-funded assistance has long been 
subject to an end-use monitoring and reporting procedure, to monitor 
its use and impact. Posts with significant INC-funded projects 
administered by Narcotics Affairs Sections must report at the beginning 
of each year the procedures established to implement end-use monitoring 
requirements in the coming year. Those posts also must now report on 
procedures established at the post to ensure that this new human rights 
restriction is observed, and all posts required to submit end-use 
monitoring reports must include an addendum describing monitoring to 
ensure that the new restriction has been observed. In response to your 
request, the Department will be happy to provide a copy of this 
telegram to the Subcommittee.
    Given the large number and great diversity of countries, recipients 
and types of assistance in the INC program, the Department considered 
it unreasonable to attempt to define a priori a single standard or set 
of conditions for evaluating responses from all countries. As embassies 
inform the Department of procedures they have established, concerned 
offices in the Department will consider all circumstances specific to 
each individual country's program, evaluating whether proposed 
procedures provide adequate assurance that this prohibition on INC 
assistance defined by the law is observed.
    Activities under the INC program are carried out in 85 countries. 
It is not practical for lists of recipient units for this entire 
assistance program in all countries to be submitted to Washington. The 
U.S. mission in each country is required to know which official or unit 
will receive assistance, where items provided as assistance are, who is 
using them, and how. Accordingly, it is the responsibility of each 
mission to correlate information held at post on recipients of INC-
funded assistance with information on gross violations of human rights. 
Any instance in which it appears that information exists that could 
require a determination by the Secretary of State whether INC-funded 
assistance to a particular unit can be provided consistent with the law 
will then be reported to the Department.
    The new provision specifies that in any instance in which the 
Secretary of State has credible evidence that members of a unit of the 
security forces of a foreign government have committed gross violations 
of human rights, no assistance funded from the INC program may be 
provided to that unit, unless the Secretary determines that the 
government of that country is taking steps to bring the responsible 
members of the security forces unit to justice. Any such determination 
by the Secretary of State will, as provided by the law, be reported to 
the Committees on Appropriations in the same manner in which 
determinations required of the Secretary by law are reported.
    The Department has instructed all missions to promptly report any 
instance of a unit of the government's security forces involved in 
gross violations of human rights that may receive counternarcotics 
assistance funded from a source other than the INC program, including 
Excess Defense Articles. This is to be done in the same manner as if 
the assistance were INC-funded. As a matter of policy, we do not intend 
to allow counternarcotics assistance funded from sources other than the 
INC program, including Excess Defense Articles, to be directed to units 
that could not under the law receive assistance funded under the INC 
program.
    Question. What will happen to Defense Articles already in the 
pipeline?
    Answer. We know of no excess defense articles in the pipeline. The 
United States will not provide any counter-narcotics assistance to 
security force units if we have credible information that such units 
have committed gross human rights violations. For example, no defense 
articles included in the FY '96 506(a)(2) drawdown for Colombia will go 
to any unit we believe to have committed such violations.
    Question. Any thoughts on extending the Provision to commercial 
sales?
    Answer. Commercial sales are thoroughly reviewed by the Department 
of State, there is no intent at this time to change the way we manage 
commercial sales.
    Question. I understand that additional end use monitoring has been 
negotiated with Colombia. What can you tell me about this?
    Answer. We continue to discuss end-use monitoring arrangements 
covering defense articles and services to be provided to elements of 
the Colombian military under the section 506(a)(2) drawdown. Final 
agreement has not yet been reached.
    Question. Are we monitoring Excess Defense Articles? If so, how? 
Any documentation?
    Answer. The end-use of grant aid equipment provided to the 
Government of Colombia is monitored by our embassy in Bogota. 
Generally, the Narcotics Affairs Section (NAS) of our embassy monitors 
equipment provided to the police and the U.S. military group monitors 
equipment provided to the Colombian military. Reports addressing the 
condition and use of the equipment are prepared annually by the 
Department. In addition, the Department's established human rights 
reporting procedures require posts to report annually on instances of 
gross violations of human rights known or reliably presumed to have 
been perpetuated by foreign government officials or agencies.
    Question. When are the 1995 and 1996 End Use Monitoring reports 
going to be released?
    Answer. The 1995 end use monitoring reports for Colombia is 
attached for your review. The 1996 report will be completed in the 
fourth calendar quarter of 1997 and will be forwarded to you when 
available.
    Question. Will human rights information about receiving units be 
included? When will the Administration be forthcoming on detailing 
which units have received assistance?
    Answer. We place a high priority on ensuring that no U.S. 
assistance is given to units containing known human rights violators. 
Information regarding those military units which are to receive 
equipment under the drawdown will be provided to you once we have 
identified all such units.

             Questions for the Record Submitted by Mr. Obey

                             nato expansion
    Question. A recent news article on the Administration's Report to 
Congress on NATO Expansion contends that the costs of this move were 
minimized to satisfy Congress. It also contends that the original 
estimate of $42 billion was altered to $27 billion after someone 
decided that fewer forces were required to operational contingencies. 
Do you have any comment?
    Answer. The cost estimates in the Administration's report were not 
minimized or altered to satisfy Congress. For the report, the 
Department of Defense estimated both the direct enlargement costs (e.g. 
for interoperability between the forces of current and new members and 
for extending NATO's integrated command, communications and air defense 
surveillance systems) and the costs of force improvements already being 
pursued by existing and new members which will also contribute to 
carrying out NATO's missions in an enlarged alliance. The direct 
enlargement costs are estimated to average $700-900 million annually 
for a total of around $9-12 billion between 1997 and 2009, the date by 
which the Alliance is anticipated to have reached a mature capability 
for collective defense with new members. The U.S. share of these costs, 
chiefly our share of the NATO budgets for direct enlargement costs, 
would largely be incurred in the ten years following formal accession 
in 1999, and would average about $150-200 million annually during that 
period.
    The study projects a security environment in Europe over the period 
1997-2009 similar to what exists today. In particular, the study notes 
that realistic threat estimates show that any direct conventional 
threat to new members is unlikely for the foreseeable future and would 
take many years to develop, if at all. If the security environment were 
to change significantly for the worse, the costs would certainly rise. 
We do not anticipate that happening.
    Question. What kind of commitment will we require from the new 
members of NATO in terms of getting them to actually spend the $9 to 
$10 billion called for in this report to expand their military 
capabilities?
    Answer. The Alliance has not asked potential new members for 
commitments to set their defense spending at specific levels. However, 
maintaining the effectiveness of the Alliance to perform its core 
functions and new missions will be an important consideration in the 
enlargement decision-making process. On joining NATO, new members must 
accept the full obligations of the Washington Treaty. they must also be 
prepared to contribute to collective defense under Article V, to the 
Alliance's new missions and to NATO budgets. The Alliance's military 
committee is currently preparing a country-specific analysis of the 
relevant military factors associated with NATO enlargement. NATO 
Foreign Ministers will have an opportunity to review these findings 
before any decisions on enlargement are made.
    Question. While Administration officials cite public opinion polls 
in Russia to bolster their case for NATO expansion (Polls indicate that 
the average Russian is not concerned about expansion), opinion polls in 
both Hungary and the Czech Republic show only 40% support for NATO 
membership. Poland, which is the only country of the three with a 
common border with Russia, has a bare majority in favor. Additionally, 
polls show majority opposed to the deployment of nuclear and use of 
nuclear weapons on their soil. People in those countries are more 
concerned with improving their economic circumstances and in joining 
the European Community. Do you have any comment? Have you studied the 
economic impacts of these countries increasing their defense budgets to 
meet NATO requirements?
    Answer. In fact there is wide political and popular support in most 
of the countries which have expressed an interest in joining the 
Alliance. In some countries NATO membership has not become an issue and 
so polls reflect large numbers of undecided and uninformed on the 
subject. In the three countries specifically mentioned in the question, 
the governments are beginning or plan active campaigns of public 
information. The Czech Republic's Prime Minister, Vaclav Klaus, 
recently affirmed to the NATO Council Czech readiness to become a full 
NATO member and accept all the related responsibilities. All mainstream 
Czech political parties support NATO membership and public support for 
membership is growing. Only a very small minority of the Czech citizens 
actually oppose NATO membership. In addition, the Czech battalion in 
SFOR enjoys almost universal support indicating the willingness of the 
Czech populace to bear the country's international burden.
    The Hungarian government, like the Czech Republic's government, has 
made clear it strong interest in joining NATO. As in the Czech 
Republic, this policy enjoys support across the political spectrum. 
Hungary has dramatically indicated its willingness to take on the 
burden associated with NATO membership through providing the Taszar 
base and other facilities for transit and use of IFOR and SFOR troops. 
Different polls than the on cited show a higher percentage of popular 
support for NATO.
    A December 1996 poll showed that 79% of Poles support membership in 
NATO. More Polish public opinion recent polls show support for NATO 
membership as high as 90%. All six of Poland's six leading political 
parties support NATO membership. The figure falls below 50% only when 
NATO membership is explicitly linked to deployment of nuclear weapons 
on Polish soil.
    Many of the countries which are seeking NATO membership have 
already begun efforts to modernize their armed forces and make them 
interoperable with NATO forces as part of PfP programs. We anticipate 
that countries would continue these efforts whether or not they are 
among the first group to be invited to begin accession negotiations. 
NATO's Economic Committee is in the process of assessing the 
implications for the defense spending plans of possible new members of 
the priority capability enhancements identified by the Military 
Committee.
    At the 1996 Brussels Ministerial, NATO stated clearly that 
``enlarging the Alliance will not require a change in NATO's current 
nuclear posture and therefore, NATO has no intention, no plan, and no 
reason to deploy nuclear weapons on the territory of new members nor 
any need to change any aspect of NATO's nuclear posture or policy--and 
does not foresee any future need to do so.'' NATO has never required 
its members to accept nuclear weapons on their soil. It has always been 
a decision taken by national parliaments.

                   Submitted to Department of Defense

            Questions for the Record Submitted by Mr. Porter

                       foreign military financing
    Question. In past years, we have heard from your Bureaus that there 
will be no future requests for Foreign Military Financing for Turkey, 
yet these requests continue to appear in the budget year after year, 
and do not get any smaller. These past assurances have impacted 
decisions not to actively seek a cut in security assistance to Turkey, 
and there is a perception that these promises were not made in good 
faith.
    (a) What was the basis for those previous assurances?
    Answer. Since 1993, the Department of Defense has informed the 
Turkish General Staff that the USG can no longer sustain the military 
assistance program that was warranted for Turkey during the Cold War. 
In particular, we have stressed that our assistance can be offered only 
in the form of loans, and we have encouraged the TGS to focus this more 
limited assistance on sustainment of the equipment we have already sold 
to Turkey or which they are in the process of producing themselves, 
e.g. the F-16 Peace Onyx program. The number of new sales to Turkey 
funded by US security assistance has dropped sharply as a result. 
Because of Turkey's current economic difficulties, Turkey has been 
unable to afford major new purchases of equipment, although the TGS 
continues to demonstrate interest in modernizing its forces to meet its 
perceived threats.
    Question. (b) Given Greece's stated willingness to forego FMF, 
Turkey's abuse of the privilege of US security assistance, Turkey's 
apparent ability to finance sustained, large-scale military operations 
(the campaign against the PKK and the occupation of northern Cyprus) 
and your agencies' previous position on continued FMF for Greece and 
Turkey, how do you justify continued requests for high levels of FMF 
for Turkey?
    Answer. The US has consistently supported efforts to ensure that 
Turkey's military is highly professional, well-trained, and well-
equipped. We have provided FMF to Turkey to maintain a Turkish military 
capable of full interoperability with US forces and their equipment. 
Given Turkey's role as a highly valued NATO ally with whom US forces 
have fought and conducted joint operations from Korea to Somalia and 
now Bosnia, it is clearly in the US military's interest, in large part 
for safety reasons, for the Turkish military to continue to employ 
systems that are fully interoperable with our own. FMF and other forms 
of security assistance make this possible.
                     cambodia humanitarian demining
    Question. In Cambodia, U.S. security assistance is being leveraged 
by that government to make tremendous strides in demining that country. 
When I was there earlier this year, I was told by the Cambodian Mine 
Action Center (CMAC), they will demine Cambodia in 100 years. But if 
their budget was doubled, they could rid Cambodia of land mines in a 
generation. In the President's budget request for FY 1998, FMF for 
Cambodia is level funded at $1 million, and there is a small increase 
in the Demining account from $7 million to $15 million, part of which 
will go to Cambodia. (a) Is it possible to double the overall U.S. 
contribution to demining efforts in Cambodia under the President's 
budget request? (b) If not, what increase(s) in what account(s) or 
reallocation within an account(s) would make such an increase possible?
    Answer. The Foreign Military Finance (FMF) program is administered 
by the Department of State. The Department of Defense (DoD) maintains a 
separate, but complementary humanitarian demining program in Cambodia. 
This program was funded at $1.5 million in FY 1996, $2.6 million in FY 
1997, and $2.880 million in FY 1998. The DoD program assists the 
Cambodian government by training local personnel in mine awareness, 
mine marking, mine removal, medical procedures, and logistics 
management. The DoD program also provides some demining equipment and 
the government of Cambodia a core of trained personnel who are 
qualified to train other local personnel in demining techniques. Any 
increase in the size of the program in Cambodia would be dependent upon 
the availability of the government of Cambodia to provide additional 
local personnel to train. An alternative way to improve the pace of 
demining in Cambodia is to increase the demining efficiency through the 
application of technology. Currently, DoD is working with the CMAC to 
field test in Cambodia several pieces of equipment developed by the DoD 
Humanitarian Demining R&D program.

            Questions for the Record Submitted by Mr. Forbes

                            nato enlargement
    Question. Regarding the expansion of NATO, has DOD or State 
developed a long-term strategy, along with a cost analysis, of the US 
financial commitment?
    Answer. As President Clinton stated last December, our goal is to 
finish the mission of building new structures of peace and security 
around the world, to complete the unfinished business of the Cold War, 
and to build an undivided Europe of democracies at peace. Enlargement 
of NATO is a key component of this mission.
    The is Department of Defense estimates the overall cost to NATO's 
current and new members might total approximately $27-35 billion over 
the period 1997-2009, of which $9-12 billion can be considered ``direct 
enlargement costs''--costs that would not have occurred absent 
Enlargement.
    Direct costs of enlargement to the US will be roughly $150-200 
million per year, largely in the ten years following formal accession 
in 1999 plus perhaps some of the costs of enchancing the military 
capabilities of new members.
    Direct costs of enlargement to our current NATO allies are 
estimated at $4.5-5.5 billion over the same period. Current allies will 
incur other costs from 1997-2009 to upgrade regional reinforcement 
capabilities ($8-10 billion) not directly related to enlargement.
    The distribution of costs is in accordance with long-standing NATO 
financial principles. The US would share in more of these costs only to 
the extent the US, with Congressional approval, may choose to continue 
or expand the current modest assistance being provided to the military 
modernization of the new democracies of Central and Eastern Europe.
    The precise costs depend on many factors not yet decided, such as 
how many and which countries will be invited, the nature of the 
projected threat environment, strategy for future Article V missions 
and force requirements, timeframe, and allocation of costs between 
countries. As the Alliance approaches the Madrid Summit, NATO has 
commissioned its own enlargement cost study, which will be released 
later this spring. In devising its methodology, NATO experts have 
patterned their cost methodology on that used in the Report to 
Congress: i.e., spreading costs out over a ten-year period; dividing 
costs between NATO members, invitees and NATO itself; using a notional 
four-nation model, etc. To assist in this effort, NATO has called upon 
the United States to make its cost technicians available to its 
International Staff analysts to lend their expertise in the preparation 
of the Alliance's estimate. A US team will be in Brussels in late April 
1997 to consult with NATO experts.
    Question. By expanding NATO, what kind of expanded seurity are we 
guaranteeing for the US that we do not already have with the current 
NATO Alliance?
    Answer. The North Atlantic Treaty Organization (NATO) is, and will 
remain, the keystone of the United States' security relationship with 
Europe. NATO has demonstrated its effectiveness by preserving peace and 
stability in Western Europe for almost half a century. Enlargement 
provides us with the opportunity to contribute to stability and 
security in the whole Euro-Atlantic area without creating dividing 
lines. As NATO prepares to admit new members, the Alliance will 
continue to reach out to other states--to build a close, cooperative 
relationship with Russia, and to forge closer political and military 
ties with the members states of the Partnership for Peace. As President 
Clinton has stated, our goal is to finish the mission of building new 
structures of peace and security around the world, to complete the 
unfinished business of the Cold War, and to build an undivided Europe 
of democracies at peace. Enlargement of NATO is a key component of this 
mission.
    Question. Does DOD or the State Department view the new NATO as 
primarily a political or military alliance?
    Answer. There is a complete convergence of views between the two 
departments on this point: NATO is a political and military alliance 
that has demonstrated its effectiveness by preserving peace and 
stability in Western Europe for almost half a century. Enlargement 
provides us with the opportunity to contribute to security and 
stability in the Euro-Atlantic area by helping to build cooperative 
European security structures throughout the whole of Europe without 
creating dividing lines.
                                 egypt
    Question. What is the security imperative that requires the US to 
provide $1.3 billion per year to Egypt for the purchase of our most 
advanced weapons systems?
    Answer. The Persian Gulf is the source of nearly two-thirds of the 
worlds' proven oil reserves upon which our own economy and those of the 
entire industrial world depends so heavily. The United States and our 
industrial allies can only be assured of reliable access to reasonably 
priced Gulf oil if the Middle East is at peace. Egypt's 60 million-
strong population--more than twice the size of the next largest Arab 
country--and its strategic location at the hinge between Africa and the 
Middle East, makes a stable, secure Egypt an indispensable requisite 
for peace throughout the region. While carefully preserving Israel's 
qualitative military edge, the $1.3 billion in annual FMF grants help 
ensure that Cairo has the national security necessary to take risks for 
peace in the face of threats and condemnation from countries such as 
Iran and Iraq. As a result, Egypt has been an unwavering US ally and 
proponent of peace for the last eighteen years.
    Question. What external threats does the country face?
    Answer. Egypt's location at the hinge between the Middle East and 
Africa places it at the center of a dangerous, volatile region. As one 
of our primary coalition allies during the Gulf War, Egypt is still 
threatened by Iraq's disproportionately large conventional forces and 
weapons of mass destruction. Egypt's secular regime is also a primary 
target of Iran's aggressive program of regional subversion and 
terrorism and expanding conventional forces. The possession of 
ballistic missiles and chemical warheads by unstable neighboring states 
such as Libya, Syria, Iraq and Iran also provides a serious security 
concern for Egypt.
    Question. What is the rationale behind Cairo's modernization 
program?
    Answer. Cairo's rationale in modernizing its armed forces is to 
replace obsolete, insupportable ex-Soviet military equipment with 
smaller numbers of more capable Western weapons systems to maintain its 
national security in the face of regional threats. By creating a more 
effective force Egypt contributes to regional stability by deterring 
regional rogues such as Iran, Iraq and Libya. A more modern military 
also gives Egypt the confidence it needs to take risks for peace. 
Finally, the introduction of modern equipment allows Egypt to more 
effectively integrate its forces into peacekeeping and coalition 
operations in conjunction with Western forces.
    Question. Is the massive US FMF program for Egypt commensurate with 
the limited contribution Egypt would make to any future Gulf 
contingency?
    Answer. Egypt's 35,000 troops organized into a two division corps 
was the largest Arab expeditionary contribution to the US-led coalition 
against Iraq. The Egyptian force was a valuable partner during the Gulf 
War, but its ability to effectively operate alongside US and Western-
equipped Gulf forces was constrained by its ex-Soviet equipment and 
military doctrine. The US FMF program is successfully creating a more 
modern, Western-oriented nucleus within the Egyptian Armed Forces. In 
the event of a future Gulf contingency, this upgraded Egyptian force 
will be much more capable of operationally effective military 
cooperation with US and Gulf nation forces.
    Question. Is the US moving ahead with the reported sale of advanced 
top-attack TOW-2B anti-tank missiles to the Egyptian army, and if so, 
how will we respond to the potential threat this weapon would pose to 
Israeli armored forces?
    Answer. The Department of Defense does not currently plan to 
provide the TOW-2B to the Egyptian Armed Forces.
    Question. What is the status of the new Defense Export Loan 
Guarantee program? Is there a provision for recipients of U.S. security 
assistance to utilize this financing mechanism?
    Answer. The DELG program is currently operational and has been 
since the program announcement was published in the Federal Register on 
08 November 1996 (Vol. 61, No. 218). It is administered by the Deputy 
Undersecretary of Defense (International and Commercial Programs).
    The DELG program operates independently of, and is entirely 
unrelated to, U.S. security assistance. Eligible borrowers must bear 
all costs incurred by the U.S. Department of Defense in administering 
this unsubsidized program.
    The National Defense Authorization Act of 1996 (10 U.S.C. 2540) 
(b)) limits participation in the DELG program to those countries which 
meet any one of the following criteria:
    A member of the North Atlantic Treaty Organization (NATO).
    A country designated, as of 31 March 1995, as a major non-NATO 
ally, pursuant to 10 U.S.C. 2350a(i).
    A country in Central Europe that the Secretary of State has 
determined has changed its form of national government from a non-
democratic form to a democratic form since 01 October 1989, or is in 
the process of changing its form of national government from a non-
democratic form to a democratic form.
    A non-communist country that was a member nation of the Asia 
Pacific.
    Economic Cooperation (APEC) as of 31 October 1993
Notwithstanding the above, DoD will not guarantee a loan to a country 
that is ineligible for guarantees from the Export-Import Bank.

           Questions for the Record Submitted by Mr. Kingston

                      regional airspace initiative
    Question. Will you please describe the Regional Airspace Initiative 
for the Baltic States? What is its purpose?
    Answer. The Regional Airspace Initiative (RAI) offers individual 
assistance to the Baltic states in designing a regional civil/military 
air traffic control/air sovereignty architecture which would emphasize 
joint civil/military resource sharing and regional cooperation to 
minimize the total costs of satisfying host country air traffic control 
and air sovereignty requirements. The underlying concept of the 
initiative is that modernization of air traffic control capabilities 
can be leveraged to achieve a corresponding modernization of air 
sovereignty capabilities at lower cost.
    The intended RAI objectives for air traffic control modernization 
planning are to realize the efficiency of regional cooperation and to 
achieve full compliance with EUROCONTROL and European Air Traffic 
control Harmonization and Integration Program (EATCHIP) standards. The 
intended objectives for air sovereignty modernization planning are to 
improve the efficiency of civil/military cooperation, increase 
operational effectiveness, promote regional military/cooperation and 
facilitate future integration with neighbor nation systems. In this 
regard, the US offer of assistance in developing modernized air 
sovereignty architectures is equally an initiative in support of NATO's 
Partnership for Peace (PFP) program.
    The main benefits to be realized by the Baltic states and others 
from RAI are closer cooperation between military and civilian air 
traffic control, and cross-border sharing of radar data with confidence 
building the accompanies that sharing. These objectives are clearly in 
the spirit of Partnership for Peace and should be pursued whether or 
not the participating countries are aspirants to NATO membership. NATO 
and EUROCONTROL compatible formats are recommended in the RAI 
architecture study because they are the most widely used Western 
standards.
                            nato enlargement
    Question. Is the United States inclined (or already beginning) to 
prepare a treaty outlining NATO's relationship with Russia in order to 
allay Russian objections to expansion?
    Answer. NATO has developed a draft NATO-Russia charter which NATO 
Secretary General (SYG) Javier Solana presented to Russian Foreign 
Minister Primakov on 9 March in Moscow. Since then, several drafts have 
passed back and forth between NATO and Russia. The goal is to conclude 
the negotiations and sign the document by the end of May 1997.
    This draft charter includes a statement of shared principles a 
mechanism for consultation and cooperation (the NATO-Russia Joint 
Council), areas for consultation and cooperation, and proposals for the 
military dimension of the NATO-Russia relationship.
    The Alliance recognizes SYG Solana as its chief interlocutor and 
negotiator with the Russians and has granted him the freedom and 
flexibility to set his own pace in his negotiations with Moscow.
    There is consensus on a number of points that are intended to guide 
SYG Solana in his negotiations: (1) the charter should be a dynamic, 
political document and not a static, legally-binding treaty; (2) the 
charter must five Russia a real consultative role in the security 
issues that NATO faces through the establishment of a joint council; 
(3) the Alliance will re-affirm the three nuclear ``no's'' i.e., no 
plan, no intention, no reason to station nuclear weapons on the 
territory of new members) and its conventional posture statement. In 
addition, there are five ``redlines'' we will adhere to in negotiations 
with the Russians; no delay in enlargement; no Russian veto on internal 
NATO decisions; no exclusion of any country from membership; no NATO 
subordination to any other institution; and no ``second class'' 
membership for any new member.
    Question. By extending NATO membership to the prime candidate 
states, will the United States gain significantly greater ability to 
prevent their further weapons proliferation to rogue states?
    Answer. Many new dangers threaten international peace and 
stability. Among them are the proliferation of nuclear, chemical and 
biological weapons, as well as their delivery systems; the fragile 
nature of democracy and market reforms in Central and Eastern Europe; 
instability and political exploitation of lingering ethnic, religious 
and territorial tensions, the large refugee flows stemming from such 
conflicts; and international crime and terrorism.
    NATO has decided that, to enhance European security, it should 
accept new members. There are several important reasons why NATO is 
taking this step.
    Strategically, a new, larger NATO will promote European stability 
and peace by projecting security eastward, and fostering among the 
nations of Central and Eastern Europe a greater willingness to resolve 
disputes peacefully and contribute to maintaining peace.
    Politically, a new, larger NATO will bolster the process of 
democracy building, market reforms and integration throughout Europe.
    Militarily, a new, larger NATO will ensure that the US and its 
allies are better prepared to maintain peace, deal with limited crises, 
and protect our interests against any threats that might arise.
    For example, enlargement will enhance our counter-proliferation 
efforts by increasing the community of nations which coordinate their 
defense and security policies on a regular basis. With the accession of 
new members, prime candidate states will have to subscribe to the 
Alliance's principles on the prevention of proliferation and defense 
efforts to counter NBC weapons and their means of delivery. These 
principles were outlined by Alliance Heads of State and Government at 
the Brussels Summit in January 1994. These states will also join two 
high-level NATO groups aimed at intensifying and expanding NATO's 
political and defense efforts to counter proliferation. The Senior 
Politico-Military Group on Proliferation (SGP) conducts consultations 
aimed at preventing the proliferation of NBC weapons through diplomatic 
means. This group has already built a consensus within NATO aimed at 
thwarting proliferation and illicit transfer. A second group, the 
Senior Defense Group on Proliferation (DGP)--co-chaired by the United 
States--has developed defense policy aimed at improving NATO's defense 
posture against the military risks posed by NBC weapons. Already, the 
DGP has produced the first Alliance intelligence assessment on the 
proliferation and has built a consensus about the countries of greatest 
concern--which includes all of the rogue states--and recognized that 
proliferation has in fact already occurred and is likely to continue to 
occur. The DGP plans to hold consultations with prospective new members 
shortly after the Madrid Summit to emphasize to those countries the 
importance of subscribing to nonproliferation norms, as well as their 
responsibilities with collective defense for protecting against the 
risks posed by NBC weapons.
    As President Clinton has stated, we believe that our goals is to 
finish the mission of building new structures of peace and security 
around the world, to complete the unfinished business of the Cold War, 
and to build an undivided Europe of democracies at peace. Enlargement 
of NATO is a key component of this mission.
                         palestinian authority
    Question. What have been the qualitative benefits of the ESF aid to 
the Palestinian Authority in the past year? Has the aid brought 
positive change for the economy?
    Answer. The U.S. assistance program has brought concrete economic 
and social benefits to the Palestinians. The U.S. has concentrated its 
resources in a number of strategic areas, namely water and wastewater 
resources, democracy and governance, and private sector promotion. It 
is in these three areas that our assistance has brought the greatest 
benefits.
    Thousands of Palestinian residents of the Gaza Strip and the West 
Bank now have enhanced access to drinking water and no longer are 
plagued by the harmful health effects of wastewater improperly treated 
and stored or diverted. These benefits have been especially felt by 
residents of Gaza City, who in the past faced significant environmental 
risks resulting from waste mixing with water which remained in living 
areas due to blocked or non-existent sewer systems. Our financial 
support for the Gaza Wastewater Storm Drain and Treatment System has 
been directly responsible for these benefits.
    A major focus of our assistance program currently and in the near 
future is to improve water and wastewater management in the West Bank. 
During the negotiations which culminated in the Israeli-Palestinian 
Interim Agreement, Israel and the Palestinians explicitly requested 
this assistance, which will also benefit thousands of Palestinian 
residents.
    In the area of democracy and governance, the most concrete benefit 
felt to date by Palestinians from our assistance program was the 
successful elections for the Palestinian Council and its executive head 
in 1996. The U.S. was a major contributor to voter education efforts, 
the production of election materials, and the observation of the 
elections themselves. Since the elections, the U.S. has financed a 
number of programs to improve the capacity of the Palestinian 
Authority--both its Legislative Council and Executive Authority--to 
serve its constituents. These programs have ranged from training for 
and establishment of constituent relations for Legislative Council 
members to doing the same for a functioning committee structure of the 
Legislative Council and training key elements of the Executive 
Authority in administration.
    In the area of private sector promotion, our assistance has been 
directly responsible for increased incomes and employment opportunities 
for thousands of Palestinians. By financing microlending programs, 
apprenticeships, small business support programs, and emergency civil 
works campaigns, the U.S., working with other donors, has helped to 
mitigate a very negative economic climate.
    The Palestinian economy has been subject to a series of exogenous 
shocks which hinder the ability of foreign assistance programs and 
internal Palestinian economic trends and capabilities from having 
greater effect. These external shocks include the significant degree of 
restriction--for security reasons--on the movement of Palestinians and 
Palestinian products between the West Bank and Gaza, between the West 
Bank/Gaza and Israel, and between the West Bank/Gaza and regional 
markets. These restrictions have been in effect to varying degrees 
since 1993. Another external factor preventing foreign assistance 
programs from having their full effect is the impact of violence and 
political uncertainly on the investment climate in the region. Real GDP 
per capita declined by more than 22% between 1992 and the end of 1995.
               eastern caribbean rss security assistance
    Question. East Caribbean Regional Security system. Please provide 
more detail about the $1M increase for the East Caribbean RSS. What 
operations were deferred?
    Answer. The proposed FY98 FMF level for the ``Caribbean Regional 
Fund'' (see CPD pages 358-359) is for $4M, an increase of $2M over the 
FY97 level. (Note: In the text of USDP Slocombe's Statement for the 
Record an increase of ``$1M'' was inadvertently cited instead of 
actually figure ``$2M.'')
    The increase in funding results from the following positive 
developments in cooperative Caribbean regional security: (1) expansion 
of support to Trinidad and Tobago under the very able and constructive 
leadership of Prime Minister Panday who won election in November 1995; 
(2) restoration of assistance to the Dominican Republic under President 
Fernandez's new, vigorous reforming administration which ended over 30 
years of Trujillo-Balaguer one-man rule in 1996; and (3) the inception 
of the Haitian Coast Guard which has the role to interdict drug 
smuggling and illegal migration.
    The reference to operations applies to the seven Eastern Caribbean 
Regional Security System (RSS) countries. In mid-1996, Grenada 
exhausted the FMF funds used to supplement its national funds for Coast 
Guard operations and maintenance. As a result, Grenada had to suspend 
operations until fellow RSS states could realign their funds to help 
Grenada buy enough fuel to resume operations. This shifting of regional 
funds had a spill-over effect on the other six RSS states. Funds 
shifted to Grenada reduced funds available for their interdiction 
efforts. This episode also had a great psychological affect on the RSS 
member states and drew attention to the critical nature of U.S. 
assistance to sustain operations in the future. At stake are their 
individual national securities and the regional collaborative security 
with the U.S. due to shared democratic values and geography as our 
``third border.''
                       nato partnership for peace
    Question. How do events in Albania reveal the shortcomings--if 
any--of the Partnership for Peace initiative? And what approach do you 
believe the Administration should take within the NATO-PFP framework to 
stabilize the situation in Albania?
    Answer. NATO's Partnership for Peace program was designed to bring 
non-NATO European nations into a closer relationship with the Alliance 
without actually joining it. The program's focus has always been on 
assuring political-military cooperation and transparency to encourage 
and deepen confidence and stability among its 27 members. The current 
crisis in Albania falls outside the parameters of a classic NATO 
contingency, since PFP membership conveys no treaty rights or 
reciprocal obligations between the participating member and NATO. NATO, 
of course, is concerned about the welfare of all European states. 
Internal security crises can quickly become large and unmanageable. 
However, in considering the nature of the internal situation in 
Albania, NATO determined that other organizations were better suited to 
deal with the crisis. The crisis in Albania has been referred to the 
United Nations and the Organization of Security and Cooperation in 
Europe (OSCE), which have oversight responsibility for such matters. 
That said, Congress should note that in this crisis to date, the 
civilian government has retained control over its military forces. In 
addition, those military forces have exercised restraint by not firing 
on civilians. Both actions may be ascribed to Albania's exposure to 
western ideals and principles gained as a result of its participation 
in the Partnership for Peace program and other internation with NATO.
    Question. Does the Department of Defense or the State Department 
have any knowledge as to whether any ``rogue'' nations are fomenting 
strife in Albania, particularly by providing weapons transfers to anti-
government groups?
    Answer. Although criminal elements, particularly Mafia related 
groups in the Vlore area assisted in fomenting strife, DOD has no 
information on any outside involvement. Weapons came primarily from 
captured Albanian military warehouses and depots, abandoned by soldiers 
who refused to fire an Albania civilians.
    Question. Now that Albania is in a state of public chaos and the 
government and military rendered powerless in the capital city of 
Tirana, how does the Administration suggest to re-allocate Partnership 
for Peace funds, as well as other forms of designated aid, dedicated to 
this nation?
    Answer. DOD is working closely with Department of State to evaluate 
the on-going crisis in Albania. Due to the present crises, we have put 
a hold on all forms of security assistance for Albania, with the 
exception of International Military Education and Training (which are 
being reviewed on a cases-by-case basis). Peacekeeping operations have 
a high priority now and we are examining, with State, the possibility 
of decreasing most of the $1.6M in FY 97 FMF allocation for PKO 
funding.
    After the Multinational Protection Force, under UN mandate, 
completes its role of providing security for the distribution of 
humanitarian aid, the Albanian military will need appreciable help. 
Assuming fair and open elections which are presently scheduled for 
June, and an Albanian Government that wants to continue its strong 
westward orientation, integration with NATO through Partnership for 
Peace and civilian control of the military, we will want to evaluate 
the state of the relationship and the degree we want to assist. With 
many military depots and warehouses raided, we have already been 
advised by the new Minister of Defense, Shaqir Vukaj, that there are 
sever shortages of food and clothing for the soldiers.
    Question. As more Partnership for Peace nations such as Bulgaria, 
Romania, the Baltic states and even some of the Newly-Independent 
States, make political, economic and military advances, will the 
Administration seek to expand the current Central European Defense Loan 
Program? Do you have any estimates on what it might cost to expand this 
program to fifteen, twenty or even thirty nations?
    Answer. As you know, the current Central Europe Defense Loan 
Program is limited to Poland, Hungary and the Czech Republic. Although 
declared possibly eligible is the first factor, a country's 
confidential risk rating is another factor taken into account in 
deciding whether to offer FMF loans to that country. We highlight that 
a country must meet certain financial criteria, before they are even 
considered eligible for participating in this program. For FMF loans, 
US policy has generally been to extend loans to countries with a ``C-
minus'' or above sovereign risk rating. These ratings are established 
through an interagency country risk assessment process. It is premature 
to speculate about the future of this program at this point. We will 
want to observe a successful track record and evaluate those results 
before recommending any expansion. Obviously no estimate can be 
provided until those results are in.
                                 jordan
    Question. As you know, King Hussein of Jordan will be visiting the 
United States from March 18-20 (N.B., now rescheduled for April 1-3) to 
lobby for additional US military aid to his country, in particular more 
M60 tanks, M113 armored personnel carrier upgrades and air defense 
improvements. What will be the Administration's position regarding King 
Hussein's prospective request?
    Answer. King Hussein did not present DOD with a specific request 
for military assistance during this visit. Rather, he pressed for an 
overall increase in the level of FMF for Jordan, somewhat more 
commensurate with the levels being provided to fellow peace partners 
Israel and Egypt. We are unable to satisfy this request through at 
least FY 98, but are consulting with the Administration on possible 
changes in aid levels in the outyears.
    Due to unexpected savings in the execution of the Congressionally 
sanctioned $100M drawdown of DOD equipment of FY 96, we were able to 
offer Jordan some additional modest amounts of US Army equipment to 
complete the drawdown. This includes 38 M60A3 tanks, 20 UH-1H 
helicopters (non-flyable, but may be repaired by Jordan or used for 
parts). 18 M110 howitzers and other miscellaneous items. This amounts 
to approximately $28M in drawdown authority, which is within the 
original limits of the legislation and does not require any 
supplemental appropriation.
                         humanitarian demining
    Question. I see that the Administration is requesting $15 million 
for demining programs in a handful of nations that urgently need 
assistance in this area. But I would like to know, and I'm being more 
curious than critical, do you have any hard data to support the 
reported success of this program? I'd be interested in learning how 
many mines have been cleared, the reduction in death and amputee rates 
caused by anti-personnel mines, and the acres of arable land returned 
to productive farming? The situation is tragic in these countries and I 
want to know that this program is having a sustainable, positive 
effect.
    Answer. For Fiscal Year 1998, the $15.0 million for demining 
programs that you are referring to is the Foreign Military Finance 
(FMF) program funded through the Department of State (DoS). There is an 
additional $25.0 million in the Department of Defense (DoD) 
humanitarian demining operations (HDO) program and $17.7 million in 
research and development (R&D) efforts. Together, the DoS FMF and DoD 
HDO portions of the program assist the host nation in establishing a 
sustainable indigenous humanitarian demining capability. DoD has 
focused its efforts on: conducting ``train-the-trainer'' programs; 
establishing a proactive mien awareness program; developing a host 
nation demining infrastructure; providing limited demining equipment; 
and conducting research and development to find safer, efficient ways 
to locate, mark, and clear mines. The DoS FMF program is used by host 
nations to purchase additional demining equipment and support.
    The U.S. Humanitarian Demining Program contains a number of 
mechanisms to gauge the effectiveness of the effort. At each step in 
the process of developing and executing a specific country program, a 
number of assessments and evaluations are required. At the core of each 
of these assessments is an evaluation of the host nation's capability 
and willingness to sustain an indigenous program. The first step in 
evaluating a potential program is to examine the proposal in light of 
the U.S. national security and military strategy, policy, legislation, 
ongoing humanitarian demining efforts, and host country needs.
    DoD, in cooperation with DoS, has been examining the issue of 
measuring the effectiveness of humanitarian demining efforts. Sources 
of feedback include: theater assessments by the regional Commander-in-
Chief (CINC); Measures Of Effectiveness data from DoS; survey data from 
non-government organizations and private volunteer organizations; and 
in-country assessments by an Interagency and CINC staff team.
    Quantitative and statistical measures of effectiveness (kilometers 
of roads cleared, trainers trained, acres of land cleared, mines 
removed, reduction in casualties, etc.) provide one perspective on 
program effectiveness. In those Cambodian provinces where the United 
States has been most active, the death rate is now half what it was 
three years ago. In Namibia, the casualty rate has dropped by 90% and 
in Mazambique, over 20,000 square kilometers of land an dove 6,000 
kilometers of roads have been cleared. Finally, in Ethiopia, over 
35,000 mines/unexploded ordnance have been destroyed.
    While the statistical achievements of the various programs show 
steady progress on a difficult and dangerous task, the CINC's 
assessments reflect additional benefits of the demining program. The 
CINCs use the demining program as part of their strategy for military 
presence and, as such, they are able to obtain access and influence in 
the country and develop important military-to-military contacts and 
relationships.
    Question. I would also like to formally request a comprehensive 
briefing by the Department of Defense on the development of its 
demining program.
    Answer. It will be our pleasure to provide you with a comprehensive 
briefing on the DoD Humanitarian Demining Program. We are flexible to 
your schedule and look forward to briefing you in the near future.

            Questions for the Record Submitted by Ms. Pelosi

                       foreign military financing
    Question. This year's budget request for Turkey contains $50 
million in ESF and another $175 million in military loans. Over the 
years Congress has debated issues on Turkey primarily in the context of 
Cyprus, human rights and their relationship with Armenia. In that 
context the Administration has continued to provide significant levels 
of military assistance through both loans and sales. What has been done 
recently in our policy discussions to reduce their appetite for more 
arms, particularly in light of the fact that their credit worthiness 
has been downgraded by the US to a very low level based on the state of 
their economy?
    Answer. Our unique relationship with the Turkish military has 
allowed us to exert positive influence in areas that remain of great 
sensitivity to the Turkish public. On Cyprus, despite the absence of a 
settlement to date, the key role the US will continue to play in any 
effort to bring both sides to the negotiating table is made possible by 
our excellent mil-to-mil relations. Concerning the PKK, while we fully 
support Turkey's right to combat terrorist activity using military 
force, we have consistently stressed the importance of respecting human 
rights and avoiding civilian casualties. The fact that the Turkish 
military has adjusted its rules of engagement accordingly should not be 
discounted. Problems still exist, however--continued USG ability to 
exert positive influence over the Turks to ameliorate conditions in the 
southeast will depend in large part upon our level of access to the 
Turkish military. FMF and other types of security assistance help 
facilitate our efforts in this regard.
    Question. What conclusions have been reached on the report on the 
end use of US supplied equipment in Turkey, and what level of effort 
did the US embassy put into it this year?
    Answer. I think you will find the State Department's 1996 Human 
Rights Report that the majority of the charges of abuse are not leveled 
against the military, but rather against the police over allegations of 
torture of detainees. The use of US-origin military equipment in 
committing atrocities against innocent civilians is not the primary 
issue, since the allegations of torture and murder do not usually 
involve the use of military equipment. Regarding village burnings, US-
origin vehicles/aircraft have probably been employed in those cases in 
which the military, not the PKK, burned villages suspected of harboring 
terrorists.
    Question. Update us on the confrontation between Turkish military 
and Islamist Prime Minister Erbakan's governing Refah party. My 
understanding is that the Turkish cabinet is to meet today to consider 
a set of pro secular measures inspired by the military to stem the tide 
of Islamist control of various aspects of society. What are your 
expectations on the outcome of this meeting? What does this clash 
portend for future progress in Turkey?
    Answer. Turkey's political future is complicated and difficult to 
predict. Ataturk, the founder of modern turkey, put great emphasis on 
the importance of maintaining a secular government in order to create a 
Turkish democracy, a principle that the Turkish military is 
constitutionally-mandated and determined to uphold. The fact that 
Erbakan's Refah party rose to power and has been able to govern Turkey 
for nine months, despite its openly Islamic bent, is a testament to the 
Turkish military's commitment to support Turkish democracy. That said, 
if the Refah party attempts to implement changes that run counter to 
Ataturk's secular principles, the Turkish military is likely to rise to 
the defense of secularism, the heart of Turkish democracy. To date, 
problems involving pro-Islamic steps taken by the Refah party have been 
worked out using established government procedures--we hope that all 
sides maintain faith in and willingness to turn to existing 
institutions to resolve differences.
    Question. On the issue of cash flow financing, do you envision any 
expansion of this practice beyond the current situation with Israel and 
Egypt being the only major countries with whom this practice is 
allowed?
    Answer. Currently, we are conducting cash flow financed security 
assistance programs with Israel, Egypt and Jordan. We have no plans for 
extending the practice to additional countries at this time.
    Question. Do you intend to limit this practice at any point in the 
future with Israel or Egypt so that their entire FMS program is not 
committed in advance?
    Answer. We have no plans to eliminate cash flow financing for 
Israel and Egypt absent formal direction to do so. We have worked with 
Egypt to reduce their outstanding cash flow value (down from a fiscal 
year 1991 high of $5.0 billion) and will continue to ensure it stays at 
a level that is consistent with future FMF levels.
    Question. Are the caveats in specific FMS cases with these 
countries regarding payment in future years being contingent upon 
appropriation enforceable?
    Answer. Cash flow customers are expected to cover the full cost or 
balance of the FMS contract if U.S. appropriations are not approved. 
All FMS cases include the following note:
    ``FOREIGN MILITARY FINANCING--If the terms of sale specify payment 
under a Foreign Military Financing (FMF) agreement between the 
purchaser and DOD, purchaser will pay to the U.S. Government, on a 
dependable undertaking basis, such costs as may be in excess of the 
amount funded by the FMF agreement.''
    Question. Last year Congress in the Armed Services bill did 
something which the Appropriations Committee had consistently refused 
to do, which was to provide a mechanism to waive research and 
development costs normally charged to customers as part of a foreign 
weapons sale. (Typically the price a foreign country pays for a weapons 
system includes an amount associated with the R&D costs of developing 
that weapon). The waiver could only be done if the arms sale is likely 
to be lost as a result of the R&D added amount. In order to offset the 
several hundred million in lost revenue from this action Congress (in a 
provision proposed by then Sen. Cohen) authorized the sale of gems, 
precious metals and other materials currently held in the ``national 
defense stockpile.'' My question is has this authority been used yet, 
and do you anticipate actual sale of assets from the national defense 
stockpile to promote arms sales by private companies.
    Answer. Three determinations have been made to date that we are 
likely to lose a sale. One waiver was completed March 5, 1997. Two 
waivers are currently in coordination. In regards to your question on 
stockpile sales, the stockpile sales are necessary to offset the total 
amount of revenue that was estimated to be lost through the year 2005, 
and are not tied to individual waivers of R&D recoupment charges. The 
law requires sales from the stockpile totaling $440,000,000 during the 
nine fiscal-year period ending September 30, 2005, of which 
$110,000,000 worth must be disposed of by the end of fiscal year 2001.
                     guatemalan military downsizing
    Question. Have we any specific expectations on the downsizing of 
the Guatemalan army in the wake of the Peace Accords, and in context of 
the possible resumption of IMET?
    Answer. The Peace Accords stipulate that the Guatemalan military 
should be reduced by 33% in 1997, using their organizational table as a 
basis. According to Minister of Defense Balconi, the military's goal is 
to downsize from a starting point of approximately 50,000 to a total 
force of about 33,000 by the end of the year. Rather than discharging 
large numbers of military personnel suddenly, the military plans to 
allow the process to occur naturally, by simply not replacing those who 
complete their service. The process has been eased further by the fact 
that many of those slots had actually remained vacant for some time.

            Questions for the Record Submitted by Mr. Yates

                                 egypt
    Question. What is the security imperative that requires the US to 
continue to provide $1.3 billion annually to Egypt?
    Answer. The Persian Gulf is the source of nearly two-thirds of the 
worlds' proven oil reserves upon which our own economy and those of the 
entire industrial world depends so heavily. The United States and our 
industrial allies can only be assured of reliable access to reasonably 
priced Gulf oil if the Middle East is at peace. Egypt's 60 million-
strong population--more than twice the size of the next largest Arab 
country--and its strategic location at the hinge between Africa and the 
Middle East, makes a stable, secure Egypt an indispensable requisite 
for peace throughout the region. While carefully preserving Israel's 
qualitative military edge, the $1.3 billion in annual FMF grants help 
ensure that Cairo has the national security necessary to take risks for 
peace in the face of threats and condemnation from countries such as 
Iran and Iraq. As a result, Egypt has been an unwavering US ally and 
proponent of peace for the last eighteen years.
    Question. What external threats does Egypt face?
    Answer. Egypt is at the center of a dangerous, volatile region. As 
one of our primary coalition allies during the Gulf War, Egypt is still 
threatened by Iraq's disproportionately large conventional forces and 
weapons of mass destruction. Egypt's secular regime is also a primary 
target of Iran's aggressive program of regional subversion and 
terrorism and expanding conventional forces. The possession of 
ballistic missiles and chemical warheads by unstable neighboring states 
such as Libya, Syria, Iraq and Iran also provides a serious security 
concern for Egypt.
    Question. Do you believe the United States FMF program for Egypt is 
commensurate with the limited contribution Egypt would make to a future 
Gulf contingency?
    Answer. Egypt's 35,000 troops organized into a two division corps 
was the largest Arab expeditionary contribution to the US-led coalition 
against Iraq. The Egyptian force was a valuable partner during the Gulf 
War, but its ability to effectively operate alongside US and Western-
equipped Gulf forces was constrained by its ex-Soviet equipment and 
military doctrine. The US FMF program is successfully creating a more 
modern, Western-oriented nucleus within the Egyptian Armed Forces. In 
the event of a future Gulf contingency, this upgraded Egyptian force 
will be much more capable of operationally effective cooperation with 
US and Gulf nation forces.
                                 turkey
    Question. Do you still believe that linking assistance to Greece 
and Turkey enhances our ability to influence the situation in the 
Aegean and Cyprus? Wouldn't it be logical to treat these two as 
individual requests and provide assistance based on the assessed need 
of each nation? How has linking assistance advanced a peaceful solution 
to the Cyprus problem?
    Answer. It would certainly be logical to provide assistance to 
Turkey and Greece based on individual need, but given the superior 
state of the Greek economy over the Turkish economy, Turkey would be 
more likely to receive assistance based on need. This would be likely 
to increase Greek animosity towards Turkey and impede, rather than 
further, our efforts to reduce tensions in the Aegean and on Cyprus. 
Continued security assistance to both Greece and Turkey has helped the 
U.S. maintain strong mil-to-mil relations with both of these NATO 
allies, and has put us in a unique position to defuse escalating 
tensions in times of crisis.
    The Administration has set the reduction of tensions in the Aegean 
and a settlement on Cyprus as important regional objectives. We have 
rejected the two extreme options of placing both countries under an 
arms embargo and of selling to either country whatever it can afford. 
We prefer to proceed on a case-by-case basis with each request for arms 
transfers, seeking to establish need for the system and the impact its 
introduction could have in the region. We are beginning to detect signs 
that both countries are seeking to defuse tensions and are open to 
dialogue with each other. It is our purpose to facilitate this trend, 
and the selective approval of arms transfers is one approach to this 
end.
    Question. With every year our budget allocation has been decreased 
(foreign aid has been cut by approximately $6 billion since 1985) 
forcing us to cut and end valuable development assistance programs. 
Last year this committee increased IMET funding by approximately $5 
million. For FY '98 the Administration is requesting another $5 million 
increase on top of the increase from last year. My question is how can 
the Administration justify another increase in IMET funding over 
development assistance programs? IMET has a highly questionable track 
record in Latin America and Asia, lacking proven results and in the 
past often training foreign military and police involved in serious 
human rights abuses. How do you justify this increase? Is it an 
appropriate tradeoff to development assistance? Wouldn't logic tell you 
that if you increase development assistance and thereby provide a 
better standard of living, such a commitment would better address the 
root causes of domestic unrest therefore reducing the possibility of 
civilian discord that we are training the IMET candidates to handle in 
a professional manner?
    Answer. Civilian discord resulting from economic deprivation is 
only one of a number of factors that have potential for disrupting 
international peace and stability and threatening the security and 
foreign policy interests of the United States. Included among these 
other factors are racial, religious and ethnic hostility and 
ideological antagonism. In many countries, the military is the 
institution with the de facto power to determine whether aggressive 
impulses triggered by the above-mentioned factors will be contained or 
will be permitted to express themselves in external aggression or 
internal destabilization. The aim of the IMET program is to prevent the 
two latter outcomes by focusing on the troubled country's military 
forces to ensure that, in a crisis, they will act neither as 
instruments of external aggression nor internal repression but rather 
will uphold the principles of democracy by adhering to the rule of law 
and respecting human rights.
    Question. In the past we have had many discussions with regard to 
the human rights problem in Indonesia. This committee restricted IMET 
to Indonesia with the exception of E-IMET. It is my understanding that 
Indonesia can purchase IMET training with their own funds. This seems 
to me to be an overt action to circumvent the will of this committee 
and I am disappointed with the Administration for allowing this 
loophole to be exploited. Please know that I understand the goals of 
IMET and E-IMET and I have also been a member of this subcommittee 
since it was the Marshall Plan Subcommittee, so I know that we will 
sell our military training to anyone who can afford it. With this in 
mind, my question is not how Indonesia can purchase IMET training, but 
why are we giving IMET funds to a nation that can clearly afford to pay 
its own way?
    Answer. By law, the only grant training courses that can be offered 
to Indonesia are those certified as Expanded IMET and which address 
such issues as defense resource management, improved military justice 
systems, civil-military relations (including the proper role of a 
military in a democracy) and the importance of respect for human 
rights. Offering such courses on a cost-free basis greatly increases 
the chances that Indonesia will choose to participate in them. The 
resulting exposure to democratic values should enhance Indonesia's 
appreciation for the importance the United States attaches to such 
values and engender a deeper understanding among members of the 
Indonesian military of the wisdom of adopting them. Removing the 
restrictions on funding of traditional IMET courses would broaden the 
scope of the training environment, thereby increasing the opportunities 
available to the United States for maintaining a strong and influential 
cooperative relationship with Indonesia's armed forces. It also would 
enhance the ``forward presence'' necessary to adequately safeguard U.S. 
national security and foreign policy interests.
    Question. I understand from staff that the vetting system for IMET 
candidates in Latin American countries is ``Ad Hoc'' at best and that 
we need to address this during the FY'98 appropriations bill. Yet, if I 
understood Mr. McNamara correctly, he said that the IMET candidate 
vetting in Indonesia is standard and a consistent structure. If this is 
true, please explain why there is an ``ad hoc'' (vetting) system for 
Latin America and one universal system for Indonesia and the rest of 
the world? Why isn't it consistent for all candidates for IMET training 
and if it is, please supply for the committee the procedures used for 
vetting candidates for IMET training?
    Answer. The betting system used for Latin American IMET students is 
not ad hoc but rather is purposefully tailored to maximize the 
effectiveness of the procedure by taking into account the different 
conditions (structures of government, patterns of relationships, etc.) 
existing in various Latin American countries. The same tailored vetting 
procedure applies to the vetting of IMET candidates from other regions 
of the world. Before a potential candidate is cleared to receive IMET 
training, a variety of checks are run to determine whether the 
individual in question has a criminal record, has abused the rights of 
others, or has engaged in the use or sale of drugs. These checks are 
run by appropriate elements of the host country and the U.S. country 
team. In carrying out this process, every reasonable effort is made to 
screen out undesirable candidates.
    In general, the process for vetting IMET candidates in Latin 
America is as follows:
    In most cases, host governments conduct the initial screening of 
potential candidates. This involves investigating a candidate's 
background and searching for any signs of previous illegal activities. 
If a candidate has committed or is under investigation for committing 
human rights abuses, he or she is automatically removed from 
consideration.
    Once a host government has developed a list of screened candidates, 
it is forwarded to the U.S. Embassy. All appropriate mission offices 
and agencies, including the political, narcotics and consular sections, 
the regional security officer, the United States Information Service, 
and, where present, members from the Military Group, Defense Attache, 
Drug Enforcement Agency, Federal Bureau of Investigation, and 
International Criminal Investigative Training Assistance Program 
(ICITAP) conduct a thorough background check against their own records.
    Embassies and governments throughout the region have continued to 
make significant progress in improving the selection process of 
candidates throughout the last decade.
    Question. How much of the money is sent to the U.S. Army School of 
the Americas? How much IMET funds are used for tuition at the School of 
the Americas?
    Answer. The total FY96 budget for the School of the Americas was 
$3,943,500, broken down as follows:

$2,701,000 in Army OMA funds
$781,400 in Security Assistance funding ($640,500 IMET and $140,900 
            FMS)
$433,300 in International Narcotics and Law Enforcement funds
$27,800 in JCS funds for exercise support
                                 turkey
    Question. It has been reported and there seems to be evidence that 
suggests that United States weapons have been used by Turkish troops to 
commit atrocities. Do you support end-use monitoring of United States 
weapons transfers to Turkey? What is the Administration's position on 
the situation in southeastern Turkey? How would you implement end-use 
monitoring of this equipment? What position will the Administration 
take should it be determined that excess defense equipment is used in 
human rights abuses?
    Answer. The Administration monitors carefully the situation in 
southeastern Turkey, specifically the allegations of atrocities 
committed against innocent Kurds. Exact reporting on specific cases has 
not been possible in most cases, since alleged incidents occur in 
remote and dangerous areas inaccessible to Americans. End-use 
monitoring of US weaponry is impractical, but we have repeatedly warned 
the TGS that the US weapons may not be used against Kurdish civilians. 
On the other hand, we have recognized Turkey's legitimate right to deal 
with Kurdish terrorists who, as part of their campaign against Turkish 
authority, have targeted innocent civilians, both Kurds and Turks.
                                 jordan
    Question. The Jordanian military is still short of supplies. Do you 
believe that security assistance to Jordan is adequate relative to the 
potential threats from Syria and Iraq? The United States has provided 
Jordan with 16 F-16 fighters and a variety of other excess defense 
equipment. What are Jordan's additional defense needs and how do we 
plan to address them?
    Answer. The Jordanian military is having considerable difficulty in 
sustaining its force for lack of funding. Jordan does not have enough 
resources, whether from national funds or from foreign assistance, to 
sustain its military in its current configuration. Jordan has indicated 
that it wants to pursue a downsizing in its military and re-orient it 
more towards a ``light and mobile'' force structure with enhanced 
special operations capability. We support this initiative and believe 
that it is appropriate given the changing threats which Jordan will 
face. This will also decrease Jordan's reliance, in the long term, on 
foreign military aid. However, this transition requires additional 
funding in the short term and Jordan's intent would be to offset force 
reductions with increases in equipment quality. Jordan's highest 
defense priorities are sustainment of the current force, modest 
modernization and enhancing its special operations forces, including 
border security capabilities.
    We are examining ways to support this reorientation within existing 
budget constraints. The recent Congressionally sanctioned $100M 
drawdown of DoD equipment was heavily oriented on spare parts for 
existing systems to mitigate this problem. Additionally, we have placed 
Jordan, which is now a Major Non-NATO Ally, in a high priority to 
receive Excess Defense Articles (EDA). In the last year and one-half, 
we have made at least seven offers of EDA equipment for Jordan, some of 
which may be used for spare parts.





                           W I T N E S S E S

                              ----------                              
                                                                   Page
Albright, Hon. M.K...............................................     1
McNamara, T.E....................................................   199
Rubin, Hon. Robert...............................................   121
Slocombe, W.B....................................................   199






                               I N D E X

                              ----------                              

     Secretary of the State Department (Hon. Madeleine K. Albright)

                                                                   Page
Africa...........................................................77, 82
Albania..........................................................    56
Armenia..........................................................    56
Azerbaijan.......................................................57, 66
Bosnia...........................................................74, 90
Budget Request...................................................    25
Bulgaria.........................................................38, 66
Bureaucracy......................................................    36
Burma............................................................57, 89
Cambodia.........................................................    58
Child Soldiers...................................................    91
Child Survival...................................................    69
Cocaine Eradication and Interdiction.............................    78
Counternarcotics Funding........................................96, 114
Cyprus...................................................31, 46, 59, 67
Deficit Reduction................................................    30
Demining.........................................................    62
Development Assistance...........................................    96
Earmarks.........................................................    26
East Timor.......................................................    39
Family Planning..................................................35, 37
Foreign Aid Budget...............................................    80
Former Yugoslavia................................................    90
Global AIDS......................................................    87
Global Change Funding............................................    52
Haiti...................................................30, 36, 41, 112
Hong Kong........................................................    30
Human Rights.....................................................   101
IDA Replenishment................................................    69
Impact of Country Specific Earmarks..............................   111
Indonesia..........................................39, 66, 90, 103, 108
International Criminal Court.....................................    91
International Narcotics..........................................    54
International Criminal Justice...................................    51
International Environment Issues.................................    63
International Family Planning....................................    63
Iran............................................................72, 107
Israel..........................................................59, 106
Jerusalem........................................................   107
Jewish Agency for Russia.........................................    92
KEDO.............................................................44, 68
Korean Peninsula.................................................    40
Latin America..........................................43, 49, 110, 115
Lebanon and Syria................................................   107
Middle East.............................33, 37, 41, 46, 78, 80, 83, 104
Mr. Callahan's Opening Statement.................................     3
Multilateral Agreement on Investment.............................   116
Nagorno-Karabakh.................................................    65
New Independent States...................................27, 76, 85, 86
North Korea.....................................................70, 113
Partnership for Peace............................................    51
Persecution of Christians........................................    39
PLO Charter......................................................    81
Population......................................................84, 104
Reform...........................................................47, 79
Refugee Resettlement Program.....................................   106
Romania..........................................................50, 67
Russia.......................................28, 42, 68, 71, 73, 87, 93
Secretary Albright's Opening Statement...........................     5
Somalia..........................................................    35
Source of American Power and Prestige............................    73
South Africa.....................................................    81
South Balkan Development Initiative..............................    49
Sudan...........................................................62, 107
Swiss Banks and Holocaust Fund...................................    94
Syria...........................................................60, 104
Terrorist Organizations..........................................    38
Time Limits for U.S. Foreign Aid.................................    73
Torture Fund.....................................................   104
United Nations.........................................83, 84, 110, 112
UNESCO...........................................................    44
US Taxpayers and Foreign Aid.....................................   111
USAID Contracts with American Firms..............................    78
Victims of Torture...............................................   103

            Secretary of the Treasury (Hon. Robert E. Rubin)

Africa Development Fund..........................................   155
Assets Seized by the Nazis.......................................   195
Bosnia/EBRD......................................................   182
Budget.........................................................143, 151
Bully Pulpit.....................................................   158
Chairman's Opening Statement.....................................   121
Child Labor......................................................   182
China and Hong Kong..............................................   183
Corporate Welfare................................................   195
Corruption in Russia.............................................   157
Country Assistance Strategy......................................   198
Creative Means of Financing Concessional Lending at the World 
  Bank...........................................................   196
Deficit Reduction................................................   146
Economic Impact..................................................   177
Encouraging Local and Community Outreach by International Lenders   196
Environment......................................................   184
Export Financing.................................................   176
Foreign Aid Spending.............................................   154
Foreign Policy Funding...........................................   179
Fund for Special Operations...............................148, 162, 197
Funding Request..................................................   170
Global AIDS......................................................   183
Global Environment Facility......................................   167
Graduate Countries...............................................   181
Haiti............................................................   160
Hong Kong......................................................149, 166
Human Rights.....................................................   161
IDA..................................................145, 164, 169, 173
IFC.......................................................150, 184, 198
Inter-American Development Bank (IDB)............................   188
International Development Association.....................173, 175, 194
International Monetary Fund......................................   176
Latin America....................................................   165
Micro Credit Lending.............................................   156
Middle East Development Bank..............................156, 165, 189
Ms. Pelosi's Opening Statement...................................   128
Multilateral and Bilateral Cooperation...........................   167
Multilateral Development Banks...................................   172
New Arrangement to Borrow......................................150, 182
North American Development Bank..................................   162
Prison Labor.....................................................   183
Private Sector Development.....................................178, 180
Reform Efforts............................................157, 178, 180
Restitution to Survivors of the Former Nazi Regime...............   152
Role of Multilateral Development Banks...........................   187
Self Sustaining Institutions.....................................   181
Social Impact Statements.........................................   168
Strategic Compact..............................................168, 198
Sudan............................................................   143
Swiss Banks and Holocaust Fund...................................   186
Tax Benefits.....................................................   146
Technical Assistance to Russia and the NIS.......................   197
Terrorism........................................................   194
US International Leadership....................................179, 196
Worker's Rights..................................................   148
World Bank.................................175, 177, 185, 191, 192, 193

                          Security Assistance

Thomas E. McNamara, Assistant Secretary of State for Political-Military 
                                Affairs

        Walter B. Slocombe, Undersecretary of Defense for Policy

Administration's Request.........................................   203
African Crisis Response Force....................................   274
Albania..........................................................   288
150 Budget.......................................................   253
Cambodia Humanitarian Demining...................................   304
Chairman Callahan's Opening Statement............................   199
Chemical Weapons.................................................   244
China..........................................................246, 291
Colombia.........................................................   295
Counter-Narcotics Human Rights Provision.........................   300
Demining in Cambodia.............................................   280
East Caribbean Regional Security System........................286, 308
Egypt.....................................................282, 305, 313
Excess Defense Articles..........................................   298
Expansion of NATO................................................   283
FMF: Egypt and Israel............................................   296
Foreign Military Financing.....................................303, 311
Guatemala.................................................275, 294, 312
Haiti............................................................   254
Humanitarian Demining............................................   310
IMET...........................................................248, 255
Indonesia........................................................   294
International Counter-Narcotics..................................   279
Israel...........................................................   256
Jordan..........................................277, 282, 287, 310, 315
KEDO......................................................239, 275, 285
Land Mines.......................................................   247
Middle East..........................................252, 256, 284, 297
Middle East Bank.................................................   203
Morocco..........................................................   276
Mr. McNamara's Opening Statement.................................   205
Mr. McNamara's Written Statement.................................   209
Mr. Slocombe's Opening Statement.................................   229
Mr. Slocombe's Written Statement.................................   232
NATO..................................252, 287, 288, 302, 304, 307, 309
Nuclear Deterrence...............................................   245
Palestinian Authority..........................................286, 308
Peacekeeping.....................................................   253
Proliferation....................................................   281
Public Perception of Foreign Aid.................................   203
Regional Airspace Initiative...................................287, 306
Turkey..........................................277, 289, 293, 313, 315