- 2000 FOREIGN POLICY OVERVIEW AND THE PRESIDENT'S FISCAL YEAR 2001 FOREIGN AFFAIRS BUDGET REQUEST

[Senate Hearing 106-599]
[From the U.S. Government Publishing Office]

S. Hrg. 106-599

2000 FOREIGN POLICY OVERVIEW AND THE
PRESIDENT'S FISCAL YEAR 2001 FOREIGN
AFFAIRS BUDGET REQUEST

=======================================================================

HEARINGS

BEFORE THE

SUBCOMMITTEE ON AFRICAN AFFAIRS

AND

SUBCOMMITTEE ON WESTERN HEMISPHERE, PEACE CORPS, NARCOTICS AND
TERRORISM

AND THE

COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

__________

FEBRUARY 8, 9, 10, 24, 25, 29, MARCH 8 and 23, 2000

__________

Printed for the use of the Committee on Foreign Relations

Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate

__________

U.S. GOVERNMENT PRINTING OFFICE
68-628 WASHINGTON : 2000

COMMITTEE ON FOREIGN RELATIONS

JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska PAUL S. SARBANES, Maryland
GORDON H. SMITH, Oregon CHRISTOPHER J. DODD, Connecticut
ROD GRAMS, Minnesota JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas RUSSELL D. FEINGOLD, Wisconsin
CRAIG THOMAS, Wyoming PAUL D. WELLSTONE, Minnesota
JOHN ASHCROFT, Missouri BARBARA BOXER, California
BILL FRIST, Tennessee ROBERT G. TORRICELLI, New Jersey
LINCOLN D. CHAFEE, Rhode Island
Stephen E. Biegun, Staff Director
Edwin K. Hall, Minority Staff Director

------

SUBCOMMITTEE ON AFRICAN AFFAIRS

BILL FRIST, Tennessee, Chairman
ROD GRAMS, Minnesota RUSSELL D. FEINGOLD, Wisconsin
SAM BROWNBACK, Kansas PAUL S. SARBANES, Maryland

------

SUBCOMMITTEE ON WESTERN HEMISPHERE,
PEACE CORPS, NARCOTICS AND TERRORISM

LINCOLN D. CHAFEE, Rhode Island, Chairman
JESSE HELMS, North Carolina CHRISTOPHER J. DODD, Connecticut
RICHARD G. LUGAR, Indiana BARBARA BOXER, California
JOHN ASHCROFT, Missouri ROBERT G. TORRICELLI, New Jersey

(ii)

C O N T E N T S

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February 8, 2000
2000 Foreign Policy Overview and the President's Fiscal Year 2001
Foreign Affairs Budget Request

Page

Albright, Hon. Madeleine K., Secretary of State, Department of
State.......................................................... 7
Prepared statement........................................... 12
Clarification of responses given by Secretary Albright during
the hearing to questions posed by Senator Grams............ 36
Responses to additional questions submitted by Senator Helms. 58
Responses to additional questions submitted by Senator Lugar. 96
Responses to additional questions submitted by Senator
Feingold................................................... 98
Ashcroft, Hon. John, U.S. Senator from Missouri, press release
entitled ``UN Biosafety Procotol,'' Feb. 4, 2000............... 49
Article entitled ``Caution Needed,'' from the Economist, Feb.
5, 2000, submitted by Senator Ashcroft..................... 48
Feingold, Hon. Russell D., U.S. Senator from Wisconsin, prepared
statement...................................................... 44
Helms, Hon. Jesse, U.S. Senator from North Carolina, prepared
statement...................................................... 3

February 9, 2000
A Review of U.S. Foreign Policy Priorities

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, prepared
statement...................................................... 102
Perry, Hon. William J., Berberian professor and senior fellow,
Institute for International Studies, Stanford University; and
former Secretary of Defense, Stanford, CA...................... 121
Woolsey, Hon. R. James, partner, Shea & Gardner, and former
Director of Central Intelligence Agency, Washington, DC........ 114
Prepared statement........................................... 118
Responses to additional questions submitted by Senator Helms. 142
Zoellick, Hon. Robert B., former Under Secretary of State,
Washington, DC................................................. 103
Prepared statement........................................... 105
``A Republican Foreign Policy,'' article from Foreign
Affairs, January/February 2000............................. 107

February 10, 2000
U.S. Agency for International Development

Anderson, Hon. J. Brady, Administrator, U.S. Agency for
International Development, Washington, DC...................... 147
Prepared statement........................................... 149
Responses to additional questions submitted by Senator Helms. 177
Responses to additional questions submitted by Senator Lugar. 178
Responses to additional questions submitted by Senator Biden. 179
``Africa and AIDS: Focus on the Missions,'' article by Rev.
Franklin Graham, from the News & Observer, Raleigh, NC, Feb. 6,
2000........................................................... 166

February 24, 2000
The AIDS Crisis in Africa

AIDS Vaccine Advocacy Coalition, prepared statement.............. 264
Bale, Dr. Harvey E., Jr., director-general, International
Federation of Pharmaceutical Manufacturers Association, Geneva,
Switzerland.................................................... 228
Prepared statement........................................... 231
Responses to additional questions submitted by Senator Helms. 259
Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, prepared
statement...................................................... 217
Bill & Melinda Gates Foundation, statement on Senator Kerry's
``Vaccines for the New Millennium Act,'' Feb. 24, 2000......... 199
Boxer, Hon. Barbara, U.S. Senator from California................ 190
Prepared statement........................................... 192
Consumer Project on Technology, prepared statement............... 264
D'Agostino, Father Angelo, Nyumbani Orphanage, Nairobi, Kenya.... 252
Durbin, Hon. Richard J., U.S. Senator from Illinois.............. 194
Feingold, Hon. Russell D., U.S. Senator from Wisconsin........... 189
Frist, Hon. Bill, U.S. Senator from Tennessee, news release
entitled ``Frist Warns AIDS Epidemic to Become Biggest Foreign
Policy Challenge in Africa,'' Feb. 24, 2000.................... 200
Graham, Rev. Franklin, president, Samaritan's Purse, Boone, NC... 248
Prepared statement........................................... 250
Kerry, Hon. John F., U.S. Senator from Massachusetts............. 185
Press release entitled ``Kerry Announces Comprehensive
Vaccine Plan,'' Feb. 24, 2000.............................. 189
Lurie, Dr. Peter, deputy director, Public Citizen's Health
Research Group, Washington, DC................................. 240
Nelson, Benjamin F., Director, International Relations and Trade
Issues, National Security and International Affairs Division,
U.S. General Accounting Office, Washington, DC, prepared
statement...................................................... 275
Perriens, J., M.D., prepared statement delivered at the Paris
1999 Conference on Community and Home Care for People With HIV
Infection...................................................... 272
Sachs, Dr. Jeffrey, director, Institute for International
Development, Harvard University, Cambridge, MA................. 224
Responses to additional questions submitted by Senator Helms. 259
Satcher, Dr. David, Surgeon General of the United States......... 201
Prepared statement........................................... 205
Responses to additional questions submitted by Senator Helms. 256
Smith, Hon. Gordon, U.S. Senator from Oregon..................... 196
Prepared statement........................................... 197
Thurman, Sandra, Director, Office of National AIDS Policy,
Washington, DC................................................. 208
Prepared statement........................................... 212
Varmus, Harold, M.D., Director, National Institutes of Health,
letter to Robert Weissman, Essential Action.................... 270

February 25, 2000
Proposed Emergency Antidrug Assistance to Colombia

Beers, Hon. R. Rand, Assistant Secretary of State for
International Narcotics and Law Enforcement Affairs, Department
of State....................................................... 285
Prepared statement........................................... 288
Responses to additional questions submitted by Senator Helms. 331
Responses to additional questions submitted by Senator Biden. 313
Ledwith, William E., Chief of International Operations, Drug
Enforcement Administration, Washington, DC..................... 296
Prepared statement........................................... 299
Sheridan, Hon. Brian E., Assistant Secretary of Defense, Special
Operations and Low-Intensity Conflict, Department of Defense... 292
Prepared statement........................................... 294
Responses to additional questions submitted by Senator Biden. 336
Skol, Hon. Michael, Skol & Associates, Washington, DC............ 315
Prepared statement........................................... 319
Responses to additional questions submitted by Senator Helms. 334
Vivanco, Jose Miguel, executive director, Americas Division,
Human Rights Watch, Washington, DC............................. 321
Prepared statement........................................... 323
Letter to Senator Trent Lott, dated Feb. 24, 2000............ 325

February 29, 2000
The Future of the International Monetary Fund and International
Financial Institutions

Page

Feingold, Hon. Russell D., U.S. Senator from Wisconsin, prepared
statement...................................................... 376
Helms, Hon. Jesse, U.S. Senator from North Carolina, opening
statement...................................................... 344
Shultz, Hon. George P., former Secretary of State and former
Secretary of the Treasury...................................... 376
Summers, Hon. Lawrence H., Secretary of the Treasury, Washington,
DC............................................................. 347
Prepared statement........................................... 352
Responses to additional questions submitted by Senator Helms. 368
Responses to additional questions submitted by Senator
Feingold................................................... 371

March 8, 2000
Administration of Foreign Affairs Budget for Fiscal Year 2001

Kennedy, Hon. Patrick F., Assistant Secretary of State for
Administration, Department of State............................ 390
Prepared statement........................................... 396
Responses to additional questions submitted by Senator Biden. 420
Helms, Hon. Jesse, Chairman, Committee on Foreign Relations,
letter to Hon. Pete V. Domenici, Chairman, Committee on the
Budget, concerning the President's budget request for the 150
account........................................................ 434
Nelson, Benjamin F., Director, International Relations and Trade
Issues, National Security and International Affairs Division,
U.S. General Accounting Office, Washington, DC................. 422
Prepared statement........................................... 425
``12 Agencies Get `Clean' Audits; Senator Thompson `Deeply
Disappointed' Only Half Meet Goal,'' article from the
Washington Post, Mar. 6, 2000, submitted by Senator Grams...... 405

March 23, 2000
Business Meeting to Mark Up the Technical Assistance, Trade Promotion
and Anti-Corruption Act for Fiscal Year 2001

Ashcroft, Hon. John, U.S. Senator from Missouri, letters received
from:
Andrew Young, GoodWorks International........................ 452
Roger N. Beachy, president, Donald Danforth Plant Science
Center..................................................... 453
L. Val Giddings, vice president for Food & Agriculture, BIO.. 454
Gorton, Hon. Slade, U.S. Senator from Washington, letter to Hon.
Jesse Helms, Chairman, Foreign Relations Committee............. 480
Helms, Hon. Jesse, U.S. Senator from North Carolina, opening
statement...................................................... 439
Prepared statements on the Ashcroft amendment................ 457
Roth, Hon. William V., Jr., Chairman, Committee on Finance,
letter to Hon. Jesse Helms, Chairman, Committee on Foreign
Relations...................................................... 442

2000 FOREIGN POLICY OVERVIEW AND THE PRESIDENT'S FISCAL YEAR 2001
FOREIGN AFFAIRS BUDGET REQUEST

----------

TUESDAY, FEBRUARY 8, 2000

U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:40 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Hagel, Grams, Brownback, Thomas,
Ashcroft, Chafee, Biden, Sarbanes, Dodd, Kerry, Feingold, and
Wellstone.
The Chairman. The committee will come to order. Well, it is
a privilege again to welcome a great lady who is very special
to all of us, the distinguished Secretary of State, Hon.
Madeleine Albright, who is the first woman to hold that job,
and how well she has done.
The official purpose of this hearing, Madam Secretary, as
you know, is to review the President's foreign affairs budget
for fiscal year 2001, which was submitted to the Congress
yesterday. However, this hearing has over the years become much
more than that. This is our annual ``around-the-world'' hearing
during which, at the beginning of each year, the Secretary of
State comes to report to the Senate the state of our Nation's
foreign affairs, and in the process always engages the
committee in a wide-ranging discussion of U.S. foreign policy.
Let me say parenthetically that we welcome a distinguished
new member of the committee. He has a good name. Well, he has
two good names. The first one is Lincoln, and the last one is
Chafee. I am delighted that Senator Chafee, who happens to be
my seat mate in the U.S. Senate, I am glad you are with us,
Lincoln, and I enjoyed working with your father so many years
and look forward to working closely with you in the years to
come.
Now, I note with some regret that while we do anticipate,
Madam Secretary, that you may appear before the committee
before the end of the year is through, this will be sort of
your final annual ``around-the-world'' hearing as Secretary of
State. Madam Secretary, by my count this is your 16th
appearance before the Senate Foreign Relations Committee. It
has always been a pleasure to have you with us, and always will
be, and while we have not always agreed on the multitude of
matters confronting the Nation during your tenure, I think we
have accomplished a very great deal together, ranging from the
expansion of NATO to State Department reorganization, to
passage of landmark U.N. reform legislation. I must say, with
all genuine appreciation, it has been a pleasure and a
privilege to work with you, and the committee is honored to
welcome you here this morning.
And to avoid the possible confusion at the United Nations,
the distinguished Secretary may appreciate my clarifying that
despite our personal friendship I do not speak for her, and in
her testimony this morning she will speak for herself and for
the President of the United States and not for the Congress.
I said that because I knew that those folks over there and
those folks over there were waiting for me to say something.
Tomorrow the committee will hear from a distinguished panel
of former administration officials regarding foreign policy,
and on Thursday we will be visited by Mr. Brady Anderson, a
very gracious gentleman and a good administrator. He heads the
Agency for International Development.
Now, this is your first appearance also before this
committee since the enactment of the James W. Nance and Meg
Donovan Foreign Relations Authorization Act, which was enacted
this past November. Now, we all hurrahed that, and I know that
somewhere up on cloud nine Bud Nance is applauding, too. That
law, named for two fine Americans, who advised us both,
authorizes State Department activities for fiscal years 2000
and 2001.
It mandates sweeping reforms of the United Nations in
exchange for payment of arrears, and it authorizes an embassy
security construction account that will serve as a blueprint
for increasing the security of the United States Embassies and
bringing U.S. diplomacy into the 21st century.
Now, that law, in conjunction with the Foreign Reform and
Restructuring Act, enacted in 1998, which abolished two Federal
agencies and integrated their functions in the Department of
State, will have major impacts on U.S. diplomacy for years to
come, and I thank you, Madam Secretary, for the considerable
role you have played in working with this committee in enacting
those two landmark bills. Without you, it could not have been
done.
But, of course, the work of both of these laws has only
just begun. Now that the U.S. Information Agency and the Arms
Control Disarmament Agency have been abolished and their
functions consolidated with the State Department, the
reorganization is in a crucial phase, and I intend to work with
you--we all do--to determine where overlap and duplication are
occurring. I very much appreciate your assurances that savings
will be found in the fiscal year 2001 budget.
I know we agreed that ensuring a strong State Department
will enhance implementation of U.S. foreign policy promises and
priorities. We are obliged to continue to work together to
ensure that the U.N. reforms are carried out. Just last month,
this committee took a visit to the United Nations and held the
first field hearing of the Foreign Relations Committee in New
York City.
And last, I call your attention to the 5-year authorization
of funds for embassy construction in the authorization bill.
Senator Grams was instrumental in conceiving this plan, and I
congratulate him for his good work. The plan provides for a
clear guidepost to the essential upgrading of U.S. Embassies
and ensuring the security of U.S. personnel overseas.
Now, this year, Madam Secretary, the committee hopes to
consider legislation authorizing U.S. technical assistance,
trade promotion policy and anti-corruption programs. The
legislation will address key priorities, including combatting
narcotrafficking in Colombia through alliances in the Andean
region and supporting democracy in the Balkans with the passage
of the Serbian Democracy Act, and policies to strengthen U.S.
exports, particularly in the agricultural sector.
And I am going to condense my statement from here on and
ask that all of it be printed in the record at the conclusion
of my remarks. We look forward to your testimony on these and
all of the issues you feel are important, so again I extend a
sincere welcome to you and look forward to a productive and
cooperative legislative year by working together.
[The prepared statement of Senator Helms follows:]

Prepared Statement of Senator Jesse Helms

It is my privilege, again, to welcome a great lady who is very
special to all of us, the distinguished Secretary of State, the
Honorable Madeleine Albright. The official purpose of this hearing,
Madam Secretary, is to review the President's foreign affairs budget
for fiscal year 2001, which was submitted to the Congress yesterday
morning.
However, this hearing has, over the years, become much more than
that. This is our annual ``around the world hearing'' during which,
near the beginning of each year, the Secretary of State comes to report
to the Senate on the state of our Nation's foreign affairs--and, in the
process, always engages the Committee in a wide ranging discussion of
U.S. foreign policy.
I note with some regret that, while we do anticipate that you may
again appear before the Committee before the end of the year is
through, this will be your final annual ``around the world'' hearing as
Secretary of State. Madam Secretary, by my count this is your 16th
appearance before the Senate Foreign Relations Committee, and it has
always been a pleasure to have you with us.
And while we have not always agreed on the multitude of matters
confronting the nation during your tenure, we have accomplished a great
deal together, ranging from the expansion of NATO, to State Department
reorganization, to passage of landmark U.N. reform legislation. It has
been a pleasure and a privilege to work with you, and the Committee is
honored to welcome you here this morning.
And, to avoid possible confusion at the U.N., the distinguished
Secretary may appreciate my clarifying that, despite our personal
friendship, I do not speak for her, and in her testimony this morning
she will speak for herself and for the President and not for Congress!
Tomorrow, the Committee will hear from a distinguished panel of
former Administration officials regarding U.S. foreign policy, and on
Thursday we will be visited by Mr. Brady Anderson, the Administrator
for the Agency for International Development (USAID).
Madam Secretary, this is also your first appearance before the
Committee since enactment of the James W. Nance and Meg Donovan Foreign
Relations Authorization Act this past November. The law, named for two
fine Americans who advised us both, authorizes State Department
activities for fiscal years 2000 and 2001; it mandates sweeping reforms
of the United Nations in exchange for payment of arrears; and it
authorizes an embassy security construction account that will serve as
a blueprint for increasing the security of U.S. Embassies and bringing
U.S. diplomacy into the 21st century.
That law, in conjunction with the Foreign Affairs Reform and
Restructuring Act, enacted in 1998, which abolished two federal
agencies and integrated their functicrns into the Department of State,
will have major impacts on U.S. diplomacy in the years to come. I thank
you, Madam Secretary, for the considerable role you played by working
with the Committee in enacting these two landmark bills.
But, of course, the work of both of these laws has only just begun.
Now that the U.S. Information Agency and the Arms Control and
Disarmament Agency have been abolished and their functions consolidated
in the State Department, the reorganization is in a critical phase. I
intend to work with you to determine where overlap and duplication are
occurring and I very much appreciate your assurances that savings will
be found in the fiscal year 2001 budget.
I know we agree that ensuring a strong State Department will
enhance implementation of U.S. foreign policy priorities.
We also must continue to work together to ensure the U.N. reforms
are carried out. As you know, just last month this Committee took an
historic visit to the United Nations and held the first field hearing
of the Foreign Relations Committee in New York City. My impression is
that members of the Committee and Ambassador Holbrooke found the visit
useful and an important step toward ensuring implementation of the
reforms called for in the bill.
And lastly, I call to your attention the five year authorization of
funds for embassy construction in the authorization bill. Senator Grams
was instrumental in conceiving this plan and I congratulate him for his
good work. The plan provides a clear guidepost to the essential
upgrading of U.S. Embassies and ensuring the security of U.S. personnel
overseas.
The President's budget does not include the full funding for this
embassy upgrade program, but I am hopeful that you will make it a
priority to ensure funding for this embassy construction plan.
This year, Madam Secretary, the Committee hopes to consider
legislation authorizing U.S. technical assistance, trade promotion
policy, and anti-corruption programs. The legislation will address key
priorities, including combating narco-trafficking in Colombia through
alliances in the Andean Region, supporting democracy in the Balkans
with passage of the Serbia Democracy Act, and policies to strengthen
U.S. exports, particularly in the agricultural sector.
There are, as you are well aware, a number of important policy
issues before you. Your having just returned from Russia (as have some
members of this Committee), we expect considerable discussion and
debate in the coming months on the future of U.S. policy regarding
Russia.
You are in the midst of serious and delicate negotiations for peace
in the Middle East. A number of treaties are under negotiation by the
State Department that could have major impact on U.S. security policy,
including economic security and U.S. exports. The Congress will be
debating the future of U.S. trade policy with China, et cetera, et
cetera, et cetera,
We look forward to hearing your testimony on these and any other
issues you feel are important. So again I extend a sincere welcome to
you and look forward to a productive and cooperative legislative year
by working together.

The Chairman. Senator Biden.
Senator Biden. Thank you very much, Mr. Chairman. Let me
begin by also on behalf of the Democrats welcoming Lincoln
Chafee to the committee. I am sure he has heard it at every
turn. Your father, Lincoln, was a man of incredible integrity
and great wisdom, and significant experience, and I do not
think--well, I know, in my experience, being here 28 years, I
have never served with a finer man than your father, and I
welcome you on the committee.
Senator Chafee. Thank you, Senator.
Senator Biden. Mr. Chairman, thank you for your opening
statement, and Secretary Albright for coming before the
committee. To state the obvious, this is an election year, and
while Congress may find itself in some difficulty deciding on
some of the controversial issues that we have to decide upon in
this year, the world's problems are not going to sort of halt
and be suspended during this election year until we see who the
next President of the United States is going to be, and so your
job goes on right up to Inauguration Day of the next President
of the United States of America, and there is still much to be
done.
First, if I could be presumptuous enough to lay out for you
what I think, and I do not speak for all Democrats by any
stretch of the imagination, nor do I presume to speak for the
Republicans, but I think all of us would acknowledge there are
four or five things we have to deal with. How we come out will
depend upon the debate and discussion and the votes here in the
Congress, but it seems to me we have to reinvigorate our arms
control discussion with the Russians, help keep the Russians on
the democratic path, and the jury is still out on Mr. Putin.
The election, which seems to be a foregone conclusion at
this point and has not been held yet, will be held in the month
of March, and it remains in our interest to stay closely
engaged with Moscow, but if Putin's Government strays too far
from the democratic road or purposefully helps other countries
develop weapons of mass destruction, we have to be prepared to
reevaluate our relationship with him, as I know you have
already communicated, as I understand it.
At the same time, literally, it is of vital importance that
we succeed in our current talks with Moscow regarding strategic
arms and ballistic missiles. Senator Hagel just led a
delegation to Moscow and brought the delegation to the
conference in Munich which has been going on for decades, where
the defense chiefs of all the NATO countries assemble and those
on their Armed Services Committee and Foreign Relations
Committee assemble, and the think tank people of all the
countries who focus most on defense, and one of the subjects
was obviously theater nuclear defense, national missile defense
and its relationship to the ABM treaty, and could it be
amended.
I need not tell you, much hangs in the balance in terms of
relations with other countries beyond Moscow, depending on
whether we can work out a framework whereby we have defense as
well as deterrence as part of the arrangement with ABM intact.
We will have a disagreement on that in this body, but I
think those negotiations are the single most important thing
that are going on right now, and I realize they are not even
negotiations yet. We are in the midst of discussions.
Second, it seems to me we have to maintain our efforts to
engage China, an emerging great power in Asia. Engagement is
neither a slogan nor a strategy. It is a hard-headed means of
advancing our national interest in the region. We can hardly
ignore China, and it is folly to think we can isolate it.
I think we have to be very careful, and the chairman and I
may end up, although we have not--everybody is beginning to
doubt both of our credibility because we are agreeing so much
on so many things of late, and I mean that sincerely. I might
add, by the way, I think the most significant thing we can do,
and it is the chairman's doing, with your cooperation, is the
reorganization of the State Department so it comports with the
21st century, and that was his objective. I played a small
part, but he did it.
So we have been agreeing on a lot, but we may not agree on
the Taiwan Security Enhancement Act which passed the House last
week. I am concerned that if it is enacted it could yield a
result not intended by its authors, and that is undermining,
not enhancing Taiwan's security by upending a careful balance
struck two decades ago in the Taiwan Relations Act, but I have
an open mind, but I just hope we really work through it very,
very closely.
Further, it seems to me we have to encourage China to
cooperate with us in seeking regional stability in South Asia.
I quite frankly do not know how we reach a reasonable
resolution for the world on the subcontinent of India, between
India and Pakistan, without China playing a constructive role.
I do not know how we get there without a constructive role
being played by China, nor do I think we are likely to
peacefully resolve without significant dislocation what is
going on in North Korea without China's constructive
participation. I do not count on it, but I think we should seek
it.
Third, I think we have to quickly authorize assistance to
our democratic allies in Colombia who are fighting the
narcotraffickers, and fourth it seems to me we have to continue
our efforts to bring peace to the Middle East and Northern
Ireland. Hard-won achievements of this administration and its
predecessors remain hanging in the balance, and I know that the
President and you, Madam Secretary, are going to continue to
work vigorously for peace until next January. Congress has to
support the administration, as it has been, in these regions,
but we are going to have to do a lot of talking back and forth
as we go forward, especially if that peace requires
appropriations.
Fifth, it seems to me we have to consolidate our
achievements in the Balkans, and your budget proposal to meet
our commitment is essential. As my friend Senator Hagel will
attest, I pointed out to my colleagues in Europe that they were
not keeping their promises to fund the civil implementation,
supporting a stability pact for the region, and the funding of
the U.N. mission in the Balkans.
We have won the war, but we could lose the peace if we do
not hang tough and keep the commitments we made. We are keeping
them. You are pushing it. I hope we can act quickly on the
administration's request.
And sixth, we have to advance our objectives in Africa, and
that is basically to two ends, helping end destructive wars,
and fighting the deadly disease of AIDS which threatens not
only the public health of the continent but also the economic
and political security.
And finally, Madam Secretary, it seems to me we have to
complete the unfinished business from last year, and that is
the approval of the remainder of the administration's proposal
for debt relief for the poorest nations.
So Madam Secretary, to state the obvious, you have got only
one person's perspective, but I doubt whether many would
disagree that regardless of how they do it, that they are at
least four or five of the major issues we have to deal with
together, and independently here in this body, and I look
forward to working with you.
As I said at the outset, you have had a remarkable working
relationship with the chairman and this committee. I think we
have done very good things, and in order not to break the mood
here, I will not even begin to talk about nominations, but I do
hope we can talk to our friend Mr. Grassley and maybe let our
people go on a few of those outstanding nominations which are
for very important posts. That may be a little harder grinding
than some other things, maybe less important in one sense, but
in other senses, in terms of the operation of your shop, very
important.
I look forward to hearing your testimony, and again I want
to begin this year by thanking the chairman. He has kept every
commitment he made about working with the Democrats on this
committee, and when we disagreed it has been straight up, when
we have agreed, we have got things done, but at least the
committee is back on the track of doing its job and getting
work done thanks to the chairman.
So I thank you, Madam Secretary.
The Chairman. Now you may proceed, Madam Secretary.

STATEMENT OF HON. MADELEINE K. ALBRIGHT, SECRETARY OF STATE,
DEPARTMENT OF STATE

Secretary Albright. Thank you very much, Mr. Chairman. It
has been mentioned that I am entering my last year as Secretary
of State in the Clinton administration, and I obviously have
done a lot of reflecting about what has been done and what
still needs to be done, and a lot does have to happen.
I have been a Senate staffer, I have been a professor, I
have been a campaign advisor, I have been a talking head, I
have been a wannabe, I have been Ambassador to the United
Nations and now Secretary of State.
Senator Biden. Which one did you like best?
Secretary Albright. I have not been elected to public
office, which I regret, and some of my fellow foreign ministers
around the world who are members of parliamentary governments
always are reminding me about their very close contact with
voters. So I have tried to make up for that by traveling
America as much as I have traveled the world, because I think
it is very important to know what the American people think.
Over the last 7 years my previous ideas and criticisms have
been tested on a daily basis by actually having to make some
decisions, and I am pleased to say that from my own perspective
I believe that I have maintained a consistent view about the
importance of America's leading role in the world.
My view has really been informed by my personal gratitude
to the American people for the role that America took during
World War II and the cold war, and I believe, therefore, in an
activist, engaged America. I have done a lot of reading and
listening, and there is a lot of talk about the U.S. role and
American power, and about priorities, obviously a subject that
is part of my daily bread, and I believe that we have the
strongest military and we have to keep it, and we have to have
an equally strong Diplomatic Service.
But I also think, out of my conversations with the American
people, which you have also in a much more intensive way, I do
not think they want us to forget about our humanity and
humanitarian concerns, or principles, and our values, and
therefore I believe in the goodness of American power, and our
priorities have to reflect those principles and values, and I
thought I would just say that by way of context for the budget
and priorities that I am going to set out today.
I am really very pleased to have a chance once again to be
here and I do hope it is not my last appearance this year,
because I think these are always very good exchanges, and
during the past 3 years I have been honored to work with you in
what has been a time of progress and accomplishment for
America, and I do believe that our sense of common purpose has
contributed to the fact that our Nation has entered this new
century strong and respected, prosperous, and at peace.
Together with allies and partners we have helped NATO gain
new members and train for new missions, and I think we did a
lot of work on that here in this committee. We have worked for
peace in Northern Ireland and the Middle East, spurred recovery
in Bosnia, and ended large-scale strife in Kosovo and in East
Timor.
We backed nuclear stability and democratic reforms in the
former Soviet Union. We have carried out the sweeping and
successful restructuring of our foreign affairs agency--I do
believe, Mr. Chairman, we can be very proud of that work--and
we have enacted a bipartisan plan to begin paying down our U.N.
obligations, another very important thing we have done
together.
Our ability to work together stems from our shared purpose,
but also from the more personal bonds reflected in last year's
State Department authorization bill which, as you pointed out,
Mr. Chairman, was named for Admiral Bud Nance and Meg Donovan.
In that spirit, I also want to thank this committee for its
speed and fairness in approving nominations and very much
second what Senator Biden said, hoping that we can get a number
of appointments done this year. It is very important.
Now, I am told this is an election year, but that does not
matter to me personally, because when I joined the State
Department, as I have told many of you, I had all my partisan
instincts surgically removed. I only mention it because some
say it is harder for the executive and legislative branches to
work together in even-numbered years, but we all know that the
world does not stop even for American elections, and we have to
work together steadily and agreeably, even when we disagree, to
seize opportunities and protect our interests against 21st
century perils.
My written statement, Mr. Chairman, is quite lengthy, and
describes our policies around the world, and since I know you
will read it perhaps at bedtime I promise not to recite it.
Instead, I will confine my oral remarks to a few of the issues
where it is most urgent that we work cooperatively this year.
The first is in supporting democracy. I emphasize this
because the democratic trends of the past decade are by no
means irreversible. Amidst progress on every continent, we also
find that transitions have stalled due to economic crisis,
ethnic division, or rising crime, and there are a number of
elected governments that are democratic in name only,
practicing not government of the people but, rather, stealing
from the people their riches and rights.
Our task this year is to renew democratic momentum, not out
of high-mindedness alone, but because democratic growth is part
of the answer to many of the challenges, economic, political,
and military, that we face. For example, we have an urgent and
obvious stake in aiding Colombian President Pastrana and his
plan to rescue his country and thereby help rescue ours from
the scourge of cocaine.
Nigeria's future development will determine whether it is a
source of chaos and corruption or a driving force for stability
and progress throughout West Africa.
Indonesia has long been a leader in Southeast Asia, and it
now has a chance, although under severe stress, to become a
model of multiethnic democracy as well.
Aside from Russia, Ukraine is the largest and most
influential of the New Independent States. The whole region
will be affected by whether it slides backward or continues up
the democratic path.
The President's budget proposes significant investments in
each of these four key democracies, and in promoting democratic
practices and values worldwide. Support for freedom is in the
proudest tradition from Washington and Jefferson to Reagan and
Clinton, and I ask your help in getting a good start on what I
hope will be known as, with a small d, a democratic century.
Second, I ask your support for peace.
In the Middle East, we will need your steady backing as we
work with the parties to find the road to a just, lasting, and
comprehensive settlement. The legacy of mistrust in the region
is hard to overcome, and the enemies of peace remain virulent
and active, but never before has the logic of peace been so
compelling, or the opportunity for peace so clear, and at this
critical time America's commitment to progress on all tracks
must remain rock-solid.
On the Korean peninsula, we have reviewed our policy over
the past year in close coordination with Seoul and our
indispensable ally, Japan, and we are backing President Kim
Dae-jung's policy of engagement with the North and have
expressed a willingness to improve our relations with Pyongyang
while it addresses our concerns about its missile and nuclear
weapons associated activities.
In Africa, the Lusaka agreement provides a basis for ending
the war in the Congo, and we have challenged the parties to
live up to their obligations under it. As they do, we can help
by endorsing a carefully designed U.N. mission.
We have learned much over the past decade about the ``do's
and don'ts'' of such missions, and we must apply these lessons
firmly and realistically in this case, but we must also be
resolute in our determination to help the Congo move from war
to peace.
Third, I ask your support for promoting the further
integration of countries into the economic, political, and
security components of the international system. This is an
overarching goal that we pursue in diverse areas by a variety
of means.
For example, last July, following the conflict in Kosovo,
we entered into a stability pact covering all Southeast Europe.
Our goal is to work with local leaders and populations to
integrate this area of chronic instability into the continent's
democratic mainstream.
We have no illusions about the difficulty of this task. It
is literally to transform the patterns of history, but such
patterns have been transformed before and, despite all the
frustrations and setbacks, a new reality is slowly taking
shape.
Consider the region's hardest case, the former Yugoslavia.
Yesterday, a new President was elected in Croatia pledged to
tolerance and economic reform. Since Dayton, elections have
been held at all levels in Bosnia. Slovenia is democratic. In
Macedonia there was a peaceful transfer of power last year. In
Montenegro, President Djukanovic is championing democracy, and
in Serbia, more and more people are asking when they, too, will
be given the right to choose their leaders freely and without
fear.
Finally, in Kosovo, our challenge is to prepare the way for
democracy by showing the same determination to build peace as
we did to end the conflict, and I ask your support for the
President's request for Kosovo and the region. I cannot imagine
a better gift to the future than a democratic and stable
Southeast Europe.
With your permission, Mr. Chairman, I would like to enlarge
upon this point for just a minute. We all know that the
politics of hate in Europe exacted an enormous price during the
last century. It dramatically altered the course of millions of
lives, and prematurely and tragically ended many millions more.
After what we have witnessed, not even elections can
validate intolerance, for democracy is based on respect for the
rights of every individual. Those who love freedom must be
vigilant in defending it against those who threaten it, even
those who would steal its very name. At the same time, we must
recognize that there are apostles of hate in every country.
Today, I hope we will renew our vow not simply to remember
the truth about the Holocaust, but also our duty to rebut those
who prefer to forget, distort, or deny it. Let us renew our
pledge to prevent genocide, oppose ethnic cleansing, and
protect the rights of all, including minorities. These are
standards which every country in the Euro-Atlantic community
and beyond should observe, and which every country should
strive to unite around.
Now, let us then talk sense to the people of Austria. Let
us expand our dialog with them while holding their leaders
accountable to the principles of pluralism and tolerance they
have just explicitly reaffirmed, and let our communities stay
focused on the opportunities and challenges that exist in
Southeast Europe by backing the promise of resources with their
timely delivery in Kosovo and around the region.
Mr. Chairman and members of the committee, when we talk
about integration, we also talk about Russia and its relations
with the West, which have been strained by political turmoil
and conflict. Over the past decade, the United States and
Russia have overcome sharp differences to cooperate in the
Balkans and on other issues of European security. This past
week in Moscow I emphasized America's desire to continue
working with the Russians to curb proliferation, ensure the
safe handling of nuclear materials, further reduce nuclear
arsenals, and find common ground on national missile defense. I
also said that Russia's integration could become isolation
unless it ends its brutal tactics in Chechnya and pursues a
political resolution of that conflict.
Another difficult but vital test of integration is in Asia,
where it is in our interest to encourage China to participate
more fully in the world economy and comply more rigorously with
global norms.
In the year 2000, we will be consulting closely with
Beijing on global and regional security issues, including
proliferation. We support the protection of Tibet's heritage
and will continue to urge Beijing to open a dialog with the
Dalai Lama.
In Geneva, we will seek international support for a
resolution calling upon China to increase respect for human
rights. We will continue to implement faithfully our
obligations under the Taiwan Relations Act, and we will be
asking Congress to support the administration's agreement to
bring China into the World Trade Organization by passing
permanent normal trade relations. If we do not, we will risk
losing the market access benefits of the agreement and the
right to enforce them through the WTO. We would also lose the
opportunity to help China further in the direction of openness
and the rule of law.
I also ask you to support integration by helping us to
assist others to participate more effectively in the economy of
the 21st century. Specifically, I ask your backing for the
varied and vital work of USAID in the Africa Growth and
Opportunity Act, the Caribbean Basin Initiative, and the
Southeast Europe Trade Preferences Act.
I ask your support for President Clinton's plan to provide
debt relief for the most heavily indebted poor countries, and
to increase our contributions to the fight against killer
diseases, including HIV/AIDS, and I ask your approval of the
President's request for full funding without unrelated
restrictions for international family planning, which reduces
the number of abortions and saves human lives.
Finally, I ask your support for American leadership.
Whether the challenge is protecting our citizens from
international terror, or our environment from global climate
change, America cannot lead without resources, not be secure
unless we lead. Despite President Clinton's strong backing and
bipartisan support from many of you, our foreign policy enters
the 21st century living hand-to-mouth. No industrialized
country contributes as small a share of its wealth to overseas
development. During the past decade alone, our rate of
investment has declined by more than a half.
We also need resources to enhance the security of those who
work in our diplomatic posts both overseas and here at home
and, as the tragic Africa Embassy bombings of 1998 remind us,
our people are on the front lines for America every day and on
every continent. They deserve, or they have earned the same
respect and care we afford to our military personnel.
So I ask your support for the President's budget in its
entirety, and I do so with clear understanding that the vast
majority of the funds requested will be spent next year, under
a new administration. The President's request has nothing to do
with parties or personalities. It has everything to do with our
Nation's determination to protect our interests and promote our
values.
I remind you that today we devote only 1 penny out of every
Federal dollar we spend to our international affairs programs,
but that single penny can make the difference between a future
characterized by peace, rising prosperity, and law, and a more
uncertain future in which our economy and security are always
at risk, our peace of mind is always under assault, and
American leadership is increasingly in doubt.
Mr. Chairman and members of the committee, the dawn of the
millennium has only intensified our awareness of the passage of
time. We conduct much of our business with technologies that
barely existed only a decade ago. The patterns of international
relations that we lived with for so long have been turned
upside down, and old friends have passed to a better place.
We live in a world that seems utterly transformed, and that
will not stop changing. No country is more comfortable in such
a world than America, but we would be lost except for what has
not changed, and that is America's purpose. There are no final
frontiers for America. We are not, and have never been a status
quo country. We have always believed in the future, and that it
can be made better than the past. We are doers.
In the year ahead we have a chance to add another proud
chapter in the history of American leadership in search of
peace, in defense of freedom, on behalf of prosperity, and in
the service to our collective boss, the American people. I have
no doubt that, in that quest, if we are united we will succeed.
Thank you very much.
[The prepared statement of Secretary Albright follows:]

Prepared Statement of Secretary of State Madeleine K. Albright

america and the world in the twenty-first century
I. Priorities for the New Year
Mr. Chairman and Members of the Committee, good morning. I am
pleased to be here to testify regarding the President's proposed Fiscal
Year 2001 budget request for international affairs, and to review U.S.
foreign policy around the world.
In times past, my predecessors have appeared before this Committee
seeking support for Americans at war, help in responding to a grave
international crisis, or solidarity in the face of threats posed by a
totalitarian superpower.
But now, in this first year of the new millennium, our country is
at peace. We enjoy record prosperity. Our alliances are united and
firm. And the ideals that underlie our own democracy have spread to
every continent, so that for the first time in recorded history, more
than half the world's people live under elected governments.
Some might see in this good news reason to sit back, put our feet
up, and relax, thinking that we are safe now and there is no more great
work to be done.
But experience warns us that the course of world events is neither
predictable nor smooth. And given the pace of our era, we know that
dangerous threats to our security and prosperity could arise with 21st
century speed.
These include the spread of weapons of mass destruction (WMD) and
the missiles that can deliver them; the plague of international terror;
the danger of regional tensions erupting into conflicts; the poisonous
effects of drug trafficking and crime; the risk of renewed financial
crisis; and the global challenges posed by poverty, disease and
environmental degradation.
Three years ago, in my confirmation hearing, I testified that the
framework for American leadership must include measures to control the
threats posed by nuclear weapons and terror; to seize opportunities for
settling regional conflicts; to maintain America as the hub of an
expanding global economy; and to defend cherished principles of liberty
and law.
I said further that our key alliances and relationships were at the
center of that framework. For these are the bonds that hold together
the entire international system. When we are able to act cooperatively
with other leading nations, we create a convergence of power and
purpose that can solve problems and spur progress around the globe.
This framework will continue to guide us in the year 2000. Our
priorities include an even stronger NATO, with ever more robust
partnerships, still open to new members, developing new capabilities
and preparing for new missions.
We will also strive with our partners to build peace in Kosovo and
integrate all of Southeast Europe into the continent's democratic
mainstream.
We will work in consultation with this Committee, our allies, and
others to respond effectively to the perils of proliferation and the
promise of arms control.
We will promote a healthy, open, and growing world economy whose
benefits are shared more widely both among and within nations, and
where American genius and productivity receive their due.
We will focus attention on our complex relationships with Russia
and China, adhering to core principles, while seeking to advance common
interests.
We will act resolutely to support peace in key regions such as the
Middle East, Central Africa, Northern Ireland and the Aegean.
We will continue our efforts to enhance stability on the Korean
Peninsula and to ease tensions in South Asia.
We will strive for even greater cooperation along our borders with
Canada and Mexico.
And we will work to strengthen democratic institutions worldwide,
including the four key countries of Colombia, Indonesia, Nigeria and
Ukraine.
These and other tasks may seem disparate, but each relates to our
vision of a secure and prosperous America within an increasingly
peaceful and democratic world.
Unfortunately, it remains unclear whether we will have the
resources we need to provide the kind of leadership our citizens
deserve and our interests demand.
Despite President Clinton's strong backing and bipartisan support
from many in Congress, our foreign policy enters the 21st Century
living hand to mouth.
Today, we allocate less than one-tenth of the portion of our gross
national product that we did half a century ago to support democracy
and growth overseas. During the past decade alone, our investment
relative to the size of our economy has declined by more than half.
Throughout this period, we have been cutting foreign policy positions,
closing diplomatic posts, and shutting USAID and USIA missions. And we
still have far to go in partnership with Congress to provide fully
adequate security for our people overseas. All this has consequences.
It reduces our influence for stability and peace in potentially
explosive regions. It detracts from our leadership on global economic
issues. It makes it harder for us to leverage the help of others. And
it often leaves us with a no-win choice between devoting resources to
one emergency and using those same resources to deal with another
urgent need.
On Monday, the President submitted his Fiscal Year 2001 budget,
including a request for about $22.8 billion for international affairs
programs. I ask you to support that request in its entirety. And I do
so with the clear understanding that the vast majority of the funds
requested will be spent next year, under a new Administration. The
President's request has nothing to do with parties or personalities; it
has everything to do with our nation's ability to protect our interests
and promote our values.
And I remind you that today, we devote only one penny out of every
federal dollar we spend to our international affairs programs. But that
single penny can make the difference between a future characterized by
peace, rising prosperity and law, and a more uncertain future, in which
our economy and security are always at risk, our peace of mind is
always under assault, and American leadership is increasingly in doubt.
Mr. Chairman, members of the Committee, it has been a great honor
to work with you these past three years, for they have been years of
progress and accomplishment for America.
Because this is an election year, some say it will be harder to
gain Executive-Legislative cooperation in international affairs. But
you and I both know that the world does not stand still even for
American elections. We have an obligation--which I am confident we will
meet--to work together responsibly on behalf of American interests. And
this morning, I would like to review with you our agenda for leadership
in the year ahead.
II. American Leadership Around the World
(A) Europe and the New Independent States
Since the end of the Cold War, President Clinton and his
counterparts in Europe have strived to adapt trans-Atlantic
institutions to deal with the realities of a transformed world. Where
once we worked with part of Europe to counter a threat that had
imprisoned and made dangerous its eastern half, now we work with all of
Europe to secure peace, prosperity and freedom throughout and beyond
its borders.
As a result, we begin the 21st Century with a NATO that has been
strengthened by new members and prepared for new missions. During the
Washington Summit last April, Alliance leaders adopted a revised
Strategic Concept, vowed to develop the capabilities required to
respond to the full spectrum of threats NATO may face, took its
partnerships with Europe's other democracies to a new level, and
pledged to strengthen the European pillar of the Alliance in a way that
bolsters overall effectiveness and unity. The Allies also underscored
their commitment to enlargement by adopting a plan to help aspiring
countries prepare for possible future membership.
We have also worked to strengthen the Organization for Security and
Cooperation in Europe (OSCE). At the November summit in Istanbul, OSCE
members agreed on a new Charter for European Security, recognizing that
security within societies is as important as security between states.
Our partnership with the European Union (EU) is another pillar of
trans-Atlantic security and prosperity. As the EU develops its foreign
policy capabilities, we are prepared to develop our partnership in
tandem with it. That is why we used the U.S.-EU Summits this past year
to improve our ability to act together in fast-breaking crises; manage
our differences; and improve joint efforts to address global
challenges. We also strongly support the EU's plan for enlargement,
including its recognition of Turkey as a candidate for membership.
These measures are part of a larger strategy for realizing one of
the most elusive dreams of this century, which is an undivided and
fully democratic Europe. This goal is also served by our support for
the Good Friday peace accords in Northern Ireland; our diplomatic
backing for UN-based talks on Cyprus; our efforts with regional leaders
to consolidate freedom in central Europe; and our support for Nordic
and Baltic nations as they move down the road to integration and
cooperation.
Unfortunately, there remains a large piece missing in the puzzle we
have been trying to assemble of a Europe whole and free. And that is
the continent's southeast corner, where the exploitation of ethnic
rivalries sparked World War I, contributed to the mayhem of World War
II, and led to four conflicts this decade, including the recent crisis
in Kosovo.
In partnership with the EU and others, we have entered into the
Southeast European Stability Pact, a multiyear strategy for integrating
the nations of that region into the continent's democratic mainstream.
The Pact's goals are to foster peaceful, tolerant societies; build
viable economies; and transform the region from a source of instability
into a full participant and partner in the new Europe.
We are under no illusions about the difficulty of this task. It is
literally to transform the patterns of history; to replace whirlpools
of violence leading nowhere with a steady upward tide. This won't
happen unless the international community follows through on
commitments to help. And unless regional leaders make the hard choices
required to create societies based on freedom and law. Accordingly, we
welcome the European Commission's intention to secure 11.2 billion
Euros for these goals during the next six years. And we are encouraged
by the commitment governments are making to curb corruption and create
a good climate for doing business.
We are also heartened by democratic progress in the former
Yugoslavia. Since Dayton, elections have been held at all levels in
Bosnia. In Macedonia, there was a peaceful transfer of power last year.
In Croatia, the just-concluded election process has been a true
breakthrough, representing a triumph for civil society and a major
turning point away from ultra-nationalism and towards democratic
values. In Montenegro, President Djukanovic is championing democracy.
And increasingly in Serbia, the people are asking when they will be
given the right to choose their leaders freely and without fear.
Finally, in Kosovo, our challenge is to prepare the way for
democracy by bringing the same determination to the task of building
peace as we did to ending conflict.
In less than eight months, much progress has been made. Large-scale
violence has ended. Almost a million refugees and displaced have
returned home. The Kosovo Liberation Army has effectively met its
promise to demilitarize. A civilian police is being established and an
Interim Administrative Council created.
Nevertheless, the situation remains tense and unpredictable. Backed
by Kosovo's leaders, we have urged citizens to refrain from violence,
and to cooperate with KFOR, the UN mission, and the international war
crimes tribunal. And we are working with them to prepare for municipal
elections later this year.
I urge your support for the President's request for funds to help
the Kosovars build a democratic society. Combined with the far larger
contributions received from our allies and partners, these funds will
be used to help create effective civil administration, spur economic
activity, create democratic institutions and train and equip the
police.
In Bosnia, we remain deeply committed to full implementation of the
Dayton Accords. In cooperation with our many partners, we are
constantly evaluating how best to enable and encourage Bosnians to take
full responsibility for building a stable, democratic society. The
President's budget requests the resources we will need to help Bosnians
continue moving in the right direction.
As we proceed with efforts to help Europe's new democracies, we
cannot neglect the health of democracy in older ones. In Austria, we
are concerned about statements made by Freedom Party head Joerg Haider.
Regardless of the government's composition, we have made it clear that
we expect Austria to continue to meet the commitments it has made to
respect the rights of minorities, foreigners and refugees.
Further to the east, towards the Caucasus and Central Asia,
democratic change remains very much a work in progress. In many
countries, respect for human rights and the rule of law is
unsatisfactory and economic reforms have been slowed by financial
turmoil. These problems are aggravated by the lack of a democratic
tradition, uncertainty about Russia's future direction, and instability
generated by extremist groups.
In the year ahead, we will vigorously pursue diplomatic and
programmatic efforts to help countries in the region find the right
road. For example, we are pressing ahead as a co-chair of the Minsk
process in search of progress on Nagorno-Karabakh. We are renewing our
request for repeal of Section 907 of the Freedom Support Act. We will
seek progress in implementing CFE commitments, and in insulating
Georgia from the consequences of the Chechen War. And with Turkey and
its partners in the Caucasus and Central Asia, we will take steps to
build on the Baku-Ceyhan pipeline agreement.
We attach high importance to our strategic partnership with
Ukraine, knowing that an independent, democratic, and prosperous
Ukraine is a key to building a secure and undivided Europe. The
Ukrainian people showed in last year's elections that they want to get
on with essential reforms. And President Kuchma has vowed to make use
of this mandate for decisive change. We will do all we can to assist in
strengthening democratic institutions, improving the investment
climate, and bolstering the rule of law. We will also deepen our
cooperation under the NATO-Ukraine Charter and strengthen our joint
nonproliferation efforts.
The past year in Russia has been extraordinarily difficult.
Political turmoil, corruption, terrorist bombings, the war in Chechnya
and continued economic problems have created hardships for the Russian
people, and at times strained relations with the West.
In the months ahead, we hope to re-establish and expand the basis
for cooperation between our countries. There is new leadership in the
Kremlin and a new Duma that may prove more constructive and forward-
looking than the one it replaced. Our nations are working together
again in the Balkans, and consulting closely on arms control and
nonproliferation issues. We seek to further develop ties between Russia
and NATO. And it remains very much in our interests to help Russia
prevent the loss of nuclear materials and expertise, and to assist the
Russian people in strengthening civil society.
The key short-term test for Russia's leaders remains the war in
Chechnya.
Like many others, we have criticized the Russian military for
indiscriminate shelling and bombing in that region. We understand the
problems posed by terrorism, but deplore the massive violations of
human rights. We are concerned about the regional impacts of the
conflict, including refugee flows. And we also believe that the harsh
tactics being used will not work.
As I said last week in Moscow, ``These tactics will not set the
stage for peace. Only a political resolution of the conflict will do
that. As long as the fighting continues, it will serve as a magnet for
extremism that could one day risk the stability of the entire region.''
It should not be surprising that the Russian transition is proving
difficult. After all, Communism was a seven-decade forced march to a
dead end, and no nation went further down that road than Russia. But
there is also no question that a peaceful and democratic Russia that is
tackling its economic problems and playing a constructive international
role can make an enormous contribution to the 21st Century. We have an
enormous stake in Russian success and will continue to work with
Russian leaders whenever possible to advance common interests.
(B) The Middle East
We begin the new century with new hope in the Middle East, where
our primary objective remains a just, lasting and comprehensive peace
between Israel and her Arab neighbors.
Last month, Israeli Prime Minister Barak and Syrian Foreign
Minister Shara journeyed to West Virginia, for intensive talks.
Chairman Arafat later met with President Clinton in Washington. And
last week in Moscow, I co-chaired with Foreign Minister Ivanov a very
successful ministerial meeting of the Multilateral Steering Group.
All this activity reflects that progress is now possible on all
tracks of the peace process. But reaching agreement on any of the
bilateral tracks remains a formidable task. President Clinton and I
will continue working with the parties to help them narrow differences
and identify compromises that satisfy core needs.
At this critical moment, it is essential that the United States
remain steady in its support for peace. I congratulate Congress for
providing funds late last year to implement the Wye River and Sharm-el-
Sheikh interim accords. I hope we will have your continued backing now,
as we seek to ensure the security and promote the prosperity of our
friends in the region.
As we strive to bring peace closer between Arabs and Israel, we
must also explore opportunities for constructive change elsewhere--for
example, in Iran.
Over the last two years, there have been unmistakable signs of
public support in Iran for a more open approach to the world. We have
welcomed President Khatemi's calls for people-to-people dialogue, his
verbal condemnation of terrorism, and his regret over the 1979 hostage
episode. The upcoming Parliamentary elections could provide evidence
that the trend towards openness is gathering speed.
At the same time, Iran continues to pursue some policies that we
strongly oppose. The United States recognizes that there are
conflicting forces at work in Iran, as there are in many nations. Our
hope is that the Iranian people will want and be able to choose
approaches that lead to better relations.
Elsewhere in the Gulf, we remain focused on containing the threat
posed by the Iraqi regime's aggression and WMD capabilities.
Last December, the UN Security Council approved a Resolution
establishing the means and mandate for resuming on-site weapons
inspections in Iraq, including a clear roadmap for assessing
compliance. The United States will work with Dr. Hans Blix, Executive
Director of the new Commission, towards fulfilling the Council's
resolutions.
We will also continue to make the point that lifting sanctions in
the absence of compliance by Baghdad with its WMD obligations is not an
option. The Iraqi Government has shown no evidence that it has learned
the lessons of the past nine years. That is why we are working for the
day when the aspirations of the Iraqi people are realized, and a new
government makes it possible for their country to rejoin the family of
nations as a responsible and law-abiding member. To this end, we have
increased our financial and other assistance to the Iraqi National
Congress, and made clear that a change in Baghdad would lead to a
change in U.S. policy.
At the same time, we remain committed to alleviating the hardships
faced by the Iraqi people. Since 1996, the ``oil for food,'' which we
strongly support and helped conceive, has substantially improved
nutrition. In Northern Iraq, where assistance is distributed by the UN
rather than the Iraqi Government, child mortality rates are lower than
they were prior to the Persian Gulf War.
America's interest in a stable and prosperous Middle East also
depends on whether the nations there work together to reform their
economies, attract investment, move in the direction of democracy and
create opportunities for their citizens. During the year 2000, we will
be active in promoting these principles in our discussions with the
region's leaders and peoples.
(C) The Asia Pacific
No part of the world will play a greater role in determining the
character of the 21st Century than the Asia Pacific. The region's
stability and its continued development and democratization are of
profound interest to the United States. This is reflected in my ten
visits to the area since becoming Secretary of State.
The United States is deeply committed to meeting our obligations to
treaty allies (Australia, Japan, the Republic of Korea (ROK), the
Philippines, and Thailand), while striving to promote economic and
security cooperation with all countries. To this end, we are working
with friends and partners to strengthen existing regional institutions,
such as APEC, ASEAN and the ASEAN Regional Forum, and to enhance
dialogues between and among nations.
Our most important bilateral relationship in the Asia Pacific is
with Japan, with whom we work closely on a full range of security,
economic and global issues. In recent years, we have modernized our
defense cooperation, negotiated steps to liberalize trade, and
developed a common agenda for action on matters such as global climate
change, international crime, and development in Africa.
Another ally, the Republic of Korea, has become a source of
regional stability under the able leadership of President Kim Dae-jung.
Over the past two years, the ROK implemented painful economic reforms
that have enabled it to emerge from the Asian financial crisis. Even as
it struggled with these difficult domestic issues, it demonstrated
regional leadership by contributing to the peace operation in East
Timor.
We fully support President Kim's policy of engagement with the
Democratic People's Republic of Korea (DPRK). This policy seeks to
reduce the DPRK's isolation, address humanitarian needs and prevent
destabilizing military incidents.
Over the past year, former Defense Secretary William Perry and the
State Department's Counsellor, Ambassador Wendy Sherman led a
comprehensive review of our own policy toward the DPRK, in close
coordination with the ROK and Japan. As a result, we have expressed our
willingness to improve relations with the DPRK as it addresses our
concerns about its missile and nuclear weapons programs.
Last September, we reached an understanding with the North that it
will refrain from any long-range missile flight tests as long as
negotiations to improve relations are underway. We will continue such
discussions at the end of this month, and anticipate additional talks
at a higher level about one month later.
The DPRK's nuclear weapons-associated activities is another area of
deep concern. By freezing the North's nuclear facilities at Yongbyon
and Taechon, which pose a serious proliferation risk, the Agreed
Framework is making a vital contribution to stability. We need
Congressional support for meeting our obligations under the Framework,
just as we expect the DPRK to meet its own.
Our policy towards the DPRK reflects our desire for permanent
reconciliation on the Korean Peninsula. The question of ultimate
reunification is one for Koreans to decide through peaceful means, and
we strongly encourage North-South dialogue. We also support the Four
Party Talks, which include China, the United States and both Koreas. We
and our allies want to engage the DPRK in a comprehensive manner so
that all sides may address issues of concern. But we are under no
illusions. Further progress depends on the DPRK's further willingness
to engage seriously with us.
We believe the new century can generate new momentum and mutual
benefits in our relations with China. As the President said in his
State of the Union Address, ``Congress should support the agreement we
negotiated to bring China into the WTO, by passing Permanent Normal
Trade Relations (NTR).'' If we do not grant permanent NTR, we will risk
losing the market access benefits of the agreement, and the right to
enforce them through the WTO. The result is that our competitors in
Asia and Europe would reap those benefits while American farmers and
businesses would be left behind.
The economic benefits we will gain by approving Permanent NTR for
China do not conflict with our other interests. Once in the WTO, China
will be required to follow international trading rules, open its
regulations to public scrutiny and reduce the role of state-owned
enterprises. This will encourage growth in the rule of law, and hasten
the development of a more open society.
During the year 2000, we will be consulting closely with China on
global and regional security issues, including nonproliferation, South
Asian security, and Korean stability. We will seek to prevent tensions
from increasing across the Taiwan Strait, and promote cooperation in
the South China Sea. We will urge Beijing to open a dialogue with the
Dalai Lama regarding the protection of Tibet's religious, cultural and
linguistic heritage within China. And as we purse engagement with the
PRC, we will continue our commitment to faithful implementation of the
Taiwan Relations Act.
Although the Chinese people enjoy greater freedom of choice in
economic and many personal matters than in the past, progress in the
area of political and other civil rights is lacking. Examples in 1999
include the harsh prison sentences received by leaders of the China
Democracy Party, an intensified reeducation campaign to control Tibetan
monasteries, continued pressure on underground churches, and efforts to
repress the Falun Gong spiritual movement. As a result, we will work
for a Resolution expressing concern about human rights in China at the
UN Human Rights Commission in Geneva next month.
Last year was a time of historic change in Indonesia, Southeast
Asia's largest nation. The Indonesian people deserve great credit for
conducting free, fair and peaceful elections. The new government, led
by President Abdurrahman Wahid, merits broad support as it strives to
stabilize the economy, curb corruption, establish the rule of law, cope
with regional crises, and address past abuses of human rights.
These goals are simple to identify, but difficult to achieve. The
new President is widely respected for his humanity and wisdom. But to
succeed, he must make tough decisions and explain them in terms his
people will understand and accept. President Clinton is requesting $144
million this year to aid Indonesia's quest for a stronger, stabler
democracy.
Elsewhere in the region, we will continue to work with the UN, the
Philippines, Australia, Thailand, and others to bring lasting peace and
democratic rule to East Timor. And we will press for a meaningful
dialogue in Burma between the government and the democratic opposition,
led by the National League for Democracy (NLD). Burmese authorities
must understand that the path to acceptance and progress lies in
movement towards a popularly supported government in Rangoon. In
Cambodia, we continue to work with the government and UN to bring
senior Khmer Rouge leaders before a tribunal that meets international
standards.
(D) South Asia
Last week, the White House announced that President Clinton will
visit South Asia. His itinerary will include India, the world's largest
democracy, with whom we seek deeper cooperation on issues that include
nonproliferation, economic reform, science and the environment. The
President will also visit Bangladesh, a nation of more than 100 million
people, and a friend and partner on matters of both bilateral and
regional concern.
In nearby Pakistan, we are encouraging the military authorities to
make good on their pledge to return the country to elected rule in a
timely manner.
As for relations between India and Pakistan, longstanding tensions
have heightened as a result of the recent Indian Airlines hijacking and
the aftermath of last year's Kargil crisis. Our policy is to encourage
dialogue aimed at narrowing differences and preventing violence, and we
intend to remain actively engaged with both countries toward this end.
In Afghanistan, we have joined with neighboring countries in
seeking an end to the civil conflict, the closing of terrorist camps,
and increased respect for human rights, which include women's rights.
(E) The Western Hemisphere
The nations of Latin America and the Caribbean have made historic
strides in building democracy over the past two decades, but serious
problems remain in many countries, including political instability,
economic inequality, corruption and crime. Fortunately, there is a
general consensus across the region about how to deal with these
challenges, and a willingness to work cooperatively on them. At the
heart of this consensus is a commitment to free trade and economic
integration. In recent years, every major economy in the region has
liberalized its system for investment and trade; and we are making
progress toward achieving a Free Trade Area of the Americas (FTAA) by
2005.
But the fruits of recent economic growth have not been evenly
distributed. While much of the region's population enjoys improved
living standards, many others have not seen any appreciable benefit.
About a third of Latin America's people live on $2 a day or less, and
income inequality is greater here than in any other region.
There is a real risk that support for democracy and free markets
will erode if these economic disparities are not addressed. Last
month's events in Ecuador serve as a warning of what can happen when
significant portions of a population feel left behind.
That is why the 1998 Santiago Summit of the Americas put special
emphasis on improving the quality and accessibility of education,
especially to the urban and rural poor, and to indigenous populations.
We are also working through the Summit process to promote judicial
reform, good governance and other steps to broaden access to the
benefits of economic growth.
I believe that history will regard this period as a turning point
in our relations with Mexico. Issues such as migration, counter-
narcotics and cross-border law enforcement will never be easy. But in
recent years, we have developed effective mechanisms, such as the
Binational Commission and the High Level Contact Group, to address such
challenges, while also exploring ways to spur mutual economic growth.
One of our most important priorities this year will be to support
Colombian President Andres Pastrana's comprehensive plan to fight drug-
trafficking, restore fiscal responsibility, and secure peace in his
country. As you know, President Clinton has asked that Congress provide
an additional $1.27 billion over the next two years for this purpose.
We are asking others in the international community to join in this
effort. The IMF has already approved a new $2.7 billion program, and we
are endorsing Bogota's request for nearly $3 billion in loans from the
World Bank and the Inter-American Development Bank.
As I made clear to President Pastrana when I visited Cartagena last
month, our support for Plan Colombia rests on the Colombian
government's commitment to continue to take appropriate action against
human rights violators--whether those violators are military,
paramilitary, guerrilla or just plain criminals. Under President
Pastrana's leadership, there has already been solid progress on this
issue, but more remains to be done.
Neither criminals nor conflict respect national borders.
Accordingly, we must also step up our support for counternarcotics and
alternative development programs for Colombia's neighbors. It is not
enough to drive drug criminals out of Colombia. Our goal must be to
drive them out of business--once and for all.
In Haiti, we are helping authorities and civil society prepare for
legislative and local elections to be held this spring. And we will be
doing our share to assist the new UN Mission in Support of Haiti, which
will be providing technical assistance on law enforcement and human
rights.
In Cuba, Fidel Castro continues to justify his pariah status by
jailing dissidents and refusing to hold free and fair elections. Last
year, the international outcry against his dictatorship grew even
stronger. In April, the UN Commission on Human Rights adopted a Czech-
Polish resolution expressing concern ``at the continued violation of
human rights and fundamental freedoms in Cuba.'' And in November, at
the Ibero-American Summit in Havana, many world leaders met for the
first time with Cuban dissidents and called on the Cuban government to
show greater respect for human rights and democracy.
Over the past two years, President Clinton has taken a series of
steps to reach out to the Cuban people and help prepare for a peaceful
transition to democracy. Our goal is to strengthen people-to-people
ties and encourage the development in Cuba of peaceful activities
independent of the government.
(F) Africa
In Africa, our challenge is to address pressing security and
humanitarian concerns, while helping to realize the continent's great
human and economic potential.
An increasing number of Africa's leaders understand that the
continent's future prosperity depends on trade and foreign investment.
They are working to create a better environment for doing business, by
privatizing state-run enterprises, revamping commercial codes, and
adopting sound fiscal policies. As a result, annual economic growth has
averaged nearly 4 percent over the past five years.
The United States has a direct stake in seeing Africa's economic
progress continue. It means better opportunities for our workers and
companies. And it means that African nations could be stronger partners
and less dependent on outside aid. So I urge Congress to complete its
good work to date and grant final approval to the African Growth and
Opportunity Act. This measure would provide essential support for
economic reform, and expand our trade with one of the world's largest
under-developed markets.
In Africa, as elsewhere, we can have the most impact where we have
strong regional allies. And in Africa, the two most influential nations
are Nigeria and South Africa.
Nine months ago, President Obasanjo became Nigeria's first elected
leader since 1983. Since then, he has waged a vigorous campaign to
stamp out corruption and revive his country's economy. But he faces
daunting obstacles.
After years of military rule, Nigeria must rebuild its democratic
institutions, reinvigorate its Parliament, reform its legal system, and
reinvent its military under civilian control. It must also cope with
complex regional issues, including ethnic strife. Around the world, few
democratic transitions are as fragile or as important. Depending on its
course, Nigeria can be a powerful factor for instability or stability
within the region. I ask your support in providing the resources
required to help Nigeria's democracy put down roots and grow.
The United States greatly values its friendship with South Africa.
Under Presidents Mandela and Mbeki, South Africa has moved well along
the democratic path, but still faces urgent challenges. President Mbeki
has been working energetically to sell off state-run enterprises,
attract private sector investment, improve education and reduce crime.
In the year ahead, we will do all we can to assist and broaden our
partnership with South Africa's leaders and people.
South Africa and Nigeria are the two anchor nations of Africa.
Increasingly, epidemic disease is the continent's albatross. Statistics
are not adequate to describe the human destruction being caused
especially by HIV/AIDS. Over the next decade, tens of millions of
children in sub-Saharan Africa will be orphaned by the disease, infant
and child mortality may double and, in many countries, average life
expectancy will decline sharply.
In his State of the Union Address, President Clinton proposed a new
tax credit to speed the development of vaccines for diseases like
malaria, TB, and AIDS that disproportionately afflict developing
nations. And he is requesting an increase of $150 million in our
worldwide fight against AIDS and other killer diseases. I urge your
support for these requests.
This past month at the United Nations Security Council in New York,
we made Africa our special focus. In addition to discussing the AIDS
crisis, we also led sessions on the conflicts in Angola, Burundi and
the Democratic Republic of Congo.
Because of its location and size, and because of the number of
countries involved, the conflict in Congo could be described as
Africa's first world war. The continent cannot hope to meet the
aspirations of its people until this war is history.
The Lusaka agreement, signed last summer, offers a solid framework
for ending the Congo war. And the international community--including
the United States--has a responsibility to support this process. The
Lusaka signatories have agreed to provide access, security and
cooperation to international peacekeepers. So I am asking Congress to
support a United Nations peace mission for Congo, consisting of 500
observers and roughly 5,000 troops for logistics and protection, with
most of the soldiers coming from African countries.
We have learned much over the past decade about the ``do's and
don'ts'' of UN missions. We must apply these lessons firmly and
realistically in this case. But we must also be resolute in our
determination to help Congo move from war to peace.
In addition, I hope you will support the United Nations
peacekeeping force for Sierra Leone. I visited that nation last fall
and met with victims of its terrible civil war. The parties have agreed
on a plan for healing wounds and building peace. We should help them do
so.
Finally, I hope the Senate will ratify the UN Convention to Combat
Desertification, which would enable the United States to be a better
partner with Africa in preserving agricultural land and making more
efficient use of natural resources.
III. Global Opportunities and Threats
America is a global power with worldwide interests. Many of the
actions and initiatives we undertake are directed, as I have discussed,
at particular countries or parts of the world. Other policies are more
encompassing and can best be considered in global terms.
(A) Protecting American Security
The first of these is our strategy for ensuring the fundamental
security of our citizens and territory. Fortunately, Cold War dangers
belong to an earlier millennium. But today, we face a variety of other
threats, some fueled by technology's advance; some by regional rivalry;
some by ambition or hate.
Accordingly, our armed forces must remain the finest in the world.
But we also need first-class diplomacy. Because on many occasions, we
will rely on diplomacy as our first line of defense--to cement
alliances, build coalitions, and find ways to protect our interests
without putting our fighting men and women at risk.
At the same time, our diplomacy is stronger because we have the
threat of force behind it. It is by combining force and diplomacy, for
example, that we protect Americans from the threat posed by nuclear
weapons.
Here, the military deterrent provided by our armed forces and the
technological edge they enjoy are indispensable. But we will all sleep
better if our deterrent never has to be used. The diplomatic challenge
is to create a political environment in which serious military threats
to our country are less likely to arise.
To this end, the United States has led in establishing an
international legal framework, centered on the Nuclear Non-
Proliferation Treaty, IAEA safeguards, and the Chemical and Biological
Weapons Conventions, designed to prevent WMD from spreading or falling
into the wrong hands.
Moreover, our Expanded Threat Reduction Initiative (ETRI) (building
on the 1992 Nunn-Lugar legislation) has done much to protect the
American people, destroying almost 5000 nuclear warheads in the former
Soviet Union; eliminating nuclear weapons from three former Soviet
Republics; and engaging 30,000 former Soviet weapons scientists in
peaceful ventures. The President is requesting $974 million for ETRI in
Fiscal Year 2001, including $141 million for programs administered by
the Department of State.
We are also taking steps to protect ourselves from the new threats
posed by ballistic missiles.
Our policy includes diplomatic efforts to restrain missile
development, an option that a number of countries have voluntarily
foregone. Thirty-two nations are cooperating to limit technology
transfers through the Missile Technology Control Regime. And we are
doing all we can to prevent known proliferators from gaining access to
advanced missile technology.
We understand, however, that nonproliferation efforts may not be
enough. To protect our forces and allies abroad, we are working to
develop Theater Missile Defense Systems.
To protect ourselves at home, we are developing and testing a
limited National Missile Defense system, with a decision on deployment
possible as early as this summer. This decision will take into account
threat, technological feasibility, affordability, and the overall
strategic environment including our arms control objectives.
But for NMD deployment to occur under the Anti-Ballistic Missile
(ABM) Treaty, certain changes in that agreement would be necessary. We
have been discussing these with other nations, including Russia.
As I told Acting Prime Minister Putin in Moscow during a visit last
week, the United States believes that the ABM Treaty contributes much
to strategic stability. It reassures leaders in both capitals about one
another's capabilities and intentions. And it has given us the
confidence needed to pursue mutual reductions in nuclear arsenals.
On the other hand, the strategic environment has changed greatly in
the 28 years since the Treaty was signed. The Gulf War showed the
dangers of theater-range missiles in hostile hands. And tests of
longer-range missiles by other nations raise concerns that must be
addressed.
To date, Russian leaders have opposed any modifications in the ABM
Treaty, and questioned severely the potential impact of such changes on
the entire system of international arms control.
We have made clear that the limited changes we are contemplating
would not undermine Russian security. In fact, because Russia and the
United States are vulnerable to the same threats, we are prepared to
cooperate with Moscow on missile defense. It is in our mutual interests
to consider arrangements that would preserve the essential aims of the
ABM Treaty, while protecting us from the new dangers we both face.
Unfortunately, our consideration of NMD has aroused concerns not
only in Russia, but also in Western Europe and elsewhere. I have had to
address fears expressed by my counterparts that America is intent on
going it alone, disregarding the interests of former adversaries and
current allies alike.
These fears were highlighted by the Senate's vote last fall on the
Comprehensive Nuclear Test Ban Treaty (CTBT). The Administration made
no secret of its disappointment with that vote. We believe that the
CTBT is very much in America's national security interests. It would
outlaw nuclear tests by others, while locking in a technological status
quo that is highly favorable to the United States.
So we are determined to continue fighting for the Treaty. But that
does not mean fighting with Congress. The world's leading nation cannot
remain divided on how to respond to the world's gravest threats. The
Administration and Congress have worked together in the past on such
key security issues as the Chemical Weapons Convention and NATO
enlargement. We must put aside partisan distractions and work together
now.
To this end, I am very pleased that General John Shalikashvili has
agreed to advise the Administration while reaching out to Senators to
find ways to narrow differences and gain bipartisan support for the
CTBT. I hope Senators will take advantage of the opportunity to enter
into a dialogue with General Shalikashvili so that he may formulate
informed recommendations, and so that we may make wise choices about
our options for moving forward.
In considering the arguments for and against a nuclear test ban,
Americans must resist the temptation to think that the strength of our
armed forces means we no longer need help from others. It is simply
impossible to halt the spread of weapons of mass destruction unless
countries work together.
International cooperation is also essential to safeguard our
citizens from other threats. As we saw several times during the past
decade, when America's military is called upon to act, we will often do
so as part of a coalition. Accordingly, I ask your support for our
security assistance programs, which contribute to the health of
America's defense industrial base, take advantage of opportunities to
promote democratic practices, and help friends and allies to develop
armed forces that are more capable and better able to operate with our
own.
Another area where international cooperation is required to protect
our interests is in responding to the threat posed by international
terror. Because of our military strength, potential enemies may try to
attack us by unconventional means, including terrorist strikes and the
possible use of chemical or biological weapons. In recent years, the
number of terrorist strikes has declined, but their severity has risen.
In countering these threats, we must be prepared at home and
overseas. That is why we are taking strong security measures and--at
President Clinton's direction--improving our planning for emergency
response.
Through our diplomacy and training programs, we help friendly
governments to improve border security and share information about
those suspected of being affiliated with terrorist networks. We offer
rewards for terrorist suspects, and gather information to advise and
warn Americans. We strive to forge international agreements and
cooperation that will leave terrorists with no place to run, hide,
operate or stash their assets. We do all we can to bring suspected
terrorists to the bar of justice, as we have in several major cases,
including the sabotage of Pan Am 103, and the tragic 1998 bombing of
two U.S. Embassies in Africa.
And this year, we are proposing in the President's budget the
creation of a dedicated Center for Antiterrorism and Security Training.
This Center will help us to improve the skills of foreign security
personnel who are the front line of defense at airports, diplomatic
missions and other facilities frequented by our citizens while
overseas.
(B) Sustaining American Prosperity
A second overarching goal of our foreign policy is to support
American prosperity by promoting a healthy world economy and by
ensuring fair treatment for American businesses, farmers, ranchers and
workers.
The State Department values highly its partnerships with America's
private sector. We consult regularly with business, agriculture and
labor leaders. We work hard, both in Washington and in our diplomatic
missions, to help our citizens take advantage of business
opportunities, to enforce the protection of contractual and property
rights, to promote responsible labor and environmental standards, and
to combat corruption which harms foreign societies while discriminating
against U.S. firms.
In addition, since President Clinton took office, the
Administration has negotiated more than 300 trade agreements, including
the Uruguay Round and agreements on information technology, financial
services and basic telecommunications. These agreements have helped us
to find new markets, raise living standards and fight inflation. Today,
more than eleven million U.S. jobs are supported by exports, and these
are good jobs, paying--on the average--significantly more than non-
trade related positions.
This morning, I urge your support for the Administration's
initiatives to restore the momentum for liberalizing global trade. As
President Clinton made clear in his recent speech to the World Economic
Forum, ``open markets and rule-based trade are the best engine we know
of to lift living standards, reduce environmental destruction and build
shared prosperity.''
The inability of the World Trade Organization (WTO) to agree on the
terms of a new trade round during its December meeting in Seattle
reflects the complexity of the issues involved. Our priorities include
broadening market-access liberalization, strengthening and extending
WTO rules, and addressing the concerns of both developing countries and
civil society.
The WTO must also proceed with internal reforms so that it is more
open in its methods and meetings, and therefore seen clearly to be a
public interest, not a special interest, organization.
There is no question that changes to the global economy have
created new challenges for the trading system. We want to work with our
partners to enhance market access for the least developed countries
through our respective preferential programs. We want to engage the WTO
and the International Labor Organization (ILO) in a constructive
dialogue, including consideration of the relationship between core
labor standards, trade policy and social development. And we will
continue to work to ensure that trade rules support, not undermine, the
ability of governments to protect the environment.
In addition, I urge members of this Committee to help us support
American prosperity by backing agencies such as the Export-Import Bank,
the Trade and Development Agency, and Overseas Private Investment
Corporation, which help our businesspeople take advantage of new
markets abroad.
In this era, American prosperity depends on the prosperity of
others. So I ask your support for the full range of our efforts to
promote development around the world.
Last year, the Earth's population surpassed six billion human
beings. More than one billion of them live on less than a dollar a day.
More than half have never made a telephone call. The new millennium has
dawned on a world divided as much as ever before between those who have
much, and those who have not. It is in America's interest to help those
who most need help to pull themselves up. For we have learned from
experience that desperation can breed conflict, generate uncontrolled
refugee flows, provide fertile ground for criminals and terrorists, and
contribute to global problems such as environmental degradation and
epidemic disease.
We also know that sustained efforts to promote development can
produce sustained progress. Between 1960 and 1990, the average life
expectancy in the developing world rose by 17 years, infant mortality
was cut in half, the rate of child immunization more than doubled, and
the percentage of children in school increased from less than half to
more than three quarters.
Obviously, the challenge of development today is different than in
the past. The world is multi-polar, technology-driven, energized by
more open markets and awash in enterprise, ideas and information.
Those who are succeeding are first adapting. To be effective,
external assistance must be matched by internal energy and reform.
Democracy must be practiced, markets must be opened, investment
encouraged and corruption stopped. Marginalized sectors of the
population must be given access to the knowledge and skills they will
need to compete in the 21st Century. And governments must lead in
educating their populations about wise environmental and health
practices, including awareness about HIV/AIDS.
Neither the United States, nor any other country or institution,
can bring sustainable development to a nation whose government is
incompetent or corrupt. But we can, and should, do all we can to help
those trying to help themselves gain the capacity to do so
successfully.
Accordingly, I ask your vote for legislation to promote investment
and trade, including the Africa Growth and Opportunity Act, the
Caribbean Basin Initiative, the Southeast Europe Trade Preferences Act,
and further extension of the Generalized System of Preferences.
I ask your support for President Clinton's initiative, in
partnership with the G-8, to provide debt relief for the most heavily
indebted poor countries, and to use a portion of that relief to address
social problems and conserve the environment.
I ask your approval of our request for funds to support all of the
varied and vital work of USAID, the world's finest and most versatile
development organization.
And I seek your backing for other vital economic, technical and
humanitarian assistance programs such as those administered by the
Multilateral Development Banks, the Inter-American and African
Development Foundations, our Peace Corps volunteers, UNICEF, the UN
Development Program, and the UN High Commissioner for Refugees.
(C) Safeguarding the Environment
The United States also has a major foreign policy stake in
protecting the global environment and in working to prevent
transboundary environmental problems that could harm our interests,
lead to conflicts or contribute to humanitarian disasters.
As societies grow and industrialize, the absorptive capacities of
the Earth will be severely tested. Misuse of resources can produce
shortages that breed conflict, famine, refugee flows and further acts
of environmental destruction.
That is why we have incorporated environmental goals into the
mainstream of our foreign policy, and why we are pursuing specific
objectives in areas such as forestry management, coral reef protection
and the conservation of marine resources in every part of the world.
Priorities for the year 2000 include (1) helping to shape an
effective global response to the challenge of climate change; (2)
working to promote and gain world acceptance for a science-based
standard for biosafety; (3) gaining international agreement to phaseout
the production of twelve persistent chemical toxins; (4) developing
multinational strategies for responding to the costly problem of
invasive species, protecting coral reefs, and managing transboundary
water resources; and (5) defeating efforts to weaken protections for
whales.
(D) International Family Planning
Last year, with this Committee's leadership, Congress approved
legislation enabling the United States to begin paying down the arrears
we owe to the United Nations. Unfortunately, that law included unwise
restrictions on our support for international family planning. I ask
your help in seeing that these restrictions are not attached to
legislation this year.
Contrary to what some believe, the United States does not provide
any funds to perform or promote abortions overseas. Instead, our
assistance is used for family planning services that reduce abortions,
promote maternal and child health, and save lives.
Pregnancy-related complications kill an estimated 600,000 women
every year. They are the leading cause of mortality among women of
reproductive age in developing countries. And experts believe that
perhaps one in every four of these deaths could be prevented through
access to family planning.
Family planning also saves the lives of children. Eleven million
boys and girls die each year before reaching the age of five. Many
could be saved if births were spaced further apart, and mothers bore a
higher proportion of their children during their healthiest
reproductive years. Accordingly, President Clinton is asking Congress
this year to return U.S. support for international family planning to
1995 levels. Moreover, we believe that private groups overseas should
be able to exercise their right of free speech and publicize their
views for or against reproductive rights without fearing loss of U.S.
funding. The restrictions imposed upon such groups this year should not
be carried over into next.
(E) Fighting International Crime and Narcotics
A third global objective of our foreign policy is to fight and win
the struggle against the hydra-headed evil of international crime.
Drug cartels and crime syndicates have expanded their operations
since the end of the Cold War, in part by capitalizing on the same
technological advances that have aided legitimate international
commerce.
Recognizing the seriousness of this threat, President Clinton has
launched a comprehensive effort to integrate all facets of the federal
response to international crime. The State Department is a key partner
in this initiative.
We are working with other nations around the globe to strengthen
legal codes; fight corruption; train police, prosecutors and judges;
close criminal front companies; halt illegal smuggling and money
laundering; negotiate extradition treaties; and bring criminals to
justice.
In regard to illegal narcotics, we have pursued a comprehensive
strategy that includes support for eradication, interdiction,
alternative development, the seizure of drug assets and the extradition
to the United States of drug kingpins.
These efforts are paying good dividends in our own hemisphere. Peru
has cut coca cultivation by more than 66 percent over the past four
years, and Bolivia by 55 percent since 1997. And as I have discussed
earlier, we have greatly stepped up our efforts to assist authorities
in Colombia in their battle against drugs and crime.
In the New Independent States, we continue to focus our efforts on
law enforcement training and helping legislators to draft anti-crime
and corruption laws. We are also negotiating agreements that will allow
our own law enforcement officers to cooperate more effectively with
their counterparts in these countries.
In Africa, Nigeria is the key. A significant portion of the heroin
interdicted in the U.S. is traceable to Nigerian smuggling
organizations. Because of the new government in that country, the
prospects for improvement are encouraging. It is essential, however,
that we have the flexibility in administering our programs to devote
sufficient resources to this continent.
(F) Human Rights, Democracy and the Rule of Law
A core element in American foreign policy is our support for
democracy, the rule of law, religious tolerance and human rights. We
view these not solely as American or Western values, but as universal
norms applicable to all people.
In 1900, no country in the world had a government elected on the
principle of universal suffrage in multiparty, competitive elections.
Today, according to Freedom House, 120 nations representing 58% of the
world's population, fit this definition. Our goal, in partnership with
others, is to preserve and strengthen democracy where it exists and to
lend appropriate support to democratic aspirations where it does not.
Earlier in this statement, I mentioned some of the specific
programs we use to aid democratic transitions, support free and fair
elections and help democratic forces build civil society.
These programs reflect our ideals and serve our interests.
We know from experience that democratic governments tend to be more
successful at preventing conflicts, maintaining stability, spurring
social progress, and building prosperous economies than regimes that
fear their own people.
I personally look forward to attending in Warsaw in June a
conference convened by democracies from Europe, Asia, Latin America and
Africa. Its purpose will be to affirm the value of democratic
principles and draw attention to the many facets of true democracy.
These go far beyond holding elections to include a free press,
independent political parties and labor organizations, and a legal
system that protects the civil, political and economic rights of the
people.
We also support democratic principles by striving to elevate global
standards of human rights and respect for the rule of law. Our goal is
to make the 21st Century an era of steady progress in each of these
areas, not a time of consolidation or settling for the status quo.
Accordingly, the United States will continue to support democratic
ideals and institutions however and wherever we can effectively do so.
We will continue to advocate increased respect for human rights,
vigorously promote religious freedom, urge accountability for crimes
against humanity wherever they occur, and firmly back the international
criminal tribunals for Rwanda and the Former Yugoslavia.
We will support efforts to help women gain fair access to the
levers of economic and political power, work with others to end the
pernicious trafficking in women and girls, and renew our request for
Senate approval of the Convention to Eliminate All Forms of
Discrimination Against Women. We will push for global ratification of a
Convention to ban the worst forms of child labor, and expand
partnerships with the private sector to eliminate abusive working
conditions in factories abroad, especially those producing for the U.S.
market.
And we will remain leaders in the international effort to prevent
harm to civilians from anti-personnel landmines. Through the
President's ``Demining 2010'' Initiative, we are working with official
and nongovernmental organizations everywhere to detect, map, mark and
destroy mines; increase mine awareness; improve mine detection
technology; and care for the victims of mines.
IV. Public Diplomacy
Last October 1, the State Department and United States Information
Agency (USIA) merged. This was a key step in the reorganization of our
foreign policy institutions called for by the Administration and
Congress.
The merger enabled us to make public diplomacy a core element in
our approach to foreign affairs by bringing new expertise and
perspectives into our policymaking team.
Public diplomacy advances U.S. interests by helping others to
understand our society, culture and values, and builds long-term mutual
ties through the Fulbright scholar and student programs. It can also be
a very practical tool for influencing events. During the conflict in
Kosovo, for example, our Internet Assistance Initiative helped us to
manage data generated by the massive humanitarian effort, while also
aiding refugees in locating loved ones who had become separated. More
recently, we used public diplomacy to warn against a breakdown of the
constitutional order in Ecuador.
In addition, the State Department's International Visitors Program
has been remarkably successful at identifying world leaders early in
their careers. Past participants include no less than three dozen
current Presidents and Prime Ministers.
I congratulate Members of the Committee for your support during the
reorganization process, and urge your backing for the full range of
public diplomacy programs in the year to come.
V. Managing for Security and Success
Mr. Chairman, one of my key goals has been to ensure that I leave
behind a State Department that is more modern, better managed, more
diverse, and more effectively organized than when I took office. With
bipartisan Congressional backing, we have made significant progress.
The Department's integration with ACDA and USIA has been successful. We
have greatly improved passport and consular services. We have
modernized communications, gone on-line, and upgraded training. Guided
by the Report of the Overseas Presence Advisory Panel, we are striving
to ``rightsize'' our diplomatic posts, and achieve better inter-agency
teamwork under our chiefs of mission abroad and the President and
Secretary of State here at home.
Above all, we are concentrating on improved security for our
personnel, our posts and the information we handle.
Since August 1998, the Africa Embassy bombings have served as a
searing reminder that the protection of our diplomatic missions demands
unrelenting vigilance and a fresh influx of resources.
Since that tragedy, with help from Congress, we have made a
significant downpayment towards our unmet construction needs, while
increasing training and hiring additional security personnel. The
President's budget request includes $500 million in FY 2001 funds for
facility replacement, $200 million for enhanced perimeter security, $16
million for new security professionals, and $328 million for recurring
costs associated with security upgrades. It also seeks advance
appropriations of more than $3 billion between FY 2002 and FY 2005 to
continue replacing our highest-risk embassies and consulates.
Within the Department, David Carpenter, the first law enforcement
professional to serve as Assistant Secretary of State for Diplomatic
Security, has taken a number of steps to tighten security. These
include enhanced perimeter protection, a tougher escort policy, and a
new surveillance detection program now operational at most of our
posts.
I have personally placed a strong emphasis on ensuring the
protection of classified information and the security of our
facilities. My message is clear that security is everybody's business,
every day.
In the days immediately prior to Millennium Eve, I was in almost
constant contact with Assistant Secretary Carpenter and our Counter-
Terrorism Coordinator, Michael Sheehan, as we worked with other U.S.
and foreign agencies--amidst a plethora of threats--to deter, detect
and prevent terrorist acts.
During the year ahead, I will have no higher priority than to see
that security in every aspect of Department operations, both internally
and in responding to external threats, is first rate both in effort
expended and results achieved.
VI. Conclusion
Mr. Chairman, the dawn of the millennium has only intensified our
awareness of the passage of time. We conduct much of our daily
communications and business through technologies that didn't exist or
were in their infancy only a decade ago. The patterns of international
relations we lived with for so long have been scrambled beyond
recognition; the new patterns shift like a kaleidoscope with every turn
of the calendar's page.
We live in a world transformed, that will not stop changing. No
country is more comfortable in such an environment than America, but we
would be lost except for what has not changed, and that is America's
purpose.
Some decades ago, when Cold War tensions were at their highest,
Walter Lippman wrote about the realities of his time in words that
serve as a warning to ours:

With all the danger and worry it causes . . . the Soviet
challenge may yet prove . . . a blessing. For . . . if our
influence . . . were undisputed, we would, I feel sure, slowly
deteriorate. Having lost our great energies [and] daring
because everything was . . . so comfortable. We would . . .
enter into the decline which has marked . . . so many societies
. . . when they have come to think there is no great work to be
done . . . and that the purpose of life is to hold on and stay
put. For then the night has come and they doze off and they
begin to die.

Our challenge is to prove Lippman wrong; to employ our energy,
retain our daring, and understand that our responsibilities are similar
in magnitude, if not so obviously in drama, as those fulfilled by our
predecessors.
It is true we face no Hitler or Stalin. But it is as great a
mission to create the conditions under which such evil does not again
threaten us, as it would be to oppose such evil if and when it did.
There are no final frontiers for America. We are not and have never
been a status quo country. We have always believed that the future can
be made better than the past. We are doers.
In the year ahead, we have the chance to add another proud chapter
in the history of American leadership, in search of peace, in defense
of freedom, on behalf of prosperity, and in service to our collective
boss--the American people. I have no doubt that if we are united in
that quest, we will succeed.
Thank you very much.

The Chairman. Well, you have not lost any of your
eloquence. A very fine statement. We tried to figure this thing
based on the number of Senators here, and I am delighted to see
all of you. We will have a first round of 6 minutes.
Madam Secretary, the President's fiscal year 2001 budget
for foreign affairs calls for an increase of $2.8 billion, or
14 percent over the fiscal year 2000 funding levels, and is
part of a highly political budget that increases spending
authority by almost $50 billion throughout the Federal
Government.
Now, we want to work with you to find additional funds for
projects like upgrading U.S. Embassies, but it is kind of
difficult when the President's offsets to some of these
increases have been debated and rejected already by Congress.
My question, based on that premise, laying aside the many
spending increases, what savings will be achieved in the fiscal
year 2001 budget from the organization of the State Department?
Secretary Albright. Mr. Chairman, I think I will take
justified pride in the reorganization of the State Department,
an issue we have worked on together. I believe the
reorganization is a very important step forward and, as we have
all said, we could not have done it without each other. But it
was a step taken primarily to enhance foreign affairs
coordination, and it was not undertaken, at least in my belief,
as a cost-saving measure.
As we notified Congress, we need to invest $219 million of
previously appropriated moneys to cover the one-time cost of
the merger with USIA and ACDA. At this point in the process I
have to be frank with you, we have not achieved savings. This
is normal for any merger of big organizations, whether they are
in the government or private sector.
However, we believe that in time the Department will
realize future savings through efficiencies made possible by
our more streamlined foreign affairs organizations and
structures. We know that to be the case already in terms of how
we are dealing with new technologies that we have to acquire.
Clearly we will streamline, but reorganization is not a cost-
savings activity at this stage.
The Chairman. Do you have more employees or fewer in the
two agencies, or in what were the two agencies? How do the
personnel compare?
Secretary Albright. I will have to get you the figures on
that, but obviously we have fewer and the reductions are taking
place by attrition. We wanted to make sure that people were
able to find appropriate jobs.
[The following information was subsequently supplied:]

The USIA merger with State has resulted in a net decrease of 202
positions. Most of the reductions were realized by small decreases in
many offices. Significant reductions (i.e. more than ten) were made in
the following areas:

25 details (mainly to State) were abolished and the
incumbents assigned to State vacancies;

11 positions in the USIA/Operations Center and various
commissions were abolished and the incumbents reassigned;

39 positions were moved to reimbursable funding which would
come out of other agencies;

14 incumbents were assigned to vacancies funded by other
appropriations.

Reductions to achieve these savings were made through attrition and
appropriate jobs have been found for all of the USIA personnel
transferred to State.

The Chairman. I want to track that as the months go by and
make sure our promises to the American people were justified.
Now, let me ask you just one little item, and this is just
for the purpose of illustrating a problem I have. Is it really
necessary, Madam Secretary, to cut U.S. funding for the Tibet
office by $1 million, as the President's budget proposes, to
fund this enormous budget increase? Now, why was that cut out?
Surely the $1 million would be lost in all of the billions and
billions of dollars we are talking about.
Secretary Albright. On that issue, Mr. Chairman, our issue
was basically with an earmark. We did not specifically continue
the new earmark. As you know, we generally oppose new earmarks.
However, we will be looking at how the performances of the
programs we have with Tibet accomplish effectively the goals
that you and we have. We will continue to fund the office using
some of the East Asia/Pacific regional funds that we requested
in 2001. So it is more a matter, sir, of opposing earmarking,
rather than not devoting funds to it.
The Chairman. I think I understand what you are saying, but
does the disposition of the office change under the President's
proposed budget?
Secretary Albright. Well, you know, we have a Tibet
coordinator, Julia Taft, who is working very hard on it. It is
not an issue so much of funds as of our ability to make our
statements and our position well-known to Beijing, which we
continue to do, I assure you, at every meeting that we have.
The Chairman. All right. Send me, if you will, or have
somebody send me, the number of employees that staff the Tibet
coordinator.
[The following answer was subsequently provided:]

The Coordinator, Julia Taft, has one full time assistant.
In addition, a Foreign Service officer from the Bureau of
Population, Refugees, and Migration (PRM) is responsible for
managing PRM's $2 million for programs for Tibetans in India
and the FY 2000 $1 million earmarked ESF funds for economic and
cultural assistance programs for Tibetans in Tibet.

The Chairman. Now, during the past 4 months, the
administration officials have stated repeatedly that Russia
will isolate itself if it continues its war in Chechnya, yet
Moscow's indiscriminate use of force in Chechnya has only
increased, and relations with Moscow continue as if this war
were simply a diplomatic inconvenience. Now, what is the United
States doing to bring this brutality to an end?
Secretary Albright. Well, first of all, Mr. Chairman, I
believe it is very important to put your question into context,
and that is, what is it that we foresee, or what role should we
have in our contacts with Russia as we move into the 21st
century?
I have believed in the fact that the Soviet Union was the
cause of terrible discomfort not only to its own people but to
the countries that were a part of the Soviet empire, and
created tremendous unease and problems, to understate it, for
the rest of the world. The changing Russia, however, is a
country with which I believe we need to have engagement in
order to make sure that it continues to travel down the road
toward democracy and economic reform.
I have just, as you know, come back from a trip to Moscow,
where I spent 3 hours with Mr. Putin. I made very clear to him
that we continue to have a very important arms control agenda
with Russia, one in which we have to try to make sure that we
deal with new threats while pursuing deep cuts that do not
undercut our strategic deterrent.
But let me say this on Chechnya. I made very clear to him
that what they were doing in Chechnya was not acceptable. They
see it, Mr. Chairman, as an issue of terrorism, and one does
have to grant them the fact that they do have a problem with
terrorism. They had three buildings blown up in Moscow. But
Chechnya is not only an issue of terrorism. I made clear that
their brutality toward innocent civilians and what they were
doing with refugees was not acceptable, that they needed to
have a political dialog in order to end it, and that there was
no military solution.
I think, however, Mr. Chairman, that for us to not have
contacts with Russia would be cutting off our nose to spite our
face. While we can be very angry at the way they are handling
Chechnya--and I do believe they are isolating themselves,
because I have talked to other foreign ministers--I think we
cannot recreate the enemy. It is essential for us to have
dealings with Russia across the board.
The Chairman. Yes or no. Do you consider the invasion of
Chechnya as it has been described, as a war of liberation?
Secretary Albright. No.
The Chairman. Thank you. Senator Biden.
Senator Biden. Thank you very much, Mr. Chairman. I think
it is very important that you be able to finish such an
important question that you started, so I for one do not mind
you taking the extra time.
Madam Secretary, I will be as brief as I can with my
question if you could be as brief as you could with your
answer, without in any way making it incomplete.
On the Balkans, I am really pleased that you are pushing in
your budget for the additional moneys for the stability pact as
well as for the aid directly that we promised to Mr. Kouchner,
the United Nations, essentially, high commissioner there, and
we are making a lot more progress there than I think some
suggest, but I think it all can come a cropper if Kouchner does
not get another couple of thousand police in place soon.
We are the ones supplying most of the police, and if they
do not get the funding for infrastructure that is needed--I
mean, we are talking about water and lights and sewer and
things that make a nation able to function, so my question is
this, and it is hard for a Secretary to answer this, I guess,
bluntly, but you have a reputation for being blunt.
Are you satisfied with our European friends, that they are
keeping their commitments on both the stability pact and the
peace process, and they are two different things, as we both
know, and the peace process within the Balkans, and
particularly Kosovo, and if you are not satisfied at this
point, are you optimistic or pessimistic we can actually get
the job done, that they will actually come through? And I am
not asking you to single out any nation.
Secretary Albright. Let me just say, first of all, I
believe that what we did as a NATO alliance in Kosovo was
essential. As I have said a number of times, I would much
prefer answering questions such as you have just asked, or more
hostile ones on the subject, than to have said we did nothing.
I think history would have judged us very, very severely on
that, and so I do think that we need to remember that we saved
thousands of lives, created a climate for the safe return of
thousands of refugees and provided an opportunity for the
people of Kosovo to rebuild their lives.
Now, I think that there has been demonstrable success under
Mr. Kouchner and UNMIK, and violent crime is down. The civil
authorities are functioning. Some of the Kosovar police force
is being trained, judges are being appointed, basic services
and utilities are being put into place, and education is being
restored, and we are hoping that there will be elections this
year. There are preparations for that underway.
Now, one of the problems that really has happened is that
there is a slowness in the money getting to Kosovo. I speak to
Mr. Kouchner very frequently, and he is in dire straits. He
calls and he says, I do not have the money to pay the teachers
and the police, and it makes it very hard if we are criticizing
the UNMIK operation and then he does not get his money.
I think what has to happen here is that we said that we
would bear a burden, a share of this, but that obviously the
Europeans have to do more. They have pledged quite a
substantial sum of money, but there is a slowness in the
delivery of it, and frankly there was a slowness in the
delivery of ours.
We just released $10 million on Friday, which they will not
get for 2 or 3 weeks. However, for every dollar that we have
spent other donors have contributed about $4 on average. The
ratio for fiscal year 2000 is closer to $6 for every dollar we
spend, so they have taken on the major bulk of this.
I spend a large portion of my day calling either EU
Commissioner Patton about making the money available, or
individual European governments. I think they need to
contribute, but I hope that we do not tie together their
contributions and ours.
Senator Biden. I do not think we should do that either,
Madam Secretary, and I imagine we may be confronted with that
option.
What I am suggesting to you is that I think the degree to
which we are likely to be confronted with that will be in
direct proportion to how persuasive you are able to be with
them to move rapidly on this.
My time is about up. I would just conclude with one
comment. I think the most dangerous part of the world right
now, one person's view, is South Asia. I think the one place
that has the greatest potential to get out of control the most
rapidly is South Asia, India and Pakistan. I do not predict
that will happen, but I do suggest that if it does, that is the
place where things could come a cropper very quickly, and with
no pun intended, a very big bang, and the question about
whether there is a deployment of weapons that have been
developed is of significant consequence.
There is a hair trigger based on geography and proximity,
and a pattern of being not at all reluctant to go to war with
one another over the past 30 years, so my question is, when
Assistant Secretary Inderfurth just had meetings with General
Musharraf--I believe I am pronouncing that correctly--and I
wonder whether or not you are able to--and if you want to wait
until the second round, Mr. Chairman, for the Secretary to
answer, but at some point if you could give me a sense of
whether or not, what issues did he address with Musharraf, and
what actions are we pursuing Pakistan to proceed with, I would
like to know that, if it is possible, and again, I do not want
to hold up my colleagues.
The Chairman. Let's keep it in context. I think it is an
important question to answer now.
Secretary Albright. First of all, Senator Biden, I agree
with you it is a very dangerous place, and we have been working
very hard. Deputy Secretary Talbott has been intimately
involved, as have I, in trying to get them to come on board on
the CTBT, which is very important, and to limit their
proliferation plans.
We have had a number of conversations with Mr. Musharraf on
several fronts. They involved getting him to move toward a
constitutional civil government, and telling him this is
something we are watching carefully. We are also seeking his
cooperation in dealing with terrorist problems as we are very
concerned about Osama bin Laden. Those are the three major
areas we have been working with the Pakistanis.
Senator Biden. I will pursue this on a second round. Thank
you, Mr. Chairman.
The Chairman. Senator Hagel.
Senator Hagel. Thank you, Mr. Chairman. Welcome, Madam
Secretary. Senator Biden referenced a delegation of Members of
the Senate and the House that followed you by 24 hours in
Russia, and I wanted to thank you and your Department,
especially Ambassador Collins, Madam Secretary, for their
support and assistance.
When we were there, a day after you, we met with the
speaker of the Duma and a number of senior committee chairmen,
as well as the chairman of the Federation Council.
I watched your conversation last night with Jim Lehrer, and
admittedly it was during a time I was reading my 7-year-old
``Captain Underpants,'' and so I may have missed parts of your
conversation. I want to refer to something that the chairman
and Senator Biden talked about, and you mentioned in your
conversation with Jim Lehrer last night, and again in your
testimony on the issue of Chechnya, that is, where the Russians
go from here.
I believe you said to Mr. Lehrer last night that you had
suggested to President Putin that they needed to work their way
out of this not just militarily, but for the long-term,
diplomatically.
You talked, I think, about the possibility of an assessment
committee or organization coming in. My question is this: How
detailed was your conservation with President Putin on Russia's
intentions? Are they thinking about a diplomatic resolution?
How did he respond to your suggestion about an outside
assessment group coming in?
Secretary Albright. Senator Hagel, first of all let me say
that we discussed your CODEL with acting President Putin, and
he was prepared to see you, but I gather you all got snowed in
somewhere, so that created some problems.
I think he indicated he really wanted to get together with
Members of Congress in order to try to establish some kind of
dialog. I think it would be very useful.
I hope we can have a longer discussion about acting
President Putin. I know he is on everybody's mind, and he is a
mixed bag. I mean, there are certain aspects to him where I see
him as being very pragmatic and a problem-solver, and in other
cases I found him in denial. Chechnya is one of those cases.
I think that the Russians have decided for their own
reasons that they have to take Chechnya. I think from their
perspective they have decided they need to liberate it. As I
say, I do not agree with that. I think they believe they can
solve the problem the way they are solving it now. I do not
believe that, and so it was the one area where we just plain
disagreed. And they see the situation in Chechnya all in terms
of terrorism, which it is not.
I spoke to him about the fact that the forces of the
Chechens have moved to the south and to the west and to the
hills. They are guerrilla fighters, and I think this will go
on. This is what I said yesterday, when they showed pictures of
Grozny having been occupied.
The Russians also have said they are now prepared to look
at a variety of humanitarian aspects of this. As I understand
it, a U.N. group went in, but did not get in far enough to
really see what some of the conditions are. I had asked that
they let an assessment team go in, and I am waiting for an
answer from Foreign Minister Ivanov on that, because Mr. Putin
said for him to look at that.
I had said that they needed to have a political dialog. We
have offered, through the OSCE and other ways, to assist. There
was not a lot of taking on that. I think ultimately they see a
political dialog, but not at any pace that we are looking at,
but their own pace.
I also asked that they allow accredited journalists to go
in, because the facts on the ground are clearly in dispute. I
made very clear that the Russian Government bears
responsibility for Mr. Babitsky, the Radio Liberty reporter.
So we have a disagreement on Chechnya, there is no doubt
about that, but I think--as I started to say to the chairman--
there are other parts of our relationship with Russia that we
need to consider, and I hope we will have a chance to discuss
that.
Senator Hagel. Thank you. You mentioned also, I believe, in
your conversation with Mr. Lehrer last night that you found the
acting President, President Putin, a little more open-minded
than you had thought regarding the 1972 ABM treaty. Would you
care to explain that?
Secretary Albright. Well, first of all, we had a 3-hour
discussion where there was a real give-and-take. He showed me
that he had a stack of note cards that he did not use. I showed
him mine, and we could have exchanged them. But he took notes.
He was very organized and careful, and when I raised the arms
control issues, what I found interesting was that he did not
deny the fact that there were new threats and that there needed
to be a way to deal with them.
He also, I think, understood the importance of what had
happened in Helsinki and Cologne, and the importance of the
previous agreements President Yeltsin and President Clinton had
made in terms of seeing the ABM and START III treaties as a
package that looks at defense and offense together. This
approach allows us to look at deep cuts and the importance of
maintaining a strategic deterrent.
So it is not definitive. Obviously, the negotiations are
being carried on at many levels, but I did not find him in a
total ``nyet'' mode, and I felt there was a way that we could
work on a common assessment of the new threats. He also felt
that we have to maintain the fundamental principles of the ABM,
and that is our view.
I have stated many times that it is possible to do that and
still adjust the ABM. It has been amended before.
Senator Hagel. If I might, Mr. Chairman, just add one
thing. I am not sure what your point was, then, when you said
on Lehrer that you found him essentially a little more
accommodating. I think the term you used was a little more
open-minded. Where is the open-mindedness?
Secretary Albright. I think this is my assessment in
previous conversations I had had. Many of the Russians had
denied the existence of any new threats and felt that this was
an American plan to only deal with trying to limit their
strategic deterrence. He did not, flat out, say there are no
threats, you are only after us, and so in that regard I found
him more open-minded.
But more open-minded than I had been led to believe. I am
not saying here that this is any kind of an easy proposition.
It is just that what struck me about him, Senator, is that he
is willing to talk. He may come out with a decision we do not
like, but he does not make pronouncements. He is basically
somebody that you can have a conversation with.
But I would like to say about him that the jury is
obviously out. There has been a lot of psychobabble about his
background, but we basically have to be looking at his actions,
not his words. We are going into protracted and difficult
negotiations on these subjects.
Senator Hagel. Thank you. Mr. Chairman, thank you.
The Chairman. Senator Dodd.
Senator Dodd. Thank you very much, Mr. Chairman.
Welcome, Madam Secretary. Let me at the outset commend you
for the wonderful job you are doing and your team is doing in
uncertain times, and let me quickly add how much I appreciate
the support that you have given to us on this side of the table
who have made some trips overseas recently, and working with
the administration, including the most recent trip by Senator
Hagel and some of our colleagues who went.
I think that kind of cooperation advances very well the
cause of our common interests here as we try and pursue the
best policies for our Nation in this century, and it is healthy
to see this kind of attitude between the legislative and
executive branch. We have seen examples of it throughout some
recent past history, and I hope we will continue to see it even
after your term of office expires.
Let me just quickly make a point. I do not want you to
respond to this, but the confirmation process, something the
chairman and I have talked about informally, has got to be
improved. We need to find a far better way in which we can deal
with the confirmations of individuals who offer themselves up
to serve our country in one capacity or another, and this is
going on too long and taking too much time, and we ought to be
able to figure out a way in which we can do a better job of
that in the future.
I have three areas I want to address with you. I will not
get to all of them in the first round, but I am very interested
in India and Pakistan. Senator Daschle, myself, Senator Reid
and Senator Akaka were in Pakistan and India a couple of weeks
ago. Our colleague, Sam Brownback was there right around the
same time we were, and so I presume he will have some questions
in this area that Senator Biden has raised.
Second, Colombia and the pay package, Venezuela and Ecuador
and the northern Andean countries is an issue I want to raise
with you, and also Ireland, so there are three important ones.
Let me pick up on the Indian and Pakistan issue since
Senator Biden has raised that one already, and I will come back
to Colombia later on if others do not bring the subject matter
up.
On India and Pakistan, Madam Secretary, there are four
issues that are of deep concern to us, as I understand them.
Terrorism, obviously, a major concern. The road to
democratization after the October coup in which General
Musharraf took control of the country, the issue of Kashmir,
which obviously is tremendously troublesome, and fourth the
issue of the nuclear weapons issue.
Now, there is also the pending question of the Presidential
trip to the subcontinent. I for one would like to see the
President make a stop in Pakistan. I know this is a very
troublesome question, and there are a lot of reasons, based on
current circumstances, why he might not. India has been a great
ally of ours, and a tremendous democracy, and someone we
basically have a tremendous respect for, and obviously they are
deeply concerned about certain actions that Pakistan has taken,
and events in Pakistan.
I do not think there is much likelihood on resolving
Kashmir in the next few weeks, nor are we likely to deal with
the issue of the nuclear weapons issue overnight, but I think
there can be some statements and some things done on
democratization and terrorism in the next few weeks which the
Pakistani Government could take, and I would hope that we would
use whatever efforts and offices we have to try and promote
that so that a stop by this President in Pakistan as he visits
the subcontinent would be possible.
I would appreciate any comments you may have on that, and
how I have characterized the four issues, whether you agree
with those or whether you want to add or subtract from the
number I have mentioned.
Secretary Albright. Senator, let me just say about travel
and CODEL's and contacts, I welcome very much, I hope you do,
the possibility that we actually talk when you are all out on
the road, as you and I have done.
Senator Dodd. As we did.
Secretary Albright. And I think that it helps a lot in
terms of what you are seeing and what our reaction to it might
be. While we do not speak for each other, I think that it does,
in fact, help a lot when we have that kind of contact. So we
very much appreciate your taking those kinds of trips. They are
not easy. I know people sometimes think they are. As somebody
who travels a lot myself, I know how hard they are, so thank
you very, very much for that.
On the issues that you have raised, I think that those are
the key issues. We have been very concerned about the path to
democracy. I think that one of the issues all along has been
how Pakistan has evolved, and how it is in fact really working.
Pakistan's ability to absorb democratic practices is not a new
issue.
We obviously were disturbed by the way that General
Musharraf took over, and have been working to try to get him to
understand the importance of having a civilian democratic rule,
and have laid out with him some of the steps that need to be
taken.
On the issue of terrorism, we expect Pakistan to cooperate
with us in trying to deal with the problem of terrorism, and
there has been cooperation at some levels, but not as much as
we would like.
Kashmir is obviously the fuse that is always there, and
what makes the situation so dangerous. It is our hope that they
can, in fact, begin to talk about it with whatever assistance
we can give.
On the issue of the President's trip, first of all I think
it is very important that the President is going to India. It
is the world's largest democracy.
Senator Dodd. It has been a long time, 1977.
Secretary Albright. It has been a long time. There are a
number of issues, not only the nonproliferation issue, which is
obviously very high, but in terms of business and environment
and a number of ways that we can include India more.
No decision has been made as to whether the President will
go to Pakistan as well. We do have these concerns, and we hope
that Pakistan will address them.
Senator Dodd. My bell has rung here, but can I interpret
from your remarks, Madam Secretary, that you would hope that
some of these issues might be resolved so the President could,
in fact, make a stop in Pakistan?
Secretary Albright. Well, we have, in fact, made our
concerns known to them, but as I have said there has been no
decision as of yet.
Senator Dodd. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator. Senator Grams.
Senator Grams. Thank you very much, Mr. Chairman. Madam
Secretary, as the chairman noted earlier, we have worked
closely together during the last year in shaping my
legislation, which was signed into law to improve the security
of our diplomatic facilities abroad, and I hope we can work
together now to tighten security at the State Department
itself.
I understand the ongoing tension between the foreign policy
establishment's desire for openness and also the security
office's need for restrictions, but I think we can all agree
that the success of Russia's foreign intelligence service in
placing an electronic eavesdropping device inside a strip of
molding in the seventh floor conference room, which by the way
is close to your office, reveals that this administration has
been dangerously lax in enforcing prudent, common sense
measures to safeguard our most sensitive diplomatic secrets.
Now, I am going to be chairing a committee hearing on this
subject on Thursday, but I also wanted to take this opportunity
to ask about the State Department's security, because it is an
issue, I believe, that should be addressed at the highest
levels, so controlling access is a contentious issue, I
understand, at the State Department.
On November 17, 1998 the Department notice stated that, and
I quote, ``all visitors, with the exception of active U.S.
Government agency personnel who display proper photo
identification, shall be escorted at all times.'' That mandate
was rescinded just 6 days later, and it took 9 months to
reinstate the policy on August 6, 1999.
Now, having all visitors escorted seems to be a common
sense and prudent measure. Why, Madam Secretary, was the order
revoked?
Secretary Albright. First of all, Senator, let me say I
agree with you completely that security at the State Department
as well as other agencies is essential, and it is something
that I have as a very high priority.
I have asked Assistant Secretary Dave Carpenter, who is a
professional law enforcement officer and a former member of the
Secret Service, to undertake a complete review, bottom-up, top-
down, of all of our security arrangements.
Let me also, just to correct something, while the bug was
on the seventh floor it was not near my office. The State
Department is a very large building. It looks like an ``H'' and
it was on totally the other side.
The escort policy had originally been changed in 1992.
There were reviews of it, and I insisted in August 1999 that it
be reimposed. I do not have a specific answer as to why. There
were questions about the numbers of people that were necessary
to escort people around. It is a resource problem, and it is a
question as to how buckled down or tied down everybody is in
the State Department.
But I can just assure you that we are taking every action
now to make the State Department a totally secure place, while
still allowing us to work. People have to come and visit us.
That is part of what we do. But I am glad you are holding
hearings, and we will be as cooperative with you as possible on
it.
Senator Grams. Madam Secretary, according to a report by
the GAO, dozens of foreign citizens were given access to
sensitive computer systems at the Federal Aviation
Administration without undergoing any security checks.
Comparable concerns have arisen regarding DOE's Stockpile
Stewardship Program.
Now, I am concerned that similar security lapses could have
occurred at the State Department as well, so my question would
be, do all foreign citizens who work at the State Department,
including all contractors, have to go through some background
checks?
Secretary Albright. Senator, it is my understanding yes. I
am as concerned as you are about this and as angered as you
are, and I am directing now that we review all of these issues.
This is obviously a concern across the board in the Government.
With respect to the freedoms allowed to Americans and for
people who are not originally born in the United States but are
citizens, such as me. We cannot completely tie ourselves in
knots. But I am absolutely as shocked, appalled, irritated,
whatever adjective you want to use, as you are, and that is why
I have directed this change. I am also looking at structural
changes within the Department.
Senator Grams. In that regard, do you have any reports as
to what nationalities have been given access to computers at
the State Department?
Secretary Albright. No, I personally do not.
[Subsequent to the hearing the following clarifications
were received from the Department of State:]

Clarification of Responses Given by Secretary of State Albright

U.S. Department of State,
Washington, DC,
February 15, 2000.
Hon. Jesse Helms, Chairman,
Committee on Foreign Relations,
United States Senate.

Dear Mr. Chairman: I am writing at Secretary Albright's request to
clarify two responses given during the Committee's hearing on February
8. Both were in reply to questions posed by Senator Grams.
When asked whether ``all foreign citizens who work at the State
Department, including all contractors, have to go through some
background checks,'' the Secretary responded in the affirmative. This
answer is correct when applied to all persons, including foreign
citizens, who are admitted to the Department with the understanding
that they will work on classified or sensitive projects or have access
to classified or sensitive information.
Contracts which do not require access to classified information or
equipment can be awarded to uncleared companies. These uncleared
companies may assign uncleared personnel, to include non-U.S. citizens,
to these contracts. If the contract performance is at the Department of
State, however, building passes are required at which time the
contractor employees undergo a records check.
In a follow-up question, the Secretary was asked whether she knew
the nationality of all individuals granted access to computers at the
State Department. She replied that she did not personally know this
information. She is, however, aware of one case, currently under
investigation, involving a subcontractor who used foreign nationals on
an unclassified project related to computers in the Department. Among
other things, the investigation is seeking to determine whether all the
policies referred to above were observed in that case.
I hope this information is helpful in clarifying and ensuring the
completeness of the record of the hearing. If you would like further
information on this matter, Assistant Secretary David Carpenter would
be pleased to brief you.
Sincerely,
Barbara Larkin,
Assistant Secretary, Legislative Affairs.

Senator Grams. One followup quick question. The Booz Allen
and Hamilton consulting firm recently conducted an audit on the
State Department's ability to respond to both terrorists and
counterintelligence threats. Now, it has been reported that one
of the recommendations made in this report was to elevate the
role of the Bureau of Diplomatic Security. I would like to ask
you, do you believe the role of the DS should be elevated, and
that the DS should report directly to you?
Secretary Albright. This is exactly the kind of thing I am
now looking at when I am saying that we are looking at
structural changes. I have the highest regard for the
Diplomatic Security Service, and I believe that their numbers
should be increased, and I believe that they should be able to
do what is necessary in order to protect our security at the
State Department as well as abroad.
I have looked at the recommendations of the report as well
as a number of other reports that have been given to me. As I
said, I am looking at structural changes in the Department, but
in the interim I have, in fact, asked Dave Carpenter, who I
respect highly, to undertake this review. I take this very
seriously, Senator.
Senator Grams. Thank you, Madam Secretary.
The Chairman. Senator Kerry.
Senator Kerry. Thank you, Mr. Chairman. Madam Secretary,
welcome. It is nice to see you here, and thanks for taking time
to be with us, and thank you also for the terrific job you are
doing in our behalf.
I thought that you and the President both made very
important statements at the World Economic Forum and again
today. I have just finished reading through your testimony, and
I think it is a terrific summary of the global responsibilities
and challenges we face.
On page 3, I think you make just an enormously important
statement in two paragraphs which is a challenge to this
committee and to the Congress, and I am not sure the full
measure of it is taken into account either in our discussion
today or in our thinking.
That is the paragraph where you talk about how we allocate
less than one-tenth of the portion of our gross national
product that we did have a century ago to support democracy and
growth overseas, how during the past decade alone our
investment relative to the size of our economy has declined by
more than one-half, and how, throughout this period, we have
been cutting foreign policy positions, closing diplomatic
posts, shutting USAID and USIA missions, and you then in your
next paragraph talk about the consequences this has for us.
I would just like to share with my colleagues and ask you a
question. Maybe you would go a little further in talking about
this. At the World Economic Forum there is a meeting that takes
place for several days with leaders from various countries
around the world, maybe 60 leaders, finance ministers, prime
ministers, Presidents of countries, many of them less-developed
countries, all of them with the same interest that we have in
stability and in development.
To a country, they are currently wrestling with the impact
of globalization and technology, and to a leader they are
struggling with the extraordinary divide that exists in the
world. We are getting richer and richer, and many of them seem
to be standing still, or even getting poorer.
The issue of AIDS in Africa is of such enormous
consequence, it is hard to grapple with it, get a hold of it. I
know you were asked a question by one woman about 40 million
children who will be orphans, added to the 100 million already
existing, and when you consider that many children being raised
as orphans, the implications for democracy-building,
institutions, or society are just enormous.
One of the great fears of developed country leaders and
less-developed country leaders is what Tom Friedman's talking
about in his book, ``Backlash,'' and each year in Davos we have
talked about the potential for backlash.
Here we are, this great cresting wave of success in our
country and around the globe in accepting market economies, and
here we are busily investing and developing these market
economies to a small degree, but not with the kind of success
we would like to see in terms of passing it on to larger
numbers of people, and, indeed, spreading stronger
institutions: witness what is happening in Russia right now
where it is actually going the other way, rather than the
direction we would like to see it go.
So I ask the question here, how is it that we can be,
perhaps, within the Congress as complacent as we are, or even
moving in the wrong direction on foreign affairs spending, and
would you share with the committee more on the danger that
exists in our not recognizing the degree to which the world has
changed, and our larger responsibility now to invest more
either through technological transfer, through technological
assistance, through cultural exchanges. If you look at the fact
that 60 percent of the Government of Taiwan was educated in the
United States, it tells us something about the values that are
transmitted by this kind of long-term investment, and yet we
are moving in the opposite direction.
I know you are speaking to this in your testimony, but I
think it bears perhaps greater emphasis, and I would ask you
simply to talk a little more about the world you see and the
implications for us as Americans if we allow a backlash to set
back this incredible acceptance of markets and movement toward
democracy that we have all wished for and invested in for so
long.
Secretary Albright. Thank you. I think that is a very broad
and open-ended question, but let me just make a few points,
because I think what you have said is so important.
There was a time when the United States basically invested
its foreign affairs resources in efforts to resist communism,
particularly on base rights. We really focused ourselves on
fighting the cold war, and I think we did that very well.
Now, we are dealing with problems that are burgeoning in
countries that most people at a certain stage did not care
about, because they were either well on ``our side'' or
hopelessly on the other. We fought in many ways to try to move
some countries from being in one camp to the other. That was
what we did with our foreign aid money. What we now have to
deal with are issues that are vast because of the complexity of
societies.
What I think is the most important point, and I think we
have all been celebrating this fact, is that there are now more
democracies. At the beginning of the century there were not any
that were elected by universal suffrage. Now there are about
120 nations where there are democracies, but democracy I think
also makes promises.
The people are promised that they will have a better life.
What we have seen, and this is true in Latin America, and in a
lot of the nations of the former Soviet Union and Central and
Eastern Europe, is that the average people are not getting the
pay-out for being democratic. So what you see is some of the
backlash that Tom Friedman has talked about and that we have
all seen. People wonder where is the democracy dividend.
So we have been talking a lot about the fact that democracy
is a process all the time. Where I believe the United States
needs to increase its help is in terms of making sure that
these are not just democracies in name, that there are judicial
systems, and commercial codes in place, that human rights
policies are carried out, and that these countries can take
their rightful place within the international system.
I just came back from a trip to Latin America, where there
were discussions about the fact that while we have celebrated
that there are no military dictators in Latin America, there
really has not been enough change there to provide a
substantial structure that would allow functioning democracies.
Therefore they may begin to flirt with authoritarianism or
protectionism.
Let me go back to the Putin question, because this is the
issue. We have rightfully spent a lot of time celebrating the
end of the cold war, but for the average Russian, not the
intellectual, not the people who live in cities even, there has
been very little pay-out. They are disoriented, and what Putin
is talking about, the buzz-word in Moscow is order. The
question is whether it is order with a small ``o'' or a big
``O'' and I think this is what we have to watch. We do not want
order with a capital ``O.''
So I think this is a huge question, Senator, but I think we
need to understand what underlies the countries that are now
democratic, and not just celebrate their democracy, but
understand the needs that come with democracy. The United
States is much better off with countries that are democratic
and have market systems, and our programs ought to be directed
toward that.
The Chairman. Thank you very much. Senator Brownback.
Senator Brownback. Thank you, Mr. Chairman, and welcome,
Madam Secretary. It is always a delight to have you here at the
committee and hear your perspectives and views.
I have got three areas that I want to address quickly and
would like for you to respond to. I think I will just put all
the questions there together and let you sort them out, as the
time goes pretty fast.
First, on South Asia, then I want to speak briefly on
Sudan, then on Iraq. On South Asia, I think we have an enormous
opportunity really staring us in the face, and all these
opportunities come with huge challenges as well.
India, it strikes me, is interested and open to a better
engagement, broader engagement with the United States, and it
is in our interests and theirs to have it, so I am excited
about the President's trip there, your trip, I believe to South
Asia before the President goes. I hope we are engaging on a
broad set of issues and not holding the whole region hostage to
one issue, which I think would be a tragedy for us.
You have the authority to waive sanctions. I would hope you
would do that across the board on economic sanctions.
Particularly, I understand there is still--the administration
is opposing some international financial institution loans into
India, and I would hope that those would be waived by the
administration in our effort to broaden the relationship with
India that I think is important.
On Pakistan, which is a very troubling for us as a country,
with what we see taking place there on several fronts, I would
hope you would go to Pakistan as well, before the President
does, and I would join my colleague Chris Dodd in urging that
the President go to Pakistan as well.
A different set of issues, but clearly the dealing with
terrorism and much of that shift of international terrorism now
moving to the region. Within that region we need to be engaged
within Pakistan to be able to deal with it, and my fear is that
if you do not go to Pakistan, if you go to India but not to
Pakistan, and the President goes to India but not to Pakistan,
we further move Pakistan away from us, our ability to be able
to deal with them, and we actually strengthen the very hand we
seek to weaken, and that of the really fundamentalist within
Pakistan.
This is a very troubling region of the world to me. I think
I am quoting my colleague, John Ashcroft, and I look at that
region as being a pool of gas looking for a match. It is just
very, very volatile right now in that region, and I would urge
us to be widely involved.
On the Sudan, I was disappointed that the authority was not
used to be able to help more in southern Sudan that was granted
to the administration. I understand from some press reports, as
recently reported in the Washington Post, that the State
Department is considering renewing engagement in the Sudan,
opening an embassy up in Khartoum, lifting some of the
sanctions in certain circumstances.
This is still a regime in place that is doing a number of
things directly contrary to what the United States believes in,
certainly in democracy, but you can go beyond that to the
killings, the slavery, the civilian bombings that continue to
take place, the support of terrorism by the Khartoum
Government. That seems to me a very odd move to us at this
point. I hope you can tell me that that is not the case.
And finally, on Iraq, the President has the authority to
sign the bill, the Iraq Liberation Act, has drawn down the
authority, has money, and has not been willing to spend that in
the opposition movement to Saddam Hussein.
Now, it is my understanding that less than $1 million of
the $97 million drawdown that was authorized under the Iraq
Liberation Act has actually been spent. None of the $10 million
appropriated last year for the Iraqi opposition appears to have
been spent, which leads me to conclude that the President has
just abandoned the idea of moving Saddam Hussein from power.
Now, I hope you can change my mind on that, but the actions
seem to speak that way.
I am throwing a number of issues out, but those are key
ones on my mind.
Secretary Albright. Thank you. Let me just add to a couple
of things on India/Pakistan. I agree with you completely that
we need to view the area as one that we have to deal with in a
more proactive way. The sanctions were something, as you know,
that were automatic on this, and you have been a leader in
trying to wend our way through this. All of you that have gone
to the region I think have come back with a lot of information,
and very useful ideas.
I see this as a tinder box, and we are working very hard to
try to diffuse a lot of that. We have made clear, and I will
not repeat all this because of time, the things we are
concerned about in Pakistan, and I believe we are moving
forward. India now has a strong government that is dealing with
a lot of the issues that have been of concern to us.
The President is also going to Bangladesh, and I think that
we need to note that because it is a small but important
country for the region.
On Sudan, Senator, let me say first of all again I would
like to thank you for your attention to Sudan. You have spent a
lot of time on it. I have, too, and I have been very concerned
about the civil war there, and the terrible fighting that is
now in its 17th year. We would like to see a comprehensive
solution for peace in the Sudan. We are supporting the IGAD
process and will continue to do so.
I hate to say this, but you cannot believe everything you
read in the newspapers. We have appointed a special envoy,
Harry Johnston, to examine where we are with Sudan. There are
those who would like us in the governments or other places to
have diplomatic relations with Sudan. The only thing we are
doing is looking at the internal things that are going on
between Bashir and Turabi, what they mean. I have spent enough
time working on the problem to know there is slavery, a modern
form of slavery going on in Sudan, and that is something that
we have to deal with on an ongoing basis.
The warring parties met for the first time January 15th,
20th under the new revitalized IGAD structure, and we are
working very hard to build their capacity for civil society and
civil governance.
On the food aid authorization, the President has not yet
made a decision on this issue. We are assessing the whole
thing.
Senator Brownback. You are still considering that, then.
Secretary Albright. Yes.
On Iraq, let me say this. First of all, we have not changed
our policy. We are for the containment policy, and we are for a
regime change, and on the implementation of the Iraq Liberation
Act, we are committed to supporting regime change and assisting
the opposition groups both inside and outside Iraq. We have
worked very hard with the Iraqi opposition and it is making
some progress. We are discussing providing it first with
nonlethal material and training support under the ILA drawdown
as quickly--and I really need to have you hear this--as quickly
as their capabilities to absorb permit. We will obviously
remain in close consultation with you.
Frank Ricciardone is the person I put in charge of this. He
has devoted an incredible amount of energy to working with the
group. In 1999, the Iraqi National Congress held its first
executive meeting since 1994, and its first mass assembly since
1992. Members of your staff and other Members of Congress
supported and witnessed these meetings.
No matter if some Iraqi party stayed away The important
point is that all Iraqis, inside and out, ranging up to Saddam
Hussein himself, began talking about the INC agenda. Frankly,
even after that meeting Saddam started talking about letting
the Iraqi people have a new constitution, elections, and
political parties. I received these people when I was in New
York at the General Assembly and urged others to do so.
The Defense Department is now working to accelerate the
training and to deliver material support to the opposition. We
are working hard to help the INC meet statutory and regulatory
requirements to make it eligible to receive the first direct
funding from the Economic Support Funds.
In sum, I think the Iraqi opposition has come far, though
it has a long way to go. We will remain in very close touch
with you. This is not an easy proposition, because, as I said,
they were divided. We have tried to bring them together, but I
just have to specifically say to you, we have not changed our
goal of regime change with Iraq.
Senator Brownback. Thank you.
The Chairman. Thank you very much. Senator Feingold.
Senator Feingold. Thank you, Mr. Chairman.
Madam Secretary, welcome. I have several questions. I may
need to go to a second round if the chairman permits a second
round. Let me just get right into it. The first has to do with
an issue that many Americans are increasingly concerned about,
and that is the use of the death penalty in this country.
I am concerned for many reasons, not the least of which is
the fact that people who are later proven innocent have sat on
death row for decades. Other domestic concerns include the
arbitrary and discriminatory manner in which the death penalty
is administered, but I am increasingly concerned about the
death penalty's impact on America's international stature,
which I have found to be mentioned more and more.
I have a two-part question with regard to this. It is my
understanding the EU denies membership to countries that employ
the death penalty. Can you tell us about how the death penalty
has arisen in your conversations with European leaders, and
have you found that the United States' use of the death
penalty, and particularly this country's willingness to execute
people for crimes they have committed as juveniles, impacts on
our credibility when we try to champion international human
rights in countries like China?
Secretary Albright. Well, first of all, I am not going to
comment on my personal views on this subject. Let me say that
it is true that the EU does have a requirement about the death
penalty. This was one of the concerns that did come up when
questions were raised about Turkey's accession to the EU.
I believe there are those who question America's position
on this, and it does come up in a number of situations, but
here I agree with Chairman Helms. I think this is our sovereign
right. It does create problems, there is no question about
that, but that is the U.S. position.
Senator Feingold. Thank you, Madam Secretary.
Switching to Colombia, I am concerned by continuing reports
of collaboration between the Colombian armed forces and the
right wing paramilitary responsible for grave human rights
abuses in that country and, as you mentioned in your remarks,
the administration is proposing very significant increases in
U.S. support for these same armed forces.
Two questions in this regard. Are you satisfied with the
Colombian Government's efforts to sever these ties, and how is
it possible to ensure that U.S. assistance does not find its
way into the hands of the paramilitary?
Secretary Albright. First of all, let me say that, as I
stated in my testimony, I think the threat from Colombia to us
in terms of drug production is huge. This is one of those
foreign policy problems that has a huge domestic impact.
President Pastrana has over the last months undertaken, I
think, a systematic approach to trying to deal with the
problems in Colombia. Some of what he has done has to do with
narcotrafficking and some has to do with the peace process, and
some has to do with his economy, and some has to do with social
issues and the social structure in Colombia.
He developed Plan Colombia, which we are supporting because
it has balanced approach and is comprehensive in dealing with
the issues I have discussed.
The assistance that we are giving is counternarcotics, not
counterinsurgency, and the issue is how the money will be used.
The paramilitary is a group that is, as far as I am concerned,
outside the legal structure, and one of the problems that
President Pastrana has is how to deal with the paramilitary.
When I was down there he presented ideas about how they were
going to sever ties with them and how they were going to make
sure that the power of the paramilitary is undercut.
On the issue of human rights and where our money is used,
the assistance that is going to the military is being used to
provide protection for the police. The state needs to gain
control over the south, and the police will be doing that. The
military is going to be providing an envelope for them to do
it.
We have all been concerned about human rights, as has
President Pastrana. He has put his Vice President in charge of
this. He has created two new military groupings that are
composed of people that have been vetted case-by-case for any
human rights abuses. So we are following the Leahy amendment,
which prevents us from giving assistance, very closely.
I do not know whether you had a chance to speak to
President Pastrana. He speaks very movingly and strongly about
his dedication to human rights, and that when he is out of
office he wants to make sure that no one ever criticizes him
for having been involved or countenanced any human rights
abuses.
Senator Feingold. I had hoped to meet with him, but that
was on the day of the snow disaster, so I hope to do that in
the future. What is the administration doing to help African
countries gain access to drugs to treat HIV/AIDS? As you
probably know, Senator Feinstein offered an amendment, which
was accepted, to the African Growth and Opportunity Act that
essentially says the United States should not fight against
African laws that are designed to improve access to AIDS drugs
provided that those laws comply with the agreement on trade-
related aspects of intellectual property rights.
At this point, we are trying to fight to keep this in the
bill in conference, and I am wondering what your position is on
that.
Secretary Albright. Well, let me point out the scourge of
AIDS in Africa, where I think the facts idicate more people
have died of AIDS-related problems than actually in some of the
fighting. We have now budgeted $244 million in the USAID budget
for HIV/AIDS, and this is a $54-million increase in fiscal year
2001.
There has been a question as to intellectual property
rights and pharmacutical remedies being dealt with in this
context. We are trying to sort out how to make it possible for
there to be availability of drugs that can deal with AIDS. At
the end of last year the President instructed the Department of
Health and Human Services to develop a cooperative approach
with USTR on these intellectual property matters that is
consistent with our goals both for helping these poor countries
gain access, as well as protection of intellectual property
rights.
I find this problem very important, and Ambassador
Holbrooke really took an outstanding step and did something
unusual in making HIV/AIDS a security issue for the Security
Council. He thereby pushed the envelope of what is normally
considered a security issue, which I think HIV/AIDS definitely
is.
Senator Feingold. I agree with you, and I hope the
administration will support our amendment as the African Growth
and Opportunity Act.
[A prepared statement by Senator Feingold follows:]

Prepared Statement of Senator Russell D. Feingold

I want to welcome Secretary Albright to this hearing this morning.
The Administration's budget was just delivered yesterday, which
gives us some idea of the Administration's foreign policy priorities
for the year ahead, but it is really this kind of interaction, where
the committee can discuss the international affairs component of the
budget and the state of U.S. foreign policy in general with the
Secretary, that is particularly useful and instructive for me.
First, I would like to commend the Administration and particularly
Secretary Albright for continuing to push for responsible, thoughtful,
and sustained engagement in world affairs. As we embark on a new
century, America's long-term interests are inextricably bound up in the
course of international events. Our leadership has never been more
important.
I am also extremely pleased to see evidence of this
Administration's commitment to addressing the AIDS pandemic. I recently
traveled in Africa and saw first-hand just how devastating, and how
pervasive, this crisis truly is. Likewise, I am heartened to see that
the Administration will continue to push for debt relief, so that the
poorest of the poor can cast off at least one set of shackles that lock
them in destitution. And I recognize and appreciate a genuine attempt
to direct much-needed attention and resources to the African continent,
where important U.S. interests are all too often overlooked, and where
so much potential lies.
As we discuss U.S. policy priorities, I want to take this
opportunity to reiterate some broad concerns that I have expressed
before, both in this committee and on the Senate floor. I do not
believe that strategies of engagement with any particular regime--China
is just one example--can meaningfully succeed absent consistent and
firm dialogue about internationally recognized human rights. It is
unquestionably true that human rights are not the only issues of
concern to the U.S., but it is also true that they cannot be treated as
a second-tier issue.
The ultimate strength and sustainability of our international
relationships, and our nation's very credibility, depend upon a
principled approach to foreign policy. In this regard, there are many
challenges in the year ahead--particularly with regard to U.S. policy
toward Colombia, Indonesia, and China. I look forward to learning more
about the Secretary's views on these matters.

The Chairman. Thank you. Senator Ashcroft.
Senator Ashcroft. Madam Secretary, thank you very much for
coming. Mr. Chairman, thank you for this opportunity. May I
commend you on your hard work. You are a very industrious
person, and I am grateful for your effort.
I want to take some questions in a different direction. A
little over a week ago, the State Department said that the
United States would abide by a newly negotiated Biosafety
Protocol. It is a protocol that is designed to implement the
convention that the Senate has not ratified, the U.N.
Convention on Biological Diversity. Quite honestly, this action
shocked and concerned me greatly, because it is a protocol that
has the potential to substantially affect agribusiness in this
country, the largest employing industry in my home State of
Missouri.
The protocol covers trade in genetically enhanced
commodities, which includes almost one-third of all corn grown
in the United States and more than half of all our soybeans. We
are seeking to make progress, for instance, to have these
disease-resistant and insect-resistant agricultural products
available not only as a result of our own commercial interests,
but because they hold great promise in feeding the world.
Round-up ready corn, for example, is pending approval in
the European Union. We would not want anything to impair that,
and I fear that if this Biosafety Protocol is to become the
ultimate standard for trade in these commodities, most corn and
soybean ships with USA painted on the side will not be getting
very far off-shore.
Let me lay out a few facts from the protocol, then I would
like to ask you a question about what you consider to be the
impact of the protocol. First, the protocol requires complete
segregation of biotech and nonbiotech commodities in order for
U.S. exporters to avoid the regulatory complexities and cost of
complying with the protocol.
Second, the protocol would for the first time require that
a type of labeling will be required for biotech bulk
commodities, and third, under the protocol countries can use
the so-called precautionary principle in order to block imports
of bulk commodities, meaning they can block U.S. farm products
without sound, scientific evidence that our food would cause
harm, and finally, countries would be authorized under the
protocol to use socioeconomic impacts of biotechnology when
deciding whether to allow imports.
Now, the EU has been trying to impose these kind of trade-
restrictive measures, the precautionary principle and
multifunctionality in trading rules for years. We stood up to
them in Seattle, but apparently not in Montreal, and I would
like for you to try, if you would--what I would like to focus
on, what impact will these new rules have on our free trade
rules in the World Trade Organization, WTO, and if you would
start with that.
Secretary Albright. First of all, Senator, let me say that
I have gotten not technically but personally interested in this
subject because I have seen it from a European perspective,
where they are going through two things. I think they clearly
do not have the kinds of protections in terms of their food
safety that we do. They do not have an FDA, and they are going
through problems with mad cow disease and various things. That
is one reality.
Senator Ashcroft. That should lead them to discriminate
against European beef, not American.
Secretary Albright. Then, I believe, we are having problems
with them in terms of protectionism from their perspective, and
various WTO issues. In my dealings with the Europeans I have
tried to get them to separate out exactly what you said, which
is, you deal with your domestic food and health safety issues,
that is your issue, but do not discriminate against the United
States.
As I said in my opening remarks I do travel the United
States, and I actually was in Iowa talking to farmers about the
problems that this creates for them. I have, in fact, now
created kind of an informal advisory group of people who talk
to me about the issues of biotech and how they are affecting
food production and our relations. I think that it is a huge
problem, and we have to separate out what is real and what is
protectionism.
But to get to the Biosafety Protocol, it does not alter the
obligations here. The United States, together with other
leading agricultural exporters, felt it was critical that this
protocol not alter rights and obligations under other existing
international agreements, including the WTO, and we were
successful in insisting that the final text include a savings
clause and an explicit statement of this understanding.
Now, one of our primary interests in the negotiation was to
ensure that restrictions on trade in living modified organisms
be based on science and realistic assessment of risk
assessment, and we believe that the protocol does do that.
However, the protocol does allow countries to make
regulatory decisions, just as the U.S. does, in the absence of
scientific certainty, and some have said that this embodies the
precautionary approach. We believe it is just a reflection of
the reality that there is always scientific uncertainty, and
that governments should not be paralyzed by this in making
decisions.
Now, we are, as I said, among the first to understand the
need to apply precaution in the development and enforcement of
environmental and health safety laws, and so our people have a
confidence in our regulatory system.
Now, we have an additional problem, which is the protocol,
the way we see it, is a less-than-perfect agreement. Since the
United States is not a party to the Convention on Biological
Diversity, we cannot become a party to the biosafety protocol.
Nonetheless, we engaged in the negotiations to protect vital
U.S. interest in agricultural trade and biodiversity. We
believe that the agreement, on balance, will help to protect
the environment without unnecessarily disrupting world food
trade.
But this is a huge problem, Senator, I understand, and we
are limited in how we can deal with it.
Senator Ashcroft. I see my time is up. This is--I frankly
have very serious reservations about the fact that the State
Department has committed us to abide by this agreement, which
you said does not bind us.
I have very serious reservations about saying we will abide
by it when the international law indicates that our practice
can be used as a way of defining our rights under WTO, and so
if we abide by something we are not a party to, we might, by
abiding by it, bind ourselves to it later.
And your statement that there is a savings clause is a
statement about one of the paragraphs in the preamble, but
there are two other paragraphs in the preamble which seem to
take us out of the savings mode, and the European Union cites
those clauses to indicate a position which is contrary to the
position that you indicate, and I have grave reservations about
this.
My time has gone, and it is short, but this is a matter of
deep concern to me, and when these protocols get entered into
by the executive branch and the U.S. Senate has not ratified
the underlying agreement, the convention, and you announce that
we are going to follow these conventions absent ratification by
the Senate, it is troublesome, and I think it threatens very
substantially the technical position of the United States and
our capacity to feed a hungry world, and I am deeply concerned.
I am glad you are sensitive to this, and I would volunteer
that if we can ever assist you and this group that you have
that is helping define your consciousness on these issues, we
would like to do so.
Secretary Albright. Let me just say, Senator, that I would
appreciate if I could send somebody up to discuss with you in
more detail what happened in Montreal, but also raise an issue
which I think is a very large issue, is how, as nonparties to
any one of the agreements that are being made, how you protect
the nonparty status.
This is true in issues of international criminal court,
various other aspects in international law, which put us at--we
have to engage in order to protect our nonparty status, and it
is a very difficult issue, and I appreciate having this
conversation with you, and I will send somebody up to have a
further discussion.
Senator Ashcroft. Mr. Chairman, may I ask that an article
from the Economist of February 5, entitled ``Caution Needed,''
which relates to this issue, and also a recent press release,
be made a part of the record?
The Chairman. Yes.
[The article and press release referred to follows:]

[From the Economist, February 5, 2000]

Caution Needed

When ministers from more than 130 countries met in Montreal to
discuss the most controversial issue in international trade--
genetically modified organisms (GMOS)--it had all the makings of a
Seattle-style debacle. European consumers are in a frenzy over the
alleged dangers of GMOS, which producers, mostly American, insist are
safe. America and a few GMO-exporting countries were bitterly opposed
to demands by the European Union and most developing countries for
strict safeguards on trade in GMOS. Their disagreement had scuttled a
previous attempt at a deal a year ago in Cartagena, Colombia. And yet,
astonishingly, on January 29th a deal was done.
The new ``Biosafety Protocol''--the first agreement regulating
trade in GMOS--seeks to respond to widespread fears that GMOS pose
risks to biodiversity and health. It requires exporters to label
shipments that ``may contain'' bio-engineered commodities such as maize
and soyabeans (which account for 90% of global trade in GMOS). And it
allows countries to block imports of GMOS on a ``precautionary'' basis
in the absence of sufficient scientific evidence about their safety.
Optimists hope that the deal will help to defuse transatlantic
tensions over GMOS, which threaten to test the World Trade Organisation
to breaking-point. One reason that the Clinton administration agreed to
compromise is that American consumers are starting to share Europeans'
concerns about the dangers of GMOS. Another is that it was loth to take
the blame for wrecking a second big trade summit in two months.
The big worry is that the Biosafety Protocol opens up a loophole
for protectionists. European governments, for instance, could use it to
protect inefficient farmers from American competition on the pretext of
protecting consumer health. Disputes about health standards that
restrict trade are currently adjudicated according to WTO rules. These
stipulate that food-safety standards must be based on scientific
evidence of a possible health risk.
Take the battle between the EU and America over growth hormones in
beef, which are widely used in America but which the EU bans, because
it claims they may cause cancer. The WTO ruled against the ban (which
the EU has yet to lift) because the EU had not conducted a risk
assessment that shows such hormones to be dangerous. For similar
reasons, the WTO might again side with America if it were to challenge
an EU ban on GMOS.
But when there is insufficient scientific evidence, the WTO allows
governments to take provisional measures ``on the basis of available
pertinent information.'' So the WTO might accept the EU's right to
maintain a temporary ban on GMOS until more is known about their
potential dangers. The EU and many consumer groups want WTO rules to
recognise this ``precautionary principle'' more explicitly, and without
setting any time limit. With that in mind, the European Commission
published its first formal guidelines on how to apply the principle on
February 2nd.
The Biosafety Protocol is a step in the EU's direction. It makes it
easier for countries to ban imports of GMOS, because it shifts the
burden of proof to exporters, who must show that their products are
safe. Admittedly, the protocol does not supersede WTO law. And since
America is not a party to the umbrella agreement of which the protocol
is part, it could in future claim not to be bound it. But in practice,
thinks Steve Charnovitz, an expert on environment-related trade law, if
America ever challenged an EU ban on GMOS, the WTO would have no choice
but to take account of a multilateral agreement such as the Biosafety
Protocol.
This is a messy compromise. It does not resolve the underlying
issue: how to reconcile governments' differing attitudes towards the
risks of technological change, without disrupting trade. Some
governments think that, even though its environmental effects may be
irreversible, bio-engineering should be allowed unless it is shown to
be dangerous. Others believe it should be banned unless it is shown to
be safe.
Coping with this fundamental difference requires political
compromise. But the danger is that countries will instead try to settle
their disputes about GMOS using legal means, at the WTO. This is a
recipe for disaster. If the WTO struck down an EU ban on GMOS, European
governments might find it impossible to override consumer fears--
however irrational--for the sake of free trade. If the WTO upheld it,
that could give a green light for protectionists. Either way, the WTO's
ability to keep world trade free could be fatally undermined.
______

[For Immediate Release--Feb. 4, 2000]

Statement by Senator John Ashcroft

UN BIOSAFETY PROTOCOL

Washington, DC.--U.S. Senator John Ashcroft (MO), a member of the
Senate Foreign Relations Committee, issued the following statement on
the UN Biosafety Protocol that resulted from the Montreal talks:
``The UN Protocol is bad news for American biotechnology, which
holds tremendous promise for fighting world hunger, reducing the use of
pesticides and other chemicals, expanding U.S. exports, and creating
new jobs in America. This Protocol allows other nations to shut the
door to American biotechnology without having to show a sound
scientific reason for doing so. In this and other respects, the
Protocol threatens serious harm to American exports, biotechnology, and
agriculture. It never should have been agreed to by the Administration.
In addition to the Protocol's undermining of science in setting the
rules for trade, there are other concerns that I will raise with
Secretary Aibright.
``In addition to handing a victory to protectionists in the
European Community, the Protocol sets a new and troubling standard for
bulk commodity shipments, by requiring that genetically enhanced
products be tracked with a new record keeping system, even though there
is no scientific reason for discriminating against biotech products.
``For American farmers who expect to make their own production
decisions, there is another concern. Farmers in Missouri tell me that
they want to move away from centralized control over their decisions
about what to plant, when to plant, and how much to plant. Certainly,
they will have no interest in a multilateral bureaucracy taking a hand
in running their farms.''

The Chairman. Senator Sarbanes.
Senator Sarbanes. Thank you, Mr. Chairman. First of all, on
my issue, it is my understanding the executive branch did not
enter into the protocol, is that correct? I do not think there
was--I mean, we have not ratified the underlying convention,
and I do not think we entered into the protocol.
Secretary Albright. Well, we were there trying to protect
our nonparty status.
Senator Sarbanes. That is right, but we are not signatories
or parties to the protocol, and it seems to me that if we had
failed to be there to try to protect our interest, we would
have been even worse off. I mean, we have this problem now with
these agreements others are entering into that are creating
these various conventions and international protocols, and if
we are not part of it, then we have a problem. How do we
protect our interest, even though we are not a party, and as I
understood it, that is what we were trying to do at Montreal,
and to protect the very interest that Senator Ashcroft is
talking about.
Secretary Albright. That is correct, Senator. What happened
is, we are not, as I said, a party to the Biodiversity
Convention and cannot sign the protocol until we are a party.
Therefore, it was necessary for us to participate in the
negotiations to this in something called the Miami Group, a
coalition of leading agricultural exporters that also included
Argentina, Australia, Canada, Chile, and Uruguay.
During these negotiations we achieved our major goals of
exempting bulk agricultural commodities such as bulk shipments
of corn and soybeans from potentially trade-restrictive review,
and ensured the inclusion of a clear statement that this
agreement is not meant to change the rights and obligations the
parties have under other existing international agreements such
as the WTO, as I said earlier.
So this is where we are. By not being a party to something
we have to go at it sideways to try to protect our nonparty
status.
Senator Sarbanes. Well, I do not think the administration
should be put in the position of somehow, in some way or
another, appearing to not have been playing an active role, or
try to protect American interests, because it is my
understanding that that is exactly what you were trying to do,
even though we are not part of this international regime that
has been established.
I mean, if we did not show up, they could go ahead and do
whatever they wanted to do and then apply that against our
exporters, as I understand it. Now, by going, you were able, I
think, to alter, along with those other countries to alter the
nature of the regime, so we have got, as it were, better terms
than might otherwise have been the case.
Having said that, I do think this is a very complicated
issue, and I am pleased to hear that you have set up a special
group to advise you on it and to follow through on it, because
the potential is obviously very significant in terms of
addressing our American interest in this regard.
I wanted to ask a couple of questions on Africa. It seems
to me that, with the U.S. being in the chair at the Security
Council in January, having made that the Month of Africa at the
Security Council and at the United Nations, and with some of
the initiatives that have been taken, we have an opportunity to
really sort of move our whole relationship with the continent
to a new level.
I see three issues, perhaps there are more, and I would
like to name those three and you could add others, and I would
like to know how you are doing on this. One is the AIDS
initiative which you have already addressed. I mean, it is an
absolute killer plague in Africa, and Senator Feingold brought
that issue up, and I know the administration actually--the
budget I think has specific provisions addressed to that.
The second are the peacekeeping efforts at the U.N. I
understand we are going to boost significantly the peacekeeping
force in Sierra Leone, and you have sent a notification to the
Congress on the Congo, and perhaps you might take a moment or
two to address those issues and their importance and the U.S.
role. As I understand it, there are no U.S. forces involved in
either of these peacekeeping missions.
Secretary Albright. Correct. First of all, let me say that
the amount of time and effort that the Clinton administration
has afforded Africa I think has been unprecedented. The
President has gone there and I have gone there every year as
Secretary of State. We have believed the continent requires a
different level of attention, and therefore I was particularly
pleased that Ambassador Holbrooke followed through on what we
were doing by having the Month of Africa. I think it made a big
difference and drew a lot of attention.
We had actually, in previous U.N. presidencies, focused on
Africa. We have really worked on this, and I think it needs
more support. We need the Africa trade act to go through,
something that we have been working on for quite a long time.
On the AIDS epidemic, I have already mentioned the
increased funding. Also, I do thank Senator Feingold, who went
on a remarkable trip, for everything he has done.
On peacekeeping, we have been very concerned about how to
do peacekeeping in Africa, and have looked at the do's and
don'ts of previous mandates. In setting up the Sierra Leone and
Congo mandates we have been very cautious in terms of the
mandate, to size the budget for it.
We have in fact now increased the size of the Sierra Leone
UNOMSL mandate, and believe that it needs to be worked harder
in terms of supporting the cease-fire. It is not a peacemaking
force. It is there to support the cease-fire.
On Congo, I think when I was in New York I talked about the
Congo and the involvement of everybody in it as Africa's world
war, basically. Congo is surrounded by nine countries. There
are various ones playing roles by being in Congo in support of
rebels, or in support of the Kabila Government. Peace in Congo
is critical for peace in Central and Southern Africa. As you
point out, there are no U.S. troops, but we are asking for an
increase in the size to about 5,000. We are reprogramming
funds, about $42 million for our other areas to go into what is
now considered phase two in support of the cease-fire. We want
them to abide by the Lusaka Accords.
Another part of something we are doing, Senator, is to try
to focus our attempts on helping democracies a little bit in
terms of what Senator Kerry was talking about. We cannot be
everywhere all the time, but I have focused on four democracies
that are in transition that I think really need to have more of
our assistance, and Nigeria is one of them.
It has been my sense that Nigeria under military
dictatorship was a missing piece in terms of stability in
Africa. With President Obasinjo we have a huge opportunity to
help him, so we have increased our assistance. I think we have
quadrupled it for Nigeria. We will be working very hard there
to support civil society to have him deal with civilian control
of the military, judicial systems, and to deal with their
ethnic problems.
So we are focused on Africa, and it has many problems, but
we would like very much to get the Africa Growth and
Opportunity Act passed.
Senator Sarbanes. Mr. Chairman, let me just observe the
administration has included in their budget important debt
relief initiatives for the African countries, and I very much
hope that here in the Congress we will be able to act favorably
on that, because I think that is another very important piece
of this puzzle.
Thank you very much.
The Chairman. Senator Chafee.
Senator Chafee. Thank you. It is an honor, Mr. Chairman, to
be named to your committee. I would followup on Senator
Feingold's questions about our aid package to Colombia. In your
experience, and your recent visit there, what level and how
rampant do you think corruption is in Colombia?
Secretary Albright. Senator, we have obviously been
concerned about corruption in Colombia--in Africa, too. What I
find heartening is President Pastrana and his team are also
very much aware of that, and therefore funds that go in are
very carefully monitored. So we do not want to have a concern
about any misuse of the funds we are providing, and President
Pastrana knows that.
Whit regard to the problems in Colombia, everything seems
to be interwoven, the narcotraffickers and corruption and the
paramilitaries. So by looking at this in a comprehensive way,
which Plan Colombia does, I think it will help us.
One point I would like to make about that, while Plan
Colombia as a whole is $7.5 billion, we have committed
ourselves to a package of $1.6 billion, $1.2 billion in the
supplemental and then what we have given previously. But
Colombia itself has committed $4 billion to this, and the World
Bank and the IMF also. We are trying to get the Europeans to
assist, and all of them are going to be looking at ways so
money does not get diverted and that corruption is also dealt
with.
Senator Chafee. How high, in your personal opinion, do you
think the level of corruption rises?
Secretary Albright. Excuse me?
Senator Chafee. How high in Colombia do you think the
corruption rises?
Secretary Albright. I can only tell you what I was told
when I was there--that President Pastrana has gotten rid of a
lot of people that he has been concerned about with regard to
human rights issues or on issues of corruption. What was
different about President Pastrana's election, I think, is that
he has worked very hard to distance himself from all of that
and is very much aware of the fact that there is a problem.
Senator Chafee. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Madam Secretary, we will keep the record open until the
close of business on Friday so that there can be additional
questions for the record from Senators who were present or not
present.
One item, and then we will recognize the Senator from
Connecticut. We have in our midst, Madam Secretary and
Senators, and those who are our guests, a prodigal son of a
sort. His name is Bertie Bowman. He has served 40 years on
Capitol Hill, 27 years on the Foreign Relations Committee
staff, and by George, he had retired and he came back the other
day. He just could not stay away from us. Bertie, we are glad
to have you here.
Now then, Senator Dodd.
Senator Dodd. Thank you, Mr. Chairman. I thought I was back
as a freshman Member of the Senate when I saw Bertie here. He
was here the first day I arrived, so it is nice to see him come
back again.
Madam Secretary, thank you again, and let me quickly make a
couple of points. One is, I am glad Senator Sarbanes raised the
issue of the world debt, the poorest nations' debt. It did not
get much attention, but this was raised at the World Economic
Forum in Davos as well.
You made excellent remarks there, by the way, Mr. Chairman.
The Secretary did a terrific job at that international
conference, as did the President. There was not much attention
here on what was done by the Congress and the administration,
and I commend the leadership of the House and the Senate as
well as the administration.
What better gift I cannot think of, than to give the
poorest nations of the world for the new millennium than to say
to these countries, that debt that you owe, we are going to
start this new millennium for the poorest nations who would
never be able to pay back this debt, to give them a fresh
start, and I commend you for it and hope we will continue with
that initiative that needs to be made, but it really deserves
recognition. It did not get as much here as I thought it should
have. It was a tremendous effort.
Second, I want to come back to Colombia as well, and I
appreciate the fact--and I welcome, by the way, my colleague
from my neighboring State, Lincoln Chafee. We all loved serving
with his dad and are going to enjoy, I think, service with
Lincoln as well. Welcome to the committee, Linc. It is a
pleasure to serve with you.
But there is this issue--and look, I am going to support
Plan Colombia. I think it is worth the effort. I have great
respect for President Pastrana. I think he is a remarkable
leader. I met with him a few weeks ago. I was in Venezuela and
Colombia and Ecuador, and I think he is determined to try and
resolve this issue with the FARC, the large insurgency, Mr.
Chairman, that has been operating for some 40 years there.
But I have got to tell you, it is troublesome as well. This
is a program which is rife with difficulties if it does not
work right, and I know you appreciate that, Madam Secretary,
and this is too small to have here, but the map of Colombia
here, and there are two battalions, Mr. Chairman, we are going
to be training with part of these funds to try and deal with
the narcotrafficking issue and the major areas they are going
to be are in three southern provinces in Colombia, Caqueta
Province, Putumayo, and Guaviare Province in the south here.
The problem with that is, to some extent is that the DMZ,
which is where the insurgency is, is right there, and in fact
in the Colombian assistance package put out by the Department
you make reference to this. You say here, helping the Colombian
Government push into the coca-growing regions of southern
Colombia which are now dominated by the insurgent guerrillas,
so the issue for us is, if our target here is to deal with the
narcotrafficking and stay away from the insurgency, that we do
not want to get ourselves bogged down in the insurgency in
Colombia, it is going to be very difficult to kind of keep
those activities separate. That is the worry we have.
Now, again, I am going to be supportive of this because I
do not have an alternative, Mr. Chairman, to suggest to you,
and I think Colombia has been heroic in its efforts. We are the
big consuming country. They are now providing more than half, I
think you pointed out, Madam Secretary, more than half of the
world's coca production. Maybe as much as 80 percent of it, Mr.
Chairman, are coming out of Colombia now that Bolivia and Peru
are being shut down.
We need to do a better job, obviously, in cutting back
consumption here, but obviously the source countries need to be
dealt with, and I do not have a better plan for you than the
one that is on the table, although I might adjust that formula
80/20 to a little more on the social side of that equation,
rather than 80/20 military to social, but nonetheless I think
it deserves support.
But I think we have got to watch this very carefully, or we
could get ourselves really bogged down here. When we get into
those southern areas here and you run smack into the
insurgency, I do not know how you take those 30 Blackhawks and
30 Hueys, train those two battalions and say, you can fire at
the coca guys but you cannot fire at the insurgents, when in
fact the insurgents are the ones who are protecting some of the
narcotraffickers.
So it is a very difficult issue, and if you want to make
some additional comments on that I would be willing to hear
them, but I am worried about it, and I hope that we might
broaden the frame of reference here to include Venezuela,
include Ecuador in the plan.
Mr. Chairman, all of the factories, the production of the
cocaine actually comes out of Colombia down into Ecuador, and
there are some problems on the Venezuelan border on the other
side, so it would be, I think, in our interests to try and
involve Hugo Chavez, who I think is worth backing. I spent time
with him. I think he is a good democratic leader. He is
different than any other leader we have seen recently in the
region, but I think he is worth spending some time with and
working with.
And I was deeply upset that we did not do more with
President Mahuad, who was the President who let us put that
forward-looking base to deal with the narcotraffickers in his
country, supported us on U.N. votes over and over again, and in
his hour of need we were not there, in my view. I say that with
all due respect. You know how I feel about it. We talked about
it.
We have got a new Vice President in charge now down there,
President Naboa, who I have talked with in the last couple of
days, but we have got to look at this more on a regional basis
than just Colombia, and to watch it very carefully that this
does not spill over, as Bob White and others have warned in
some editorial comments that it could.
So I would be interested to further sort of explanation
here, Madam Secretary, how you are going to try and keep these
activities separate.
Secretary Albright. Well, first of all I think you point
out a very serious problem. Clearly there is a history of
previous assistance in other places that have been of concern
to many of us over the years, but I think that we understand
the problem.
You point out the map that I have carried with me
everywhere. Basically the problem is that the government in
Bogota does not have control over large portions of its
country. That is why we are concerned about this pushing into
the south. Because we are aware of the problems there, we are
going to try to do everything we can to keep it all separated.
But it is difficult, you are right. Sometimes it is hard to
distinguish between a narcotrafficker and a paramilitary and an
insurgent, so this is difficult.
One thing I do want to tell you is, while I did not talk
about this, this is a regional issue. There is also money going
to Ecuador. We are talking to Chavez. When I was talking to
Pastrana we spoke about the importance of having it look more
like a friends of Colombia, that there has to be a real effort
here to involve the neighboring countries.
Partially, the fact that this has happened in Colombia is
due to success that we had in Peru and Bolivia. A lot of the
growing of cocaine, coca plants had moved over. It is a strange
thing, but some of this is due to our success. I just want to
assure you that we are looking at it in the larger picture.
On balance, I would have rather had more for the ``social
aspect'' of this, but we have been told by USAID, for instance,
that they cannot absorb large amounts of this type of
assistance at the moment. But we are looking at it constantly,
because I think that as I have gotten immersed in this problem
it clearly has a number of components to it. Obviously,
narcotraffickers do not have alternative farming. The economy
and the whole economic structure of Colombia is a problem.
On President Mahuad, we did talk to him a lot, and we
obviously regret what happened, but we are in very close touch
with the new President, and have done--I know you had other
ideas here, but we really have tried to be supportive of him.
We clearly were unable to do that.
Senator Dodd. I know my time is up, but Mr. Chairman, let
me ask one other question on this. Again, looking at the map
with both Colombia and Venezuela, which just sort of--people I
know know this, but both countries have significant parts of
their country that border on the Caribbean.
I know there are different feelings around here about the
Caribbean Basin Initiative. I wonder if you want to comment on
this very quickly, but I would like to see us--one of the
things I thought we might do, I am a strong supporter of the
Caribbean Basin Initiative. One of the things I thought we
might do is add Colombia and Venezuela to the CBI countries
here. They are not presently added, but they have tremendous
part of their countries on the Caribbean Basin.
This could be the long-term kind of real economic
assistance that is an alternative to the present difficulties
they face in both countries here, less in Venezuela, obviously,
with the petroleum reserve, but certainly more so in Colombia.
Do you have any comment on that? I am going to try and work
this and talk with other Members of Congress and see how they
feel about it, but does the administration have any deep
objection if Colombia and Venezuela were to be added?
Secretary Albright. I would have to look at that. I was in
Cartagena, which is clearly a Caribbean port, so I think
basically there is the Caribbean aspect to it. Let us look at
that.
The other part of the problem we have to look at is that
these are countries, especially Colombia, that have huge river
systems. So we also have to look at various other ways to
involve all parts of the military in this. We must help them
with a lot of activities on their rivers and with their coast
guard. This is a huge project, no question about it.
I will not repeat what you said, Senator Dodd, but this is
an American problem. We always talk about the linkage between
domestic and foreign policy. There is no clearer example than
this. This is one that I think is explicable to the American
people, because this is how we are protecting our children.
Senator Feingold. Mr. Chairman, I will be very brief, but
let me just say I want to compliment the administration and
agree with the Secretary's comments about the administration's
commitment to Africa, as well as the President's commitment,
your own efforts, and Ambassador Holbrooke's. I think the
emphasis is being felt in Africa, and making a difference in
sort of setting the stage for what Senator Sarbanes had
suggested, and I want to thank you for that.
Specifically on Congo, I have been impressed with the
administration's efforts to take this very seriously, and
pleased that this notification has come through. The approach
that has been suggested by the Secretary General, as you know,
is a carefully phased approach. We completed phase one, and now
we are into this phase two that is the subject of the
notification.
I wonder if you could just comment on what kind of
benchmarks we look for before we move to another phase of that.
I am going to talk to my colleagues about this. What are the
kinds of things we would be looking for in terms of progress in
the situation in Congo and the Lusaka agreement, so that I
could continue to feel good about where we are heading on this?
Secretary Albright. Well, I think this is all about whether
they live up to a cease-fire. The next phases would have to do
with disarmament issues--who would do it, and how that would be
done. We started talking about that a bit when I was in New
York with the leaders of the countries. We have to see how they
are abiding by the cease-fire parts of it, how the rebels are
dealing with the Kabila and the Kinshasa Government. We must
also look at the issues that came up in the statements of the
other Presidents regarding how Uganda and Rwanda are responding
and the role of Zimbabwe.
So I cannot give you specific benchmarks. But the real
issue is, we are not going to move into another phase until we
feel that it is doable.
I think for me, and I spend a lot of time on African
peacekeeping issues, is that we have to make sure that the
mandates work, that the budgets are correct, that the right
people are able to do the job. We just had a problem in Sierra
Leone, where some of the rebels were disarming the
peacekeepers. They were not doing their job, because the
numbers were not big enough, or they were not instructed
properly.
So when we say we do not want to have American forces
somewhere, we then rely on the forces on the ground in the
region. We have to do more in terms of helping to train the
Africans in the African Crisis Response Initiative so that they
can undertake this.
But let me say, I think that as we have gone around here on
all the issues, it makes me just realize what I said
initially--that the United States has an interest in many
places. We are concerned about how stability in Africa affects
us for any number of humanitarian reasons, but also about HIV/
AIDS. I think that is something Americans understand.
And while it is very easy for somebody in my position to
come up here and say, it is so complicated, and it is much more
complicated than it ever was, the truth is that we now care
about a lot more places than we ever did before because they
are not frozen in a cold war stance. So we have to learn to
absorb all these new threats and opportunities as they come up
in the 21st century.
Senator Feingold. Thank you very much.
Senator Dodd. Mr. Chairman, just one additional, and I
apologize to you, and I am not doing this in the order, but
obviously Ireland is on everybody's mind as we watch the events
unfolding here, and I want to just make a quick comment on it.
I read the editorial comments the other day about what some
determined as a failure on the part of the administration, of
people like our colleague Senator Kennedy and others who worked
on this issue. Silence is somehow condoning certain activities,
and I know first-hand that the administration has worked
tirelessly on this issue, cooperating with Prime Minister Blair
and Prime Minister Hearn as well as members of the--David
Trimble and obviously other members of the political community,
Gerry Adams and the like.
I am wondering again, and I am hopeful that this can be
resolved over the next several days, but I wondered if maybe
you wanted to take this opportunity just to express what the
administration's view is on this issue and what prospects for
hope you have that matters can be resolved.
Secretary Albright. Well, first of all, let me say this is
an issue on which the President has spent a great deal of time
and personal interest. He has been in touch with the various
parties all along. Whenever any party, whether it is Gerry
Adams or Trimble or anybody comes here we spend time with them.
Senator Dodd. As we do up here, by the way, on all sides.
Secretary Albright. Then I think the President believes, as
you do, that the Good Friday agreement needs to be carried out.
Should it not be carried out it would be so unfortunate, in
contrast to other places that we deal with. The people voted
for this power-sharing government and moving this process
forward. They voted in much bigger numbers than people thought.
The people want this to happen.
And we are certainly not silent on the issue. As you have
said there has been a lot going on, and your former colleague
and my friend Senator Mitchell has spent an awful lot of time,
both in terms of quality and quantity, on this. We are hoping
that the agreement will be carried out, because it is so
important, and that is what the people there want.
Senator Dodd. Well, I thank you for that, and it is
important. The fact that we are not issuing statements or
making speeches on the floor of the Senate about it does not
mean there are not people working at this every day, and I
thank you for it, and I thank you for this morning. You have
been tremendously patient and done a tremendous job in visiting
a lot of places all over the globe, and once again we are
reminded how lucky we are to have you as our Secretary of
State.
Secretary Albright. Thank you, and let me say what an honor
it is for me to be Secretary of State. I am glad I have another
year.
The Chairman. Madam Secretary, another impressive
appearance. We thank you for coming, and I am overdue 30
minutes in letting you leave, but you brought it on yourself,
and you did it well.
Thank you so much, and there being no further business
before the committee, we stand in recess.
[Whereupon, at 1 p.m., the committee adjourned.]

----------

Additional Questions Submitted for the Record

Responses of Secretary of State Madeleine K. Albright to Additional
Questions Submitted by Senator Jesse Helms

treaty negotiations
Question. Please provide a listing of all bilateral and
multilateral treaties and other international agreements under
negotiation by the United States. Please list the treaties and
agreements by the bureaus in the State Department charged with leading
the negotiation. Indicate whether the agreement will be submitted to
the Senate for its advice and consent and the projected date of
completion of negotiation of the agreement. Also, please indicate other
federal agencies that are participating in the U.S. negotiation of each
agreement. In addition, please list the meeting schedule for all
multilateral negotiations.
Answer. I am unable to provide the information requested in this
question for several reasons.
First, the Department of State maintains no comprehensive list of
treaties and international agreements under negotiation. The Department
maintains only a record of treaties and international agreements that
have been signed and/or concluded. Aside from treaties, which are
transmitted to the Senate for Advice and Consent, the conclusion of
other international agreements is reported regularly to Congress in
accordance with the Case-Zablocki Act, 1 U.S.C. 112b (``Case Act'').
Second, many federal agencies (e.g., USTR, DOD, etc.) have
independent statutory authority to negotiate international agreements
without any Department of State participation. The Case Act requires
only that other federal agencies coordinate with the Department of
State prior to the conclusion of an international agreement. Until
conclusion, federal agencies with this authority are free to negotiate
without coordinating those negotiations with the Department of State.
Third, in those areas where the Department of State would have a
lead in negotiations, there are numerous instances where authority has
been delegated to another federal agency to negotiate and/or conclude
particular classes of agreements. Under those circumstances, the
Department is often unaware of the existence of any negotiations prior
to an agreement's conclusion.
Accordingly, a Department of State compilation of all treaties and
international agreements presently being negotiated by the United
States is simply not possible given the statutory and administrative
framework that presently applies to the United States' negotiation and
conclusion of treaties and other international agreements.
biosafety protocol
Question 1. Please provide a detailed analysis of the U.S.
commitments under the Biosafety Protocol.
Answer. The United States has no legal commitments under the
Biosafety Protocol, nor will it when the Protocol enters into force.
The United States is not a party to the Convention on Biological
Diversity and, therefore, cannot become a party to the Biosafety
Protocol. As a non-party, the United States Government is not legally
obligated to implement the particular requirements of the agreement.
We expect countries that become a party to the Protocol will amend
their domestic laws so as to be consistent with the provisions of the
Protocol. Our agricultural exporters who then trade with these
countries will have to comply with these domestic import requirements.

Question 2. Is it accurate that the Administration intends to
implement the Biosafety Protocol despite the fact that the United
States is not and will not become a party to the Protocol?
Answer. The Administration does not intend to implement the
Biosafety Protocol as the United States is not a party to the agreement
and it is not in force. We believe, however, that it is in our national
interest to participate voluntarily in several of the information-
sharing aspects of the Protocol. Our relevant domestic regulatory
agencies, for example, already provide factual information to the
public about living modified organisms, including via the Internet,
pursuant to existing domestic authorities. Sharing our risk assessment
information will help familiarize other countries with LMOs, and may
promote international confidence in U.S. exports and reduce the
likelihood of international criticism of the U.S. and its exporters.

Question 3. Please explain the legal basis for implementation of
the Biosafety Protocol without Senate advice and consent to
ratification.
Answer. The Administration does not intend to implement the
Biosafety Protocol. As a non-party to the Convention on Biological
Diversity (the parent treaty of the Biosafety Protocol), the U.S.
Government is not legally obligated to implement the agreement.
Participating voluntarily in several of the programs envisioned by the
Protocol, such as the sharing of information that the United States
already makes public, may prove to be in our national interest. In the
long term, we believe sharing this information will help ease concerns
regarding biotechnology, and could facilitate trade in biotechnology
goods.

DESERTIFICATION CONVENTION

Question. Please provide a breakdown of all U.S.-funded projects
that would qualify as implementation of U.S. commitments under the
Desertification Convention. Indicate the cost of each project.
Answer. Attached is a table compiled by USAID which sets forth
bilateral and regional support in Africa for desertification activities
in 1996, 1997 and 1998. We are working with USAID to update this
information for Africa and other regions and would be pleased to
furnish it as soon as it becomes available. USAID informs us that a
significant portion of its resources for drought and desertification is
devoted to Africa. We also are consulting with other federal agencies
to determine their degree of support, if any for U.S.-funded
desertification projects overseas.
As a non-party to the Convention to Combat Desertification, the
United States has no treaty obligation to commit resources to combat
land degradation under the terms of that Convention. If the United
States were to become a party, ongoing development assistance programs
would fulfill our obligations under the treaty. The Convention to
Combat Desertification does not require any specific level of funding.
annex a\1\--usaid's africa bureau bilateral and regional support
directly relevant to desertification \2\

------------------------------------------------------------------------
US$mil.
Strategic Objective Country FY96 FY97 FY98
------------------------------------------------------------------------
1. Sustainable Dryland
Agriculture:
Increased food security..... Eritrea.......... 0.45 0.40 0.18
Increased availability of Ethiopia......... 0.13 1.00 1.25
locally produced food
grains.
Smallholder agriculture and Kenya............ 0.66 0.80 0.80
natural resource management.
Economic growth............. Mali............. 2.72 2.40 3.06
Rural household increased Mozambique....... 1.25 0.75 0.61
income in target areas.
Improved regulatory Zambia........... 0.09 1.65 0.65
environment for
agricultural production.
Increased household food Zimbabwe......... 1.92 1.20 0.87
security in communal areas.

2. Rehabilitation of Dryland
Areas:

Rehabilitation and Angola........... 0.04 0.01 0.01
resettlement.

3. Drought/Disaster Early
Warning and Mitigation:

Famine early warning and Africa........... 5.34 7.90 7.70
crisis prevention,
mitigation and response.

4. Mitigation Using Natural
Resource Management:

Protect the natural Guinea........... -- -- 2.92
environment.
Reduce natural resources Madagascar....... 1.68 2.19 2.45
depletion in target areas.
Increased sustainable use, Malawi........... 1.54 -- 4.70
conservation and management
of natural resources.
Improved benefit from Namibia.......... 0.12 0.10 0.35
locally managed natural
resources.
Increased crop production Senegal.......... 3.08 3.85 1.40
via improved natural
resource management.
Environmentally sustained Tanzania......... 2.05 1.75 2.00
natural resource management.
Sustainable increases in S. Africa Region. 0.51 2.50 1.75
agriculture and natural
resources.
Conservation in critical Uganda........... 0.74 1.28 --
ecosystems.
Improved policies, programs, Africa........... 0.40 1.80 2.32
strategies in sustainable
environments.

5. Awareness Raising in
Dryland National Resource
Management:

Dryland information and Sahel Region..... 0.65 1.30 1.50
development.

6. Capacity Building and
National Planning:

Horn of Africa support Gr. Horn of Afric 0.19 -- 0.35
program. a.
Regional technical support.. Africa........... -- 0.40 0.70

------------------------------------------------------------------------
\1\ Data is included in a USAID booklet entitled, ``USAID Framework for
Cooperation in Africa in the Implementation of the Convention to
Combat Desertification.''
\2\ Based on the Control Data from USAID's Africa Bureau, Office of
Development Planning.

Note: Beyond dryland management, many activities supported by USAID
support the anti-desertification goals, such as marketing and enabling
policies and infrastructure, rural economy growth initiatives, etc.
Activities for which USAID provides funding have met the following
three criteria.
Is environment a priority in the USAID Country Strategy? If so,
has the Mission taken national priorities for combating
desertification into account in preparing its Strategic Plan?
Assuming an activity is defined within a given National Action
Program to Combat Desertification (NAP), how does it relate to the
country's National Environment Action Plan (NEAP), and is it clearly
coordinated with the work of other donors?
Has the responsible agency in-country designed and implemented
a system of benchmark indicators (as established within the
Convention), along with monitoring, evaluating, and mitigation plans?
Has policy reform gone forward to the extent that demonstrable
progress can be demonstrated toward a policy environment?

UN REFORM

Question. The toughest reform at the United Nations necessitated by
the Helms-Biden law is a wholesale change in the assessment scale. If
the American share of dues is cut to the fair level that the
legislation mandates, other major powers will have to contribute more.
That will require high-level bilateral diplomacy conducted by you, in
addition to the efforts by Ambassador Holbrooke at the United Nations.
In particular, China, a Security Council member with one fifth of the
world's population, contributes less than 1 percent of the UN budget.
What are you going to do to address that inequity?
Answer. The Administration has already initiated a broad diplomatic
effort to secure support for revisions to the UN's scales of assessment
that will provide a flatter and more equitable distribution of the UN
budget among its members and that will meet the Helms-Biden benchmarks.
We are considering a number of different scenarios to illustrate ways
in which the resulting reduction in U.S. contributions can be
redistributed. The UN's Fifth Committee will begin deliberations on
scale of assessment when it reconvenes in mid-March. Although it is not
possible to determine with certainty at this time whether China's
assessment will increase, that is a possible outcome. As the UN
decision-making process proceeds, culminating at the 55th UN General
Assembly, the U.S. will strongly advocate revised scales of assessment
to ensure their adoption by the required two-thirds of the UN members,
using all the tools at our disposal.

PEACE PROCESS

Question 1. Do you contemplate any possibility that the United
States will provide assistance, either economic or military to the
Assad government in Syria? What conditions would Syria have to meet to
be eligible for assistance? How much do you think a Syria-Israel
package will cost the United States? Will those costs be borne over
several years? How much burden sharing can we expect from Europe and
Asia?
Answer. Syria, a state sponsor of terrorism, is precluded from
receiving U.S. assistance. Assad and his government know what Syria
needs to do to get off the state sponsor of terrorism list. Until that
occurs, it is premature to discuss U.S. assistance to Syria.
However, we all recognize that we have a major opportunity this
year to help the parties achieve a comprehensive peace in the Middle
East. As the parties move forward in their negotiations, we will need
to work closely together--the Administration and Congress--to shape an
assistance package that will support the parties as they make tough
decisions.
Israel will incur major security costs in future peace agreements.
The Israelis have begun to outline to us some of their prospective
needs, which we are reviewing closely. In the context of peace
agreements, we hope to be responsive to their needs, just as we have
with every other Middle East peace agreement over the past two decades.
We are at a preliminary stage. It is too early for specifics on a
U.S. contribution. We will, of course, also look to the broader
international community to play a major role in supporting the costs of
Middle East peace. In Moscow in February, I began a dialogue with my
colleagues from Europe. Japan, and others on helping to meet these
costs.
We recognize that Congress needs to be involved at an early stage
and look forward to consulting closely with you.

Question 2. Last go-round with Israel and Syria the issue of U.S.
troops on the Golan Heights was a topic of some interest. Has the issue
been discussed with the parties? Would this Administration support a
request to supply U.S. troops to a Golan Heights peacekeeping or
multinational force?
Answer. The President has expressed a willingness, in consultation
with Congress, to consider a U.S. troop contribution to a potential
monitoring or peacekeeping force on the Golan, in the context of a
peace agreement between Israel and Syria, should both parties request
it. The security requirements of any possible peace deal between Israel
and Syria have not been determined yet, so it would be premature to
comment on them at this time.

IRAQ

Question 1. How much of this year's appropriation of $10 million
for the Iraqi opposition has been obligated or disbursed?
Answer. We have recently submitted the congressional notification
for FY 00 funds. None of the $10 million appropriated has been
obligated or disbursed. The Iraqi National Congress Support Fund has
submitted a preliminary assessment of projects it would hope to fund
through the use of FY 00 ESF funds. We look forward to receiving more
concrete proposals from them and from groups interested in developing
evidence of Saddam's war crimes and related pursuits in the near
future.

Question 2. Why has the Administration failed to pursue additional
training courses and further drawdown for the Iraqi National Congress
under the ILA?
Answer. DOD and State are pursuing an active dialogue with the
Iraqi National Congress about using the ILA drawdown for both material
and training needs. DOD is currently developing a range of courses that
would meet the needs discussed most recently in January meetings in
London. At the same time, the INC is putting together its own list of
potential trainees and determining language capabilities and other
logistical needs. We anticipate that we and the INC will agree on the
next series of training courses shortly and that more Iraqi students
can participate in U.S.-led training early this spring.
The INC itself has told us that it is not currently prepared to
carry out humanitarian assistance to Iraqis under the ILA. It is taking
steps to develop the infrastructure necessary for such activity.
We will continue working closely with the INC, as representative of
the groups listed separately as eligible to receive drawdown under the
ILA to further our common goals.

LEBANON

Question. During the civil war, staffing levels at the U.S. mission
in Lebanon were understandably low. Is it the Administration's
intention to increase staffing levels at the U.S. mission in Beirut?
Answer. The safety of personnel at our overseas posts is one of my
highest priorities. Staffing levels at embassy Beirut have been kept to
a minimum because of security concerns. However, we continually re-
evaluate conditions at Beirut and other posts. We will consider
increasing the staffing level in Lebanon only when I have been assured
that this can be done safely.

PALESTINIAN AUTHORITY

Question 1. Numerous human rights organizations have complained
about the Palestinian Authority's reckless disregard for human and
political rights. Officials of international financial institutions and
numerous EU governments point to pandemic corruption. Internal remedies
for these problems are almost non-existent because of Arafat's
autocratic rule. Are these issues a priority for the Administration,
and is it the Administration's policy to pressure Arafat to sign the
Basic Law?
Answer. We maintain close watch over the human rights situation in
the West Bank and Gaza. We regularly raise human rights concerns with
Palestinian officials.
The Administration released its annual human rights report to the
Congress on February 25, which detailed our concerns about human rights
practices in the West Bank and Gaza. In our report, we specifically
noted that the Basic Law and other laws passed by the Palestinian
Council, designed to limit executive branch abuses and to delineate
safeguards for citizens, have not been signed.

Question 2. In January Palestinian police seized property in
Jericho belonging to the Russian Orthodox Church Outside of Russia
(ROCOR), a religious organization incorporated in the United States.
Apparently the Palestinian Authority intends to turn over the land to
the Moscow Patriarchate, despite the fact that the ownership documents
are in the possession of ROCOR. What steps is the Administration taking
to stop this illegal handover of property?
Answer. While we have taken no position on the merits of the
dispute over ownership of the property, we believe that property
disputes should be resolved in an orderly way through a judicial
process in accordance with the rule of law, not by decree or by force.
I have raised this issue with Chairman Arafat personally.
Officials from the U.S. Consulate General in Jerusalem are
monitoring the situation closely and maintaining contact with
Palestinian officials and leaders of the Russian Orthodox Church
Outside Russia.

ASSISTANCE TO KOSOVO

Question. Please provide to the Committee the U.S. contribution to
date to: (1) the operation of the United Nations Mission in Kosovo
(UNMIK), (2) the budget support program directed by UNMIK for local
officials in Kosovo participating in the administration of the
province, (3) the United Nations International Police force in Kosovo
(UNIP), (4) the Kosovo Protection Corps (KPC), and (5) all bilateral
assistance for reconstruction purposes.
Please provide the same information for the member states of the
European Union.
Answer. [Please see attached charts, one for each element of the
question.]

U.S. and E.U. Assessed Contributions to UNMIK
[As of March 15, 2000]
----------------------------------------------------------------------------------------------------------------
First Assessment: $125 Second Assessment: \1\
million $302 million
Countries Share 1999 ---------------------------- Share 2000 ---------------------------
Requested Paid Requested Paid
----------------------------------------------------------------------------------------------------------------
United States \2\........... 25.00% $31.25 $31.25 25.00% $75.52 $35.38
Germany..................... 9.81% 12.26 12.26 9.86% 28.07 0
France...................... 7.94% 9.93 9.93 7.93% 22.61 0
United Kingdom.............. 6.18% 7.73 7.73 6.17% 17.59 17.59
Italy....................... 5.43% 6.79 6.79 5.44% 15.50 0
Spain....................... 2.59% 3.24 3.24 2.59% 7.38 0
Netherlands................. 1.63% 2.04 2.04 1.63% 4.65 0
Sweden...................... 1.08% 1.35 1.35 1.08% 3.08 3.08
Austria..................... 0.94% 1.18 1.18 o.94% 2.68 0
Denmark..................... 0.69% 0.87 0.87 0.69% 1.97 1.97
Finland..................... 0.54% 0.68 0.68 0.54% 1.54 1.54
Portugal.................... 0.42% 0.53 0 0.43% 1.23 0
Greece...................... 0.35% 0.44 0.44 0.35% 1.00 0
Ireland..................... 0.22% 0.28 0.28 0.22% 0.64 0.64
Luxembourg.................. 0.07% 0.09 0.09 0.07% 0.20 0
----------------------------------------------------------------------------------------------------------------
Others...................... 31.71% 39.64 36.24 31.78% 106.71 50.4
================================================================================================================
Totals.................. 100% 125.00 121.6 100% 290.37 110.6
----------------------------------------------------------------------------------------------------------------
\1\ Billed mid-January 2000, at $302 million for the US and $285 million for others (to account for tax
exemptions).
\2\ Paid out of CIPA account. United States has been billed by UN 30.4% in CY 1999 and 30.28% in CY 2000

Note: Altogether 15 EU member states represent 37.89% of CY 1999 and 37.94% of CY 2000 assessed contributions.
Calculations represent unofficial estimates of UN assessments and payments.

Donor Contributions and Disbursements to UNMIK \1\
As of March 28, 2000, including off budget expenses (civil registry, electricity imports)
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Total Pledged to \2\ % of Donor's
Donors Date Donor's % of Disbursed Pledge
Total Pledges Disbursed
----------------------------------------------------------------------------------------------------------------
United States........................... $24.0 13.4% $24.0 100.0%
EC/EU/NATO.............................. 134.7 75.2% 117.5 87.2%
----------------------------------------------------------------------------------------------------------------
Others (Canada, Japan, World Bank)...... 20.5 11.4% 10.7 52.2%
================================================================================================================
Totals.............................. 179.2 100.0% 152.2 84.9%
----------------------------------------------------------------------------------------------------------------
\1\ Data for non-U.S. donors provided by the UN.
\2\ Unlike the U.S., the fiscal year for most other donors begins January 1. Therefore, U.S. disbursements vs.
other disbursements in March are not directly comparable.

Donor Contributions and Deployments to International Police Force in Kosovo \1\
[Number of Forces (April 10, 2000)]
----------------------------------------------------------------------------------------------------------------
\2\ Total
Donors Pledged to Date Donor's % of Deployed % of Donor's
Total Pledges Pledge Deployed
----------------------------------------------------------------------------------------------------------------
REGULAR POLICE:
United States......................... 550 16% 513 93%
EU/NATO \3\........................... 1,038 30% 816 79%
Others................................ 1,816 53% 1,428 79%
Total............................... 3,404 100% 2,757 81%
----------------------------------------------------------------------------------------------------------------

SPECIAL POLICE:
United States......................... 0 0% 0 0%
EU/NATO \3\........................... 230 20% 0 0%
Others................................ 920 80% 149 16%
Total............................... 1,150 100% 149 13%
----------------------------------------------------------------------------------------------------------------

TOTAL POLICE:
United States......................... 550 12% 513 93%
EU/NATO \3\........................... 1,268 28% 816 64%
Others................................ 2,736 60% 1,577 58%
Total............................... 4,554 100% 2,906 64%
----------------------------------------------------------------------------------------------------------------
\1\ Data for non-U.S. donors is based on data provided by the UN.
\2\ Total authorized strength is 4,718 of which 3,593 CIVPOL and 1,125 Special Police. The total number of
pledges has risen by 153 since 3/7/00, but the number pledged by the EU and NATO remains unchanged.
\3\ EU/NATO: 15 EU member states + other NATO members Norway, Iceland, Czech, Poland, Hungary, Turkey.

[Deployed as of April 10, 2000]
----------------------------------------------------------------------------------------------------------------
Regular Regular Special Special
Country Police Police Police Police Total Total
Pledge Deployed Pledge Deployed Pledge Deployed
----------------------------------------------------------------------------------------------------------------
EU/NATO:
Austria......................... 50 49 -- -- 50 49
Belgium......................... 5 5 -- -- 5 5
Czech........................... 6 6 -- -- 6 6
Denmark......................... 30 27 -- -- 30 27
Finland......................... 20 19 -- -- 20 19
France.......................... 78 77 -- -- 78 77
Germany......................... 420 264 -- -- 420 264
Greece.......................... 15 -- -- -- 15 --
Hungary......................... 10 10 -- -- 10 10
Iceland......................... 2 2 -- -- 2 2
Italy........................... 82 45 -- -- 82 45
Luxembourg...................... -- -- -- -- -- --
Netherlands..................... 1 1 -- -- 1 1
Norway.......................... 25 15 -- -- 25 15
Poland.......................... 10 9 115 -- 125 9
Portugal........................ 25 25 -- -- 25 25
Spain........................... 37 34 115 -- 152 34
Sweden.......................... 42 44 -- -- 42 44
Turkey.......................... 120 124 -- -- 120 124
UK.............................. 60 60 -- -- 60 60
----------------------------------------------------------------------------------------------------------------
Totals........................ 1,038 816 230 -- 1,268 816

United States..................... 550 513 -- -- 550 513
----------------------------------------------------------------------------------------------------------------

Others:
Argentina....................... 68 38 115 -- 183 38
Bangladesh...................... 50 31 -- -- 50 31
Benin........................... 5 5 -- -- 5 5
Bulgaria........................ 60 60 -- -- 60 60
Canada.......................... 100 90 -- -- 100 90
Dominican Republic.............. 30 -- -- -- 30 --
Egypt........................... 71 71 -- -- 71 71
Estonia......................... 5 5 -- -- 5 5
Fiji............................ 33 33 -- -- 33 33
The Gambia...................... 5 -- -- -- 5 --
Ghana........................... 137 136 -- -- 137 136
India........................... 245 86 230 20 475 106
Jordan.......................... 230 230 230 15 460 245
Kenya........................... 50 39 -- -- 50 39
Kyrgyzstan...................... 2 2 -- -- 2 2
Lithuania....................... 9 9 -- -- 9 9
Malawi.......................... 30 -- -- -- 30 --
Malaysia........................ 48 47 -- -- 48 47
Mozambique...................... 5 -- -- -- 5 --
Nepal........................... 53 53 -- -- 53 53
Niger........................... 5 6 -- -- 5 6
Nigeria......................... 50 48 -- -- 50 48
Pakistan........................ 110 88 115 114 225 202
Philippines..................... 45 23 -- -- 45 23
Romania......................... 70 45 -- -- 70 45
Russia.......................... 130 120 115 -- 245 120
Senegal......................... 16 16 -- -- 16 16
Tunisia......................... 10 10 -- -- 10 10
Ukraine......................... 29 30 115 -- 144 30
Zambia.......................... 60 55 -- -- 60 55
Zimbabwe........................ 55 52 -- -- 55 52
----------------------------------------------------------------------------------------------------------------
Totals........................ 1,816 1,428 920 149 2,736 1,577
================================================================================================================
Grand Totals................ 3,404 2,757 1,150 149 4,554 2,906
----------------------------------------------------------------------------------------------------------------

contributions to the kosovo protection corps (kpc)
United States: $14.1 million
$5.0 million SEED for KPC salaries, equipment (UNMIK)
$2.5 million SEED for KPC training (IOM)
$2.5 million SEED for KPC training (IOM--committed but not
yet distributed)
$4.1 million DOD draw-down (KPC uniforms, equipment)
European Union and Member States: $13.7 million
$5.0 million (European Community Task Force)
$2.0 million (U.K.--IOM program)
$1.0 million (U.K.)
$4.0 million (France--pledged)
$1.6 million (Germany--pledged)
$0.06 million (Germany--in kind)

EU and Euro-NATO Contributions and Disbursements for Kosovo Reconstruction in 1999 and 2000
[As of April 7, 2000--In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
% of
Total Donor's % of
Donors Pledged \1\ Contracted Pledge \2\ Payments Donor's
Contracted Pledge Paid
----------------------------------------------------------------------------------------------------------------
EC/EU/NATO \3\........................... $402.0 $93.0 23.1% $36.4 9.1%
----------------------------------------------------------------------------------------------------------------
\1\ Contracted = Implementation of commitments via contracting of services, goods.
\2\ Payments = Implementation of contracts via payments made to either contractors or UNMIK.
\3\ The current available data only includes EU allocations and disbursements. Europeans: 15 EU member states
and other European NATO members Norway, Iceland, Czech, Poland, Hungary, Turkey. The EU includes part of their
support to the UNMIK budget ($5 million paid in 1999 and $10 million paid in 2000) within their framework of
reconstruction assistance contributions.

EU and Euro-NATO Contributions and Disbursements to Humanitarian
Assistance for Kosovo in 1999 and 2000
[As of April 7, 2000--In millions of U.S. dollars]
------------------------------------------------------------------------
% of
Total Donor's
Donors Pledged \1\ Contracted Pledge
Contracted
------------------------------------------------------------------------
EC/EU/NATO \2\............... $428.0 $347.0 81.1%
------------------------------------------------------------------------
\1\ Contracted = Implementation of commitments via contracting of
services, goods.
\2\ The current available data only includes EU allocations and
disbursements. Europeans: 15 EU member states and other European NATO
members Norway, Iceland, Czech, Poland, Hungary, Turkey.

U.S. and E.U. Pledges to Kosovo Stabilization and Revitalization \1\
[FY 2000, in millions of U.S. dollars (2/28)]
------------------------------------------------------------------------
Total Pledged to Donors % of Total
Donors Date Pledges
------------------------------------------------------------------------
United States..................... $168.0 13.9%
European Commission .............. 360.0 29.7%
Austria \2\....................... 4.1 0.3%
Belgium \2\....................... 0.3 0.02%
Denmark........................... 36.5 3.0%
Finland........................... 11.1 0.9%
France............................ 18.6 1.5%
Germany \2\....................... 36.0 3.0%
Greece............................ 21.0 1.7%
Ireland........................... 2.5 0.2%
Italy \2\......................... 10.9 0.9%
Luxembourg........................ 17.0 1.4%
Netherlands....................... 52.5 4.3%
Portugal.......................... 1.3 0.1%
Spain............................. 13.9 1.1%
Sweden............................ 35.2 2.9%
United Kingdom.................... 50.6 4.2%
------------------------------------------------------------------------
Others.......................... 371.3 30.7%
========================================================================
Total......................... 1,210.8 100.0%
------------------------------------------------------------------------
\1\ Includes assistance for democratioc reform as well as civilian
police.
\2\ Provisional, under allocation process.
Note: European Union (EU + member states) represents $671.5 million
(55.5% of the pledges).

balkan policy
Question 1. Given the fact that it is widely believed that the
Administration's insistence on early elections in Bosnia legitimized
hardliners in that country and made a sustainable peace much more
difficult to achieve, is the United States supportive of a plan to hold
elections in Kosovo before moderate leaders have had time to develop?
Given the fact that the wounds from war are still fresh, would
elections be appropriate at all this year?
Answer. There were two options on elections in Bosnia: wait for
some undetermined period, meaning we would have to exercise direct rule
which no one contemplated at the time, or use the elections as a
moderating process. We opted for the latter approach.
Each successive election in Bosnia has produced greater moderation.
The election process produced the moderate SLOGA coalition in Republika
Srpska. It has spawned the growth of moderate parties in the
Federation.
On balance, we believe this was the correct approach, though it has
meant also enhancing the authority of the High Representative along the
way in order to make the system function.
Kosovo differs from Bosnia in important ways. First, under UN
Security Council Resolution 1244 the United Nations Interim
Administration Mission in Kosovo (UNMIK) is to form through democratic
elections provisional, rather than permanent, self-governing
institutions that would remain subject to UNMIK's oversight and
authority until such time as Kosovo's future status is determined.
Second, there are already a number of politically active moderate
leaders in Kosovo today, allowing for significant choice for voters,
and creating a range of potential partners for the continuing work of
the international community. Lastly, the magnitude of ethnic division
in Kosovo is far smaller than in Bosnia. Serbs and other non-Albanians
comprise little more than 10 percent of the population. The outcome of
the election would therefore be more likely to reflect intra-Albanian
political choices than it would a stark test of ethnic strength. We are
fully supportive of UNMIK and OSCE's plan to hold municipal elections
this fall.

Question 2. What is the status of each of the ten benchmarks set
forth by the Administration on which progress must be made before U.S.
troops participating in the Stabilization Force (SFOR) in Bosnia can be
withdrawn?
Answer. The following is a summary of the report to Congress signed
by the President on July 23, 1999, addressing each of the ten
benchmarks set forth in section 7 of P.L. 105-174, the 1998
Supplemental Appropriations and Recissions Act (known as the Levin
amendment). We expect a newly updated report will be transmitted to
Congress soon.

1. Military Stability.--Aim: Maintain Dayton cease-fire.
Despite the Kosovo crisis, Bosnia and Herzegovina (BIH)
remained calm. The senior leadership of the Republika Srpska's
(RS) Army remained neutral in the Kosovo conflict, and
Federation armed forces were not involved in any way. The
Office of the High Representative (OHR), OSCE, and SFOR
cooperated closely to increase professionalization and
education of the entity armed forces (EAFS) and push them
towards a common BIH security policy and a state dimension of
defense. A Permanent Secretariat for the State-Level Standing
Committee on Military Matters was established.
2. Public Security and Law Enforcement.--Aim: Restructured,
democratic police forces in both entities. There are positive
signs of reform in public security and law enforcement. The
Federation and RS signed agreements with the UN International
Police Task Force (IPTF) Committing both governments to
restructure police forces in accordance with democratic
principles. The Federation Police Academy, with U.S. and IPTF
assistance, has graduated two classes. The RS Police Academy
opened and began training predominantly minority Bosniak and
Croat recruits. Hiring of minority officers lags in all areas,
and tensions persist. Public disorder remains a threaty and
SFOR's Multinational Specialized Unit (MSU) has been crucial in
supporting local police responses.
3. Judicial Reform.--Aim: An effective reform program. OHR is
responsible for reform of the judicial system, assisted by
international organizations and NGOs. The UN's Judicial System
Assessment Program (JSAP), issued its first comprehensive
report in April 1999, covering areas needing reform, including
property, employment, and commercial law. The JSAP involved
Bosnian legal experts in judicial reform, ensuring that local
capacity is developed as critical areas requiring reform are
identified.
4. Illegal Institutions, Organized Crime, and Corruption.--
Aim: Dissolution of illegal pre-Dayton institutions. Customs
control has improved, and advances in police and law
enforcement reform allowed greater emphasis on dealing with
corruption and organized crime. Units specializing in organized
crime and drugs trained local police and provided technical
assistance.
5. Media Reform.--Aim: A regulated, independent, democratic
media. Continued progress was made in democratization and de-
politicization of the media. One of Bosnia's two public
television networks, RTV BIH (in the Federation), was freed
from party control, and a process of restructuring began to
create a Federation TV network. The reform of the Serb radio
television network continued with its further separation from
political oversight and renaming to reflect the multi-ethnic
character of the RS (radio television of the RS). The IC-funded
open broadcast network (OBN), Bosnia's only cross-entity
television network, is a reliable countrywide source of
objective news and public affairs programming. The Independent
Media Commission (IMC) put in place a licensing framework and a
code of practice for electronic media. On this basis, the IMC
informed EROTEL, a subsidiary of the Croatian state
broadcaster, that its old license would be revoked and that its
new license would limit braoadcast coverage and content.
6. Elections and Democratic Government.--Aim: National
democratic institutions and prectices. At the state level, the
joint Presidency made progress toward functioning as a
responsible institution. Until the formal adoption of a Bosnian
election law, the OSCE remains in charge of running elections
in Bosnia under the Dayton Accords. The next round of municipal
elections was postponed from November 1999 to April 2000. SFOR
ensures a secure and stable environment in which the
parliamentary assemblies at the state and entity levels can
function and in which democratic elections can take place.
7. Economic Development.--Aim: Free-Market Reforms. Bosnia
has made progress towards economic reconstruction and recovery,
but progress toward a free market economy is slow. Ethnic
tensions hinder reform, and the pilitical leadership remains
wedded to control over economic activity, which supports ethnic
parties financially. These vested interests block privatization
and market reform. There is still little private investment,
either domestic or foreign. Due to international assistance,
annual economic growth has averaged about 40 percent in real
terms since 1995, and GDP reached $4.1 billion in 1998, roughly
40-percent of its pre-war level. The Kosovo crisis compounded
reconstruction difficulties, in particular for the RS, whose
major trading partner was the FRY.
8. Displaced Person and Refugee (DPRE) Returns.--Aim: A
Functioning, Phased, Orderly Minority Return Process. Over
600,000 DPREs repatriated or returned to their homes since the
signing of the Dayton Accords. As of July 1999, 80,000 had
returned to areas where their ethnic groups were minorities.
About 1.2 million Bosnians remain displaced internally or
abroad. Hard-line nationalists seek to block minority returns
with bureaucratic maneuvers and, occasionally, violence.
However, violance against minority returnees has substantially
declined, and implementation of property legislation is
improving. The pace of minority returns has slowly improved.
Significant spontaneous returns occurred, particularly in areas
such as Drvar, where Serb returns have reached significant
levels with no repetition of earlier violence. SFOR's
contribution to a secure environment is key to the return
process.
9. Brcko.--Aim: Implementation of the Brcko Arbitration
Tribunal's final award that was issued on March 5, 1999. The
award called for the creation of a neutral, multi-ethnic self-
governing district comprised of the entire pre-war municipality
of Brcko. Both entities will be required to delegate their
authority over the district to a democratically elected local
government. International supervision remains in place.
Moderates in the RS, led by Prime Minister Dodik, accepted the
award after some initial objections and obstruction from hard-
line Serb elements. SFOR support remains crucial to deterring
violent attempts by hard-liners to disrupt Brcko
implementation.
10. Persons Indicted for War Crimes (PIFWCS).--Aim:
Cooperation with the International Criminal Tribunal for the
Former Yugoslavia (ICTY) leading to the transfer of PIFWCS to
the Hague for trial. As of July 1999, SFOR had assisted in the
transfer of 28 indictees to the Hague. Cooperation from the
parties varies widely. Bosnian Serb cooperation with the
Tribunal has improved since Milorad Dodik became Prime Minister
of the RS. The two most senior indictees for war crimes
committed in BIH, Radovan Karadzic and Ratko Mladic, have yet
to be apprehended.

LIFTING THE FLIGHT BAN

Question. Has the Department of State or any other Administration
agency analyzed the effect that lifting the flight ban against Serbia
would have on that country's economic situation? Could lifting the
flight ban provide any material benefit to Serbia? If so, why did the
Administration support this move?
Answer. We have discussed with our European partners the commercial
implications for Belgrade of Yugoslav Air Transport (JAT) flights to
Europe, and we have looked into the facts ourselves. It is not at all
certain that the JAT service will earn a profit from flying to European
ports, and it is unlikely that the Serbian economy will gain much from
the EU suspension of the flight ban.
Prior to the EU flight ban, Belgrade authorities charged a $30 per
passenger surcharge on all passengers flying EU carriers. Our contacts
in the EU tell us they will insist on strict reciprocal relations with
JAT, and will not pay this charge.
In addition, JAT is currently leasing many of its planes to
carriers in countries not participating in the U.S. or EU sanctions
regimes, and JAT is not known to earn profits from its regular flights.
JAT will earn some added revenue from landing fees charged to EU
carriers, but the level depends on the frequency and type of flights.
It is too soon to estimate what these earnings would be.
Under the proposed EU regulations JAT would be authorized to
establish one bank account in each member country that can be used to
make and receive payments related only to flights. JAT would also be
permitted to obtain necessary fuel and petroleum products at EU
airports. However, no fuel could be exported to Serbia. EU airlines
will be permitted to transfer funds to the FRY for payment of goods and
services, as well as payments of taxes, customs duties and other
charges. However, all such payments would be subject to Commission
review.
We will seek to ensure that JAT cannot profit from these new routes
by carrying cargoes that would be subject to the EU finacial sanctions.

NATO

Question. How is the NATO Alliance affected by the numerous trade
disputes the United States has with the European Union?
Answer. Trade disputes have not been on the agenda of alliance
discussions. Although eleven members of the EU are also alliance
members, trade disputes have not detracted from the important security-
related work being conducted at NATO.

ESDI

Question. The NATO Alliance and the European Union have agreed the
EU will only undertake military operations ``where the Alliance as a
whole is not engaged.'' Is there a common understanding of this phrase
among NATO members and between the Alliance and the EU? What
arrangements do you envision between NATO and the EU that will
structure their relationship so that it lives up to your understanding
of this phrase?
Answer. The NATO Washington Summit and the EU Helsinki Summit both
have affirmed that NATO is the institution of first choice for
undertaking military operations. The EU will take action in a crisis
only if NATO chooses not to act. No possibility of duplication or
overlap exists.
Institutional NATO-EU links will serve as the basis for
operationalizing the arrangements whereby the Alliance ``hands off''
action to the EU.
We are pressing for regular and close consultations between EU
structures and corresponding NATO structures to ensure full
transparency and coordination.

NATO ENLARGEMENT

Question. Is it the position of the United States Government that
of those European states that have applied for NATO membership there is
not one whose admission into the Alliance today would enhance the
security of the Alliance and its ability to carry out its
responsibilities? If not, please identify which of the candidates
currently meet these criteria.

Answer. Since including the Czech Republic, Hungary, and Poland as
new NATO members in 1999, neither NATO nor the U.S. has conducted a
definitive review of whether any of the current aspirants are yet in a
position to enhance the security of the Alliance and have the ability
to carry out the responsibilities of membership. At the 1999 Washington
Summit, NATO Allies agreed to review enlargement again at the next
summit, which will be held no later than 2002.
At the Washington summit, NATO offered to assist countries aspiring
to join the Alliance through a Membership Action Plan (MAP). In this
context, NATO met with senior members of aspirant governments earlier
this year to examine progress made through the MAP and provide feedback
and assistance.
President Clinton and NATO leaders made clear in Washington that
the door to NATO membership remains open to all aspirants, based on
NATO's determination that a country is ``willing and able'' to assume
the obligations of NATO membership and would contribute to the
political and strategic interests of the Alliance.
At the May 2000 North Atlantic Council Ministerial in Florence,
NATO reaffirmed this commitment. NATO reiterated its expectation that
further invitations would be extended in coming years to nations
willing and able to assume the responsibilities and obligations of
membership. Nine countries--Albania, Bulgaria, Estonia, Latvia,
Lithuania, Macedonia, Romania, Slovakia, and Slovenia--have thus far
expressed a desire to assume those responsibilities.

NATO-RUSSIA

Question. Russia suspended its participation in the NATO-Russia
Permanent Joint Council to protest Operation ALLIED FORCE. Is the
United States or the Alliance encouraging Russia to re-engage in the
PJC? If so, does this effort involve any offers by the Alliance or the
United States to alter the PJC's agenda from its original construction?
Is the Russian government making any such proposals as a condition for
their return to the PJC?
Answer. NATO kept the door open for Russia to re-engage with the
Alliance, and we fully supported this position. We welcomed Russia's
return to the PJC after the end of the Kosovo air campaign and urged
Russia to re-engage on issues other than Kosovo and KFOR alone. It is
in NATO and Russia's interest to resume the broader dialogue envisaged
in the Founding Act, as NATO-Russia cooperation can contribute
fundamentally to European security.
NATO neither set nor agreed to any conditions in resuming broader
dialogue. The consultative nature of the PJC will remain unchanged. We
have urged Russia to make full use of this mechanism.
NATO Secretary General Robertson's visit to Moscow on February 16
was an excellent step at the right time. He had constructive
discussions with Russian Acting President Putin, FM Ivanov and MOD
Sergeyev. This visit confirmed Russia's decision to re-engage broadly
with NATO.
I note that cooperation between Russian and NATO SFOR and KFOR
forces on the ground is excellent and that this cooperation also rests
on a consultative basis.
``holocaust reparations''--german allocation plan
Question. The German government has agreed to compensation for Nazi
slave and forced labor of 10 billion DM and negotiations are ongoing as
to how these funds will be dispensed. Why is the Administration
supportive of the German concept of allocation--77% for direct payments
and 23% for all other payments--rather than the allocation favored by
the countries in Central and Eastern Europe that represent the
victims--90% for direct payments and 10% for all other payments?
Answer. I am pleased to report that in late March all the parties
participating in the negotiations, including the victims groups, agreed
to an allocation plan. All agreed that the lion's share of the funds,
at least 8.1 billion of the 10 billion DM in the German foundation,
should go to labor and other personal injury cases. The 8.1 billion is
expected to be augmented by interest earnings and from other sources.
The next step in this process is approval of German legislation that
will establish the foundation, anticipated by July. This timetable
could lead to operation of the German foundation by the end of the
year.

NORTHERN IRELAND

Question 1. What has the Administration done to pressure the Irish
Republican Army and its political wing, Sinn Fein, to begin IRA
decommissioning? Why should the United States government continue to
allow representatives of Sinn Fein to travel and raise funds in the
United States when Sinn Fein has failed to meet its obligations on
decommissioning under the Good Friday Accord?
Answer. The Administration continues to urge the parties involved
in the peace process to implement all aspects of the Good Friday
Accord, including decommissioning.
Neither we nor the British or Irish governments are questioning the
sincerity of the Sinn Fein leadership's efforts to implement the Good
Friday Accord and establish lasting peace in Northern Ireland.

Question 2. Has Marion Price, a former IRA member who was convicted
of planting four bombs in London which killed one person and wounded
nearly 200, applied for a visa to the United States at any time during
the past two years? If so, was the visa issued? Has Marion Price
traveled to the United States at any time during the past two years?
Answer. Marion Price applied for a visa to the United States in
late December. Due to her previous convictions, she is ineligible for a
visa and requires a waiver to receive one. An inter-agency group
including representatives from the Departments of State and Justice
considered Ms. Price's most recent waiver request. This request was
denied.
Marion Price has not traveled to the United States at any time
during the past two years.
international criminal tribunal for the former yugoslavia
Question 1. Should the United States continue to support
financially the International Criminal Tribunal for the former
Yugoslavia (ICTY) in light of its investigation into the conduct of
NATO actions during the war in Kosovo?
Answer. ICTY Prosecutor Carla Del Ponte herself has said previously
that ``NATO is not under investigation'' and ``There is no formal
inquiry into the actions of NATO during the conflict in Kosovo.''
Moreover, NATO fully incorporated the laws of armed conflict in
training, targeting and operational decisions in Kosovo. NATO undertook
extraordinary efforts to minimize collateral damage.
The United States continues to support the ICTY through a variety
of means, including financial, diplomatic, logistical and other support
for its investigations and trials. We expect this support to continue
in the future.

Question 2. Are you concerned at the speed with which the Office of
the Chief Prosecutor initiated this investigation, particularly in
light of the fact that it took them nearly eight years to indict
Slobodan Milosevic--the instigator of all of the bloodshed and violence
in the former Yugoslavia?
Answer. As noted in the previous answer, the Prosecutor has told us
NATO is not under investigation and there is no formal inquiry of NATO
now underway.
The United States fully supports the ICTY's investigations and
indictment of Slobodan Milosevic for crimes against humanity and war
crimes in Kosovo, and is supporting the ICTY's efforts to investigate
other crimes in Croatia, Bosnia and Kosovo for which he and his
associates may be held individually and criminally responsible.

CHECHNYA

Question 1. Last September, bombs went off in four apartment
complexes in Moscow and other cities. Russian authorities have
attributed these bombings to Chechen terrorists and used these
accusations to justify the invasion of Chechnya. Do you believe that
the Russian government is justified when it accuses Chechen groups as
responsible for the bombings? If so, would you please forward to the
Committee any evidence that you have that links these bombings to
Chechen entities?
Answer. We condemned the deadly apartment bombings in the harshest
terms. Acts of terror, in all their forms, have no place in a
democratic society.
The investigation into these bombings is ongoing. We offered our
assistance to Russian law enforcement immediately following these
incidents.
We understand that Russian authorities have linked the bombings to
Chechnya. Chechen authorities, including President Maskhadov, deny this
link.
We have not seen evidence that ties the bombings to Chechnya.

Question 2. Were the decisions of the United States Government to
suspend IMF loans and EXIM Bank programs to Russia linked to Russia's
invasion and use of force in Chechnya? If a move is made to end the
suspension of the IMF's loans to Russia, will the United States block
it on the grounds that Russian military spending exceeds the loan's
provisions concerning the Russian national budget?
Answer. The IMF decided to withhold further disbursements under the
program Russia agreed to in 1999 because Russia had not met all the
conditions of that program. We will consider supporting future
disbursements under that program only if Russia fulfills the
conditions--including spending targets--it agreed to with the IMF.
Where Russia has met the conditions of its agreements with the
international financial institutions, disbursements have been made, as
occurred with a $100 million tranche of the World Bank's coal loan in
December.
I invoked the Chafee Amendment to delay Ex-Im Bank transactions
with one specific Russian company so that important questions about
that company's conduct could be fully examined. At least one other Ex-
Im transaction has gone forward since I invoked the Chafee Amendment in
December.

Question 3. The European Union recently decided to suspend and
redirect its assistance programs to Russia to underscore its concern
about Russia's invasion of Chechnya. What is the Administration's
position on this move by the European Union?
Answer. We understand the concerns about Russia's conduct of its
campaign in Chechnya which led to the announcement of certain measures
by the Europeans in January. The United States shares those concerns.
Two-thirds of our bilateral assistance to Russia is aimed at
reducing the threat of proliferation of weapons of mass destruction.
The remainder of our bilateral assistance consists largely of
humanitarian assistance for vulnerable groups and programs focused on
promoting grassroots economic and democratic reform outside Moscow.
These efforts include support for NGO's, Internet access, independent
media, regional initiatives, exchange programs, and small business
development. Cutting this aid would run counter to U.S. interests in
Russia's successful transition to a democratic society and a market-
oriented economy that is integrated into global political and economic
structures.

Question 4. Can Russia win its war against Chechnya without seeking
to subordinate Georgia in order to further isolate the Chechen
resistance? If Russia were to take actions that threatened the
sovereignty, security, and independence of Georgia, what would be the
reaction of the Administration?
Answer. The shift of Russian military operations in Chechnya
southward into the Caucasus mountains gives new urgency to U.S.
concerns about the potential for spillover of the conflict into Georgia
and the South Caucasus.
The U.S. strongly supports Georgian sovereignty and territorial
integrity and has dedicated significant diplomatic energies and
assistance to this end.
We strongly supported the December 15, 1999, OSCE Permanent Council
decision to expand the Georgia OSCE mission's mandate to include border
monitoring in the northern region.
We have made it clear to the Russian government--at the highest
levels--that Russia cannot cross the border without serious
consequences to our bilateral relationship and to Russia's standing in
the world.
Acting President Putin stated in a December 11, 1999, press
interview that ``Russia will never cross the border of a sovereign
state.'' We have reminded Russia of this statement on numerous
occasions.
We are pleased by recent improved cooperation at the working-level
between Russian and Georgian border guards.

Question 5. What has the Administration done to promote a just
peace in Chechnya aside from rhetorically emphasizing the need for
peace?
Answer. Our firm and continuing dialogue with the Russian
Government is producing some results. Russia agreed at the March 3
Lisbon Ministerial to allow an OSCE assessment visit to the region in
preparation for the reestablishment of the OSCE Assistance Group in the
region. This is a direct result of concerted pressure by the U.S. and
our allies.
Acting President Putin has also acknowledged his readiness to
engage in a political dialogue with Chechen leaders and address the
economic and social issues at the root of this conflict.
We have also made clear our redline that this conflict must not
threaten the security of Russia's neighbors. Putin's public restatement
of his policy of respect for the sovereignty and territorial integrity
of Russia's neighbors came, in part, in response to our expressions of
concern.

Question 6. How does a war against Chechnya affect the prospects of
Russia's evolution into a democracy?
Answer. Overall, Russia has made considerable progress over the
last decade as an emerging democracy. This is a long term process.
The conduct of the State Duma elections in December and the
upcoming presidential elections indicate that democracy is taking root
in Russia.
However, the war in Chechnya has had a negative effect on Russian
democracy in certain areas, such as freedom of the press, treatment of
ethnic minorities, and protection of displaced persons. Government
policies in these areas raise questions about Russia's commitment to
improving the protection of individual rights and freedoms.
It is important that the Russian government continue to abide by
the constitution and ensure all citizens their rights and
responsibilities.

Question 7. The Administration has repeatedly stated that Russia
will pay the price of international isolation if it does not cease its
indiscriminate military operations against Chechnya. How has President
Putin's use of indiscriminate force in Chechnya directly resulted in
any dilution of the political engagement and economic benefits it
receives from the West?
Answer. Russia is paying the price for its actions in Chechnya
through its growing isolation from the international community. Russia
will have difficulty advancing its own agenda when Chechnya dominates
its dialogue with the world.
That said, our policy of engagement with Russia has not changed. It
is important that we stay engaged in Russia. We have a broad range of
shared interests with Russia and will continue to pursue them.
Because we continue to engage Russia, we and the international
community have had some influence in Chechnya and the region,
especially with regard to the provision of humanitarian assistance.

Question 8. In light of the known atrocities committed in Chechnya,
should there be an investigation of war crimes committed by the
combatants in this tragic conflict?
Answer. Widespread reports of Russian and some rebel actions in
Chechnya raise fundamental questions under international humanitarian
law that necessitate immediate Russian investigation and access to
Chechnya by international observers.
A thorough investigation would, of course, be necessary to gather
sufficient evidence to prosecute any individual for specific criminal
acts.
Because of the seriousness of these allegations, we are urging the
Russian government to investigate in an open and transparent way and,
where warranted, prosecute those responsible for violations.

Question 9. During your recent visit to Moscow, you proposed that
Russia allow an international commission to visit Chechnya and
determine the needs of the peoples displaced by this war. Are you
considering any proposal in which the United States would provide
humanitarian assistance and reconstruction assistance to the displaced
peoples of Chechnya?
Answer. We have so far provided $12 million worth of assistance as
financial support in response to appeals from the ICRC and UNHCR, and
we have provided some food commodities to the World Food Program for
Chechen refugees. We are not considering help with reconstruction.

Question 10. You have called upon the Russian government to ``get
involved in a political dialogue'' with the Chechen resistance. Yet,
when a senior representative of the Chechen resistance, Ilyas Akhmadov,
visited Washington in January, you and other senior State Department
officials, including the Assistant Secretary of State for Human Rights,
refused to meet with him. How can the Kremlin be expected to take your
call for a political dialogue seriously when our own government refuses
to meet with members of the Chechen leadership?
Answer. The U.S. supports the territorial integrity of the Russian
Federation, which does not recognize independent Chechnya. Mr. Akhmadov
represented himself as the ``Foreign Minister of the Chechen
Republic.'' It would be inappropriate for us to meet with him at senior
level.
Working-level officials--who are our leading experts on Chechnya
and are involved in the policy-making process--met with Mr. Akhmadov
while he was in Washington. I assure you that Akhmadov's views were
conveyed to the senior policy level.
We remain convinced that Russia's military policy does not address
the deep-rooted economic and social problems which lie at the root of
unrest in the North Caucasus region. We have consistently called on the
Russian government to enter a substantive dialogue with legitimate
leaders in the region to seek a long-term political resolution to this
conflict.

Question 11. You have called upon the Russian government to ``get
involved in a political dialogue'' with the Chechen resistance. How do
you envision the structure of such a political dialogue? Who should
represent the Chechen resistance? Should outside parties such as the
OSCE and neighboring states such as Georgia and Azerbaijan be a part of
this dialogue?
Answer. We have consistently made clear to the Russian government
that we believe their military policy in the North Caucasus does not
address the social and economic problems which lie at the root of
unrest in the region. We continue to urge the Russian government to
take meaningful steps toward a political solution. Substantive dialogue
with responsible Chechens is critical.
We have encouraged the Russians to facilitate a return of the OSCE
Assistance Group to the North Caucasus region. The Assistance Group's
broad mandate tasks it with engaging parties in substantive political
dialogue.
We have encouraged Russia to work closely with its neighbors in the
South Caucasus; the OSCE has been a useful forum for some of this
discussion. The Russians agreed in the Istanbul Summit Declaration that
the OSCE ``would contribute'' to achieving a political solution.
We strongly supported the December 15, 1999 OSCE Permanent Council
Decision to expand the Georgia OSCE Mission's mandate to include border
monitoring on the Georgian side of the Russian-Georgian border with
Chechnya.

RUSSIA AND PROLIFERATION

Question. The Director of Central Intelligence recently sent to
Congress a report on the proliferation of technologies relating to the
weapons of mass destruction (WMD) and advanced conventional munitions.
The report concludes that the Russian government's ``commitment,
willingness, and ability to curb proliferation-related transfers remain
uncertain.'' Recognizing that this CIA repot addresses the first six
months of 1999, how do you assess the Russian government's commitment
to restrain these dangerous transfers of missile and WMD technology
under the leadership of Prime Minister and Acting President Vladimir
Putin? What in your view should the United States do to further
encourage or pressure the Government of Russia to curb the
proliferation of such technologies and materials?
Answer. Russia has undertaken a wide range of international
commitments to control the export of equipment and technology for use
in weapons of mass destruction (WMD), missiles for WMD delivery, and
advanced conventional weapons. Moreover, the Government of Russia has
consistently stated that its policy is to oppose proliferation. The
U.S. continues to press the Russian Government at all levels to fully
meet its commitments and abide by its stated policy, and to work with
the Russian Government to assist it in doing so.
Nevertheless, the U.S. remains concerned that Iran and other
proliferators are able to obtain items for their WMD/missile programs
from Russian entities. In response, the U.S. will continue both to
press the Russian Government to improve its controls over sensitive
technology and to assist Russia in doing so. Moreover, the U.S. will
continue to enlist the help of our allies in this effort, as well as
provide alternatives to proliferation activity for key Russian
institutes and scientists. Finally, as warranted, the U.S. will
continue to impose penalties against Russian entities for engaging in
proliferation activity, as we have already done with ten Russian
entities involved with Iran's missile and nuclear programs.

PROLIFERATION

Question. China's recent purchase of two $800 million missile
destroyers underscores the growing military ties between Beijing and
Moscow. What are the implications of this deepening Sino-Russian
military relationship for America's security interests? Has the United
States expressed to the Russian government opposition to these other
sales of military equipment?
Answer. We are well aware of Russia's arms sales to China and have
been monitoring closely the development and modernization of China's
military and its potential affect on U.S. security. While China's
purchase of two guided missile destroyers will clearly improve its
naval capabilities, the Department of Defense has indicated that it
does not pose a significant military threat to the U.S. military
posture in Asia and that it will not fundamentally alter the regional
balance of power.
The United States maintains an active dialogue with Russia on the
issue of arms sales, reflecting our concern about proliferation and
regional stability. We will continue to monitor closely Russian arms
sales to China and will raise them with the Russian government in a
manner consistent with our overall nonproliferation and security
interests.

NORTH KOREA

Question 1. Have we committed to, or are we considering, removing
North Korea from the terrorist list? If so, how can this be justified
in light of recent CIA testimony that North Korea is now the world's
largest weapons proliferator and that North Korea's missile development
program continues, despite last year's flight-testing pledge?
Answer. We have made no commitment to the DPRK to remove it from
the list of state sponsors of terrorism.
We have conducted several rounds of bilateral talks on this issue,
the most recent in New York in March.
In those talks we again raised with the DPRK our concerns regarding
terrorism and described to the DPRK in detail what steps it must take
to be removed from the list.
The objective of the talks was to ensure that the DPRK addresses
our concerns-removal of the DPRK from the list is not the priority
rather, our goal is to get the DPRK out of the terrorism business.
We will not remove the DPRK from the terrorism list until it takes
actions necessary to meet our concerns.
The issue of the DPRK's missile program is of serious concern to us
and the international community and is itself a subject of bilateral
discussions aimed at stopping the DPRK's missile evelopment and export
activities.
We expect to continue bilateral missile talks to achieve the
important goals laid out by Dr. Perry in his report.
We have already obtained a suspension of the DPRK's flight testing
of long-range missiles while high-level talks to improve our bilateral
relations are underway. We are seeking to clarify and extend the
suspension in our ongoing high-level talks.

Question 2. It has come to my attention recently that seven North
Korean UNHCR recognized refugees, including a 13-year-old boy, made
their way from North Korea to Russia, across Chinese territory. Despite
pleas from the UNHCR and South Korea, Russian authorities deported the
seven back to China, which then regrettably had the refugees sent back
to North Korea. What is the status of the seven refugees? What steps
has the Administration taken to halt such repatriations? What does the
future hold for other North Koreans seeking to escape persecution?
Answer. Estimates of the number North Koreans in northeastern China
vary widely. Most of them are migrants who intend to stay temporarily
and then return voluntarily to North Korea.
The PRC office of the U.N. High Commissioner for Refugees--the
recognized lead international agency for such issues--and various NGO's
have been able to assist some needy North Koreans in China. We have
been told that these organizations are generally satisfied with their
freedom of important UNHCR activities in China which aid these
migrants.
Regarding the seven refugees who were returned to the DPRK from
China in January, we are working closely with the office of the UNHCR,
which has raised this issue with the PRC, to ensure that the needs of
the asylum seekers are met. We support the position of the High
Commissioner on refoulement, which opposes the forcible return of
persons to a place where they face persecution.
It is not possible for the administration to ascertain directly the
status of these individuals because we have no embassy or official
presence in North Korea. We take this case very seriously and expect
all members of the international community to abide by the guiding
principles of the U.N. Charter and the Universal Declaration of Human
Rights.
We have also kept in close touch with the ROK government, which of
course has a strong interest in this case and in the welfare of the
North Korean people.

BURMA

Question. If the United States does not place an ambassador in
Rangoon, why does the United States continue to allow the Burmese
junta's ambassador to stay in Washington?
Answer. In support of our policy objectives--democracy, improved
human rights, and more effective counternarcotics efforts--we maintain
diplomatic relations with the Government of Burma. This allows us to
staff an embassy in Rangoon in pursuit of those objectives. Our
unilateral decision to downgrade our chief of mission status from
Ambassador to Charge is a result of the regime's failure to implement
the results of the 1990 elections, won by the democratic opposition.
This symbolic downgrading does not, however, impede the efforts of our
Embassy to effect change in Burma.
If we required the Burmese to downgrade the status of their chief
representative, any retaliatory action aimed at our Embassy in Rangoon
could impinge upon the ability of our diplomats to do their jobs,
which, in turn, would interfere with our ability to support the
democratic opposition, including Aung San Suu Kyi.

PRC SUNBURN MISSILE

Question. What capabilities does Taiwan have to track, lock on to
and shoot down the PRC's recently acquired Sunburn anti-ship missile?
Answer. The U.S. has supplied a number of weapons systems designed
to provide Taiwan navy ships a limited capability against Sunburn
missiles. Perry-class and Knox-class frigates are equipped with the
PHALANX Close-In Weapons System (CIWS), which is designed to intercept
surface skimming, low-flying anti-ship missiles. Additionally, F-16
aircraft, equipped with the air-launched Harpoon antiship missile, can
be used to attack PRC ships before a Sunburn could be launched (the
preferred tactic of the U.S. Navy.) However, the Sunburn's terminal
flight maneuvers make it an extremely difficult target for any U.S.
weapons system, including Aegis, to track and shoot down.

TAIWAN

Question 1. Has the Chinese government been demarched for the
threatening statements made by DCM Liu Xiaoming on February 3rd, when
he implied that China would initiate military action against Taiwan if
Congress passed the Taiwan Security Enhancement Act?
Answer. Yes. Assistant Secretary of State for East Asian and
Pacific Affairs, Stanley Roth, called Chinese Ambassador Li Zhaoxing
personally, shortly after Mr. Liu's remarks were made public. Assistant
Secretary Roth also called the Senate Foreign Relations Committee, to
inform them of the substance of the demarche.
In his call to the Chinese Embassy, Assistant Secretary Roth told
Ambassador Li that Mr. Liu's remarks were inappropriate, needlessly
provocative, and contrary to China's stated policy of seeking
``peaceful reunification'' with Taiwan.

Question 2. Has the State Department or the White House taken any
steps to induce the government of Taiwan to make negative statements
about the Taiwan Security Enhancement Act?
Answer. No, we have not taken any steps to induce the Taiwan
authorities to make negative statements about the Taiwan Security
Enhancement Act (TSEA).
The administration's reasons for opposing the legislation are well
known. We believe it would seriously diminish Taiwan's security and
undermine the important U.S. objective of stability in Asia.
We remain firmly committed to fulfilling our commitments under the
Taiwan Relations Act, including the security and arms transfer
provisions.

VIETNAM

Question. I understand that the Refugee Resettlement Unit at the
U.S. Consulate in Saigon has begun processing ``Priority One'' cases.
How many cases have been received and processed thus far? Of those
cases, how many refugees have been admitted to the United States?
Answer:. The Refugee Resettlement Section (RRS) in Ho Chi Minh City
has not yet begun to process ``Priority One'' (P1) cases. Since
November the program in Vietnam has been in transition with the close
out of Orderly Departure Program (ODP) operations in Bangkok and the
expansion of RRS operations in Ho Chi Minh City. This month the RRS
initiated interviews for the small number of residual ODP cases.
Concerning the P1 program, we are currently in the process of
implementing procedures for the new program and expect that the program
should be in place by early April. Later this month we intend to
contact your staff and the staff of other interested Members of
Congress to offer a briefing on the process.

COSTA RICA

Question. The Committee continues to receive regular requests for
assistance from U.S. (and other) citizens with squatter-related
property and security issues in Costa Rica. How many of these cases is
the USG aware or what is being done to assist these U.S. citizens? What
more could be done?
Answer. The United States Embassy in San Jose, Costa Rica, does not
maintain an historic roster of squatter and security cases. We are
aware that many of the cases that arose in Pavones, Costa Rica, late in
the previous Costa Rican administration, have been resolved. At the
present time, the Embassy is actively tracking one squatter case and
one security case.
The police in Costa Rica have recognized the issue and have
increased their presence in Pavones, as well as increased police
presence for the active security case upon the request of the U.S.
citizen involved and the Embassy.
The Government of Costa Rica recognizes the importance of public
security to further development. The Penal Code and the court system
were significantly amended in January of 1998, making them similar to
the penal code and court system of the United States. We are working
with the Government of Costa Rica to strengthen the professionalism of
the police force and Costa Rican law mandates that one-quarter of the
Public Security force be kept on with each new administration.
The Department of State has no greater purpose than the protection
of the security of Americans living and traveling abroad. The Bureau of
Consular Affairs as well as our Embassy in San Jose stand ready to
assist American citizens in any way they can, including but not limited
to liaison with the police, provision of information regarding the
Costa Rican legal system and legal remedies, and advocacy with the
government in egregious cases.

COUNTER-DRUG FUNDING

Question. What is the Department of State doing to resolve
overflight issues in South America so that counter-drug funds and the
FOL investment in Manta can be most effectively used?
Answer. Overall, we are extremely pleased with the level of
cooperation and support that South American and Caribbean governments
have provided for our aerial interdiction efforts in the Western
Hemisphere. In 1999 we sealed a ten-year agreement with the Government
of Ecuador permitting the U.S. to operate regional counter-narcotic
detection and monitoring missions from an Ecuadorian air force base in
the city of Manta. We also reached an interim agreement with the
Netherlands Antilles to permit similar missions throughout the Eastern
Caribbean region, with negotiations currently underway to extend
operations into the next decade.
Regarding the issue of overflights by U.S. counterdrug aircraft,
all countries involved in regional counter-drug operations recognize
that sovereignty concerns must be respected and addressed. In
particular, we are engaged actively in discussions with the Government
of Venezuela to reach a mutually agreeable resolution of the issue that
respects the sovereignty concerns of the Venezuelan Government.

HAITI: FORMER PRESIDENT ARISTIDE

Question. In your view, to what degree has Jean Bertrand Aristide
(both in office and out) frustrated U.S. efforts to bring democracy,
economic reform, and rule of law to Haiti since he was returned by U.S.
troops?
Answer. In September 1994, the UN sanctioned, U.S.-led
Multinational Force restored elected government to Haiti, which for
three years had been under the brutal dictatorship of the de facto
military regime. Then- President Jean Bertrand Aristide, who had been
elected in 1990 in elections widely regarded as free and fair, returned
from exile in 1994 to assume his duties in Port-au-Prince. President
Aristide subsequently dismantled the Haitian army and oversaw the
establishment of a professional civilian police force. Although he had
been in exile for much of his term, President Aristide stepped down
from power when President Rene Preval assumed office in January 1996.
This was the first peaceful transition from one elected president to
another in Haitian history.
Former President Aristide continues to be an important political
figure in Haiti, as head of the Famni Lavalas (FL), the country's
largest political party. In December 1999 at the FL party conference,
he denounced violence in the lead up to the upcoming legislative,
local, and regional elections and called on his party to respect
political pluralism. Some 9,000 FL candidates have registered to
compete in the elections at all levels, and the FL was the first to
sign the code of ethics committing the parties to non-violence during
the electoral process. We are concerned by a recent rise in elections-
related violence, including the killings of a prominent journalist and
an opposition party activist, and the burning down by agitators of the
headquarters of an opposition political party. Some of the violence has
been perpetrated by self-professed supporters of former President
Aristide, although the FL leadership has publicly condemned the
violence. We called on the Government of Haiti to restore a climate of
security and ensure that the perpetrators of violence are identified
and brought to justice. Additionally, we believe the leaders of all
Haitian political parties, including former President Aristide, have an
obligation to use all means possible to dissuade their followers from
engaging in violence or other actions that could call into question the
integrity of the electoral process.

HAITI: ELECTIONS-RELATED VIOLENCE

Question. Has the USG received information that suggests,
indicates, or otherwise links Aristide or individuals associated with
him with disruptions in election-related activities, including the
registration process? Are you prepared to use your authority to pull
the visas of individuals involved in these activities?
Answer. Some four million Haitians registered to participate in
upcoming legislative, regional, and local elections, and we are
continuing to urge the Haitian government to ensure these elections are
held rapidly in an atmosphere of nonviolence. While in some areas the
registration process unfolded in a peaceful manner, several areas
experienced localized disturbances or violence, primarily related to
the selection of electoral personnel at a local level. Also, some
protests directed against the Provisional Electoral Council (CEP)
occurred because of the CEP's failure to ensure adequate registration
supplies in some locations and the timely opening of some registration
sites. We are concerned, however, by an increase in the demonstrations
and violent acts carried out by supporters from range of political
sectors--including the pro-Aristide Famni Lavalas (FL) movement--in the
early weeks of April, 2000. The FL party has publicly denounced the
violence and called for an atmosphere of calm.
Special Haiti Coordinator Donald Steinberg, in a press statement in
Haiti in December, stated ``the U.S. Government has the right to deny
entry into the United States by individuals who violently disrupt
political rallies; attack election registration sites; or attack and
intimidate the Haitian National Police, electoral officials, voters, or
candidates.'' We are prepared to use this authority as appropriate to
promote U.S. interests in ensuring the continued consolidation of
Haitian democracy.
A significant international observer presence is absolutely
critical to deter potential fraud and violence during the upcoming
elections. A hold by the Senate Foreign Relations Committee on $1.3
million in U.S. funding for OAS elections observers has greatly
jeopardized the ability of the international community to provide
adequate observation for this critical vote.

HAITI: OBJECTIONABLE POLITICAL FIGURES

Question. We know from testimony by State Department officials that
members of President Aristide's security forces were implicated in
political assassinations committed by hit squads run out of the
national palace. The leadership of these forces included longstanding
Aristide confidants, Dany Toussaint, Medard Joseph, and Fourel
Celestin, individuals Ambassador Swing has testified were chosen
because of their personal loyalty to Aristide. Do these individuals
maintain an association with Jean Bertrand Aristide? Does the
Department of State share the Committee's concern that the same
individuals who led the security forces during the period of the
assassinations will be returned to the National Palace along with Jean
Bertrand Aristide if he is re-elected?
Answer. We have made consistently clear to President Preval, as we
did to former President Aristide, our concern that individuals placed
in key government positions, particularly those related to security,
demonstrate a high level of integrity and respect for the law. We have
also made clear that continued U.S. assistance for developing the
Haitian National Police (HNP) would be jeopardized if individuals
believed to have been involved in human rights abuses or illegal
activity were placed in positions of responsibility over the HNP.
Dany Toussaint, Medard Joseph, and Fourel Celestin are presently
candidates in the impending senate elections under the Famni Lavalas
(FL) banner. They continue to associate with former President Aristide.

HAITI: ``POLITICAL'' KILLINGS

Question. With regard to political assassinations in Haiti since
President Aristide was returned, State Department officials have
briefed Committee Staff that ``no one believes that anyone will be
prosecuted for these crimes'' and that maintaining an investigative
advisor to the SIU is really about having some sort of ``deterrent or
prophylactic'' effect on potential murders. Why has the State
Department concluded that no one will ever be brought to justice in
these cases? Why is it apparently no longer the State Department's
objective to see that the murderers are brought to justice for these
crimes?
Answer. The Department of State and Embassy continue to urge the
Government of Haiti to ensure progress on investigations of politically
linked killings that took place before and after the 1994 restoration
of elected government. The continued poor state of the Haitian
judiciary remains a major impediment to the resolution of these cases.
We are encouraged by recent movement towards a trial for the 1993
killing of innocent citizens by security forces near the town of
Raboteau. We are also encouraged by swift moves by the Haitian National
Police (HNP) to arrest and detain its own members responsible for the
killing of 11 individual in the Port-au-Prince borough of Carrefour-
Feuilles. We hope these positive developments will increase confidence
within the HNP Special Investigative Unit (SIU) and judiciary and lead
to results in the investigations of other outstanding cases.

HAITI: ATTACKS ON POLICE

Question. Recent months have seen attacks on individuals associated
with the police and on the institution of the police itself, with some
evidence that Jean Bertrand Aristide or partisans are the source of
these assaults. Does the Department of State share the Committee's
concern that an effort is underway to politicize the Haitian National
Police?
Answer. In the period leading up through October 1999, a series of
violent incidents targeted at the Haitian National Police (HNP)
leadership--including the killing of a senior police advisor--raised
deep concerns of attempts by some sectors to politicize the five year-
old force. The security situation since that time has been relatively
calm, and HNP actions on the ground have indicated a general respect
for political pluralism and support of the democratic process. The HNP
has provided a level of protection at key political rallies, developed
a security plan for elections, and improved coordination with the
Provisional Electoral Council and a range of political parties. HNP
Director General Denize has told us publicly that politically-related
pressure on him and others in the police leadership has greatly
diminished.
We continue to make clear to Haitian leaders the importance of a
professional and apolitical police force to the development of Haitian
democracy, and we continue to watch closely new appointments of key
security officials. The biggest challenge is that the HNP remains an
extremely small force, with fewer than 5,500 members for a country of
roughly seven million people. The U.S. continues to provide bilateral
and multilateral assistance to develop the HNP. We are working closely
with other donors and the UN in building up the new International
Civilian Mission for Support in Haiti (MICAH) which began operating
March 16 with the mandate of providing technical assistance to the
police, judiciary, and human rights sector. We would reevaluate current
U.S. assistance levels if it appeared at some point that Haitian
leaders had abandoned their commitment to the HNP's political
neutrality.

HAITI: ARISTIDE FOUNDATION

Question. What has been done to determine the degree to which the
Aristide Foundation for Democracy is involved in destabilizing
campaigns against economic and fiscal reform, against U.S.
organizations like IRI, and against the institution of the Haitian
National Police? What has been concluded?
Answer. We have received no credible information and have no reason
to believe that the Aristide Foundation for Democracy has been involved
in destabilizing campaigns against economic or fiscal reform, against
U.S. organizations, or against the Haitian National Police.

HAITI: REPATRIATION AGREEMENT

Question. Has the GOH re-signed the bilateral Repatriation
Agreement with the United States? Has the U.S. requested that they do
so? When? What was the response? Has the text of such an agreement been
drafted and presented to the GOH?
Answer. All migrant interdictions at sea and subsequent
repatriations are handled in accordance with Executive Order 12807. The
Order signed by President Bush on May 24, 1992 provides authority for
the United States Coast Guard to interdict undocumented aliens on the
high seas and to arrange for their repatriation to the country from
which they came or another country.
In a letter dated March 14, 1994, then-President Aristide gave
notice to President Clinton of Haiti's intention to terminate the 1981
Repatriation Agreement. Pursuant to the Agreement's terms, the
termination became effective six months following that notification--on
September 14, 1994. The letter claimed that Executive Order 12807
violated the terms of the Agreement by requiring the summary return of
all Haitians interdicted at sea without consideration of their
eligibility for refugee status.
Notwithstanding the termination of the Repatriation Agreement, the
United States has continued to interdict Haitians on the high seas and
to repatriate them as appropriate under Executive Order 12807 with the
cooperation of the Government of Haiti under the same procedures as
under the Repatriation Agreement. Since the termination of the
Agreement the Coast Guard has repatriated more than 5000 Haitian
migrants. We do not, at this time, and the Coast Guard concurs, see a
need to seek to negotiate a new agreement with the Haitians.

PANAMA: ACCESS TO FORMER U.S. FACILITIES

Question. Has the United States requested Panamanian officials
since the inauguration of President Moscoso to consider an arrangement
affording U.S. law enforcement or military officials access to former
U.S. bases or port facilities in Panama for the purposes of mutually
beneficial missions, including counterdrug operations? If not, please
provide a detailed explanation.
Answer. No, the United States has not made such a request to the
Government of President Moscoso. The failure of negotiations for a
Multilateral Counter-narcotics Center (MCC) and the subsequent public
statements by leaders from across the political spectrum in Panama
demonstrate a lack of credible political support for an agreement to
reestablish a U.S. military or law enforcement presence there.
Even if there were greater Panamanian receptivity to such an offer,
U.S. facilities in Panama have already been dismantled and transferred
to the Government of Panama in accordance with the 1977 Panama Canal
Treaty and most are being converted to other uses. Therefore any such a
presence would require that facilities be re-established there. Re-
establishment would only be viable if such facilities were to offer a
complete range of activities. However, the present political climate in
Panama will not support the establishment of a significant U.S.
military or law enforcement presence.
While the Department of State has not requested from the current
Panamanian Government an arrangement to provide U.S. military or law
enforcement officials access to former U.S. bases or port facilities in
Panama, it is acutely aware of the needs for Panamanian security and to
continue efforts to interdict shipments of illicit narcotics headed for
the United States.
Accordingly, the U.S. Departments of State and Defense have begun a
series of high-level bilateral security and law enforcement
consultations with the Panamanian Government, aimed at creating a new
Panamanian security strategy and at seeking areas where the United
States and Panama can cooperate to strengthen Panamanian security and
counterdrug capabilities. The first round of these consultations was
held in Washington in November, 1999, and another round is planned for
Panama in May, 2000. Additionally, following the cessation on May 1,
1999, of counterdrug air operations at Howard AFB, and in order to
continue uninterrupted source and transit zone counterdrug operations,
the Departments of State and Defense have established Forward Operating
Locations (FOLs) at existing airports in Manta, Ecuador and Aruba/
Netherlands Antilles (Curacao). These FOLs will eventually be capable
of supporting continuous aerial operations 24 hours a day, 7 days a
week. A long-term FOL agreement has already been reached with the
government of Ecuador and we expect to sign a long-term agreement with
the Netherlands very soon to replace the interim FOL agreement now in
effect. We also plan to establish a third FOL site at an appropriate
location as conditions warrant and as funding permits. Once
infrastructure improvements are accomplished at the FOLs, U.S.
counterdrug assets previously based in Panama will operate from these
alternative locations continuously.
Until FOLs become fully operational, the Department of Defense will
rely on a combination of interim sites in Puerto Rico and the
continental U.S., as well as the FOL sites mentioned above, from which
to run its counterdrug missions. An initial, but minimal degradation in
our baseline counterdrug aerial interdiction coverage will gradually
improve as FOLs become fully operational. With the addition of a third
FOL, the Department of Defense is confident that counterdrug detection
and monitoring coverage will exceed Howard AFB capabilities at a cost
well below what would have been needed to maintain that multipurpose
military facility. We believe that with a concerted U.S. effort over
the near term, we can maintain adequate support to the National Drug
Control Strategy as we re-establish our regional counterdrug support
infrastructure. With the conclusion of long-term agreements with FOL
host nations, we hope to receive the authority and budget to carry out
necessary overseas military construction/upgrades that will allow us to
maintain the continuous commitment of U.S. air assets and personnel in
the counterdrug effort. The Secretary of Defense has given his full
commitment to bringing the FOLs to full operational status. Other U.S.
agencies involved in counterdrug activities have likewise given full
support to the FOL plan. We therefore have every reason to believe the
FOL concept is the most promising and cost-effective alternative to
counterdrug operations previously conducted at Howard AFB.

PANAMA: TELCON TO U.S. AMBASSADOR SIMON FERRO

Question. On September 28, 1999, Mr. John Keane told staff of the
Foreign Relations Committee that on or about June 7, 1999, Mr. Keane,
upon instructions of then Deputy Assistant Secretary of State John
Hamilton, called U.S. Ambassador to Panama Simon Ferro to instruct him
not to go forward with the Embassy's plan to revoke the visa of a
Panamanian official. Mr. Keane further confirmed that on June 9, 1999,
the Embassy did revoke that visa. Ms. Susan Jacobs, Deputy Assistant
Secretary for Legislative Affairs, attended that briefing. On November
2, 1999, and January 2000, the SFRC staff sent two (2) separate
memoranda to DAS Jacobs requesting her assistance in obtaining
affidavits to substantiate these alleged events. To date, these
affidavits have not been produced. Could you explain the unwillingness
of Mr. Keane, Ambassador Ferro, and/or Ambassador Hamilton to cooperate
with this request of the Committee? Please append to your reply to this
question the requested affidavits, to wit:

Of Mr. Keane substantiating the date and content of that
telephone call, including any phone logs or cables documenting
that phone call.
Of Ambassador Hamilton substantiating that he instructed Mr.
Keane to make that phone call and what actions he took upon
finding that Ambassador Ferro did not follow the instructions
provided by the Bureau.
Of Ambassador Ferro substantiating his recollection of that
phone call and explaining why he did not follow the
instructions allegedly conveyed in that phone call.

Answer. The above referenced call from Mr. Keane to Ambassador
Ferro took place on the afternoon of June 7, 1999, at the request of
Ambassador Hamilton, who instructed Mr. Keane to ask Ambassador Ferro
if he had consulted with the Department or other Washington agencies
prior to his meeting with Panamanian President Perez Balladares during
which the revocation of the Panamanian official's visa was discussed.
The focus was on consultations about the subject matter with Washington
prior to discussions with Panamanian officials. In addition, Mr. Keane
asked Ambassador Ferro not to go forward with the revocation of the
Panamanian official's visa, if it had not already been done, until he
received instructions from the Department. However, the Embassy made
its finding of inadmissibility against the Panamanian official and
entered the name into the computer lookout system on June 7, 1999. The
Panamanian official was advised of this inadmissibility via
correspondence dated the same day.
As stated in Department correspondence to the Senate Foreign
Relations Committee Chief of Staff, Mr. Stephen Biegun, dated January
11, 2000, the requested affidavits are not and have not been provided
because the Department regards the normal channels of oral and/or
written communication with the Congress to be the appropriate means of
providing and exchanging information. We do not believe that affidavits
from Department officers are necessary in order for the Department to
provide credible and reliable information to the Congress.
The Department of State is and has been fully prepared to cooperate
with the Committee concerning this matter and to make Department
officers available to the Committee in any reasonable manner in order
to be responsive.

CUBA: VISA FOR FERNANDO GARCIA BIELSA

Question. I have written you regarding the Department's decision to
grant a visa to Cuban intelligence officer Fernando Garcia Bielsa,
however, the Department's reply failed to address my concerns. U.S.
federal agencies have documented the direct role that Cuban officials
have played in supporting terrorist attacks by Puerto Rican
``nationalist'' groups on U.S. soil. Cuban spies are on trial in U.S.
federal court at this very moment, their illegal activities abetted by
Cuban ``diplomats'' at the UN. Has the Department been informed by any
U.S. agency that Fernando Garcia Bielsa has met any time, including in
the last three years, with associates of the Puerto Rican terrorist
groups FALN or Macheteros? If so, why has the Department chosen to
disregard contact between this Cuban intelligence officer and members
of associates of terrorist groups in granting that intelligence officer
a visa to work in the United States?
Answer. We did not disregard the information the FBI provided us
concerning Garcia Bielsa. The FBI did share certain information with
the Department. The FBI withdrew its initial objection to Garcia
Bielsa's posting to the Cuban Interests Section in Washington; the visa
was issued with the FBI's concurrence.

CUBA: FAILURE TO EXPEL TWO OFFICERS

Question. Please explain in detail why the Department has failed to
expel from the United States two Cuban officers who the FBI informed
the Department played a role in the spy ring that was discovered in
September 1998.
Answer. Those diplomats at the Cuban Mission to the United Nations
in New York who the FBI was able to identify as having direct links to
the captured spies either departed voluntarily from the United States
before we could expel them or were expelled by the State Department. No
one whom the FBI could document as having direct contacts to these
spies is in the United States.

CUBA: POSTING OF OFFICERS IN U.S. TERRITORIES

Question. Will you assure me personally that the Department will
not allow the posting in U.S. territory of any Cuban diplomat or Cuban
intelligence officer who is known to have had direct contact with
associates of the Puerto Rican terrorist groups FALN or Macheteros? If
not, please explain your decision to disregard this threat.
Answer. All applications for diplomatic visas are reviewed to
determine whether the applicant is ineligible under the terrorist and
other security provisions of the Immigration and Nationality Act, and
visas are only issued after any ineligibility issues are resolved.

CUBA: GRANTING NONIMMIGRANT VISAS TO OUR INTERESTS SECTION

Question. In 1996, sec. 102(e) of P.L. 104-114 stated the sense of
the Congress that, ``The President should instruct the Secretary of
State and the Attorney General to enforce fully existing regulations to
deny visas to Cuban nationals considered by the Secretary of State to
be officers or employees of the Cuban government or of the Communist
Party of Cuba, consistent with executive Proclamation 5377 of October
4, 1985, pursuant to section 212(f) of the Immigration and Nationality
Act of 1952, as amended. In recent months, Cuban government officials
at the Vice Ministerial level have been granted visas to enter the
United States. When questioned by Committee staff Department officials
blamed these decisions on a new procedure intended to increase the
issuing of visas in Havana. Please explain in detail the new procedures
for granting nonimmigrant visas to Cubans from our Interests Section
Havana. Has the President rescinded Proclamation 5377 of October 4,
1985? Please provide a detailed explanation of the procedure for
granting visas to senior Cuban government officials.
Answer. The President has not rescinded Proclamation 5377 of
October 4, 1985. However, the application of the Proclamation was
modified to carry out President Clinton's January 5, 1999, announcement
expanding people-to-people contact between the United States and Cuba,
particularly in the educational, cultural, scientific, athletic,
professional and religious areas.
New procedures effective May 17, 1999, generally provide for the
more expeditious processing of the visa applications of persons
resident in Cuba and subject to the Proclamation. Six categories of
employees or officers of the Government of Cuba or the Communist party
of Cuba are exempt from the new procedures, however:

1. The President and Vice President, a minister or vice minister of
the Government of Cuba;
2. The President and Vice President of the National Assembly of
Cuba;
3. A politburo member, central committee department head or
provincial first secretary of the communist party of Cuba;
4. A senior military, intelligence, or police official;
5. A Cuban Government or communist party officer or employee
determined by the U.S. Interests Section to be a person of potential
foreign policy concern to the United States; and
6. A Cuban government or communist party officer or employee whose
application is opposed by an interested USG agency within ten days of
the submission of the case to Washington.

These new procedures implemented the President's policy to promote
people-to-people contact while still restricting Cuban officials who
might pose a threat to national security or be a foreign policy
concern. While senior government officials, including vice-ministers,
are subject to INA 212(f) sanctions imposed against Cuban Government
officials, 212(f) sanctions are not used to deny visas when visa
issuance is in the national interest and/or required by our
international commitments.

CUBA: TDY OF OFFICIALS TO U.S.

Question. How many Cuban officials have been admitted to
``temporary duty'' (TDY) in the United States in the last two years?
How many U.S. officials have been granted TDY visas to enter Cuba in
the same period? What procedure exists for ensuring that Cuban
officials entering the U.S. on TDY visas are not intelligence officers
before granting them TDY visas? What procedure exists for informing the
FBI of the entrance into the U.S. of Cuban officials on TDY visas? What
purpose is served for allowing Cuban officials to enter the U.S. on TDY
visas? What procedure exists for ensuring the timely departure of Cuban
TDY visitors from U.S. territory? How many Cuban officials on TDY visas
have stayed beyond their departure date? What is the penalty for Cuban
officials overstaying their departure date?
Answer. In the last two years (March 2, 1998-March 2, 2000),
approximately 140 visas have been granted to Cuban officials for
temporary duty assignments in the United States at the Cuban Interests
Section. In addition, some 380 visas have been granted to Cuban
officials for temporary assignment to the UN Mission in New York for
temporary assignments. We estimate that at least 150 U.S. officials
have traveled to the U.S. Interests Section in Havana for temporary
assignments. (We do not have precise date because of a computer
malfunction that damaged our database.) Decisions to issue visas to
Cuban officials are made in accordance with applicable laws,
reciprocity, and the needs of the U.S. Interests Section. In general,
requests for visas for Cuban officials are evaluated to determine
whether the proposed representative is subject to any grounds of
inadmissibility and if so, whether a waiver of inadmissibility is
legally available. The issuance of bilateral diplomatic visas (A-1 and
A-2 visas) is also subject to acceptance by the Secretary of State.
All visa applications are reviewed by appropriate law enforcement
agencies as provided for by law prior to issuance or denial.
Temporary duty officials from Cuba and the United States are issued
visas for the purpose of performing work internal to the mission. The
agreement establishing the two Interests Sections provided for
personnel ceilings. The Cuban Interests Section is permitted 25
permanent officials and 10 long-term duty persons. The U.S. Interests
Section in Havana has a total of 26 permanent positions, 5 long-term
duty positions and an additional 20 permanent positions for the
consular section to implement the Migration Accords. Long-term
temporary support officers are permitted a total of a one-year stay in
the host country. Short-term temporary support officers may stay in the
host country for nine months.
Last year two individuals had overstayed their visas in the United
States and were asked to leave the country promptly. The Department of
State has implemented procedures in coordination with the Federal
Bureau of Investigation to monitor Cuban Government compliance with the
staffing and length of stay limits noted above.

CUBA: FUGITIVES OF JUSTICE

Question. The Department of State has provided the Committee a list
of several dozen fugitives of justice granted sanctuary by the Cuban
government. Please document the date and circumstances when the
Department last asked the Cuban government to surrender any of these
fugitives to justice in the United States?
Answer. The Department of State raises this issue periodically with
the Cuban government. However, We have not recently sent a formal
diplomatic note on this issue.
Past Cuban responses and recent journalistic reports offer no
encouragement that the Castro government will treat as serious any
request to extradite fugitives from justice.
Nonetheless, we will continue to insist that the Cuban government
extradite individuals indicted for crimes in the United States.

UNCHR PLANS

Question. What specific steps is the Department of State taking to
ensure the passage of a resolution on human rights in Cuba at the
upcoming meeting of the UN Commission on Human Rights in Geneva?
Answer. The U.S. has agreed to co-sponsor the resolution on Cuba
that the Czech Republic and Poland introduced at the UN Commission on
Human Rights on April 11, 2000. We stand ready to help the Czechs and
Poles in their valiant efforts to keep the world focused on the
deplorable state of human rights in Cuba.

CUBA: FUGITIVES AND ELIAN GONZALES

Question. Did any official in the Department of State (including
any in the U.S. Interests Section in Havana) or, to your knowledge any
other U.S. official, suggest to any Cuban official a quid pro quo by
which Cuba would receive fugitives from St. Martinville, Louisiana, in
exchange for the repatriation of refugee Elian Gonzales?
Answer. No. The Cubans did not suggest a quid pro quo nor did we
offer one. There is no connection between these two cases.

CUBA: SOL MELIA CUT UNDER TITLE IV

Question. What is the status of the inquiry into the Sol Melia case
under Title IV of the Libertad Act? When will the Department make
available to the Committee the documents requested regarding this case?
Answer. On July 1, 1999, we contacted Sol Melia by letter and
telephone to advise the company of the potential application of Title
IV to certain of its activities in Cuba. This case continues to be of
the utmost concern to the Department. We are working on this matter
assiduously and have been in regular contact with all parties involved.
Because this case is still under review by the Department, we are not
in a position to release documents or publicly discuss the status of
the investigation.

CUBA: A-A/S ROMERO RECUSED FROM TITLE IV

Question. What U.S. official is responsible for making final
determinations under Title IV of the Libertad Act? Please provide the
Committee with the document by which Acting Assistant Secretary Peter
Romero recused himself from such decisions.
Answer. The statute places this responsibility with the Secretary.
On May 1, 1996, the Secretary's authority under this provision was
delegated to the Assistant Secretary for Western Hemisphere Affairs.
However, the Secretary, the Deputy Secretary, and the Under Secretary
for Political Affairs may exercise any function delegated by this
delegation. Since July, 1999, Acting Assistant Secretary Peter Romero
recused himself from Title IV matters to avoid the appearance of
conflict, given his pending confirmation before this committee. There
was, however, no document to bring this about.

CUBA: STATE DEPARTMENT TESTIMONY BEFORE CONGRESS

Question. Please describe the policy under which Acting Assistant
Secretary Peter Romero has repeatedly refused appearing before the
Foreign Relations Committee while making himself available on a number
of occasions to other Congressional committees.
Answer. Acting Assistant Secretary Romero was nominated by the
White House to be the Assistant Secretary for Western Hemisphere
Affairs on September 10, 1998. To date the Senate Foreign Relations
Committee (SFRC) has declined to invite Ambassador Romero for a
confirmation hearing, at which he would be able to address issues of
interest and concern to the Chairman and Members of the Committee.
It is the practice of the Department of State not to offer for
testimony before the SFRC those senior-level officials who are awaiting
confirmation hearings by the same Committee.
As of this writing, Ambassador Romero has executed the duties of
the office of Assistant Secretary in an acting capacity for almost 18
months. In the course of those duties and in an effort to better inform
Congressional members in their legislative and oversight capacities,
Ambassador Romero has appeared before Congressional committees to offer
testimony on key events and USG activities in the Western Hemisphere.
The Department would welcome and encourages the SFRC to extend to
Ambassador Romero an invitation to participate in a confirmation
hearing.

ASSISTANCE TO CUBA

Question. The Department has recently decided to post at the U.S.
Interests Section in Havana a U.S. Coast Guard officer to share
information with Cuban authorities on suspicious flights over Cuban
territory, notwithstanding the fact that Cuba does not meet the
requirements of 22 U.S.C. sec. 2291-4(a) (2) that, inter alia, ``the
country has appropriate procedures in place to protect against innocent
loss of life in the air and on the ground in connection with
interdiction.'' Please provide the Committee a copy of the legal
opinion on that decision. What Department officials took part in making
that decision? Has each of these Department officials been informed of
their potential liability under held criminally liable under 18 U.S.C.
sec. 32(b) (2) and 18 U.S.C. sec. 2(a)? If not, why not? Who made the
final decision to post this Coast Guard officer to share information
with Cuban officials? Does not due diligence require that officials of
the Department of State, before facilitating the exchange of
information on suspicious flights over Cuban territory, first clarify
with Cuban officials their government's policy with respect to the
destruction of suspicious aircraft in its territory? Please explain the
date and circumstance under which that clarification was sought or the
decision not to seek such clarification.
Answer. I can confirm that the U.S. Coast Guard has recently
assigned one of its officers to work at the U.S. Interests Section in
Havana on maritime issues and Coast Guard activities such as narcotics
interdiction, safety at sea, search and rescue, and repatriations. The
assignment was made with the approval of the State Department and in
consultation with other U.S. Government agencies.
In a letter to Chairman Helms dated December 17, 1999, Office of
National Drug Control Policy Director McCaffrey addressed on behalf of
the Administration the question of whether Cuba has a policy of
shooting down civil aircraft suspected of involvement in drug
trafficking, for which U.S. provided information would be relevant. As
indicated in that letter, Cuban officials have never used U.S. provided
aircraft position information to shoot down civil aircraft, and we have
no indications that Cuban officials intend to use future position
information to shoot down aircraft suspected of narcotics trafficking.
We continue to monitor carefully our counterdrug information
sharing programs with Cuba. Should we see any evidence of a Cuban
policy or intent to shoot down civil aircraft suspected of narcotics
trafficking, we will certainly take appropriate action under U.S. law.
The discussion and information provided in Director McCaffrey's
letter to Chairman Helms continues to represent the Administration's
position on this subject.

CUBA: SECTION 109 OF THE LIBERTAD ACT

Question. Do you believe that it was proper for Counselor to the
Department Wendy Sherman to question former Cuban Affairs Coordinator
Michael Rannenberger as to why so many ``Cuban-American groups'' had
received support under Section 109 of the Libertad Act? What steps will
you take to ensure that these alleged comments do not result in, as
stated, in USAID regulations, ``any U.S. citizen or legal resident
(being) . . . excluded from participation in, (being) . . . denied the
benefits of, or (being) . . . otherwise excluded from discrimination on
the basis of race, color, national origin, age, handicap, or sex?
Answer. As part of her responsibilities as Counselor, Ambassador
Sherman has generally reviewed the implementation of the program grants
funded under Section 109 of the Libertad Act. I know Ambassador Sherman
would characterize such alleged comments as inappropriate, unwarranted,
and wrong and, therefore she would not and, in fact, did not make such
comments. Ambassador Sherman and all my colleagues in the Department of
State support the strict implementation of the program in conformity
with USAID regulations.

SCHOOL OF THE AMERICAS

Question. As the person who speaks for the Executive Branch on
foreign policy matters, would you please explain the contribution made
by the U.S. Army School of the Americas (USARSA) to U.S. interests in
Latin America? How would you rebut the claims of USARSA critics that
the school has trained persons responsible for human rights violations
or coups? Do you personally believe the school should remain open?
Answer. The U.S. Army's School of the Americas can play an
important role in developing civil-military relations, consolidating
democracy, promoting regional stability, and pressing for the highest
standards in respect for human rights.
Much of the controversy about the School stems from human rights
abuses committed by some of its past graduates. Clearly, there have
been abuses, which we condemn.
But the School's curriculum has been revised to strengthen and
accentuate training and instruction on civilian control of the
military, the promotion of democracy, and respect for human rights, so
that these abuses have less likelihood of occurring in the future.
The School also encourages regional stability and cooperation
through training in peacekeeping, demining, counterdrug operations,
medical assistance, leadership development and military justice.
These goals are in our national interest, and we should support the
efforts of the School of the Americas to help achieve them.

COLOMBIA SUPPORT

Question 1. The Administration has unveiled a plan of extraordinary
support for Colombia. Despite our support for Colombia in the last
several years--approaching a-half-a-billion dollars--U.S. estimates of
cocaine and heroin production have more than doubled in that period.
How will the $1.3 billion aid plan produce a marked decline in the
production of cocaine and heroin from Colombia?
Answer. While total production in Colombia has increased at an
explosive rate (with a 20 percent increase last year alone), those
increases have, as a general rule, occurred outside of the areas of our
focused efforts. That is why this package is so important. It will
allow for the expansion of counternarcotics eradication operations into
areas that are beyond the reach of current efforts without sacrificing
performance in current areas of operations. In addition to expanding
current eradication efforts to new areas, the supplemental will improve
Colombia's interdiction capabilities, allowing Colombia to overlay the
coca fields with aerial and riverine interdiction of the movement of
coca and precursor chemicals, and give new impetus to alternative
development and other social programs to cement the eradication gains.
Expectations are positive for the programs supported by the
package, in part, because they are based on the lessons learned in our
counternarcotics cooperation with the governments of Peru and Bolivia.
Since 1995, despite the explosive growth in Colombian coca cultivation,
regional cultivation has declined because of the successes in those two
countries. Over that time period, Peru has reduced its coca crop by 66
percent and Bolivia by 55 percent. Colombia hopes to match that
performance.

Question 2. What specific activities are Colombian guerrillas
engaging in that make them complicit with the illegal drug trade? If
they are, making a fortune trafficking drugs, why would anyone think
they are committed to the peace process?
Answer. Guerrilla and paramilitary leaders have publicly admitted
to taxing the narcotics trade. Additionally, there is evidence that
they are more actively involved: providing protection for crops,
encouraging cultivation, etc. We would be happy to arrange a classified
briefing to discuss details of this.
A key objective of counternarcotics efforts in Colombia is to break
the financial nexus between the guerrilla and paramilitary groups and
the narcotics trade. Narco-dollars are the single biggest source of
funds for these groups. The Government of Colombia believes that
disruption of this income will deal a severe blow to the groups and
encourage their participation in the peace process.

Question 3. Why does the supplemental request for Colombia not
include increased aid for Bolivia, Peru, Ecuador or Panama to which the
illegal cocaine trade will spill as we help Colombia crack down on
illegal activities in its territory? What additional programs or
funding could be responsibly used in those neighboring states (above
already what is programmed in the Administration's 2001 request)?
Answer. That is an oft-stated misconception. In reality, there is
$70 million dollars in the proposal specifically designated for those
very countries. These funds are in addition to the regular FY 2000 and
FY 2001 requests and will enhance interdiction in those countries to
prevent spillover while simultaneously expanding development and social
services to provide licit alternatives to the narcotics trade.

PERU

Question 1. Do the decisions of President Fujimori to seek a third
term and his maneuvers to fire constitutional court judges and
electoral tribunal members and harass media opposed to his third term
hurt or harm the institutionalization of democracy in Peru? Why has our
Embassy in Peru failed to speak out clearly on these issues of human
rights and democracy in Peru? Please provide examples of Ambassador
Hamilton's statements on these subjects.
Answer. We have repeatedly expressed our concern over the
longstanding problem of weak democratic institutions in Peru. We have
told the Government of Peru publicly and privately that an independent
and transparent judiciary and freedom of speech are essential elements
to any democratic government, and we have pointed out actions which
threaten to undermine these fundamental rights. Our Country Report on
Human Rights Practices concludes that the government's record on
protection of political and civil rights was poor over the last year,
and thoroughly documents the problems we believe must be corrected.
Ambassador Hamilton has spoken out on these issues from his arrival
in Lima last September. On the presentation of his credentials
September 6, his remarks (quoted extensively in the press) stated that
``foremost among the challenges'' in our bilateral relations is ``the
deepening of Peru's democratic process . . . to find effective ways of
encouraging the promotion of competitive and transparent electoral
processes, respect for human rights, a vigorous free press and
effective, independent legislative and judicial branches.'' When the
U.S. House and Senate passed separate resolutions on democratic
freedoms in Peru in October 1999 (HR 57 and SR 209), Ambassador
Hamilton went to the Peruvian Congress, where he told the press that
these were ``the considered opinions of friendly institutions'' and
urged all Peruvians to study them carefully, emphasizing their
bipartisan nature. In a nationwide radio interview January 8, the
Ambassador highlighted our concern that the Peruvian elections be fair
to all participants. Echoing recommendations from the pre-election
observation mission from the National Democratic Institute and Carter
Center, the Ambassador in a February 23 interview in ``Caretas''
magazine highlighted the problems of opposition access to the media and
use of state resources for partisan ends. At a speech before the
American Chamber of Commerce in Peru on February 24, the Ambassador
reported that ``our bilateral relations have not yet reached their full
potential'' because GOP restrictions on democracy and human rights
``limit what could otherwise be a robust and healthy relationship.'' He
urged the GOP to ``take concrete and rapid measures'' to implement the
NDI/Carter Center recommendations in the days remaining before the
April 9 elections.

Question 2. Under what specific terms did the U.S. decide to
provide funding to the OAS for an electoral observation mission in
Peru? What steps will the Department take to ensure that the OAS
electoral mission complies with these commitments? Will the Department
insist that the OAS mission document the anti-democratic maneuvers by
which President Fujimori is seeking a third term?
Answer. We authorized $275,000 in support of an OAS electoral
observation mission, which was invited by the Government of Peru to
monitor the April 9 elections. The mission has fully complied with all
the conditions of our funding. The team, led by former Foreign Minister
Eduardo Stein of Guatemala, established a presence in Peru in March,
well in advance of the April 9 elections. Under Stein's leadership, the
Mission coordinated with independent domestic and international
observers of the pre-election phase to build on and reinforce the work
done by those groups. Stein issued numerous reports in advance of the
elections, highlighting the deficiencies identified by other observers
in the pre-election phase and recommending measures to improve the
technical as well as substantive aspects of the electoral process.
On election day, the OAS fielded a team of 90 observers throughout
the country to monitor the vote and conduct a ``quick count'' sample of
returns. Stein has led other observers in expressing concern over the
discrepancies between official government results and the independent
quick counts, and spoken out sharply on irregularities in the balloting
and tabulation process. While reserving final judgment until complete,
official results are available, Stein has warned that a first round
victory for President Fujimori would not be an acceptable result, as it
would contradict the independent findings.

VENEZUELA--FLOOD ASSISTANCE

Question. In light of President Chavez' rejection of U.S. military
personnel on Venezuelan territory, why do U.S. helicopters and
personnel remain in Venezuela today? Does the Executive branch plan to
expend any additional sums from the DOD ``drawdown'' in Venezuela in
light of that government's rejection of U.S. military personnel? Please
explain in detail.
Answer. The Government of Venezuela welcomed USG flood relief
assistance, including a sizable deployment of military personnel to
help with search and rescue, airlift of relief supplies and other
emergency tasks. Shortly thereafter, the Venezuelan Minister of Defense
requested U.S. and Brazilian military engineering assistance for
roadclearing. On January 13, the GOV indicated that Venezuelan
engineers had achieved better than expected progress in opening the
roads and notified us they no longer believe the deployment is needed.
The USG accordingly canceled the projected deployment (Brazil cancelled
its project as well). The very late decision by Venezuela that it no
longer needed the assistance surprised us, but we respect it.
Although an initial press report on Venezuelan President Chavez's
press statements indicated a rejection of foreign military personnel on
Venezuelan territory, Chavez and members of his government quickly
clarified they were referring only to the road clearing projects
planned by the USG and Brazil. They believed the situation had changed
and that the Venezuelan military and private sector could handle the
task. President Chavez and the Foreign Minister expressed again their
great appreciation for the USG's contribution to the assistance effort,
which has included assistance in the search and rescue efforts, airlift
support, water purification units, hazardous material management
technical assistance and a variety of relief supplies.
On February 6-8, three USG military planes transported donated
Swedish equipment and personnel to help control and suppress any future
fire from the chemical spill at La Guaira port. The decision to proceed
with this assistance was made after it was determined that no
commercial or other donor sources of transport was available for this
urgently needed equipment.
The DOD operation was phased down as planned, and ended in mid-
March with an estimated total cost of $9.3 million.

ECUADOR

Question. Did the events of January in Ecuador effect a coup, in
light of the fact that the democratically elected president was toppled
from power and did not resign voluntarily? What decisions have been
made regarding Ecuador's continued eligibility for U.S. foreign Aid?
Why did the U.S. fail to invoke the ``Resolution 1080'' mechanism at
the OAS in light of events in Ecuador?
Answer. On January 22, 2000, Vice President Gustavo Noboa succeeded
President Jamil Mahuad in a series of events which were strongly
influenced by the Ecuadorian armed forces but which did not constitute
a ``military coup'' in the sense of a planned and sustained military
seizure of power. While a number of military officers took actions that
were intended to achieve an extra-constitutional change of government,
at no time did the military assume control of the government.
Furthermore, constitutional government was reconfirmed by the Vice
President's assumption of the presidential mantel when President Mahuad
publicly proclaimed his inability to exercise his presidential duties.
Accordingly, the U.S. Government did not suspend assistance to Ecuador
and Ecuador remains eligible for assistance.
The United States did not invoke the ``Resolution 1080'' mechanism
at the January 21 emergency meeting of the OAS Permanent Council
because President Mahuad was still in office at that time. Though the
demonstrators and their ``junta'' were receiving extensive publicity
and some declarations of support, they had no control of the
government. The OAS passed a strong resolution condemning actions
against President Mahuad and his government and instructed the
Secretary General to report on the situation. This OAS declaration
helped preserve constitutional rule by warning plotters that an
illegitimate government in Ecuador would be unacceptable to the
hemisphere. The U.S. and other OAS members were preparing to take
action under ``Resolution 1080'' if the situation warranted.

STATE DEPARTMENT PERSONNEL POLICIES

Question 1. Within your Department, what is the status of AFSA's
request?
Answer. AFSA's request is currently being reviewed by the
Department.

Question 2. Do you believe you have legal authority to grant each
of AFSA's 13 separate proposals? If not, which proposals are beyond
your authority?
Answer. We do not believe that we have the legal authority to grant
each of AFSA's 13 separate proposals. We are not aware of any current
authority that would permit us to accept the following proposals:
access to post medical facilities; access to government contract
airfares; and the employment preferences granted to American family
members.

Question 3. Do you intend to act on AFSA's request unilaterally? If
so, what do you intend to do?
Answer. The Department does not intend to act unilaterally to
implement changes that are beyond its statutory authority. The
remainder of AFSA's requests are under review.

Question 4. Within your Department, what is the status of the
organization of Gays and Lesbians in Foreign Affairs Agencies (GLIFAA)?
Does the organization receive any public funds from your Department or
from other governmental organizations? Besides the meeting of January
22, 1999 with Director General Gnehm, have you or any other official of
the Department met with GLIFAA to discuss its agenda? In the meetings
with GLIFAA, what has the Department agreed to do? Have any of GLIFAA's
proposals been rejected?
Answer. GLIFAA has no official or formal relationship with the
Department and receives no public funds from the Department or other
government agencies. It is a recognized organization for purposes of
use of public space and Department bulletin boards. The Department has
generally granted requests for meetings to specialized employee groups
such as GLIFAA, HECFAA (Hispanic Employees Council of the Foreign
Affairs Agencies) and BIG (Blacks in Government). At such meetings
participants share their views on issues of interest to the group.
(AFSA is the exclusive representative of covered Foreign Service
employees and as such is the organization with which the Department
negotiates conditions of employment).
I have not met with GLIFAA. Other officials of the Department have
met with GLIFAA. All of these meetings have been informational in
nature. The Department has not formally accepted or rejected any of
GLIFAA's proposals.

Question 5. Within your Department, what is the status of GLIFAA's
request?
Answer. GLIFAA's request is not under formal consideration from the
Department. The requests submitted by AFSA are being considered since
AFSA is the official bargaining unit for Foreign Service employees in
the Department of State. The Department's willingness to meet with AFSA
on their proposals is in the context of our normal labor-management
relationship with them.

Question 6. Do you believe you have legal authority to grant each
of GLIFAA's separate proposals? If not, which proposals are beyond your
authority?
Answer. Since we have no official bargaining relationship with
GLIFAA, we are not formally considering any of their proposals.

Question 7. Do you intend to act on GLIFAA's request unilaterally?
If so, what do you intend to do?
Answer. Since we have no official bargaining relationship with
GLIFAA, we are not formally considering any of their proposals.

Question 8. In June 1999, Moscow requested the Department's
guidance with respect to an employee and the employee's partner (Moscow
014507). In its response (State 177246 11), the Department said:

Currently, no published Department of State guidance exists
regarding support for unmarried partners of the same or
opposite sex. While we understand the difficulties the current
situation presents to unmarried partners residing at our
overseas missions, the Department has not authorized official
action on behalf of partners who do not have a legally
recognized relationship with a U.S. Foreign Service employee. .
. .

Does this statement still represent the policy of the Department of
State? If so, does the Department plan to make any change in that
policy? If the quote stated is not Department policy, please provide
the Committee with a copy of the Department's current policy and tell
us when the new policy took effect and under what circumstances.
Answer. This statement still represents the policy of the
Department of State. Any future change to this policy would be
consistent with our statutory and regulatory authority.

Question 9. AFSA stated that, ``The Board was concerned with what
appeared to be [as stated in State 177246] a change in the previous
practice of allowing chiefs of mission flexibility in dealing with this
issue and of advancing `family friendly' policies in general'' (State
211732-2). Do you agree with AFSA that the policy stated in State
177246 was new? If so, please explain the change; if not, please
summarize the history, of the policy.
Answer. We do not agree with AFSA that the policy outlined in State
177246 is new. Chiefs of Mission have always been given wide latitude
(while adhering to all legal and regulatory constraints) to establish
personnel practices at their missions, in response to circumstances in
each country.

Question 10. If you believe the policy stated in State 177246 was,
indeed, new (see above), do you believe that the change was mandated by
the Defense of Marriage Act, I U.S.C. Sec. 7 (Supp. 111 1997)? (The
pertinent part of the Defense of Marriage Act was quoted in paragraph 2
of State 177246:

In determining the meaning of any Act of Congress or of any
ruling, regulation, or interpretation of the various
administrative bureaus and agencies of the United States, the
word ``marriage'' means only a legal union between one man and
one woman as husband and wife, and the word ``spouse'' refers
only to a person of the opposite sex who is a husband or a
wife.)

Answer. We do not agree with AFSA that the policy outlined in State
177246 is new.

Question 11. In summarizing the effect of the Defense of Marriage
Act, State 177246 paragraph 2 said, ``The Defense of Marriage Act of
1996 generally constrains the Department from interpreting the word
`marriage' or `spouse' to include same-sex partners.'' What does the
Department mean by the term ``generally constrains''? Under what
circumstances might the Department be freed from the express and
unambiguous terms of the Defense of Marriage Act? Is it the position of
the Department of State that the Defense of Marriage Act ``generally
constrains'' a redefinition of ``marriage'' and ``spouse'' or that the
Act flatly excludes such redefinitions?
Answer. The term ``generally constrains'' in paragraph 2 of State
177246 means that the Department is currently constrained by the
Defense of Marriage Act from interpreting ``marriage'' or ``spouse'' to
include same-sex partners. The Department would be freed from the terms
of the Defense of Marriage Act only if the Act were altered or amended
by Congress. It is the position of the Department that the Defense of
Marriage Act flatly excludes any definition of ``marriage'' and
``spouse.''

Question 12. In its memorandum of September 23, 1999, GLIFAA
``propose[d] that the Department, in coordination with the civilian
agencies with employees covered by the Foreign Affairs Manual, expand
the definition of Eligible Family Member (EFM) to include the partners
of gay and lesbian employees'' (page 1). By what authority do you
believe you have the ability to redefine the term ``family'' or
``Eligible Family Member''? Section 311 of the Foreign Service Act, 22
U.S.C. Sec. 395 1 (1994), provides a hiring preference for family
members of government employees assigned abroad. Do you believe you
have lawful authority to define ``family members'' for purposes of
section 311 to include persons who are related neither by blood, nor
marriage, nor adoption? Do you have authority to extend the hiring
preference for ``family members'' to persons who are dear friends or
sexual partners of the government employee?
Answer. In light of Department regulations and the Defense of
Marriage Act, the Department is not intending to extend hiring
preferences. With respect to Section 311 of the Foreign Service Act,
pursuant to the Department's regulations and the Defense of Marriage
Act, the Department only has the legal authority to extend hiring
preferences to persons who are either a U.S. citizen spouse or
dependent.

Question 13. Article 37.1 of the Vienna Convention on Diplomatic
Relations (entered into force with respect to the United States on Dec.
13, 1972) says, ``The members of the family of a diplomatic agent
forming part of his household shall . . . enjoy the privileges and
immunities specified in Articles 29 to 36.'' In turn, the provisions of
Article 37 have found their way into the United States Code, e.g., 22
U.S.C. Sec. 254a(2) & Sec. 4304a(c)(2) (1994). What are the
international diplomatic implications of redefining ``family''?
Answer. Sending States generally defer to the discretion of the
Receiving State in defining ``members of the family forming part of the
household'' for the purposes of granting family member status, and
attendant privileges and immunities, under the Vienna Convention on
Diplomatic Relations.

Question 14. GLIFAA's memorandum of September 23, 1999 says the
following:

President Clinton's Executive Order 13087 of May 1998
mandates non-discrimination on the basis of sexual orientation
in Federal agencies. This provision has been incorporated into
the Foreign Affairs Manual as 3 FAM 1511. Statements by
Secretary Christopher (1994) and Secretary Albright (1997)
similarly prohibit discrimination on the basis of sexual
orientation in the Department. Nonetheless, the Department
continues to deny the partners of gay and lesbian employees the
benefits, privileges and immunities accorded to the spouse of
heterosexual employees.

Does the Department believe that marriage (together with its
accompanying benefits) constitutes invidious discrimination? Does the
Department believe that Executive Order 13087 requires the Federal
Government to eliminate all preferences for, or benefits to, married
persons? Does the Department believe that E.O. 13087 requires a
redefinition of ``family''? As noted above, 22 U.S.C. Sec. 3951 (1994)
provides a hiring preference for ``family members of government
employees assigned abroad.'' Is this preference ``discrimination on the
basis of sexual orientation'' which is unlawful under E.O. 13087?
Answer:
Does the Department believe that marriage (together with its
accompanying benefits) constitutes invidious discrimination? No
Does the Department believe that Executive Order 13087 requires the
Federal Government to eliminate all preferences for, or benefits to,
married persons? No
Does the Department believe that E.O. 13087 requires a redefinition
of ``family''? No
As noted above, 22 U.S.C. Sec. 3951 (1994) provides a hiring
preference for ``family members of government employees assigned
abroad.'' Is this preference ``discrimination on the basis of sexual
orientation'' which is unlawful under E.O. 13087? No

Question 15. AFSA says that its proposals can be implemented ``at
little or no budgetary cost'' (State 211732-19). What is the
Department's estimate of the cost of implementing AFSA's proposals?
Answer. The Department is not contemplating incurring any budgetary
costs relating to AFSA's requests.

Question 16. It has been said that AFSA's proposals will make a
difference only at overseas posts. This cannot be true inasmuch as the
proposals themselves speak of ``appropriate training opportunities at
the National Foreign Affairs Training Center'' in Virginia. If adopted,
what effect would AFSA's proposals have within the United States?
Answer. Consistent with current law, regulations and practice, the
Department is not extending training opportunities at the National
Foreign Affairs Training Center.

Question 17. What is the Department's estimate of the cost of
implementing all of GLIFAA's proposals?
Answer. The Department is not considering the GLIFAA proposals, and
therefore no estimate of costs has been made.

Question 18. Under GLIFAA's proposal, benefits would be available
to same-sex partners when the employee and his/her partner executed an
affidavit ``testifying they are of legal age, are not blood relatives,
are not married to anyone else, are mentally competent, share a
domicile and agree to notify the Department if they terminate their
relationship'' (Memorandum of Sept. 23, 1999, pp. 4-5,
``Eligibility''). Under AFSA's proposal, benefits would be available
``only in cases where the employee has certified that he/she and his &
her domestic partner have been each others sole domestic partner for at
least six months and intend to remain so indefinitely, are at least 18
years of age, unmarried, and mentally competent to consent to contract,
and are jointly responsible for each other's common welfare and
financial obligations'' (State 211732-15). GLIFAA's definition says
nothing about ``sexual orientation.'' Would the Department accept
GLIFAA's definition or AFSA's definition or is there another definition
that the Department prefers? Does the Department of State have any
expertise in defining a relationship which is not marriage but which
involves two persons sharing living quarters who want to be treated in
some aspects as if they were married?
Answer. The Department of State has no expertise in defining a
relationship which is not a marriage, but which involves two persons
sharing living quarters, who want to be treated in some aspects as if
they were married. The Department has not accepted either the GLIFAA or
the AFSA definitions for purposes of establishing a partner's,
eligibility for the privileges accorded to legal spouses of our
employees. There is no other definition the Department prefers.

Question. Effective security for our diplomatic missions and
personnel abroad is essential. Did any personnel security issues
develop for State Department officers as a result of the arrest of Mir
Aimal Kansi in June 1997? If so, how were they resolved? Do any issues
remain unresolved? What lessons in the Kansi arrest might apply now in
the search for Osama bin Ladin?
Answer. I take personnel security issues for all State Department
officers very seriously. Effective security for all or missions and
people is one of our highest priorities. We took the appropriate
security measures deemed necessary to address the general security
issues surrounding the case of Mir Aimal Kansi in June 1997.
Not all issues from this case have been resolved. Because the
details of this case pertain to intelligence matters and could still
affect the security of official U.S. personnel, additional information
should be provided by the agencies directly involved in a classified
session.
The success of the Kansi rendition was due to intensive and
effective coordination by U.S. government agencies, and concerted
diplomatic efforts to gain cooperation against terrorism. These are
among the key elements in our approach the we hope will bring Usama bin
Ladin to justice.

PROPOSED CHANGES TO THE EXPORT ADMINISTRATION ACT

Question 1. I am concerned that the standards for setting controls
on commodities are established at a high and unreachable level. Section
201, for instance, restricts end user and end use controls to only
those commodities which ``could materially contribute'' to WMD. Do you
agree with this standard (e.g., only those dual use commodities that
are considered a ``material'' risk should be controlled)? How would
such a standard affect technologies and know-how?
Answer. The Administration has been working with Senate staff on a
number of proposed amendments to the text of S. 1712, as it was
reported out of the Senate Banking Committee. Some of these amendments
would affect the standards for imposing sanctions. The Administration
has supported deletion of ``materially'' in section 201(c) and will
continue to work with Senate staff on this and other issues.

Question 2. Section 212 creates exemptions from export control
unless the President decides that the lack of controls ``would prove
detrimental to the national security'' and there is a ``high
probability'' that the U.S. can achieve multilateral controls on the
item. It appears to me that ``would'' requires a specificity of
information indicating definite knowledge that a commodity will be
misused. Do you agree that the appropriate standard should be whether a
commodity, if uncontrolled, could harm national security to the
agreement of other nations to control the commodity? Does this approach
make sense in light of how some foreign nations refuse to constrain
WMD-related exports to Libya, Iraq, and Iran, or the controversy over
proposed exports to Saddam Hussein under the oil for food program?
Answer. The Administration still has concerns about this provision
(Sec. 212). We have seen proposed amendments addressing some of our
concerns. We will continue to work with Congress to ensure that the
bill provides adequate protections and set-asides to address our
national security concerns.

Question 3. Section 213, relating to foreign availability, again
sets its criteria at a very high level. Moreover, even if a commodity
is not exempted by 213, it still can be rapidly decontrolled pursuant
to a non-stop 6 month review period. What are your views on this
section?
Answer. The Administration has had questions about the mass market
exemption (Sec. 213) similar to those we have had with the foreign
availability exemption (Sec. 212). The mass market set-aside is less
onerous than the foreign availability set-aside, but still could be
improved. We have been evaluating proposed amendments to this section
that would address our remaining concerns.

Question 4. Section 301 would seem to impose unreasonable standards
for policy controls. It is not enough that a commodity might pose a
threat to the U.S. It must pose a serious threat. And the foreign
policy controls proposed must be 100 percent guaranteed to be
effective, or they cannot be implemented. 303 is likewise configured.
Do you, Madame Secretary, accept these guidelines for the conduct of
U.S. foreign policy, or do you continue to believe--as you have often
said--that the ``perfect should not become the enemy of the good''? If
so, how would you restructure Section 301?
Answer. The Administration believes that, in general, the foreign
policy controls in this bill provide sufficiently broad authority to
successfully implement our export control policies. The bill sets a
standard that the controls are ``likely to achieve'' the relevant
foreign policy objectives, which is acceptable. The standard of a
``serious'' threat only applies to contract sanctity. The
Administration's main objection to Title III is the exception for
components as stated in section 301(c). This concern has been
transmitted to Senate staff, and we have seen amendments addressing the
issue. We will continue to work with Senate staff on the issue.

Question 5. Many sections of the bill seek to put commercial
interests at the same level, or an even higher level (in the case of
proposed review boards), as national security. Section 202, for
example, requires that ``national security'' be balanced against
``economic costs.'' We all agree that commercial interests are
important, and that the strength of the U.S. economy is a core national
security concern. But do you agree with S. 1712's effort to put
commercial interests on the same footing as the nation's security
concerns?
Answer. The Administration agrees that commercial concerns must be
balanced with national security. However, national security can not be
compromised in the name of economic gain. We have worked with Senate
staff to ensure that no provision of this bill will force any President
or Administration to make decisions that jeopardize our national
security.

Question 6. Numerous sections of the bill provide authority to the
Secretary of Commerce with no offsetting authority to those agencies
that are responsible for safeguarding national security. Section 211 is
a good example. The determinations regarding ``foreign availability''
and ``mass market status''--two categories designed to create loopholes
in the control lists for commodities--fail to mention specific agencies
beyond DOD only provide for ``consultation'' (e.g., Commerce can ignore
the views of other Departments). Do you agree that the State Department
should be involved, and that concurrence be required?
Answer. The State Department has an essential role to play in the
national security, foreign policy, and foreign commerce matters
addressed in this legislation. We in the Administration believe that
questions of consultation within the Executive Branch are best left to
the President's discretion and direction. However, if legislation
specifies roles for individual agencies in particular matters, it is
important that State's key role not be overlooked.

Question 7. S. 1712 explicitly does not include, as a reason for
controlling an item, the fact that the U.S. has numerous multilateral
commitments (such as the Australia Group and the MTCR) and bilateral
commitments that require export controls. Section 212, for example,
does not take this into account. Do you agree that the bill should be
amended to add these international commitments as a legitimate basis
for controlling an item? Do you also agree that the bill should take
into account the fact that sometimes the U.S. must ``go it alone'' to
make a point, to achieve an objective, or to bring other nations along?
Answer. This remains a matter of concern for the Administration. We
have discussed with Senate staff our multilateral nonproliferation and
export control commitments in reference to sections 212 and 213. We
have been evaluating proposed amendments to these sections that would
address our concerns. We agree that it is essential to protect the
vitality of the multilateral export control regimes. It is also
important that the Administration be able to set unilateral export
control policies in some instances to achieve important national
security and foreign policy objectives. This bill provides authority to
impose controls where necessary to achieve our objectives.

Question 8. Numerous other Departments and agencies have provided
comments and specific amendments to S. 1712 via their oversight
committees. The Foreign Relations Committee, however, has not heard any
formal views from the Department of State. Nor has it received any
suggestions or amendments to improve the bill or resolve matters of
concern, despite numerous entreaties by Committee staff. Madame
Secretary, would you please direct the Department to prepare formal,
views and suggestions for the Committee's use?
Answer. We appreciate the opportunity to address your questions on
S. 1712. This bill would form the basis of our commercial export
control system and be a crucial component of our continued efforts to
safeguard national security. The Administration has been working
closely with staff from the Senate Banking Committee to address the
concerns of all affected agencies. In response, the Committee has made
important changes. However, some important concerns remain unresolved.
The State Department will continue to discuss with you our views
concerning this important legislation.

DOD GLOBALIZATION INITIATIVES

Question. What role did the Department of State play in the
recently concluded MOU with the United Kingdom concerning defense
cooperation principles?
Answer. The Department of Defense initiated the dialogue with the
British MOU, which led to the recent signing of the Declaration of
Principles. The Department of State played no role in the exchanges,
which resulted in the conclusion of this non-binding mutual statement
of aspirations. It imposes no legal obligations on either government,
although it commits to entering binding agreements in the near future.
It provides DOD's vision for trans-Atlantic defense industry
cooperation, and as such, contains some basis for future reflection.
The Declaration recognizes however that it does not affect the
prerogatives of other agencies, particularly State, which has
jurisdiction over certain matters addressed therein.
In this regard, the Departments of State and Defense are actively
engaged in developing enhanced trade initiatives to benefit NATO
countries and certain other allies. The Department of State remains
committed to preserving a strong and comprehensive defense trade
controls system that supports the foreign policy and national security
interests of the United States. We seek to establish an Administration
position on commercial defense industry trade that will facilitate
transnational cooperation, in accordance with U.S. law and regulation,
while preserving the strength of our current controls.

Question. What has been the Department's role in the discussions
with other countries (Australia, Netherlands, France, and Germany)
referred to by DOD spokesmen in their February 8, 2000 press briefing?
Answer. The Department of State has not been party to the
discussions referred to by the DOD spokesman on February 8, 2000. We
are working within the interagency arena to ensure that a U.S.
Government position on defense industry cooperation, which encompasses
trade controls and security procedures, is established before
consultations with foreign governments are initiated.

Question. With respect to the so-called ``Canadian exemption,''
Section 38 of the Arms Export Control Act was crafted at a time when it
was not the case (or not understood) that terrorist organizations or
front companies might utilize license-free exemptions to acquire
restricted commodities. Under these circumstances blanket exemptions--
even for Canada--may be seen as dangerous loopholes in U.S.
nonproliferation efforts. One would hardly wish to see nations such as
Russia, or even Israel or Turkey, engage in parallel behavior with
their neighbors. How is U.S. policy on exemptions under Section 38
evolving? Are you prepared to allow, Madame Secretary, the exemption
under Section 38 to be expanded to encompass license-free trade to
nations such as Australia? If so, given that friendly countries, and
even NATO allies, have been caught transferring U.S. weaponry to rogue
regimes, what would the arms control and nonproliferation consequences
be from such a decision? How would U.S. efforts to strengthen the
export control policies of other nations be affected?
Answer. The Department of State has subjected the Canada ITAR
exemption to extensive scrutiny because of, among other things,
enforcement and diversion concerns. As you know, due to those concerns,
the Department amended the exemption in April 1999, making it much more
restrictive and subject to further review.
Since April, the Department has been engaged in a constructive
dialogue with Canada concerning the appropriate scope of the exemption,
and possible changes to Canada's export controls. We expect to conclude
negotiations with the Canadians in due, course, at which time I believe
we will have developed an exemption that serves both the unique needs
of our only contiguous NATO ally, with whom our defense industries
enjoy a unmatched degree of integration, and our commitment to foreign
policy and non-proliferation objectives.

Question. Will you assure the Committee that the Department not
liberalize the International Traffic in Arms Regulations (ITAR) during
the Presidential election campaign or before the current Administration
leaves office?
Answer. The Department of State remains committed to preserving a
strong and comprehensive defense trade controls system that supports
the foreign policy and national security interests of the United
States. In accordance with State's primary legal and policy authorities
and responsibilities for all defense military assistance, as well as
the President's Conventional Arms Transfer Policy, we will facilitate
transnational defense cooperation in support of our national security
and foreign policy objectives.
As is our normal practice, we would plan to consult with the
relevant committees prior to any ITAR changes.

TRIPS AGREEMENT

Question. As a strong advocate for intellectual property protection
worldwide, you are aware that the World Trade Organization Agreement on
Trade Aspects of Intellectual Property entered into force for major
developing countries in January 1, 2000. The TRIPS Agreement serves as
an important standard for ensuring that countries recognize and provide
full protection for intellectual property rights for innovation from
pharmaceuticals to software to music to books.
It is my understanding that several countries, including Argentina,
Brazil and India have failed to meet their TRIPS Agreement deadline.
In light of this fact and given the importance of TRIPS
implementation to American companies, do you support use of the WTO
dispute settlement process against countries that have failed to meet
their TRIPS obligations?
What steps would the State Department consider to complement
enforcement of TRIPS obligations through the WTO dispute settlement
process to ensure that TRIPS Agreement will be implemented in these
countries?
Answer. Of course we support the rapid implementation by developing
countries of their responsibilities under the TRIPS Agreement. We will
encourage them by any and all appropriate and effective means.
In some cases this will clearly mean that we will consider action
in the WTO under the Dispute Settlement Understanding (DSU), as we have
already done in past intellectual property disputes (e.g. our action
against India regarding implementation of their ``mailbox''
requirement).
It is crucial that TRIPS implementation proceed smoothly. We are
meeting our own commitments, and in case of outright refusal by other
governments to honor their commitments we will not hesitate to use the
DSU to enforce compliance.
At the same time, we must recognize that agreements such as TRIPS
are complex. Some countries have genuine difficulty implementing them
despite making sincere efforts to do so. In such cases, our preferred
approach is to work through the problems with them on a constructive
and pragmatic basis. That is the best way to ensure that we address the
fundamental concerns countries have and preserve the integrity and the
balance of rights and obligations all of us have taken up.

Question. Several private relief organizations and some individual
constituents have recently contacted my office to express their
concerns about the current humanitarian situation in Iraq. The United
Nations ``oil for food'' program, they suggest, does not provide the
Iraqi population, particularly the most vulnerable including children,
with sufficient food and medicine. Death and starvation are the result.
I recognize the continuing need to maintain international sanctions on
Iraq until it has fully complied with all relevant United Nations
resolution. However, two questions come to mind.
First, are you aware of the alleged shortcomings of the ``oil for
food'' program and do you see any possibility to ensure the timely
delivery of humanitarian goods to the Iraq people?
Answer. The humanitarian impact of oil-for-food has been dramatic
and measurable. Conditions are improving all the time.

Last year, oil revenues reached $11 billion. This year,
they're projected at $20 billion.
The UN reports that average per capita caloric intake has
increased from around 1,275 to over 2,000 calories per day.
Food imports are now just about at pre-war levels.

Nonetheless, we are always looking at ways to improve the program
to better meet the needs of the Iraqi people. UNSCR 1284, adopted in
December, permits Iraq to export as much oil as required to meet
humanitarian needs, and calls for a number of procedural reforms which
should streamline the program.
The resolution also calls on Iraq to ensure timely and equitable
distribution of goods and to address the needs of Iraq's most
vulnerable populations--including children and the elderly.

Question. Second, how do you evaluate proposals to put the United
Nations in charge of the distribution of food and medicine in southern
Iraq, similar to the situation in the Kurdish areas in the North?
Answer. The oil-for-food program would certainly be more effective
if the UN could administer it in the south and center as it does in the
north.
Last year a UNICEF study found that child mortality in the north
was lower than in the early 1980's, long before sanctions were imposed.
In contrast, child mortality in the remainder of the country--where the
UN must manage oil-for-food through the Iraqi government--is now more
than double the level, recorded in the early 80's.
However, the UN could not take such a step without the concurrence
of the Iraqi Government. Therefore, we will continue to try to find
ways to improve the program despite the regime's obstruction.

Question. Could you tell the committee the current status of the
initiative identified with Christine Gosden, the British geneticist who
has fought to gain funding, a U.S. commitment and access to the town of
Halabja, Iraq to conduct research and dispense medical advice and
treatment to victims and the environment stemming from the chemical
attack by Saddam during the Iran-Iraq war? Can you provide me with the
level of funding provided, the terms of the agreement, other country
participation, and other relevant information on this important
project?
Answer. The Washington Kurdish Institute, the organization with
which Dr. Gosden has implemented the project has established the
Halabja Post-Graduate Medical Institute (HMI). The U.S. provided a
grant of $235,000 to conduct a medical survey of the population in
northern Iraq exposed to chemical and biological weapons attacks. The
survey will establish a base line of the long-term effects of these
agents on the population and environment. The grant also provided funds
for an international advocacy campaign to publicize the human rights
abuses by the regime and to generate additional support for the
treatment and research project.
WKI and Dr. Gosden have successfully completed the first phase of
the project. Four HMI centers were established in Halabja,
Suleymaniyah/Kirkuk, Dohuk and Erbil. Ten percent of the population of
northern Iraq has been surveyed. With funds provided for advocacy work,
the grantee has been able to garner financial and other support from
several other countries, including the Swiss, British and Italian
governments; WKI is currently in consultations with the Kuwaiti
government. Additionally, they have received significant contributions
from non-governmental organizations based in northern Iraq.
We are pleased with the results of the initial grant and are
working with WKI now to provide additional funding for the next phase
of this project.

Question. Madam Secretary, corn and soybean farmers in my state are
in the process of making final planting decisions for the Spring's
planting. What assurances can you give corn and soybean growers in my
state that the U.S. Government is going to successfully resolve the
biotech trade dispute with the EU prior to this Fall's harvest?
Answer. The U.S. Government can give no assurances that the market
access problem with the EU will be resolved this year. We have had a
number, of discussions with the EU over the past year to try to resolve
this problem. President Clinton and EC President Prodi discussed the
problems when Prodi visited Washington on October 27, 1999. The issue
was also discussed at the December 19 U.S.-EU Summit, and will be on
the agenda again for the next U.S.-EU Summit.
Following these discussions, a high-level group, led by Under
Secretary Larson on the U.S. side, was formed to intensify our efforts
to find solutions. The State Department has made extensive outreach
efforts to U.S. farmers, and other interested parties, on biotech
issues. We will continue to work diligently to resolve the market
access problems with the EU and help disseminate information on biotech
agriculture.

Question. As you know, the EU has not approved any agriculture
biotech products since the Spring of 1998. This has led to U.S. corn
farmers losing $200 million for each of the last two years due to the
EU's unwillingness to address approvals of new agriculture biotech
products. More recently, the EU has threatened to limit imports of
other U.S. corn-based products, such as corn gluten feed, which totals
$800 million a year, because they may contain GMO varieties unapproved
in Europe. Given the significance of this issue for U.S. agriculture,
does the Administration have a short-term game plan to resolve this
issue?
Answer. Agricultural use of biotechnology is extremely politicized
in Europe. Consumer and environmental groups have effectively joined
together to raise public concerns about food safety and environmental
aspects of the technology. The EU also brings into the debate vague
socioeconomic issues associated with agricultural production.
Some Member states have indicated that they are waiting for a
revised environmental regulatory system to be put into place in 2001
before granting new approvals. The current approval system is therefore
not sanctioning. The new regime could include a requirement for each
biotech trait to be tracked through the commercial stream, ``from farm
to fork,'' which would be extremely onerous.
Given this highly-politicized environment, our short-term ``game
plan'' consists of finding areas of mutual agreement with EU officials
in order to allay consumer anti-biotech fears. We will look for
opportunities to leverage in already approved varieties. Last November,
pursuant to an agreement between President Clinton and European
Commission President Prodi, we initiated a High-Level Dialogue with
members of the European Commission to attempt to break the market
access impasse. This Dialogue includes senior-level government-to-
government discussions, as well as the establishment of a consultative
forum, composed of eminent scientists, industry leaders, and members of
civil society to address the major public concerns. Our differences are
sufficiently deep that even with these mechanisms progress is likely to
be slow.

Question. Who in the Administration is taking the lead on
developing and implementing the plan to resolve this critically
important trade issue with the EU?
Answer. The State Department has taken the lead to coordinate the
High-Level Dialogue on a bilateral basis with the EU. Additionally, the
U.S. Trade Representative's Office has the lead to engage the EU in the
Transatlantic Economic Partnership (TEP) Biotechnology Working Group,
established in 1998 to develop common data elements in our respective
application process for new biotech seeds. USDA has the lead on our on-
going multilateral work in the area of food safety, at the Codex
Alimentarius Committees on General Principles and Food Labeling, and at
the OECD.
The State Department has also taken the lead on coordinating an
aggressive public diplomacy campaign, which we believe is the key to
debunking the misinformation that has circulated. We are undertaking
outreach to foreign press and interest groups, and have our Embassies
doing yeoman's work to help raise awareness on this issue around the
world. We are using websites and interactive video-conferencing to
deliver our message is that we seek a balanced approach to fair market
access while addressing consumer and environmental concerns. Embassy
Hague sponsored a conference with top scientists and industry leaders,
and our International Visitors programs have brought skeptical but key
European constituencies to the U.S. to learn more about biotechnology.
We are encouraging an awareness of the current and potential
benefits of this promising technology, stressing that we seek to ensure
that the concrete benefits of biotechnology agriculture are shared
worldwide. We believe many consumers are not aware of these benefits.
European consumers have been enjoying domestic beer, cheeses and dairy
products produced through biotech processes for some time. Three of the
five biotech seed companies in the world are European, and have
developed new strains of corn, rapeseed, potatoes, and sugar beets. The
EU has created a $14 billion venture capital fund for new biotech R&D.
Consumers are also largely unaware of the environmental benefits of
biotechnology. In addition to the new plant varieties that are
resistant to pests and to disease, reducing the amounts of chemicals
needed, some farmers are reporting increased yields and a reduction in
the need to farm new or marginal land which is too environmentally
fragile to cultivate. Cotton crops enhanced by biotech production
processes reportedly reduce the need for chemical fertilizers by one-
third. We hope to meet the challenges of food security by requiring
less land and water and far fewer chemicals to achieve increased food
supplies for the growing global population.
Additionally, biotech plants are being developed to replace
petroleum as a source of plastics. Only further research will reveal
the many positive applications of biotechnology to agriculture,
industry, and medicine. And there are already enhanced health-related
benefits for consumers from ``nutriceuticals.'' Through biotechnology,
vitamin A can be added to rice to combat blindness created by a vitamin
A deficiency, which afflicts millions of children in Asia. A malaria
vaccine embedded in bananas is also being tested, which could reduce
time and cost of refrigerating and distributing life-saving medicines.

______

Responses of Secretary of State Madeleine K. Albright to Additional
Questions Submitted by Senator Richard Lugar

export license report
Question. Part of the study involved providing data on the time it
took in 1999 to process the major categories of license, staffed and
not staffed to other agencies. While I recognize the amendment
suggested six months as a reasonable time frame to look at all the
issues, I would appreciate an effort to provide a printout of that
statistical data, which I understand is readily available. This will
help me and other members put the concerns expressed by our
constituents and other interested parties into some perspective. Would
it therefore be possible to have such a printout in the next several
weeks?
Answer. Unfortunately, we do not maintain the complete data that
you seek in a readily available format, but I believe the chart below
will be of some assistance while we work to produce the report required
by legislation and help address some of your constituents' concerns
about license processing times.

------------------------------------------------------------------------
Not Staffed Staffed
At Present Staff Level \1\ Interagency Interagency
------------------------------------------------------------------------
FY 1996........................... 18 days 74 days
FY 1997........................... 14 days 69 days
FY 1998........................... 21 days \2\ 86 days
FY 1999........................... 24 days 98 days

Projected with Full Use of $2 Million for Additional FTE

(By mid 2000, 9-12 month phase)... 10-12 days 60-65 days
------------------------------------------------------------------------
\1\ Start to finish in calendar days (i.e., date received to date
closed).
\2\ Incorporates increase in review period at DOD from 41 to 54 days (FY
1997 vs. FY 1998).

On average, approximately 25-30 percent of the annual volume of 45,000
munitions authorization requests are staffed inter-agency, chiefly to
the Defense Department (DTRA, formerly DTSA). The average times
reflected include all Congressional notifications and other
significant cases (e.g., those where missile technology assurances are
required from the recipient government).
Seventy to 75 percent are decided by DTC without referral to other
agencies or other State offices.
In FY 1999, the average processing times for license applications not
staffed to other agencies was 24 calendar days and 98 calendar days
for cases staffed to other agencies.
14,686 cases were staffed in FY 1999 out of 45,000 received (13,382 were
staffed to DOD).

Given Congressional and industry interest in the handling of
communications satellite (comsat) cases since the transfer of
jurisdiction to State from Commerce, it may be interesting to note that
State licensing from March 15, 1999 through the end of February 2000
included 902 interagency staffed cases that took an average of slightly
more than 80 calendar days to process. The average time out with DOD
was 36 days and with State, including the time to obtain MTCR
assurances, 44 days. There were 296 non-interagency staffed cases, the
average processing time for which was 25 days. Fourteen comsat
notifications were made to Congress.
With the change of comsat jurisdiction, State's annual licensing
workload may increase by 1500-2000 cases.
In my January 1999 report to the Congress concerning implementation
of the National Defense Authorization Act for FY 1999, State and
Defense established a goal of ``90 working days'' for acting on
satellite-related munitions export requests, exclusive of cases raising
substantial policy issues or major sales requiring notification to
Congress, and assuming the availability of additional financial and
personnel resources. The above data suggests that the ``90 working
day'' goals has been generally met or exceeded, even in those cases
requiring notification to Congress.

SANCTIONS REFORM

Question. I am confident the Congress will consider some form of
sanctions reform this year. It has never been clear where the
Administration stands on sanctions reform, whether it is the
comprehensive reform proposals in S. 757 which I and others have
championed or the more limited sanctions reform proposals involving
food, agriculture, and medicine. Could you clarify the administration's
view on sanctions policy and sanctions reform? Is the Administration
prepared to sit down and negotiate the language in the sanctions reform
bill?
Answer. The Administration is committed to a rational, consistent
and effective sanctions policy that is carefully targeted, truly
advances our foreign and security policy goals, and avoids damaging
other interests. Moreover, we must take account of the burdens
sanctions impose on U.S. business and financial interests and their
costs in terms of jobs and exports.
We have carefully studied the proposals submitted last year by
Senators Lugar, Ashcroft, Hagel and others and have worked with
Chairman Helms on this issue. We share the desire to improve the way we
develop and use sanctions, and to make them better serve the national
interest. We support some aspects of each of these initiatives.
Sanctions reform should include procedures to analyze the impact of
sanctions in a systematic way, including potential costs and benefits
as well as to improve discipline on their use by both Congress and the
Executive Branch. As part of our need for Presidential flexibility, we
also support a national interest waiver as a key element of any reform
package.
We share the goal of exempting some agricultural products as well
as medicine from sanctions. Indeed, the Administration last year
exempted agricultural products and commodities, medicine, and medical
products from sanctions for humanitarian reasons.
The State Department welcomes the opportunity to work with
Congress, which shares these overall objectives and concerns, to try to
craft comprehensive legislation on which we can all agree.

RUSSIAN AND UKRAINIAN BUSINESS SKILLS TRAINING

Question. Last year, I proposed legislation, the Russian-Ukrainian
Business Management Education Act, which was enacted in the State
Department authorization bill and the omnibus spending bill, but no
funding earmark was provided for implementation. The initiative
provides authority to train Russians and Ukrainians in fundamental
business skills and to do the training in the two countries. This would
be done in collaboration with the private sector here and in the two
countries. I understand that the administration believes this program
and the objectives it seeks to accomplish are a high priority.
Can you tell us how much funding the Administration is allocating
to this initiative through the Freedom Support Act in order to achieve
the objectives of this legislation? Is there an Administration game
plan for this program? What can I expect on this program?
Answer. The Russian-Ukrainian Business Management Education Act
underscores one of our shared priorities in the region--increasing
understanding among young people in Russia and Ukraine of important
economic and business concepts and enhancing their ability to apply
these concepts in a practical way. In FY-00, we expect to exceed our
FY-99 level of support by funding over, $15 million worth of programs
directed at strengthening business, accounting and other management
skills in Russia. We anticipate spending over $18 million in Ukraine.
In Ukraine, the Next Generation Initiative launched this year
reaches out to young Ukrainians by doubling some of our most successful
exchange programs and expanding educational opportunities for
undergraduate and graduate students to study in Ukraine. It includes
additional support for university partnerships, distance learning, and
the Economics Education Research Consortium at the Kiev-Mohyla Academy,
which trains the best and brightest in Ukraine in graduate-level
economics. We have redirected funds from other programs to support this
initiative.
In Russia, the Department will support internship programs for
Russian entrepreneurs, university linkages and specialized English
training in support of the Presidential Management Training Initiative.
The Library of Congress Russian Leadership Program will bring over 1400
young leaders from the regions. USAID is reaching out to Russia's
regions with numerous training programs, intervening early with new
curricula in the high schools through Junior Achievement, and building
a core of specialists in International Accounting Standards.
With increased funding in FY-01 we could do still more.

______

Responses of Secretary of State Madaleine K. Albright to Additional
Questions Submitted by Senator Russell D. Feingold

NIGERIA

Question. Overall, I am pleased by the Administration's efforts to
support the new democracy in Nigeria. But despite the many encouraging
signals sent by the Obasanjo Government, some of the government's
actions in the Niger Delta and elsewhere echo some of the unfortunate
choices of the past. In our efforts to be encouraging, does the U.S.
risk sending a signal that ``anything goes'' with this new government?
Answer. We are providing strong support to the Obasanjo Government,
but we are also very concerned about the numerous outbreaks of communal
violence that have caused hundreds, if not thousands, of deaths since
this government was inaugurated. We are very troubled by the use of the
military to restore order in such trouble spots as Odi in the Niger
Delta; our Country Reports on Human Rights describes the destruction of
this town by troops sent in to restore order. We have made clear that
brutality and violations of human rights are not acceptable, and we
have strongly urged all Nigerians to respect each other and to resolve
differences peacefully.
By no means are we sending a signal to this government that
``anything goes,'' and we have underscored our concerns publicly and
privately to Nigerian Government officials. We believe that the
Government of Nigeria, the general population, and even the military
understand that brutality and repression should not be tolerated.
Unfortunately, previous military rule decimated political, economic,
and social institutions in Nigeria, and the police and the judicial
system were among the institutions most adversely affected.
Years of authoritarian rule repressed expression of political views
and legitimate grievances. Now that Nigerians have the freedom to
express themselves, unresolved social, religious, and economic
conflicts have started to surface and cause very serious outbreaks of
violence. Poorly trained and equipped police are often incapable of
restoring order once violence starts, and the state governments have
had to ask the Government of Nigeria to bring in the military to deal
with criminality or to restore order. The long-term solution requires
rehabilitation of Nigeria's political, economic, and social
institutions, particularly the police and judicial system. We are
supporting this effort with more than $2 million in assistance this
year to help train judges, and police and law enforcement officials.
Finally, and most importantly, sustained investment and economic growth
are needed to create opportunities for all Nigerians to prosper and to
work together for the common good of their country.

INDONESIA

Question 1. As the power struggle between the military and the
newly elected government continues in Indonesia, it seems to me that it
is critically important that the U.S. offer strong support for the
forces of reform. I can see that the Administration intends to do that.
But I also believe that it is equally important to send strong signals
about what the international community will not tolerate. How does the
Administration plan to keep the pressure on the elements of the
Indonesian military who are challenging President Wahid's authority and
continuing to fail in their duties to protect civilians?
Answer. We are optimistic about the progress of Wahid's efforts to
reform the military and establish civilian control. In the earliest
stage, it may have been accurate to speak of a ``power struggle''
between the Wahid government and elements of the military. However,
subsequent developments indicate that Wahid's power is unlikely to be
challenged by the military in the short or medium term. As you know,
Wahid successfully removed General Wiranto from his cabinet position in
January. Wahid has since embarked on an ambitious reshuffling of his
military leadership, replacing Wiranto supporters and opponents of
reform with his own allies and supporters of military reform. The U.S.
welcomed these steps in the context of our strong support for military
reform.
It is important to note that President Wahid possesses the
legitimacy of having been democratically elected and enjoys the clear
support of the Indonesian people. Most members of the Indonesian
military recognize this and support President Wahid. The potential
challenge lies in a relative minority of disaffected military officers
rather than the military institution as a whole. The United States has
been very clear about the consequences to Indonesia's international
reputation, political stability, investment climate and economic
recovery of any attempt by elements of the military to seize power.
Any Administration plan to resume military-to-military relations
with Indonesia would be a step-by-step effort undertaken after careful
coordination with President Wahid to ensure that it unequivocally
reinforces Wahid's reform agenda.

Question 2. Please elaborate on the Administration's proposals for
East Timor. In light of the devastating scorched-earth campaign waged
by militias, with the backing of elements of the Indonesia military,
the needs in East Timor are extraordinarily great. What are the key
priorities that the U.S. intends to address, and what is the absorptive
capacity of East Timor today?
Answer. After the devastation in East Timor in 1999, and given the
challenges inherent in transforming a poor, small territory to into a
democratic, economically active, independent nation in a few years, the
needs of the East Timorese people are indeed extraordinarily great. The
UN (UNTAET) and World Bank--with strong support from the U.S. and many
other donors--are leading the international effort of reconstruction,
capacity-building, and development in East Timor.
The U.S. contribution is substantial and covers a wide range of
needs. Our first priority has been the humanitarian needs of refugees
and internally displaced persons. The U.S. spent some $20.5 million in
1999 on relevant humanitarian assistance. In 2000, we expect to spend
an additional $49.0 million in multilateral and bilateral humanitarian
assistance, including some for East Timorese refugees still in camps in
West Timor. This humanitarian assistance would come primarily from the
State Department's Department of Population, Refugees, and Migration
(PRM) and USAID's Office of Foreign Disaster Assistance.
In FY 2000, we are also supporting the multilateral effort in East
Timor with contributions to the UNTAET Trust Fund ($4 million) and to
the World Bank Reconstruction Trust Fund ($500,000). The UNTAET Trust
Fund is vital to ensuring that basic public services are fully restored
in East Timor and that East Timorese develop the skills to provide them
on a continuous basis. Most of the UNTAET Trust Fund (and thus most of
our contribution) will be used to benefit East Timorese immediately and
directly by paying salaries for public workers, most of them teachers
or health care workers. Some of the fund will go to critical projects
that support democracy and governance. The World Bank, working through
its Trust Fund, is the main coordinating body for the multilateral
effort to rebuild East Timor into a self-sustaining economy over the
long-term. We are enthusiastic about the World Bank's coordinating role
and programs, but most U.S. assistance to support similar objectives in
East Timor will be provided on a bilateral basis.
Specifically, the U.S. will spend about $20 million in FY 2000 to
expand existing USAID and USAID Office of Transition Initiatives (OTI)
bilateral projects in East Timor. We expect that USAID's $8.1 million
project to assist coffee farmers will have a particularly rapid and
positive impact on the East Timorese economy (a priority need that all
agree upon) as coffee is East Timor's most viable export product. Our
goal is to provide income-generating employment for 220,000 East
Timorese. USAID and OTI will also assist in providing quick employment
in community projects to East Timorese. Quick employment opportunities
will help stabilize urban and village populations by increasing the
purchasing power of the, population, stimulating economic activity, and
reducing unrest. The U.S. objective in most OTI projects (about $10
million in programs and $1.4 million more in administrative support)
will be to encourage the growth and development of local civil society
and other institutions that will be critical to democratic governance
in East Timor.
Other U.S. programs will address East Timor's urgent need for
assistance on forensics and human rights training. East Timorese
responsible for documenting past human rights abuses on the ground in
East Timor (both UNTAET officials and NGO workers) lack the specialized
training needed to conduct such investigations, have little access to
forensic expertise, and possess little to none of the specialized
equipment. We expect to spend about $1.4 million in FY 2000 to address
these skill and equipment gaps and to assist East Timorese to monitor
current human rights abuses (for example, by establishing a position of
human rights ombudsperson) and to prevent future abuses.
In addition, we expect to expend about $1 million for judicial
training, justice sector institution building and promotion of the rule
of law in East Timor, another priority need. These funds will support
the training of judges, prosecutors, and public defenders; the revision
of the legal code, and overall planning for the development of an
independent East Timorese judiciary.
Internal security is another immediate priority in East Timor. The
U.S. will increase its civilian police (CIVPOL) contingent in support
of UNTAET and, consistent with what is permissible under U.S. law, help
to establish a local police force capability and critical judicial
functions. These last activities will require expenditure of about $8.5
million in PKO funds in FY 2000.
The U.S. also has a small, non-combat U.S. military presence
(USGET) in East Timor to coordinate a program of U.S. military medical,
humanitarian and civil engineering assistance to the East Timorese
people to be provided by appropriate units deployed from ships
temporarily stationed off shore. This U.S. military presence and
assistance is not part of the UNTAET peacekeeping operation. A good
estimate on the monetary worth of this in-kind military assistance is
not yet available.
The East Timorese are talented, resourceful people but nobody
doubts that they and the international community face a daunting
challenge to bring into existence an economically active, independent
East Timor after 2-3 years of transition under UN auspices. UNTAET, the
World Bank, and major donors, including the U.S., have from the
beginning given great consideration to the real problem of absorptive
capacity in East Timor, and have sought to address it in the design of
their assistance programs. A donor coordination mechanism has been
established that will help donors to balance regularly the needs for
urgent assistance against the constraints of absorptive capacity.

A REVIEW OF U.S. FOREIGN POLICY PRIORITIES

----------

WEDNESDAY, FEBRUARY 9, 2000

U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:34 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Biden, and Kerry.
The Chairman. The committee will come to order. Yesterday
this committee, the Committee on Foreign Relations, heard from
the distinguished Secretary of State, Hon. Madeleine Albright.
She testified regarding the Clinton administration's foreign
policy priorities for the year 2000. The committee engaged in a
good debate of issues with Secretary Albright, and she fielded
questions very well. She is very competent.
Now, today we are going to continue to explore the same
subject in this session. We are so fortunate to have with us
today a panel of particularly distinguished Americans and
experts in foreign policy. Today's panel consists of a long-
time friend, Hon. R. James Woolsey, a partner in Shea &
Gardner, and a former Director of the Central Intelligence
Agency.
We have Hon. Robert B. Zoellick, a former Under Secretary
of State, and Hon. William J. Perry, the Berberian professor
and senior fellow at the Institute for International Studies at
Stanford University.
Now, these gentlemen, I will say to the young people here,
are distinguished Americans, and Secretary Perry was Secretary
of Defense when he was in the Government. Now, I am going to
pause and give us a chance to be joined by the ranking member
and other Senators.
I will make the comment for the record, in defense of
members who cannot make it, that every committee is meeting
this morning and every Senator belongs to two or three
committees. I belong to three myself, so sometimes they have to
make a call on which one they are going to, because all of us
are meeting at the same time. We will stand at ease until a few
more minutes have elapsed.
[Pause.]
The Chairman. I am going to proceed. The record will be
available to all Senators, and we will make it available to the
public as well.
Gentlemen, I hope that you will provide oral statements so
that we can engage with you in an exchange regarding foreign
policy issues that will be confronting the United States in the
coming year, and let me thank you again for your willingness to
appear here this morning. I know that you have 10,000 things to
do, and as a rule I would be calling on Senator Biden, the
ranking Democrat on the committee.
Senator Biden. You call and I answer, Mr. Chairman.
The Chairman. Great. I will present to the witnesses and to
the general public Hon. Joseph Biden of Delaware.
Senator Biden. Mr. Chairman, in the interest of hearing
what our panel has to say--I know they are all busy men--I will
ask unanimous consent that my statement be placed in the record
as if read.
The Chairman. Without objection.
Senator Biden. Thank you.
[The prepared statement of Senator Biden follows:]

Prepared Statement of Senator Joseph R. Biden, Jr.

Mr. Chairman, I commend you for convening this hearing to hear the
views of a distinguished panel of witnesses about American foreign
policy priorities.
To state the obvious, this is an election year. This is a time when
the American people should debate the great issues of the day.
As we begin the new century, we face many serious foreign policy
questions--even if they have not, so far, become major issues in the
campaign.
Among the many questions we face are these:

How do we help Russia consolidate democratic rule after
centuries of misrule from czar through commissar?
How do we best reduce the large nuclear arsenals still
possessed by Russia and the United States?
How do we manage the emergence of a great power in China?
How do we counter the proliferation of weapons of mass
destruction and the means to deliver them?
How do we counter the threat of international terrorism and
international organized crime, including narcotics smuggling?
How do we address other transnational threats of
environmental pollution, deadly disease and refugee and
migration flows?
How do we best advance human rights and expand the community
of democratic nations?
How do we continue our economic success at home, and help
advance economic opportunity and stability abroad?

These are just a few of the questions that the United States will
continue to confront in the coming decades.
To help us answer these and other questions, the Committee has been
fortunate to obtain the advice, if only for a couple of hours, of a
distinguished panel of witnesses.
We have managed to invite not only a group of great stature, but a
group that is evenly balanced--quite a feat given that there are three
witnesses.
Bill Perry was President Clinton's second Secretary of Defense, who
managed the Pentagon with great distinction.
Robert Zoellick was an Under Secretary of State and Counselor to
Secretary of State Baker in the Bush administration.
And Jim Woolsey has served under both Democratic and Republican
Presidents--including as President Clinton's Director of Central
Intelligence, and as negotiator of the Conventional Forces in Europe
Treaty under President Bush.
I join the Chairman in expressing my appreciation to our witnesses,
who, though they have left government service, continue to give their
time and energy to the public good.
I am especially grateful that Secretary Perry accepted my
invitation to leave sunny California to come to snow-covered Washington
in the month of February.
Gentleman, welcome.

The Chairman. All right. Let's see, left to right. You are
on, sir.

STATEMENT OF HON. ROBERT B. ZOELLICK, FORMER UNDER SECRETARY OF
STATE, WASHINGTON, DC

Mr. Zoellick. I thank you very much, Mr. Chairman, Senator
Biden. It is a pleasure to be with you both today, and since I
suspect that the committee is most interested in having time
for an exchange, I will keep my opening remarks very brief.
I would like to thank the committee on both sides of the
aisle for taking the time to review America's foreign policy
strategy. Today, the vitality of the United States private
economy is unmatched. America's military power is preeminent,
and the appeal of American ideas around the world is
unparalleled, but good times do not last forever. Therefore,
the United States should be using this special period to our
advantage for the future.
We should be building public support at home, and laying
the foundation abroad for a strategy that will shape the world
so as to protect and promote American interests and values for
the next 50 years. We need to find a modern American
internationalism for a very different era.
This morning, I will list six priorities for this new
strategy. First, America is most effective when it can extend
its influence by leading coalitions. Therefore, the United
States needs to overhaul its ties with its primary partners and
allies so as to adjust to changed circumstances and meet new
challenges.
We should not take our relationships with these traditional
partners for granted. These are the countries to which the
United States is most likely to turn for help, whatever the
problem. If we are not careful, a pattern of competition and
conflict could lead to acrimony and even alienation, but if we
lead wisely, with a good sense of America's key objectives as
well as the points that are subject to compromise, the United
States should be able to get its allies and other partners to
bear a fair share of responsibilities.
Our partnerships start at home, in the neighborhood of our
hemisphere. If North America is strong, the United States will
be free to pursue its aims around the world. But if our
continent, the Caribbean, and South America are troubled
because of economic, political, narcotics, environmental, or
immigration problems, the United States will be preoccupied at
home and handicapped abroad.
America's allies across the Atlantic and the Pacific are at
the core of America's vital interests. They secure the U.S.
position in the Eastern and Western regions of Eurasia, the
world's largest land area, which has the people and resources
to either shape or shake the world, and these allies can
enhance America's ability to deal with the great uncertainties
of China's and Russia's future.
America's NATO and Pacific allies should also be stronger
partners in dealing with dangerous states and new security
threats, including terrorists with terrible weapons, and the
market democracies of the European Union and East Asia must
help contribute to an international economic environment
hospitable to dynamism, creativity, and the energy of the
private sector.
Second, the United States faces the challenge of the three
other large powers of Eurasia, a China that has been rising, a
Russia that has been weakening, and an India that has been
reassessing its outlook and place in the world.
These are the big ones. If we handle these relationships
wisely, America may be able to establish a sound basis for a
peaceful and prosperous future. If we mishandle them, the
benign assumptions of today could be quickly replaced by the
dangerous realities of tomorrow.
Today, China and Russia are certainly not strategic
partners, or even friends, but they need not become enemies.
The United States should seek to draw these states into the
economic, political, and security arrangements that America and
its allies have sponsored, yet the United States needs to be
prepared to shield against these powers if peaceful integration
is not possible.
Third, North America, the European Union, and Japan need to
reach out to the next group of potential partners. In varying
degrees, countries in Central and Eastern Europe, Latin America
and East Asia have been turning to private markets, building
middle classes, and developing representative democracies that
respect individual liberties, but these countries have faced
enormous stresses.
We need to buttress their home-grown efforts to embrace
competitive markets and representative Government through
closer economic integration, security ties, and support for
democracy, and if we succeed, these democracies should be able
to help America address the next generation of challenges.
Fourth, the United States must counter those dangerous
recidivist states that threaten America's closest friends, such
as Israel, or America's vital interests, such as maintaining
access to the energy resources of the Persian Gulf. In
particular, the United States will need to be able to develop
theater and national missile defenses to intercept missiles
that might target U.S. conventional forces overseas or paralyze
America if it intervenes to resist their threats.
Fifth, in this information age, the United States needs to
be able to promote open economic architecture that will enable
the private sector to unleash productivity, innovation, and a
free flow of ideas. Communities or private groups, whether
organized for business or social events, can achieve results
far beyond the reach of governments and international
bureaucracies.
Given America's strong and diverse private sector, the
United States can gain from the widening influence of American
citizens, businesses, associations, and ultimately our ideas.
The United States should link itself to the private agents of
change around the world through new networks of free trade,
information, and investment.
At the same time that we secure the benefits of dynamic
intervention, however, the United States needs to be able to
deal with the inevitable stresses of capitalism on a global
scale. To have support at home for a successful foreign policy
abroad, the United States must help its citizens to adjust to
and benefit from new possibilities, including through superior
education, portable benefit plans, low taxes that reward work
and risk-taking, and secure savings and pensions.
Sixth, the United States needs to transform its defense
capabilities to ensure America's military remains unmatched
well into the future. To do so, the United States should align
its military power with the strengths of America's society.
America's skilled people, its advanced technology, and
Americans' proficiency at integrating interactive, fast-paced
systems into potent networks.
I would like to close with a final point about how the
United States pursues these strategic goals. In recent years,
the conduct of America's foreign policy has prompted too many
countries, even France, to pull back from or even resent the
United States. Too often, they have perceived U.S. actions as
combining the arrogance of might with inconsistency and
unreliability.
That is an unnerving combination. America's power is
obvious to the world, but we can extend that reach and
influence further, and we can do it for much longer, if the
United States speaks softly while acting with clear purpose and
conviction.
Which brings us back to the topic of strategy. If the
United States asserts that it is committed to do everything,
its commitment to everything will be suspect. To have a clear
purpose, to have a sense of what is most important, to be able
to weigh what ends warrant which means, to have the
capabilities to integrate policies across issues in time, to do
these things, the U.S. Government needs a strategic vision for
the future, and this strategy can be the cornerstone of a
modern American internationalism.
Thank you, and I would be pleased to try to answer any of
your questions.
[The prepared statement of Mr. Zoellick follows:]

Prepared Statement of Hon. Robert B. Zoellick

Chairman Helms, Senator Biden, Members of the Committee:
It is a pleasure to be with you today. Since I suspect the
Committee is most interested in having time for an exchange, my opening
remarks will be brief. I also have submitted, for your record, an
article that I recently published in Foreign Affairs that covers
today's topic in greater detail.
I would like to thank the Committee, on both sides of the aisle,
for taking the time to review America's foreign policy strategy. Today,
the vitality of the U.S. private economy is unmatched. America's
military power is preeminent. And the appeal of American ideas around
the world is unparalleled.
But good times do not last forever.
Therefore, the United States should be using this special period to
our advantage for the future: We should be building public support at
home, and laying the foundation abroad, for a strategy that will shape
the world so as to protect and promote American interests and values
for the next 50 years. We need to define a modern American
internationalism for a very different era.
This morning I will list six priorities for this new strategy.
First, America is most effective when it can extend its influence
by leading coalitions. Therefore, the United States needs to overhaul
its ties with its primary partners and allies, so as to adjust to
changed circumstances and to meet new challenges.
We should not take our relationships with these traditional
partners for granted. These are the countries to which the United
States is most likely to turn for help, whatever the problem. If we are
not careful, however, a pattern of competition and conflict could lead
to acrimony and even alienation. If we lead wisely--with a good sense
of America's key objectives, as well as of the points that are subject
to compromise--the United States should be able to get its allies and
other partners to bear a fair share of responsibilities.
Our partnerships start at home, in the neighborhood of our
hemisphere. If North America is strong, the United States will be free
to pursue its aims around the world; if our continent, the Caribbean,
and South America are troubled because of economic, political,
narcotics, environmental, or immigration problems, the United States
will be preoccupied at home and handicapped abroad.
America's allies across the Atlantic and Pacific are at the core of
America's vital interests: They secure the U.S. position in the eastern
and western regions of Eurasia, the world's largest land area, which
has the people and resources to shape or shake the world. These allies
can enhance America's ability to deal with the great uncertainties of
China's and Russia's futures.
Over time, America's NATO and Pacific allies should also be
stronger partners in dealing with dangerous states and new security
threats, including terrorists with terrible weapons. And the market
democracies of the European Union and East Asia must help contribute to
an international economic environment hospitable to the dynamism,
creativity, and energy of the private sector.
Second, the United States faces the challenges of the three other
large powers of Eurasia: A China that has been rising, a Russia that
has been weakening, and an India that has been reassessing its outlook
and place in the world. These are ``the big ones.'' If we handle these
relationships wisely, America may be able to establish a sound basis
for a peaceful and prosperous future; if we mishandle them, the benign
assumptions of today could be quickly replaced by the dangerous
realities of tomorrow. Today, China and Russia are certainly not
strategic partners, nor even friends, but they also need not become
enemies. The United States should seek to draw these states into the
economic, political, and security arrangements that America and its
allies have sponsored. Yet the United States needs to be prepared to
shield against these powers if peaceful integration is not possible.
Third, North America, the European Union, and Japan need to reach
out to the next group of potential partners. In varying degrees,
countries in Central and Eastern Europe, Latin America, and East Asia
have been turning to private markets, building middle classes, and
developing representative democracies that respect individual
liberties. But these countries have also faced enormous stresses. We
need to buttress their homegrown efforts to embrace competitive markets
and representative government through closer economic integration,
security ties, and support for democracy. If we succeed, these
democracies should be able to help America address the next generation
of challenges.
Fourth, the United States must counter those dangerous, recidivist
states that threaten America's closest friends, such as Israel, or
America's vital interests, such as maintaining access to the energy
resources of the Persian Gulf. In particular, the United States will
need to develop theater and national missile defenses to intercept
missiles (perhaps carrying weapons of mass destruction) that might
target U.S. conventional forces overseas or paralyze America if it
intervenes to resist their threats.
Fifth, in this information age, the United States needs to promote
an open economic architecture that will enable the private sector to
unleash productivity, innovation, and a free flow of ideas. Communities
of private groups, whether organized for business or social ends, can
achieve results far beyond the reach of governments and international
bureaucracies. Given America's strong and diverse private sector, the
United States can gain from the widening influence of American
citizens, businesses, associations, and ideas. The United States should
link itself to the private agents of change around the world through
new networks of free trade, information, and investment.
At the same time that we secure the benefits of dynamic
integration, however, the United States needs to be able to deal with
the inevitable stresses of capitalism on a global scale. To have
support at home for a successful foreign policy, the United States must
help its citizens to adjust to and benefit from new possibilities,
including through superior education, portable benefit plans, low taxes
that reward work and risk-taking, and secure savings and pensions.
Sixth, the United States needs to transform its defense
capabilities to ensure that America's military remains unmatched well
into the future. To do so, the United States should align its military
power with the strengths of American society: America's skilled people,
its advanced technology, and Americans' proficiency at integrating
interactive, fast-paced systems into potent networks.
I would like to close with a final point about how the United
States should pursue these strategic goals. In recent years, the
conduct of America's foreign policy has prompted too many countries,
even friends, to pull back from, or even resent, the United States. Too
often, they have perceived U.S. actions as combining the arrogance of
might with inconsistency and unreliability. That is an unnerving
combination. America's power is obvious to the world. But we can extend
the reach of that influence much farther and for much longer if the
United States speaks softly, while acting with clear purpose and
conviction.
Which brings us back to the topic of strategy: If the United States
asserts that it is committed to do everything, its commitment to
everything will be suspect. To have a clear purpose, to have a sense of
what is most important, to be able to weigh what ends warrant which
means, to have the capability to integrate policies across issues and
time, the U.S. Government needs a strategic vision for the future. This
strategy can be the cornerstone of a modern American internationalism.
Thank you and I would be pleased to try to answer any questions.

______

[From Foreign Affairs, Volume 79, No. 1, January/February 2000]

Campaign 2000

A Republican Foreign Policy

(By Robert B. Zoellick)

an era of change
At the opening of the twentieth century the United States began a
quest similar to today's. The rise of American power, revolutions in
technology, and great clashes abroad set the stage for a historic
transformation. Theodore Roosevelt and Woodrow Wilson dominated the
age, as they debated and labored to promote their visions of America's
role in a new international system. In 2000, the world is again in an
era of rapid change, reminiscent of a century ago. The vitality of
America's private economy, the preeminence of its military power, and
the appeal of the country's ideas are unparalleled. But as former
British Prime Minister Margaret Thatcher cautioned her colleagues, we
must ``expect the unexpected.'' A primary task for the next president
of the United States is to build public support for a strategy that
will shape the world so as to protect and promote American interests
and values for the next 50 years.
At the end of the Cold War, President George Bush built on Ronald
Reagan's legacy by beginning to adapt American foreign policy to the
challenges of changed circumstances. Recognizing the importance of
economic ties, his administration negotiated the North American Free
Trade Agreement (NAFTA), supported a free-trade agreement with Chile as
a step toward free trade throughout the western hemisphere, and
promoted the Asia-Pacific Economic Cooperation (APEC) group to bind
U.S. economic interests across the Pacific. The United States then
employed these regional initiatives to bring the global trade talks of
the Uruguay Round to the edge of conclusion. Those initiatives have
created the most powerful movement toward free trade in history.
The United States also took advantage of its preeminent position to
push hard for peace in a number of vital areas. In the Middle East, the
United States used its standing after the Cold War and the Gulf War to
break old deadlocks at the Madrid Conference and to push the Arab-
Israeli peace process to a totally new plane. The Bush administration
sought to reshape the strategic landscape across Europe and Russia by
uniting Germany within NATO in 1990, defining a new strategic concept
for NATO in 1991, opening the alliance to former enemies in 1990 and
1991, and negotiating landmark conventional and nuclear arms reduction
agreements to underpin the new security framework. U.S. ties with
Russia reached an impressive level of effectiveness, as demonstrated by
their cooperation in the Gulf War. U.S. links with China were also
slowly improving after the Tiananmen Square tragedy, as the Bush
administration handled sharp differences in a way that still enabled it
to foster positive change. By the end of its term, the administration
had created a climate of cooperation among the world's major powers.

CLINTON'S FLAWED APPROACH

President Bill Clinton's intelligence and his ability to synthesize
policy and politics at home held out the prospect that he could build
on Bush's initial efforts to redefine America's position in the world.
Unfortunately, the Clinton administration never adopted a guiding
strategy or even demonstrated a sustained commitment to foreign policy.
As a result, Clinton has failed to define a new internationalism for
the United States, thus letting historic opportunities slip away.
Clinton's foreign policies have been stymied by five flaws. The
first, an unwillingness to remain committed to his own priorities, has
been demonstrated by his drift on international trade. Clinton started
with an encouraging emphasis on trade, perhaps because he inherited a
signed NAFTA deal and a partial Uruguay Round agreement that he could
not abandon easily. But after 1994, the Clinton administration changed
its course: it made pledges for free trade, but the reality of its
policies did not match the rhetoric. Instead, the United States
demanded managed-trade quotas with Japan--precisely the wrong remedy
for a country needing deregulation--until it was compelled to retreat.
Fearful of alienating protectionist political constituencies, Clinton
was unwilling to build on NAFTA or even to defend it. After deferring
to the new economic isolationists, Clinton seemed surprised in 1997
when he could muster only about 40 out of 200 members of his own party
in the House of Representatives to support his forlorn search for the
authority necessary to negotiate additional trade agreements.
These mistakes have had lasting consequences. In the early 1990s,
countries throughout Latin America were competing to negotiate free-
trade agreements with the United States. Recognizing the strategic
value of NAFTA, they wanted to connect their economies, societies,
security, and even political systems to America. Today, no one in Latin
America or elsewhere expects the current administration to follow
through on its statements. Latin Americans proceeded with their own
customs union, which has been negotiating new trade ventures with the
European Union (EU) and Japan. When East Asian economies faced their
greatest financial shock in generations--creating possibilities for
structural reforms but also a need to fight protectionism with mutual
liberalization--U.S. trade negotiators stood on the sidelines. Without
the initiative and leadership of the United States, all participants
involved in launching the global trade talks in Seattle last November
approached the meeting defensively. So the new trade round was stymied
by stalemate. Washington has the power to shape global economic
relations for the next 50 years, but it has marginalized itself in this
crucial area.
The White House's second flaw has been to erode its credibility by
offering words that are not backed by actions; this has taken a special
toll with U.S. allies. It is ironic that an administration that came
into office proclaiming ``assertive multilateralism'' has dissipated
America's energies as a coalition leader. The Gulf War coalition is in
tatters, not surprisingly, after years of strong language about the
dangers of Saddam Hussein's machinations, followed by only tepid and
reflexive actions. Despite the American military's overwhelming
superiority in Kosovo, at the end of the bombing its European allies
concluded that they needed to create their own alternative to U.S.
political and security leadership. After China harshly criticized Japan
for agreeing to new defense guidelines with the United States, Clinton
could not find one minute during his nine-day trip to China to stand by
his struggling Japanese ally. The administration managed to boot out a
U.N. secretary-general, but it has never developed a sustained,
consistent strategy toward the organization that would serve U.S. ends.
(Only a few years earlier, America had proved that a more constructive
approach to the U.N. was possible when it built the Gulf War coalition
and organized the repeal of the ``Zionism is racism'' resolution.)
The Clinton administration's third flaw is its inability to frame
strategies supported by operations, which has particularly damaged its
dealings with China and Russia. Neither one is the ``strategic
partner'' that Clinton proclaimed. In fact, the distrust created by the
administration has made it hard for the United States to cooperate with
either country on long-term mutual interests. Sadly, the Clinton legacy
with both China and Russia--the two great powers whose future paths
remain uncertain and potentially unstable--is one of tense and
suspicious relations that have been getting worse.
In the case of China, at first the administration linked human
rights to normal trading relations, but it later backed down--a clear
sign of weakness. Clinton then mistakenly promised the Chinese that the
United States would not grant a travel visa to the president of
democratic Taiwan, Lee Teng-hui; his subsequent reversal of that
decision generated distrust and counterreactions that have increased
dangers between Beijing and Taipei. During Clinton's high-profile trip
to China in 1998, he neglected to explain serious security differences,
ultimately misleading China and failing to prepare the American public
for China's missile buildup, its nuclear espionage, and its crack-downs
on democracy. Next, Clinton prodded Chinese Prime Minister Zhu Rhongji
to offer the United States concessions in exchange for Chinese
membership in the World Trade Organization (WTO) but then inexplicably
spurned Zhu's proposal during a high-profile visit, thereby weakening
China's reform efforts. The agreement with China on the WTO in November
1999, although welcome, only underscores that Clinton could have cut a
deal earlier that was as good or better--avoiding a crisis that left
unnecessary scars.
Clinton's Russia policy has discredited free-market economics,
squandered money from the International Monetary Fund (IMF), and
generated widespread anti-Americanism. His ``Monroeski doctrine'' and
his comparison of the battle in Chechnya to the U.S. Civil War have
encouraged both a view of state power that conflicts with a modern,
democratic Russia and a revival of Russian imperialistic attitudes. The
administration's indifference to Yeltsin's shelling of the Russian
legislature, among other autocratic measures, revealed a blind spot in
the importance of Russia's rule of law and democratic process. Clinton
has never seemed to grasp the costs of embracing an elected czar, one
who oversaw a privatization drive that turned into massive theft and
who now presides over pervasive corruption. Not surprisingly, this
system has failed to improve the livelihood of average Russians,
setting the stage for future trouble.
A fourth flaw has been Clinton's uncertainty on when and how to use
American power--frequently hesitating, then overcommitting, and
regularly failing to match means with ends. This weakness has shadowed
his initiatives to resolve humanitarian and ethnic strife with military
intervention. His ``nation-building'' failure in Somalia was costly in
terms of lives, the reputation of the United States, and America's
confidence that it can deal effectively with such problems. The U.S.
invasion of Haiti and its multi-billion-dollar effort to bring
``democracy'' turned out to be an unhappy reminder that supposedly good
intentions cannot save a flawed policy. The United States continued to
be drawn into miniwars in the Balkans without clarifying its goals or
being honest about the ongoing commitment of human and material
resources these U.N. ``colonies'' would require. The history of false
starts and missteps was captured well by Clinton's own new ``doctrine''
on intervention in such conflicts: his words were at first stunning in
their reach but were then quickly reinterpreted, leaving the world to
conclude that America is confused, cynical, or both.
Finally, many of Clinton's ventures have the disquieting feature of
being driven significantly by political polls and calculations; this
perception has made it exceedingly hard for him to call credibly for
bipartisan foreign policies. As Clinton's ad hoc foreign policies have
frayed, the administration has lashed out at its critics, calling them
isolationists. In fact, Clinton's inability to develop a foreign policy
disciplined by sustained priorities, reliability, strategy,
selectivity, and frankness has squandered opportunities. The
president's mistakes have made it harder for him to complete work in
areas--such as the Middle East and Northern Ireland--where he has
invested considerable effort in bringing parties together for peace
processes. The Clinton foreign policy style has also taken its toll
abroad. The administration has caused too many countries to be weary,
and even resentful, of the United States. The power of the United
States is obvious to the world, but Clinton has failed to use that
power wisely or diplomatically. His rhetoric has contained much hubris
but little credibility. America is more influential if it speaks
softly, but with firm conviction. If it asserts that it is committed to
do everything, its commitments to everything are suspect.

REPUBLICAN PRINCIPLES

Five principles distinguish a modern Republican foreign policy.
First, it is premised on a respect for power, being neither ashamed to
pursue America's national interests nor too quick to use the country's
might. By matching America's power to its interests, such a policy can
achieve its objectives and build credibility both at home and abroad.
U.S. policy should respect the histories, perspectives, and concerns of
other nations, but it should not be paralyzed by intellectual penchants
for moral relativism. All States do not play equally important roles.
Given America's responsibilities in the world, it must retain its
freedom to act against serious dangers.
Second, a modern Republican foreign policy emphasizes building and
sustaining coalitions and alliances. Effective coalition leadership
requires clear-eyed judgments about priorities, an appreciation of
others' interests, constant consultations among partners, and a
willingness to compromise on some points but to remain focused on core
objectives. Allies and coalition partners should bear their fair share
of the responsibilities; if they do, their views will be represented
and respected. Similarly, to have an effective U.N., the key nations
that compose it must recognize that their actions--not their speeches
and posturing in an international forum--will determine whether
problems can be solved.
Third, Republicans judge international agreements and institutions
as means to achieve ends, not as forms of political therapy. Agreements
and institutions can facilitate bargaining, recognize common interests,
and resolve differences cooperatively. But international law, unlike
domestic law, merely codifies an already agreed-upon cooperation. Even
among democracies, international law not backed by enforcement
mechanisms will need negotiations in order to work, and international
law not backed by power cannot cope with dangerous people and states.
Every issue need not be dealt with multilaterally.
Fourth, a modern Republican foreign policy must embrace the
revolutionary changes in the information and communications,
technology, commerce, and finance sectors that will shape the
environment for global politics and security. Because of these changes,
people's aspirations--to exercise their free will and transform their
lives--are rising in all corners of the globe. Communities of private
groups, whether organized for business or social ends, will achieve
results far beyond the reach of governments and international
bureaucracies. The United States can leverage this dynamism to open
minds and markets. America's foreign policy must promote these global
trends. It must take practical steps to move the world toward greater
freedoms and human rights. It should link itself to the agents of
change around the world through new networks of free trade,
information, and investment.
Finally, a modern Republican foreign policy recognizes that there
is still evil in the world--people who hate America and the ideas for
which it stands. Today. we face enemies who are hard at work to develop
nuclear, biological, and chemical weapons, along with the missiles to
deliver them. The United States must remain vigilant and have the
strength to defeat its enemies. People driven by enmity or by a need to
dominate will not respond to reason or goodwill. They will manipulate
civilized rules for uncivilized ends.

POWER AND ECONOMICS

A modern Republican foreign policy should apply these principles
within a long-term strategy to promote peace, security, and liberty.
America must capture the dynamism of the era and transform its new
elements into the economic and security foundations for a future
system. The United States and its partners need to link the world's
continental regions within a global economic system that secures the
benefits of integration while coping with the inevitable stresses of
capitalism. Looking at the twentieth century, it is clear that peace is
not ensured through closer economic ties alone; so the United States
must navigate changing great-power relations, strengthen its alliances,
and maintain unquestioned military superiority over dangerous regimes.
In the information age, America should promote an open architecture
in order to capitalize on its greatest assets: a vibrant, innovative
economy and a society that continually reinvents itself: American
concepts of corporate governance, shareholder value, benchmarking, and
the ``value chain'' are now discussed in executive offices around the
globe. By incorporating advances in information and communications
technologies into business processes, U.S. corporations have triggered
gains in productivity similar to those achieved when companies learned
how to reengineer their businesses using electrical power 100 years
ago. The surge in e-commerce, already a $500 billion activity, is
transforming business models again. Governments everywhere are turning
to privatization and deregulation to help their countries keep pace.
The American entrepreneur commands an awe that matches the respect
accorded the American military.
The American private sector is a powerful, attractive magnet. But
the U.S. government has not used this energetic force to transform
others in ways that enable America to build on its successes. Instead,
growth and market imbalances have led to the largest trade deficits in
American history. Although U.S. markets are generally open to the
world, too many others remain closed to the United States. Countries
should embrace changes that will tap the vitality and genius of people
around the world, improve their livelihood and health, and open doors
to freedom. Government efforts to turn back the clock, even if well-
meaning, will end up hurting people. Instead, governments and societies
should help people adjust to and benefit from new possibilities.
Therefore, a successful U.S. foreign policy must also be based on
superior education at home, low taxes that reward work and risk-taking,
and secure savings and pensions for retirees.
The United States needs a strategic economic-negotiating agenda
that combines regional agreements with the development of global rules
for an open economy. To link up with Latin America and the Asia-Pacific
region, the United States should propose free-trade agreements, with
either individual countries or regional groups. If India continues its
reforms, the United States should offer it a new economic partnership
beginning with those Indian sectors that are open to the world or can
offer large public gains through deregulation. As a new generation of
leaders gains authority in the Middle East, possible peace agreements
can be buttressed by drawing these societies into information-age
economics and integrating their economies into world markets. African
countries seeking to abandon the old, failed state controls need the
incentive of open U.S. and world markets for their emerging
enterprises, as well as financial backing for serious reforms. The EU
and the United States should follow the lead of their increasingly
integrated businesses by opening even more sectors to cross-investment
and greater competition, with the aim of achieving transatlantic free
trade.
These agendas should be ambitious--ranging from farm products to e-
commerce. Tariffs should be cut further. The United States should
support innovative business ventures to streamline common standards. It
should promote the deregulation and opening of vast new global markets
for services--in areas such as energy, airlines, finance, and
entertainment. The United States should apply successful regional
precedents in economic and trade liberalization to other regions or to
global negotiations through the WTO. By operating at the center of this
changing network, the United States-the one economy with a truly global
reach--should promote openness among regions.
If some regions are too slow to open their markets, the United
States should move on to others. America should spur a competitive
dynamic for openness and transparency. Competition can work wonders:
when the United States pursued NAFTA and APEC, the EU finally felt the
pressure to complete the global Uruguay Round trade negotiations. If
others hold back in the new WTO round, the United States should repeat
this strategy of regionalism with a global goal in order to break the
logjam.
This modern Republican design recognizes the benefits of regional
integration and seeks to harness it for global purposes; regional
integration can help countries deal more effectively with transnational
problems, such as the environment or narcotics trafficking. The
practice of joint action within regions, especially by private-sector
groups, can be expanded to deal with common political and even security
issues. The history of U.S. foreign policy is full of examples of
private parties--from missionaries to engineers--who forwarded
America's belief in the future by helping others face the challenges of
the day. The very nature of the ``new economy''--with its rapidly
adapting technologies, fast-paced change, and innovative spirit--will
elevate the role of private parties; they will often surpass the
government in their ability to resolve inevitable disputes. These
parties are not zero-sum thinkers. The U.S. government should create a
climate in which citizens can serve both the private and the public
good. Prosperity with a purpose is an idea that reaches far beyond U.S.
borders.
If America links its economy to those of key regions, it can also
promote its geopolitical agenda. Deeper integration with Latin America,
Europe, and East Asia will support U.S. security commitments as
citizens of these regions recognize their common interests. At best,
economic interdependence will be a new glue that draws partners close
together. More modestly, creating common rules for open economies will
connect private sectors and help manage a combination of cooperation
and competition.
This blueprint expands on America's political and economic
principles. It promotes open markets and open societies, the free flow
of information and ideas, and the development of the private sector--
all of which contribute to the growth of economies, middle classes, and
liberties. If China, Russia, India, and others want to keep up, they
will have to open up. This plan offers a positive program around which
internationalists of both parties can rally to counter protectionists
and isolationists. It also challenges America to sustain its openness,
a feature that attracts great thinkers and doers from all over the
world. It creates a dynamism that gives its diverse society cohesion
and a shared purpose; and it safeguards liberty and freedom.
The public international financial institutions--especially the IMF
and the World Bank--also need to be overhauled to match the demands of
the information age and the globalization of financial markets.
Considering how private-sector financial firms have changed in recent
years, it is understandable that the Bretton Woods institutions of 1944
require major reengineering. First, the operations of the IMF and the
World Bank must be more transparent, on-line, and real-time. They
should fight corruption, which can drain both money and confidence. But
they should not, out of technocratic hubris, usurp the proper roles of
either creditor or debtor governments or of the private financial
sector. A dependency on international bureaucracies for solutions to
tough problems will dissuade national governments from taking
responsibility for their countries' futures and will ultimately erode
the legitimacy of both governments and international financial
institutions.
The IMF still has a role to play in buffering national financial
markets against shocks that threaten global stability, until self-help
rebalances the capital movements. But the IMF must exercise this role
in a fashion that does not add to long-term financial instability by
encouraging risks for which investors are not willing to pay.
Furthermore, since today's global economy (different from what it was
50 years ago) rests on private capital flows, the IMF must ``bail-in''
creditors, not bail them out. Private creditors must play a financial
role in restructuring ``national bankruptcies,'' just as when they have
loaned money to companies in trouble; creditors can reschedule loans,
take discounts, and extend more money during workouts. The World Bank
should concentrate on helping people adjust to change. In poor
countries, this agenda may involve improving basic health and
subsistence needs while creating economic opportunities. In other low-
income countries, the World Bank can assist in developing markets that
will enable people to benefit from self-help.

ALLIES, ENEMIES, AND IN-BETWEENS

In pursuing a reinvigorated foreign policy, the United States first
needs to overhaul ties with its partners and allies: its North American
neighbors and its two primary partners abroad, Europe and Japan.
Mexico, Canada, and the United States share an interest in building on
their common democracy and prosperity by addressing problems that
require greater regional cooperation--such as narcotics, the
environment, and illegal immigration. To operate effectively overseas,
the United States must ensure that it has a strong neighborhood at
home. Transatlantic and transpacific alliances can go a long way toward
ensuring security in the eastern and western parts of Eurasia, where in
the past dangerous powers have threatened the United States. These
partnerships can enhance America's ability to address the uncertain
futures of China and Russia. The EU and Japan are also important
colleagues in ensuring an international economy hospitable to growth,
dynamism, and the creative spirit.
The United States should not be complacent about its allies' roles.
Europeans say they want to shoulder a greater defense responsibility--
and they should--especially when it comes to policing their own
continent. But a wide gap still separates Europe's defense oratory and
its actual spending on the necessary capabilities. The United States
should encourage its NATO allies to face this reality and to recognize
the mutual benefit in having European defense forces operating in close
concert with the U.S. military through coalitions. Ultimately, an
effective European defense arm will require serious participation by
British, French, and German troops.
Japan should evolve gradually toward assuming more responsibility
for East Asian security, in concert with America and its allies. Only
the United States can help Japan's neighbors accept this historic
adjustment, which is the key to transforming Japan's domestic opinion.
As a start, Japan, the United States, Korea, and Australia should form
closer defense ties. Over time, Japan's forces should be more closely
integrated to support the U.S. military in Asia. These steps will
strengthen the posture of the Pacific democracies toward North Korea,
demonstrate to China that it should seek security cooperation (and not
competition) with the Asia-Pacific democracies, and channel any
increased Japanese capabilities into a reassuring framework.
Second, the United States and its partners face three great
challenges in Eurasia: China, Russia, and India. China has been rising,
Russia has been weakening, and India has been reassessing its outlook.
These are the ``big ones,'' and more mistakes with them could cost
America dearly in the future. The United States must be realistic, not
romantic, about the prospects for China and Russia. These states should
be integrated into the economic, security, and political arrangements
that America and its allies have sponsored, although we must be
prepared to shield against these countries if integration is not
possible. These countries are ``works in progress;'' they are not yet
friends and are certainly not partners, but they need not be enemies.
The United States and its allies should explain to both China and
Russia the steps that can build on shared interests and lessen
differences. Ultimately, America will evaluate its own ability to
cooperate--and the world will assess America's willingness to do so--
based on concrete actions, not photo opportunities.
India, the worlds largest democracy and before long its most
populous nation, will play an increasingly important role in Asia. To
grow and prosper, it will need to adjust to the global economy. To
contribute to its prosperity and regional security, India will need to
lower the risk of conflict with its neighbors. And to have influence
with India, America must stop ignoring it. A more open India,
possessing a broader understanding of its place in the world, could
become a valuable partner of the United States in coping with Eurasia's
uncertainties. In addition to proposing trade and investment
liberalization, the United States should open a regular; high-level
security dialogue with India on Eurasia and the challenges to
stability.
Third, North America, the EU, and Japan need to reach out to the
next group of potential partners. In varying degrees, moving at
different paces, countries in central and eastern Europe, Latin
America, and East Asia have been opening private markets, building
middle classes, and developing representative democracies that respect
individual liberties. But these countries have been subject to enormous
stresses. With Latin America in particular, the United States has
resumed its old, bad habit of overlooking its neighbors until problems
compel it to pay attention. Resistance is slowing the momentum for
democracy and free markets that Latin America kicked off a decade ago.
More debt defaults, rising populism, frustrations with the lack of
tangible results from economic reforms, and narcotics traffickers
seeking to control governments all threaten to eclipse the movement
toward what should be a historic and strategic achievement: a fully
democratic and prosperous western hemisphere.
Fourth, the United States must counter those dangerous states that
threaten its closest friends, such as Israel, or its vital interests,
such as maintaining access to oil in the Persian Gulf. In dealing with
the likes of Iraq and North Korea, the United States needs to offer
consistent long-term directions to guide coalitions that will deter and
even replace their brutal regimes. Concessions to blackmail and
threats, even if they serve as temporary expedients, will exacerbate
these problems. The United States must retain the initiative so that
its opponents are so worried about what America is planning that they
cannot plot attacks or new forms of blackmail. Theater and national
missile defenses will let the United States counter missiles carrying
weapons of mass destruction from those countries that might target U.S.
conventional forces or paralyze the United States if it intervenes
against their threats. Time is on America's side--not that of these
decaying dictatorships--if the United States has the confidence and
determination to stand up to, and if necessary defeat, its enemies.

MILITARY MIGHT

America's leadership in the next century requires a strong
military, wisely used. The Clinton administration has too often relied
on the U.S. military to bail out speculative diplomatic ventures that
turned sour. Concurrently, America's military has been cut back some 40
percent. At some point, doing more with less just becomes doing less
with less. Given the current demands on the U.S. military the Pentagon
has made the troublesome choice of trying to fund present needs at the
expense of future capabilities. This spending improvisation is divorced
from the administration's own plans. As the military equipment bought
in the early 1980s ages, the armed services are spending more and more
funds just to keep old planes, ships, and tanks operating. The
administration's undersecretary of defense called this quandary a
``death spiral.'' The chair of the joint chiefs of staff called it a
``nosedive.'' These are strong words. The failure to prepare for the
future will become sharply apparent during the next decade, when the
wheels start to come off the weapons purchased some 25 years ago. As
one Marine general said, ``If parents are uncomfortable sending their
sons and daughters to college in 25-year-old cars, what will they think
about sending them into harm's way in 25-year-old helicopters?''
The challenge for the next president is not just to spend more on
defense but to spend wisely. In transforming its defense strategy for
the future, the United States should seek to align the military's
strength with the nation's strengths: America's people and technology.
U.S. companies that have not incorporated the revolutionary advances in
information and communications technologies have been swept away by
their competition with surprising rapidity. The Pentagon cannot afford
to run a similar risk. The United States must invest in a combination
of sophisticated sensors, information technology, real-time
communications, and precision-guided weapons that will enable the
individual services to fight together seamlessly in joint operations.
Future networked forces should be smaller, quicker, easier to deploy,
more dispersed, and able to destroy targets with fewer sorties and
greater ``standoff'' capabilities. They must be able to act together
when executing discrete missions--such as suppressing air defenses,
achieving complete air dominance, and destroying small, mobile
targets--that will be vital in the new security environment. They will
need ``more teeth and less tail.'' At the end of the day, gutsy
soldiers in muddy boots will still have to hold ground, but they need
to be the fastest to get to decisive points, with the most precise
firepower to support them.
This transformation will take time. In many respects, technology is
the easy part. The challenge is to integrate technology into new
operational concepts, doctrines, and organizational structures--and
then to practice them. (In June 1940, the French army had more and
better tanks than the German army, but the panzer leaders knew how to
use blitzkrieg operations to overwhelm France within weeks.) The
experience of the private sector points the way toward a smart,
modernized defense for the future. Like private business executives
facing new challenges, the next generation of military officers needs
clear goals to guide change--and strong support in making the country's
forces achieve these goals. Only the president can establish these
goals and provide the needed leadership.
The Pentagon can also learn from the private sector about cutting
costs. Although the cost of civilian information-technology systems has
fallen tremendously, the price of analogous military systems has not.
Like other professional organizations, the Defense Department must
focus on its core missions and outsource supporting activities. In
leading this transformation, the next president must also challenge
America's allies to keep up. In critical areas, U.S. allies in Europe
and the Pacific can share significant burdens and make major
contributions. In order to fight together, their forces must be
interoperable. And allies should assume greater roles in peacekeeping
operations, supported by unique U.S. capabilities and backed by the
hammer of its robust force.

THE RIGHT TRACK

As Americans enter a new century, the history of the last one may
inspire a sense of both caution and opportunity. The United States in
1900 seemed to have unbounded potential. But the first half of the
twentieth century involved frightful costs. And although America
achieved great accomplishments over the past 50 years, these came at a
high price of lives, money, and national attention. Now a new
generation must chart a course for America amid revolutionary changes
in technologies, economies, societies, and weaponry. It is a mistake
for the United States simply to react to events. America needs a
strategy that blends traditional truths with the opportunities of a
networked marketplace and a modernized army. It must be realistic about
human nature and conflicting interests while being optimistic about the
world's potential. America must deploy its power wisely, selectively,
and consistently to mold an international system that will enhance its
influence in future events. Drawing on this influence, modern
Republicans believe they can work with like-minded Democrats so that
America can advance both its interests and its ideals. America's
potential is extraordinary, and so is the world's. It is time to get on
the right track.

The Chairman. Thank you, sir. Before we proceed to Mr.
Woolsey, Joe, I would note that we have a great many young
people here this morning. I am encouraged by that, because they
have the most to gain or lose based on what we do here in the
Congress of the United States. If you cannot for any reason
hear back there, sort of gently wave your hand. Be sure,
gentlemen, to have your mike close to you, because they are the
ones among us that I especially want to hear what you are
saying.
So I say to the young people that this gentleman is the
former head of the Central Intelligence Agency of the United
States of America. Mr. Woolsey, you may begin.

STATEMENT OF HON. R. JAMES WOOLSEY, PARTNER, SHEA & GARDNER,
AND FORMER DIRECTOR OF CENTRAL INTELLIGENCE AGENCY, WASHINGTON,
DC

Mr. Woolsey. Thank you, Mr. Chairman, Senator Biden. It is
an honor to be asked to testify today. I will summarize this
5\1/2\ page statement in about 10 minutes, if I might.
Our first priority, in my view, is to take steps in foreign
relations that would maximize our ability to defend the
American homeland. This is a relatively new concern for the
United States in recent decades, because for many years during
the cold war the Soviets were the only power really relevant to
this. Our relationship with them was complex. It involved our
needing to couple our military forces to those of NATO and to
deter clearly any conventional Soviet attack in Western Europe.
This led, through a set of reasonings and political
realities in the early seventies, to the ABM treaty of 1972.
China was not particularly relevant on this issue during the
cold war, because it was essentially our tacit partner in
containing the Soviets. It has a very elementary ballistic
missile capability for much of this period.
Hostile rogue states were not particularly relevant,
because states such as North Korea did not have the capability
to threaten us here at home, and terrorism, the other threat, I
think, to the American homeland, was not really an issue
because it had not impinged on the United States within this
country in a major way, and certainly not in the form of
terrorists looking to possess weapons of mass destruction.
All of these assumptions are now gone with the wind. We
will no longer need to concern ourselves with a Russian
conventional attack in Western Europe for many years. Russia's
strategic rocket forces are not the stable and elite force that
once thoroughly and clearly controlled Russian nuclear weapons.
China is no tacit partner of ours vis-a-vis anyone. Indeed,
it implicitly threatens us with its rapidly improving nuclear
arsenal, principally in order to try to discourage us from
fulfilling our pledge to ensure peace in the Taiwan Strait. And
not only North Korea, but right behind it Iran and Iraq, will
threaten us within relatively few years with the possible
deployment of ICBM's capable of reaching the U.S. International
terrorists have us very much within their sights, and they can
be sure to make a serious effort to acquire weapons of mass
destruction.
The shifts in all these strategic tectonic plates in my
view call on us to give the very highest priority to homeland
defense. Some in Europe would contend that we would be more
likely to help defend them if we are ourselves vulnerable. This
argument has been advanced in various circles in Europe by the
same people for years in attacking a number of American
strategic modernization programs. It grows no less ridiculous
with repetition.
Arms control has some utility in this overall picture I
think, Mr. Chairman, but I do not believe we should let the
arms control tail wag the strategic dog. I would be pleased to
answer questions about the Comprehensive Test Ban Treaty. On
the choice that was faced here in the Senate, up or down on
that particular treaty, I believe the Senate acted
appropriately.
My own preference would have been for a reservation to be
attached to the treaty, forcing its renegotiation to move
toward a low yield test treaty. But that was not the course
which events took.
With respect to the ABM treaty, I believe we should take
whatever steps are needed, hopefully bilaterally with the
Russians, but unilaterally if we must, to permit us to defend
ourselves against rogue states and China particularly.
Kibitzing parties on this treaty who are not parties to the ABM
treaty, such as China and France, deserve exactly the degree of
attention due kibitzers.
To put it bluntly, we owe Chinese ballistic missiles a free
ride across the Pacific to exactly the same degree that we owed
it to the Japanese in the 1930's not to build Carl Vinson's
two-ocean Navy and thus to permit Japanese aircraft carriers
free passage across the Pacific. Or as it might be put in the
current argot: Not.
We must insist, I believe in the strongest possible terms,
that other nations join us in the struggle against
international terrorists.
With respect to Russia and China, Russia is a troubled
democracy. We hope it will become less troubled and still
remain a democracy. Its economy in major sectors somewhat
resembles the Chicago wholesale liquor market of the 1920's:
competition based not on price and quality, but on skill in
assassinating competitors.
China is still a Communist dictatorship, albeit one with a
partially modernized economy and, I would add, some interesting
political developments such as elections in villages. It seems,
unfortunately, to have chosen the tactic of threatening Taiwan
in order to rally the Chinese people behind nationalism as
China's economic change leads to social unrest.
I believe that with both Russia and China we should be
cordial, we should be calm, we should be firm. We should be
willing, for example, with China to trade, and to see it and
Taiwan admitted to the WTO, and still not hesitate to criticize
it vigorously for its violations of human rights.
We should be able to help Russia sequester its nuclear
warheads and fissionable material under the Nunn-Lugar program,
and take other cooperative steps with Russia, but still make it
clear that we have no intention to permit it to hinder our
ability to protect ourselves from the likes of North Korean and
Iranian ICBM's.
The rogue states, principally North Korea, Iran, and Iraq,
bear us and our allies and friends particularly ill will. All
of them are aided to one degree or another by one another, by
other proliferators, and by organizations in or by the
governments of--sometimes it is hard to tell the difference--
Russia and China in their efforts to acquire ballistic missiles
and weapons of mass destruction.
In the case of North Korea and Iraq, I believe our tactic
is simply to do what we can to weaken their ruling regimes and
keep our powder dry.
With respect to Iran, the situation is more complex.
Although the hard-line clerics retain control of the
instruments of state power, and they use such instruments
especially to support terrorism abroad, they have lost the
support of the vast majority of the people of Iran. I believe
that Iran's social and political structure holds the promise
that if we play our cards right we may in time help encourage
that country to move in a constructive direction. With Iran, I
think we should bide our time.
Free trade, Mr. Chairman, I believe is our friend as we
seek to maintain our own remarkable economic performance and to
see prosperity spread around the globe. As a general matter, in
my view I think we ought to work to reduce trade barriers
through the WTO and otherwise.
There is one area which I will not go into substantially,
but I want to mention, where I believe vigorous U.S. Government
action is needed to create an alternative to a major product, a
major commodity. Today, as oil prices rise, we see the
increasing leverage of oil exporting nations. The vast majority
of the world's proven reserves are in the Persian Gulf and
adjacent areas, a region in which most ruling regimes are
either pathological predators or vulnerable autocrats.
The world's transportation systems run on petroleum-based
fuels and substitution in a crisis is virtually impossible. I
believe it would be most wise for us to take steps to move
toward bio-based fuels as a substitute for petroleum-based
ones, and to take other steps to reduce the need to rely on oil
imports from the Mideast. Senator Lugar, a member of this
committee, and I co-authored an article a year ago in Foreign
Affairs on this subject titled ``The New Petroleum.''
I want to stress, however, that what I am suggesting is not
to move toward the use of grain-derived products such as
today's corn-based ethanol. Rather, it is to undertake the
research, development, and initial steps of commercialization
in order to produce ethanol and other useful products out of
agricultural and other wastes. Added funds for this purpose are
in the President's budget, and Senator Lugar has proposed
legislation on this important subject as well.
I believe that only the use of waste products, and of crops
such as prairie grass, for feedstocks will lower the cost of
alternative fuels to the point that they can compete with fuels
derived from Mideast oil.
We need, Mr. Chairman, to maintain our ability to intervene
abroad, I believe to be able to fight two near-simultaneous
regional wars, and that level of military capability will give
us the wherewithal to use force in lesser contingencies as
well. I think force should be our last resort, but there are
some important criteria to look at, such as whether major
economic interests are involved and whether military logistics
permit us to operate successfully.
I think it should be a very rare occurrence for us to
intervene in a country's internal struggles, but stopping
genocide seems to me to present a plausible exception to that
rule.
Generally, I think it is important that we limit the use of
American forces to cases where our opponent has what Clausewitz
called ``a center of gravity,'' that is, a military capability
that, if we defeat it, will mean victory. We should not send
U.S. forces to hang out in bad neighborhoods looking for
something useful to do. Our involvement in the Gulf war met
this criterion. Destroying Saddam's command and control and
defeating the Republican Guard meant military victory. Our
involvement in Somalia did not. There was no center of gravity
to defeat.
But it is far from the case that the most important and
effective tools we have to influence events always involve
force, or threatened force. Both Lech Walesa and Vaclav Havel
have said that the most important thing the United States did
during the cold war was to operate Radio Free Europe.
Joseph Nye of Harvard, a friend of all three of us, has
given the name ``soft power'' to our influence abroad that is
derived from our media, our culture, our economy and the like.
Sometimes these influences can be very important, and they are
especially important when they augment and magnify the message
that our way, the path of political and economic freedom, holds
the best promise to improve the lot of the world's people.
I want to make only one final comment, Mr. Chairman. Given
the importance of the message that this Nation stands for human
freedom, it is especially dismaying when we see our own
Government undermining it. Within the last month, the press has
had a few reports about a step the administration is taking in
negotiations in Vienna that can only be described as
despicable.
This issue was first brought to public attention by William
Bennett and Charles Colson in a piece in the Wall Street
Journal on January 10 of this year. In the negotiations on the
U.N. Convention on Transnational Organized Crime, the
administration is proposing to define sexual exploitation as
being limited to ``forced prostitution'' rather than simply
``prostitution.''
This would have the effect of creating a huge loophole for
the enforcement of international restrictions against the
trafficking in and the victimization of women. Most traffickers
claim that those they have forced into prostitution have made
this choice voluntarily. It is virtually never true.
Most nations of the world, and particularly poor nations,
which tend to be the homelands of the women who are coerced
into prostitution and then transported to wealthier countries,
oppose this administration effort to give a free pass to
traffickers. The motivation of those in the administration who
are instructing our diplomats to join in these negotiations
together with The Netherlands and a few other wealthy countries
where prostitution is legal, in order to make life easier for
predators who export poor women--and to do so against the
wishes of the governments of the world's poor nations which are
trying to stop this exploitation--is absolutely beyond
comprehension.
I know that you, Mr. Chairman, have written to the
administration on this matter, as have 32 Members of the House
of Representatives. It is an issue in which religious groups
have spoken out in dismay and anger, and they have met as their
colleagues in this cause, speaking virtually the same language,
such individuals as Jessica Neuwirth, Patricia Ireland, Eleanor
Smeal, Gloria Steinem and other prominent feminists.
Whatever anyone thinks should be our highest foreign policy
priorities, surely removing the international barriers to
coercing poor women into prostitution should be nowhere among
them. What in the world does the administration think it is
doing?
Thank you, Mr. Chairman.
[The prepared statement of Mr. Woolsey follows:]

Prepared Statement of Hon. R. James Woolsey

Mr. Chairman and Members of the Committee, it is an honor to be
asked to testify before you on this important subject. I will seek to
summarize briefly what I believe our top foreign policy priorities
should be.

HOMELAND DEFENSE

Our first priority, in my view, should be to take those steps in
foreign relations that maximize our ability to defend our homeland.
This is a relatively new concern for the United States, at least in
recent decades, because of the fact that the Soviets' ability to
destroy us was subsumed for many years in the question of many other
aspects of our relationship with them during the Cold War. NATO, for
example, was paramount for us. Thus we bargained away our ability to
build ballistic missile defenses against the Soviet threat in no small
measure to enhance our ability to have a clearly credible offensive
deterrent (thus our desire to ensure low levels of such Soviet
defenses); this guaranteed offensive capability, many of us believed at
the time, made us better able to deter a conventional attack by the
Soviets on Western Europe. Low levels of Soviet defenses had the added
advantage of ensuring that our British and French allies also had a
strategic deterrent against the Soviets.
China was, for many years, not at all central to our thinking about
the need for strategic defenses because, beginning in the early
seventies, it was functionally our tacit partner in containing the
Soviets. Hostile rogue states such as North Korea did not have the
capability to threaten us here at home. Nor was terrorism, then,
thought to be able to reach our shores from abroad in a major way--
certainly not in the form of terrorists' potential use of weapons of
mass destruction.
All these assumptions are now gone with the wind. We no longer need
concern ourselves with a Russian conventional attack on Western Europe,
and this will probably be true for many years. The once-solid command
and control of Russia's nuclear arsenal by elite and well-trained
Strategic Rocket Forces troops is no more. China is no tacit partner of
ours vis-a-vis anyone, but rather China threatens us with its rapidly-
improving nuclear arsenal principally in order to try to discourage us
from fulfilling our pledge to ensure peace in the Taiwan Straits. Not
only North Korea, but right behind it Iran and Iraq, will threaten us
within a very few years with the possible deployment of ICBM's capable
of reaching the U.S. And international terrorists have us very much
within their sights; they can be sure to make a serious effort to
acquire weapons of mass destruction.
The shifts in all these strategic techtonic plates, in my view,
call upon us to give the very highest priority to homeland defense
against both ballistic missiles and terrorists, and to take the very
important steps in foreign policy needed to implement such strategic
steps. With respect to ballistic missile defense, some in Europe
contend that we will be more likely to help defend them if we are
ourselves vulnerable. This argument has been advanced by many of the
same people for years to attack a number of our strategic modernization
programs. It grows no less ridiculous with repetition.
Arms control has its utility I believe, in some circumstances, in
limiting certain threats--but we should not let the arms control tail
wag the strategic dog. This happened in the 1920's and it is not a
history we should repeat. I believe that it was far preferable for the
Senate to defeat the recent Comprehensive Test Ban Treaty than to
approve it, although a reservation amending the treaty substantially
and forcing its renegotiation--e.g. to permit low-yield testing--would
have been my preference.
With respect to the ABM Treaty we should take whatever steps are
needed--bilaterally with the Russians if possible, unilaterally if we
must--to permit us to defend ourselves. Kibitzing parties, such as
China and France, deserve exactly the degree of attention due
kibitzers. To put it bluntly, we owe Chinese ballistic missiles a free
ride across the Pacific to exactly the same degree that we owed it to
the Japanese in the 1930's not to build Carl Vinson's two-ocean navy
and thus to permit Japanese aircraft carriers free passage across the
Pacific. Or as it would be put in the current argot: Not.
We must insist in the strongest possible terms that other nations
join us in the struggle against international terrorism: if that means
adopting policies that anger our allies who like to trade with Iran, or
if it means pressing hard for tough action by states such as Pakistan
that are close to states harboring terrorists, so be it.

RUSSIA AND CHINA

Russia is a troubled democracy, which may or may not remain such,
with an economy in which major sectors resemble the Chicago wholesale
liquor market of the 1920's: competition based not on price and
quality, but on skill in assassinating competitors. China is still a
communist dictatorship, albeit one with a partially modernized economy;
it seems to have chosen the tactic of threatening Taiwan in order to
rally the Chinese people behind nationalism as China's economic change
leads to social unrest. With both Russia and China we should be
cordial, calm, and firm. We should be able to trade with China (and see
it and Taiwan admitted to the WTO), e.g., and still criticize it
vigorously for its violations of human rights. We should be able to
help Russia sequester its nuclear warheads and fissionable material
under the Nunn-Lugar program, and still make it clear that we have no
intention to permit it to hinder our ability to protect ourselves from
rogue state ICBM's.

ROGUE STATES

North Korea, Iran, and Iraq bear us and our allies and friends
particularly ill will, and show no signs of being limited by any of the
normal conventions of international behavior except as they are
deterred by military power. All are working hard on ballistic missiles
and weapons of mass destruction. All are aided to some degree by one
another, or other proliferators, and by organizations in, or the
governments of (it's sometimes hard to tell the difference), Russia and
China.
In the cases of North Korea and Iraq, the objective seems first and
foremost to intimidate their neighbors and to deter us from again
intervening to protect South Korea, Kuwait, and other nations near
Iraq. Iran is a more complex case: although the hard-line clerics
retain control of the instruments of state power--and use such
instruments especially to support terrorism abroad--they have lost the
support of much of the people of Iran. And the people have some limited
ability to make their wishes known, through elections and otherwise.
Dealing with Iran requires firmness and we should be wary of moving too
eagerly toward resumed relations. But Iran's social and political
structure holds the promise that, if we play our cards right, we may in
time help encourage that country to move in a constructive direction.
With Iran we may bide our time and look for an opportunity. With North
Korea and Iraq we should do all that we can to weaken their ruling
regimes, and keep our powder dry.

INTERNATIONAL TRADE AND OIL DEPENDENCE

Free trade is our friend as we seek to maintain our own remarkable
economic performance and see prosperity spread to the rest of the
globe. As a general matter, in my view, we should systematically work
to reduce trade barriers, through the WTO and otherwise. But there is
one area of the economy where I believe vigorous U.S. government action
is needed to create an alternative to a major commodity.
Today as oil prices rise we see the increasing leverage of oil-
exporting nations. The vast majority of the world's proven reserves are
in the Persian Gulf and adjacent areas, such as the Caspian Basin--a
region in which most ruling regimes are either pathological predators
or vulnerable autocrats. The world's transportation systems run on
petroleum-based fuels, and rapid substitution of other fuels during a
crisis growing out of this unstable region is today impossible.
I believe that we have an obligation--for reasons of security, and
to promote other goals such as improving the environment and improving
our trade balance and rural development--to move toward bio-based fuels
as a substitute for petroleum-based ones and to take other steps to
reduce the need to rely on oil imports from the Mid-East. I will not
dwell on this point since Senator Richard Lugar and I co-authored an
article a year ago in Foreign Affairs on the subject: ``The New
Petroleum.'' I will simply note that what is at issue is not to move
toward the use of grain-derived products, such as today's corn-based
ethanol, but rather to undertake the research, development, and initial
steps of commercialization that are needed to produce ethanol and other
useful products out of agricultural and other wastes. Added funds for
this purpose are in the President's budget. Only the use of waste
products and of crops such as prairie grass (switch grass) for
feedstocks will lower the cost of alternative fuels to the point that
they can compete with fuels derived from Mid-East oil. Senator Lugar
has proposed legislation on this important subject.

INTERVENTION: HARD AND SOFT

We need to maintain the military capability to project power abroad
and to fight two major regional wars near-simultaneously. Sliding back
from this objective will only encourage, e.g., Saddam to attack his
neighbors if we were to become involved in defending South Korea
against a North Korean attack. This level of forces will give us the
wherewithal to use force in lesser contingencies as well. When should
we do so?
Certainly force should normally be our last resort, and indeed we
will need to use it less if our reputation for success is solid.
Ordinarily such use should be undertaken with our allies, such as the
nations of NATO, in defense of allies themselves or to defend weak
nations against aggression by powerful neighbors. Important economic
interests will often be central to these decisions, as was the case in
1990 when, after seizing Kuwait, Saddam was about 100 miles away from
controlling over half the world's proven oil reserves. (As someone put
it at the time, our analysis would doubtless have been different if
Saddam had threatened to control over half the world's reserves of
broccoli.)
Military logistics will always be an important factor: is the
proposed intervention in a place that we can readily reach with
effective force? Is it near major air bases that we can use, or near
the sea so that our Navy and Marine Corps can readily be brought to
bear?
It should be a very rare occurrence for us to intervene in a
country's internal struggles, but stopping genocide seems to me to
present a plausible exception in some circumstances to this general
proposition.
We should generally limit the use of American forces to cases where
our opponent has what Clausewitz called a ``center of gravity,'' e.g. a
military capability that, if defeated, will mean victory. We should not
send U.S. forces to hang out in bad neighborhoods looking for something
useful to do. Our involvement in the Gulf War in 1990-91 met this test:
destroying Saddam's command and control and defeating the Republican
Guard meant victory. Our involvement in Somalia in 1992-94 did not:
there was no center of gravity.
But it is far from the case that the most important and effective
tools that we have to influence events abroad always involve force.
Lech Walesa and Vaclav Havel have said that the most important thing
the United States did during the Cold War was to operate Radio Free
Europe (for much of its existence, I would note, a CIA covert action).
The Dean of the Kennedy School at Harvard, Joseph Nye, has given the
name ``soft power'' to our influence abroad that derives from our
media, our culture, our economy, and the like. Sometimes these
influences may be steered or directed by government action, as in the
case of Radio Free Europe, but often not. Given our position as the
world's only superpower these influences can be powerful, and they can
be especially so when they augment and magnify the message that our
way--the path of political and economic freedom--holds the best promise
to improve the lives of the world's people.

A FINAL NOTE

Given the importance of the message that this nation stands for
human freedom, it is especially dismaying when we see our own
government undermining it. Within the last month, Mr. Chairman, the
press has had a few reports about a step the Administration is taking
in negotiations in Vienna that can only be described as despicable.
This issue was first brought to public attention, I believe, in a
column in the Wall Street Journal on January 10 of this year by William
J. Bennett and Charles Colson: ``The Clintons Shrug at Sex
Trafficking.'' In the negotiations on the U.N. Convention on
Transnational Organized Crime the Administration is indeed proposing to
define ``sexual exploitation'' as being limited to ``forced
prostitution'' rather than simply ``prostitution.'' This would have the
effect of creating a huge loophole in the enforcement of international
restrictions against the trafficking in, and victimization of, women.
Most traffickers claim that those whom they have forced into
prostitution have made this choice ``voluntarily,'' but in fact
coercion of many types is the norm, not the exception.
Most nations of the world--particularly poorer nations, which tend
to be the homelands of the women who are coerced into prostitution and
transported to wealthier countries--oppose this Administration effort
to give a free pass to traffickers. The motivation of those in the
Administration who are instructing our diplomats to join in these
negotiations, together with the Netherlands and a few other wealthy
nations where prostitution is legal, in order to make life easier for
predators who exploit poor women--and to do so against the wishes of
the governments of the world's poor nations which are trying to stop
this exploitation--is absolutely beyond comprehension.
I know that you, Mr. Chairman, have written to the Administration
on this matter, as have 32 Members of the House of Representatives.
This is an issue in which, also, religious groups have spoken out in
dismay and anger--in almost exactly the same language as Jessica
Neuwirth, Patricia Ireland, Eleanor Smeal, Gloria Steinem, and other
prominent feminists. Whatever anyone thinks should be our highest
foreign policy priorities, surely removing the international barriers
to coercing poor women into prostitution should be nowhere among them.
What in the world does the Administration think it is doing?
Thank you for inviting me to appear today, Mr. Chairman.

The Chairman. Thank you, Mr. Woolsey.
Mr. Secretary.

STATEMENT OF HON. WILLIAM J. PERRY, BERBERIAN PROFESSOR AND
SENIOR FELLOW, INSTITUTE FOR INTERNATIONAL STUDIES, STANFORD
UNIVERSITY; AND FORMER SECRETARY OF DEFENSE, STANFORD, CA

Dr. Perry. Thank you, Mr. Chairman.
We are, of course, beginning a new century, and somehow we
all survived the dread Y2K bug. And as we define the foreign
policy challenges of the 21st century, I think one thing is
absolutely clear: We do not want to repeat the tragedies of the
20th century.
Indeed, the 20th century saw four major tragedies: the
Great Depression, which was worldwide in scope and
unprecedented in depth and duration; the rise of fascism and
communism, which resulted in atrocities typified by the gulags
and by the concentration camps; two world wars of an
unprecedented ferocity, resulting in more than 70 million
fatalities; and finally, a cold war, characterized by a balance
of terror in which both the United States and the Soviet Union
held the other country hostage with thousands of nuclear
weapons. As tragic as the world wars were, if deterrence had
failed, the cold war would have resulted in the supreme
tragedy, namely, the extinction of civilization.
Now we begin the new century on a positive note but still
with profound challenges, and I want to speak about some of
those challenges.
The first challenge is economic. Instead of a Great
Depression, we are in the midst of an economic boom. Some hold
that this is only a bubble which will soon burst. I do not
agree. Indeed, the stock market may go up and the stock market
may go down, but underlying this boom are two fundamental
developments. First has been the introduction of free market
economies and free markets on a widespread basis in the world.
And the second has been the information technology revolution,
which is deeper and more profound than the industrial
revolution of the last century.
I live and work in Silicon Valley in the midst of this
revolution, and I know it is characterized by remarkable new
tools, created by the marriage of the computer with
communication networks. These allow vastly greater productivity
in the work place, the home, and in schools. I believe the
economic boom in the United States is driven by these
productivity increases as they begin to take hold in the work
place.
The good news is that this has a long way to go. We are
only seeing today the tip of the iceberg as to what
productivity benefits will come from these two technologies.
The further good news is that America is the undisputed leader
of this revolution and the principal beneficiary of it.
The bad news is that the benefits are not shared much by
the rest of the world, and therefore there is a wider gap
between the haves and have-nots being created, with attendant
sociological and political problems. The challenge to us is to
find ways of bringing some of the benefits from market economy
and the information technology to the whole world.
The second challenge is political. As the century ended,
democracy was on the rise everywhere, especially in Eastern
Europe and in Latin America. This is a remarkable development
and the most hopeful note on which to begin the new century.
But these new democracies are fragile. No one should
underestimate how fragile they are, and nowhere are they more
fragile than in Russia today. Russia is undergoing a profound
transformation in political, economic, and social. The
remarkable thing is it has not resulted in chaos and bloodshed
already, but we should understand just how difficult this
transformation is they are going through.
A major holdout in this democratic revolution is China. We
can hope, however, that as a market economy and free trade
becomes established in China, it will create an environment
which will allow a flowering of democratic principles in that
country.
Our policy should be to encourage and support democracy
around the world because I believe that democracy around the
world will benefit not only our country, but also promote
stability throughout the world.
The third challenge is in the military field. As we begin
the 21st century, the good news is that there is no real
likelihood of another global war. The bad news is that major
regional conflicts are all too likely, and the really bad news
is that these regional wars could become much more destructive
than in the past as regional powers increasingly gain weapons
of mass destruction.
The United States needs three lines of defense against that
likelihood.
The first is diplomatic, to create the conditions that make
war less likely, and you well know that this committee and
Secretary Albright work every day on that problem.
A second, to be done in parallel with that, is to do
everything we can to prevent the proliferation of weapons of
mass destruction because regional powers become emboldened to
start a war if they possess the weapons of mass destruction
and, if they do start one, are able to create catastrophic
damage. That is why I am working with the President and with
the Congress trying to minimize the risk that North Korea will
gain a nuclear and missile arsenal.
The third line of defense is maintaining strong military
forces. We have today, as has already been said at this
hearing, the strongest, most capable military force in the
world. The challenge is to maintain that force so that if
deterrence fails, our forces will be able to win the resulting
war quickly, decisively, and with minimal casualties.
The fourth challenge and what I believe is the primary
challenge of our national security policy today is avoiding the
reemergence of another cold war. Indeed, this was the subject
of a book which I wrote last year called ``Preventive
Defense,'' trying to put some focus on this question of
preventing the reemergence of a cold war.
As Russia struggles with its economic, its political, and
sociological problems and as we decide how to assist Russia in
the struggle, we should remember what is at stake because if in
Russia's democracy fails, they could easily revert to a
military dictatorship or, alternatively, they could descend
into anarchial chaos. A military dictator, were there to become
one, would have about 20,000 nuclear weapons at his disposal.
In the event of anarchy, the country would be divided up among
warlords and presumably the nuclear weapons would be divided
among the warlords. Any new cold war that resulted from that
development could be much more dangerous than the last one.
I do not pretend to have all the answers on how to deal
with the difficult and complex problems in Russia today, but I
do know how high the stakes are and I believe that we should
not wash our hands of the problems of Russia. I believe we
should not give Russia the back of our hand, and I believe we
should make a best effort to work with their government to try
to effect the most cooperative structure we can to help them
through this transformation through which they are going.
Finally, I would contend that if we and China mismanage our
affairs, there is the potential that we could blunder into a
cold war with China. That would be a catastrophe for both
countries. Indeed, the leaders of both countries realize that,
and therefore I do not believe that this will happen. But there
are forces driving the two countries in that direction.
The flash point, of course, is Taiwan. I am personally
sensitive to this issue since I was the Secretary of Defense at
the time we sent two carrier battle groups to Taiwan during the
1996 crisis. Those were sent not to create a crisis, but to
defuse a crisis, and they were successful in doing that. I will
remind you that it is now 4 years later. And another election
in Taiwan is coming up next month, and the same conditions
which led to that last crisis, it seems to me, are confronting
us today.
Again, I do not pretend to have all the answers on how we
should deal with our problems with China, but I do fear that if
we mismanage those problems, that we will end up with an arms
race, first of all, between Taiwan and China, second between
the United States and China, and then third between the United
States and China and Russia. Such an arms race, if it gets
started and if it cannot be moderated, could be the first step
in the new cold war.
I would summarize my comments, Mr. Chairman, by saying we
are starting the 21st century on a positive note. Our economy,
the strength of our military, the state of the world in many
respects. The challenge is to keep it that way and not let the
21st century degenerate into the tragedies which we faced in
the 20th century.
I thank you, Mr. Chairman.
The Chairman. Thank you, sir.
We have been joined by the distinguished Senator from
Massachusetts, Senator Kerry. I mentioned earlier, John, that
when I got to my office a while ago from another meeting, the
corridor was full of young people waiting to get into this
hearing. It occurred to me that they are perhaps the most
vitally interested in what this country is going to be like in
terms of our national defense and other matters, of course.
I have even asked them to raise their hands if they cannot
hear the witnesses, and two or three of them have and we have
moved the mike a little closer.
Let me say to you, the young people, that this lady here is
taking down every syllable of every word that these gentlemen
are saying, and it will be printed. If you think you might make
an A in foreign affairs or some other class when you get back
to college or to high school, or wherever you are, and you need
a verbatim copy of the testimony this morning, drop me a note,
or Senator Kerry, or Senator Biden, and we will send one to
you. OK?
Now then, why do we not take about 7 minutes apiece.
Senator Biden. Fair enough.
The Chairman. Jim, Mr. Woolsey, you mentioned the growing
terrorist threat. Now, we were all greatly relieved with the
stellar work done by the intelligence community and the Customs
Service in apprehending a terrorist trying to enter the United
States from Canada. That incident underscores how great a
threat to the United States citizens terrorism truly is.
Now, how do you assess this administration's battle against
terrorism? And what do you think of the proposals being made
informally to remove Syria and North Korea from the list
designated as ``state sponsors of terrorism''?
Mr. Woolsey. I think that in terms of the response in the
intelligence community and the law enforcement community, as
you suggested, Mr. Chairman, there has been a lot of effort and
it has gone well. The CIA has had a special effort focused, for
example, on Osama Bin Laden and his organization, which is
called mainly in the Mideast by its initials MK for Office of
Services, which is the organization he ran in Afghanistan
during the war against the Soviets. He and that rather loose
organization are a huge part of the international terrorism
problem. The other major portion I think is the Nation of Iran
and its sponsorship of Hezbollah and other terrorist groups,
many of them focused very heavily on Israel.
I think the intelligence work and the intelligence law
enforcement cooperation has been good and continues to improve.
We should note that the terrorist trying to cross the Canadian
border was caught by a regular customs inspector doing her job,
just straightforwardly, just as Timothy McVeigh was caught by
an Oklahoma highway patrolman just doing his job. So, down
there in the ranks of the people who work for the Federal and
State Governments, what is really important is that people at
that level perform the way those two did and many do.
I think that having a single list for terrorist states is
probably a mistake because North Korea, just to take one
example, used to sponsor terrorism in some substantial measure.
It has kidnapped people in Hong Kong and elsewhere. It has
kidnapped Japanese citizens. It was responsible for terrible
terrorist incidents against South Korea and the South Korean
Government in the past. It is today, more or less, a retirement
home for some aging terrorists.
Syria is a far more active terrorist state because it
provides sort of the entrepot. It provides the circumstances
and the possibility for Hezbollah and other operations to take
place on its soil, operating principally against Israel.
I think what we need is a list of states that have
something to do with terrorism that is rather heavily
footnoted, sort of like an SEC-required report, for which you
have to read the footnotes to figure it out. North Korea would
go appropriately on, I think, any big list of states that have
something to do with terrorism, but unlike Iran or a handful of
other states that are quite actively involved, that is more or
less a past sin of North Korea's and not the principal present
problem that it presents to us. The present problem is the one
Dr. Perry is working on.
Syria I think under no circumstances should be regarded as
off a list of terrorist-sponsoring states as long as Hezbollah
and the Palestinian Islamic Jihad and the others operate from
its soil against Israel the way they do.
The Chairman. Mr. Zoellick, Mr. Perry, do you have a
comment on this?
Mr. Zoellick. No. I basically agree with what Director
Woolsey said.
The Chairman. Mr. Secretary.
Dr. Perry. I agree with the assessment that terrorism is
going to be a major problem in the coming decades. I believe
dealing with it is going to require improved intelligence and,
in particular, a coordination among intelligence agencies not
used to cooperating, the CIA, the DIA, and the FBI, for
example. So, there are institutional barriers set up which make
that cooperation difficult. I saw that functioning in real time
when we tried to conduct an anti-terrorist operation during the
Atlanta Olympics. It was very difficult getting that
coordination. This may even require some legislative change.
Also, we need to have improved consequence action, that is,
the action we take to respond to a terrorist event that we have
not been successful in preventing, and the capability for doing
that today resides primarily with the military, but the
military has no law enforcement responsibilities. So, it has
required bringing together the capabilities of the military
with the law enforcement responsibilities of the Federal,
State, and local police authorities.
The Chairman. Good point.
Dr. Perry. And in that respect, the posse comitatus law is
an issue that I think needs to be reexamined. I am in favor of
the principle of the posse comitatus law, but I think it is
going to be a problem when we try to develop effective
responses to terrorism. If we make any law changes, we ought to
do it in calmness and deliberation rather than in hysterical
response to an event after it has occurred.
The Chairman. I tell you I have 1 minute remaining. I am
going to pick that up next time.
Senator Biden.
Senator Biden. Thank you very much.
I thank all three of you for being here. As the chairman
would know, if you were willing and we were able, I would sit
here with you over the next 8 hours and ask you questions.
There are so many things I want to ask you about.
I might note, Dr. Perry, that we had a major piece of
legislation I introduced that you worked with me on back in
those days to deal with posse comitatus, and it was attacked
very hard from those who felt that it was a violation of the
Constitution, the unholy alliance between the far left and the
far right. Mr. Woolsey's friends on the right were absolutely
opposed to it, and I found it kind of fascinating how we dealt
with that issue. It was very difficult. And on the left as
well, I might add.
Jim, you have obviously been hanging out with Bill Bennett.
You are getting his flair these days.
Mr. Woolsey. No, I really have not. I just read his
article.
Senator Biden. But you are getting the cadence down and the
whole works. You know what I mean?
The whole thing on prostitution and all the rest. That is
good stuff. But at any rate, let me get to that later. I want
to talk to that because it is serious but I think you got some
of it wrong. But I am not here to debate. I am here to ask some
serious questions.
We all talk about a strategic doctrine. We all talk about
having an informed foreign policy that has broad outlines that
everyone understands, and I think understandably the last two
Presidents have not had one because the world has changed so
rapidly. All the smart guys that you and I know, all the
talking heads, all the politicians who think they know about
foreign policy, all the experts, the more standing they have,
the more reluctant they have been to lay out a clear vision of
what they thought. Because the world was moving so rapidly,
they were not so sure.
Unfortunately, when you ran the agency, Jim, it turned out
to be dead wrong on major, major issues in terms of its
predictions. Not your fault because I do not think we fully
funded it enough. I do not think you had enough resources to
make judgments.
So, we are in a period of transition here that really
presents great opportunities, to paraphrase Dr. Perry, but also
great dangers.
I would like to focus on one in my first round here in the
5 minutes or so I have left, and that is that I for one find
the notion of a national missile defense system appealing. But
then I find as I examine it, it is somewhat confusing.
For example, would it make a difference to any of you if,
in the abandonment of the ABM treaty, to be able to deal
effectively with the North Korean threat, Iranian threat, or
Iraqi threat, the three we are most concerned about in terms of
rogue states, that the result of that would be--and I do not
know if it would be. But would it make any difference if that
would force Japan to become a nuclear power? Would that alter
your calculation as to whether or not--and the relative risk--
is it a safer world for our grandchildren if Japan is a nuclear
power and China goes from 18 to 800 or 1,800 ICBM's because
they figure, you know, the game is up? Would that make a
difference? Is that something I should be asking the agency,
Jim, as I make this decision?
What is your assessment of Chinese intentions now with
regard to their nuclear capability? And how, if any way, would
it be altered if we do deploy, having had to deploy, without an
amendment agreed to by the Russians, meaning we abandon ABM?
Should I be asking the agency and others who I have great
respect for what impact that would have then on Japan?
I am willing to bet you my job--and I have been even more
successful at mine than you at yours in terms of getting one
back every time. And that is, I am willing to bet it, that if
that happens in China, either because we abandon or because we
do not abandon the treaty, it is only a matter of time before
Japan becomes a nuclear power. I think there is an
inevitability to it. I can see no logic that would dictate
anything else.
I see no logic that would dictate anything else other than
India's proliferation that is, it would go to deployment in a
significant way if China, with or without abandonment of the
ABM, fundamentally alters its strategic forces.
In turn, that means Pakistan will have moved to deployment.
Now, is it a better world for us, in terms of our overall
security, if they are the options? I am not saying they will
be, but should we be asking those questions before we make a
unilateral decision, if we may have to? And the President is
prepared to, as I understand it. I am less sanguine about it
than he is. But should we be asking those questions? Do they
matter?
Mr. Woolsey. They certainly matter, Senator Biden. I think
they are excellent questions.
I think the CIA and the U.S. intelligence community's
cachet is stealing secrets, and where there are no secrets to
steal, where it is a matter of judgment, understanding the
culture of, say, a friendly government such as Japan, you might
get as good or better a judgment from--although there are some
real experts on Japan out at the CIA--people in the State
Department or some parts of the academic world.
I will give you my tentative response--I think it is an
excellent question--which is that we should try to do this
bilaterally with the Russians, but I believe the most important
thing is that whatever we propose be militarily effective. And
I think that a land-based system with limited numbers oriented
toward North Korea is not likely to be particularly effective.
It is much harder to hit a bullet with a bullet, shooting from
the earth, than to do this in some other ways.
Now, there is a big dispute in the scientific community. It
has gone on for many years about these issues. I have always
been, for at least the last number of years, somewhat drawn to
the approach called ``Brilliant Pebbles'' which the Bush
administration was interested in rather more than directed
energy weapons in space and rather more than land-based
systems, the reason being that any ballistic missile is slow
and hot and easy to see when it is in boost phase. For an ICBM,
that might be until it goes up about 300 miles and is down
range 500 or 600 miles. It is much easier to deal with it then.
There has been work--Dr. Perry can talk about this better than
I--for some of the low earth orbit telecommunication satellite
companies, Iridium and others, that have made progress on some
of the types of satellite technology that would be relevant to
a program like ``Brilliant Pebbles.''
Senator Biden. Jim, let me cut you off there because my
time is up.
Mr. Zoellick and I were at a conference where everyone at
this conference--you have attended it before--the Wehrkunde
Conference in Germany with all our European friends, where we
were all trying to tell them, do not worry, this will not
affect anything. We are only talking about a limited defense.
And they talk about, no, that is not true. The people really
pushing this, the Woolseys of the world, if they knew they
could only have a limited defense and that would be locked in
in an ABM amendment, they would not be for it. They would not
be for it. You would not be for it.
But let us be honest with people. The major proponents of a
national missile defense system, if given the option of a
permanent amendment to ABM that limited only to two sites,
land-based, with the capacity only to intercept a handful of
missiles from rogue states, and that was the permanent thing we
were locking in, you would not be for that, would you?
Mr. Woolsey. No.
Senator Biden. Right. And no one else would that I had
before here, the so-called experts who supported the system.
So, I think it is time for a little truth in advertising
here. This idea that this is merely just a desire to have a
limited nuclear defense to deal with the rogue states is a way
to attract all those kids out there and say, look, do not
worry. We are not upsetting the balance here in a major way.
Now, it may be the way to go, but I think we should argue
this out honestly here.
Mr. Woolsey. Senator Biden, let me just two sentences.
Senator Biden. Yes.
Mr. Woolsey. There have been a number of proposals from
Greg Canavan at Los Alamos and others that earth-orbiting
systems, such as ``Brilliant Pebbles,'' but put in orbits
below, say, 41, 42 degrees such that they would only be able to
intercept launches from rogue states or China and not from
Russia. It is conceivable scientifically and technically I
think to have an agreement which is early effective----
Senator Biden. Oh, no, it is conceivable, but that is not
what you want. You said you got to protect against China.
Mr. Woolsey. Well, 41, 42 degrees would protect against
China.
Senator Biden. I am off my time.
The Chairman. Let him finish.
Senator Biden. I am off my time. I will come back to that
later.
The Chairman. Go ahead and finish. Please finish your
statement.
Mr. Woolsey. Systems in that kind of orbit would protect
against the rogue states and China but not against Russia. This
might be a very difficult negotiation with the Russians, but I
think one could conceive of striking a new type of agreement
with them in which--at least as long as Russia is a democracy--
we would be willing to have an agreement whereby we were not
deploying vis-a-vis them, but we were deploying a space-based
effective system against China and the rogue states. I think
that is a feasible approach.
The Chairman. Thank you very much.
Senator Kerry.
Senator Kerry. Thank you, Mr. Chairman.
Gentlemen, thank you for being here and sharing some
thoughts with us. Like Joe, I would love to stay and ask a lot
of questions, but in fact, I have to go to a meeting on the
very topic that Joe was just talking about momentarily with the
administration.
But let me ask you a quick question, if I may. There are
two things. One, I want to ask you about the direction we are
going in in the East China Sea, the Taiwan Strait with the
Sunburn missile capacity that comes with this destroyer
capacity being delivered to China from Russia within this week
or so. While obviously we can find and destroy that level of
destroyer very quickly, it begins, coupled with their submarine
purchases, to shift the stakes in that relationship. I would
like any of you to comment on that.
But the first question I want to ask and pursue is Iraq.
Saddam Hussein has been characterized in the most harsh terms
by almost everybody in the U.S. Congress and the
administration, this one and the prior administration, and the
threat of his development of weapons of mass destruction was
sufficient for us--it was part. It was not the entire--
obviously, the liberation of Kuwait and so forth were critical.
But we saw fit at the end of that war to have a clear
mandate by the United Nations with respect to his ability to
develop weapons of mass destruction, and we saw fit to
prosecute an air war in an effort to enforce that, as well as
imposing a sanctions regime on Iraq.
But we are not doing very well at it obviously. The
Chinese, the Russians, the French particularly have complicated
our efforts to enforce U.N. Security Council Resolutions and
find a strong UNSCOM-type of monitoring agency. I do not need
to review all of it because you are very familiar with it.
But now we have the New York Times reporting that Iraq has
rebuilt the military and industrial sites that were bombed in
1998, and that Saddam is probably rebuilding his WMD capacity.
And everybody is quiet. Nothing is going on. So, this
demonization and mobilization that took place at one point
seems to be running for cover today because of people's lack of
a sense of how to get something done with regard to Iraq.
Would you, Mr. Secretary Perry, begin the process of
weighing for us where we really are there? Do you see some
options other than those that are being employed? Are we stuck?
Should we be more worried? What is the reality in terms of our
policy with respect to that now?
Dr. Perry. We should be worried, for openers.
If I could relive history, I would have kept the Gulf war
going for a few more days until Saddam Hussein was overthrown.
But that opportunity was missed.
Now we are stuck with a much harder problem. We are dealing
with a sovereign nation. Saddam Hussein is the ruler. We are
trying to prevent the development of weapons of mass
destruction through the agency of U.N. inspections, and we have
wavering support among key members of the U.N. conducting those
inspections in a tough and meaningful way. So, I see this as
being a very difficult and probably eventually unsatisfactory
way of containing the weapons of mass destruction.
The alternatives are not attractive. The alternative of
trying to overthrow Saddam Hussein has been expressed several
times, has been attempted several times, has yielded no great
success. And I am not at all sure that is likely to lead to
success.
So, other than what we are doing, which is frustrating in
the extreme, the only clear alternative is to go back to where
we were at the end of the Gulf war. I think there is no stomach
in this country for doing that. I would not recommend doing
that. So, we are just going to have to struggle through the
situation the way it is. What we are doing now is frustrating
and difficult. I do not see a credible approach, a politically
feasible approach that is better than that. I invited anybody
to suggest a better approach that we could take that could
really be executed.
Senator Kerry. Do you agree, Mr. Woolsey? Are we stuck
essentially, which is what the Secretary says?
Mr. Woolsey. We are probably stuck in the short run. I
think that support for the Iraqi opposition conceivably could
bear some fruit, but it would be a matter of probably years.
Had we started vigorously with this back in 1991 and supported
the Shi'a at the end of the war when they rebelled in the south
and had we not been on-again/off-again Finnegans with our
support for the Kurds and the others in the north back during
the mid-1990's, I think we would be a lot further toward a
weakened Saddam regime today.
But one has to start somewhere and sometime, and I think
Congress' efforts to move toward a more vigorous support for
the Iraqi opposition are wise. It is just that I think we have
to have patience that it is going to take some time for them to
have some effect.
Senator Kerry. Mr. Zoellick.
Dr. Perry. Senator Kerry, could I add briefly to that?
Senator Kerry. Yes.
Dr. Perry. I agree with what Mr. Woolsey has said. We
should continue to try those efforts, try harder. I am just
saying we should not hold our breath for any results quickly
from that.
Second, I believe we should continue the efforts we are
doing militarily which are harassing the Iraqis. I do think
that should slow down.
Senator Kerry. Would you take that harassment to the higher
level if we had intelligence regarding specific sites of
development to be preemptive?
Dr. Perry. Yes.
Senator Kerry. You would?
Dr. Perry. Yes, but I would require specific intelligence
to do that. The goal is slowing down the nuclear development.
There is nothing we have underway now that guarantees that it
is going to be stopped.
Senator Kerry. Well now, they currently are refusing to
comply with Resolution 1284, notwithstanding the way in which
the French and the others seem to be indicating that if they
did comply, that the sanctions would be very quickly lifted.
So, we are better off, in a sense, as long as they remain in
noncompliance, are we not, because at least you keep the
sanctions in place?
Dr. Perry. That is a close call. I am not sure of----
Senator Kerry. Secretary Zoellick, you have not had a
chance to answer yet.
Mr. Zoellick. Yes. You asked if there is a different
option. I think there is another option. I do not think it will
be an easy option. I regret to say I suspect we may be pushed
to it over the next couple years because what I think has
happened over a course of time is that Saddam Hussein kept
making challenges, moving troops to the south, assassination
attempt on President Bush, playing games with the inspectors.
And each time he came away a little better, and that has not
gone unobserved by everybody in the region. This is one reason
why the Saudis, for example, are making their own terms with
the Iranians because they are now assuming that the dynamic is
that at the end of the day he will be left there standing. That
is why I think the coalition has badly frayed.
Now, what this comes down to is at some point do we decide
we want to reverse that momentum, so that if he makes a move,
which he will again, that we push two steps back as opposed to
just meet his forces at each point along the line.
With a leader like Saddam Hussein, the reason I think we
may be driven to this is that we have seen that he is willing
to use weapons of mass destruction against his own people,
against enemies. We have seen that he is motivated by revenge.
In a sense, as Jim was saying, as we look at terrorists, he is
in a different category than North Korea in my view.
So, I think what the United States needs to start to
consider is that at some point when he moves again, whether we
want to take a step that would, for example, remove his
authority and control in the south of Iraq. We have partly done
this in the north of Iraq, and we could probably do more of it
in the north of Iraq so that the momentum is shifted. The
momentum becomes he moves one step, he gets two steps back, and
that we create a true basis for an opposition.
I support Jim's idea of an opposition, but I think we have
to be realistic. I do not think that opposition is going to be
effective against Saddam Hussein's regime under the current
situation.
So, if we are really worried about this guy, if we really
see him developing the weapons of mass destruction, if we do
not have inspection sites, then we have to ask ourselves, are
we willing to take some actions which would require more
military action but still might be limited to a degree because
there are points in the south and the north with rather limited
troops and air power, we could exercise that control, moving
toward the dynamic that ultimately his authority in Baghdad has
been linked to his ability to slowly regain his power. And if
he starts to lose that, then what effect will it have on the
thugs around him? And frankly, what effect will it have on the
French and Russians and others that are now assuming that, if
they play along, some day they will be the ones that sell the
oil? That dynamic has not worked in our direction.
So, I do not mean, by saying this, to suggest this is easy,
but I think this is the choice, frankly, Senator, we are going
to face in the next year or two. I do not think we are going to
face it this year for obvious reasons.
Senator Kerry. Thank you, Mr. Chairman.
The Chairman. Thank you, sir.
Before we go further, I will say again to the young people
that the give and take in debate and questioning does not
indicate that there are any hard feelings. As a matter of fact,
I expect that every Senator in the Senate will agree that Jim
Woolsey was one of the best CIA directors we ever had.
Senator Biden. I will agree, Mr. Chairman.
The Chairman. I feel that way. And if anybody was getting
it wrong--I believe that was the expression you used--it was
because they were not listening.
But anyway, Mr. Zoellick, I wanted to ask you a question.
We all know about NATO and the U.S. security pact with Korea
and Japan. Now, how would you assess the current state of U.S.
alliances in Asia and in Europe? Specifically, is leadership
from the United States as influential and respected within our
alliances as it was during the beginning of the last decade?
And if not, why? And are our allies still committed in
resources and in policies to defending our mutual interests? I
put those together so you could address the whole picture.
Mr. Zoellick. Well, it is interesting, Mr. Chairman. You
and Senator Biden both started a question the same way, which
is focusing on allies. I think that is a key question because
part of the point of my statement was at a time of flux, we
cannot take these relationships for granted.
Senator Biden asked some questions about how the Japan
relationship might change. I personally believe, Senator, that
the absence of a missile defense is more likely to create the
phenomenon in Japan that you are worried about than the
presence of one. And then to play it back into our own
politics, if we have a theater missile defense for Japan that,
in effect, is a national missile defense for Japan, you
gentlemen can tell me better than I could how likely we can
sell our American public that we are defending Japan but not
the United States from missiles. So, these points connect.
And this is a difficult challenge for the United States
because working with allies is often a terrible pain. You do
not get to do everything the way we want it. My own view is
that the United States can extend its influence much further
when it works with allies. But the key to that, Mr. Chairman,
is having a strong sense of your objectives, so you know the
most important things so you can compromise on the secondary
things.
I have to say that I think, to a degree at times in recent
years, we have been somewhat ad hoc and reactive, and so we
have not had a sense of that strategic objective. We just
talked about the Gulf war coalition. That is one example of a
form of alliance that is not in very good shape today.
Senator Biden mentioned being in Europe. I personally think
that some of the reaction we are getting from the Europeans on
national missile defense is that we did not really lay the
groundwork in explaining what we think about this and why we
think about it. You could even see at this meeting that some of
them, when they get the idea that the United States is going to
go ahead with this one way or the other--there are differences
about timing, when, and others--they are going to adapt to
that. But frankly, part of alliance relations is preparing for
that.
It goes again to a core issue that Senator Biden raised.
The Europeans have come away with the idea that missile defense
is to create a fortress America, to delink. I see it as exactly
the opposite. I think that if the United States is going to
continue to project power abroad, we need to make sure that
those theater forces are protected, and frankly, the United
States is not vulnerable from a North Korea and Iraq or Iran
that might take us on. That is the nature of alliance relations
that I think has suffered.
One more example just from Asia, since Secretary Perry is
here, he did, I think, an excellent job in starting to overhaul
our U.S./Japan alliance relationships after the threat with
North Korea and we became aware of the risks that, if there was
a conflict, the Japanese might stand on the side and the
American public would not be very pleased.
In the aftermath of that, not surprisingly, the Chinese
came down on the Japanese like a ton of bricks, and the
Japanese--bless their hearts--stood up to the Chinese.
When President Clinton went to China for 9 days, that topic
did not come up, and I think that was a mistake because I think
that if you have got an ally, you agree on something, it was
incumbent on the United States to defend what we worked out
with our ally from a security position. And that would be the
answer to Senator Kerry as well. What we know is the Chinese
have a different view of security in the region than we do. It
does not mean we have to be enemies, but we better defend our
friends if we agree with something.
So, these become small accoutrements. At the end of the
day, the United States is a powerful country. People are not
going to abandon us. But there are a lot of issues where, if we
do not handle these relationships properly, we are going to
make our job a lot tougher dealing with uncertainties.
The Chairman. You could not see them, but your colleagues
were nodding.
Now, you know about the high level delegation from North
Korea that was to come to Washington in a couple of months. I
believe that was supposed to happen in October of last year,
Mr. Secretary. Why do you think it took so long, after we
agreed to lift sanctions on North Korea, for the North Koreans
to commit to sending a high level delegation to the United
States?
Dr. Perry. Mr. Chairman, they never gave us a date until
the last meeting in Berlin when they indicated that we would
have one more preparatory meeting late in February and that the
high level meeting would be about a month after that. That is
the first time they ever specified a date.
Why did it take so long, though, is your question.
The Chairman. Yes, sir.
Dr. Perry. I can only give you my estimate of that. My
estimate is that there is a struggle going on within the North
Korean Government between those who see the benefit of
normalizing diplomatic and economic relations with the United
States--and the benefits would be quite real--and those who see
the hazards to doing that. The hazard is basically opening up
North Korea to Western visitors, to diplomats, to business
people. And this is a country that is totally isolated and its
people are separated from the rest of the world. I believe many
people in the regime fear that this opening up could undermine
the regime. So, as a consequence, I believe there is a struggle
going on within the North Korean Government, weighing the
advantages of opening up versus the disadvantages.
The Chairman. Plus the fact that they have bad domestic
problems, like feeding their people, as you well know.
Mr. Woolsey, a lot of folks in this town are trying to play
politics with the CTBT vote. There are commercials being run
back home and all the rest of it. You know, they are doing this
in spite of the fact that they might undermine the nuclear Non-
Proliferation Treaty and the ability of the IAEA to inspect
rogue countries.
Now, I have made repeated requests of the administration
respectfully for submission of the enhanced safeguards
protocol. I want that to come to the Senate, but the
administration does not want the Senate to endorse a nuclear
Non-Proliferation Treaty at this time--even if it would
strengthen the IAEA's ability to inspect dangerous countries.
Now, my question is, how do you assess the value of the NPT
and the IAEA, and do you think that the administration or
anybody should be playing politics with efforts to sustain and
strengthen those efforts?
Mr. Woolsey. Mr. Chairman, the NPT and the International
Atomic Energy Agency's operations under it, without the
enhanced protocol, have some utility, but it is relatively
limited. Saddam, after all, complied with Mr. Blix's and the
IAEA's inspections and ran several nuclear weapons programs.
And it is not because the IAEA inspectors were a bunch of
Inspector Clouseaus. It was because they really did not have
the authority, I think, to investigate fully what they needed
to.
The protocol, as I understand it, permits challenge
inspections that cannot be turned down, and that is a big step
in the right direction. It would help a lot. It was
negotiated--I forget, but it has been a couple of years ago. I
do not know what the reason is that it has not been submitted,
but it seems to me if one is serious about having the IAEA be
effective, you have got to have the protocol that permits
inspections of the sort that could not be undertaken in Iraq
back in the late 1980's and at the beginning of the 1990's.
The Chairman. Good. Thank you very much.
Mr. Biden.
Senator Biden. Thank you, Mr. Chairman.
Dr. Perry--and I would like all of you to answer this in
any order. You all know a man I think we all respect as well, a
heck of a scientist, Richard Garwin. Garwin had an idea for a
missile defense system that was limited, that was easier to do
and more reliable, but would require some real negotiation, and
that is to have a land-based boost-phase defense operation,
which is even more reliable than ``Brilliant Pebbles,'' more
accurate, able to be done cheaper. But what it requires is you
have to have this missile defense system--I know you all know
this, but for the record--near the site of the rogue state. So,
in the case of North Korea, we would end up having to have that
site in Russia, preposterously in China, or in Japan, or in
South Korea.
But it seemed to me to be a proposal that--one of my
liabilities is--I am sure none of you share it--I have been
doing this for so long that as one of my former colleagues
said, dealing with the question of nuclear defense and nuclear
offense is like reading Aquinas' Summa Theologica and the
debate about how many angels can fit on the head of a pin. I
mean, we have our nuclear theologians, and I am afraid I may be
becoming one of lesser stature, but nonetheless becoming one.
But it seemed a couple years ago this idea was one from a
purely scientific standpoint and for dealing with the immediacy
of the threat an appealing notion. I am going to ask you just
to respond to what I have to say. It seemed as though to me
from my perspective that it was abandoned a little bit in the
same way that that famous phrase of G.K. Chesterton about
Christianity. He said it is not that Christianity has been
tried and found wanting; it has been found difficult and left
untried. I think that we basically found this difficult and
left untried. But I could be wrong about that.
So, my question is this. If you are able and if you would
like to, if you could respond to the efficacy of a boost-phase
defense system operated near rogue state sites, and two, the
politics, the international politics of that. What are the
constraints assuming it is efficacious? What are the
constraints?
Why are we not talking about this anymore and talking about
a considerably more expensive system and a system also that, as
Director Woolsey says, you know, a bullet hitting a bullet--we
may be able to do it, but still, that is pretty tough stuff.
And with a little bit of--not luck. With the good graces of our
neighbors, we may succeed in the next test, which is within the
next, I guess, 2 months.
But can you talk to me about Garwin's notion of boost phase
and proximity?
Dr. Perry. I have thought a lot, Senator Biden, about how
to deal with North Korea's long-range missile threat, and I
will summarize my judgment on that.
First of all, the first alternative and, by all odds, the
best alternative is to try to influence them not to deploy the
damn missiles.
Senator Biden. Agreed.
Dr. Perry. That is what we should be focused on first of
all, and that is what we are trying to do.
Senator Biden. And we are and you are.
Dr. Perry. If we are unsuccessful in that, then in my
judgment the preferred defense would be to go after the missile
during the boost phase. I would do that not from land,
certainly not from Russia, but I would do it from sea. An Aegis
missile based off the coast of North Korea would have a very
easy shot, during its boost phase when it is the easiest target
and before it could release any penetration aids or decoys.
The third alternative, which is not competitive, if you're
only defending against North Korea, would be a ground-based
system in the United States going against the reentry vehicle
which is a harder way of doing it by quite a bit.
But let me say clearly that I believe that while there has
been much technical debate over the NMD system, whether it can
be done or whether it cannot be done, my own judgment is it can
be done. It is going to cost more and take longer than most
people believe today. But I do have complete confidence that
this is technically feasible and that we will be able to do it.
But even rather unsophisticated decoys and penetration aids
makes the job more difficult. That is the advantage of getting
at the missile during the boost phase; it is far better because
it avoids the decoys and penetration aids.
Senator Biden. Right, if you continue.
Having run the Defense Department, why was this Aegis
option basically--that is what I will call it for the sake of
discussion here--apparently dismissed? It seemed to me to be so
logical. So, from a scientific and an immediacy standpoint, it
seems to me that would be discouraging for them to produce. If
they knew that all this effort was going to go for naught
because we demonstrate that we are capable of doing that and
you have Aegises sitting in international waters off the coast,
I just do not understand why was it rejected? Why was it not
pursued?
Dr. Perry. I do not believe it has been dismissed, Senator
Biden. We are moving full steam ahead to develop a theater
missile defense system on the Aegis, which itself would be
quite suitable for doing this job. And it is in about parallel
development with the national missile defense system.
I would point out, of course, though that that would defend
against a Korean attack.
Senator Biden. Right.
Dr. Perry. But you have to have the right kind of geography
for a system like that to be effective.
Senator Biden. I got it.
Mr. Woolsey. There are two points, Senator Biden. Without
an amendment to the ABM treaty, a Aegis boost-phase defense
against a North Korean ICBM would violate the treaty.
Senator Biden. I understand that.
Mr. Woolsey. So, you would have to amend the treaty.
The second thing is that North Korea is really the only one
of the three rogue states that is geographically situated in
such a way that this surface-based, boost-phase intercept might
be reasonable. Iran and Iraq I think probably are not unless
one has boost-phase intercept based in Russia again. So, that
is what has driven some of us, not any great affection for
space, but that is what has driven some of us to this notion of
boost-phase intercept with kinetic energy interceptors from
space in these inclined orbits that I talked about earlier.
Senator Biden. I guess what I am trying to say is--my time
is up.
The Chairman. Go ahead.
Senator Biden. The people whose views I respect the most,
including yours--and I mean that sincerely--seem to come down
in one of two areas. We have to develop a theater nuclear
defense anyway, unrelated to the rogue states in my view. I
think in terms of our projection of conventional capability, I
do not want our forces out in the circumstance where we have
them through our significant lift capacity moved 8,000 miles or
12,000 miles from the shore and the proliferation of nuclear
capability in a theater range not be able to be at least
arguably dealt with. So, I would assume that no one is
suggesting if we get a national missile defense land-based
system, that we are not going to continue to work on a theater
system.
So, it seems to me that the people who I speak to most
often--and it is across the lines, Jim, I promise you. I have
tried my best. I even asked Richard Perle and Wolfowitz to come
and see me. OK? So, you know how open-minded I am.
But all kidding aside. I really am trying to figure this
out.
It seems to me, Doctor, that the people who seem to know
the most about the best strategic posture either end up where
Jim does on ``Brilliant Pebbles'' in a low or a high altitude
in outer space or they are talking about boost phase.
It seems, though, what we have settled on in the Congress,
not speaking of you all, is we have settled on the present
approach as being required to, if it works basically--if the
next test works, with good reason--I am not being critical of
people who disagree with me on this--there will be a hue and
cry here to immediately commit to that system, the system that
just missed and the one that hopefully will hit next time and
we will have two successful tests. There will be a political
stampede to employ that, which is an incredibly costly system.
It seems to be all of the experts' third choice, not first
choice. And that is what confuses me about this.
I truly believe that--because I guess if you are here long
enough, you begin to think you know some things, which is a
dangerous thing. I have spent a lot of time doing what you guys
do, writing articles about what should be the broad outlines of
American foreign policy, what our strategic doctrine should be.
I have thought a lot about it. I have inquired of all of you,
and I end up at the same place, which is the combination--you
started off, Jim. You said the combination of a defensive
capability and an offensive capability. You said ABM and
defense, but so everybody understands a defensive and an
offensive capability that is agreed to internationally is
ideally the best matrix for us to work within. I am with you on
that.
I just am expressing my frustration and will stop, Mr.
Chairman. I have been a politician too long. I have held public
office for 30 years. The Senator and I came the same time. I
was a local official before this. We are going on 28 years. I
think the only thing I know as well as anybody but probably the
chairman is I can smell the politics. I do not mean partisan
politics. I do not mean partisan. I can smell the politics of
this place where the horses are about to smell the water, man,
and there is a stampede. It is like we are not thinking it
through. We, not you. We. So, that is the source of my
confusion here.
Mr. Zoellick. Mr. Chairman, with your indulgence, could I
just make a brief comment on this?
The Chairman. Certainly.
Senator Biden. I would love to hear what you have to say.
Mr. Zoellick. I think again, Senator, your opening
inclination in your first question is the right way to try to
look at this which is let us go back to some of the strategic
basics. Before we get into technology, let us ask ourselves
here.
People may disagree with Henry Kissinger about a lot, but
there is an interesting piece in today's paper I would suggest
you look at because it talks about his view of the history of
the ABM and the logic. Point one is it was driven by what some
people might have an illogic of mutually assured destruction.
It even seems more illogical if you do not just have two
powers.
So, the starting point is do you really believe in this era
we need to defend against missiles and we are willing to devote
the resources to do that. Because if you do, my view is the con
game here is that eventually you are going to end up having a
system that is partly sea-based, you are going to have a system
that is partly air-based with lasers, and you are going to have
a land-based because the best way to assure protection is
multiple tiers. On top of that, you are going to have space
sensors, if you believe this is an important aspect to develop
because, just as you were doing, you go through each of these
options. There is a little flaw here, a little flaw there. And
the technological capabilities I believe will be there for
these systems, but you have to ask yourself do you believe
these are important for projecting power, protecting your
homeland, basic strategic decisions.
Now, this leaves one other question, which we all ponder,
which is, OK, well, we talk about making amendments to the ABM
treaty and how can you talk about making amendments to the ABM
treaty, if you are talking about the type of system development
that I am talking about.
To me this is why we need to think through these things
with a new strategic logic. I think we should go to the
Russians and say, look, the ABM model was designed for a
different era. We are in an era now where we are concerned
about these missiles. Frankly, you in Russia should be too. And
we would be willing to work with you on these, but here is the
problem we face. We do not know if the information we give you
ends up in Tehran. But then that is a modern problem that we
can be focusing on about how to stop that as opposed to
discussing theory of things that were 30 years ago.
So, I am reinforcing perhaps the nonpolitical instincts
here, which is to go back to the strategic purpose, and that is
what we as a country have to decide.
Senator Biden. No. If I may, Mr. Chairman. I agree with
you, and I know for a fact that is the nature of the discussion
that is happening right now. That is exactly what Talbott and
others are saying right now, what you just said.
I guess if I can say it this way, Mr. Chairman, it will be
a very homely analogy. It is clear that if I am a 14-year-old
kid left at home and I live in an apartment where there is a
guard downstairs--you have to get through the guard to get up
to the apartment--and my parents are not going to be home, that
is not the safest place for me to be and it is not the best
place for me to be, and it is better for me to be at
grandmother's house. But if I have to walk through a rough
neighborhood to get to grandmother's house, I may get mugged
and really hurt much more badly. So, the problem I have here is
how do you get to grandmother's house.
I think you are right about eventually where we have got to
get. The problem is if in the meantime what we do is we end up
not as a desire, but as a consequence of our actions, with the
significant proliferation of many more nuclear weapons
worldwide, then we have upped the ante in ways that we have to
rely upon the certainty that the people possessing them will
believe that the defense is of such consequence that they will
not have any utility. That is an even harder game for
politicians--I know how politicians think--for politicians to
calculate than the consequence of I know if I react, I am
obliterated. So, there are equally difficult concepts here.
So, I am just figuring out how to get to grandmother's
house, and I think it is a really rough neighborhood you got to
go through to get there.
The Chairman. Well, the solution to that is to get grandma
to move into the same apartment.
Senator Biden. I think you are exactly right, Mr. Chairman.
The Chairman. We have kept you for 2 hours, but this is
probably one of the top 10 hearings since I have been chairman
in terms of importance. I want you to know, all three of you,
that I appreciate your patience and your willingness to come
here this morning.
Now, I am going to get away from the weaponry because I
have got friends on both sides, and I try to satisfy my
friends, you know. It was a lot easier to be a statesman back
when Benjamin Franklin was alive than it is today, because they
did not have all these complications.
But seriously--and I am going to direct this to you, Mr.
Zoellick. I want to talk about treaty negotiations. Do you have
the impression sometimes that our Nation, our Government, is
isolating itself in more and more multilateral treaty
negotiations?
What I am trying to say is that we end up agreeing to the
least bad treaty and then labeling the result as a big victory
compared to the treaty that could have been negotiated. Now,
that bothers me.
Now, this bizarre measurement of success was used by this
administration with the Biosafety Protocol, with which you are
familiar, on trade in genetically modified product, which was
concluded I believe last month in Montreal, as well as the
Kyoto Protocol on Climate Change, the International Criminal
Court, the Ottawa Convention on Land Mines, et cetera, et
cetera, et cetera.
My question is what negotiating posture can the United
States take to ensure its interests are not eroded in these
large multilateral negotiations? And a second part of the
question is, should the United States continue to participate
in every forum that initiates an international legal process?
If you will take that, that will be my end for the day.
Mr. Zoellick. Well, I am in the worst position of this
because I served in the State Department.
The Chairman. That is the reason I asked you.
Mr. Zoellick. My colleagues to the left--you know, the
State Department is always easy on this stuff, compared to the
tough guys at CIA and Defense.
Mr. Chairman, we started this conversation, the two of you,
with the importance of allies and working with partners. I
still believe that is the preferable route for the United
States and it is an important way to do it, as we have talked
about on national missile defense. It takes a lot of homework.
It takes a sense that people will trust your word. It takes a
sense that you have your objectives clearly stated so you know
where you can compromise. And that is the preferable route.
But I also believe, to be effective as a leader in
negotiations or in war coalitions, you have to be willing to
demonstrate that you will act alone if necessary. I worked with
President Bush and Secretary Baker at the time of the Gulf war
coalition. It was an amazing example of using the U.N.
effectively for a war-fighting coalition. But I believe we
never would have been successful if the United States had not
made clear that, one way or another, we were going to reverse
this aggression. So, it was the combination of the multilateral
action but also the individual will.
You mentioned a couple of cases, and I will just refer to
one that troubles me deeply and it goes to this question of the
United States putting a marker down. I am deeply troubled with
what this Yugoslav human rights court is doing in terms of the
investigation of NATO forces. I think this is the worst case of
moral equivalency. I believe that there are plenty of thugs and
human rights violators that need to be hunted down without
doing phoney investigations of U.S. forces.
And my real concern here is that this is the type of real-
life example that the discussion about the International
Criminal Court brings to light. You gentlemen would know this
better than I do, but my concern is if the families of American
soldiers feel that they are not only going to put their lives
on the line in terms of peacekeeping or peace enforcement
missions, which they may question in the first place, and then
on top of that, they are going to have lawyers second guessing
what NATO forces do, I suspect the willingness to engage in
these forces is going to be less and less.
So, this frankly is one where if I were in the
administration today, I would be making crystal clear that we
do not accept this process, and if people want to go forward
with it, then the lawyers can pick up the guns and our guys can
come home because I think this is a bad way to approach an
issue where the United States has demonstrated leadership
abroad dealing with human rights atrocities. So, sometimes you
do have to make clear your view, and that is one I would make
it clear on.
The Chairman. Very well. Do you have any comment?
Mr. Woolsey. Only, Mr. Chairman, once when fighting in
Spain, the Duke of Wellington said that he was not sure whether
his forces frightened the enemy, but he said, ``by God, sir,
they frighten me.''
And I think if we had a force of lawyers, as Mr. Zoellick
hypothesized, that would definitely be the consequence.
The Chairman. Mr. Secretary.
Dr. Perry. I am also in favor of drafting all the lawyers.
Senator Biden. Mr. Chairman, may I make one point?
The Chairman. Sure.
Senator Biden. I know Mr. Zoellick knows this. The
prosecutor who unfortunately said that has walked away from her
own statement. Nobody--nobody--nobody in the alliance said that
was any part of the war crimes tribunal. She has stepped back
from it. She has said that is not what we are going to do. She
did say it, and within 48 hours she backed away from it more
rapidly because people like me and a lot of other people deeply
involved in the issue immediately said, wrong, that is not in
it. That is not part of the deal. So, that is not the official
position.
Mr. Zoellick. Well, with respect, Senator, as I understand
it--and mine comes from the New York Times. You have better
sources. She has not dropped this, and I think that she ought
to make clear that this is off and it will not be done again.
You would be the first to know that----
Senator Biden. I absolutely, positively agree with you. My
understanding is that it is off, but whatever it takes to make
sure that is done, I assure you I for one will weigh in on that
point.
I too want to thank you all very, very much.
I want to recommend one thing for the students who are
here.
And I want to thank you. You have all come a distance, but
particularly Dr. Perry came from California for this hearing
and I understand it is basically the only reason you are here.
I cannot tell you how much we appreciate your making the effort
to be here.
Further, I reveal my prejudice. I think your book on
preventive defense is one of the finest expositions that I have
read, and I have tried to read every damn important book that
has been written in the last 15 years on strategic doctrine and
on our defense posture. And I would recommend it. It is called
``Preventive Defense'' and it is written by Secretary Perry and
Ashton Carter for those of you who are students. Whether you
agree with the position or not, it will give you the most
articulate case, I think, for the case for prevention that I
have ever read, and I think you do it extremely well.
Dr. Perry. Thank you, Senator Biden. I hope that is in the
transcript.
Mr. Zoellick. It needs to be in a book blurb is what it
needs.
The Chairman. In capital letters.
I imagine that requests for printed transcripts of this
hearing are going to be greater than we have had in a long
time. Therefore, on behalf of the Senators who had obligations
on other committees and who were not here, I am going to keep
the record open for a couple of days so that they can submit
questions in writing. I know this is a burden, but I hope you
will favor us with your responses.
Thank you again and I thank the people who have been here
as visitors.
The Chairman. There being no further business to come
before the committee, we stand in recess.
[Whereupon, at 12:13 p.m., the committee was adjourned.]
[Responses to additional questions for the record follow:]

Additional Questions for the Record

Responses of Hon. R. James Woolsey to Additional Questions Submitted by
Senator Jesse Helms

Question. I have supported a policy of trying to replace aggressive
regimes which sponsor terrorism, proliferate the most deadly weapons,
repress their people, and have designs on repressing their neighbors'
people. Iraq, Serbia, and North Korea are all examples of states where
the best policy, in my mind, would be for the United States to aid
opposition forces and broadcast uncensored news--to help change the
regime, as the heart of the problem.
How would you assess the performance of the Clinton
Administration in pursuing this simple idea?

Answer. With respect to Iraq, I believe the Administration's policy
has been almost uniformly feckless and flaccid. With respect to Serbia,
I believe that there was a long delay in challenging the Milosevic
regime with respect to its activities in Bosnia, and an unwise
limitation on the use of force once the decision was made to challenge
it in Kosovo. With respect to North Korea, I believe the opportunities
for regime change are quite limited. But in all three cases, I would
strongly support aid to opposition groups, where possible, and in any
case the broadcasting of uncensored news.

Question. Where the Clinton Administration has said it supports a
regime-change policy--as in Iraq and Serbia--is it following through?

Answer. With respect to Iraq the Administration's actions have been
particularly weak in terms of supporting a change of regime. It seems
to be principally interested in postponing any outbreak of conflict, or
even tension, with Saddam until after January 20 of next year. It has
not followed through even fmancially with what the law requires. With
respect to Serbia, the Administration did at least take military action
in Bosnia, although after several unproductive years of trying to make
the UN dual-key system of control work. It took action after a time in
Kosovo (a much more difficult case, politically, because Kosovo had
been recognized as a part of Serbia), but by declaring that ground
forces would not be used and by limiting air action to high-altitude
bombing it unnecessarily prolonged the use of force.

Question. Has it followed through when urged on by Congress, as in
the case of the Iraq Liberation Act?

Answer. No. The Administration's implementation of the Iraq
Liberation Act has been reluctant, formalistic, and minuscule.

Question. Another foreign policy tool for dealing with rogue states
is economic sanctions, the application of which a number of legislators
seek to ``reform.''
How important a tool are sanctions for either facilitating
regime change, urging a regime to alter behavior threatening
our interests and principles, or highlighting the importance
the United States places on a problem such as terrorism, arms
proliferation, and political repression?

Answer. As a general proposition I believe that the United States
over-uses the tool of economic sanctions. They are rarely effective
unless they are multilateral and thoroughly enforced, and often they
are employed against regimes which care little or not at all about
economic deprivation of the people they rule. Having said that,
however, I believe we should persist with the economic sanctions in
effect against Iraq. A very fine piece by Patrick Clawson in the
Washington Post on Sunday, February 27 (``The Numbers Don't Lie. Saddam
Does'') sets out the reasons for maintaining these sanctions quite
well.

Question. Do you agree that we ought to take care not to too
narrowly constrain the ability of the Executive Branch and Congress to
implement sanctions against rogue states, and specifically countries on
the State Department list of sponsors of terrorism?

Answer. Yes. If the government makes a decision to implement
sanctions, we should do everything we can to make them effective. I
believe, however, that the State Department list needs to be made more
precise in its description of state sponsors of terrorism. Some states
that are on it (e.g., North Korea and Cuba) have ruling regimes that
are terrible in their deprivation of human rights and in other ways--
such as, in North Korea's case, proliferation of weapons of mass
destruction and ballistic missiles--but now have very limited roles in
terrorism. The principal state sponsor of international terrorism is
Iran, and there the recent election of a majority of reformers to the
Majlis suggests the possibility (not yet the reality) of some
substantial changes in government policy; this should be considered in
any assessment of the desirability of sanctions.

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

----------

THURSDAY, FEBRUARY 10, 2000

U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:35 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Chafee, Sarbanes, Feingold, and
Boxer.
The Chairman. Good morning. We welcome all of the visitors
here this morning.
Lincoln--Senator Chafee, I would say that I am very pleased
at the interest in foreign affairs on behalf of the young
people.
And I always tell everybody if you cannot hear, raise your
hand, and we will crank it up a little bit.
And we work for you here, and now--see this gentleman with
the plug in his ear and with the pen in his hand and all that
stuff, he is taking down the verbatim comment in this committee
this morning. And it will be printed verbatim, except that we
usually exclude stuff like right now.
But if you find yourself interested in some of the
information, as you very well may, drop me a line and we will
get you a printed copy.
I have been advised that Senator Biden, who like all
Senators, we all have committee meetings galore--I think
sometimes they--there is some sort of computer down in the
bowels of the Capitol that cranks out stuff about 11:30 every
night that says, ``How can I schedule Helms at three places at
one time tomorrow.''
So I just pick and choose. And I always choose Foreign
Relations, because this--this is sort of my committee.
All right. We welcome this morning a distinguished
American, the honorable Brady Anderson, who is Administrator of
the U.S. Agency for International Development.
Now, USAID is the foreign aid establishment. And sometimes
into the history--its history, it has run amuck at the
displeasure of the American people.
Here is a man who is getting all that straightened out. Mr.
Anderson was confirmed for this position on July 30 of last
year, after serving as an ambassador.
Prior to that time, Mr. Anderson and his wife answered an
even higher calling. They were missionaries in Africa.
And Mr. Ambassador, you bring an unique perspective to
USAID and we look forward to hearing your frank assessment of
the operations of that Agency.
And, of course, the management changes from time to time,
and so do the challenges that you run up against.
We especially look forward to hearing your view of the
President's fiscal year 2001 foreign aid budget priorities, as
well as the plans for the Agency you have for the rest of the
year.
Now, then it may come up during the hearing, so I will
mention it right now that Senator Biden and I are engaging in
discussions regarding legislation we hope to consider very
soon.
Now, we have kept the committee members informed about the
general outline of what we will attempt to do.
And I intend to provide committee members the details of
that proposal as early as possible, maybe next week.
The Technical Assistance, Trade Promotion and Anti-
corruption Act is not--let me emphasize--is not a foreign aid
bill, per se, but I fully expect it to contain a number of
provisions of interest to you and to USAID. And you and I have
talked about that.
Our staff have discussed it, of course. And we are working
with you on various proposals, because we plan to give you the
tools to manage USAID more effectively and efficiently.
I have, therefore, every confidence that the committee can
and will produce a bipartisan bill with the administration's
support that will promote U.S. interest abroad and be fair to
the taxpayers and citizens of the United States.
Senator Sarbanes, do you have any comments, opening
comments?
Senator Sarbanes. Well, Mr. Chairman, I just want to join
you in welcoming Brady Anderson before the committee.
I think this is his first hearing as Administrator since we
confirmed him on July 30 of last year, and, of course, he has
had quite a full plate at USAID.
USAID has been the principle Government agency involved in
assisting countries with sustainable development, with disaster
relief, and recovery, with poverty reduction and with the
strengthening of democracy.
And I particularly want to note that the USAID-run
immunization programs have saved millions of lives all around
the world. They have developed some very cost-effective
solutions, the water re-hydration therapy, for example.
And a lot of the focus is now being paid to the AIDS
problem in various parts of the world. And they have initiated
and developed some prevention programs, which have been very
effective in some of the developing countries, so we are very
pleased he is here. And I join you in looking forward to
hearing from him.
I might observe that we are going to be having a vote in a
little while, and I am not sure I will be able to get back
after that vote, but I certainly welcome the Administrator.
The Chairman. Well, we appreciate your coming for this.
Senator Chafee, I will say to the young people is--how long
have you been in the Senate?
Senator Chafee. Three months.
The Chairman. His distinguished father served many, many
years most effectively as an United States Senator, and he
passed away last year, and the Governor of his State appointed
his son, Lincoln Chafee.
And John Chafee was my seat mate. And I am proud that
Lincoln Chafee is my seat mate on the Senate floor.
Do you have any comments, Senator?
Senator Chafee. No, thank you, Mr. Chairman.
The Chairman. You may proceed, sir.

STATEMENT OF HON. J. BRADY ANDERSON, ADMINISTRATOR, U.S. AGENCY
FOR INTERNATIONAL DEVELOPMENT, WASHINGTON, DC

Mr. Anderson. Thank you, Mr. Chairman.
Mr. Chairman and members of the committee, I am pleased to
be here today in my capacity as Administrator of the United
States Agency for International Development to present the
President's fiscal year 2001 budget for foreign assistance
programs, and to set out for you the priorities of this Agency.
I would like to make a brief presentation and request that
my formal remarks be included in the record.
In testimony before this committee earlier this week, the
Secretary of State did an exceptional job of laying out the
President's foreign policy goals and challenges in very
realistic and eloquent terms.
The President's fiscal year 2001 budget request for
international assistance programs identifies the tools and the
resources we require to pursue these foreign policy goals and
to meet these challenges.
Since my confirmation, I have visited the Balkans, the
Middle East, Turkey, and the Central American countries of
Guatemala, El Salvador and Honduras.
Today, I would like to share with you some of my
observations from these visits.
We are in a tough business. We cannot overestimate the
difficulty of the challenges the people of these countries
face.
While recognizing that there has been progress, one is
confronted with the stark reminder of how far these people have
to go to achieve free and prosperous societies.
Oftentimes, that progress is two steps forward and one step
backward.
I was moved by the people in these countries who look to
us, not so much for our financial resources, but for
inspiration as they struggle for individual freedom and
opportunity.
They respect America and they admire our values. They do
so, in my judgment, because in large measure, Americans are
defined by our belief in the dignity and the worth of the
individual. That is what strikes a responsive chord with people
everywhere.
I think USAID's programs today reflect this fundamental
value, the worth of the individual.
That is why I would like to emphasize that USAID is not
about international charity, or transferring money to
governments.
Granted, financial resources are important. However, our
most important contribution is the transfer of knowledge, of
ideas and of information.
We engaged so many elements of our own society in these
efforts. Farmers, businessmen, judges, lawyers, universities, I
might add in North Carolina, cooperatives, credit unions, State
and local governments, and religious and secular organizations.
I believe that is why people around the world want us to
help them find solutions themselves to their own problems, such
as by building institutions that foster and protect individual
rights.
This represents a tremendous faith in our values, something
for which all Americans can and should be proud.
But what we do is not just for the benefit of others. We do
it because we want a safe, secure and stable world for
ourselves, for our children and for our grandchildren.
No one wants to live in a world of failed states, massive
hunger, diseases that know no boundaries or terrorism and
instability, which endanger our security and our prosperity as
a people.
As the President stated during his State of the Union
address, ``We cannot build our future without helping others to
build theirs.'' I certainly concur.
I also believe that we can make a difference in responding
to this challenge, because of who and what we are, a Nation
based on the principle that all men and women are created equal
and endowed with certain inalienable rights.
From the very beginning of my tenure as Administrator, I
emphasized that one of my priorities was to improve the
coordination between USAID and the Department of State to
ensure that our assistance programs reflect and support our
foreign policy goals. I know this has been a concern of this
committee.
The President's budget reflects the results of this
enhanced and extensive collaboration at every level in the
State/USAID relationship.
Beginning with our Embassies and USAID missions in the
field to our regional and central bureaus in Washington, and to
the final review conducted by the Secretary of State and me,
our closer alliance is working very well.
In programmatic terms, our assistance reinforces the
following foreign policy goals: promoting democracy and open
markets, addressing global problems such as the spread of
infectious diseases like polio, HIV-AIDS and TB, and mitigating
and preventing, where possible, conflict and man-made and
natural disasters.
However, for the U.S. Government to meet these foreign
policy challenges requires efficient management of all our
resources.
Another priority outlined during my confirmation hearings
was the need to address the management problems that have
bedeviled this Agency for some time.
One of the most critical of those concerns is the
implementation of a core financial system that meets Federal
financial standards.
USAID has now purchased a commercial, off-the-shelf core
accounting system that we are in the process of installing.
Additionally, I have requested a work plan to deal with the
serious procurement problems facing the Agency. And we are in
the process of finalizing that plan. I am committed to moving
quickly in remedying this problem.
While I am not satisfied that we have addressed all the
management problems that face the Agency, we will continue to
press hard to make real progress toward efficient and effective
management.
Mr. Chairman and members of the committee, I have also
emphasized that another very critical goal of mine is to
improve the relationship between USAID and the U.S. Congress.
In that spirit, I welcome the chairman and the committee's
desire to pass an authorization bill this year.
I hope that in the spirit of cooperation, we can reach a
consensus on such a bill. And I look forward to working closely
with you in this endeavor.
Once again, I want to thank you for your kind
consideration. And I am ready to take your questions.
[Mr. Anderson's prepared statement follows:]

Prepared Statement of Hon. J. Brady Anderson

Mr. Chairman and Members of the Committee, I am pleased to be here
today in my capacity as Administrator of USAID to present the
President's budget for foreign assistance programs and to set out the
priorities of the Agency.
I appreciate this opportunity to be heard on behalf of USAID, an
agency that does so much to help people around the world, and directly
serves our foreign policy goals. Your warm welcome this morning reminds
me of last July, when I met with you for the first time at my
confirmation hearing. I am once again gratified by your gracious
reception. I look forward to working with you throughout the coming
year in this same spirit of cooperation and mutual respect.
As you know, I've been at USAID for nearly seven months. That's not
very long in a job as complex as this, and there is still so much that
I'm learning. But overall this has been a very rewarding experience. I
have been to Kosovo, the Middle East and Central America and personally
observed USAID at work. I am impressed by the work done by USAID and by
the dedication of our staff. I am honored to serve as USAID
Administrator. And I would like to share with you some of my initial
observations as Administrator, some of the accomplishments that have
most impressed me, and some of my priorities for the remaining year of
this Administration.
As you know, my own experience comes from the people in the
villages of East Africa--Kenya and Tanzania--where I witnessed first-
hand how political instability and violence can hold nations hostage
and rob individuals of their potential. But I also have seen, both in
East Africa and on my recent trips, how U.S. development assistance has
brought hope and new opportunities to communities--through improved
education, health care, and sanitation, and by providing training and
assistance to open up both markets and political regimes. Every time I
am thanked for the work that USAID is doing--whether by a simple
villager or a head of state--it makes me proud of our country and what
we stand for.
I know that there are some important things we need to work on in
the coming year, in particular to make sure Americans know what USAID
does and why it is important. I want to make sure people understand
that foreign assistance is not global charity or international welfare;
it is about making a secure environment for U.S. business and citizens
abroad. It is an investment in our future.
Put most simply, through United States development assistance
programs we apply our knowledge to help improve the lives of hundreds
of millions of people around the world, and in the process we improve
our own security and prosperity. This knowledge is drawn from a wide
variety of sources--U.S. universities, non-governmental organizations
and the private sector, as well as from USAID's own professional staff.
Our programs are not simply directed at governments. We work with
citizens and citizen groups throughout the world to help them improve
their own lives and expand the livelihood of their communities. It is
important that we give the American people confidence that the
resources they provide are being well spent, and I welcome your help in
doing this.
Americans also need to know that foreign assistance isn't just
about the well being of people overseas. It is about our own security
as well. It's been said that stable democracies don't go to war, and to
me, that's a pretty good reason to try to strengthen democratic
institutions in the countries where we work. Moreover, there are harsh
reminders that diseases like tuberculosis, HIV/AIDS and polio don't
respect national borders. If we want to protect our citizens, we need
to be concerned about the capacity to control these diseases in the
countries where they are now taking the heaviest toll. Not only does
foreign assistance contribute to our health security it contributes to
our economic security as well. History has shown us that countries with
open market economies make strong trading partners for America. U.S.
exports of goods to the developing world in 1998 alone totaled more
than $295 billion. The developing world is our fastest growing trading
partner. In fact 80 percent of the world's consumers live in developing
countries. It is evident to me that we have an important stake in how
these economies and societies develop.
Americans deserve to know that their money is working and being
used effectively and has been for a long time. Since 1961, when USAID
was created, worldwide literacy has risen by almost 50%, life
expectancy has risen by a decade, smallpox has been eliminated and the
percentage of people living in absolute poverty has been cut almost in
half. We didn't do it alone. But it wouldn't have happened without us.
Mr. Chairman, foreign assistance--both development and
humanitarian--is an essential American foreign policy tool to help deal
with the fundamental causes of instability and other problems within
societies. I believe that the economic health and prosperity of the
United States depends on the development of free markets and the
establishment of democratic institutions abroad because it brings
benefits home to America. U.S. foreign assistance strengthens our
ability to promote peace, to combat the spread of illegal drugs, to
fight terrorism, and combat nuclear proliferation. Poverty, hunger,
illiteracy and disease suffocate hope and create the circumstances for
upheaval and instability. USAID programs help people transform how they
live so that they can become more productive participants in the global
marketplace. And, in return, foreign assistance helps secure our own
safety and economic health.

USAID PROGRAM OVERVIEW

As you know, the U.S. foreign assistance request has a large number
of distinct components--Development Assistance, Child Survival and
Diseases, the Development Fund for Africa, credit programs,
International Disaster Assistance, Operating Expenses and P.L. 480 Food
for Peace. We also work closely with the Department of State in
programming and managing the Support for East European Democracy
Account, the Freedom Support Act programs, and Economic Support Funds.
The complexity of our program can sometimes be overwhelming, and as we
focus on particular accounts or particular countries, we must not lose
sight of the bigger picture. As I see it, the United States, through
USAID, is addressing a range of problems that are or can become global
in scope and that can and do affect our own quality of life and the
security of this country. Before moving to the details of the FY2001
request, let me give you some examples of how USAID serves U.S. foreign
policy priorities.
In Egypt, as in much of the Middle East, our focus is on regional
stability and the peace process. While there are other important
components to our activities in Egypt, the key U.S. strategy is to
provide programs that stimulate economic growth and create jobs in
order to benefit the whole of Egyptian society. USAID has been in
partnership with Egypt since the Camp David Peace Accords were signed
over 20 years ago.
In Nigeria, a country which is just emerging from 15 devastating
years of a corrupt military dictatorship, USAID is focused on efforts
to bolster the urgent needs of the new and struggling democracy under
the leadership of President Obasabjo. We are engaged in economic
reform, health and education programs, infrastructure policy and
activities to promote the successful transition to democratic
governance. It is very important to the U.S. and to all of Africa that
Nigeria succeeds.
And in El Salvador, where I recently visited, USAID is helping the
new democratically elected leadership pursue policies that are needed
to ensure that its citizens share equitably in the reforms. Our
programs concentrate on consolidating and sustaining the gains that
have been made. A peaceful transition to democracy in Central America
will create more opportunities for American investment, which will
benefit both the United States and Central America.
In other areas important to our national security interests, we are
working hard to make similar progress. In Indonesia we are providing
assistance to help them emerge from the political and economic chaos of
the last three years. In Russia, our programs continue to target
selected democratic and economic reforms. And in Colombia we are
working with President Pastrana to eliminate the production of
narcotics and to foster a secure and responsive governmental structure.
We are making progress, but the challenge ahead of us is great.
Turning now to the major elements of our program, I know that this
Committee is certainly aware of the global environmental challenges we
face--degradation and depletion of natural resources, rapid
urbanization, the substantial environmental and health problems often
associated with energy inefficiency, and the economic and ecological
challenges of global climate change. USAID will participate in two
inter-agency Presidential initiatives: Greening the Globe, to protect
forests and biological diversity around the world, and International
Clean Energy, to accelerate globally the development and deployment of
clean energy technologies. Environmental challenges pose real threats
to America's economic and political interests, and our request
addresses conservation of natural resources, pollution prevention, and
cleaner energy worldwide.
Examples of USAID's environmental work in the past year include
improvements in the management of coastal resources in Mexico,
Indonesia, Tanzania and Kenya; the institution of awareness campaigns
on water conservation in Central America and the Middle East; and
promotion of cleaner manufacturing processes in Bolivia, Ecuador and
Egypt. Our children will inherit a cleaner and healthier world as a
result of the environmental investments we are making today.
As this Committee certainly appreciates, open markets and economic
growth are important to the United States, and we are working to
promote these goals worldwide. Now, everyone knows that economic growth
brings benefits to all groups in society, including the poor, the
disadvantaged and the marginalized. But whether countries can achieve
broad-based growth and reduced poverty depends on the development of a
policy environment that promotes efficiency and economic opportunity
for all members of society, as well as institutions that are soundly
organized and managed. A level playing field requires good government.
More than anything else, our programs help countries to become full
participants in the global economy. This is at the heart of USAID's
development assistance effort.
For example, microenterprise is an important part of USAID's
overall poverty-reduction strategy, and we expect to continue to fund
these efforts from all accounts. In 1998 USAID microenterprise programs
served a record 3.5 million clients worldwide, and 83 percent were
poverty loans. The average loan size in Africa was $170, and women
constituted 84% of all microfinance clients. These programs helped
millions of the poorest households in the world to help themselves.
USAID's worldwide agriculture programs are another important
element of our overall program. With the world's population at 6
billion and growing at a rate of 73 million a year, mainly in the
developing world, we all need to be concerned about how countries will
ensure adequate food supplies, generate rural incomes and employment,
and service the growing urban areas without decimating the environment.
USAID collaborates with the U.S. university community as well as
private industry to develop and promote technological improvements that
will improve agricultural productivity--productivity that benefits
farmers everywhere, including in the U.S. It has been estimated that
improved productivity from USAID-sponsored work on improved wheat and
rice varieties has resulted in an additional $14.7 billion for our
farmers between 1970-1993. We expect to maintain programs worldwide to
improve agriculture in FY 2001.
USAID's health and family planning programs have long demonstrated
that health improvements are essential for a better quality of life for
individuals. It has also become increasingly clear that reducing
illness, death rates and population pressures lowers the risk of
humanitarian crises in countries where population growth is the
highest. There is little disagreement that by protecting human health
in developing and transitional countries we also directly benefit
public health in the United States as we are a mobile society that
travels throughout the world coming into contact with unhealthy
conditions and diseases not seen here at home. Unhealthy conditions and
inadequate health systems elsewhere in the world increase the incidence
of disease and threat of epidemics.
I am happy to report that significant gains have been made in
protecting human health and stabilizing population growth. Through
USAID's programs, millions of children's lives have been saved and
fertility rates have continued to decline in all regions. The latest
data available on fertility reduction and mortality rates for children
under 5 shows that there continues to be steady progress. In Romania,
where USAID has provided family planning assistance, we have dramatic
new evidence that in the past six years the use of modern methods of
contraception has doubled while abortion rates have declined by one
third. As a global leader and the largest bilateral donors in this
sector, the United States can claim considerable credit for these
achievements. However, we recognize we still have much to do to meet
the needs of the estimated 150 million married women who want to space
or limit births but still don't have access to modern methods of
contraception.
In order to make further progress in health and to safeguard the
health gains achieved during the past few decades, we need to address
changing disease patterns and shifting population demographics. The
biggest challenges are the HIV/AIDS pandemic, stagnating rates of
immunizations, and the rising incidence of anti-microbial resistant
strains of malaria, tuberculosis and other infectious diseases.
Progress with child survival appears to be ahead of targets in all
regions except Africa, which is lagging behind expectations primarily
because of the HIV/AIDS epidemic and political instability, which
disrupts health care services. Many couples still do not have the means
to choose the number and spacing of their children. In January 2000, at
an historic UN Security Council session, Vice President Gore announced
an increase of $150 million to fund the fight against HIV/AIDS and
other infectious diseases internationally. For FY2001, we are seeking
over $1 billion for these population, health and nutrition programs
worldwide. President Clinton is actively supporting the Global Alliance
for Vaccines and Immunization (GAVI) recently announced in Davos,
Switzerland. In FY 2000 USAID started an important $10 million
initiative to ``Boost Immunization'' in countries where vaccination
rates are lagging.
As we end a most violent and conflicted century, we recognize that
developing a community of democratic nations is a goal we must continue
to pursue. As we have seen in Indonesia, structural flaws in the
economy can be hidden when not accompanied by progress in democracy,
and the economy can fall apart. In the past decade alone, we witnessed
some of the most important events of our age including the collapse of
communism and the end of the Cold War. In many places, opportunity for
freedom has been accompanied by internal conflict. As these countries
have moved ahead with the transition to market economies and democratic
governance, we recognize that our best hope to prevent a recurrence of
conflict is through the strengthening of these nascent democratic
states. USAID has been at the forefront of efforts to support progress
toward the establishment of democratic societies around the world.
Mr. Chairman, as you know, there has been an unparalleled movement
toward more open and transparent political systems around the globe.
Today, more people live in freedom than ever before in human history.
However, political change is rarely linear and we have learned that the
democratic gains are often fragile and can be reversed. We must
continue to support the efforts of determined men and women around the
world who are working to build political systems that are
representative, accountable and transparent. USAID funds rule of law
programs to help curb the abuse of power and authority within
societies. We support political processes, including elections that
allow citizens to choose their representatives and hold them
accountable. We have assisted the growth of organizations for citizen
participation (civil society), which have emerged as a major democratic
force in many countries around the world.
Finally, we are helping societies to build national and local
government institutions that are responsive to citizen needs and are
accountable and transparent, such as rules for the banking sector,
capital markets and appropriate regulatory bodies. This year, we have
put a special emphasis on addressing the corrosive effects of
corruption, and are working to encourage the transparency and
accountability so needed in government, no matter where it is in the
world. As a result of USAID's technical assistance and institutional
support to the Supreme Audit Institutions in Benin, they have started
to audit electoral campaign expenses and develop a manual for
transparent financial and procurement operations.
Mr. Chairman, I take very seriously my responsibilities as the
President's Special Coordinator for International Disaster Response. We
live in a dangerous and uncertain world. Last year humanitarian crises
affected an estimated 418 million people: natural disasters accounted
for some 315 million, while complex emergencies affected an additional
103 million. The number of people receiving USAID assistance rose from
40.6 million in 1997 to 140.8 million in 1998. USAID responded to 87
declared disasters in 1998, of which 65 were natural disasters, up from
27 the previous year. Several of the major emergencies were associated
with weather anomalies related to the El Nino phenomenon.
When Hurricane Georges swept across the Dominican Republic, there
were critical shortages of food, water and shelter. Malaria, cholera,
dengue fever, conjunctivitis and respiratory infections were serious
health problems. Hurricanes Mitch and Georges affected over 12 million
people, caused more than $10 billion in damage, and drove down the
annual GDP growth rates of Honduras and Nicaragua by several percentage
points each. Americans were profoundly affected by this tragedy. We all
can remember pictures of people and homes being washed away and
communities being smothered by mud. The loss of life was staggering.
Americans wanted to help.
As part of our response to these crises and others, in 1998, USAID
provided over 920,000 metric tons of food to some 22 countries, and
provided more than 200,000 metric tons to the World Food Program's
Protracted Relief Operations in 12 countries. This latter contribution
represents 41% of total tonnage of food provided to the WFP by all
donors. While the United States does not often get credit for it, we
can be proud of being the largest food aid donor in the world and that
these programs provide a direct benefit to our farmers at home. The
recovery and reconstruction of these countries is not only a
humanitarian issue, it directly affects the economy of the United
States.
In addition to responding to immediate disaster recovery needs,
USAID has also been called on to support longer-term rehabilitation and
recovery for countries in transition, especially those emerging from
complex emergencies, frequently caused by civil strife, manifested by
armed conflict, death, displaced populations, hunger, injury, torture
and massive human rights abuses. Helping societies and governments
shift from emergency relief to the reestablishment of political and
social stability is an important component of what we do. This includes
demobilization of ex-combatants and removal of land mines to enhance
local security. We help strengthen local governance and institutions in
order to promote reconciliation and help the reintegration of ex-
combatants into society.
There are many other aspects of U.S. development assistance that
assume greater significance when viewed globally. For instance, USAID
has played an important role in improving education around the world,
especially for girls. I am personally convinced that teaching girls and
young women how to read and write may be our most important
contribution toward moving the development of countries forward.
As I have noted earlier, USAID has helped countries establish the
policies necessary to encourage private investment and trade, including
accession to the World Trade Organization, which opens more markets to
American business.
USAID has worked tirelessly to identify and address human rights
abuses ranging from torture to trafficking in women and children. For
example, in Nepal, USAID is funding microcredit, health, and education
activities in rural communities that are specifically targeted at
preventing the trafficking of thousands of vulnerable young women and
girls.
Through all of these programs we are improving the lives of
countless millions, promoting the values that Americans most cherish,
and making the world a safer and more prosperous place for all of us.
Before I turn to the specifics of our budget request, let me touch
on a few other important areas of concern to you, and to me. When I
assumed leadership of the Agency, I pledged to you that I would focus
my attention and best efforts on a number of issues that were of
concern to this committee, including the management of USAID and our
relationship with the Department of State. While we still have a way to
go, I am here to report on the important progress that has been made.
USAID mission critical systems were made Y2K compliant and to date
because of our efforts, no USAID program activities have suffered Y2K
problems.
I was made acutely aware of the problems we have had with our
financial and other information systems that made it extremely
difficult for us to provide consistent, timely and complete
information. Though it has been time consuming and costly, it is a
priority for me to increase our management efficiency and to make
demonstrable progress this year in fixing these systems.
We are in the process of developing a five-year information
management strategic plan, which will guide all agency information
technology investments over this period. We have awarded the contract
to install a new core accounting system, which will be completed in
Washington by the end of this year and completed overseas by the end of
2002. Additionally, we have trained almost 500 staff and partners in
more than 45 countries to plan, report and manage for results. And
finally, we are now better able to collect comprehensive information
regarding the award of contracts and grants overseas. By the end of the
calendar year we expect to have the entire 3 year backlog of data
entered into the database and available to meet the federal requirement
for reporting.
I must admit that I was disappointed that USAID did not receive the
requested authority to implement a Working Capital Fund. The absence of
this fund is making it much more difficult for USAID to continue to be
a source of high quality, lower cost services to other agencies in the
field. I look forward to working with the Committee to address any
congressional concerns so that we can add this important tool for
resource management in the field.
This Committee has a special interest in USAID's relationship with
the State Department, and I am pleased to report that the relationship
has never been closer. For example, this year was the first time the
Secretary of State undertook a formal review of USAID's budget. We
worked closely with the State Department to determine funding levels,
and to manage all foreign assistance so that it supports foreign policy
goals. We are working closely with the State Department to ensure that
our overseas security and facility costs are being adequately
addressed. Two working groups have been established to address issues
of concern to the Secretary and me. And based on agreement between
State and USAID, several operations have been consolidated, including
retirement processing, travel contract, information technology main
frame collection, training, and storage of household effects.
Additionally, eight press staff were transferred to the State
Department last April. Overall, the closer alliance between our two
organizations is working very well.

THE REQUEST

The Administration request for FY2001 is for a total of $2.141
billion for Sustainable Development Assistance programs in three
accounts: the Development Assistance Account, at $949 million, the
Child Survival and Diseases Fund, at $659 million and the Development
Fund for Africa Account, at $533 million.

DEVELOPMENT ASSISTANCE (DA)

The requested $949 million for Development Assistance is an
increase of $212 million over the amount provided in FY2000 for
programs outside of Africa. This account supports programs that promote
open and democratic systems, economic growth and agricultural
development, education and training, and environmental management in
some of the poorest countries in the world.

CHILD SURVIVAL AND DISEASE FUND PROGRAMS

The request for Child Survival and Diseases Fund programs for
FY2001 is $659 million. This is $44 million more than last year. These
funds will be used for Child Survival, HIV/AIDS, infectious diseases
and other health programs, and for basic education, particularly for
girls. The level for HIV/AIDS has been increased by $54 million in
support of the President's new LIFE Initiative (Leadership and
Investment in Fighting Epidemics).
We have seen some striking successes in the child survival
programs. Infant mortality rates have dropped, polio is on the verge of
being eradicated, and deaths from measles have been cut in half. Last
year, USAID launched the Global Alliance for Vitamin A, a partnership
with UNICEF and other major donors, including U.S. food and
pharmaceutical companies. Through this program we are using food
fortification to accelerate the elimination of vitamin A deficiency,
which causes blindness, and other serious problems.
In FY2000 USAID launched a $10 million initiative to ``Boost
Immunization'' in countries where vaccination rates are lagging.
Recently, President Clinton proposed a U.S. Government contribution of
$50 million in FY2001 to the new Global Alliance for Vaccines and
Immunization (GAVI).

DEVELOPMENT FUND FOR AFRICA (DFA)

The Administration places a high priority on broad-based economic
growth in Africa, which is an extremely diverse and complex
environment. The DFA request for Africa this year is $533 million, in
addition to another $304 million for Africa planned from the Child
Survival and Diseases Fund.
U.S. foreign policy and development assistance for Africa is
focused on efforts to reduce poverty and to accelerate Africa's
integration into the global economy by meeting and overcoming the
problems that threaten development. This includes strengthening
economic growth and education and training in order to expand
opportunities, which helps to prevent conflict and outbreaks of
violence. It means addressing environmental degradation, building
classroom-based education reform, providing humanitarian assistance,
supporting Nigeria's difficult democratic transition, which is a
priority for this Administration, and perhaps of greatest importance,
by continuing to address the HIV/AIDS crisis.
USAID programs are making a positive difference in African economic
and democratic institutions. Despite the encouraging signs of progress,
however, development in Africa is not assured. Even while democracy and
good governance programs are helping to shift control of the economy
and political power to the hands of the people, the HIV/AIDS pandemic
and the destructiveness of both old and new conflicts continue to have
a severe impact on progress. For development to proceed in Africa, we
must help Africa meet these threats head on, and stop their deadly
effect on African society.
In Africa, the impact of HIV/AIDS is staggering. This year, for the
first time, the majority of new HIV infections will affect women. It is
a crisis that threatens to undermine Africa's progress because whole
generations are being lost to this deadly disease. Societies are being
crippled as mothers, fathers, children, teachers, doctors, and other
core workers, all are being lost to AIDS. The statistics are
overwhelming. As of December 1998, nearly 23 million adults and
children were estimated to be living with HIV/AIDS in sub-Saharan
Africa. UN figures indicate that eastern and southern Africa account
for more than 50 percent of the world's HIV-positive population. There
are 11 million AIDS orphans in Africa today, and the number is rising.
Additionally, in the area of health, mortality rates for children under
five are increasing and immunization levels are declining. USAID is
taking a lead role in addressing the many aspects of these problems
from prevention to impact mitigation.

LATIN AMERICA AND THE CARIBBEAN

The core request for the Latin America and Caribbean region for
FY2001 is $539 million. Of this $264 million is for Development
Assistance, $86 million for Child Survival and Diseases Fund, and
$133.6 million for the Economic Support Fund, and $55.5 million is for
the International Narcotics Control. This FY 2001 request is the
minimum needed to continue USAID's solid record of achievement in the
region, and to mitigate the problems inflicted by Hurricane Mitch.
Program priorities for Development Assistance and Child Survival
and Diseases Fund for this region include: $41 million to strengthen
democratic institutions, and promote broad citizen participation; $62
million to expand economic growth, reduce poverty and improve income
equality; $144 million in programs involving population growth, improve
maternal and child health, and slow the spread of HIV/AIDS and other
infectious diseases; $73 million to maintain biological diversity and
sound environmental practices; and $29 million to improve the quality
of education.
Mr. Chairman, I just returned from Latin America, where I visited
USAID programs in Guatemala, Honduras and El Salvador. As you know,
these countries suffered the destructive ravages of Hurricane Mitch,
which caused more than $10 billion in damages in Central America, and
severely threatened the progress these countries had made in the past
decade.
I know that there are concerns about the pace of implementation of
the reconstruction. I was concerned as well with reports that little of
the supplemental funding has been expended. Let me put this in
perspective. Immediately following the Hurricane, our Missions on the
ground put all available resources to work, including funds from our
Office of Foreign Disaster Assistance (OFDA), food aid, and funds
reprogrammed from ongoing activities. After visiting our projects, it
is clear to me that our people in the field began working immediately
following the Hurricane and have not slowed down. They are now using
the supplemental funds as fast and as responsibly as possible to help
build back these countries. Virtually all the funds have been notified
to the Congress and obligated to the countries.
It is important to remember that after Hurricane Mitch we saw no
uncontrolled outbreaks of epidemics in Central America. Today, because
of our efforts, people have been moved into shelters, schools have
reopened, and throughout the region, microenterprise institutions have
been re-capitalized. Borrowers have continued to repay their loans and
economic enterprise has continued, even though their national economies
suffered enormously.
As we continue to design reconstruction programs, USAID is doing
everything possible to ensure an extra layer of accountability. We have
included concurrent auditing, and hired independent accounting firms to
assist the work of host country Controllers General, who play a role
similar to our General Accounting Office. We have worked with other
donors to create additional monitoring mechanisms that will review
procurements, audit the financial side and inspect work completed under
the reconstruction program. We believe that all these steps are
necessary to give the American taxpayer, as well as the citizens of
these countries a greater feeling of confidence that these funds are
being spent wisely. We continue to view this undertaking as a two-year
mission and believe that we can achieve the bulk of the relief and
reconstruction results promised to Congress by the end of 2001.
Turning to another part of the region, as you know over the last
three years in Peru and Bolivia, USAID has instituted a program of
interdiction and alternative development to reduce the number of
hectares in coca cultivation. The results have been significant with
increased public commitment to voluntarily reduce coca cultivation,
participation at community and local government levels, and a
substantial increase in the growth of the legitimate economy. Building
on the success of this approach, the Administration is initiating
comprehensive support in FY2000 for President Pastrana's ``Plan
Colombia.'' As an integral component of the USG support, USAID will
help Colombia provide people with viable alternatives to illicit drug
production and strengthen the country's democracy by assisting the
people displaced by violence and improving human rights and rule of
law.

ASIA AND THE NEAR EAST

The Administration is requesting $2.4 billion for Asia and the Near
East programs for FY2001. Of this amount, $271.4 million is for
Development Assistance, and $97.6 million is for the Child Survival and
Diseases Fund, and $2 billion is for the Economic Support Fund. In
FY2001, the United States has an unprecedented opportunity to
significantly affect the transitions occurring in Asia and the Middle
East, both in the recovery from the Asian economic crisis and in the
crucial task of helping the Middle East make the promise of peace,
opportunity and security a reality. Unfortunately, the region continues
to be plagued by critical problems such as high unemployment and water
scarcity that if not managed carefully, could lead to conflict. Our
national security interests compel us to remain actively engaged in
this region.
The last two years have been landmarks in the region's slow
progression toward regional peace and cooperation. Implementation of
the Wye River Accords has been a top priority for this Administration.
USAID has been providing development assistance which is improving the
quality of life and economic opportunity for the Palestinian and
Jordanian people.
In Asia, the region is still suffering from the aftershock of the
economic crisis. While there are positive signs of economic recovery,
the underlying economic infrastructure in Indonesia, the Philippines
and Thailand remain weak and in need of reform and restructuring. To
address this problem, USAID is helping to improve economic
transparency, reduce ``crony capitalism,'' and create a better
environment for investment in the region.
As the economic crisis spread to Indonesia, we saw the fall of the
Suharto regime, initiating what we hope will be a continued transition
to democratic stability. However, economic recovery has been delayed
due to social and political instability. The most tragic example of
such instability was seen last year in East Timor where the previous
regime consistently violated international standards on human rights.
USAID invested over $33 million to help increase the transparency
and fairness of Indonesia's first free and fair elections in over a
generation. We provided technical assistance to establish a framework
for those elections including voter education, conflict resolution and
election day monitoring.
USAID's Asia and Near East priorities for the FY2001 funding
request include support for Indonesia's transition to democracy,
facilitating economic reforms especially in the countries hardest hit
by the Asian financial crisis, and supporting a comprehensive peace in
the Middle East. USAID will also encourage regional economic
integration by promoting cooperation and trade in clean energy
production and technology among South Asian countries.
We are also working hard to support a comprehensive peace in the
Middle East, by supporting the critical preconditions for peace. U.S.
assistance to the Middle East has contributed to regional stability and
has helped build the foundation for economic prosperity and increased
adherence to democratic principles. Our programs in Egypt and in Jordan
concentrate on promoting broad-based economic development and also
include support for democratic institutions.
In the West Bank-Gaza, the U.S. has focused efforts on
strengthening the Palestinian Council, and assisting local non-
governmental organizations working to improve living conditions for
Palestinians. USAID has provided more than 14,000 small businesses with
essential start-up microenterprise loans, created an industrial light-
manufacturing center that will employ 20,000 and increased the
availability of safe drinking water.
As you know, water is one of the key issues in the Palestinian/
Israeli peace negotiations. In my recent visit to the Middle East, I
took part in the dedication of the Bethlehem-Hebron water supply
system. This is a $72 million USAID effort that includes the drilling
of four wells, the installation of 31 kilometers of transmission lines,
the construction of reservoirs and the completion of pumping stations.
This will double the quantity of water for Bethlehem-Hebron and bring
the water usage for 500,00 people close to the minimum household water
supply set by the World Health Organization.

INTERNATIONAL DISASTER ASSISTANCE ACCOUNT

This has been a challenging year marked by hurricanes, earthquakes,
flooding and marred by conflicts in places like Kosovo and East Timor.
Funded by this separate account, USAID has been involved in efforts to
deal with disasters, both political and natural in nearly every region
of the world. For FY2001, we are requesting $220 million for the
International Disaster Assistance Account to provide relief,
rehabilitation, reconstruction and transition assistance to victims of
such disasters through the Office of U.S. Foreign Disaster Assistance
(OFDA) and the Office of Transition Initiatives (OTI). Of the total,
$55 million is requested for OTT.
USAID's three objectives for Humanitarian Assistance programs are
prevention, relief and transition. These objectives form the heart of
current relief efforts. I know you agree that emergency assistance is
not a substitute for long term development programs but it is a
safeguard for economic and social development.

DEVELOPMENT CREDIT PROGRAM

For FY2001 we are proposing consolidation of our various credit
programs into a single new Development Credit program. This program
would consolidate the current Urban and Environment credit program, the
Micro and Small Enterprise Development credit program and the
Development Credit Authority. This new program will give USAID a
flexible means of using credit to achieve our economic development
objectives where credit is financially viable, where borrowers are
credit-worthy, and where there is opportunity for effectively involving
private lenders in development. We have requested authority to transfer
into this new account up to $15 million from other assistance accounts
and an appropriation of $8 million for the administrative costs of
managing all our current and new credit activities.

ECONOMIC SUPPORT FUND

The Economic Support Fund is budgeted at $2.313 billion for FY2001.
$1.818 billion will be used for economic reforms and as continued
support for the Middle East peace process as I described earlier, which
includes $840 million for Israel, $150 million for Jordan, and $695
million for Egypt. ESF funding will assist other countries in their
transition to democracy, promote stability in Ireland and Cyprus and
promote Human Rights. Additionally ESF funds will be used in certain
countries to respond to environmental crises, for water management;
primary health care, and priorities such as climate change and
biological diversity.

FREEDOM SUPPORT ACT

Mr. Chairman, the request for the FREEDOM Support Act for the
Eurasian states is $830 million. This includes $87 million to continue
the Expanded Threat Reduction Initiative. This initiative, to reduce
the threat of proliferation of technology and weapons of mass
destruction, began last year in response to growing concerns over
security issues due to the Russian financial crisis, which has impeded
economic progress in the region. The potential for scientists or others
with access to this technology to sell their services to other states
posed unacceptable risks to the United States. USAID transfers funds to
other agencies such as DOE and State, which manage these programs.
USAID-managed programs will continue to focus on longer-term efforts
that support the transition to democracy and free markets and trade in
the former Soviet states.
We have learned that our work in the former Soviet states will take
more time than we originally thought. While communism has failed, in
many cases the communist mindset has not disappeared. Official
corruption has hindered progress, both political and economic. While it
is far too early to assess the policies that Acting President Vladimir
Putin will embrace, we know that a free and democratic Russia is in the
best interest of the United States. We are helping maximize the chance
that they will stay on the right path toward a better future by working
at the grassroots level, and in the regions far from Moscow to help
support advocates of reform in the non-governmental and business
communities and to build lasting partnerships between U.S. and local
organizations. We were encouraged by the positive results of the
election to the Duma in December, and we are emphasizing the importance
of holding a free and fair election for President next month. We will
encourage the winner to carry out the fundamental reforms needed for
Russian economic and democratic development.
While challenges continue to be great, we have also made
considerable progress. For example Kyrgyzstan was the first NIS country
to accede to the World Trade Organization. Armenia has excelled during
the first six months of a comprehensive market reform program adopting
new measures in privatization, accounting and tax reform, and land
management. Environmental issues such as greenhouse gases are being
addressed throughout the region.

SUPPORT FOR EAST EUROPEAN DEMOCRACY ACCOUNT

The request for Eastern European Democracy (SEED) Act countries is
$610 million, which is a $77 million increase over the FY2000 funding
level of $532.97 million. As you know, SEED is a transitional program
to assist Central and Eastern European countries as they shift to
democracy and free market economies.
This request reflects a dramatic shift of funds away from
``graduating'' Northern tier countries to Southern tier countries such
as Romania, Bulgaria and Albania where progress has been slower. By the
end of this year we expect all of the Northern Tier countries will have
graduated from direct bilateral assistance. Poland, Lithuania and
Slovakia are joining previous graduates--Estonia, Latvia, Slovenia, the
Czech Republic and Hungary. The Northern Tier countries remain
politically and economically important to the United States; therefore
regional mechanisms will still be available for limited support in the
event of a crisis and to ensure continued relationships between local
and U.S. organizations. We hope these Northern Tier countries will be
able to provide help and guidance to their neighbors as they move
forward in their transition. But we are proud to say that our job is
basically done.
In the Southeast European countries of Bulgaria, Romania, Albania,
Macedonia and Croatia, the conflict in Kosovo had severe economic costs
and has set back the timetable for their full integration into the
international economy. We are working closely with other donors to help
these countries integrate their economies including facilitation of
trade and customs reforms, and to continue the structural reforms that
are building stronger democratic market economies.
The request also includes $90 million for Bosnia-Herzegovina, a
sharp reduction from previous years, as the program shifts from its
earlier emphasis on reconstruction to greater efforts to establish and
implement the legal framework and institutions of a market economy. It
also requests $175 million for Kosovo, to help build basic
governmental, economic and judicial structures, and to jump-start the
economy to create jobs and provide needed basic goods and services.
While accepting the need for a temporary UN administration, the Kosovar
people and the U.S. are anxious to see a representative government
formed.
Much of the Kosovo request will go to address the need for basic
security, good governance and human rights programs funded through
transfers of funds to other USG agencies such as the State Department.
USAID-managed programs, which account for less than one-third of the
funds requested, will address the need to restore basic community
services and infrastructure, establish the institutions of a market
economy, restore the agricultural sector, provide credit to micro-
enterprises, and strengthen democratic institutions such as the media,
political parties, the judiciary and other elements of civil society.
We are creating the building blocks for a functioning and capable local
economy and society.
The Kosovo conflict also underscored the challenge, and the
importance, of supporting democratic forces in Montenegro and even
inside Serbia itself. As this Committee has recognized, support to the
Serbian opposition is critical to build pressure against the Milosevic
regime. Our request includes $55 million for support to media, the
democratic opposition, and reform-minded municipalities. In Montenegro,
we will provide vital budget support to the courageous Djukanovic
regime, which will be complemented by our assistance in creating strong
economic and democratic structures.
We clearly recognize that it will take a generation or more to
fully realize the progress made in each of these countries as they make
the difficult transition to free and open societies.

P.L. 480 FOOD FOR PEACE PROGRAM

While I am aware that a different committee authorizes the P.L. 480
programs, I believe this Committee has an interest in this important
part of USAID's overall program. The request for P.L. 480 Title II non-
emergency and emergency food assistance has been set at $837 million.
This will allow the Office of Food for Peace to continue efforts to
promote managed growth in Title II programs and to meet critical
emergency food needs of targeted vulnerable groups including refugees,
internally displaced families or those who lose their land or
livelihoods due to natural or man-made disasters. This year, renewed
attention will be given to the use of food for nutritional feeding
programs such as the President's LIFE Initiative to mitigate the
negative impact of HIV/AIDS in sub-Saharan Africa and India.
On a global level, more than 800 million people are chronically
undernourished. The P.L. 480 Food for Peace program has provided over
$500 million in emergency food aid to an estimated 11 million people,
it has used resources to reduce food insecurity in the developing world
by enhancing household nutrition and increasing agricultural
production.
Title II funds are also used to support the Farmer to Farmer
program, which provides voluntary technical assistance to farmers, farm
groups and agribusinesses to enhance the potential for substantial
increases in food production, processing and marketing. The program
relies on volunteers from U.S. farms, land grant universities,
cooperatives and private agribusiness and non-profit organizations.
Volunteers for this program have been recruited from all 50 States and
the District of Columbia. This program has had a positive impact on the
U.S. and raised public awareness about the needs of developing
countries.

OPERATING EXPENSES

For Operating Expenses the request is $518.96 million for FY2001.
This is almost equal to the FY2000 level. These funds cover salaries,
benefits and other administrative costs that assure effective oversight
of USAID programs worldwide. OE provides the oversight of the programs
funded through Development Assistance, Child Survival and Diseases, the
Economic Support Fund, the Support for Eastern European Democracy Act,
the FREEDOM Support Act and the International Disaster Assistance
account. The requested amount will permit USAID to maintain the current
levels of direct-hire staff overseas, though at the cost of continuing
reductions to our staff in the U.S. It also provides for essential
training to maintain and upgrade the skills of Agency staff.
Additionally, OE funds will permit the continuation of Agency efforts
to modernize its financial and other information systems. The financial
system purchased by USAID in FY2000 will begin to be deployed overseas
in FY2001 and will include significant upgrades to information
technology for effective and efficient use of our automated systems.

CONCLUSION

This is an especially challenging time to be heading USAID I want
to work more closely with you to meet these challenges. I am making it
a top priority to meet with more Members of Congress, one on one, in
order to build a better understanding of the vital role of this Agency.
This is my message to you today. USAID's work in development
assistance takes time. It is an incremental process that pays off for
America and for the world. Foreign assistance is a national security
priority. USAID is a smart investment and one of the most effective
tools the U.S. Government has in building the foundations for trade and
markets, and the spread of democratic ideas.
As President Clinton stated in his State of the Union address:
``Globalization is the central reality of our time. . . . We cannot
build our future without helping others build theirs.'' This has been
the decade of globalization, let it become the century for
democratization.
Thank you for your contribution to USAID's success. And thank you
for your attention this morning.

The Chairman. Very well. A good statement, and unusual
around this place that it was relatively brief and to the
point.
I suppose in the light of the voting situation, we start
with just 5 minutes per Senator.
I want to talk about the Inter-American Foundation, which
you are familiar with.
It was established, I believe, about 30 years ago to help
poor people in Latin America, who are not benefiting from the
large USAID infrastructure projects at that time.
Now, a lot of folks do not realize that back then USAID
spent hundreds of millions of dollars on dams and power plants
and roads and that sort of thing. You do not do that anymore.
You are concentrating on what the American people
anticipate should be the real purpose, and that is helping the
people who cannot help themselves.
In any case, the backdrop of that, the poor people were not
being helped and they were sort of cynical about it and it was
during that time that Cuban revolutionaries supported by the
Soviet Union were making converts among some in these states in
the poor communities.
Now, USAID now advertises itself as a development agency
that works closely with poor people throughout the grass roots
organizations and I think your statement emphasizes that is
what you are trying to do. And this sounds a lot like the
Inter-American Foundation.
And my question is can you name me one or more activities
that the Inter-American Foundation does that USAID is not
already doing?
Mr. Anderson. Thank you, Mr. Chairman. My understanding is
that the Inter-American Foundation works with very small grants
to, perhaps, even a few individual farmers or a small grass-
roots organization.
While it is true that USAID works from the grass roots,
normally our trend is to work with larger civil society groups
and communities.
One reason for that is the cost in resources and time and
people here in Washington and our missions overseas that is
required for very, very small grants to just one or two or
three farmers.
That is very expensive for us and with very tight budgets,
and operating expenses especially, we have to look at how we
contract and try to reduce the number of instruments that we
actually have.
So while I am not terribly experienced with the Inter-
American Foundation, I am informed that their tendency is to
have very small and very, very rural and very local and grass
roots activities.
We would tend to have a bit larger program than that with
the groups we work with.
I will continue to think about that. I do not think I am
going to have any other answer than that one, Senator.
The Chairman. OK.
Mr. Anderson. I know the thrust of your question though.
The Chairman. That responds adequately to my question, and
I appreciate it.
Now, about the administration's proposed $244 million HIV-
AIDS initiative for the Third World, Franklin Graham, who is a
friend of yours and friend of mine--he is the son of Billy
Graham, of course--Franklin established and is now president of
Samaritan's Purse.
It is a worldwide humanitarian relief organization and my
hometown paper, the Observer had an op-ed piece written by
Franklin. I think it was earlier this month, February 5 or 6.
Here is what it said, ``I must express a clear word of
caution. If funds are sent to many of the governments in Africa
or to government-run hospitals, large amounts of money will be
squandered.
``Much of the world intentioned aid sent to curb this
crisis will instead end up padding Swiss bank accounts of
corrupt bureaucrats.''
Now, Franklin Graham, as far as I am concerned, is
qualified to speak from experience more than any other human
being I know. And you and I have discussed all of the projects
that he does.
No money is involved. He has hundreds upon hundreds of
doctors who volunteer to go to various spots in the world and
practice for a month or two, and various things like that.
And I think Franklin is right, and I would just like to
hear your comments about it.
Mr. Anderson. I appreciate that. The HIV-AIDS programs are
targeted primarily at the community level.
Part of it is designed to help the health departments in
various countries to strengthen.
Some places, some countries where we work in Africa, the
Ministry of Health is very poorly organized. And where we can
give technical assistance, advice as it were, on how to
organize themselves in their country and even provide them
training, but no money--training for the doctors and the
nurses, the public health-care workers and encourage them to
get out into the villages where people really live and where
there are lots of HIV-AIDS cases, then that is what we do.
I agree that transferring money to ministries of health in
Africa is not a good idea.
The Chairman. OK. My time is expired.
Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
Now, just following up on this last subject, I have heard
rumors that USAID may be thinking about ending the higher
education program for Africans that you have had in place.
Under the program, large numbers have been educated, and public
health professionals, community leaders have come for
specialized training in American universities and a number of
institutions all across the country.
I think most people think that the program has worked
pretty well. And I wondered whether there was any basis to
these rumors.
Mr. Anderson. No. Thank you, Senator Sarbanes.
I am not aware of--and I would not be in favor of--a plan
to end that.
Our universities provide unique training in the world and I
know that people in most parts of the world would like to come
to the United States for college and university training. And
that is something that we have done quite effectively, as you
say, in the past.
It is expensive, I think, to bring someone to the United
States for training, for education, but sometimes it makes
sense, if there is not a proper educational institution in
their own country, where they could get the same kind of
training.
My preference, I think, would always be if someone could
stay in their own country to get their own training. That would
build the institution there and it would also better ensure
that person would remain in their country and use the talents
and education they got.
But in some cases, I think the best option is for them to
come to universities here.
Now, whether or not this program, you know, what the trend
is and the financing of it is, Senator, I'm not sure. But I
will look at that.
Senator Sarbanes. Well, it is the so-called ATLAS program,
the Advanced Training for Leadership and Skills program.
It is our leading higher education program for Africa. I
understand that under the ATLAS program, working with the
Council of Graduate Schools and the African-American Institute,
we have really been able to bring people over and significantly
enhance their professional skills.
Of course, the premise is that those who benefit will
return to their countries. And I gather generally that has been
the case.
Since we were discussing the very point of training for
Africans, I just wanted to register that concern.
Mr. Administrator, I have been a strong supporter of the
American Schools and Hospitals Abroad grants program, the ASHA
program. And there are many others in the Congress who share
that support.
We have not had a chance yet to examine the 2001 budget
carefully, but I presume it will carry funding in it for the
ASHA program. Is that correct? Do you know?
Mr. Anderson. Your assumption is correct.
Senator Sarbanes. OK.
Mr. Anderson. It does. So there is no cut in that at all.
It seems to me it was $15 million.
Senator Sarbanes. I think that is right.
Mr. Anderson. It was a straight line. It is in there. Yes,
sir.
Senator Sarbanes. Well, there are a number of American-
founded institutions in various parts of the world that look to
that program.
And I think most of those have been very well-run and very
successful.
I know we used to appropriate about $35 million, I think.
So the figure has come down, in my view unfortunately.
But in any event, I certainly do not want to completely
phase out that program.
I came here from a reception that was held earlier for a
Catholic Relief Services worker named Loren Wille, who was
incarcerated in the Republic of Georgia, because he was driving
and his car skidded off a road, and the Georgian translator
that was traveling with him was killed.
And eventually Mr. Wille was released. It was determined
there was no basis to charge him with anything.
And a lot of the feeling was that it was all done in part
in retaliation for the Georgian diplomat here who was driving
under the influence and killed someone here in the District of
Columbia.
The Government of Georgia waived diplomatic immunity and he
has been sent to jail. He is in jail in this country now.
I gather our extradition treaty with Georgia permits that
he could go back there and serve his jail sentence, which is
apparently being discussed, and it seems to me probably worth
examining.
But in any event, it really leads to the question of the
extent to which our humanitarian workers overseas increasingly
face dangers of violence and death, and that we hear of these
incidents.
First of all, I am concerned about the USAID workers and
what sort of program you have for them and how you seek to
protect them.
And second, is USAID doing anything with the NGO and the
PVO community to address this concern? I think it is obviously
a real problem which needs to be confronted.
So we are worried about our own people. And we are worried
about the private sector people who do this kind of work.
Many of them are religious organizations, and others are
dedicated to this humanitarian work.
Mr. Anderson. Humanitarian work is a very risky business.
And humanitarian workers in recent years, as you stated,
Senator, have come under increasing attack, whether it be a
World Food Program plane shot down in Angola, workers killed in
Sudan, workers in the previous Chechnya conflict killed.
Our concerns and the State Department's concerns for
security of humanitarian workers is an element that we keep
before us all the time in places like Chechnya.
We do not want our workers, we do not want Americans, we do
not want NGO's, we do not want workers in the countries where
we are kidnapped or killed in a conflict.
There are an increasing number, it seems these years, of
complex crises in the world that involve military conflict, but
also involve huge numbers of refugees and displaced persons and
women who have been abused and raped, and children who are
starving.
In those environments, our humanitarian workers and groups
like CRS, which is one of the finest ones we work with, and
Franklin Graham's group, Samaritan's Purse--are going to want
to be involved in Kosova and these places.
And I am not aware of a specific training program for them.
But we are very concerned about it. In places we work we
consult very closely with the regional security officer of the
embassies before we let our people go into a place and assess
the risk to our own workers.
Senator Sarbanes. If I could just close, Mr. Chairman, very
quickly.
InterAction's newsletter has an article entitled ``As
Violence Increases, NGO's Grapple With Security Training.'' I
just want to suggest to you that USAID should interest itself
in this issue. Presumably you have programs for your own
people. And there may be ways that you can be of assistance to
the NGO's in this regard. Thank you.
The Chairman. Thank you, Senator.
Senator Boxer.
Senator Boxer. Thank you so much for your courtesies, Mr.
Chairman--thank you for holding this hearing. I will be brief,
given the fact that we have a vote.
Mr. Anderson, thank you for appearing before this
committee. I am going to focus on HIV-AIDS and tuberculosis
despite knowing that there are many other issues we are
concerned about.
I know you have personally seen the devastating
consequences of AIDS in your work.
And I know several of our Senators and staff went to Africa
to see the devastation firsthand, which I really applaud,
because it is not a pleasant trip. But I think it is very
important.
We thought tuberculosis was a disease that was eliminated.
In fact, we did it with the development of antibiotics back in
the fifties, but the disease is making a comeback. And I am
very concerned about it.
It is showing up all over this country, Mr. Chairman, as a
result of immigration and the fact that the world is a much
smaller place.
We know, any virus, any disease is one plane ride away. And
WHO estimates that nearly 2 million people die of TB-related
conditions annually.
And one third of the entire world's population is infected
with TB. This is an incredible statistic, one-third.
I also share your concerns about HIV-AIDS and the effect
that it is having in sub-Sahara and/or in Africa. Some 13.7
million people in sub-Sahara and in Africa have died of AIDS.
That's 84 percent of all the people in the world who have died
of AIDS since the beginning of the epidemic, so we know Mr.
Chairman where the problem is.
I just want to make sure the chairman knows this, that
unlike other areas of the world, the HIV-AIDS epidemic in sub-
Sahara and Africa is predominantly a woman's disease.
A majority of infected adults, 55 percent to be exact, are
women. And as a result, by the end of the year, the HIV-AIDS
epidemic will be the reason that over 10 million children in
sub-Sahara and in Africa are orphans. So many children are
getting the disease from their mothers.
Now, the good news about that is there has been a
breakthrough from the pharmaceutical companies and they have
found a way for $4--$4, to pretty much stop the transmission
from mother to child during pregnancy.
And what I want to say is that I think we have a moment in
time here where we can make a difference.
And I think it not only will impact the women and the
children and the families in Africa, but also in our own
country, because, again, if we are going to end this disease,
we have got to end it worldwide.
So Senator Smith and I have introduced bipartisan bills to
fight the two terrible diseases of tuberculosis and HIV-AIDS.
And I am just very hopeful that we can work with you, Mr.
Chairman. What we have tried to do is--is increase the funding
in increments, so that we are not just throwing money at the
problem. And No. 2, we are being very careful not to create any
new bureaucracies, any new ways of delivering services, but to
make it work.
And so Senator Smith and I are very interested, Mr.
Chairman, in speaking with you more on both--our colleagues on
both sides of the aisles on these two bills.
Stopping tuberculosis, stopping AIDS, and Mr. Chairman, I
will--I will complete my remarks here and just tell you that--
--
The Chairman. Thank you, Barbara.
Senator Boxer [continuing]. How well I remember in 1983
when the disease was just starting, I was a very green Member
of Congress. And I went to William Mattern, who was then the
chairman of the Appropriations. You may remember him from
Kentucky, a fine gentleman.
And he said, ``OK, Congresswoman, I don't know anything
about this, but if you say that we need a little help, we
will,'' and I mean we started with $12 million in an
appropriation for AIDS research, not knowing what we were
facing.
And I am so bound and determined in my public career to try
and finish this whole thing off and make sure that we do not
face these tragedies. So thank you very much for this
opportunity.
I know how much you care about it, Mr. Chairman. I look
forward to working with you on both these issues along with
Senator Smith.
The Chairman. Good.
Senator Boxer. Thank you.
Mr. Anderson. Thank you, Senator Boxer. And this is, as you
know, a huge priority for this administration.
We we are increasing the funding. In 2000, it is about $200
million from all resources. In 2001, we are moving toward about
$254 million of total resources for HIV-AIDS mainly for sub-
Sahara Africa and India.
Senator Boxer. Thank you.
Mr. Anderson. Thank you very much.
The Chairman. I have called the cloak room and told them I
will be just a little bit late. And I will wait the return of
Senator Chafee.
But I would like to followup and continue for just a
moment, if I may, about Franklin Graham.
I think he is clearly right. I don't know of any human
being in this world who has done more single-handedly, but with
the voluntary cooperation of hundreds upon hundreds upon
hundreds of people. And I am proud of my North Carolina friend.
Now, he makes the point, and which I think we can agree
on--let me see--he thinks that every measure must be taken to
keep money out of the hands of corrupt governments.
You have already addressed that. We all agree on that.
Mr. Anderson. Right.
The Chairman. Now, substantially more than the planned $10
million must go to help orphans. Do you agree with that?
Mr. Anderson. We continue to fund displaced children and
orphans, this year for $12 million, some of which is for AIDS.
In addition, in the President's new budget for HIV-AIDS, about
10 percent of the money this year, $200 million is the total
amount, about $20 million will go for assistance to HIV-AIDS
children, including orphans, primarily in Africa.
The Chairman. Now, there are at least 10 million HIV-AIDS
orphans in Africa alone, is that correct?
Mr. Anderson. It is--I believe it is.
The Chairman. There are at least--well, let's see, $1 per
capita or per orphan is not a very serious proposal.
And the third thing, he believes and I share his view, more
work with churches and people of faith in these areas must be
attempted, in recognition of the moral and behavior factors
associated with the transmission of HIV-AIDS.
I just was wondering if you would comment on that.
Mr. Anderson. We do. I was Ambassador in Tanzania, as you
know, Mr. Chairman I lived in Tanzania for 6 years--as
Ambassador and then previously.
And I know that the HIV-AIDS prevention effort in Tanzania,
and I am certain in other countries in sub-Saharan Africa, does
include work with religious groups, both Christians and
Muslims.
In a number of the places where we work, there are a large
number of Muslims. Any time one talks about HIV-AIDS, this is a
difficult and touchy subject in a community--there is a lot of
embarrassment. There is humiliation that people suffer when
they become infected with this terrible thing.
The Chairman. Right.
Mr. Anderson. And the religious authorities in their
communities are very often the most significant authority of
any kind in their communities. Both the churches and the
mosques--Tanzania has lots of Muslims--are concerned about this
terrible problem.
I think it has taken them as well as their governments some
time to realize the extent of the problem and the extent of the
decimation of their towns and villages that HIV-AIDS is
causing.
And we are, in fact, cooperating with them in things like
voluntary testing and counseling.
The religious groups, and oftentimes the village leaders
together will set up a confidential place where individuals who
want to know if they are infected can come and have voluntary
testing.
And I am told by the American Ambassador to Zambia who is a
friend of mine who was here recently, that he thought that the
voluntary testing and counseling was one of the most important
things we do. Because then the man or woman who is tested knows
whether he or she is HIV positive.
And when an individual knows, then they can better make a
decision about their future behavior and try not to infect
someone if they are, or try not to be infected if they know
that they are not.
The Chairman. Well, without objection, I am going to ask
the consent and I think it has been granted that the article by
Franklin Graham entitled ``Africa and AIDS: Focus on the
Missions,'' from the February 6, 2000 edition of the Observer
in Raleigh, be included in the record at this point.
[The article referred to follows:]

[From the News & Observer, Feb. 6, 2000]

Africa and AIDS: Focus on the Missions

(By Franklin Graham)

boone, nc
To the casual observer, there's nothing unusual about the cluster
of ramshackle bulidlings that sit on the side of a stair-step plateau,
a 40 minute walk off the main highway near Kijabi, Kenya.
But in fact there is something quite remarkable about this place, a
bush hospital with 200 beds run by the Africa Inland Mission. Offering
primary medical treatment, emergency care, education and training in
nutrition, public health and hygiene, it is a humble outpost the like
of which is the only mortal hope in what today is a losing battle
against AIDS in sub-Saharan Africa.
Fifty-five hundred AIDS funerals take place every day. At least 23
million of Africa's citizens have been infected with HIV. By the end of
2000, 10.4 million African children under 15 will have lost their
mother or both parents to AIDS.
To say ``help is needed'' is severe understatement. Alarms are
sounding, as the United Nations discusses with new urgency the African
AIDS epidemic and the U.S. administration gropes for an effective role
for this Country.
It is urgent that the world recognizes that ``on the ground'' the
answers are found in the simple mission hospitals, jungle clinics and
churches and other institutions providing education and care that have
been the ``thin red line of heroes'' against death and disease in
Africa during the last century.
I was delighted to hear Vice President Al Gore's pledge to seek an
additional $150 million from Congress to combat AIDS in Africa,
bringing the total to $325 million in the next fiscal year. But having
provided medical, educational and relief assistance in Africa for 20
years, I must express a clear word of caution. If funds are sent to
many of the governments in Africa or to government-run hospitals--
tragically, most are pathetic, filthy places--large amounts of that
money will be squandered. Much of the well-intentioned aid sent to curb
this crisis will instead end up padding the Swiss bank accounts of
corrupt bureaucrats.
On the other hand, church and mission-based hospitals in Africa are
run by people who are motivated by their faith and have committed their
lives to bringing health and hope to people they've grown to love.
Assistance given to these facilities will get directly to the people in
need.
Dr. David Livingstone first took modern medicine to Africa more
than 100 years ago, and today missionaries operate many of the leading
hospitals on the continent. A good portion of the credible medical care
in Africa is provided by mission hospitals, both Protestant and Roman
Catholic. For decades, there has been an ironclad record of
dependability, integrity and sacrifice. It is the unsung heroes in
these hospitals who can best turn the tide of suffering as they respond
to God's call on their lives to relieve unfathomable pain through
medical care, personal relationships and the sharing of faith.
But these people are not only worthy of the assistance, they are
also trustworthy. They are the most effective means for providing the
medical aid and life-saving counsel so important in the battle against
this pernicious virus.
The church is an appropriate participant in this battle because,
although the demographic picture of AIDS in Africa is vastly different
than in the West, there are strong moral and behavioral factors, with
almost all of the transmission of the disease occurring as a result of
sexual promiscuity.
The vast network of mission hospitals and mobile clinics, together
with many Christian relief and development organizations and other
nongovernmental organizations, are the backbone of the African medical
system. Over the years, my organization, Samaritan's Purse, has had the
opportunity to work side-by-side with dozens of these mission
hospitals. More recently Samaritan's Purse has utilized a handful of
paid staff members and large number of volunteers to play a small role
in raising AIDS awareness through training projects in Kenya, Uganda
and the Congo.
In Kenya, where one out of nine adults is infected with HIV
Samaritan's Purse helps train members of the African Inland Church to
lead the community in AIDS awareness. In Uganda and the Congo, we
provide AIDS training materials and HIV test kits for potential blood
donors. In addition, we help orphaned children, many of them orphaned
through AIDS.
While our efforts are just a drop in the bucket, the combined work
of mission hospitals and Christian relief organizations throughout
Africa has provided healing and comfort to countless individuals. But
there is still an incredible amount of work at hand.
If we maintain business as usual, or even medical missions at the
levels that have been practiced for years, Africa's AIDS catastrophe
will overshadow the Great Plague of the 14th century, when one third of
Europe's people died. If something is not done, tens of millions of
African people are likely to die of AIDS this decade, and countless
millions of children will be orphaned.
We must act now. The shortest and straightest line to success in
curbing the epidemic is for the people and governments of the world to
bolster the efforts of the church-based medical system that has been
trusted to save the people of Africa from so many medical calamities
for so long.

The Chairman. Now, I think I better not push my luck too
far on this vote and Lincoln Chafee will be back in just a
moment.
So we will stand in recess until he returns, which ought
not to be more than 2 or 3 minutes.
[A brief recess was taken.]
Senator Chafee. Welcome, Mr. Ambassador.
Mr. Anderson. Thank you.
Senator Chafee. I have one quick question.
Mr. Anderson. Yes, sir.
Senator Chafee. The administration has identified--the
Secretary of State in a visit here a couple of days ago
identified four countries, Nigeria, Colombia, Indonesia and the
Ukraine for special attention in the fiscal year 2000, 2001
budget relationship aid program. And as the chairman said
earlier, these four countries, I would worry about Swiss bank
accounts--Colombia, Indonesia, Nigeria and Ukraine.
Could you please comment on the rationale for proposing
added attention to each of these four countries?
Mr. Anderson. Yes. Thank you.
The Secretary did, as you said, speak about it and because
she is the one who has, as it were, chosen them, she is the one
better to speak about it than I. But she and I have talked
about these four.
Under Secretary of State Pickering and I have talked about
these four quite a bit, especially in the context of
formulating our budget request.
Because of where they are in the world and because of their
size, the four of them have the potential to contribute greatly
to economic growth in the region of the world where each of
them is.
And they have the capacity to contribute to political
stability in the regions where they are.
Because they can contribute positively, they can
unfortunately also contribute negatively to those things.
Colombia, I think, is a country of emphasis for the obvious
reason of the drugs--coca and poppy grown there, and the
freedom with which it finds its way into the United States.
Nigeria--unfortunately, also drug trafficking through
Nigeria has become a very significant problem.
Nigeria also, some have called, the fraud capital of the
world.
Nigeria is, I believe, the sixth largest exporter of oil to
the U.S. and the world, and is important to us for that reason.
Nigeria has been very active in peacekeeping. Their troops
are significant in places like Liberia and Sierra Leone and
that part of Africa. And they participate in peacekeeping
operations in other parts of the world.
These countries, as well as the Ukraine, are important
regional actors, if their economies can really get off the
ground, and if their governments stabilize and move toward
democracy. I do not like to say, ``Choose democracy,'' because
I think it is not one day you are not, and the next day you
are.
In Nigeria, we are very pleased with President Obasanjo and
his commitment. He has even canceled some fraudulent, corrupt
contracts that were given by the previous administration to
corrupt military officers.
He is going to go back and examine government contracts
that have been left for a long period of time, including from
when he was in office quite a long time ago.
So we want to help these various large regional powers. We
want to help them if they are committed themselves to rooting
out corruption and respecting human rights, and opening their
economies to the world in a global marketplace and making their
economies places where Americans would like to invest.
So we see these four as pivotal--pivotal from a regional
perspective and all of the increases in our programs are
designed to help enhance political and economic stability, as
long as we can have governments there we can work.
Indonesia, we are all very pleased with the change in
power; President Wahid and Vice President Megawati are saying
the right things. They have a history of saying the right
things, both of them do.
President Wahid is someone that USAID actually has worked
with for a long time. We had given support to the Islamic NGO
that he founded and was the head of.
So we know him quite well. And we believe he is the right
man for the time in Indonesia.
Indonesia is important because of the sea lanes and because
of its size--the fourth largest country in the world and the
largest Islamic country in the world.
And if a true multi-party democracy can develop and take
hold in Indonesia, that would be a very positive thing for that
region. Because it is an Islamic country, I think it would also
be helpful as an example to other Islamic countries considering
democracy.
So we feel very strongly that we should be supportive of
President Wahid and his efforts. His democracy is in its very
infancy.
We just had a team--a State Department, USAID joint effort
to assess where we are with Indonesia and what kinds of
programs would be most helpful.
Indonesia, as you know, Senator, is along with Thailand and
the Philippines and some other countries, coming out of the
Asian financial crisis.
And while there are some good signs economically, we
believe that new institutions need to be put in place so that
the kind of crony capitalism that infected Indonesia and was in
part responsible for what happened to them, will not happen
again. I have in mind reforms like proper bank regulation and
fiscal reforms.
We feel these countries are very high priorities and
deserve the support that we are going to give them.
Senator Chafee. Thank you very much. It certainly will be
challenging, considering, as you said, that one of the
countries has a reputation as the graft--or what did you call
it? The----
Mr. Anderson. Fraud capital.
Senator Chafee. Fraud capital of the world. It is very
challenging for you to administer these increases in foreign
aid.
Senator Feingold.
Senator Feingold. Thank you, Mr. Chairman. And I apologize
for all of the different things that I needed to be at this
morning, not being here as early as I like.
I want to thank the administration for being here today.
This week's schedule has been remarkably full, but
opportunities like this one are well worth the extra effort
involved.
U.S. bilateral economic assistance programs account for a
very, very small fraction of the overall budget, but they can
have extraordinary effects abroad.
Our aid programs serve our interests and I think reflect
our national values. And I think it is highly appropriate that
we take the time to talk about USAID's specific priorities this
week, as we all try to grapple with the big picture for the
year ahead.
Wisely administered foreign assistance can do so much to
advance American interests. The U.S. has a clear interest in a
strong and healthy environment, and in fighting the infectious
diseases that threaten all people, regardless of nationality.
The United States has a strong stake in the development of
human resources and institutional capacity abroad so that we
can develop strong trading partners, who will work with us for
mutual prosperity.
And America has a clear interest in promoting democratic
governance and the rule of law abroad, leading to a more stable
and a more just world.
We need to set our foreign assistance priorities
thoughtfully to maximize progress toward those goals.
It is precisely because economic assistance programs are so
valuable that they have to be well monitored and well thought
out.
U.S. dollars should be used to fight corruption, not to
fuel corruption. And given the realities of limited resources
and sometimes overwhelming needs, donor coordination has never
been more important.
I know that the administrator is well aware of these
imperatives. And I, again, look forward to working with him in
the year ahead on these and other issues.
I will just ask a few questions, if I could. First, Mr.
Anderson, on the issue of AIDS and infectious diseases, I am
very supportive of the administration's proposals to step up
our efforts to fight the HIV-AIDS crisis.
As you know I recently traveled with our Ambassador to the
United Nations, Ambassador Holbrooke, to ten sub-Saharan
African countries, and I had a chance to see a little bit
firsthand of the devastating impact of the disease.
But increased funding will not by itself achieve its
maximum potential impact, unless the African governments
themselves muster the political will necessary to face the
epidemic head on, for example the kind of thing we saw and many
others have commented on with regard to Uganda's efforts to
take on the problem.
How can our diplomatic channels be put to use to urge these
governments to face the problem?
Mr. Anderson. Thank you very much, Senator. I am very
pleased that you brought up the trip that you took with
Ambassador Holbrooke.
I think it was important to shine a light on that part of
the world and on this terrible HIV-AIDS scourge.
As you mentioned, President Musevini in Uganda really stood
out as a leader of his people, a true leader of his people,
when he began to publicly state what a terrible calamity they
were facing. And he encouraged his government and his people to
face this crisis and do something about it.
And as you said, unfortunately, some other leaders have not
been as forthcoming.
HIV-AIDS, because it usually involves sex, is a very
difficult topic for governments to talk about. And that is
understandable.
But we--the USAID missions working with the ambassadors and
the countries where we work in Africa--we work very closely
together and we discuss ways in which to encourage the
leadership of the countries to recognize the reality of the
epidemic, to recognize the damage that HIV-AIDS is going to do
to their economy, and even to recognize threats to stability in
some cases. There are so many people affected, including school
teachers, it's not just the truck drivers.
And as Senator Boxer said, now, for the first time, there
are more women infected than men in Africa.
It is spreading to school teachers, civil servants, the
professional classes. It does not stay within one class, as it
were, of people. The countries are facing a crisis.
It kills more people than civil wars have. And we are
talking with them and encouraging them to act at every chance
our ambassadors get.
I spoke with an ambassador from Africa within the last
week. He is in one of the countries you visited and he is very
committed. Whenever he can, he brings up this topic at the
highest levels of the government, he told me.
We can only do so much, but we will continue to make the
effort.
Senator Feingold. And I would note that I noticed the
commitment of many of our ambassadors and interest in this that
I appreciate it and I would urge them on.
Mr. Anderson. Well, I----
Senator Feingold. I would like you to say a little bit
about other public health threats that USAID will be addressing
in the year ahead.
I have heard a fair amount about malaria in some of the
countries you went to. What kind of malaria and measles
prevention strategies does USAID employ?
Mr. Anderson. Malaria--which I myself have had the
unfortunate privilege of suffering from several times when I
lived there--malaria kills, I don't recall the exact
statistic--but it is an incredibly large number of babies and
young children every year in Africa.
There are a number of things that can be done, including
mosquito nets for beds treated with a chemical. I think
pyrethrum is the chemical that is most often used out there.
We encourage small businesses in various places, sometimes
through our micro-enterprise program, which is wildly
successful, to purchase these nets.
They are very inexpensive to make. The chemical is very
inexpensive. And there is a big market for it.
And we work with health ministries in various countries in
sub-Saharan Africa to address the problem of distribution and
to make sure that there are mosquito nets and that people know
exactly how they can prevent malaria, knowing that the
mosquito--the female anopheles--bites at night and comes out at
night.
If there is a mosquito net over a child's bed, that is the
best protection against malaria.
The President announced that he is proposing a tax credit
for pharmaceutical companies that would work on vaccines for
malaria and HIV-AIDS.
These diseases, especially malaria, affect people in the
tropics and because countries in the tropics are poorer
countries, it is harder to get pharmaceutical companies to
invest in research on malaria.
If we suffered from malaria in the U.S., I suspect we would
have already had a vaccine, because we would have had the
economic power to demand a vaccine.
So we are providing some assistance from our country to
encourage the development of a malaria vaccine. It is being
worked on. And USAID has been involved in the work.
But apparently malaria is a very, very difficult disease,
because it goes through various stages in the body and it is a
really difficult one to track down.
Senator Feingold. I appreciate your discussion on the
malaria problem. When the committee went to the U.N. under the
leadership of the chairman when we had an opportunity to talk
to a number of the Ambassadors to the United Nations from a
number of African countries in the middle of our very serious
conversations about AIDS, a number of us--of them pressed us to
make sure that we understood the malaria problem and--and what
some described as a particularly dangerous form of malaria in
some of their countries.
So I appreciate that discussion.
Mr. Anderson. Thank you.
Senator Feingold. Mr. Anderson, I had the chance to ask the
Secretary of State earlier this week a little bit about
Colombia. And I would like to pursue that a bit with you.
The administration has proposed a very ambitious program of
assistance for Colombia.
Much of the rationale for the assistance, as you know, has
to do with the war on drugs.
But I also know that the conflict in Colombia has forced
thousands of civilians from their homes. I am concerned that
this issue, which is very important for Colombia's overall
quest for stability and strength is often ignored.
In fact, last week, I was told that the World Food Program
had to postpone a planned relief program for internally
displaced people in Colombia, because it had not received any
contributions at all from donors.
Will USAID be addressing this issue as a part of the
administration's Colombia initiative and specifically, if you
know, what portion of the $1.6 billion package is to be spent
on the internally displaced?
Mr. Anderson. Absolutely, we are very aware of this
problem.
There are various estimates of what the numbers are of
internally displaced persons now in Colombia. And the best
figure I have seen is about 700,000 people already because of
the instability.
And the economic problems they face are enormous. And we
already are working with some of them.
Because of our experience in Peru and Bolivia with
alternative development programs, we know that when the crops
are sprayed or burned and destroyed, some of the farmers will
be able to stay where they are. Part of our effort will be to
provide them with alternative crops, with the materials they
need.
We will test the soil, see what works, that kind of thing,
work with them, ask what have they planted before--hoping that
people can, for the most part, stay where they are.
It does not do anybody any good if they have to leave.
However, in some cases, we know that this very worthwhile
effort to eliminate the illegal crops will create some more
internally displaced people.
Some of them are just not going to be able to stay where
they are.
Some of them were sort of like day workers anyway. They are
not really committed to that part of the land, but they are
there for the money they can make.
And so in addition to the alternative development that we
are going to help the farmers with, we are going to spend a
large part of our funds to provide health care, education and
training for these people.
Many are going to need to become economically viable in a
town or a city nearby.
And undoubtedly some of them will migrate to the cities.
Senator Feingold. Do you have any sense of what portion of
the $1.6 billion would go to some of these?
Mr. Anderson. It is in the several hundred million dollar
range.
It is substantial--I mean, it is a lot of money to us. As a
percentage of the overall amount, it does not look so big.
It is a fairly large program for us to gear up. We already
are making plans for it. But we are only going to have a very
small program staff actually, in Colombia.
I think we only have two American USAID direct hire
employees--foreign service officers--there now.
We are going to add another two very soon. They have
already been identified, so we will have four. It is going to
challenge us to gear up and get going but we know it is
absolutely essential.
Senator Feingold. Thank you for that answer.
Back to Africa, I am pleased to see that the administration
is calling for the reestablishment of the Development Fund for
Africa.
Would you comment on what the rationale is for that
decision and--and on the potential value you see in
reestablishing the DFA?
Mr. Anderson. Of course, Senator. Because I lived in Africa
for 8 years, it is a special concern to me and I might have
done it on my own. But the President himself has traveled to
Africa. The First Lady has traveled to Africa.
I had the privilege to host her when she visited Tanzania,
both the First Lady and Chelsea came out there.
So the President has, I think it is fair to describe it, a
very special interest in Africa. He is maybe the first
President since Teddy Roosevelt--who used to go on big game
hunts in East Africa--to have such an interest in that country.
This President has a real interest in Africans and their
future. That is why the African Growth and Opportunity Act he
has proposed is very important to him.
That is why he has proposed such a big increase in the HIV-
AIDS budget, because it is so devastating in Africa.
The Act is a way to bring special attention to the problems
that Africa faces. Sub-Saharan Africa is a very large place.
Tanzania, the country where I lived, has 30 million people
and is the size of my home State of Arkansas, Louisiana and
Texas combined.
If you look at a map, it is actually a fairly small place
on the east coast of a continent with a lot of people, a lot of
problems. But some success stories, too.
South Africa and Nelson Mandela's face is one that always
pops up in my mind. He personifies the success of South
Africans, and their ability to overcome. They are still working
on their ethnic divisions, but their experience is something
that we can hopefully see duplicated in other parts of the
world. One of the big challenges that we face in the world is
ethnic division.
And so the President wants to bring special attention to
that part of the world.
Senator Feingold. And I think that is a very effective
answer. And I appreciate it.
I appreciate your answering all these questions. I just
have one more, because I want to highlight another aspect of
what I believe you are involved in, something that I have been
very interested in.
Corruption stands in the way of every single U.S. interest
abroad, distorts economics, undermines the rule of law and
political legitimacy. And in a lot of cases, it--we are afraid
it siphons away resources away from human development.
And we had a tremendous meeting with the administrator of
Ethics and Integrity in Uganda. She talked to me about what she
was trying to do and--and her needs.
And, for example, she talked about the lack of trained
auditors and investigators in her country. What is USAID doing
to help countries to fight corruption?
Mr. Anderson. Thank you for that question. The training
that you mentioned in Uganda is one thing that we are doing in
a lot of places: training the comptroller general and the
auditor's office to use international accounting standards.
One would hope that all countries would use international
accounting standards, but a lot of countries where we work,
which have been very centrally controlled by a totalitarian
authority, saw no need in the past for international accounting
standards. Only a few people ran the country anyway.
But now, as they are opening up to the world economy and as
their political systems are liberalizing, international
accounting standards are very important and we do training in
that regard.
Institution of the rule of law is, I think, fundamental to
the battle against corruption in a country. And that one we
could talk about for hours and hours and we only have a few
minutes. But it is so important I want to mention it.
We are helping countries like El Salvador. I was just there
a few weeks ago.
We have political scientists from the University of Texas
in Austin and from the State University of New York, who are
helping the legislative assembly in El Salvador to strengthen
its committee structure, to create a budget analysis unit,
which they never had before.
And we are helping them regionalize their legislative
offices. Actually they are opening some regional offices to
respond to people out in the rural areas of El Salvador,
thereby strengthening the legislature. You know these
countries, so many of them have had such a strong executive
with no legislature and no court system. And that is almost the
definition of corruption in a way.
We are involved in strengthening the legislatures, in a lot
of places, and strengthening the judicial branch.
In the West Bank, I was there in December, I met with the
legislative assembly of the Palestinian Authority.
We were working with them to help them really create, in a
way for the first time, a strong legislative branch of their
authority.
And the speaker of the Palestinian Assembly told me--he
said, ``You know, we are moving from the days of PLO when we
only had an executive. We did not have a legislative or
judicial unit.
``We want to become a country. And so we know that we have
to, as it were, take power from the executive and place some in
the legislature and place some in the judicial branch.''
And USAID is working with both the legislative branch and
also the judiciary in many countries.
Helping countries create an independent judiciary is one of
the most important, but unfortunately one of the most
difficult, things in developing countries.
There has been so much corruption and in many cases, even
where there has been something called a court, we would not
recognize it.
In Central America, their system involves presenting
briefs, written briefs. The judge made a decision really
without ever seeing anybody or taking oral testimony or having
an adversarial examination.
And when everything was only done in writing, it gave the
clerk of the court an opportunity to be involved in corruption
and the judge too. So we have encouraged reform with some
assistance from the American Bar Association, which has worked
with us in many countries around the world, but also in Central
America.
They have gone to a more open and transparent and
accountable system in the way they handle their trials. And
they have already seen some positive results from it.
Another thing that I think is important is reducing the
numbers of permits and licenses that a businessman or anybody
else needs to transact business in a country.
When I was in Tanzania, USAID brought some American
businessmen out. And we took them through all the procedures
necessary before they could invest money in Tanzania.
We were not doing it so much as a anti-corruption exercise
as to help the Tanzanians see how difficult it is to invest in
their country and show them if you really want people to
invest, you are going to have to reduce all this red tape.
Instead of having 70 steps--I think it was 70 something
different things you had to do--you know maybe 12 is a lot
better.
Well, what we realized was at every step in that process
for an American businessman or a German or a Brit, at every
step in that process was another opportunity for corruption,
somebody to say, ``Yes. You know, I will give you this license
if you will give $100,'' or ``I will give you this permit, but
if you want to farm over here, you have got to go through these
12 offices.''
And reducing that sort of thing both makes it investor
friendly, which is a huge priority of ours, and also helps
reduce the opportunity for corruption.
There are laws and ethics requirements that are like what
we have that we share with them.
But, Senator, frankly, if the government and the people are
not committed to the kinds of reform that you are talking
about, we cannot do anything about it. They have got to be
committed.
Some of the things outside the government we can do is
buildup an independent media--newspapers and television and
radio stations--watchdog groups, human rights groups and
consumer groups. Building the civil society, strengthening from
the grass roots, encouraging people to go to the government and
demand that these sorts of things stop.
That is really where corruption is going to be ended: by
the people themselves realizing that government is there to
serve them.
This is a principle that you and I were born with. The
government serves the people.
But in many of the countries where we work, it has been the
reverse. The people are there to serve the few.
And it is the people themselves who are going to have to
demand these changes.
Senator Feingold. Well, you obviously have given this issue
a lot of thought. And I appreciate that.
You said many interesting things, but in particular I was
interested in what you said about building the legislatures.
When we were in Africa, Ambassador Holbrooke made it clear
that he represented the executive and I represented the
legislative side and it gave me an opportunity, for example, to
meet with a group of legislators, which was a very interesting
meeting.
We also had the opportunity to work--meet with a group of
legislatures in Namibia who had come from other countries to
help monitor the elections in Namibia.
And that was a very stimulating conversation. I learned a
lot. And I felt there was a tremendous eagerness on the part
of--the different members of the legislatures--different
legislatures to compare notes and talk about exactly what you
said.
There is such an executive tradition there--in many of
those countries--that it is a long process that I think a lot
of Americans would find very interesting to be involved in
strengthening the role of legislatures. It was very stimulating
for me having only been a legislator in terms of my
governmental activity.
The judicial is harder and in fact, constitionalism. We
were, I think, troubled by what is going on in Zimbabwe.
I read today that there is a vote going to be held on a
constitution where apparently only one side gets to put their
position about whether the constitution should pass on the
radio and the other side does not.
And I know that one of the issues involved there had to do
with what kind of judicial review would be a part of that
constitutional system.
And given the importance of our fundamental decisions in
this regard, Marbuny versus Madison and other decisions, it
sets the whole tenure for a nation and the future of its
nation, who has the primacy in terms of the law and how
independent those courts are.
So this is not just in Africa, of course, but everywhere in
the world, because these are things that Americans, especially
young people, I think, could find very exciting to be a part of
in the future in a cooperative way.
So I thank you, on behalf of the chairman, I thank you for
being here and--and on behalf of all the members of the
committee.
The record will be left open for additional questions for 3
days and with that the hearing is adjourned.
Mr. Anderson. Thank you, Senator.
[Whereupon the committee adjourned.]
[Additional questions submitted for the record follow:]

Additional Question for the Record

Responses of USAID Administrator J. Brady Anderson to Additional
Questions Submitted by Senator Jesse Helms

Question. Central to the reform of Ukraine's struggling economy is
the reform of its agricultural sector. What are USAID plans to assist
the modernization and marketization of the Ukraine agricultural sector
in FY 2000 and FY 2001?
Answer. USAID is committed to advancing agricultural development in
Ukraine and is moving forward to support the reforms being initiated by
the Government of Ukraine [GOU]. In FY 2000, as the GOU develops a
reform program, USAID will maintain support for the Ukraine
agricultural sector via several ongoing projects. These are: (a) policy
reform assistance to the Ministry of Agriculture's Secretariat and
Policy and Analysis Unit; (b) support for farm restructuring and land
reform; (c) small farmer training; (d) the provision of Farmer-to-
Farmer volunteers; and (f) implementation of the agribusiness
partnership program.
In April 2000, the International Monetary Fund, the World Bank, and
USAID are planning to evaluate the GOU's policy reform performance.
Assuming consensus among international donors that Ukraine is meeting
its policy reform commitments, USAID expects to commence the design of
a new agricultural development project that would build on the existing
projects mentioned above. Such a new agricultural project would be
implemented in FY 2001 or earlier, if possible. In this effort, USAID
expects to work closely with the World Bank to coordinate our
assistance and to leverage it with greater multilateral resources.

Question. Some have asserted that USG assistance programs,
particularly those intended to promote market reform in Central Europe
and Russia, tend to direct their efforts to regions within a country
where there is greatest chance of reform as opposed to those regions
where reform is needed most. In Ukraine and Russia, does the USG direct
its market and economic reform programs to cities and regions that for
political and economic reasons are most important to the future of
their respective countries even if the task of reform may be more
difficult for cultural, political and economic reasons? If not, why
not?
Answer. U.S. Government assistance programs in Ukraine and Russia
are designed to encourage reforms needed for long-term social,
political and economic development. As reforms at the national level
have stalled in the last few years, USAID and other agencies have
redirected their limited resources to give more priority to assistance
at the regional level.
The question posits two alternative approaches to targeting
assistance to the regions:

(a) assisting regions that are already reform-minded in the
hopes of nurturing replicable ``successes,'' versus
(b) assisting the most politically important regions,
regardless of their commitment to reform, in the hopes of
maximizing influence over the country's future direction.

Our strategy is based on an important lesson learned from previous
assistance efforts in the former Soviet bloc, and elsewhere around the
world. Past experience has demonstrated that where a genuine commitment
to reform is lacking, efforts to influence change in terms of
government policy and practice are bound to fail. We therefore avoid
funding assistance to regional or municipal governments that are
resistant to or uninterested in reform.
The U.S. Government is providing different forms of assistance in a
very broad range of regions in both Ukraine and Russia, and at many
levels of society within those regions. The most politically and
economically important regions in both countries have been major
recipients of such assistance. We recognize that the reform process in
these countries is complex, and change is happening in the private as
well as the public sector. We do not reject particular regions from any
assistance at all because, for example, its governor is not reformist.
In regions that are resistant to reforms, we focus on programs on
individuals and institutions receptive to such USG-sponsored activities
as exchanges, small business training and credit programs, and NGO
grant programs. These people and institutions represent the seeds of
future change in their regions, and should not be ignored.
At the same time, we recognize that, given the enormous scope of
the transition underway in Russia and Ukraine, our resources are very
limited, and therefore we must look for ways to leverage assistance
dollars. One potentially effective way to achieve this is to help
progressive regions to succeed in creating a workable economic and
political system, based on democracy and the market. These regions can
then become models that serve to disseminate their approach to many
more regions. This replication effect is the primary motivation behind
the ``regional initiatives'' in Russia and Ukraine, which involve
concentrating a large number of assistance programs in a region.
In choosing sites for regional initiatives, we are looking above
all for regions where chances for reform to succeed are good, and where
the results of this success will be evident. Such regions may be among
the most politically and economically important ones (for example,
Samara Oblast in Russia), or they may be smaller, but nonetheless
excellent showcases for the positive results of reform (such as
Novgorod Oblast in Russia).
There is increasing evidence that Ukraine's Central Government is
now composed of a group of leaders seriously committed to economic
reform. If they demonstrate that they are undertaking meaningful
reforms, USAID would consider increasing its assistance directed at the
national level, but also would continue our focus outside Kiev.

______

Responses of USAID Administrator J. Brady Anderson to Additional
Questions Submitted by Senator Richard Lugar

Question. The Financial Volunteer Corps [FSVC] using volunteers and
providing non-commercial advice, has established an excellent track
record over the past ten years in delivering technical assistance. It
has made an important contribution to strengthening the financial
infrastructure in numerous countries and to developing transparent
market-oriented economies. I am interested in learning what role USAID
envisions for FSVC in the republics of the former Soviet Union and in
the Balkans over the next several years.
Answer. USAID has benefited from a close working relationship with
the Financial Services Volunteer Corps [FSVC]. FSVC provides volunteers
and expertise in three core areas: central banking, commercial banking
and capital markets development. Since the inception of the FSVC
program in the early 1990s, the U.S. Agency for International
Development [USAID] has provided more than $32 million in funding to
the FSVC.
USAID's vision for FSVC in the republics of the former Soviet Union
and in the Balkans is to partner with us in promoting economic reform
and establishing sustainable partnerships between the United States and
the countries of Europe and Eurasia, between these countries and other
regions of the world, and among the countries themselves.
As our development partner, FSVC meshes its short-term technical
assistance with our Missions' long-term strategic priorities.
FSVC is engaged strategically with USAID at a regional level in
Washington through our Partners for Financial Stability program. FSVC's
dialogue with our Missions in the former Soviet Union and the Balkans
is even more important as they have the job of sorting priorities for
their limited country-specific programs.
Based on ongoing and future projects, illustrative examples of our
cooperative efforts with FSVC over the next several years include:

Russia, where work is concentrated in commercial banking and
financial market management reforms. USAID and FSVC are working
closely to develop a sharply focused, three-year strategy for
continuing financial market reforms, emphasizing regulatory
development and implementation;
In Albania, current and future projects may encompass a
broadened spectrum of activities in financial sector reform. In
addition to improving bank communications and settlement
process, FSVC may be called upon to provide assistance in
establishing a stock market and to advise on financial aspects
of privatization;
The Republic of Georgia, has made requests to FSVC for
several projects which would support the efforts of current
USAID projects in bank supervision and electronic payments
systems;
In Ukraine, FSVC's work centers on USAID projects in on-site
bank supervision, and bank accounting as well as a capital
markets component;
Macedonia's future activities will continue to support
banking and capital markets development and may branch out into
legal reviews of the commercial code, assistance in export
promotion, deposit insurance, bank rehabilitation and money
laundering detection;
Several Missions, including Bosnia, Kosovo, Montenegro and
Armenia may access FSVC services in the future, once their
respective financial infrastructure and legal/regulatory
frameworks are better established.

Question. The Congressional report for the FY 2000 Foreign
Operations bill included sense of the Congress language which said
``The managers encourage USAID to support the Financial Services
Volunteer Corps [FSVC] which contributes to the process of building
sound financial infrastructure in countries that are seeking to develop
transparent, market-oriented economies. FSVC, as a not-for-profit
organization, leverages its funding resources with expert volunteers
from the U.S. financial services community to provide assistance that
is objective, independent and free of commercial interest.'' I agree
with this statement and would like to know what your funding
recommendation for the FSVC in FY 2000 will be. What level of funding
do you foresee for FY 2001?
Answer. USAID concurs that FSVC's reputation is well deserved and
well established, based on a decade of experience, primarily serving
Eastern Europe and the Former Soviet States. To facilitate FSVC's
broader participation in USAID's program, USAID's Global Bureau awarded
to FSVC a three-year Cooperative Agreement on September 30, 1999, with
$219,000 in core funding. This will serve as a quick-response revolving
fund which missions will reimburse and cover some administrative costs.
The demand for FSVC's services will depend on USAID missions'
priorities. Based on prior years' demand and estimated new demand for
technical support in the area of financial sector development
worldwide, USAID estimates field demand for FSVC services at
approximately $600,000 per year.

______

Responses of USAID Administrator J. Brady Anderson to Additional
Questions Submitted by Senator Joseph R. Biden, Jr.

Question. Some countries in Eastern Europe--for example, Poland and
Hungary--have now ``graduated'' and no longer require USAID's
involvement. What are the prospects that countries in the Balkans and/
or the former Soviet Union where USAID is now engaged will be able to
similarly ``graduate'' some day?
Answer. I am proud that the United States has been able to play a
important role in the transformation of formerly communist states into
market democracies based on the rule of law. By the end of Fiscal Year
2000, Estonia, Latvia, Lithuania, Poland, Hungary, Slovakia, Slovenia,
and the Czech Republic will all be in the ranks of USAID ``graduates.''
At that time, there will no longer be any bilateral USAID missions
active in any of the northern tier countries of Europe.
USAID's Bureau for Europe and Eurasia has a thoroughgoing system
for analyzing and tracking country progress toward commonly-accepted
graduation thresholds, for all of the sectors in which we work. A
report on Monitoring Country Progress is updated twice annually, and
special assessments are performed on a periodic basis by the Europe and
Eurasia Bureau, analyzing progress against strategic indicators and
graduation thresholds on a country-by-country basis. Examples of such
graduation thresholds include progress toward legal and regulatory
reform, privatization, and creation of an effective civil society.
Although there still are a few rough spots in some countries
(Slovakia and Lithuania, for example), our analysis indicates that the
transition process is now essentially self-sustaining in all eight of
these ``graduate'' countries. Regional legacy mechanisms in such areas
as energy, the environment, and fiscal management are in place to meet
remaining needs in the northern tier. In Slovakia, we expect to provide
some limited assistance through regional mechanisms to shore up weak
spots in the economic reform area.
However, progress on reform has not seen as swift in the countries
of Southeastern Europe and the former Soviet Union. We are applying the
same strategic indicators and graduation thresholds that were used in
the northern tier. At this point, we do not have target graduation
dates for any additional countries. But, the prospects for eventual
``graduation'' of the countries of Southeastern Europe are promising.
The emergence of democratically-elected reform governments in such
countries as Bulgaria, Romania, and, most recently, Croatia, has given
the United States enthusiastic partners who are committed to the common
values of the Euro-Atlantic community and are actively seeking to
qualify membership in the European Union.

Question. Specifically with regard to USAID's efforts in Bosnia and
Herzegovina, do you believe that we are placing enough conditionality
on our assistance to the political leadership there?
Answer. USAID does not assist Bosnia-Herzegovina's political
leadership. We do not implement programs designed to uphold the status
quo. Instead, we implement programs to weaken the social and financial
dominance of the most recalcitrant opponents of reform, whether they be
in the Federation of Bosnia-Herzegovina or in the Republika Srpska. The
dismantling of the three ethnically-based payments bureaus and
development of a real and functioning independent banking system will
dry up a major source of funds for the three dominant nationalistic
parties. Developing an independent media will offset nationalistic
rhetoric of state-controlled media and provide real, unbiased
information to Bosnia's citizens. Training for moderate political
parties and their supporters will help to prepare a new generation of
leaders to lead Bosnia in the 21st century.
USAID uses its political leverage and places conditionality
whenever possible. The suspension of the USAID privatization technical
assistance program to the Federation on December 19, 1999 brought to
bear such public pressure and outrage against the Federation government
officials that they moved hurriedly to try to mend their reputations.
We saw that, if you engage and educate the citizens of Bosnia, they are
the best check on the corrupt and obstructionist activities of their
government.
More progress has been made on the conditions for privatization of
the large enterprises of Bosnia than ever before. Before the
suspension, only 26 of the 47 companies under the Federation
Privatization Agency had submitted opening balance sheets and only 20
had submitted privatization plans. Since suspension 21 additional
companies have submitted opening balance sheets and 20 have submitted
their privatization plans.
The $256 million Municipal Infrastructure Program was conditioned
on municipal officials publicly signing a Memorandum of Understanding
to adhere to the Dayton Accords and turn over publicly indicted war
criminals within their jurisdiction, among other conditions, in order
to receive assistance through this USAID program. An example of the
implementation of this conditionality is Tuzla, where, because of the
MOU, municipal officials evicted a group of politicians who were
occupying apartments of the minorities place claims for repossession of
their property. After the evictions were concluded and the minority
return took place, USAID implemented two projects: reconstruction of
the water system in Tuzla and reconstructing the school in Lipnica.
Another example of conditionality in the Municipal Infrastructure
Program occurred in the eastern Republika of Srpska. The municipalities
of Trebinje, Cajnice and Bileca proposed and had their projects
accepted to repair the water systems in all three towns. Municipal
officials in Trebinje and Bileca projects refused to sign a MOU to
adhere to the Dayton Accords, therefore the projects were never
initiated and USAID ran a heavy publicity campaign so that the citizens
in the municipalities knew why their water system was not repaired.

Question. Now that a peace of sorts exists in Sierra Leone, what
sorts of programs is USAID planning to undertake in Sierra Leone? Can
you explain what strategy donors are using to help Sierra Leoneans put
the pieces back together in a society as devastated as theirs is?
Answer. USAID continues to provide humanitarian and transition
assistance to Sierra Leone. In FY 1999, USAID humanitarian assistance
to Sierra Leone totaled $32.5 million. Planned levels for FY 2000 are
about $44.4 million. USAID programs include food and disaster relief
and transition assistance; non-governmental and community-based
organization strengthening; child tracing and family reunification;
prostheses, wheelchairs and orthotics for the disabled. USAID is
reviewing options to bridge the transition between humanitarian and
near-term (3-year) development priorities.
Regarding a donors' strategy, we cannot speak for all donors, but
it is USAID's understanding that substantial post-disarmament and post-
demobilization assistance will be made available through the World
Bank-managed Multi-donor Trust Fund to help revitalize communities and
reintegrate ex-combatants into communities. That program is being
carried out in conjunction with the Government of Sierra Leone. The
United Kingdom is the major contributor to the Trust Fund, and is
providing support and technical advice in a number of areas, including
disarmament, demobilization and reintegration, security, police
restructuring, anticorruption, elections, local governance, and non-
governmental organization democracy and governance efforts. UNICEF has
successfully been addressing needs of children affected by the war,
including child combatants. USAID, State, and other donors through
their contributions to the World Food Program, will continue to address
humanitarian needs of refugees and internally displaced people. No
United States food or disaster relief commodities are being provided to
combatants. In Sierra Leone, USAID supports a non-governmental
organization [NGO] coordinating body that effectively coordinates all
humanitarian assistance. All donors and NGO's participate in bi-weekly
coordination meetings, chaired by the director of the Government of
Sierra Leone's National Commission on Reintegration, Rehabilitation and
Reconstruction. The United States government participates in regularly
scheduled meetings of the National Commission on Disarmament,
Demobilization, and Reintegration, chaired by President Kabbah. As
mentioned above, USAID is reviewing how we might use development
assistance to help bridge the transition between humanitarian
assistance and near-term development needs.

Question. USAID has proposed a number of programs in Liberia aimed
at promoting human rights and election assistance. How important are
these programs to helping Liberians institute democracy and the
observance of human rights? Will the programs that USAID is proposing
help strengthen or preserve the Taylor government as critics contend?
Answer. USAID's democracy and governance activities are not
intended to lend credibility to the Taylor regime. We strongly believe
that without a free press, without human rights champions on the
ground, without efforts to create an independent judiciary, and without
the mantle of visibility that United States democracy and governance
assistance brings, the fate of those who challenge the Government of
Liberia would be further compromised.
The programs serve a very real purpose on the ground in that they
help safeguard against the potential emergence of a repressive one-
party state. They also symbolize a United States government commitment
to the tenets of democracy and human rights. The proposed programs
support independent voices that seek to hold the government accountable
to the people. They support Liberian human rights groups' efforts to
provide citizens with information on and access to legal redress for
human rights abuses. They help citizens exercise their rights and
participate constructively in political processes.
These programs become increasingly important as we draw closer to
the 2003 elections. Now is the time to lay the groundwork, through a
focused and targeted democracy and governance program, to ensure a
variety of candidates in the 2003 election.
USAID has provided critical limited assistance to strengthen the
judiciary and the legislature, both of which have helped balance the
overwhelming power of the executive. However, the bulk of our democracy
and governance assistance has supported local non-governmental
organizations, free media, and human rights groups. Under Brooke
Amendment sanctions, we can no longer provide democracy and governance
assistance to government in any form, but would like to continue
providing a voice for citizens.
We continue to believe it is important to bolster the elements of
society that attempt to hold the executive regime accountable and who
are the best hope for stability and democracy over the longer term. We
stand ready to consult with the Committee at any time to address
concerns and reach a mutual understanding about how to achieve our
shared objectives in Liberia.

INDONESIA AND EAST TIMOR

Question. How do we strike the right balance in aid for Indonesia,
a pivotal state of 200 million people, and East Timor, a tiny fledgling
nation of just 750,000? Are we assigning the right priority to each?
Answer. USAID's approach to providing assistance to Indonesia and
East Timor is primarily based on our assessment of the needs of each
country in relation to the United States' strategic interests.
Indonesia is the world's fourth most populous country, essential
for maintaining stability in Southeast Asia, and now on its way to
becoming the world's third largest democracy. In recognition of the
importance to the United States of the Indonesia's economic and
democratic transition, the Administration is proposing as much as $500
million in assistance over the next few years, starting with an
assistance level of $145 million in grant and food aid for FY 2000.
East Timor's devastation requires a significant initial infusion of
donor assistance to help restart and re-build the economy and put it on
the path toward becoming a stable new democracy. The United States,
through USAID, which was a lead donor in East Timor prior to the
crisis, is particularly well positioned to jump-start East Timor's
economic revitalization with revival of a successful coffee production
project and initiation of community-led development programs.
USAID is scheduled to receive a significant portion of the $25
million FY 2000 earmark for East Timor and will utilize the funds for
economic revitalization activities. USAID will focus on efforts to
provide quick employment and continue building civil society.
We expect other bilateral and multilateral donors to take on a
greater role in East Timor's long-term development within several
months. Consequently, the Administration proposes a much lower level of
assistance in the next fiscal year for East Timor as other major
funding comes on line.

INDONESIA

Question. What aid are we providing to Indonesia, if any, aimed at
cultivating greater civilian control over the military and greater
respect for basic human rights?
Answer. It is only recently that the military has begun to
relinquish its social, political and economic role in Indonesia. USAID
is providing grants to civilian organizations focused on reexamining
the role of a modern military in a democratic environment with a clear
separation of powers and responsibilities.
In addition, USAID provides grants to civilian organizations that
support efforts to promote reconciliation, trust and respect between
the military and civilian community. These USAID grants have financed
seminars, roundtables, dialogues, media broadcasts on civilian control
of the military and training for journalists to research and report on
military issues.
Throughout Indonesia, USAID has provided $800,000 in grants to
local groups which support workshops on voter education and community
preparedness for conflict resolution at the grass roots level and human
rights campaigns through printed materials, electronic media and
interpersonal contacts dealing with the issue of reconciliation.

CAMBODIA

Question. Under what circumstances should the United States be
prepared to resume direct aid to the Cambodian government?
Answer. The Cambodian government is showing a willingness to
proceed with democratic and economic reforms. A national election held
in July 1998 led to the formation of a democratically elected coalition
government in November 1998. An elected National Assembly and appointed
Senate, both with a vocal opposition party, is seated and enacting
legislation. Since February 1999 the coalition government has embarked
upon an ambitious and comprehensive economic reform agenda that is
reviewed quarterly with donors. These developments, together with
further progress toward an internationally acceptable tribunal to try
Khmer Rouge and adherence to basic standards of human rights, should
lead the United States to consider resumption of direct aid to the
Cambodian government to spur continued economic and democratic reform.
The United States is alone among bilateral and multilateral
entities in not resuming a direct relationship with the Cambodian
government.

PAKISTAN

Question. What conditions would Pakistan have to meet in order to
be eligible for USAID assistance, and what progress has it made over
the past year?
Answer. Legislative restrictions on USAID direct assistance to the
Government of Pakistan have been imposed because of (1) sanctions
following Pakistan's possession, and then testing, of nuclear weapons
in May 1998; (2) defaults on repayment of its loans from the United
States; and (3) its military coup of October 1999.
Pakistan is currently eligible for, and receiving, assistance under
USAID's Pakistan NGO Initiative [PNI]. USAID is permitted to provide
assistance under section 541(a) of the FY 2000 foreign appropriations
act and its predecessors. This legislation authorizes USAID assistance
to programs of non-governmental organizations [NGO's] in a country when
the USAID Administrator (as delegated by the President) considers such
assistance to be in the United States national interest, and so
notifies Congress under the regular notification procedures.
Under PNI, USAID provides assistance to two U.S. NGO's based in
Pakistan: the Asia Foundation and the Aga Khan Foundation. These two
NGO's work with local Pakistani NGO's in the areas of basic education,
literacy and skills training, basic maternal and child health, NGO
capacity building and policy advocacy. PNI is a $19 million, seven-year
program begun in FY 1995.
The Department of Defense FY 2000 Appropriations Act provides
permanent, comprehensive authority for the President to waive nuclear
sanctions (for both Pakistan and India) to allow assistance, but does
not provide authority to waive other legal restrictions such as those
related to the military coups and defaulting on loan repayments.
On November 26, 1999, the Government of Pakistan [GOP] and the USG
signed a Paris Club bilateral agreement to reschedule GOP debt
repayment currently in arrears. Notification of the signing of this
bilateral agreement was sent to Congress on January 24, 2000 and
expired without objection on February 23, 2000. Pakistan is no longer
in arrears on its repayment of United States government debt.
Legal restrictions on USAID direct assistance to the Government of
Pakistan, because of the October 1999 military coup, cannot be lifted
until the President determines that a democratically elected government
has again taken office in Pakistan.

Question. Can you update us on what measures are being taken to
address concerns with the physical security of the USAID employees at
the Ronald Reagan Building?
Answer. Primary responsibility for the security of the RRB rests
with the General Services Administration.
Within the space we lease and are authorized to control, we have
installed security systems and implemented procedures that are in
compliance with Federal security standards. We are confident in the
security provided by these systems and our own security staff.
We have strong liaison with the FBI and other federal and local law
enforcement agencies and have obtained routine access to domestic
intelligence to keep informed of known threats.
We continue to have concerns about perimeter security and
unauthorized vehicle access to the building and are working
aggressively with GSA at different levels to address these concerns. We
are encouraged by GSA's recent acquisition of equipment to better
control vehicle access into the building, and we will continue to work
with GSA building management and the Federal Protective Service to
highlight our other concerns and request assistance as appropriate.

Question. In 1997, USAID proposed authority to begin a new loan
program--a Development Credit Authority. The new authority was made
contingent on the Office of Management and Budget certifying that the
Agency had improved its loan portfolio management. That certification
occurred late last year. The President's budget proposes consolidating
this and other USAID credit programs into one ``Development Credit
Account.'' The budget says that this account ``permits the Agency to
substitute credit assistance for grant assistance to achieve'' economic
development purposes. What is the purpose of consolidating all your
credit programs under one account?
Answer. Consolidation of the Agency's credit programs will
strengthen credit management capacity by centralizing the credit
administrative staff and streamlining credit risk analysis, credit
portfolio management, and credit accounting systems for new credit
activities into a single, more efficient unit.
The consolidation of all agency credit activities under a single
DCA appropriation account is consistent with the goals of the
Administration and Congress to reduce the number of appropriation
accounts.
This consolidation will also ensure that future credit assistance
activities will be strictly subject to the reforms embodied in the
Federal Credit Reform Act of 1991.
The absence of line-item appropriation requests for the urban,
environment and shelter sector and the microenterprise sector does not
signal a retreat from these sectors. A combination of grants and DCA
assistance will finance future work in these areas at roughly the same
level as in prior years unless the priorities change.

Question. In general, under what circumstances are loans preferable
to grants?
Answer. In most circumstances, USAID relies on grants to carry out
its programs. However, in limited circumstances, loan guarantees and
direct loans, utilizing the Development Credit Authority [DCA], may
provide an additional, powerful tool. By utilizing credit rather than
grant funding, USAID can create sustainable public/private partnerships
for development. Credit-based development projects can mobilize local
private resources far in excess of available public development funds.
Thus, for example, a $350,000 investment by USAID with a commercial
bank in Poland has made available up to $10.0 million in potential
lending. Furthermore, by utilizing commercial sources of capital at
market rates, DCA projects can demonstrate to private sources of
capital that development can be both sustainable and profitable. Credit
assistance will be particularly useful in areas such as micro and small
enterprise, privatization of public services, infrastructure, efficient
and renewable energy, and climate change.
DCA is primarily intended for countries and regions where USAID has
an active presence. Eligible projects must demonstrate the potential to
have a positive financial rate of return so that the loans can be
repaid. Where USAID's risk analysis of a specific project demonstrates
that the estimated risk is too high, USAID will decline to offer credit
assistance. In this case, grants may be the more appropriate means to
accomplish USAID's developmental objectives.

Question. In view of the current Administration proposals to
provide debt relief for the poorest nations are these loans primarily
to governments or to private entities?
Answer. The Development Credit authority [DCA] is primarily
intended for non-sovereign lending. Under the regulatory reforms that
govern DCA, only a handful of USAID-assisted countries would be
sufficiently creditworthy to qualify for sovereign risk credit
assistance. Instead, DCA credit assistance is intended for credit
enhancement purposes in cases where borrowers are non-sovereign
entities and the lenders, with whom we partner, take more than 50% of
the risk. DCA will be used for credit enhancement purposes in
partnership with local banks and other private investors.
There is no relationship between our DCA request and the
President's debt reduction initiative for the poorest countries. DCA
will not be used for sovereign lending in countries where debt is being
forgiven or rescheduled. Only in limited circumstances may DCA be used
for sovereign credit, however, even in sovereign transactions, the DCA
models require true risk sharing.

THE AIDS CRISIS IN AFRICA

----------

THURSDAY, FEBRUARY 24, 2000

U.S. Senate,
Subcommittee on African Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. William Frist
(chairman of the subcommittee) presiding.
Present: Senators Frist, Smith, Biden, Sarbanes, Kerry,
Feingold, and Boxer.
Senator Frist. Good afternoon. Our agenda today has been
distributed.
We are going to attempt to accomplish a lot, which means
that as the chairman, I will be swinging the gavel to keep
people moving along. And it is going to be very frustrating,
because of the breadth of the topic, but we are faced with a
true crisis and, thus, the title for today is ``AIDS Crisis in
Africa.''
I am very excited about the next four panels we have before
us, because we will address the issue of AIDS initially from a
legislative standpoint, hear the Surgeon General of the United
States give us some background, some understanding of the
disease and where we are today, and travel through a range of
panels that cover not the entire spectrum, but a large part of
the spectrum of this crisis in Africa.
We will have some opening statements, but I think out of
respect for our colleagues, four of whom will be with us over
the course of the next few minutes, we will turn directly to
them to make some opening comments, introducing specific
legislation that they may be involved with and establishing the
setting from which we can emerge on the three panels that
follow.
With that, let me first turn and we will go straight down
in order on the agenda on panel one to Senator John Kerry from
Massachusetts.
Senator Kerry.

STATEMENT OF HON. JOHN F. KERRY, U.S. SENATOR FROM
MASSACHUSETTS

Senator Kerry. Mr. Chairman, thank you very, very much, and
thank you, Senator Feingold, for your leadership on this issue
and for affording us the opportunity to have this very
important hearing today.
We are going to hear from a lot of experts on later panels
about the scope of the AIDS epidemic in Africa, so I am not
going to take a lot of time to underscore it.
But I want to say on a personal level, and I know my
colleague, Barbara Boxer, and Senator Durbin join me in feeling
that the proportion of this calamity in sub-Saharan Africa is
absolutely stupefying.
There are not words to adequately describe it. It is as
compelling and as sobering an issue as any of us could face
here.
And it seems to me that when you contemplate that of the 33
million people on this planet who are infected with HIV,
perhaps 95 percent of them are in developing countries. It will
kill more than 2.5 million people this year. During the time it
takes me to testify, some 60 people are going to become
infected with HIV.
And I think that no nation, but particularly our Nation
with the extraordinary talent we have, with the technology we
have and with the money we have, can possibly fail to take a
leadership position and to respond to this.
Now, how do we do that? This is an epidemic out of control.
And we should all remember that borders do not matter, as you
well know, Mr. Chairman, when you are dealing with contagion.
I believe that there are an enormous range of steps that we
can take. Senator Feingold, Senator Boxer, Senator Durbin and
others have taken the lead in offering plans and I joined with
them on their bills.
But frankly, the scope of this epidemic requires perhaps
even a bolder response than we have yet contemplated. It
requires us to look beyond preventing and treating the disease,
especially when you figure the numbers of people we are dealing
with, the amount of time that takes, the complexities
sociologically, all of the infrastructure issues that are
linked to trying to treat those who are infected and prevent
new transmissions of HIV.
And while I am extraordinarily supportive of those
programs--we have seen locally in Massachusetts how many of
them work very effectively--I believe that there is something
else we can do. It is time for us to lead the world in
developing a vaccine.
Vaccines, most people will acknowledge, are the most cost-
effective weapon in the arsenal of modern medicine to stop the
spread of contagious diseases. They offer a relatively
inexpensive means of lowering society's overall costs of
medical care.
Prime examples of the success are the three million
children whose lives are saved every single year as a result of
early childhood immunizations against diphtheria, polio,
pertussis, tetanus, measles, and tuberculosis.
Mr. Chairman, consider the alternatives that we have right
now. Pharmaceutical products like the highly touted anti-viral
cocktail for treating AIDS patients can cost on average as much
as $15,000 a year. Now, that is obviously a princely sum even
in a wealthy country like ours.
But for nations with a per capita income of $700 or $800,
like Malawi, such treatments and drugs are nowhere in the realm
of possibility.
They also require an incredible infrastructure and
investment in medical compliance, which is difficult to adhere
to in this country, let alone in any of the developing
societies.
So for these nations, finding an affordable vaccine for
AIDS is really the only option. It offers them an opportunity
for gaining control over the epidemic.
Unfortunately, of the $2.4 billion or so spent on overall
AIDS research last year, only a fraction was spent on AIDS
vaccine research.
The World Bank estimated that between $280 million to $350
million was spent worldwide on finding a vaccine for AIDS in
1999, or somewhere between 10 or 15 percent of the total amount
spent.
Furthermore, of the $300 million or so spent on HIV vaccine
research, less than $50 million came from private sector
research and development budgets.
Simply put, our biotechnology and pharmaceutical industries
do not believe that investing in AIDS vaccine research is a
good investment.
So, Mr. Chairman, we have a responsibility to change that
equation, that economic perception or judgment. Investing in an
AIDS vaccine is one of the best investments that we could make
as a Nation.
And for Africa, I suggest respectfully, it may be the only
hope for survival.
While continued and expanded investments in our research
engines are vitally important--I refer to the AIDS research at
the National Institutes of Health--we should explore additional
strategies to stimulate the private sector in research and
development.
Mr. Chairman, I was amazed to learn that of the $56 billion
a year spent globally on health research, well over 90 percent
is spent on research into health problems that occur in only 10
percent of the world's population.
Amazingly, of the 1,200 new drugs commercialized between
1975 and 1997, only 13 were for tropical diseases, diseases
such as malaria and tuberculosis, which combined kill close to
3 million people a year.
So we can change this approach of the pharmaceutical
companies. Do they not invest because there is no hope of
finding a vaccine for malaria or AIDS? The answer is no. Is it
because the science is insurmountable? The answer is no.
It is simply because these vaccines do not offer the same
return to shareholders as the return from Viagra or Lipitor, or
Prozac or other blockbusters here in the United States.
Now, I do not blame any company for responsibility to
shareholders. But let us take our moral imperative and our
common sense and change the equation for them economically.
So what do we do? Well, what we need to do is give
pharmaceutical companies the financial incentive to achieve
what we know is possible and let them work their magic.
These are the same engines of growth and technological
progress which have helped extend life expectancy beyond what
was imaginable at the turn of the century.
And now we can do this with respect to this scourge. How?
And I will be very quick. Here is how you do it. The
legislation that I introduce today, the Vaccines for the New
Millennium Act provides a number of market incentives to
encourage private sector investment in life-saving vaccines.
They could be classified in two ways, as a push mechanism
for lowering the cost of R&D; and as a pull mechanism to show
that the market will exist if the pharmaceutical companies
provide the product.
On the push side, we expand the development tax credit from
20 percent to 50 percent for research related to developing a
vaccine for AIDS, malaria and tuberculosis or any infectious
disease which kills over 1 million people a year.
The tax credit is incremental. And I will not go through
the details of how it works, but we will submit that in the
bill.
Second, the bill allows small biotechnology companies which
do not have tax liability to pass a smaller tax credit through
to investors. And firms with assets under $50 million can
choose to pass through a 25 percent tax credit to investors who
provide financing for research and development of one of the
priority vaccines.
Both of these proposals have been endorsed by a combination
of public health advocacy groups and industry, including AIDS
Action Council, the Global Health Council, the American Public
Health Association, the AIDS Vaccine Advocacy Coalition,
Chiron, Vaxgen, and others.
Third, the bill authorizes voluntary contributions to the
Global Alliance for Vaccines and Immunizations and the
International AIDS Vaccine Initiative.
I might add that that is being supported by a number of
nations and international donors, including an incredibly
generous gift by the Bill and Melinda Gates Foundation, who
today have issued a statement supporting our legislation and
the efforts of the Clinton administration to move down this
vaccine road.
So, Mr. Chairman, this bill includes other ways that we
could accelerate the intervention and production of life-saving
vaccines, for example the tax credit proposed by the President.
That credit doubles the purchasing power of non-profit
organizations and others who purchase vaccines for developing
countries.
Our plan also establishes a life-saving vaccine purchase
fund, which has been advocated most prominently by Jeffrey
Sachs, my friend from Massachusetts, who will appear on a later
panel.
So I believe that this proposal really offers the best
chance we have beyond prevention, which we ought to be doing,
and beyond the treatment, which we obviously also need to do.
But ultimately to gain control of this on a global basis as
well as to deal with malaria, infectious tuberculosis and other
diseases, I believe this is the approach.
We were working on this for about 2 years, Mr. Chairman.
This past weekend, it was endorsed as a positive step by
academics, pharmaceutical executives and governmental leaders
at a high-level conference convened by the University of
California in San Francisco, the World Bank and the Global
Forum for Health Research.
Congresswoman Nancy Pelosi will introduce similar
legislation in the House of Representatives. It is my hope that
we can pass it in the Senate.
And I thank you for your attention.
[A news release from Senator Kerry follows:]

[For Immediate Release--February 24, 2000]

News From John F. Kerry, U.S. Senator From Massachusetts

kerry announces comprehensive vaccine plan--vaccines for the new
millennium act combats world's deadliest diseases
Washington, DC.--U.S. Senator John F. Kerry, today announced his
proposal to spur research and development of vaccines against HIV,
malaria and tuberculosis. His nine-point plan, the Vaccines for the New
Millennium Act, unifies the public health community advocates and the
private sector in the fight against the world's deadliest infectious
diseases. The Kerry plan provides tax incentives for vaccine R&D,
creates market mechanisms for the purchase and distribution of vaccines
in developing countries, authorizes funding for multilateral vaccine
and immunization efforts, and establishes a commission to coordinate
public-private partnerships for vaccine development. Kerry announced
his plan at a hearing of the Africa Affairs Subcommittee of the Senate
Foreign Relations Committee.

Last year tuberculosis, AIDS and malaria killed 5.2 million
people. This is not a problem waiting to happen--it is already
a catastrophe of the worst order. Today, I am presenting the
first comprehensive plan in the Senate to begin to reverse this
death spiral. Affordable and effective vaccines against these
three diseases are the only sure way to eradicate these
pandemics.

Kerry's bill provides creative financing mechanisms to unleash the
energy of the private sector, which offers the best hope for new
vaccine breakthroughs. The bill increases the existing R&D tax credit
for qualified research into vaccines against TB, malaria and AIDS, and
establishes an investment credit for smaller biotechnology companies
which engage in lifesaving vaccine research. In addition, the bill
builds on President Clinton's call for a vaccine purchasing tax credit
which would double the purchasing power of non-profit organizations
which buy and distribute new vaccines against any disease which kills
more than one million people a year.
The Kerry plan also includes a trust fund for the purchase of new
vaccines, thereby creating a market for developing countries which
desperately need vaccines. It calls on the President to negotiate with
other countries and multilateral banks to establish an international
fund to finance the purchase of new vaccines. It also authorizes U.S.
contributions to the Global Alliance for Vaccines and Immunizations as
well as the International AIDS Vaccine Initiative.

We, as a responsible member of the international community,
should instill the appropriate incentives to encourage research
in lifesaving areas the pharmaceutical and biotech sectors have
previously ignored. This is a moral imperative.

Senator Frist. Thank you very much, Senator Kerry. The
member statements will be made a part of the record in their
entirety. The members obviously are welcome to leave; I know
that a number of you have other hearings going on as we go
through.
Let me turn to ranking member, Senator Feingold and then
Senator Boxer.

STATEMENT OF HON. RUSSELL D. FEINGOLD, U.S. SENATOR FROM
WISCONSIN

Senator Feingold. I want to thank you, Mr. Chairman, for
holding this important hearing. And of course, I want to thank
all the witnesses for being here today. We have excellent
panels in store for us.
And I know the time is very short, so I want to just speak
for literally 1 minute and say, first, how much I enjoyed
Senator Kerry's remarks and how much I appreciate the passion
and commitment that both Senator Durbin and Senator Boxer have
already brought to this issue. I am grateful for it.
We can, of course, all cite the appalling statistics, and
many of us have already had some human encounters with the
human face of this tragedy.
For me, the devastating statistics took on a new life the
day that I learned that some reports estimate life expectancy
in Zimbabwe has dropped from 65 to 39, because of this
epidemic.
And when I was walking past the Parliament building in
Harare in December, I asked somebody how old you had to be to
become a member of the legislature there, the Parliament. The
answer is 40, 1 year older than the life expectancy.
Likewise, many of us have a responsibility to take
legislative action to stop the relentless march of this disease
across the African Continent and through countless African
families.
And Senator Feinstein of California, Senator Boxer's
colleague and I, have introduced an amendment to the African
Growth and Opportunity Act, and have it in the bill at this
point in the Senate version, designed to stop our Government
from pressuring governments that take legal measures to improve
access to AIDS drugs in their countries.
And I have co-sponsored Senator Moynihan's initiative to
step up the fight against mother-to-child transmission of HIV.
I know that all the distinguished Senators testifying
before us today have introduced some proposals of their own. I
hope that this hearing will give this subcommittee and, indeed,
all of the members a chance to consider possible responses and
initiatives in a careful and collaborative fashion. I know the
chairman shares that sentiment with me.
Mr. Chairman, I also ask that the statement of James Love
of the Center for Study of Responsive Law be submitted for the
record. Mr. Love has worked extensively on some of the
intellectual property issues relating to pharmaceuticals.
And I, again, thank you for holding this hearing.
Senator Frist. Thank you. It will be made a part of the
record.
[The statement referred to is on page :]
Senator Frist. Senator Boxer.

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM CALIFORNIA

Senator Boxer. Thank you so much, Mr. Chairman, Senator
Feingold. Thank you both for your leadership on this and for
giving me this opportunity to testify.
If you want to put on the 5-minute clock, that's fine. And
then when it turns red, I will close my----
Senator Frist. OK. Thank you.
Senator Boxer. Really, it helps me----
Senator Frist. OK. Will do.
Senator Boxer [continuing]. Keep track of time. Otherwise,
I tend to lose track of time.
Senator Frist. A good precedent for everybody here today.
Thank you very much.
Senator Boxer. All right. Mr. Chairman----
Senator Feingold. Thank you for setting that precedent
late.
Senator Frist. Well, we went through 11 minutes there.
Go ahead, Senator.
Senator Boxer. All right. Well, let me just say, you know,
sometimes people who like our work will come up to us and say,
``You are doing God's work,'' which I take as the ultimate
compliment. And sometimes I think we do not always, and we do
not.
But I have to say to this subcommittee, you are, because
this is a very, very serious matter that is impacting innocent
people all over the globe. And I am just so pleased to see the
bipartisanship taking shape around it.
I want to also thank, in addition to both of you, Ron
Dellums, who was a former Congressman as you probably know, for
many, many years from northern California, who testified before
Senator Specter and Senator Harkin and myself and Senator
Feinstein in San Francisco a year ago or so, and--and in the
most dramatic terms, the eloquence that I just could never
emulate, told us about what was happening in Africa. Many of us
were unaware of the impact that we now are aware of.
As you know, Mr. Chairman, no place on Earth is harder hit
by AIDS than Africa. And the United Nations has said it is,
``The worst infectious disease catastrophe since the bubonic
plague.''
So here we are sitting in the midst of this plague and
thank goodness we are doing something about it, or we will soon
do something about it.
The statistics, 13.7 million people in sub-Saharan Africa
have died of AIDS, it's an amazing statistic. Last year, two-
thirds of all new cases of HIV/AIDS were in sub-Saharan Africa.
And of all the people in the world living with HIV/AIDS, 69
percent of them live in sub-Saharan Africa.
Unlike many areas of the world, the epidemic there is
predominantly a woman's disease. And I have had a chance to
express that to Senator Helms, because I think we are going to
need him to get more involved in this.
And he was very interested in learning more. And so I am
hoping we can share the results of this hearing today with the
chairman.
A majority of infected adults, 55 percent to be exact, are
women. And this creates a ripple effect. When women get the
disease, they often pass it to their unborn babies.
As a result, 10 percent of the HIV/AIDS cases in sub-
Saharan Africa are children. And when women die, their children
become orphans.
And, Mr. Chairman, this is a fact that has the greatest
impact on me. By the end of this year, the HIV/AIDS epidemic
will be the reason that over 10 million children in sub-Saharan
Africa are orphans--10 million children. That number equals the
total number of children living in California, the largest
State in the Union.
And I would suggest in some of your States, it is many
times more the numbers of children living in your States.
Now, imagine if every single child in California was an
orphan. That is what we are talking about in sub-Saharan
Africa. And even worse, the number of children orphaned there
because of HIV/AIDS could double, triple or even quadruple in
the next decade if we do not do something.
This is a global catastrophe. And we must lead the way, as
my colleague John Kerry so eloquently said, ``It is up to us to
lead the way.'' That is what world leadership is.
I am happy to tell you that Senator Gordon Smith and I have
worked together on this. And along with many of you, we are
helping each other move this forward.
He and I have introduced the Global AIDS Prevention Act.
And it calls on the USAID to make HIV/AIDS a priority in the
foreign assistance program and to undertake a comprehensive
coordinated effort to combat HIV/AIDS.
We do not set up any new bureaucracies. We go along with
the entities that are already there on the ground, doing a good
job. But we give them more resources and we ratchet it up over
the next several years.
I want to say something on a very personal level. I want
you to think about this. In 1983, I was sworn into the
Congress, to the House. And there were a few cases of this
mysterious disease, and I turned around to get the help of my
colleague, Phil Burton. And we started to work on it. And then
he passed away. And I found myself the lone Congressperson from
San Francisco with this mysterious disease.
Mr. Chairman, we have made tremendous progress in learning
to cope with this disease, how to prevent it, how to cope with
it, what we need to do to stop it. We have a long way to go,
but at the minimum we have got to take what we already know and
apply it to Africa, while we help John in his efforts to get a
vaccine.
I want to say on the good news front, there is a new tablet
called Navirapine.
This new tablet Navirapine is going to be very effective,
already is, in preventing mother-to-child transmission. And it
costs half--no--a percent of what the AZT costs. And it only
takes two dosages, one to mother, one to the child.
And the group Pediatric AIDS Foundation, which as you know,
was founded by Elizabeth Glasser, is out there now in Africa
trying to help get this drug out. So we have made progress.
Let me close by saying this: We need to do more on this
fight.
We also need to do more on the fight against tuberculosis.
And I have, again, been working with Gordon Smith on that. And
as we spoke earlier today, this is a humanitarian issue. This
is a moral issue. It is a very spiritual issue.
It is also a question of common sense as Senator Kerry
said. If we do not do something about these epidemics abroad,
we will never resolve our problems here at home.
So, again, I thank you for doing this. And you can count on
me, as I know you can count on all of us, to join hands across
the aisle to get something done. And I know we know what to do.
It is just the will to do it.
Thank you very much.
[The prepared statement of Senator Boxer follows:]

Prepared Statement of Senator Barbara Boxer

the aids crisis in africa
Mr. Chairman, thank you for allowing me to testify before the
Senate Foreign Relations Subcommittee on African Affairs on the AIDS
crisis in Africa. I appreciate having this opportunity and am grateful
to see that so many of my fellow colleagues share my strong concerns
about this terrible epidemic.
As you know, no place on Earth is harder hit by AIDS than Africa.
As the United Nations has said, it is ``the worst infectious disease
catastrophe since the bubonic plague.''
Since the beginning of the HIV/AIDS epidemic, 13.7 million people
in sub-Saharan Africa have died of AIDS. That is 84 percent of all the
people in the world who have died of AIDS since the beginning of the
epidemic.
Last year, two-thirds of all new cases of HIV/AIDS were in sub-
Saharan Africa. And of all the people in the world living with HIV/
AIDS, 69 percent of them live in sub-Saharan Africa.
Unlike any other area of the world, the HIV/AIDS epidemic in sub-
Saharan Africa is predominantly a woman's disease. A majority of
infected adults--55 percent to be exact--are women.
This creates ripple effects. When women get the disease, they often
pass it along to their unborn babies. As a result, about 10 percent of
the HIV/AIDS cases in sub-Saharan Africa are children. More
dramatically, when women die, their children often become orphans.
And Mr. Chairman, this is the fact that has the greatest impact on
me: by the end of this year, the HIV/AIDS epidemic will be the reason
that over 10 million children in sub-Saharan Africa are orphans. Ten
million children--this number is equal to the total number of children
living in California today. Imagine if every single one of them was an
orphan. That is what we are talking about in sub-Saharan Africa. Even
worse, according to those who are working on this issue in Africa, the
number of children orphaned there because of HIV/AIDS could double,
triple, or even quadruple in the next decade.
This is a global tragedy, a global catastrophe, a global emergency.
It requires a global response. And the United States must lead the way.
That is why I have introduced, along with my colleague on the
Foreign Relations Committee, Senator Gordon Smith, the Global AIDS
Prevention Act. It calls on the United States Agency for International
Development--USAID--to make HIV/AIDS a priority in the foreign
assistance program and to undertake a comprehensive, coordinated effort
to combat HIV/AIDS.
Under my bill, this comprehensive effort would address four
essential priorities. The first is primary prevention and education. We
have seen in San Francisco and elsewhere in the United States that
prevention and education is still the best vaccine in fighting HIV/
AIDS. The second priority is to provide medications to prevent the
transmission of HIV/AIDS from mother to child. I have spoken with the
Pediatric AIDS Foundation on this issue, and there are optimistic signs
that a drug called Navirapine, which costs $4 a tablet, can be
effective in preventing mother-to-child transmission.
The final two priorities in my bill are to provide care for those
living with HIV/AIDS, and voluntary testing and counseling.
To meet these priorities, my bill would increase funding for
USAID's international HIV/AIDS effort. Over five years, the bill would
authorize $2 billion for the fight against AIDS, and at least $1
billion of that is dedicated to the problem in sub-Saharan Africa.
As I mentioned, I am joined in this effort by Senator Gordon Smith.
He and I worked together last summer in introducing a separate bill to
fight the international tuberculosis problem, but let me be clear, TB
is not an unrelated issue.
Tuberculosis is a disease that is spread from person-to-person
through the air, and extremely dangerous for people infected with HIV.
According to the Centers for Disease Control and Prevention, TB is the
world's leading cause of death among people infected with HIV. In fact,
TB is the cause of death for one out of every three people with AIDS
worldwide. So I think it is important to address this issue in our
discussion about AIDS in Africa.
These global diseases know no borders. Given that the world is
increasingly interconnected, the United States will never be able to
eliminate HIV/AIDS and TB in this country without eliminating them
worldwide.
Once again, Mr. Chairman, thank you for holding this important
hearing. I look forward to working with you on these critical issues.

Senator Frist. Thank you, Senator Boxer. Thank you for your
commitment to this issue as we all join hands to address it.
Now, Senator Richard Durbin.

STATEMENT OF HON. RICHARD J. DURBIN, U.S. SENATOR FROM ILLINOIS

Senator Durbin. Chairman Frist and Senator Feingold, thank
you for this hearing.
As I approached the hearing room, I noticed a long line of
students waiting to come in and be part of the audience. I
thought it was entirely appropriate that of all the hearings on
Capitol Hill, they would choose this one.
There may not be another hearing on the Hill more important
to their future than our discussion about this epidemic on the
poorest continent on the face of the Earth.
And I hope that those who are following it by C-SPAN or in
the audience will listen carefully, because some of us have had
an opportunity to visit Africa. I do not profess to be an
expert. I was there for 10 days. I came away with one of the
most profound experiences of my life.
I went there to look at a lot of things, to look at food
aid and micro-credit and trade. I came back saying there is one
issue that just overwhelms everything. That is the AIDS
epidemic. The AIDS epidemic may be the greatest moral challenge
of our time.
Will a world of relative worth rally to save the poorest
continent? Will superpowers reach out to save the poorest and
the powerless? That is our challenge here.
There have been some excellent suggestions from my
colleagues, Senator Kerry, Senator Boxer. I am co-sponsoring
legislation with Senator Kerry involving the World Bank. Their
suggestions on vaccine, Senator Boxer's suggestions, are all
excellent.
I have put a bill in. I have no pride of authorship
whatsoever. And I hope that all of us can set that aside for a
moment and really look at the goal here that we are trying to
reach.
I was just overwhelmed in visiting South Africa, Kenya, and
Uganda. Sandra Thurman was with me and as our National AIDS
Director, her group--and she had been there before. I visited
some places that she was well known at, including Tusa and
Kampali, Uganda.
But I can tell you that the people I met there were some of
the most inspiring people I have ever met. These are nations
that have turned into hospices. These are people who know they
are doomed. They look at their children longingly, knowing that
they will never see them reach an adult life.
They try to cope with counseling and support groups and
just the most routine therapies and medicines, knowing full
well that they will never ever be able to reach the drugs and
medicines available in the West that might prolong their lives
a few years or perhaps even longer.
And I came away from that experience thinking to myself, we
ought to be doing things that work. The easiest reaction for
people in the United States is to say, it is impossible, 10
million orphans and tens of millions infected, the rate of
infection growing in some countries--I think the natural
reaction is to turn away from it, not to look at it.
Now, Senator Kerry has said and Senator Boxer has said, we
cannot afford to do that. This is a global world.
What happens in Africa, what happens in Asia, affects
Springfield, Illinois and Tennessee and Wisconsin and Maryland.
We are all in this together.
Here is one of the things that I came forward with, and it
is, believe me, I hope it is part of the bigger package. It
does not solve the problem. But here is what I found when I
went there.
There is no place for these orphans to go. There is no
orphanage. There is no institution that is going to absorb 1.7
million orphans in Uganda. It is not going to happen.
The only hope for these children is in an extended family,
that some relative's family, perhaps--I hope a relative--will
reach out and bring the children in when both the mother and
father have died from AIDS. And it is happening over and over
again.
What will enable these families in some of the poorest
countries on Earth to absorb two, four, five or six AIDS
orphans? My experience is sometimes it is very simple.
There is a lady named Bernadette that I bet will be talked
about quite a bit when Sandy comes up. This is a lady who has
lost 10 of her 11 children. She has been written up in Newsweek
magazine. These 10 kids died from AIDS. And she has brought in,
what, 34----
Ms. Thurman. Thirty-five.
Senator Durbin [continuing]. Thirty-five grandchildren into
her home. She is almost 70 years old. How can she cope? How can
she get by? Let me give you two things included in my bill that
we ought to think about.
Microcredit: Sometimes extending to these poor mothers $100
or $200 in credit can change their lives and revolutionize it.
They can buy some goats, some chickens. They can expand their
sales in the market. Now, they can bring those mouths into feed
from their brother's family. Now, they can take care of these
orphans. Microcredit works.
The FINKA program, which has been helped by USAID is a good
illustration of that. It is 98 percent return and payback, 2
percent default; any bank in America would jump at those
statistics.
But this money can transform lives and empower these
families and particularly these mothers to bring in AIDS
orphans.
My observation, very quickly, is that if you take a look at
any of these countries in Africa, you will find those making
the most progress dealing with development and coping with this
epidemic are those which are empowering females, giving the
women in that society a voice and a role and an opportunity to
help solve the problems.
The second issue, very quickly, is food aid. We already are
engaged in massive food aid distribution. I would like to see
us focusing that food aid to the families that are adopting
orphans and bringing them in. Give them special treatment,
special help.
That is the best way to keep these orphans off the street.
They turn to the streets. They become petty thieves and
prostitutes, and you know that the ultimate result of that will
be horrible.
I will close by saying this: Many people have discounted
this year on Capitol Hill. They have said that because of a
looming Presidential election, we are likely to accomplish
little or nothing.
I hope they are wrong. Can we as a group, Democrats and
Republicans, resolve to do this on a bipartisan basis, to not
leave town in the year 2000 without putting together our very
best effort in a bipartisan response to this AIDS epidemic in
Africa and Asia?
I think our investment in time and energy on a bipartisan
basis with skills from persons like yourself, Senator Frist,
with your own medical background, could be invaluable.
We are not going to cure this epidemic. Perhaps some of the
things suggested by John and others will move us toward that.
But at least for this time and place, let us find ways to
provide support for those families who could bring these
orphans in.
Thank you.
Senator Frist. Thank you very much.
Senator Smith, welcome. Your name has been mentioned as
part of legislation. We would like to turn to you for a few
minutes.

STATEMENT OF HON. GORDON SMITH, U.S. SENATOR FROM OREGON

Senator Smith. I hope it has been mentioned in good terms,
Senator.
Senator Frist. Yes, it was.
Senator Smith. Thank you, Mr. Chairman, members of the
committee.
I am pleased to be here with my colleagues on a bipartisan
basis about a disease that does not know national boundaries
and, frankly, does not care how we register politically.
I was honored a few months ago when Senator Boxer came to
me and asked me to join her in introducing the Global AIDS
Prevention Act. I know there are other approaches to this, but
this is ours.
Our legislation authorizes $2 billion over the next 5 years
to support the Agency for International Development's efforts
to prevent and treat HIV/AIDS abroad.
Fully half of the funds authorized would go to fight AIDS
in the sub-Saharan African area. The remainder will go to other
areas, including some countries of Southeast Asia where
infection rates are growing at alarming rates as well.
While the nations of the sub-Saharan Africa have faced a
myriad of disasters in the last decades of the 20th century,
few reached the proportions that the spread of AIDS has on
every level of life in that area.
I have read news accounts recently of this. I do not think
we can even begin to comprehend the horror in which life is
lived in this area. The statistics are mind-numbing. In some
countries, one in four adults is living with HIV.
Life expectancies in those countries over the next 5 years
have been slashed from the mid-60's to the early 40's.
Cumulative deaths attributable to AIDS number over 13 million
by 1999. And the number of children orphaned by AIDS is
estimated between 7 million and 10 million.
It is incredible to me that there are not even 1 million
children in my entire state. And here you have these kinds of
numbers among the most innocent of our planet.
An estimated 1 million children in Africa are being
infected per year. These numbers impact every facet of life in
this region of Africa, where populations of adults are not able
to enter the work force or care for their children.
And the economy in that circumstance simply cannot grow.
Where millions are orphaned and many time watching their
parents die, a future that includes--does not include any basic
education leaves a very bleak future indeed.
In places like this, governments struggle with civil strife
unimaginable. And basic medical needs of its populations are
simply unmet.
Perhaps you have read in U.S. News and World Report a story
that talked about how this was localized even on a category of
teachers there. I was amazed. I mean, you have where teachers,
one in three, are--or are infected.
And what kind of a future do children have without
teachers, without education? But the teacher community, just
taking that one slice has been decimated in this area.
I am proud of the private and religious organizations that
have heroically struggled to fight the impact on families.
However, it is clear that the scope of the AIDS crisis requires
additional support. In a region of the world where infection
rates reach one out of four of adult population, our diplomatic
efforts to Africa are simply not meeting the task.
While the internal political strife in some of these
countries can be equally heartbreaking in outcome, the ongoing
devastation by the spread of AIDS in some of these countries
needs to be addressed in a broad and an immediate way.
You can see this type of foreign aid is a branch of our
diplomacy. If we are to help the countries of sub-Saharan
Africa facing this very real problem, this has to be one of our
first steps.
I am pleased, as I said, that there are others with other
ideas on how to do this, but Senator Boxer and I have a bill
that does increase funding dramatically.
I am not saying we just throw money at it. I am saying we
target it in ways that actually arrest the spread of this
disease. But I believe there is bipartisan support in this
committee, in the Senate that we do something, and that it
includes a dramatic increase in funding.
I look forward, Mr. Chairman, to working with you and my
other colleagues to make sure that this is a priority, that
this can happen in this Congress and it can happen with
Republicans and Democrats acting in concert as human beings.
[The prepared statement of Senator Smith follows:]

Prepared Statement of Senator Gordon Smith

Mr. Chairman, thank you for your interest in the AIDS epidemic in
Africa and for holding this important hearing.
Several weeks ago I joined my colleague, Senator Barbara Boxer, to
introduce ``The Global AIDS Prevention Act.'' This legislation
authorizes $2 billion over the next five years to support the Agency
for International Development's (AID) efforts to prevent and treat HIV/
AIDS abroad. Fully half of the funds authorized would go to fight AIDS
in sub-Saharan Africa. The remainder will go to other areas, including
some countries of southeast Asia where infection rates are growing at
alarming rates.
While the nations of sub-Saharan Africa have faced a myriad of
disasters in the last decades of the 20th century, few reach the
proportions that the spread of AIDS has on every level of life in that
area. The statistics are mind-numbing--in some countries, one of four
adults is living with HIV/AIDS. Life expectancies in those countries
over the next five years have been slashed from the mid-60s to the
early 40s. Cumulative deaths attributable to AIDS numbered over 13
million by 1999 and the number of children orphaned by AIDS is
estimated between 7 and 10 million. An estimated 1 million children in
Africa are HIV positive.
These numbers impact every facet of life in this region of Africa.
Where populations of adults aren't able to enter the work force or care
for their children, an economy cannot prosper and grow. Where millions
are orphaned, many times watching their parents die, a future that
includes any basic education is likely not to happen. Where governments
struggle with civil strife, the basic medical needs of its populations
go unmet.
U.S. News and World Report last week put this issue in the most
alarming context--with a two page article that underlined the toll on
society in Africa. AIDS is killing Africa's teachers, and U.S. News
cited estimates of HIV infection rates of 1 in 3 in some countries of
Africa. Of course AIDS affects more than teachers, but just looking at
the impact on a society without teachers puts the devastation in very
real context. How does a society function without teachers? How does a
generation of children face the future without education?
I am proud of the private and religious organizations that have
heroically struggled to fight the impact on families, however, it is
clear that the scope of the AIDS crisis requires additional support. In
a region of the world where infection rates reach one out of four of
the adult population, our diplomatic efforts must first and foremost
include a means to stop this epidemic.
While the internal political strife in some of these countries can
be equally heartbreaking in outcome, the ongoing devastation spread by
AIDS in some of these countries needs to be addressed in a broad and
immediate way. This type of foreign aid is diplomacy. If we are to help
the countries of sub-Saharan Africa, facing this very real problem has
to be the first step.
I am pleased that there are other bills in the Senate now with
different approaches to this issue. Our bill does increase funding
dramatically. In general I do not believe that the federal government's
solution to a problem should be throwing more money at a situation. But
I believe there is bipartisan support here on this Committee to
increase funding and I believe that we can work within the Committee to
make sure that it will be spent wisely in the best possible manner.
I look forward to working with you Senator Frist and the Chairman
to authorize sufficient funds to fight AIDS world wide.

Senator Frist. Thank you very much. I want to thank all
four of my colleagues who have come forward. It is a bipartisan
effort.
And as you sit here and listen, clearly none of what each
of you have put forward excludes the other. And in truth, it is
going to take a package.
Over the course of the afternoon, we will be talking about
how to dissect the problem to make sure that the resources are
invested in a wise way, taking into account, your suggestions;
and hopefully by the end of today, we really will be able to
come up with a comprehensive approach. I want to thank each of
you.
It is interesting that the impact of travel there--my own
interest came from working in hospitals in Africa in three
different countries, where the incidents of the patients who
had come into that operating room of AIDS/HIV positivity was
about one in four.
And, again, not enough of our colleagues have had that
opportunity or taken advantage of that opportunity to travel.
But as you listen and you see the experiences, you see how
important it is.
But I thank all of you very, very much.
Senator Kerry. Sir, can I ask that the statement from the
Gates Foundation be placed in the record?
Senator Frist. Without objection, it will be made a part of
the record. And your entire statements will be made a part of
the record.
[The statement referred to follows:]

[For Immediate Release--February 24, 2000]

Statement From the Bill & Melinda Gates Foundation on Senator John
Kerry's (D-MA) Vaccines for the New Millennium Act

The Bill & Melinda Gates Foundation today announced its support for
Senator John Kerry's (D-MA) and the Clinton's administration's work to
develop and distribute life saving vaccines. Senator Kerry today
introduced the Vaccines for New Millennium Act, a proposal which would
authorize U.S. government expenditures to organizations including the
Global Alliance for Vaccines and Immunizations (GAVI) and the
International AIDS Vaccines Initiative (IAVI).
These organizations are also grantees of the Bill & Melinda Gates
Foundation. In November 1999, the Foundation announced a $750 million
grant to the GAVI to help ensure that children in developing countries
are immunized against major killer diseases in the new millennium. The
Foundation also gave more than $25 million to IAVI in an effort to
develop a vaccine that would immunize against the AIDS virus.
The Bill & Melinda Gates Foundation supports efforts to spur
research and development into vaccines to fight the spread of diseases
such as AIDS, tuberculosis and malaria. We are pleased to see the
comprehensive plan being introduced today by Senator John Kerry at the
Africa Subcommittee of the Senate Foreign Relations Committee.
The Foundation supports the plan's goal of establishing as a major
objective of U.S. foreign policy the universal vaccination and
immunization of all children from preventable diseases within 10 years.
Access to vaccines can save the lives of as many as three million
children every year. The Foundation has been pleased to support GAVI,
which works with the pharmaceutical industry, international governments
and others to improve distribution and stimulate the development of
vaccines and IAVI, an international non-profit organization working to
speed the development and distribution of an AIDS vaccine.

Senator Frist. Thank you very much.
I will ask the second panel to come forward. As they are
coming forward, again, let me point out that the idea is to
introduce some of the legislation that is before the U.S.
Congress and then to introduce the administration's policy and
programs as well as to what we know about the disease, followed
by a discussion on the global impact and economics of AIDS. And
then there is what it is actually like to deal with AIDS on the
ground in Africa.
As we have heard, our topic today is a matter of life and
death, not just of a person or the community or of a family or
even just of a nation. It is a matter of life and death for an
entire continent.
Today, we are going to hear a lot about the extent of the
disease, the implications for humanity. We have already heard
of the trends that are becoming increasingly terrifying and, in
many ways, apocalyptic.
I think what is important for our subcommittee and our
larger committee to both understand and focus upon is the fact
that all goals that the United States has in Africa--goals that
we share with Africa--are being seriously compromised in some
shape or form, if not completely undermined, by AIDS.
Our subcommittee has looked at trade issues, education and
health, imports, exports from Africa, corruption, stronger
democracies, efforts toward peace.
This one issue that we are addressing today will undermine
each and every one, all of those, will sap the life from some
of the most promising generations and productive generations,
unless we act and act in a responsible way.
Thus, I view this topic today as one of the greatest--and I
hesitate to say the greatest--but among the greatest policy
challenges for the United States in Africa--for the United
States, for Africa, and for Africans themselves. I think we do
have to be mindful that the United States can and should be a
great force for good in Africa.
We will hear about the fact that the United States is
charitable, is compassionate and as this hearing demonstrates,
I believe we have the political will to take a more aggressive
posture toward combating AIDS in Africa.
The real challenge is going to be, I believe, to determine
how best to use those resources, which are, in fact, limited--
but how best to use those resources in order to maximize the
potential for good on the African Continent.
And it is rare that subcommittees and committees address
with such a clear focus, issues of life and death as we are
today.
[A news release from Senator Frist follows:]

[For Immediate Release--February 24, 2000]

News Release From Bill Frist, U.S. Senator From Tennessee

frist warns aids epidemic to become biggest foreign policy challenge in
africa
Washington, DC.--Chairing a hearing today of the Senate Foreign
Relations Subcommittee on African Affairs, U.S. Senator Bill Frist (R-
TN) warned that the growing AIDS epidemic in Africa is affecting all
aspects of relations with the continent and is certain to pose the
biggest challenge to Africa and to United States policy toward Africa.
``The United States' goals in Africa--expanding trade, better
education and health, stronger democracies and preserving peace--will
all be undermined if the AIDS epidemic continues to plague the
continent at its current rate,'' said Frist. ``The cost in human life
and societal and economic disruptions from this crisis demand that we
don't simply turn our backs. Instead we must seek answers that offer
hope to Africa's future generations. Simply spending more money is not
the answer. We must determine how we can best use our resources to
address this crisis.''
According to reports from the United Nations, 23.3 million adults
and children are infected with the HIV virus in Africa, representing
nearly 70 percent of the worldwide total of infected people. In some
African countries, 20 to 26 percent of adults are infected and an
estimated 13.7 million Africans have already lost their lives to AIDS.
In fact, AIDS has surpassed malaria as the leading cause of death in
Africa.
AIDS is having a devastating impact on social and economic
consequences, depriving Africa of skilled workers and teachers, while
reducing life expectancy significantly in many countries. The problem
is uniquely acute in Africa because of the region's widespread poverty.
In many cases, health systems are ill-equipped for prevention,
diagnosis and treatment.
Senator Frist used today's hearing to take a broad overview look at
the crisis in Africa and examine specific proposals being offered by
the Administration and Senate colleagues. Frist heard from Dr. David
Satcher, Surgeon General and the Director of the Office of National
AIDS Policy, who described the extent of the disease, its implication
for humanity and current efforts underway by the Administration. He
also heard from Senators John Kerry (D-MA), Barbara Boxer (D-CA),
Gordon Smith (R-OR) and Richard Durbin (D-IL) about their specific
proposals for addressing the African crisis.
Senator Frist is chairman of the African Affairs Subcommittee and
has traveled to Africa to participate in medical missionary work to
examine first-hand the challenges African healthcare systems face.

Senator Frist. With that, let me turn to our second panel,
the Surgeon General, David Satcher, who has taken such a
leadership position in this issue and so many issues; and
again--both have already been introduced in other people's
comments--Ms. Sandra Thurman, Director, Office of National AIDS
Policy. And I want to welcome you both.
Dr. Satcher.

STATEMENT OF DR. DAVID SATCHER, SURGEON GENERAL OF THE UNITED
STATES

Dr. Satcher. Thank you very much, Senator Frist, and thanks
for this hearing. To the other members of the Subcommittee on
African Affairs, let me say how delighted I am to have this
opportunity to share my perspective and concerns about AIDS in
Africa.
I am sure you have heard many times of this pandemic being
compared with the plague of the 14th century that wiped out a
third of the population of Europe and more than 20 million
people; or with the influenza pandemic of 1918, which killed
somewhere between 25 million and 40 million people in the
world.
I want to say that I believe that in a sense we have never
seen anything like the AIDS pandemic, and I am going to tell
you why.
Let me just emphasize again that we are talking about a
pandemic that has already killed over 16 million people in the
world, and a pandemic in which there are about 34 million
people living with the virus.
As you have heard, nearly 70 percent of those people living
with the virus are in sub-Saharan Africa; and over 80 percent
of the people who have been killed by the virus are in sub-
Saharan Africa.
In sub-Saharan Africa, there are 12 to 13 African women
infected for every 10 African men. Now, that is different from
this country where, as you know, this has been predominantly a
male disease, even though the infections in women are
increasing.
But there are very interesting differences. I think this
figure is an interesting one, and it is real, the fact that
every day, 15,000 to 16,000 new people are infected by the AIDS
virus in the world. And, again, over 70 percent of those are in
sub-Saharan Africa.
It is also interesting, I think, that when this epidemic
started in Africa, it was primarily in the upperclass. It was
in businessmen who traveled, and they often encountered
commercial sex workers. And they then in turn spread the virus
to their partners back home.
And now, of course, it is primarily a disease that
threatens mostly the poor and the uneducated, but still very
much a disease of all the people.
How is it different? I think one of the most important
things is to point out how this virus is different, because I
do not think we have ever seen a virus like this which, in
fact, infects the host; becomes a part of the cell of the host,
the genetics of the host in essence; reproduces itself within
the cell. And this can go on for ten or more years without the
host being ill or even, in some cases, even knowing that he or
she is infected.
That was not true with the plague. That was not true with
the influenza pandemic. They hit hard and fast. People died,
almost 40 million people within 2 years with influenza
pandemic.
We are in at least the second--the end of the second decade
of this pandemic, and we are just beginning to see the impact
of it. There are still millions of people infected with this
virus who do not even know they are infected.
And so the difference here is: How do you convince people
that you are dealing with something as serious as the AIDS
pandemic when so many people who are infected are healthy,
walking around every day, working every day, doing well? But in
time, as we are seeing in sub-Saharan Africa, the epidemic
explodes.
So I think that challenge that we are facing in terms of
education and prevention, but also that partnership in a sense
between the virus and the host, which goes on for so many years
and which allows the virus to be spread to other people, it
interacts with ignorance. It interacts with poverty. It
interacts with prejudice in terms of sexism, and it interacts
with denial.
And we have seen all of those things in sub-Saharan Africa
and in other places throughout the world. And it is a unique
kind of public health challenge, which we do not have a record
of having been successful in conquering, so it is a new
challenge that we are facing.
I want to talk a few minutes about the public health
approach to this problem, because I think it does dictate how
we are going to face it.
As you know, there--we generally define four steps in the
public health approach. The first step is to answer the
question, ``What is the problem, and what is the magnitude of
the problem?''
That is the surveillance step. We--regardless of the
problem, we want to know: How big is it? How does it affect
different--how does it affect different people, different
genders, different races, et cetera?
It is very important and you must have the systems in place
in order to pass this step. You have to have testing, accurate
testing. You have to have people being willing to be tested.
You have to have in place a system that randomly tests, to be
successful.
The second step is to answer the question: ``What are the
risk factors or the causes of this problem?'' And in this case,
of course, we know the virus causes the problem, but in
addition to the virus there are other risk factors.
For example, in Africa, working with Tanzania, we were able
to demonstrate a few years ago, primarily NIH-funded research,
that aggressive treatment of sexually transmitted diseases,
other sexually transmitted diseases, could reduce the rate of
infection of HIV by as much as 40 percent.
And what we discovered, of course, was that the presence of
another sexually transmitted disease, like gonorrhea, herpes,
significantly increased the spread of HIV in people who have
those sexually transmitted diseases.
So one of the approaches that has to be taken in dealing
with this epidemic is to aggressively treat other sexually
transmitted diseases and, therefore, slow the spread of HIV
itself.
The third step in the public health approach is to define
interventions that work. The best example, of course, if you
are dealing with polio and you get a vaccine like the polio
vaccine, you have discovered an intervention that works.
And the only challenge then is to go to the fourth step and
implement it widely.
I think when it comes to interventions that that can work
in Africa. I do think we have some, and that we need to
implement them aggressively. But they have to be comprehensive.
I do not think we can select one and exclude the others.
And I would like to focus on three. And the first one is
prevention. The second one is treatment. And the third one is
to continue the research to develop new treatment and to
develop a vaccine.
I think we have to do all three of those things, and that
requires infrastructure development, which I will also mention.
There are some very striking examples of success in
prevention in Africa. Now, obviously in this country, around
the middle of the 1980's we were seeing 100,000 to 150,000 new
HIV infections a year. We have--since the early 1990's, we have
been seeing about 40,000 new infections a year. We made a lot
of progress in prevention.
It is not enough; we need to do much more, but we have
demonstrated that we could reduce the spread of HIV in this
country.
In Africa, we worked very closely with Uganda. And Uganda
has what I think is a very encouraging record, because there
was a time in Uganda when women coming to the reproductive
health clinics, 35 to 40 percent of them were positive for HIV.
And that is within the last 10 years.
Uganda had outstanding leadership from the top, President
Museveni. There was open discussion about this epidemic. There
were signs placed on the streets about the magnitude of this
problem and what needed to be done.
And what we have seen over the last 10 years is a dramatic
decline to about 11 to 12 percent now of women coming to those
clinics being positive for HIV. So Uganda has demonstrated that
prevention can work.
Senegal has also been a good example. In that country, the
religious community has been working very closely with the
political leadership. Senegal has had one of the lowest rates
of HIV infection of any country in Africa. And that continues
as we speak.
But it has demonstrated how openness and education and
aggressive testing and counseling is a part of this prevention.
In other words, when people come and you test them and if they
are positive and you tell them they are positive, on the basis
of that, you can counsel them about how to change their
lifestyle.
If you test them and they are negative, then you counsel
them and tell them how to stay negative. But it is in the
context of knowing their test results.
So in order for a prevention program to be successful, we
think it has to be combined with testing and counseling, very
effective testing and counseling.
The other thing is that we have to remember--because we
have had some very, I think, interesting partnerships--that
many of the countries that are suffering most now from this
epidemic went through a period of denial. And this was at a
time, of course, when the epidemic was increasing, that many
people were infected but didn't know it. Everybody was quiet
about the epidemic. Nobody was willing to talk about it until
very recently, within the last year or two.
Those countries have been hit very hard with this pandemic.
And I think now it is going to be very difficult in those
countries.
But if we start today with aggressive prevention programs--
and in their case, we have already started--we will make a
difference to millions of people.
The second step, and it is sort of a bridge between
prevention and treatment here because as you know, one of the
most important success stories with this epidemic in this
country has been the fact that we have actually reduced the
spread of HIV from mother to child by 72 percent since 1992,
1993, by treating the mother with a course of AZT in the inter-
natal period, during delivery and after delivery, mother and
child.
We worked very closely with some of our colleagues in
Africa, the CDC, NIH studies in Abijan, sub-Saharan of the
Ivory Coast, Cote d'Ivoire, in Thailand and in Uganda,
demonstrated that a shorter course of AZT could reduce the
spread of HIV by as much as 50 percent from mother to child.
So that reduced the cost from about $800 to $1,000 in this
country to a net setting of about $50.
As you heard from Senator Boxer, research done in Uganda
recently funded by NIH has demonstrated that Navirapine can
reduce the spread as much at a cost of $4--a complete cost of
$4 to treat mother and child and reduce the spread of AIDS from
mother to child by more than 50 percent.
That is not happening in most African countries. We still
have about 500,000 cases of newborns every year being infected
by HIV from mother to child. So we need to find a way to
implement those programs.
I know I am getting a little long.
Treatment, I think it is important to point out that we in
this country, of course, have benefited significantly from
treatment. And it is because of how much we know about the
virus.
Again, it is the virus, it is the nature of the virus--the
fact that we know how it incorporates itself into the cell. We
know how it goes through a transcription to become--from RNA to
DNA.
We know how it gets out of the cell and, therefore, we have
developed drugs to stop each one of those points. So it is the
knowledge of the virus that has allowed us to develop as many
as 14 effective anti-retroviral agents now.
And as you know, the death rate from this disease has
decreased since 1995 from over 50,000 a year to less than
20,000 deaths a year.
People with this disease are living much longer. They are
working every day. They are living productive lives. We do not
know how long this drug--these drugs will be effective. There
is concern about resistance developing. But without question,
these drugs have been effective.
Now, about the use of these drugs in Africa: Now, as you
know, one of the real challenges that we face is that these
drugs are very costly. And you have heard about the budgets of
the countries in Africa. But there is something else that I
think needs to be pointed out, and that is that it also takes
an infrastructure to develop one of these treatment programs in
order for it to be effective.
It takes a medical care infrastructure. It takes a public
health infrastructure that we should be working with Africa to
develop. And that in some ways is just as important if not more
important than getting the drugs themselves there.
I think we are working with our colleagues, especially
working with WHO and the World Bank and UNAIDS on looking for
ways to get treatment to countries in Africa that where now it
is unaffordable.
I think we are going to see progress in that area, but I do
not think we can forget the fact that without an infrastructure
to make sure that people are tested and counseled and followed-
up on on a regular basis, the drugs will not solve the problem.
In fact, the problem of resistance development will be
exacerbated tremendously.
So we have to look at the complete picture when it comes to
treatment. We believe that treatment is important. We believe
that treatment expedites prevention, and we have something to
say to people about what happens after you are tested and you
are positive.
I think it helps us to encourage people to come for testing
and counseling.
Finally, we do need to continue our research to develop new
drug treatments and new vaccines. The good news, of course, is
that we have had phase one and phase two trials in this country
and in Africa and in Thailand. And we have begun phase three
trials in Thailand. CDC is providing technical support to our
colleagues in Thailand.
I was able to visit that program on my way back from
Vietnam recently. Thousands of people have enrolled in that
phase three drug trial. And as, you know, phase one and two
primarily looked at safety and dose range.
Phase three, you enroll large numbers of people to--in
order to determine whether there is a significant decrease in
the risk of their getting infected. That is where we are in
Thailand.
Let me, however, caution, this is a very difficult virus.
As you know with influenza, we still have to have a new vaccine
every year. Some people feel that in this case, we could need a
new vaccine every month or more often. We just do not know.
But the nature of this virus is such that it is going to be
very difficult to have an effective vaccine.
Let me conclude by saying, the unfolding AIDS crisis
requires, I think, orchestrated multi-faceted and aggressive
response, well coordinated. It requires partnerships on a
global basis. It requires leadership within the countries in
Africa and in this country.
And we have learned a lot. But we still have a lot to learn
about this epidemic and pandemic.
Thank you.
[The prepared statement of Dr. Satcher follows:]

Prepared Statement of Surgeon General David Satcher, M.D., Ph.D.

INTRODUCTION

Thank you for the opportunity to come and speak with you as a
physician and public health professional on the enormous unfolding
global crisis of HIV/AIDS and its impact on Africa. On January 10,
2000, the United Nations Security Council held a meeting focused on
health--the first time ever in the history of the Council's 4,000
meetings which date back over a half century. I accompanied Vice
President Gore to that meeting as part of his delegation. Never before
had a sitting Vice President addressed the Council, not to mention a
Surgeon General and Assistant Secretary for Health. Why does the United
Nations consider the HIV/AIDS crisis a threat to security? In a word,
instability. Not only has this pandemic wiped out soldiers and military
personnel, but it has also impacted other professionals such as
teachers, businessmen, and laborers who are vital to the future of a
nation. HIV/AIDS is a serious public health problem of such magnitude
that it threatens the very security of many African countries.
Both the dimensions of this epidemic, and the capacity of existing
health care systems to halt its relentless march, demand urgent action
to halt the toll of human suffering and loss of life. The attention
that this Committee is devoting to the AIDS crisis in Africa is
extremely valuable to the creation of new partnerships that can
strengthen the global response to HIV/AIDS.

SCOPE OF THE EPIDEMIC

The HIV/AIDS epidemic will soon become the worst epidemic of
infectious disease in recorded history. In the 1300s, the bubonic
plague decimated the population of Europe with 20 million deaths, and
the influenza epidemic of 1918-1919 killed more than 20 million people
worldwide.
At the end of 1999, 16.3 million people are estimated to have
already died from AIDS worldwide and another 33.6 million individuals
are living with HIV/AIDS. Without a cure in sight, the toll of AIDS in
terms of lives lost is on a rapid rise.
Nowhere has the impact of the epidemic been more severe than in
Africa. Of the 33.6 million people living with HIV, an estimated 23.5
million (nearly 70%) are in Africa. An estimated 13.7 million people
have died of AIDS in Africa, over 80% of the deaths due to AIDS
worldwide. In 1998 in Africa, when 200,000 people died as a result of
armed conflict and war, AIDS alone killed 2.2 million people. The
progression of this disease in Africa has outpaced all projections. In
1991 the World Health Organization projected that 5 million people
would die of AIDS between 1991 and 1999, but half that number now die
each year.
In many southern African countries, HIV/AIDS has become an
unprecedented emergency, with one in four or five persons (20%-26%)
between the ages of 15 and 49 years living with HIV infection. Women
are more heavily affected than men. New information suggests that
between 12 and 13 African women are currently infected for every 10
African men; this disparity is greatest among girls aged 15-19, who are
five or six times more likely to be HIV positive than boys their own
age. The next generation of children of Africa will be doubly burdened
by their own HIV infection, or by growing up without the nurture and
protection of a parent.
HIV/AIDS also interacts with a number of other infectious diseases,
such as tuberculosis and other sexually transmitted diseases.
Individuals with immune systems weakened by HIV are more susceptible to
infection with TB, and TB is widely prevalent across the African
continent. HIV infection is also more easily transmitted in a setting
of untreated sexually transmitted diseases. The predominant mode of HIV
transmission in Africa is unprotected heterosexual intercourse,
highlighting the importance of prevention and early treatment of STDs
as an HIV prevention strategy.

THE PUBLIC HEALTH APPROACH

The HIV/AIDS epidemic in Africa, as it has done throughout the
world, has shown us the interrelationships of social behaviors,
cultural and religious belief systems, and economic and political
systems as they influence public health and the delivery of health care
and prevention interventions. The traditional approach of public health
is to:

define the problem
determine the risk factors or causes of the problem
develop interventions and strategies to address the risk
factors or causes, and
implement interventions and evaluate their effectiveness

We have learned a great deal about the virus which causes HIV/AIDS,
and a number of studies are ongoing to examine the specific subtypes of
the virus which are most prevalent in Africa. Understanding the
pathogenesis of infection, modes of transmission, and parameters of how
infections are moving through a population serve as the cornerstone of
a public health intervention. These basic science inquiries, and the
equally important understanding of the behavioral risk factors and
social contexts that facilitate continued spread of the disease,
continue to inform the public health response to ending this tragic
epidemic.
What is needed to overcome this expanding epidemic is a sustained
orchestrated worldwide effort that includes elements of prevention,
treatment and ultimately a preventive vaccine. Together, the world
community can do this.

PREVENTION

Prevention is our first and best line of investment to end the
global HIV/AIDS epidemic. As the world increasingly becomes a global
village, an epidemic that continues unchecked in any region will
ultimately affect us all. The good news is that we can change the
future course of the HIV epidemic through effective actions taken
today. Over the last two decades we have learned many things, and there
are many examples that demonstrate that the tide of HIV/AIDS can be
turned. The challenge is to take this knowledge and support its
application systematically, not in isolated communities or a few
countries. Bringing prevention efforts up to a scale that can turn the
tide of the HIV epidemic should be among our highest public health
priorities.
Achieving the goals of prevention requires a number of elements:
the availability of accurate information; the ability to act on that
information without fear of stigma or prejudice; and the means to
protect oneself from exposure to the virus. With respect to HIV/AIDS,
it also means the ability of a mother to protect her unborn or newborn
child from exposure to HIV before birth or through breast milk. The
ability to screen and treat other sexually transmitted diseases also
serves as a primary prevention tool for HIV.
Prevention efforts are most effective when they are grounded at the
community level and responsive to the social and cultural contexts in
which people live their lives. All too often, stigma and prejudice
continue to preclude access to prevention information that can minimize
the spread of infection. There are many examples of effective
prevention efforts in Africa, as in Uganda--where the whole nation has
mobilized to end stigma, urge prevention, and change behavior, with a
resulting dramatic drop in the HIV infection rate. In Uganda, the HIV
infection rates in certain antenatal clinics have decreased from 30% to
15% as a result of these efforts. Scientists and health professionals
from the National Institutes of Health and the Centers for Disease
Control and Prevention have worked in partnership with their Ugandan
colleagues to evaluate the impact of prevention interventions and
support research to develop new prevention tools. In Senegal, the
religious and political leadership of the country joined together early
in the epidemic to invest in getting prevention messages out, and the
result has been one of the lowest HIV infection rates on the continent.
These are but a few examples of some successes achieved on a continent
where the epidemic is raging.

TREATMENT

There is also hope for people living with HIV/AIDS to live longer,
healthier and more productive lives due to the discovery of new
antiretroviral treatments, and effective drugs to treat common
opportunistic infections which cause great suffering and early death.
The natural course of HIV disease in the United States has seen a great
change due to these therapies, with many more adults and children now
living longer healthier lives, participating in their communities and
the workforce, and parents caring for their children. Our ability to
slow the progression of immune dysfunction, and to diagnose, prevent
and treat the concurrent opportunistic infections has greatly decreased
morbidity and mortality in the developed world.
One of the greatest successes has come in the ability to reduce
transmission of HIV from mother to child, through HIV counseling,
testing and use of antiretrovirals such as AZT and Navirapine. In the
United States, there has been a 72% decline in the number of HIV-
infected babies born between 1992-1998 with the use of AZT in the
prenatal, labor and delivery, and postpartum period. However this
complex regimen is expensive and requires a level of medical
infrastructure not available in many areas of the world. The urgency to
develop affordable and practical therapeutic interventions for
developing countries is profound. In some areas of sub-Saharan Africa,
30 percent or more of pregnant women are infected with HIV, and 25%-35%
of their infants will be born infected. In response to this pressing
need, a partnership effort between Uganda and NIH scientists identified
a highly effective, safe and inexpensive drug regimen for preventing
perinatal HIV transmission. Administration of one oral dose of
Navirapine to a mother at the onset of labor and another dose given to
her baby, cut the rate of HIV transmission in half compared with a
similar short course of AZT--for a cost of $4.00 instead of the roughly
$800 required for the AZT regimen now recommended in the United States.
If widely implemented in developing countries, this intervention
potentially could prevent some 300,000-400,000 newborns per year from
beginning life infected with HIV.
To maximize the benefits of antiretroviral therapies, their safe
and responsible use requires a level of medical care and infrastructure
that presents an enormous challenge to the developing world. But first
steps can be taken by supporting the development of community-based
capacities to diagnose HIV and provide low cost treatment for common
opportunistic infections that kill prematurely and cause great
suffering. It has been our experience that community-based services,
built upon partnerships among existing community institutions, serve as
the most effective and sustainable model to provide the net of
prevention, health and social services vital to curtailing this
devastating epidemic. As the Governments of Africa and their health
leaders determine how best to involve communities, determine and
address the needs of their people and what their systems can support,
the worldwide public health community must stand ready to help.

VACCINE

The importance of developing an effective vaccine for HIV is
paramount, as the greatest hope for ending the epidemic lies in this
intervention. Vaccines have been the most significant public health
intervention to eradicate or curtail the incidence of feared diseases,
such as polio, smallpox, diphtheria, tetanus and many others. This
Administration has made the development of an HIV vaccine a priority,
and my HHS colleagues are working in collaboration with international
partners to ensure these products will be effective against the virus
strains that are predominant in Africa. A year ago, the first vaccine
trial in Africa began in Uganda under the sponsorship of the NIH and
carried out by Ugandan investigators. The first Phase III vaccine trial
is now underway in Thailand with CDC support.
The utility of an HIV vaccine must take into consideration the
availability of a health care system that can safely deliver the
vaccine to large and often isolated populations. This remains a barrier
today to the delivery of many existing vaccines in Africa and
developing nations in other parts of the world. Even as we press
forward to develop effective vaccines, it is imperative that we not
ignore those who are already living with HIV infection. Our experience
in this country has shown that developing medical systems of care for
already infected persons becomes a critical component of an effective
prevention effort.

CONCLUSION

The full dimensions of the unfolding AIDS crisis are becoming
better understood. The need to mount an orchestrated, multifaceted and
aggressive response is inescapable. Current national/country level AIDS
activities in Africa must be expanded dramatically and rapidly to make
a substantial impact on the course of the disease. As effective
approaches are defined, we need to find ways to support their wide
application, working closely with public health leaders on the front
lines. Experience from some countries has shown that when governments
commit their own political prestige and financial resources, involve
broad aspects of society at the community level, and directly confront
issues of prejudice and behaviors that hold a high risk of
transmission, the rate of new infections can be slowed and communities
can begin to develop more durable responses to effectively cope with
the HIV epidemic. We have seen over and over again in the Western world
the need for a sustained prevention-medical treatment continuum.
Developing strategies that are episodic in targeting at risk
populations can inevitably lead to high rates of recidivism and a
resultant resurgence of new infections.
It is critical we not minimize the human side of this epidemic. The
statistics describe a public health crisis that has largely gone
unchecked, and do not reflect the extent of human suffering. The
extraordinary human toll is evident, the millions of potentials
unrealized, the expanding wave of grief that extends beyond the
individual, their family and community is self-evident. As part of the
Human Family, we will all be feeling the repercussions of this
extraordinary human loss for generations to come. We are committed to
look for every opportunity to assist African countries in their
continuing efforts to end this epidemic.

Senator Frist. Thank you, Dr. Satcher. Thank you for your
real leadership that overview as well as specific
recommendations. That is very, very helpful.
Ms. Thurman, welcome.

STATEMENT OF SANDRA THURMAN, DIRECTOR, OFFICE OF NATIONAL AIDS
POLICY, WASHINGTON, DC

Ms. Thurman. Thank you. And I thank you, Mr. Chairman and
members of the subcommittee and full committee.
I am delighted to be with you today to talk about the AIDS
pandemic, particularly as it affects Africa. And I have to say
that your willingness and eagerness to deal with this issue is
very much appreciated and certainly very much needed. So I
thank you.
And we have heard your colleagues and our Surgeon General
lay out a very vivid picture of the scope of this tragedy,
particularly as it relates to the public health crisis.
But I would like to use my time today to talk with you
about its impact on the stability of families and communities
and, indeed, nations. And I would like to share with you some
of the--of my experiences with the faces behind these facts and
figures.
And I would like to outline for you some of the key
components of the administration's strategy to combat the
pandemic.
By any and every measure, AIDS is a plague of Biblical
proportion. It is claiming more lives than all of the armed
conflicts occurring on the African continent today.
But unlike other wars, it is increasingly women and
children that are caught in the crossfire of this relentless
pandemic. In Africa, as you heard, an entire generation is in
jeopardy. And already in sub-Saharan Africa, as many as one-
third to one-fifth of all children have lost one or more
parents to AIDS.
And within the next decade, we estimate that more than 40
million children will be orphaned as a result of AIDS in
Africa. That is the equivalent of all the children in the
United States living east of the Mississippi. The numbers are
just staggering.
AIDS has wiped out decades of steady progress and
development--steady progress in improving the lives and health
of families throughout the developing world.
Infant mortality is doubling. Child mortality is tripling.
And life expectancy is dropping in many countries by 20 years
or more.
Clearly, AIDS is not just a health issue. It is an economic
issue. It is a fundamental development issue, and it is a
security and stability issue.
AIDS is having a dramatic effect on productivity, trade and
investment, striking down workers in their prime, driving up
the cost of doing business and driving down GNP.
Dr. Sachs will address some of the economic impact a little
later on. But it is also affecting the stability and security
in the region.
As you all know, the U.N. Security Council just last month
held a day-long session on HIV and AIDS. It is the first time
ever that the United Nations Security Council has focused on a
health issue in one of its meetings. And I think that speaks to
a growing awareness that AIDS is a security threat that
requires global mobilization.
This reality was also addressed in a report recently
released by the National Intelligence Council that I encourage
you all to look at.
It documents that the impact of this pandemic is far worse
than we ever anticipated and that it is not just an African
issue or an American issue, that the center of the pandemic or
the epicenter of the pandemic will be in Asia and India in
another 15 years, if we do not do something to stop it now.
But our message today is not one of hopelessness and
desolation. On the contrary, I hope to share with you a real
sense of optimism, because amidst all of this tragedy there is
hope. And amidst this terrible crisis, there is an opportunity
for all of us to empower women, to protect children, and to
support families and communities throughout the world in our
shared struggle against AIDS.
It is important to remember that what we are talking about
today is not these figures and facts, but faces and families.
It is not numbers, but it is names.
And Senator Durbin has talked to you about my hero in the
epidemic that many of us in this room have met, Bernadette, who
lost 10 of her 11 adult children and is supporting 35
grandchildren with the money that she has from a community
banking program.
In fact, she has 15 of her grandchildren in school and is
able to provide modest treatment for the 5 of her grandchildren
who are infected with HIV.
I think that is extraordinary, but Bernadette is not alone.
There are young people from Lusaka doing street theater to
educate their peers about HIV and AIDS.
There are women in Soweto who have formed support groups to
provide care for other women who are living with HIV and AIDS.
Communities around the world are mobilizing and are
creating extraordinary ripples of hope.
The good news is, as many have stated, that we know what
works. We have the knowledge. We have the tools to prevent
disease and to care for the sick. What we are lacking in many
instances is the political will to do so.
The Surgeon General has outlined the successes in Uganda
and Senegal. There is one reason for that. I guess there are
really two. The first is leadership and the second is a steady
resource of support needed for these communities on the ground
to do this very important work.
The United States has been engaged in the fight against
AIDS here at home since the early 1980's. But increasingly we
have come to realize that when it comes to AIDS, both crisis
and opportunity have no borders.
We have much to learn from the experiences of other
countries, like Uganda and like Senegal.
We have done much, but there remains much more to do in the
United States and around the world for us to be able to bring
these important programs to scale.
During the past 3 years, I have visited Africa four times;
I have visited eight countries. We have taken Members and staff
from both parties and chambers to look firsthand at both the
triumphs and tragedies of the epidemic in Africa.
And the response to the findings of those trips, as many of
you know, was that the administration last year requested and
the Congress appropriated an additional $100 million in fiscal
year 2000 to enhance our global AIDS efforts.
The new initiative provides for a series of steps to
increase U.S. leadership through support for some of the
extraordinary community-based programs currently being funded
through USAID and to provide the much-needed technical
assistance that these developing nations struggling to respond
to the needs of their people need.
This effort more than doubles our funding for programs of
prevention and care in Africa, and challenges our G-8 partners
to increase their efforts as well.
And while this is a significant increase in our own
Government's investment in the global battle against AIDS, it
just begins to reflect the magnitude of this rapidly escalating
pandemic.
The initiative focuses on four key areas: prevention, basic
education, mother-to-child transmission counseling, and
testing.
It focuses on home and community-based care, including some
basic medical care for the diseases that the Surgeon General
has talked about: tuberculosis, sexually transmitted diseases,
other opportunistic infections, as a result of HIV infection;
certainly care and support for children orphaned by AIDS; and
last, the all-important development of the infrastructure that
people have mentioned, so necessary to do all of the other
things that we have talked about.
Some of the other key components of this initiative include
an increase in our efforts to include AIDS in our foreign
policy dialog; and to engage the private sector and include the
corporate sector, including foundations, labor, the religious
community and other non-governmental organizations in this
fight.
You will find a more complete description of the
initiative; I have included it in the record for review.\1\
---------------------------------------------------------------------------
\1\ See ``Report on the Presidential Mission on Children Orphaned
by AIDS in sub-Saharan Africa,'' accessible at www.whitehouse.gov/onap
---------------------------------------------------------------------------
But while this initiative greatly strengthens the
foundation of a comprehensive response to the pandemic, UNAIDS
has estimated that it will take at least $1 billion to develop
a comprehensive prevention program in Africa. Currently, all
the donors combined, both public and private are spending a
little less than $350 million.
In addition, UNAIDS estimates that in order for us to even
begin to deliver care and treatment to those who are currently
infected, it will take another $1 billion. And we have barely
scratched the surface when it comes to delivering care and
treatment to people infected with HIV.
We have only begun this work. And in the face of such
tremendous need, the administration has requested in the
President's 2001 budget submission an additional $100 million
to enhance and expand our efforts to combat AIDS in Africa and
around the world.
These funds will enable us to bolster our efforts already
underway at USAID and CDC, and expand our approach to include
the Department of Labor and the Department of Defense to
address HIV and AIDS transmission in the workplace and in the
military.
Let me repeat, however, that the United States cannot and
should not do this alone. This crisis will require engagement
from all segments of all societies working together, every bi-
lateral donor, every international lending institution; the
list goes on and on.
The bottom line is this: We have no vaccine and no cure in
sight. And we are just beginning to see the impact of this
global pandemic.
What we are seeing in Africa today is only the tip of the
iceberg. And as goes Africa, so will go India, the rest of
Asia, and the former states of the Soviet Union.
There must be a sense of urgency in working together with
our partners in Africa and around the world to learn from the
experiences that we have had here in the U.S. and in Africa and
to share those successes, and avoid the failures with those
countries that are currently standing on the brink of disaster.
We look forward to working with all of you here in the
Congress and receiving the broad-based bipartisan support that
this crisis deserves.
AIDS is not a Democratic or Republican issue. It is a
devastating human tragedy that cries out for all of us to help.
In one word, I guess, in many ways, Africa's destiny is our
destiny. But there is hope on the horizon, but that hope will
only be realized if we take constructive action together.
Thank you.
[The prepared statement of Ms. Thurman follows:]

Prepared Statement of Sandra Thurman

Mr. Chairman and other members of this Subcommittee and Full
Committee, I am delighted to be with you today to talk about the global
AIDS pandemic--with a special focus on AIDS in Africa. Your interest in
addressing this crisis is very much appreciated--and desperately
needed.
We have heard your colleagues and our Surgeon General lay out a
vivid picture of the scope of this tragedy--particularly as it relates
to the public health crisis. I would like to use my time with you to
talk about its impact on the stability of families, communities and
nations. I would like to share with you some of my experiences with the
faces behind these shocking facts. And I would like to outline for you
some key components of our enhanced Administration response to this
global pandemic.
By any and every measure--AIDS is a plague of Biblical proportion.
And it is claiming more lives in Africa than in all of the wars waging
on the continent combined. But unlike other wars--it is women and
children that are increasingly caught in the crossfire of this
relentless epidemic.
In Africa, an entire generation of children is in jeopardy.
Already, in several sub-Saharan African countries, between one-fifth
and one-third of all children have already been orphaned by AIDS. And
the worst is yet to come. Within the next decade, more than 40 million
children in Africa will have lost one or both parents to AIDS. 40
million. That is about the same number as all children in the United
States living east of the Mississippi River. Or taken another way, it
is almost the same number as all children in public school in this
country. Left unchecked, this tragedy will continue to escalate for at
least another 30 years.
In just a few short years, AIDS has wiped out decades of hard work
and steady progress in improving the lives and health of families
throughout the developing world--infant mortality is doubling, child
mortality is tripling, and life expectancy is plummeting by twenty
years or more.
AIDS is not just a health issue; it is an economic issue, a
fundamental development issue and a security and stability issue.
AIDS is having a dramatic effect on productivity, trade and
investment--striking down workers in their prime, driving up the cost
of doing business, and driving down GNP. Professionals have been hit
particularly hard in sub-Saharan Africa, including civil servants,
engineers, teachers, miners, and military personnel. In Malawi and
Zambia, more than 30% of teachers are HIV positive. Some mining firms
in South Africa are reporting that nearly half of their workers are
already infected. And many businesses are hiring at least two workers
for every one skilled job, assuming that one will die from AIDS.
According to the Economist magazine, recent studies have found that
AIDS is seriously eroding the economies of many of our partner nations.
In Namibia, AIDS cost the country almost 8% of its GNP in 1996. By
2005, Kenya's GNP will be over 14% smaller than it would have been
without AIDS.
Similarly, in Tanzania, The World Bank has predicted that its GNP
will be 15% to 25% lower as a result of AIDS. The South African
government has estimated that this epidemic costs the country 1% of its
GNP each year, a situation that will only worsen without strong
intervention.
AIDS is also effecting stability in the region. As you all know,
the UN Security Council recently held a day-long meeting on HIV/AIDS.
This historic event highlighted the growing awareness that AIDS is a
security threat that requires a global mobilization. This reality was
also addressed in a report recently released by the National
Intelligence Council. The Report draws several very disturbing
conclusions including the following:

The epidemic is far worse than predicted.
Development of an effective global surveillance and response
system is at least a decade or more away.
The economic costs of infectious diseases--especially HIV/
AIDS--are already significant and could reduce GDP by as much
as 20% or more by 2010 in some sub-Saharan countries.
Some of the hardest hit countries in sub-Saharan Africa--and
possibly later in South and South-East Asia--will face a
demographic upheaval as HIV/AIDS and associated diseases reduce
human life expectancy by as much as 30 years and kill as many
as a quarter of their populations over a decade or less,
producing a huge orphan cohort.
Nearly 42 million children in 27 countries will lose one or
both parents to AIDS by 2010; 19 of the hardest hit countries
will be in sub-Saharan Africa.
The relationship between disease and political instability
is indirect but real.

The prevalence of HIV in the armed forces of many African countries
is already staggeringly high. The Economist has estimated the HIV
prevalence in the Congo range at 50% to 80%. Other recent reports have
projected that the South African military and police are also heavily
impacted by HIV. Moreover, as these troops participate in an increasing
number of regional interventions and peacekeeping operations, the
epidemic is likely to spread.
Extremely high levels of HIV infection among senior officers could
lead to rapid turnover in those positions. In countries where the
military plays a central or strong role in government, such rapid
turnover could weaken the central government's authority. For those
countries in political transition, this kind of instability could slow
or even reverse the transition process. This is a dynamic that deserves
serious attention not only in Africa, but also in the Newly Independent
States of the Former Soviet Union, and in India where AIDS is
intensifying its deadly grip.
The South African Institute for Security Studies has also linked
the growing number of children orphaned by AIDS to future increases in
crime and civil unrest. The assumption is that as the number of
disaffected, troubled, and under-educated young people increases, many
sub-Saharan African countries may face serious threats to their social
stability. Without appropriate intervention, many of the 2 million
children projected to be orphaned by AIDS in South Africa alone will
raise themselves on the streets, often turning to crime, drugs,
commercial sex, and gangs to survive. This seriously affects stability
and promotes the spread of HIV among these highly vulnerable young
people.
Yet my message to you today is not one of hopelessness and
desolation. On the contrary, I hope to share with you a sense of
optimism. For amidst all of this tragedy, there is hope. Amidst this
terrible crisis, there is opportunity: the opportunity for us--working
together--to empower women, to protect children, and to support
families and communities throughout the world in our shared struggle
against AIDS.
It is important to remember that what we are talking about today is
not numbers but names, not facts and figures but faces and families.
Let me tell you the story of one inspirational grandmother I met in a
small village outside of Masaka, Uganda.
Bernadette has lost 10 of her 11 adult children to AIDS. Today, at
age 70, she is caring for her 35 grandchildren. With loans from a
village banking system, she has begun growing sweet potatoes, beans,
and maize, raising goats and pigs, and trading in sugar and cooking
oil.
With the money she earns, she is now able to send 15 of her
grandchildren to school, provide modest treatment for the 5 who are
HIV+, and begin construction on a house big enough to sleep them all.
In her spare time, she participates in an organization called ``United
Women's Effort to Save Orphans''-- founded by the first lady of Uganda,
Mrs. Museveni--linking in solidarity thousands of women allied in the
same great struggle.
And these women are not alone. From the young people doing street
theater in Lusaka to educate their peers about HIV to the support
groups in Soweto providing home and community based care for people
living with AIDS--communities are mobilizing and creating ripples of
hope.
These are the faces of children and families living in a world with
AIDS. And their spirit, their determination, and their resilience lead
us on.
The good news is, we know what works. With our partners in Africa
we have developed useful knowledge and effective tools. Together, we
have designed model programs and proven that they work. And today, we
know how to stem the rising tide of new infections, how to provide
basic care to those who are sick, and how to mobilize communities to
support the growing number of children orphaned by AIDS. Uganda has
demonstrated that with strong political commitment and sustained
nationwide programs, HIV prevalence can be cut in half. And Senegal has
shown that HIV can be stopped in its tracks and prevalence can be kept
low. But there is more, much more that needs to be done if we are to
bring these successes to scale.
The United States has been engaged in the fight against AIDS here
at home since the early 1980s. But increasingly we have come to realize
that when it comes to AIDS--both the crisis and the opportunity have no
borders. We have much to learn from the experiences of other nations,
countries, and the suffering of citizens in our global village touches
and affects us all.
The United States has been the leader in the battle against AIDS.
The Administration has taken an active role in sounding the alarm on
the AIDS crisis in Africa, and in ensuring that the United States
supports African efforts to combat this deadly disease.
Since 1986, this nation has contributed over $1 billion to the
global fight against AIDS. More than 50% of those funds have been used
to address the epidemic in sub-Saharan Africa. Overall, nearly half of
all of the development assistance devoted to HIV care and prevention in
the developing world has come from the U.S. The United States has also
been the leading supporter of the Joint United Nations Programme on
HIV/AIDS--UNAIDS--contributing more than 25% of its budget.
It is a strong record of engagement and one of which we can be
proud, but unfortunately it has not kept pace with this terrible
pandemic. We have done much, but there remains much more that the
United States and other developed nations can and must do.
During the past year and a half I have made four trips to eight
African countries. Together with members and staff from both parties
and chambers we went to witness firsthand both the tragedies and
triumphs of AIDS in Africa. In response to the findings of these trips,
the Administration requested and the Congress appropriated an
additional $100 million in FY2000 to enhance our global AIDS efforts.
This new initiative provides for a series of steps to increase U.S.
leadership through support for some of the extraordinary community-
based programs currently being funded through USAID and to provide much
needed technical assistance to developing nations struggling to respond
to the needs of their people infected and affected by AIDS. This effort
more than doubles our funding for programs of prevention and care in
Africa, and challenges our G-8 and other partners to increase their
efforts as well. This initiative is a significant increase in the U.S.
government's investment in the global battle against AIDS and it begins
to reflect the magnitude of this rapidly escalating pandemic.
The initiative focuses on four key areas:

Prevention. Specifically, we hope to implement a variety of
prevention and stigma reduction strategies, especially for
women and youth, including: HIV education, engagement of
political, religious, and civic leaders, voluntary counseling
and testing, interventions to reduce mother-to-child
transmission, and enhanced training and technical assistance
programs.
Home and community-based care. This will help create and
enhance counseling and support systems, and help clinics and
home health workers provide basic medical care (including
treatment for related illnesses like STDs and TB).
Care of children orphaned by AIDS. We hope to improve our
ability to assist families and communities in caring for their
orphaned children through nutritional assistance, education,
training, health, and counseling support, in coordination with
micro-enterprise programs.
Infrastructure. These funds will help to increase the
capacity for the effective delivery of essential services
through governments, NGOs, and the private sector. We also need
to enhance surveillance systems so that we can better track the
epidemic and target HIV prevention efforts.

Some of the other key components of this initiative include an
increase in our efforts to include the AIDS epidemic in our foreign
policy dialogue, both to encourage and support political leadership in
hardest hit countries and to promote an increased response by our
developed nation partners. We are also taking steps to increase our
coordination with the private sector and the many non-governmental
organizations working in Africa, including religious organizations.
You will find a more complete description of this initiative--both
the problems and solutions--in the report released by the
Administration last summer. I have submitted a copy to this
Subcommittee and would like to request that it be included in the
record as part of my remarks.
While this new initiative greatly strengthens the foundation of a
comprehensive response to the pandemic, UNAIDS has estimated that it
will take $1 billion to establish an effective HIV prevention program
in sub-Saharan Africa. Currently all donors combined are contributing
less than $350 million to that end. In addition, UNAIDS estimates that
it will take a minimum of $1 billion to begin to deliver even the most
basic care and treatment to people with AIDS in the region. We have not
even begun to scratch the surface when it comes to delivering
treatment.
In the face of such tremendous need, the Administration has
requested, in the President's 2001 Budget submission, an additional
$100 million increase to enhance and expand our efforts to combat AIDS
in Africa and around the world. These funds will enable us to bolster
our efforts already underway at USAID and CDC, and to expand our
approach to include the Departments of Labor and Defense for efforts to
address HIV/AIDS transmission in the workplace and in the military.
Let me repeat, however, that the United States cannot and should
not do this alone. This crisis will require engagement from all
segments of all societies working together. Every bi-lateral donor,
every international lending agency, the corporate community, the
foundation community, the religious community and every African
government must do their part to provide the leadership and resources
necessary to turn the tide. It can be done.
The bottom line is this: We have no vaccine or cure in sight, and
we are at the beginning of a global pandemic, not the end. What we see
in Africa today, frankly, is just the tip of the iceberg. As goes
Africa, so will go India and the Newly Independent States of the Former
Soviet Union. There must be a sense of urgency to work together with
our partners in Africa and around the world to learn from the
experiences there and to share the successes and avoid the failures in
countries now standing on the brink of disaster. Millions of lives--
perhaps hundreds of millions of lives--hang in the balance.
We look forward to working closely with each and every one of you,
and are so grateful that this issue is receiving the broad-based
bipartisan support it deserves. AIDS is not a democratic or republican
issue--it is a devastating human tragedy that cries out to all of us
for help.
We are one world--and in many ways--Africa's destiny is our
destiny. There is hope on the horizon--but that hope will only be
realized if we take constructive action together. Today, let us commit
to seize this opportunity. And let me conclude by thanking this
Subcommittee for its interest in this issue, and offer my continued
assistance as you seek ways to respond to this terrible tragedy. As
Archbishop Tutu said: ``If we wage this holy war together--we will
win.''
Thank you.

Senator Sarbanes. I did not have an opportunity to make an
opening statement. I am going to have to depart, and I regret
that. But, I just want to----
Senator Frist. Take a few minutes now.
Senator Sarbanes. I just wanted to commend you for holding
this hearing. I think it is a very significant and important
initiative, and I know that you and Senator Feingold have been
very much focused on this issue, along with other members of
the committee.
It seems to me that we ought to be able to enact an
important piece of legislation in this Congress this year, and
in the next few months. I think it is a very important
priority.
I want to thank the Surgeon General, and I want to thank
Sandy Thurman, who I think has done an absolutely terrific job
of focusing attention on this issue and providing some very
significant and important leadership.
And I very much hope that before this Congress adjourns, in
fact, well before that, that we can get something on the books
that will provide a framework within which they can work and
make some important and significant advances.
I mean, this is--I am encouraged by the sense now that
there are some paths we can follow that will provide some
solutions. I mean, everyone comes in and says how terrible the
situation is, and I think we need to do that to make people
appreciate how severe the problem is.
Although, I think, one reason some people are reluctant to
come to grips with it is because they do not see any way out of
it. And I think if you can combine an emphasis on how serious
the problem is, but also presenting alternatives for working
through the problem, we might be able to develop a greater
willingness both here and indeed over there, as well, because I
understand that is a very significant problem.
A greater willingness to come to grips with this problem.
So, I look forward to looking with you, and Senator Feingold,
and your other colleagues, Senator Biden and others who have
taken a keen interest to see if we cannot get some legislation
on the books.
I do apologize to these other panels that we will be
hearing from today that I cannot stay. And I do want to say to
Father D'Agostino that I have heard a great deal about the good
work that he is doing at his orphanage in Kenya. And one of the
members of your board, Ben Polumbo, is a close friend of mine,
and he has very much brought me up to date on the extraordinary
work that you are doing. And I apologize to my colleagues and
to those giving testimony that I cannot stay.
Senator Frist. I appreciate your comments, and the reason
this construct of this hearing is very much to talk and hear
about the successes instead of just the money, and just the
investment which is critically important, and the construct of
this hearing is very much to look at the very positive things
to show the great advances that have been made. And that is why
this panel itself is important. Senator Biden, do you want----
Senator Biden. I would ask that my opening statement be
placed in the record, and as we say in this body, I would like
to associate myself with the remarks of Senator Sarbanes in
thanking both of you for being so committed to dealing with
this.
And also that the one thing that came across to me was the
point that Senator Sarbanes made. I think part of the reason
why there is this sense of impotence, and as a consequence, a
notion that no matter how much money we appropriate or spend,
it does not make any difference, is that I would bet you that
if you took a national poll, and you gave the American people
the statistics about the circumstances in Africa, south of the
Sahara in particular, the American public would say we would
like to help, but there is nothing to do.
And so we must emphasize what we can do and how what we do
can be of consequence. And the last point I will make, is I
happen to belong to what used to be called an Arms Control and
Observer Group, which is a fancy way of saying there is ten of
us that have been appointed to a committee to deal with the
strategic balance in arms control issues that are going on with
Russia now.
And Mr. Talbott is testifying in the secret room we have,
S-407, at 4, and I am going to have to go to that because of my
responsibility on that committee. But, I will stay until then
and maybe a little beyond, and I do apologize to the other
panels.
It is not out of lack of interest. It is because I am on
another committee that I happen to rank higher on and am
supposed to be there more on. And so--both of these guys know a
hell of a lot more than I do anyway, and I follow them both.
Senator Sarbanes. He is going to make Secretary Strobe
Talbott appreciate why AIDS control ought to rank up with arms
control in terms of significance in dealing with the
international environment.
Senator Biden. Bring him down here. We will just have the
meeting right here. But, thank you, Mr. Chairman.
[The prepared statement of Senator Biden follows:]

Prepared Statement of Senator Joseph R. Biden, Jr.

I would like to welcome all of our witnesses to today's hearing and
to thank each of you for coming. The subject of HIV/AIDS in Africa is
one of intense interest here in the Senate, as evidenced by the
presence of my colleagues who will testify shortly, and the number of
bills that have been introduced since we began the legislative session
this year aimed at halting the spread of this deadly disease.
HIV/AIDS is the 21st century's bubonic plague. There is no need for
me to tell anyone of our witnesses what a devastating impact that AIDS
is having in sub-Saharan Africa. It is destroying the very fabric of
African societies. According to news reports, it is killing the
professional classes, the civil servants, the teachers, and military
officers. Teachers are dying faster than academic institutions can
train replacements. I have read that some African militaries have an
infection rate upwards of 40 percent.
AIDS is devastating the rural areas. AIDS orphans are shunned,
ignored and neglected because of the stigma associated with the
disease, due to fears that they might be infected with the virus, and
due to ignorance about how the disease is spread. Millions of children
are left parentless in countries where government social safety nets
are too weak to support them. They are left to fend for themselves.
The result is millions of orphans literally living in the streets.
They may or may not be HIV positive, but they are almost certain to die
of starvation, or to become the victims of some sort of violence or
exploitation.
In essence we have a situation where two generations of people are
being lost. The adults are dying at an astronomical rate. The children
are being neglected to the point where it will be almost impossible for
them to contribute in any meaningful way to society when they reach
adulthood.
James Wolfensohn's remarks before the UN Security Council about the
level of funding needed to combat the disease in Africa are truly
sobering. If he is correct, this means that the efforts of the
international community are only one tenth those needed to halt the
spread of this modern day plague. It is apparent that more needs to be
done.
I will close by underscoring two things: First, the international
community cannot fight AIDS in Africa alone. We are going to need more
than cooperation from our African partners. We need their active
participation. The focus and commitment of African governments, heads
of state and of civil society is urgently required if the spread of
HIV/AIDS is to be slowed at all, let alone checked and halted.
Second, there are treatments available in the United States which
can considerably lengthen and improve the quality of life of those
living with HIV/AIDS. The impact in Africa should these drugs be made
affordable and available would be profound. At the very least, it would
slow the loss of the professional and working classes which are the
backbone of these countries. It would cut down on the number of AIDS
orphans and the resultant social problems.
There has to be a way to make these treatments available to those
living with AIDS in Africa, and I hope that we are able to explore the
possibility during the course of this hearing.
Again, I thank each of our witnesses for coming here today and I
look forward to hearing your testimony.

Senator Frist. If you let me just ask one question and then
I will turn to my colleagues. We do have three--three, or two
additional panels. Doctor Satcher, Africa is 10 percent of the
world's population. You have 70 percent of the world's
infections. What is the short answer as to why AIDS has spread
so extensively in this continent and has taken such a hold in
Africa as we have heard? In truth, it is worldwide, but why
there, why the hold there sooner than other continents?
Dr. Satcher. I think the shortest answer is, I do not know.
I think we do not know, and I think the conference out in San
Francisco recently demonstrated that. Every time we look at
data, we learn something new. For example, we learned that in
different countries in Africa where the behaviors are the same,
the Rabi infections are different.
And we do know, for example, that there are some things
like the problem with respect to sexually transmitted diseases
that influence the transmission of HIV, but we are also
beginning to think that there is some host genetic factors. I
think in one study, about 15 percent of commercial sex workers
demonstrated resistence to HIV.
They were very active commercial sex workers, a lot of
different partners, and yet after years, they had not become
infected. In one case, some of them took off 2 months, and when
they came back to that profession, they were infected. And the
question is, why? What was the difference?
What was the nature of the resistence that broke down with
this period off? So we are still learning. So we do not really
know all the reasons, but let me just say that I think we do
know that there are some factors that tend to perpetuate this
infection, and exacerbate it. And certainly, denial, when we
are not open in discussing it, and--this similar thing happened
in India.
We have not talked about India, but six and a half million
cases are there in India, and I am not sure what the future
holds, but we are concerned about it. But, injection drug use
and heterosexual spread are factors. Primarily in Africa, it
has been a heterosexual spread of this disease.
As I said, we think it started with commercial sex work
with travelers and then spread. But in environments of poverty
and environments for women do not have the kinds of rights that
give them some say in control in terms of sexual relationships,
and in an environment where people are not educated about the
risks, I think they are fertile environments for the spread of
this virus. So you have to say that is part of it, but we also
have to admit that we do not know the full answer.
Senator Frist. Thank you. Could you just comment on the
subtype C virus? I get asked all the time to bring people up to
date, and that is why I appreciate you coming here in terms of
the science itself. HIV I-subtype C virus is the principal
cause of AIDS in Africa, is that correct?
Dr. Satcher. Well, in some areas, there are differences. We
are doing a study right now, and the reason I am going to be
hesitant to respond because we have a special study going
looking at the subtypes in Africa, and we are going to need to
see that through.
But, subtypes are different in different parts of the
world, and that is why also, when you are developing a vaccine,
you really have to target the subtypes in different areas. But
certainly, the subtypes in Africa and the subtype C is more
prevalent.
Senator Frist. And from the exact same standpoint, which is
important as we develop strategies and give incentives, is
there a subtype that is more likely to be amendable to vaccine
development?
Dr. Satcher. I do not think we know yet. I really do not
think we know the answer to that, yet.
Senator Frist. Thank you.
Dr. Satcher. But we have got to find out sooner.
Senator Frist. That's right. Makes every day critical.
Thank you. Senator Feingold.
Senator Feingold. Mr. Chairman, Dr. Satcher spoke of the
importance of testing. What can you tell us about some of the
lower cost testing options that are available now, specifically
saliva-based testing. Is it effective, and is it widely
available?
Dr. Satcher. Well, again, saliva-based testing is fairly
new. We still rely primarily on testing of the blood, but we
know that saliva-based testing can be accurate when done
appropriately. But it is very early, I mean, in the use of it
in terms of large populations of people.
And so, we still primarily rely on blood. You know, I
worked with Uganda. One of the most important things, I think,
was the development of rapid testing. If you can test people
when they come to the site, and they can get their results in
terms of having to go home and come back in 2 weeks, most
people are not going to come back in 2 weeks.
So the rapid testing technique which we developed in
conjunction with our colleagues, I think has made a big
difference in terms of prevention, testing and counseling
prevention.
Senator Feingold. Let me ask both of you. Well, you have
talked about the spread of AIDS in Africa and the epicenter
moving from eastern to southern Africa, and as everyone has
said, you see the progress in Uganda and Senegal.
Could each of you speculate on the future of this in
Africa, the places that are likely to be hot spots, in the
negative sense, in the future, and where can we look to for
successes, such as Uganda and Senegal in the relatively near
future? Start with Dr. Satcher and then Ms. Thurman.
Dr. Satcher. Well, I think--history, I think, tells us that
we can look for successes in those countries where you have the
leadership, progressive leadership, in discussing this
epidemic, and in providing the resources.
One of the things we have not talked about, and I want to
make sure that we do not miss it. I did talk about the
importance of aggressive treatment of sexually transmitted
diseases.
That requires a primary care system being in place. We talk
a lot about the drugs, but in the absence of a primary care
system in place, people do not get treated for sexually
transmitted diseases that we know how to treat.
And therefore, in those countries, we know that the spread
is going to be exacerbated. The success stories are going to
come, I think, in the countries where there is leadership,
where there is commitment to supporting a primary care
infrastructure.
Senator Feingold. Is there anywhere in particular where you
feel that leadership is coming in addition to the country's----
Dr. Satcher. Well, honestly, we know a lot about Uganda. We
know a lot about Abidjan, Cote d'Ivoire----
Senator Feingold. Ivory Coast.
Dr. Satcher. Tanzania, Senegal, but I also think that South
Africa is working very hard now. They have a lot to overcome.
They have 1,500 new infections every day in South Africa, but
they are committed to working hard.
We are working very closely with them. We expect to see
some success there because they have good leadership and a
commitment to primary care, making sure that we treat
opportunistic infections that go along with this epidemic, we
are aggressive about it. Those things, I think, are going to
make the difference.
Senator Feingold. Thank you, Doctor. Now, Ms. Thurman.
Ms. Thurman. I think I would add to that that we see some
real success in Zambia, for instance. Real leadership on the
part of President Chiluba. We have seen a drop now in
infections in young people in the age range of 15 to 19. And so
I think that is encouraging.
Certainly, President Mbeki in South Africa has taken this
issue on and is showing great leadership. We see leadership in
Tanzania and Kenya. We are seeing some real movement there.
Certainly in Ghana and West Africa, which has a low prevalence
rate, we have seen a lot of activity on the part of the First
Lady and the President in addressing HIV and AIDS head on.
We hope they will share this success of Senegal, by getting
ahead of the game and keeping the prevalence low. I think we
are--I see a trouble spot, however, in Nigeria. We see the
infection rate beginning to creep up. The infection rate
currently in Nigeria is a little less than 6 percent in the
population overall.
We understand that military personnel coming back from
peacekeeping missions are now showing a 15 percent prevalence
rate. So that tells us that as people move around, we can see
Nigeria getting in trouble. I think that is an area we need to
put some special attention.
Senator Feingold. That is very helpful. Let me just
followup with you on another matter. You indicated to me a
while ago that the administration was reviewing the Feinstein/
Feingold amendment which prohibits the Government from
pressuring countries using legal means to gain access to HIV/
AIDS pharmaceuticals. What has been the result of that review?
Ms. Thurman. Certainly, that Feingold and Feinstein
amendment, I believe, supports the administration's policy. And
so we support----
Senator Feingold. The administration supports that
amendment which is in the Growth and Opportunity Act at this
point. I thank you for that, and I thank you, Mr. Chairman.
Senator Frist. Senator Biden.
Senator Biden. I would like to followup if I may with both
you on many questions, but on two issues that have already been
raised. You pointed out at least in one country, possibly two,
where African heads of state have taken an interest, you have
had progress.
I was quite frankly surprised, and I do not know why I
should have been, but I was surprised to find out that when the
conference was called in Zambia last September, inviting nine
African heads of states, not one head of state showed up,
including the President of the host country.
Why in the heck was that? I mean, what is--let me explain a
little more precisely. We all know the cultural/religious/moral
and we could go on, differences that for the longest time
paralyzed our debate about AIDS here in this country.
And we would be foolish if we did not acknowledge that
there was a need for a broader education in crossing religious
and cultural boundaries. So there is something there. I mean, I
am a plain old politician. I am not an African President, but
African Presidents are plain old politicians, whether they are
totalitarian or democrat.
There is no difference. God has not made a new brand of
politician in the millennium. So there has got to be some
reason. What is the political, or social, or cultural reason
for what is by a Western standard at least, ignoring or the
attempt to ignore or deny the existence and/or the extent of
the problem?
Dr. Satcher. I will be brief because I do not really know
the answer to that, but I think we do know that going back to
what I said about the nature of AIDS and the fact that people
can be infected for years, 10 years or more, and not even know
they are infected.
This epidemic can be very quiet. And I think there is a
tendency to deny the fear that it is going to hurt the image of
a country, tourism, et cetera. I think all of those things are
factors. And there are many examples of where leaders have
waited until this epidemic exploded.
Senator Biden. Well, how many heads of state have acted? I
mean, if you had to count of all the African countries, which
heads of state would you count? You do not have to give me
their names, but the number; how many would you count as being
fully engaged and energized in dealing with this problem? An
honest answer.
Dr. Satcher. Senator Biden, I would say that within the
last 2 years, I think the leadership in South Africa has
stepped up to the plate. And apologize for, in fact, ignoring
and denying the existence of this problem, and the negative
attitude toward women that went along with it in terms of the
blame. In some countries, women are blamed for this problem,
and sometimes they are put out of their homes when the men
discover that they are positive, even though in many cases he
was the one who brought it into the home in the first place. So
we have seen all of that. We have seen all those things, in
fact.
Ms. Thurman. I think certainly, all the things that you
have mentioned. I mean, there is stigma, and there are cultural
norms, and all the rest, but I think from a political
standpoint the thing that has been our most difficult challenge
is that when leaders name a problem, then they are compelled to
have to do something about it.
And in countries that are very poor and countries that
spend only $5 per capita on health care overall, in countries
that are in armed conflict and spending a lot on military, or
countries that are trying to make ties with other nations and
development investment, all of those are issues that I think
prohibit many leaders from stepping up to the plate and taking
this on head on.
I think that is why it is so important, however having said
that, that this Congress, this Senate, that the President, that
the Vice President, that the other people and leadership in
this Nation are being very open and vocal about the need to do
something about AIDS in Africa and showing a willingness to
take this on because it sends a very strong message to leaders,
not only in Africa, but elsewhere.
Senator Biden. Well, my time is almost up. Let me follow up
on one other part that you both touched on. One of the things
that I personally have been involved in and wish I had not been
involved in it as I am, is this notion of training peacekeeping
forces, or the need for peacekeeping forces.
And up until a few years ago, Third World countries have
viewed participation in that as a way to earn dollars. And has
caused some serious dilemma in a two tiered world system here
at the U.N. and other places about the utility of the use of
these forces and so on.
But, you said something that struck me. We are having a
significant increase in the number of African troops that we,
the United States, are helping train for peacekeeping missions.
And yet you point out that in the case of Nigeria, that there
is a 15 percent infection rate of those very troops as they
head back home.
AIDS requires mobility to spread geographically. Are we
doing the right thing? I mean, is there reason to be concerned
about ``training African troops'' I mean, if I read the
numbers, my staff tells me and correct me if I am wrong, 40
percent--estimates are that 40 percent of all military--is that
the number, 40 percent of all military personnel extending to
South Africa--is it all military or just South African
military?
In the South African military, reports have suggested that
as much as 40 percent of their military may be infected with
HIV. Now if that is true in South Africa, I would assume since
you have given us numbers and other data has indicated that
other states may have a higher infection rate, in terms of
sound public policy, international in this case public policy,
what is the right thing for us to be doing here? I mean, should
we be--maybe that is not for you to answer, but could you talk
to me about that piece of it?
Ms. Thurman. Well, I think that when we look at military,
it is one of the reasons that the administration has requested
money in the DOD budget to deal with HIV and AIDS. And the fact
of the matter is that there are very high rates of infections
in Africa, but that is going to be the same in the rest of the
developing nation as we look down the road a few years.
I think our challenge is going to be to use those
militaries which are some of the best infrastructure that we
have in Africa, certainly much better organized and funded than
the health care infrastructure is, and to use that opportunity
to provide education and training, and in some instances, some
basic health care counseling and testing and the rest. We have
seen, again, great success in Uganda, and in fact, Uganda's
response to the epidemic was in large part due to the high
infection rate in their military. And so I think we have an
opportunity that we would be very remiss if we did not seize to
use our military apparatus to engage with other militaries to
provide education and support.
Senator Biden. And again, if I just close this, Mr.
Chairman, I beg your indulgence for another 60 seconds here. I
guess I should not be asking you two the question that is
really sort of perplexing me right now.
The military is the structure that is the most disciplined
and the most bureaucratical manageable, and it is a good thing
for the United States military to be training African military
in terms of awareness. Keep in mind however, that the only
reason we are training them is for them to pick up from their
African country and go abroad.
That is the reason we are training them. We are training
them to participate in peacekeeping activities in far foreign
nations. Is that good public policy?
Because if you are picking up an infrastructure that you
are training, not withstanding the fact that you are training
them as well about the disease, if we do that, you are still
sending somewhere between 15 and 40 percent of those folks into
another area of the world who are infected with the disease,
and I doubt whether you assume that they will be celibate the
entire time they are out of country. That is not the history of
militaries for the past three centuries.
Senator Frist. I need to move to the next panel. Let us
respond quickly.
Dr. Satcher. It is a major challenge and a major
opportunity and we are working very closely with South Africa
around that. But also, look at our experience with Thailand. It
was primarily a problem with the military, major problem, but I
think the success in Thailand demonstrates that you can deal
with that.
I think we have an opportunity to work very closely with
the military in Africa. U.N. Security Counsel discussed that
problem in its January 10 meeting, but I think it is an
opportunity as well as a challenge today.
Senator Biden. I thank you both.
Senator Frist. It is an important issue that we had the
opportunity to discuss before and I think further discussion
and further disclosure on that in getting real direction, is
critical. Senator Feingold.
Senator Feingold. Mr. Chairman, just before Senator Biden
leaves, he has asked as always, a couple of very good and tough
questions. And I will defer until later to talk about the
attitudes of the Presidents. But, his issue about the military,
I think is very important.
I would just note that a country like Nigeria is involved
with sending its troops to different places, regardless of our
policy any ways, such as in Liberia, and that this is a problem
in any event. We have an opportunity to get involved in trying
to educate these countries about how to solve this problem.
I just want to put in the record, that my understanding is
that Senator Levin, the ranking member of the Armed Services
Committee has a strong interest in working on this aspect of
the problem.
Senator Biden. Let me make it clear. I am not suggesting
that we should not train. I was not suggesting that. I was just
wondering. Thank you.
Senator Frist. Provocative as always. Thank you, Senator
Biden. I think what we will do is keep the record open for
another 6 days to submit questions. Again, I appreciate it very
much your perspective. It's very useful in terms of setting the
stage for today. Thank you both very much.
Our third panel to come forward, Dr. Jeffrey Sachs,
director, Institute for International Development, Harvard
University, who has testified numerous times here, is with us
once again. Dr. Harvey Bale, director-general, International
Federation of Pharmaceutical Manufacturers Association from
Geneva, Switzerland.
Dr. Peter Lurie, deputy director, Public Citizen's Health
Research Group, here in Washington, DC. A number of issues we
will touch upon today including the economic impact of AIDS
during this panel. Dr. Bale, in particular, I want to welcome
you from Geneva.
He is an economist with the International Pharmaceutical
Manufacturers which represents people broadly across the world,
who will focus on the economic research and development of
drugs to treat AIDS, and Dr. Peter Lurie, who is a physician,
will be telling us more about drug companies and the licensing
issues to treat AIDS in Africa.
Welcome to all three of you and I think we will have your
presentations in the order that I introduced you. Dr. Sachs
first. Welcome.

STATEMENT OF DR. JEFFREY SACHS, DIRECTOR, INSTITUTE FOR
INTERNATIONAL DEVELOPMENT, HARVARD UNIVERSITY, CAMBRIDGE, MA

Dr. Sachs. Thank you very much, Mr. Chairman. Thank you for
the opportunity to be here. I apologize for not having prepared
testimony before hand, but I have a good excuse. I am just
coming back from Nigeria last night, so I bring you fresh
information.
And I hope it is worth the bargain. You have heard many
eloquent statements in the last hour about the depth of the
crisis. And I think the task at hand is very clear and that is
to fashion an effective response. There can be no doubt that
this is one of the greatest challenges in the entire world.
Ms. Thurman noted that this will wipe out decades of
developments. I would just rephrase a little bit what she said
when she said decades of steady progress. If only it were true.
This is going to set back a continent that has not had
steady progress, that is already, even without this epidemic,
been in an extremely deep, and I would say deepening crisis,
were the measures had been taken in the last 20 years through
the multi-lateral institutions and our own AID agencies have
not been very effective to date.
And then, this crisis comes on top of what is already an
extraordinarily a deep crisis. We face therefore, a very grave
challenge. I have had the opportunity to discuss these issues
with this subcommittee before and let me just repeat a point
that I had a chance to make last time we talked, and that is
that when one looks at the development crisis in Africa, even
without AIDS, one has to say that the public health crisis may
be the most important single factor of all in Africa's failure
to achieve sustained economic growth.
So we normally think of development producing good health,
but I think the research is showing, and the experience and
common sense is showing, that the Congress proposition, that
poor health is a fundamental barrier to successful development,
is equally true.
And when we ask why Africa of all the regions of the world
that has had the very hardest time, there is little valid in my
mind that the profound diseased ecology of the continent, the
fact that you have the most efficient vectors of malaria by
far, that you have for many, many deep reasons of the tropical
environment of Africa, a burden of infectious disease that is
many folds higher than in other parts of the world, that that
has been one of the core conditioning factors of Africa's poor
economic development.
We have to address the health crisis, in other words, in
order to get at the development crisis. And unfortunately, we
did not really recognize this for a long time. All of the
structural adjustment programs of the last 20 years, I thought
that by turning macroeconomic dials, one could save the days. I
am a macro economist.
I believe in turning those dials, but I can also tell you
that they do not get to where we need to go when you have a
continent where the burden of disease is such that life's
expectancy is already only 52 or 53 years even before the AIDS
epidemic started to hit.
So we have a fundamental public health crisis in Africa
that needs to be addressed, of which HIV/AIDS has become, by
far, the dominant factor, but it was bad enough already, and it
needed a major--it was a fundamental challenge for us and for
Africa, even beforehand.
Let me also note that the economic effects of AIDS, or
malaria, or cystosomiasis or of the other multiplicity of
diseases and disease groups in Africa are extremely complex.
They are not well understood.
They are multi-factorial, and they hit the economy in so
many different ways that the cumulative effect is absolutely
profound. They effect not just the lost days of work and the
lost years of life, but also the possibility of running stable
educational systems, the possibility of investing in ones own
future, the possibility of attracting foreign direct investment
where we know that the malaria barrier or now the AIDS barrier
is keeping out foreign investors that might otherwise go into
the continent and be a major force for development there.
My own guess, but it is purely a guess, is that the AIDS
epidemic will take off 1 to 2 percentage points of growth per
year, in GDP, but that is on top of another couple of
percentage points that malaria and other interactions of
malnutrition and infectious disease already take away, so that
we are talking about a continent in the grips of a generalized
public health crisis, and a development strategy should start
at that point.
We are not there yet. There is no plan that I know of that
our Government or the international institutions has
formulated. And one of the things that this committee could be
extraordinarily helpful on, in addition to completing
legislation this year, would be to push the administration to
develop a more comprehensive framework, and to push the
administration to work together with the rest of the world to
develop a global framework.
This is not in place as far as I can see right now, and it
is one of the main messages that I would like to leave under my
brief remarks. We need a global plan in two senses. One is a
global plan that engages the global community. Of course, it
should engage Africa, but it should engage all of the major
donor countries. This is not just a U.S. burden. This is a
worldwide effort that needs to be raised and the multilateral
institutions need to play a very important role. We need a
global plan in a second sense which is that it should be global
in the sense of a comprehensive development strategy, working
together with Africa in which HIV/AIDS is seen as part of a
more general set of problems that need to be treated together.
We have heard, for example, many of the previous witnesses
have noted that without a working health care system more
generally, it is very hard to do some of the effective AIDS
interventions. But we do not have working health care systems
in a lot of the continent, and I will come back to a basic
reason for that in a moment.
Now, I would say that there are at least three basic
directions that a comprehensive plan should have. First, there
are many types of interventions that could probably be
effective already now.
We have heard some of the preventative interventions and
other kinds of surveillance and treatment interventions. We
could discuss those in more detail in questions if you would
like. Second, we need much more focus on basic science. We do
not have the answers to a lot of the most basic questions, and
as Dr. Satcher noted, when you asked him about the clads of HIV
virus in sub-Saharan Africa, in the February 11 issue of
Science, they report the latest findings from studies, and
essentially, and I will just paraphrase, there is tremendous
perplexity about the fact that you cannot lick the extent of
the epidemic with nature of sexual behavior, so clearly as one
would imagine.
So as the Science issue reports, researchers found little
connection between HIV prevalence and life time numbers of
sexual partners, contact with sex workers, condom use with sex
workers, or age at first sex.
And what they say is that we believe that differences in
sexual behavior will probably outweigh differences in the
efficiency of HIV transmission. This is a startling finding,
but it shows how much basic science and immunology, and
epidemiology is yet to be done and in situ for us to get sound
answers but we are not investing very much in that, as usual,
for that kind of in situ, immunological and epidemiological
investigation.
And third, there is the applied research for vaccines which
will be absolutely fundamental. Let me talk about funding
sources briefly, if I might. I see four types of sources which
I would like to mention.
First is debt cancellation and debt relief aid, an issue
that we have discussed before. I can tell you, Senators, we
have not yet done what needs to be done in that most basic
mechanism.
And to this day, the IMF does not seem to understand that
there is a link between AIDS, for example, and debt
cancellation. So to this day, and I mean until yesterday
evening in Laos, you have the IMF saying, ``You do not need
that relief,'' without even looking at the social conditions.
In Nigeria where President Obasanjo has said, ``This is what I
truly need to be able to fund social spending.''
Last year, we got from Nigeria $1.9 billion of debt
service, and you know what they spent on health care? $360
million. We took six times more out of the country in debt
servicing than they spent on health care. This, if I could
characterize it, is not serious international policy by the
IMF, the World Bank, the U.S. Treasury, the U.S. Government, or
the other creditors.
If you want to find a lot of money for this, look to the
debt service payments because we are bleeding the continent,
and to this moment, the IMF is not registering the reduction in
correspondence with the crisis. And I have written to the IMF
in the last couple of days, saying that in the first four debt
reduction cases that they put on their web sites, I have gone
back to look at the underlying analysis.
There is not even a paragraph of attempt in any one of the
four countries who link social spending to the amount of debt
relief. It is as if the issue is not even joined. This is the
first place to look because we can get billions of dollars of
relief, but to this day, the administration has told Nigeria,
we are not discussing debt cancellation with you.
And if ever there was a policy that could leverage our
funding for about $150 million of appropriations for Nigeria,
we probably leverage about $25 billion of worldwide relief for
Nigeria, a lot of which could be turned into increased social
expenditure. So, there are tricks to this that really make a
great deal of sense and we are not even at the starting line on
this yet.
Senator Biden. Mr. Chairman, let me briefly intervene. The
Secretary of the Treasury is coming up to testify to us his
single highest priority is debt relief.
Dr. Sachs. And I would be happy to submit some queries that
I have about how to make the connection between what is on
offer and what is really needed? Because we are not there yet.
The logical connection has not been established.
He is on the right side of the issue within the sense of
pushing hard to get it, but we are not getting the connection
between the depth of the relief or the coverage of countries
and the social needs. We have an absolutely bizarre
bureaucratic mechanism for deciding these things where the
relief is linked to an arbitrary multiplier of exports, not to
anything about social conditions, AIDS, needs, programs. It is
weird. It is absolutely very strange. Second----
Senator Frist. Let me get you to summarize, and we will
come back and question and answer.
Dr. Sachs. I will stop in 1 minute then. The second point
that I think is very important is we will make appropriations I
think, in addition to debt cancellation, although I tell you,
debt cancellation through growth leverage for our buck that you
can find if it is deeper than we have right now.
We have to decide whether to put that through USAID or
through the UNAIDS. And I think we make a mistake actually, to
put this strongly to a USAID rather than through the global
UNAIDS effort.
This is not hugely popular in this Congress, perhaps, but
we have a multilateral international group of actors that are
charged with the global coordination, and we do not fund them,
and we do not help them to operate effectively. So I would urge
that we put them into the global effort and then multiply our
contribution by demanding that what we put in gets multiplied
by five or by ten by other donor countries. And we make the
real package that is really global, not a bunch of particular
projects of our own USAID agency.
This is not going to make friends necessarily with an
agency that I work closely with, but I do not think that in
this case we are doing the best to get the global leverage if
we do not fund the international program more effectively. A
third, I will mention, I am a big fan, and I have tried to
analyze this carefully as possible a kind of vaccine promotion
initiative, and I just want to be on the record definitely as
supporting the direction that we are moving, although I think
there are a lot of details that need to be discussed. And the
fourth place where we can get some help is from the
pharmaceutical companies.
I know my friend, Harvey Bale, will speak to that. I do
believe in two tier pricing for a number of the most important
AIDS drugs, particularly those that stop vertical transmission.
We have to engage the private sector constructively, not to
break their markets here, but to push them, and urge them, and
help them to deliver, at cost, these drugs to the poorest
countries in the world. And I think that those are four ways to
proceed.
Senator Frist. Good. Thank you. And I am sure that we will
come back to this discussion. Thank you, Dr. Sachs.
Dr. Bale, welcome.

STATEMENT OF DR. HARVEY E. BALE, JR., DIRECTOR-GENERAL,
INTERNATIONAL FEDERATION OF PHARMACEUTICAL MANUFACTURERS
ASSOCIATION, GENEVA, SWITZERLAND

Dr. Bale. Thank you, Mr. Chairman. Thank you Mr. Chairman
and members for inviting me. I am visiting over here on my way
to Tokyo from Geneva, and it is a pleasure to participate in
such an important forum as this. As you--well, perhaps you do
not know, IFPMA represents the industry to the World Health
Organization, UNAIDS, the World Market Profit Organization, the
World Trade Organization. We are also partners in the Global
Alliance for Vaccines and Immunization and the Medicines for
Malaria Venture.
I would like to sum up by making a number of key points
that are in the written testamony in fuller detail.
Our industry is dedicated to augmenting its effort to fight
the AIDS crisis. Our primary role is in providing and combating
AIDS through its new discovery and development capabilities,
vaccines, medicines, and treatments. Today, there are about 15,
as Dr. Satcher mentioned, about 15 antiretrovirals on the
global market, with more in the industry's research pipeline.
Today, there are over 100 new AIDS medicines in our industry's
R&D pipeline, including 35 new antivirals [ARVs] and 10
vaccines for HIV prevention. This research will yield shorter-
course treatments, such as Navirapine from Boehringer-Ingelheim
for preventing mother-to-child transmission of HIV; more
convenient and tolerable regimens, such as tests of ``one-pill-
a-day'' regimens being tested by various research companies,
including Bristol-Myers-Squibb; and scientific breakthroughs
which could open up whole new avenues to fight HIV, such as a
recent announcement by Merck scientists that they have found
two experimental compounds which were able to obstruct the
activity of an enzyme called integrase which plays a critical
role when the AIDS virus infects cells.
Second major point, we believe that the HIV crisis requires
a comprehensive multi-sector response. I think this has been
said already. And let us get a coalition of stakeholders. No.
1, set up educational programs that change attitudes and
behavior to curb the HIV spread. Two, enhance the capacity of
health systems to deliver essential medical care. Three,
encourage new innovation, new therapies, and new vaccines while
improving access to existing ones in such regions as Africa.
More generally, innovative approaches are needed to attack
disease patterns in the poorest countries. And more resources
are required as Jeffrey has mentioned. Fortunately, novel
approaches are being explored in a sense that the WHO, and the
World Bank, and UNAIDS are looking at ways to guarantee a
market for vaccines for diseases predominant in developing
companies--heading up an idea that has been raised before by
Professor Sachs.
The Medicines for Malaria Venture is another way of
introducing public-private partnerships and we are proud to be
a full partner in it. This public-private partnership is
designed to develop new antimalarial drugs as an investment in
resources to find new treatments for this wide spread disease.
We would urge the Congress as part of its' attack on poverty
and disease in Africa and elsewhere, to back this public-
private partnership by joining several other countries that
have already funded the MMV.
The financial requirements to contribute positively to this
are very small at the beginning but have major potential
benefits, if we can find one new antimalarial every 5 years, is
enormous. Another mechanism can be explored: the orphan drug
legislation, the tax credit, and market exclusivity provisions
of the U.S. orphan drug legislation.
We note positively the proposal by the administration to
set up a market-based mechanism to support vaccine development
for HIV, malaria, and tuberculosis. New incentives, however,
should not be limited to vaccines. Breakthroughs in drug
treatments may come more quickly than new vaccines and may
provide cures, which would have an important impact in quality
of life for those millions already living with disease. Despite
the large amount of research being conducted into HIV/AIDS,
most estimates still reflect a view that a very effective
vaccine may still be at least 5 or 10 years away.
Let me summarize with some major conclusions because I
think a number of points have been made about infrastructure
requirements, and these are enormous. And in fact, these
infrastructure requirements dwarf the cost of medicines.
Cooperation among public institutions and the private
sector is the only route. It is the only route that can work in
an effective way. We in industry are working on more effective
therapies and vaccines, but delivery will be a critical problem
and this involves several key issues, including the following:
One, political commitment. Concrete actions by countries
affected are needed to prevent the spread of AIDS and to treat
those affected. Raising AIDS awareness is a priority and it is
essential. It is only now being done in some countries.
As UNAIDS' executive director, Peter Piot has mentioned,
pumping money into a country where AIDS is a low priority will
do nothing to affect the epidemic.
Second, international funding. Professor Sachs has already
mentioned this. More international funding is needed. Looking
at the issue of drugs, bridging the cost gap in the case of
drugs and future vaccines between the costs and prices of AIDS
products that would be coming forward; while getting cheaper,
they will often still be much more expensive than people in
poor countries can afford.
How do we bridge that cost gap? You need more funding.
Infrastructure and distribution improvements are obvious, so I
will skip it. Serious partnerships are essential. Our companies
have been working with UNAIDS and countries on pilot projects
in several countries.
Cote d'Ivoire has been mentioned, Uganda, Chile, Thailand.
A true partnership is required at the national level. Not all
countries have responded positively to mother-to-child programs
offers of medicines, even at a substantially discounted price.
It seems that some countries prefer to use an approach of
charging that AIDS drugs have too much toxicity, or they try to
find some other excuse for simply not treating their citizens.
And finally, innovation. One of the most critical elements of a
global strategy is to foster continued innovation through
academic and industrial R&D.
We have responded, but we have to do more. We do not have a
vaccine. We are working on them. But without a strong global
patent system, we would not have these medicines today or we
would not have them in the future.
Industry R&D can only continue when there is respect for
implementation of full intellectual property rights. More and
more concerns about access to AIDS medicine in Africa and
elsewhere, but this access has very little to do with patents.
In fact, I quote one or two of the executives that have been
out to Africa in the last few weeks. They claim it is
irrelevant. I will argue at least that it is not significant.
Many developing countries today do not respect patents. There
are generic versions of AZT on the market today. If one looks
at India, where large populations with AIDS infections exist
and AIDS is growing very rapidly, generic versions are
prevalent in this part of the world. Should there be an access
problem? In theory, no. But there is. The question is, why? The
question really is, why where there are not patents being
protected. There are a number of other issues, Mr. Chairman,
that I would like to go into, and perhaps undoubtedly you will
want to save for questions. I just want to say that there is a
caveat.
We cannot address the AIDS crisis, neglecting the other
issues of TB, hepatitis, upper respiratory ailments, and other
disease that are becoming equal dangers in the future in Africa
and elsewhere. Again, I urge the administration to look at the
Medicines for Malaria Venture. They are working on getting new
antimalarials out there, and eventually, a vaccine.
In closing, I just want to convey to this committee, the
global pharmaceuticals industry's commitment to be a partner in
this exercise and increasing its efforts in the future. Thank
you.
[The prepared statement of Dr. Bale follows:]

Prepared Statement of Dr. Harvey E. Bale, Jr.

INTRODUCTION

Mr. Chairman and other Members of the Subcommittee: I am the
Director-General of the International Federation of Pharmaceutical
Manufacturers Associations (IFPMA), based in Geneva, Switzerland,
representing the research-based industry in over 55 countries. The
Pharmaceutical Research and Manufacturers of America (PhRMA) is one of
our important members. We represent our industry before the World
Health Organization, the World Trade Organization, the World Bank, the
World Intellectual Property Organization and other UN agencies, and the
OECD. We are also full partners in the Global Alliance for Vaccines and
Immunization (GAVI) and the Medicines for Malaria Venture (MMV).
Our mission is to seek to work with international agencies and
national governments to find new ways to bring the therapeutic
technologies and know-how of our industry together with efforts to
reduce disease burdens. We also address the most important conditions
necessary to strengthen the capability of our industry to continue to
develop innovative therapies and vaccines: i.e., intellectual property
rights, competition-based health care delivery systems, effective
product regulatory systems and open information delivery policies for
health care professional and patients.
We are here today to focus on one of the most serious global
threats to public health globally and the worst threat to Africans'
well being and the economic development of the sub-Saharan African
region. The research-based pharmaceutical industry is strongly
committed to helping people living with AIDS--who wait for better and
less costly therapies and, hopefully in the not-too-distant future, a
vaccine or vaccines to effectively prevent further HIV infections. I
will seek to relate our perspective on this serious problem and to
suggest what is needed.

THE SERIOUSNESS OF THE HIV/AIDS PANDEMIC

HIV/AIDS is indeed the public health crisis in Africa. Over 34
million people in the world are currently infected with HIV/AIDS, with
95% of those living in developing countries. Most tragically, over 13
million children have lost one or both parents. Two-thirds of those
infected live in sub-Saharan Africa, and more than 80 percent of the
world's HIV/AIDS deaths have been in this region. HIV/AIDS is now the
number one killer in Africa, taking more African lives each year than
all the conflicts in the region combined, and HIV-related illnesses are
an additional burden on already weakened public health services.
According to WHO's 1999 World Health Report, HIV/AIDS has become the
disease with the greatest impact on mortality in Africa. Indeed, life
expectancy in Africa is declining because of AIDS, and in some places
may fall back to 1960s levels, according to Dr. Peter Piot, Executive
Director of the Joint United Nations Program on HIV/AIDS (UNAIDS). This
would mean a drop in expected life spans from 59 years in the early
1990s to just 45 years by 2010. As Dr. Piot recently noted, ``AIDS in
Africa has become a full-blown development crisis, and is on its way to
becoming the single greatest threat to human security on the continent.
. . . Few sectors of African society remain untouched by AIDS. The
epidemic is wiping out health, social and economic gains that Africa
has worked towards for decades.'' Furthermore, AIDS is decimating the
most productive elements of African society. UNDP Administrator Brown
declared at the first meeting of the UN Security Council this year that
``an extraordinary depletion of the region's human capital is underway.
There are estimates that the number of active doctors and teachers in
the most affected countries could be reduced by up to a third in the
coming years.''

INDUSTRY'S KEY CONTRIBUTION: SEARCHING FOR CURES

The pharmaceutical companies responsible for the discovery,
development and supply of medical products for managing HIV/AIDS are
acutely aware of the urgent need to tackle the epidemic in Africa and
other parts of the developing world. We are devoted to finding hope for
those affected by the tragedy unfolding before us, as literally
millions of men, women and children are swept away to untimely deaths
by the rising AIDS pandemic. We call upon all parties, national
governments and international organizations to take coordinated strong
action to fight AIDS. We in industry are prepared to participate in
augmenting our contribution to the struggle against AIDS, based on our
special expertise and scientific and technical resources.
Industry's primary role in combating HIV/AIDS worldwide is through
its unique role in the discovery and development of new vaccines,
medicines and treatments for disease and disorders. Indeed, it is
important to recall that, twenty years ago, AIDS was not yet
identified. At that time AIDS was considered untreatable as well as
incurable, subjecting those infected with HIV to certain misery and
untimely death. Today, there are about 15 antiretrovirals on the global
market, with more in the industry's research pipeline. This tremendous
advance in treatment is possible thanks to the billions of dollars that
the industry has devoted to AIDS medicines and vaccine research,
including research into treating opportunistic infections related to
AIDS. Today, there are over 100 new AIDS medicines in our industry's
R&D pipeline, including 35 new antivirals and 10 vaccines for HIV
prevention. Such research will, we hope, one day yield: shorter-course
treatments, such as Navirapine from Boehringer-Ingelheim for preventing
mother to child transmission of HIV; more convenient and tolerable
regimens, such as tests of ``one-pill-a-day'' regimens being tested by
various researchers, including Bristol-Myers-Squibb; as well as
scientific breakthroughs which could open up whole new avenues to fight
HIV, such as a recent announcement by Merck scientists that they have
found two experimental compounds which were able to obstruct the
activity of an enzyme called integrase that plays a critical role when
the AIDS virus infects cells. New treatments developed by the
pharmaceutical industry and introduced in the last several years--e.g.,
antiretrovirals (including the protease inhibitors and non-nucleoside
reverse transcriptase inhibitors) as well as anti-infectives and
antifungals to combat opportunistic infections--have begun to change
the pattern of the AIDS epidemic.
Industry R&D can only continue when there is respect for and
implementation of protection for intellectual property rights which
promote and protect such research. The challenge now is to improve
therapies and the search for cures, continue to extend access to these
breakthrough medicines to all affected populations and ultimately to
develop an effective vaccine--or several vaccines. Allowing market
incentives to proceed without counterproductive interventions is
vitally important in creating an environment favorable for developing
new vaccines, treatments and possible cures for HIV and AIDS-related
conditions. Drug research and development by the research-based
pharmaceutical industry is financed by companies' own internal
resources, and on average it takes hundreds of millions of dollars to
research, develop and test a new medicine, including treatments for
AIDS. It is vital that this research is not hindered by quick-fix
solutions such as compulsory licensing, parallel trade and other
measures which may sound attractive to some in the short term, but
would fatally retard R&D into HIV/AIDS related medicines in the medium
and long-term, disappointing the hopes of millions who look for a cure
for AIDS. Today, we no longer speak of ``incurable diseases''--only
those diseases for which we have not yet developed a cure or vaccine.
There are real concerns about access to AIDS medicines in Africa and
elsewhere, but this access has little to do with patents, and weakening
patents would not--I repeat, not--significantly improve access for
reasons discussed below.
First, many developing countries are not yet TRIPS-compliant and
some such countries, such as India, already produce generic copies of
patented AIDS drugs. If patents were indeed the problem, large
populations within these countries should have easy access to these
copied, generic versions of AZT and other medications; but in India and
parts of Africa this is demonstrably not the case.
Second, the cost of a pharmaceutical product is only a small part
of the overall AIDS treatment costs, including training, patient
diagnostics, treatment supervision and safe drug distribution--elements
absolutely essential to ensure the effective use of complex AIDS
treatment regimens.Third, the ex-manufacturer price of drugs in
developing countries is often only a small part of the final retail
price for consumers due to high import tariffs, taxes and wholesale and
retail distribution margins. In America, these mark-ups may add perhaps
40-60% to costs. In Africa, they often add 100-300% to ex-manufacture
prices.
Fourth, parallel trade and systematic compulsory licensing regimes
(which were abandoned by Canada and New Zealand 10 years ago), weaken
patent protection, but are claimed as cost saving policy instruments by
advocates. Actually, when one observes price differences across
national boundaries one is seeing differences in retail prices--which
are reflective of many factors including the margins mentioned
previously and which do not form a basis for parallel trade. In any
case, where parallel trade exists (e.g., within the European Union)
evidence shows that the benefits of parallel trade to consumers are
small because such trade mainly benefits the parallel traders, not
consumers, because the former capture most of the ``rents'' arising
from the differences in ex-manufacturer prices across countries. Some
activists promote compulsory licensing as another ``solution'' to
access to AIDS drugs. Such advocates present compulsory licensing as a
way to create a more competitive market akin to post-patent generic
competition in the United States and a few other industrialized
countries. However, as compulsory licensing is a deliberate action by
governments, it can lead to a limited number of licenses being issued,
with recipients potentially being chosen due to political favors rather
than objective criteria. Thus, price benefits may be minimal, while the
quality of a copied version may not be equivalent to the original.
Finally, many of the millions of people of Africa earning less than
a US dollar a day, and their governments, cannot afford good quality
generic versions of AIDS drugs either. Patent-pirated versions appear
in Africa and their prices are often not significantly lower. And there
are bottom limits to prices, set by costs; and at these levels the unit
costs (especially when the rest of the full costs of a treatment are
added in) are well beyond the capability of the poorest patients who
need the most help.

PARTNERSHIPS AND NEW INCENTIVES FOR R&D

We believe that the AIDS crisis requires a comprehensive,
multisectoral response, led by committed governments and
intergovernmental institutions--the World Health Organization and the
World Bank. We must as a coalition of stakeholders (1) step up
educational campaigns to change attitudes and behavior to curb the
spread of HIV; (2) enhance the capacity of health systems to deliver
essential medical care to the people living with the disease; and (3)
encourage further innovation into new therapies and vaccines while
improving access to existing ones in regions such as Africa. We must
also recognize that the problem of access to drugs for AIDS and related
conditions is one aspect of the broader issue of access to adequate
health care generally.
More generally, innovative approaches may be needed to attack
disease patterns in the poorest countries. And more resources are
required. Fortunately, novel approaches are being explored. For
example, UNICEF, WHO, the World Bank and UNAIDS are looking at ways to
guarantee a market for vaccines for diseases predominant in developing
countries, picking up on an idea of creating a fund (to purchase
vaccines) raised initially by Professor Jeffrey Sachs.
The Medicines for Malaria Venture (MMV) is another example of
innovative public/private sector partnerships to address the need to
develop new medicines for special categories of diseases--in this case
malaria. This public-private sector partnership in the Medicines for
Malaria Venture (MMV) designed to develop new antimalarial drugs is an
excellent investment of resources to find new treatments for this
widespread disease, which infects millions of people in developing
countries, while researchers search for an effective antimalarial
vaccine to protect future generations. We would urge the Congress and
Administration to financially back the public/private MMV initiative,
joining several other countries that have already done so. The
financial requirements to contribute positively are relatively small
compared to the very large potential benefits that will accrue to
millions of malaria-threatened populations in Africa and elsewhere.
Other mechanisms should be explored as well. These include
developing policy measures similar in concept to U.S. orphan drug
legislation, which includes tax credit and market exclusivity
provisions. We note positively the proposal by the Administration to
set up a market-based mechanism to support vaccine development for HIV,
malaria and tuberculosis. New incentives should not be limited to
vaccines, however. Breakthroughs in drug treatments may come more
quickly than new vaccines and may provide cures, which would have an
important impact on quality of life for those millions already living
with these diseases. As with all innovative drugs, the investment in
developing new antiretrovirals and researching an HIV vaccine is
immense. The continually mutating nature of HIV adds additional
complications to the search for more effective treatments as well as
possible vaccines or even cures for AIDS. We must accept that, despite
the progress being made, bringing an effective treatment, cure or
vaccine to market will be a long and demanding process. Despite the
large amount of research being conducted into HIV/AIDS, most estimates
still reflect a view that a very effective vaccine may still be at
least five or more years away.

INDUSTRY PARTNERSHIPS IN THE FIGHT AGAINST AIDS AND OTHER DISEASES
THREATENING AFRICA'S HEALTH AND DEVELOPMENT

Individual companies are working in partnership with the public
sector and civil society to fight against AIDS worldwide, particularly
in Africa. Such partnerships include the following:

For over ten years, GlaxoWellcome's ``Positive Action'' and
Merck's ``Enhancing Care Initiative'' have been offering
support to communities for education, training, and social
action projects to improve their capacity to deliver care to
people in developing countries; GlaxoWellcome also partnered
with UNICEF, providing sharply discounted antiretroviral
products for projects in the Mother to Child Transmission
(MTCT) Program as well as providing its products at
substantially discounted prices through the UNAIDS HIV
Treatment Access Initiative Pilot Program. GlaxoWellcome has
also played a leading role in the Global Business Council on
HIV/AIDS, bringing business leaders from many industry sectors
together to develop, in cooperation with UNAIDS and NGOs, an
effective corporate response to the epidemic.
Bristol-Myers-Squibb has committed $100 million for HIV/AIDS
Research and Community Outreach in five African Countries under
their ``Secure The FutureTM'' Program, focusing on women and
children in South Africa, Botswana, Namibia, Lesotho and
Swaziland. An example of efforts supported by this initiative
is a joint study of HIV-1C, a strain of HIV particularly
prevalent in Africa, conducted by the Harvard AIDS Institute
and the government of Botswana, supported by a US$18.2 million
grant from BMS.
Launched in November 1997, the UNAIDS HIV Drug Access
Initiative is designed to develop innovative, effective models
to improve access to needed drugs to treat HIV, its
opportunistic infections, and sexually transmitted diseases in
the developing world. The Initiative seeks to address the many
challenges of developing-country drug access, such as lack of
medical infrastructure, drug distribution channels, drug
supply, professional training, and patient support through
facilitating collaboration among pharmaceutical companies,
health care providers, national governments, nongovernmental
organizations, and people living with HIV/AIDS. Pilot projects
designed to increase access are underway in Uganda, Vietnam,
Chile and the Ivory Coast. Pharmaceutical partners in the
UNAIDS initiative include: GlaxoWellcome, F. Hoffmann-LaRoche,
Virco NV, Bristol-Myers-Squibb, Organon Teknika, Merck&Co., and
DuPont Pharma.

There are also industry initiatives in the eradication and
prevention of other serious diseases impacting developing countries:
AIDS is by no means the only serious threat to the well-being of the
poorest developing countries. Often overlooked are the extensive
activities of companies contributing their patented or off-patent
medicines or technology for specific diseases of poorer countries.
These programs were launched and are succeeding because as
preconditions governments were required to fully commit to the success
of the campaigns. This commitment is critical and offers lessons for
the attack against AIDS in Africa and elsewhere. Examples of such
company actions include:

Merck has donated ivermectin free of charge for as long as
it is needed to fight onchocerciasis (river blindness). Key
international partners involved with Merck have been the WHO,
World Bank and the Carter Center.
SmithKline Beecham and Merck are donating albendazole and
ivermectin (two antiparasitic drugs for lymphatic filariasis)
free of charge for use in countries where LF in endemic. This
also done with support of WHO and other agencies.
GlaxoWellcome is donating a antimalarial combination drug
(Malarone) free of charge to the public sector in malaria-
endemic countries for treatment of cases which are resistant to
standard first-line treatments.
To help in WHO's global fight to eradicate polio, Aventis
Pasteur has donated 50 million doses of oral polio vaccine to
cover the vaccine needs for National Immunization Days
scheduled in five conflict affected areas in Africa in 2000-
2002. Countries to be covered are Angola, Liberia. Sierra
Leone, Somalia and South Sudan.
Pfizer is donating an antibiotic azithromycin to combat
trachoma in 5 developing countries (Morocco, Ghana, Mali,
Tanzania and Vietnam) in collaboration with the Edna McConnell
Clark Foundation.
Recently, Aventis Pharma donated the patent rights on life-
saving eflornithine to WHO to treat African trypanosomiasis
(sleeping sickness). This concluded a 15-year old public/
private sector collaboration between Hoechst Marion Roussel and
WHO, during which the development of the drug and its approval
by drug authorities were finalized. The partnership in the
effort to ensure efficient distribution of this drug includes
WHO, Aventis and NGO's.
Hoffmann-LaRoche has conducted the ``Sight & Life Program''
dedicated to the prevention of xerophthalmia and other adverse
effects of vitamin A deficiency that impairs the health of
children in numerous developing countries. In this initiative,
Hoffmann-LaRoche donates vitamin A in many countries in Africa,
Asia and Latin America, as well as educational materials.

There are other industry-wide efforts to improve health worldwide
in partnership with the public sector including:

The new Medicines for Malaria Venture (MMV), started in
partnership between WHO, pharmaceutical industry and other
parties has been established to stimulate the discovery and
development of new treatments for this wide-spread disease. We
are seeking to develop a new anti-malarial therapy every 5
years beginning in this decade. We do not preclude, indeed we
hope, that a new malaria vaccine might also come from the MMV
or separately.
The IFPMA and its vaccine company members are in full
partnership in the Global Alliance for Vaccines and
Immunization (GAVI). Through the Alliance, member partners will
address ways to accelerate the development and introduction of
new vaccines specifically needed by developing countries. The
vaccine industry members of the IFPMA will, in cooperation with
their GAVI partners, work to ensure accessibility to the
vaccines and other related elements that are necessary for the
immunization of all the world's children, with a particular
focus on poor populations and countries.
The WHO/CEO Roundtable process involves not only a yearly
meeting between the Director-General of WHO and CEOs of IFPMA's
companies, but also WHO/industry working groups on issues
relating to research and development, drug quality and access
to drugs. For example, the WHO/CEO Roundtable process supports
the ``Malaria Pathfinder'' initiative, which is a joint WHO/
industry program examining ways to sustainably improve
antimalarial access and rational use at the household level (in
some cases, at the district level) as measured by improvements
in rapid procurement and dispensing of appropriate treatments.
A joint communique on the most recent meeting of the WHO/CEO
Roundtable is available on the IFPMA and WHO web sites: (http:/
/www.ifpma.org and http://www.who.int/medicines/).

BARRIERS TO ACCESS TO HEALTH CARE

It must be recognized that only a committed effort by national
governments can be effective in fighting AIDS, as the spread of AIDS is
very much linked to poverty and underdevelopment which make people more
vulnerable to becoming infected with HIV. Furthermore, there are
several barriers to access to health care, barriers which industry can
play only a limited role in overcoming. Indeed, the manufacturers' cost
of pharmaceutical products is small in comparison to the overall
distribution costs required to reach populations affected by AIDS or
even to the retail price paid by the end consumer.
Understanding barriers to access is extremely important because
they would make even free-of-charge antiretrovirais impossible for
people living with AIDS in Africa to access regularly and effectively,
making treatment useless and even possibly dangerous. Indeed,
inappropriate use of these powerful drugs can and has resulted in
strains of HIV developing which are resistant to all known treatments,
making our search for a cure even more difficult. Also, due to the
complexity of ARV regimens and the possible toxic side effects of these
powerful drugs, appropriate medical support and careful monitoring is a
vital part of using ARVs. According to UNAIDS and WHO, certain services
and facilities must be in place before considering the use of
antiretrovirals in any situation:

Access to functioning and affordable health services and
support networks into which ARV treatments can be integrated so
that the treatments are provided effectively;
Information and training on safe and effective use of ARVs
for health professionals in a position to prescribe ARVs;
Capacity to diagnose HIV infection and to diagnose and treat
concomitant illnesses;
Assurance of an adequate supply of quality drugs;
Sufficient resources should be identified to pay for
treatment on a long term basis; patients must be aware that
treatment is ``for life'';
Functioning laboratory services for monitoring, including
routine hematological and biochemical tests to detect
toxicities, must be available;
Access to voluntary HIV counseling and testing (VCT) and
follow-up counseling services should be assured, including
counseling people living with HIV/AIDS on the necessity of
adherence to treatment.

The barriers to access detailed below make it very difficult and
even impossible to create the infrastructure described above which is
so vital for the effective use of antiretrovirals and other medications
for treating AIDS and related conditions. Therefore, examining access
to AIDS health care from a broader perspective will help policy-makers
focus their attention on reforms in the areas likely to have the
greatest impact.
Military, Social and Political Issues
Military spending priorities: The existence of international
and civil wars in many developing countries increase peoples'
vulnerability to HIV-infection and prevent people living with
AIDS from being treated. Even in countries where there are no
wars or external threats, governments give a higher priority to
spending money on ``defense'' than on healthcare, including
AIDS.
Lack of priority due to political cynicism: Effective
treatments are being offered by companies (often at substantial
discounts) and cheaper therapies are becoming available. Yet,
in some countries, groundless excuses for not increasing
spending on AIDS treatments, such as an alleged excessive
toxicity of antiretroviral AIDS drugs, have been made. These
excuses mask the basic cynicism that some governments have
concerning treating poor people living with AIDS or in
preventing mother-to-child transmission of AIDS. A very recent
article in the African press quoted a government official from
the region as saying that trying to prevent mother-to-child
transmission in impoverished areas would only shift the cause
of mortality later on. In other words, the government that this
official serves is making policy based on the cynical
observation that poverty and malnutrition could lead to the
same result as HIV in the motherless and impoverished child.
Tolerance of corruption: In countries where official
corruption is prevalent, health care access is impeded through
the pilferage and diversion of products and services, with the
poorest elements of society being harmed the most.
Inefficiency and wastage: UNAIDS has found that, although
the World Bank and other international agencies make money
available for AIDS projects in Africa, much of it goes unspent
because of bureaucratic complexities and other problems;
Literacy and language barriers: If the patient is illiterate
and/or does not understand the language used by the health care
providers, then they will have difficulty in accessing care;
Minority (including ethnic or gender) groups may experience
discriminatory attitudes from health care providers. Illegal
immigrants may fear discovery or be not entitled to full access
to health care facilities, thus hindering their access to care;
Stigma: The stigma attached to being HIV-positive in many
cultures has led to ostracization, abandonment, violence and
even murder of people living with HIV. In light of these
dangers, people will refuse to be tested for their HIV status
and, if they do discover that they have HIV, they will be
afraid to seek appropriate treatment due to the possible
repercussions if others were to find out their status.
Financial Hurdles
The shortage of financial resources in the poorer developing
countries is the most important barrier to access to health
care, including medicines, in these countries. International
aid agencies, as well as industrialized countries, often play
an important role in financing health care infrastructure in
the poorest developing countries.
In many countries in Africa and elsewhere, governments
require patients to ``co-pay'' for therapy costs (including
diagnostics, training, health care infrastructure, etc.),
ranging from $35 to hundreds of dollars per month. Clearly few
can afford such payments; so that less than 1% of HIV infected
patients receive such therapy. (In comparison, in Brazil a much
higher percentage of infected persons receive therapy; but
Brazil is aided by World Bank funds.)
Many countries due to insufficient resources can provide not
even rudimentary health care. For example, annual spending on
health in some African countries is under US$4 per capita. This
lack of spending can also result from governments not setting
health care services, including care for people living with
HIV/AIDS, as a high enough priority in determining the use of
national resources.
Inadequate purchasing power for medicines and a lack of an
adequate number of medical professionals and hospital
facilities to deliver health care result from this lack of
adequate financial resources.
Physical Infrastructure Barriers
Lack of physical access to health care facilities or personnel is
another major barrier to access in developing countries. There are
several factors leading to such inadequate access:

Adequate clean food and water is needed. Therapy for HIV/
AIDS requires healthy food intake in some relation to the time
of drug ingestion as well as access to clean water. Both are
often missing in the developing world.
Inadequate health care facilities to meet the needs of a
growing population due to insufficient public and private
resources.
Insufficient transportation infrastructure to permit access
to medical care providers for much of the population.
Unequal distribution of health care facilities that may be
concentrated in densely populated urban areas, leaving wider,
rural areas without adequate coverage.
Bad Micro-Economic Policies
Protectionism: Many governments protect their local
insurance and pharmaceutical companies from foreign
competition, making local insurance and pharmaceutical costs
higher than they should be. Tariffs imposed on imported
pharmaceuticals raise drug cost margins to patients. In
developing countries, the final price to a consumer is often 3-
5 times the price received by the manufacturer, whereas in
developed countries, the ratio is often less than twice the
manufacturers level.
Non-competitive distribution networks: Protected wholesale
and other distributors can artificially raise distribution
margins, making drug costs in developing countries high--
perhaps even higher than in some developed countries.
Poor Intellectual Property Protection: The lack of adequate
and effectively enforceable intellectual property rights hurts
access to health care and pharmaceuticals by eliminating
incentives for research and development of new products in at
least two ways:
(1) local firms in countries with good scientific
infrastructure devote resources to copying (often
without regard to Good Manufacturing Practices (GMP))
instead of focusing on research into diseases prevalent
locally; and
(2) countries which allow international patent
exhaustion (i.e., parallel trade) discourage local
pharmaceutical investment and the offer of companies to
supply the local market on terms that local patients
and governments would find more advantageous.
Price Controls: Governments may look at price controls as
one solution to access. However, price controls tend to damage
incentives for research and development industry, they can also
negatively affect the development of a GMP-based local generics
industry. Furthermore, price controls destroy competition and
usually evolve from being limits on price increases (or
``ceilings'') to become fixed price ``floors'' preventing
consumers from enjoying benefits of market competition. One
need only look at comparisons in changes in post-patent prices
between Europe, where price controls exist, and the United
States.
Informational Gaps
People may fail to access health care due to a lack of
information about the need to treat diseases such as
tuberculosis, hepatitis, or hypertension.
Patients may not know how or where to access health care
(particularly in the cases of minorities or immigrants).
Self-medication by poorly informed patients may lead to
ineffective drug utilization.
Poorly informed physicians in developing countries often
treat illnesses such as diarrhea inappropriately with
antibiotics or they may not always be aware of the most cost-
effective therapy.
There is often the lack of information about the quality of
generic products. In most developing countries, providers and
patients prefer brand name products because they are unsure of
the origin, safety and reliability of generic products.
Lack of adequate training for inspectors and regulators
regarding pharmaceutical product quality issues hinders
people's access to quality health care. Such insufficient
training allows substandard and counterfeit drugs to enter
national markets, which endangers the population's health,
engenders uncertainty about the effectiveness of treatments,
and often crowds quality out of the market.
Gray-market or illegal workers not contributing to the
national tax system may be excluded from the social and workers
health insurance system of their country of residence.
Cost and Price Issues
How important are price and cost issues? We firmly believe that
they are secondary or tertiary problems in Africa compared to those
discussed above. Some have charged that patents for pharmaceutical
products reduce access to these products. This focus on patents (and
prices) ignores the complexity of the access to healthcare issue and
prevents policy-makers from considering real solutions to this issue.
This is recognized by patient groups and public-sector decision-makers
alike. For example, the European Coalition of Positive People publicly
stated with regard to HIV/AIDS drugs recently that focusing on patent
protection and pricing is ``simplistic and fails to take into account
the serious practical problems that need to be addressed . . .'' Drugs
could be free and still not be appropriately used without adequate
health care systems. In fact, they would rapidly become ineffective.
The cost of drugs to patients in Africa is determined principally by
distribution, infrastructure, training and other factors discussed
above. The issues of patents and prices of AIDS drugs are not the key
issues.
Approaching the access issue solely through debates over price is
not only simplistic, as noted above, but also factually incorrect.
Patents do not, in fact, have an influence on access to the drugs,
which the population in developing countries actually consumes. These
are primarily off-patent drugs; for example, almost all of the products
on the WHO Essential Drug List are off-patent. Furthermore, many
developing countries do not currently have TRIPS-compliant intellectual
property legislation and the poorest of these countries will not be
required to implement such legislation until 2005, perhaps even later
if they apply for a longer transition period. Therefore, access to the
drugs for which this population is looking is not inhibited by patent
protection. Indeed, developing countries without effective patent
protection have already started producing their own versions of
patented AIDS products, including India and Brazil.
An additional indication that prices are not the major barrier to
access to drugs is shown by the experiences of several companies when
they instituted the programs (mentioned specifically above) to donate
their products for free or at dramatically reduced prices. Drugs that
had been offered at a zero price could not find their way to patients
until the barriers and issues were addressed that constitute the real
obstacles. The targeted populations could only receive the drugs they
needed after national governments and international agencies undertook
concrete actions to ameliorate these barriers to access.
One would expect that, if intellectual property protection were
really a barrier to access that some claim that it is, there should be
no problem for the population of these countries to obtain drugs at
``affordable'' prices. However, the evidence shows otherwise: Again,
why is it that in India--where patent protection is not required by
TRIPS and where unprotected copies of AIDS drugs (patented in Europe
and elsewhere) are available from a number of local producers--that
there is a drug access problem and the AIDS epidemic is reaching
alarming proportions?
Accepting the alleged, but spurious, links between intellectual
property rights, prices, and access to pharmaceuticals could lead
political decision-makers to institute policies such as parallel trade
and compulsory licensing, which destroy the basis upon which further
scientific progress is based: intellectual property rights. By
threatening to take away the fruits of innovative companies' labor, the
advocates of compulsory licensing and other attacks on intellectual
property rights are driving research-based companies away from working
on diseases particularly affecting developing countries. If there are
to be cures and vaccines for diseases and conditions that are currently
incurable or untreatable, further research must be protected and
encouraged. After all, before one can realistically talk about gaining
access to drugs and vaccines, these substances first need to be
discovered, developed, tested and registered, a costly process taking
years to accomplish. Without protection, companies simply cannot devote
the huge resources (literally hundreds of millions of dollars)
necessary for bringing new products to market.

V. CONCLUSIONS AND RECOMMENDATIONS

Industry, which has much experience--not only in developing the
drugs available today to patients everywhere and in developing the
drugs and vaccines in the pipeline for tomorrow's use--but also in
health care delivery systems experience which can be brought to the
table if asked to do so--firmly insists that there are a number of key
elements to resolving the AIDS crisis. They are:

(1) Partnerships among public institutions and with the
private sector is the only effective route. Recognize that no
single solution will solve this problem. We in industry are
working on more effective therapies and vaccines, but delivery
will be a critical problem and this involves several key
issues, including the following:
(2) Political commitment and concrete actions by countries
affected to prevent the spread of AIDS and to treat those
affected. Raising AIDS awareness and as a priority is vital.
Prevention through education must be a high priority. Regarding
funding, as UNAIDS' Executive Director has noted, pumping money
into a country where AIDS is a low priority will not end the
epidemic. ``If a country does not recognize that it has an AIDS
problem, then it is not willing to take on the tough
questions,'' Dr. Piot said: ``Outside support for something
that can only be solved from the inside will not work.''
Figures in 1997 show that international aid paid for the bulk
of the millions spent on AIDS prevention in Africa in 1997.
Uganda accounted for much of the money that the African
countries spent. National priorities in Africa need to be
shifted away from arms and weapons towards healthcare,
including AIDS care, if this epidemic is to be fought
effectively;
(3) International funding is needed to meet the crisis:
Bridging the cost gap, in the case of drugs and future
vaccines, between costs and prices of AIDS products and what
people in poorer countries can afford will need new
international financial support.
(4) Infrastructure and distribution improvements: So much of
current drug supplies are wasted. Why is it that the price paid
by a patient for quality AIDS and other drugs in parts of
Africa and other developing countries is three to five or more
times the price received by the manufacturer--because of the
level of taxes, tariffs, monopolistic distribution systems,
etc.--so that if you were to cut the manufacturers' price by,
say, 50%, patients would not significantly benefit; and then if
you counted in the cost of the health support services needed
for AIDS treatments, a drug price reduction may not reduce
overall costs of delivery at all.
(5) Serious Partnerships: Our companies have been working
with UNAIDS and countries on the pilot projects but supplying
medicines and expertise in their use. Industry knows that it
must contribute in this extraordinary crisis. But true
partnership is required, not one-way partnership. For example,
not all countries have responded positively to mother-to-child
program offers of medicines, even at discounted prices. It
seems that some countries prefer to use legalistic approaches
to undermine patents instead of working together with industry.
Partnership means we all must be committed. As a sign of the
seriousness which the industry gives to partnership efforts,
IFPMA and major pharmaceutical companies have represented the
research-based pharmaceutical industry in deliberations of the
International Partnership Against AIDS in Africa organized by
UNAIDS, most recently in New York at a meeting convened by UN
Secretary-General Kofi Annan. This partnership brings together
stakeholders in this issue, including donor countries, NGOs,
the private sector and the African countries themselves. It is
our hope that this dialogue will create effective and practical
ways for all of us to work together to fight the AIDS menace.
(6) One of the most critical elements of a global strategy is
fostering continued innovation through academic and industrial
R&D. The industry has responded to the need for AIDS medicines
and has spent billions of dollars to make current treatments
available; but we are not there yet. We do not yet have a cure.
We do not have a vaccine. We are working on them. Over 100 new
medicines are in the industry's development pipeline, including
second-generation protease inhibitors, new drugs for
opportunistic infections and vaccines against HIV. But without
a strong patent system we would not have these medicines today
or in the future. Attacking patents on AIDS medicines would
means causing industrial R&D to shift away from AIDS research
to more research on heart disease, cancer, depression. etc. The
only winner in a strategy to weaken patents is the industrial
copier or parallel trader, and the loser is the AIDS patient
worldwide who is waiting for help.

One caveat must be raised here. We cannot, in addressing the AIDS
crisis, neglect the importance of addressing other serious threats to
the health of Africa and other poor regions of the world. Malaria, TB,
hepatitis, respiratory ailments and other diseases may become equal
dangers in the future. I urge the Congress and Administration to
support public-private initiatives such as the Medicines for Malaria
Venture and the Global Alliance for Vaccines and Immunization. Let's
also explore new vehicles for developing new vaccines and drugs taking
the tax credit and market exclusivity aspects of the U.S. Orphan Drug
legislation as examples of possible approaches that may be needed in
addition to traditional patent protection.
In closing, I want to convey the desire of the R&D pharmaceutical
industry that IFPMA represents to work more with countries, WHO, UNAIDS
and other parties on this most serious matter for Africa. With resolve
and with positive partnerships, we believe that we all can make a real
difference.

Senator Frist. Dr. Bale, thank you. Thank you for being
with us.
Dr. Lurie.

STATEMENT OF DR. PETER LURIE, DEPUTY DIRECTOR, PUBLIC CITIZEN'S
HEALTH RESEARCH GROUP, WASHINGTON, DC

Dr. Lurie. Good afternoon. I would like to take my time to
describe the details of a rather straightforward six point plan
that I think can make a big difference in the HIV epidemic in
the short-term. I am not going to focus on research issues like
on vaccines, important as they are. These proposals pay off
relatively quickly.
Many of these elements are extremely cost effective, and
others, would in fact, cost the U.S. Government absolutely
nothing to implement. But instead, we will see United States
policies that are low on funds, short on specifics, and in some
cases, are actually antagonistic toward some of the proposals I
will put forth.
Proposal No. 1, prevention of infant transmission. We have
heard quite a bit about this today. Data showing 50 percent
reduction in HIV transmission from mother-to-infant due to the
drug Navirapine. What this means is it costs $40 in drugs to
save the life of an infant.
There is very little more cost effective in medicine today.
If there is only one thing that you could do to make an impact
on HIV/AIDS in sub-Saharan Africa tomorrow, this would be it.
No. 2 and this point has been made as well today, the
treatment of sexually transmitted diseases. A 1995 study from
Tanzania showed a 42 percent reduction in the transmission of
HIV if sexually transmitted diseases were appropriately
handled. Again, though, there is an enormous gap between
science and policy.
The larger parts of sub-Saharan Africa do not enjoy the
benefits of this cost-effective intervention, $218 to prevent
an HIV infection. And, in particular, they do not enjoy a
stable supply of pharmaceuticals, in part, because of price.
No. 3, compulsory licensing and parallel imports. I do not
think this is the place to get into details of the economics.
And we agree that infrastructure is important.
But this is a pharmaceutical company's rather lame excuse
for avoiding the issue of pricing. Infrastructure and pricing
are important. Both must be addressed. And because they are two
things that need to be addressed, it does not mean that you
simply cower away from the other.
This issue has produced an avalanche of misleading
information from the pharmaceutical industry and the unseemly
specter of the U.S. Government interceding on behalf of multi-
billion dollar pharmaceutical corporations at the expense of
the lives of people in developing countries.
Now, we heard Dr. Satcher briefly refer to the notion of
HIV resistance to antiretroviral drugs. I discussed this in my
written testimony, and shall not go into it in great detail
here except say that this argument has neither a scientific nor
a moral basis. What industry seems to be arguing is that people
in sub-Saharan Africa are best protected by us--by us--from the
dangers of these drugs. That is paternalism in the extreme. But
let us be clear, compulsory licensing and parallel imports do
not require any country to engage in these practices. But the
aggressive posture of an industry and of this administration
has prevented these developing countries from exercising choice
as to whether or not to use these legal mechanisms.
In the background in this funny debate over resistant
strains is the unstated concern that the resistant HIV strains
that we are worried about are ones that are going to come back
and infect Americans. What the pharmaceutical industry is
really arguing is that Africans should remain untreated so that
Americans might live longer. This is reprehensible and is also
not scientifically supportable.
We also heard much about the need for profit on the part of
pharmaceutical industry. The argument is that if we just allow
the companies to continue doing their research, the right
affordable drug will come along. Try making their argument to
an HIV-infected person in sub-Saharan Africa today where, in a
world where compulsory licensing and parallel porting are
relatively infrequently invoked, they still do not have access
to the potentially lifesaving medications that we now have. Why
should they have any reason to believe that it will be
different the next time? The drug companies are rolling in
profits.
Research and Development are not a top priority for the
U.S. drug companies. The top ten firms realized an average of
1.5 times more in profits than they invested in R&D in 1998,
and the pharmaceutical industry is the most profitable in the
United States where profits are measured by the return on
sales, assets, or equities. And the pharmaceutical industry has
been a median 1.7 times more profitable than other industries
in this country.
We as tax payers are engaging in an enormous handout to the
pharmaceutical industry; $27.4 billion in income tax credits,
including the research and experimentation credit, between 1990
and 1996.
Research is often conducted at the NIH and has produced
important drugs. Boehringer-Ingelheim did not come up with
Navirapine. The NIH funded that study. The same is true for AZT
and DDI, and some others.
Nonetheless, the administration has devoted itself to
acting as a bagman for this highly profitable industry at the
expense of access to drugs for people in developing countries.
Time and again, in South Africa, Thailand, now in Brazil, we
have the U.S. Government interceding on behalf of the
pharmaceutical industry to either oppose compulsory licensing
and parallel importing, or else try to undermine a local
generic drug industry.
President Clinton says that all of this is going to change.
But if you are on the ground in the Dominican Republic, or if
you are on the ground in Thailand, things do not feel any
different. The last three quick points. Treatment of
opportunistic infections. This is what people who have HIV
ultimately die of, from lack of sulfa-like drugs that are
relatively cheap right now or could be made so by compulsory
licensing or parallel importing.
Five, debt relief. Dr. Sachs is absolutely right, but I
want to turn his notion around and to say that while we have
looked at the impact of HIV upon the economy and upon
development, we have not looked at the notion that the
structural adjustment policies imposed on these countries, now
producing these massive debt burdens, may in fact be in part
responsible for the mess that we now find ourselves in.
These export-driven programs have helped undermine rural
economies by focusing on agri-business over local subsistence
economies. The programs have built up massive transportation
infrastructures to serve export economies so that people are
moving back and forth perhaps transmitting disease. They have
concentrated people in cities where drug use and commercial sex
work is more prevalent.

And finally, they have undermined government social
spending so that there is not sufficient money around for
condoms, for education, for sexually transmitted disease
treatment, and the like. These programs, in part, are at the
root of the problem that we look at today.

And to have debt repayment of the size proposed, as Dr.
Sachs pointed out, is minuscule compared to what is needed, and
is conditioned sometimes upon a repeat of the conditions that
we seem to have made in the past. This seems to me absurd.

Finally, we always say do not throw money at a problem, but
the fact is that you do need money in this particular
circumstance. The President is proposing an increased budget
for international AIDS effort, and that is all to his credit.

But, nonetheless, it amounts to an anemic $10 per person
living with AIDS or HIV. If we are going to make a difference,
we have to go beyond mere statements of support to encompass
the kinds of concrete actions that I have described in this
testimony. To not do so will undermine the U.S. claims to be a
world leader in the world's fight against HIV/AIDS. Thank you.

Senator Frist. Thank you, Dr. Lurie. Dr. Lurie, in terms of
the money that is currently being spent and I know you
commented on the budget in the future, the money that has been
spent in the past in your studies, has it been spent well, or
poorly, or inadequately as you look at the challenges that we
have?

Dr. Lurie. There is an enormous amount of need out there.
And it is very difficult to put blame in that sense. Really
what is needed is enormously more money than has been provided,
but I think personally, that not enough money has been directed
at the kinds of things that I have talked about today.

I think that counseling and testing as advocated by Dr.
Satcher is probably not going to have a large impact upon the
HIV epidemic in Africa. I think the kinds of social changes
that would result from debt relief, pointed out by Dr. Sachs,
are far more likely to have an impact.

Things that I have talked about are generally things that
have been proven in randomized control trials to work. Mother-
to-infant transmission, there is no question that these drugs
work. There is no question that sexually transmitted diseases
treatment will result in a decrease in transmission of HIV.
That, I think, is where our efforts need to be made.

Senator Frist. Dr. Sachs, Dr. Bale, I guess both of you can
comment on the incentives that might be given to the
pharmaceutical companies to invest. These hearings need to
focus on short-term and the long-term, and need to focus on the
supply and the demand side of the equation. Dr. Sachs we will
begin with you.

What are the sorts of things we can do in the year 2000
with the U.S. drug companies and the international drug
companies that we might use to incentivize the system?

Dr. Sachs. I think broadly speaking, there are three stages
to bringing an effective treatment all the way to
implementation. The first is basic science and there is still a
lot of basic science to be done, both here and in Africa. And,
indeed, basic science should be funded in both places.

Second, is R&D within the pharmaceutical companies to
support through tax incentives and other means. Some of the
costs of development which are extremely high. Neither of those
which are so-called push mechanisms in the jargon which is now
being used, really would bring either drugs or vaccines all the
way to availability of very poor people.

Poor people could not afford the end product and they do
not provide a market by themselves. Somebody has to buy that
stuff in the end. Moreover, if it is going to be developed
through phase one, two, three clinical trials, for example, to
get a vaccine, the pharmaceutical companies and the biotech
firms which are going to do a lot of that in the end, are going
to have to know that somebody is going to buy it.

So the notion is to put a poll mechanism in place as well.
And that is some notion of a guaranteed market. The way that
the Clinton administration has proposed to add our part in
fiscal year 2001 budget is ingenious, but I am not convinced it
is enough, and it has to be multilateralized.

The ingenious is to say rather than a fund, we will give a
tax credit, so we will double whatever somebody pays to buy the
drug. If UNICEF is going to end up paying $1, the company, in
effect, will get $1 tax credit.

It will be as if there is $2 of market incentive there. I
support that very much. Now, but I am not sure that by itself
without also providing the guaranteed funding for UNICEF which
does not have anything like this amount of money available,
that we have really done the full job of creating the poll
mechanism.

I know because of many of discussions of this issue in
Europe in the last couple of months with senior officials in
all of the major European governments, that there is tremendous
multilateral interest in the concept of creating a committed
market to get a spur to R&D. And I hope the Clinton
administration is doing the work to create the multilateral
framework. It has taken an important step with an innovative
mechanism that it has proposed. But, now to combine that with
Germany, which has expressed interest, the Netherlands, and
many, many other governments, is something that could be done
by the time of the summit to really nail down the poll
mechanism in addition to----

Senator Frist. The structure that that is done through--the
forum it is done, the multilateral component is what?

Dr. Sachs. If it is for that, it seems to me that we have a
framework called GAVI which has been established partly to
house the new Gates funding, but it is in a sense a
multilateral effort that is creditable, in my view, bringing
together the public sector and the private sector, and it could
be the house of a multilateral effort from scientific credit
ability helping to usher in tests and bringing partnership with
the recipient countries and helping to coordinate a United
States, European, Japanese contribution at the same time. So I
would point to GAVI as a very promising way to proceed in a
legislative forum and in a negotiating forum.

Senator Frist. Let me go ahead and turn to Senator Feingold
and Dr. Bale, I will let you comment after that.
Senator Feingold. Thank you, Mr. Chairman. Let me ask all
of you something. Article 31 of the agreement on trade related
aspects of intellectual property rights outlines conditions, of
course, under which countries may legally resort to measures
like compulsory licensing.
Referring specifically to quote, ``The case of a national
emergency or other circumstances of extreme urgency.'' Now
starting with Dr. Lurie, would you agree that the AIDS epidemic
in Africa is the type of situation referred to by Article 31
and the other clauses and referred exemptions from standard
patten protection procedures?
Dr. Lurie. If the AIDS epidemic is not it, it will never
come along.
Senator Feingold. Dr. Sachs.
Dr. Sachs. I think it is a national emergency. It could
justify the use of this mechanism.
Senator Feingold. And Dr. Bale.
Dr. Bale. Well, I think in principal, it could be, but if a
country has a national emergency and AIDS is the No. 1 threat
to it's national security, then I think you have to look at the
details of the case.
One country in particular that has been mentioned quite
often is South Africa. It has been mentioned as a case-in-
point, where there are legal cases that are pending in both the
courts in international disputes. Here is a case where AIDS is
a serious problem. But, is it the No. 1 issue? I am not sure,
because clearly what we see here last fall was a decision by
the South African Government to spend $5 billion on new
submarines, aircraft carriers, and other things for which they
do not need because they know they do not have any enemies.
On the other hand, they refuse to buy AZT or Navirapine and
claim that the drugs are toxic. So I think you have to look at
the issue case by case; but there are clauses that are in the
TRIPS agreements, are there for a purpose which is to provide
an escape valve for certain cases that go beyond the normal
circumstances that we see from day to day.
Senator Feingold. I take your point about South Africa, but
I did hear you say that you would not necessarily say this does
not fall within the language, is that correct?
Dr. Bale. That is correct.
Senator Feingold. Thank you very much.
Thank you. Dr. Lurie, I understand the UNAIDS program has
recently issued a document on the ethical conduct of HIV
vaccine trials. And I understand you have done some work on
this.
Dr. Lurie. That is correct.
Senator Feingold. Could you just comment on the report and
its conclusions a little bit?
Dr. Lurie. Yes, it has been an ongoing consultation process
that took about 2 years to produce this document. And this
document should be seen as part of a conserted effort by people
in the research industry, by whom I mean the pharmaceutical
industry, the NIH and the CDC, to water down the existing
protections that exist for research subjects.
Under the current guidelines, the Declaration of Helsinki,
in particular, one is obligated if one is a researcher to
provide the best known effective therapy. And there is no
qualification for if you are in a poor country for example.
What these UNAIDS vaccine guidelines, as well as attempts
to water down the Declaration of Helsinki itself, and another
document that goes by the acronym CIOMS, would allow the
injection of an economic factor into this such that if you
lived in a poor country, it now would become acceptable to not
provide effective therapy.
And indeed, as we have seen in the case of the mother-to-
infant transmission studies, the results of which have been
referred to numerous times today, literally thousands of women
were provided with placebos even though more effective
medications existed.
There are the kinds of studies that could take place. And
again, I emphasize the leading role that the NIH and the CDC
have taken in the watering down of all these different
guidelines.
Senator Feingold. Anybody else want to comment on that one?
Dr. Sachs. I cannot comment on the particular
recommendations, but I do want to say that economics belongs
here centrally because we face the tragic reality that these
countries are now spending about $5 per capita in total health
spending for everything.
So, the notion that our standards could just be transmitted
or that is the moral way when it might be a $16,000 drug
regiment is not a realistic approach. I am not talking about a
$4 dose for Navirapine. I am talking about antiretrovirals and
others.
Just to make very clear, we are talking about places where
you have per capita income of $200, that even if by some
miracle, because most countries do not do this, even if they
mobilize 5 percent of gross national product for health, that
would be the principal sum of $10 per capita per year.
That is for everything and they face crises all over the
place, like getting clean water, diarrheal disease, acute lower
respiratory infection, and many, many other absolute killers of
millions. We have a generalized public health crisis in these
countries. They need a lot more money. We need to be spending a
lot more money on this problem, but we are also absolutely
going to have to design the regiments to face these economic
realities.
Senator Feingold. Dr. Bale.
Dr. Bale. Senator, I just also wanted to say that in a
crisis such as we face today, we have to look at the
appropriate tools. I mean, the question of legality may not be
the key issue, whether a policy instrument is legal or not. The
question is, is it the right policy?
I think funding is the issue. I think the industry's
contribution and innovation and trying to lower the cost of
medicines through innovation and through competition, is
another way. I do not believe, quite frankly, that any of the
messages that I have heard regarding issues such as compulsory
licensing and parallel trade are solutions.
So maybe at one extreme and unusual circumstances, such as
a health crisis potentially legal, the question is, do such
measures make good policy? And there have not been any cases
recently that show that.
Senator Feingold. Well, I thank all of you, and Mr.
Chairman, my time has elapsed.
Senator Frist. While we are getting another panel together,
let me just give any of you an opportunity to make some closing
comments. I know we had a lot of things going back and forth,
and I appreciate all of you being relatively brief. Your entire
statements, sirs, are made a part of the record so we will have
that opportunity. But let me say, Dr. Lurie, any final
comments?
Dr. Lurie. Yes, I suppose I would just add on that
compulsory licensing issue again. Nobody is operating from the
naive notion that compulsory licensing or parallel importing is
going to magically solve the problem so the developing
countries have access to medications.
I mean it is one component of that. For some particular
countries, compulsory licensing will mean the difference
between access and non-access. And for some particular people
who live in some poor countries, it will mean the difference
between access and non-access.
So to simply disregard it because Dr. Bale can come up with
some problem that he sees as larger, I think is really not the
appropriate policy approach.
Senator Frist. Thank you. Dr. Sachs.
Dr. Sachs. I wanted to bring greetings from President
Obasanjo and also to convey his plea, actually, to the United
States which is that he has said that he regards the debt
reduction as fundamental for the future of Nigeria, for the
consolidation of democracy, and for the ability for a debt-
starved government to address these social emergencies.
I regard, as a professional economist, I regard his
assessment as absolutely correct. And I think that for an
extremely small amount of money, we could do a vast amount of
good for the most populous country of sub-Saharan Africa and to
more generally, help the whole region if we generalized that.
Just to conclude since you are seeing the Treasury
Secretary next week, if there was a serious attempt to link the
capacity to pay not to some notion of exports which came out of
thin air, but to the real sale of the crisis that these
countries face, what would happen is that all of the debt
servicing would stop.
The debts of these poorest countries would be canceled, and
we would find no more effective way to get the billions of
dollars that are needed to rebuild health care systems in the
region than that. And we know that the total cost to the U.S.
tax payer would be tiny if we did that because what we would do
is leverage the entire world creditor community of which we are
only a small part.
So I must say, to this moment, I still remain perplexed at
our hesitancy in taking that leverage. When President Clinton
announced that for some of the poorest countries the U.S. would
cancel 100 percent of the debts, and Congress partially funded
that in fiscal year 2000, immediately the UK came in and said,
``OK. We will do that, too.'' And then France jumped in and
said, ``No, we will do that to.'' We are world leaders in this.
And if we take the lead, we will leverage the entire world
in getting a realistic savings from these countries. If we just
stop the outflow of this, you will find billions of dollars per
year that can then be mobilized to the problems and we really
could fund the UNAIDS objectives, and we really could get clean
water, and existing vaccines to those who need it.
That is President Obasanjo's message for Nigeria, and I
think it is a more general message for us. We are very close to
that, but we have not grabbed it yet.
Senator Frist. Well said. Dr. Bale.
Dr. Bale. Just in closing, Mr. Chairman, to come back to
your question about incentives, and where they should be
placed, and how they should be placed very quickly. As I
mentioned, there is a lot of work that is going on in AIDS and
we certainly do need to work toward an AIDS vaccine, and
anything that can be done to incentivize that through tax
credits, market exclusivity, funds, et cetera, I think would be
worthwhile doing.
I would say that more importantly in some of the disease
areas that are really neglected, we in the industry will admit
more has to be done even though companies are doing research on
TB and malaria. We have to focus in on a lot of these areas and
look at the truly neglected areas of research.
In this regard, I will repeat again. I urge the
administration and Congress to consider very carefully these
new malaria initiatives that are partnerships of these
multilateral institutions that Jeffrey has talked about. These
are multilateral initiatives.
The UK, the Dutch Government has started to contribute
funds to this project, this Medicines for Malaria Venture. And
it points out the problem that while vaccine technology in the
field of TB, malaria, and AIDS is right now very difficult, we
can make progress on some very good breakthrough medicines. So
let us put some focus on there: incentivize breakthrough
medicines as well as vaccines. Thank you.
Senator Frist. Thank you. Again, I apologize for keeping on
schedule. We will probably have questions to submit, but thank
all of you for your participation today. We will ask our fourth
panel to come forward. Again, a panel that comes back to a lot
of the issues that have been referred to today, and that is the
infrastructure.
We will hear from two panelists today, Father Angelo
D'Agostino. He runs a large orphanage in Nairobi, Kenya. And
Mr. Franklin Graham, president of Samaritan's Purse in Boone,
North Carolina. Father D'Agostino, as we have heard earlier
today mentioned, has been a tireless advocate for orphans, and
Mr. Franklin Graham has been a forceful proponent of using
missions hospitals throughout Africa in fighting AIDS. Clearly,
in terms of infrastructure, missions hospitals throughout
Africa play a large role as they are a very high percentage of
health care facilities in Africa. And we will first begin with
Mr. Graham.

STATEMENT OF REV. FRANKLIN GRAHAM, PRESIDENT, SAMARITAN'S
PURSE, BOONE, NC

Mr. Graham. Thank you, Mr. Chairman. And I want to thank
you for your personal interest in this crisis in Africa and
personally going yourself to see for yourself the situation
that exists.
As one who has spent over 20 years traveling to Africa and
working in the area of health care, I have gained some
knowledge concerning the AIDS epidemic that is ravaging the
sub-Sahara in Africa. The social, political, economic and
spiritual problems are immense. Perhaps the following comments
will be of some value.
No one infected with the AIDS virus has ever survived. Some
people may have reprieve of as much as 8 to 10 years as a
result of multiple drug HIV treatments, but everyone infected
with the AIDS virus will die from it unless they die of
something else first.
No magic bullet drug therapy is likely to become available,
at least, for several years. If it ever does become available,
it will no doubt be very expensive and therefore not readily
available to people in developing countries.
Current triple drug therapy for HIV-positive individuals is
very expensive and it only buys time. Patients who are HIV-
positive develop suppression of their natural immune systems
defenses and are easily prey for infections, especially TB.
Because of AIDS, tuberculosis has become a major health threat
worldwide, with the number of patients with active TB rapidly
escalating.
Furthermore, drug resistant TB is becoming a major threat
worldwide, and even flying on a commercial airliner presents a
risk of contracting TB.
Compassionate and caring Christians first introduced health
care to Africa. In the mid-1880's, Dr. David Livingston, a
Scottish doctor, was one of the first to bring missionary
medicine to Africa. History considers him one of the most
important European explorers in Africa and one of the pioneers
in the abolition of the slave trade. He blazed the trail for
future missionary medicine to be practiced across the
continent.
Since the days of Dr. Livingston, there have literally been
thousands of Western missionary doctors who have followed in
his footsteps. After World War II, there was a huge increase in
the missionary medical effort in Africa. Most nations in the
sub-Sahara have church-related mission hospitals that would
either be Protestant or Roman Catholic. The total number of
church-based hospitals and clinics in Africa today is well over
500.
In almost every instance, these mission hospitals provide
the very best health care in the entire country. And I
emphasize, the very best health care in the entire country.
Unfortunately, most African governments are politically corrupt
and guilty of gross mismanagement at every level, pilfering
treasuries and natural resources for personal use.
U.N. sponsored programs reflect many of the same problems.
Government run hospitals and clinics are mismanaged, poorly
staffed, and are not in a position, in most cases, to deal with
this grave crisis.
There are exceptions, of course. There are excellent
hospitals in South Africa, Zimbabwe, and a few good private
hospitals, such as in Kenya; however, most of these private
hospitals are out of the reach of the poor. The mission
hospitals carry the brunt of the health care in the sub-Sahara.
I do not believe that any effective program addressing the
HIV virus can be carried out while ignoring the church in
Africa. The missionary doctors and nurses, themselves, are
dedicated to the care of the physical, mental and spiritual
needs of the African people. Many have years of experience
dealing with the HIV virus.
Short of a medical anecdote for the HIV virus, the only
true solution to the AIDS epidemic in Africa and worldwide is
behavioral change. While governments, schools and others seek
to educate people in how to avoid becoming infected by the HIV
virus through practical, safe sex means, such as use of
condoms, these measures are inadequate. This has been shown to
be particularly true as the African crisis has escalated.
Education is inadequate without the teaching that the only
reliable way to avoid contracting AIDS through sexual conduct
is by maintaining a life-long monogamous relationship. But just
as important, we must recognize that the ability to adopt such
dramatic lifestyle changes is almost impossible without the
moral conviction that sex outside of marriage between a man and
a woman is contrary to God's law.
The crisis will be curbed only when the moral teaching of
God's word permeates African society. In this matter of AIDS,
this will happen only through the work of the Christian church
and when the church and mission-based hospitals and clinics are
strengthened and equipped in their physical, social and
spiritual ministries.
Where do we begin? By enlisting the help of all churches
across Africa, and especially the churches involved in health
care, because the church is in every Africa community.
From there, I believe we must educate at the local level by
enlisting the help of pastors, tribal chiefs, political
leaders, and policymakers at the community level, informing
each group as to the facts about HIV--how it is transmitted,
who is at risk, et cetera.
In Kenya, where one out of nine adults is infected with
HIV, the organization I work with, Samaritan's Purse, helps
train members of Africa Inland Mission in Kenya to lead the
community in AIDS awareness.
In Uganda and the Congo, Samaritan's Purse provides AIDS
training materials and HIV test kits for potential blood
donors. In addition, we help orphan children, many of them
orphaned through AIDS.
While our efforts are just a drop in the bucket, the
combined work of mission hospitals and Christian relief
organizations throughout Africa has provided healing and
comfort to countless thousands of individuals. Last year, we
placed over 400 doctors and nurses in Africa as short-term
volunteers. They served in over 20 mission hospitals.
The church, and specifically missionary medicine, is the
key, Mr. Chairman, to reaching people in Africa, presenting to
them the spiritual, moral and medical reasons for monogamous
sexual relationship with one person of the opposite sex to whom
one is married and with none other.
If this happened, even then, everyone in the world will
still have to face possible infection by the AIDS virus through
blood transfusions. Everyone in the world will also have to
deal with the increased risk of becoming infected with possibly
drug resistant TB and other super infections which are
developing secondarily because of the AIDS epidemic.
This ultimately results from those who persist in having
this always deadly HIV virus to others as part of seeking
sexual gratification for themselves. There are Biblically based
moral standards that cannot be ignored. And these must be
taught if we are to win the battle. This is why it's imperative
for the church to be at the heart of this effort.
What can Congress do? First, I urge you to look favorably
on requests for funding of the AIDS package, to help with the
AIDS crisis in Africa, but be sure that education efforts
include instruction on the importance of sexual abstinence
outside of marriage.
And please, please consider earmarking substantial funds to
strengthen the church and mission-based hospitals and clinics
that hold the key to reducing this crisis situation.
With God's help and by looking to Him, I believe He will
give us the answers and show us the way. If we choose to ignore
God and His standards, I believe this plague of Biblical
proportions will not only continue to consume millions of
Africans, but will eventually consume many millions in this
country.
We cannot ignore the Hand of God. If we fail to ask for His
help, we will be the ones to suffer.
[The prepared statement of Rev. Graham follows:]

Prepared Statement of Rev. Franklin Graham

As one who has spent over 20 years traveling to Africa working in
the area of health care, I have gained some knowledge concerning the
AIDS epidemic that is ravaging the sub-Saharan Africa. The social,
political, economic, and spiritual problems are immense. Perhaps the
following comments will be of some value.
No one infected with the AIDS virus has ever survived. Some people
may have a reprieve of as much as 8-10 years as a result of multiple
drug HIV treatments, but everyone infected with the AIDS virus will die
from it, unless they die of something else first.
No ``magic bullet'' drug therapy is likely to become available (at
least for several years). If it ever does become available, it will no
doubt be very expensive and therefore not readily available to people
in developing countries. Current triple drug therapy for HIV positive
individuals is very expensive and it only buys time.
Patients who are HIV positive develop suppression of their natural
immune system defenses and are easy prey for other infections,
especially TB. Because of AIDS, tuberculosis has become a major health
threat worldwide with the number of patients with active TB rapidly
escalating. Furthermore, drug resistant TB is becoming a major threat
worldwide (and even flying on a commercial airliner now presents the
risk of contracting TB).
Compassionate and caring Christians first introduced health care to
Africa. In the mid-1880s, Dr. David Livingstone, a Scottish doctor, was
one of the first to bring missionary medicine to Africa. History
considers him one of the most important European explorers in Africa
and one of the pioneers in the abolition of the slave trade. He blazed
the trail for future missionary medicine to be practiced across the
continent.
Since the days of Dr. Livingstone, there have literally been
thousands of western missionary doctors who have followed in his
footsteps. After World War II, there was a huge increase in the
missionary medical effort in Africa. Most nations in the sub-Saharan
have church-related mission hospitals that would either be Protestant
or Roman Catholic. The total number of church-based hospitals and
clinics in Africa is over 500. In almost every instance, these mission
hospitals provide the very best health care in the entire country.
Unfortunately, most African governments are politically corrupt and
guilty of gross mismanagement at every level, pilfering treasuries and
natural resources for personal use. UN sponsored programs reflect many
of the same problems. Government-run hospitals and clinics are
mismanaged, poorly staffed, and are not in a position in most cases to
deal with this grave crisis.
There are exceptions of course. There are excellent hospitals in
South Africa and Zimbabwe, and a few good private hospitals such as in
Kenya; however, most of these private hospitals are out of reach for
the poor. The mission hospitals carry the brunt of health care in the
sub-Saharan.
I do not believe that any effective program addressing the HIV
virus can be carried out while ignoring the Church in Africa. The
missionary doctors and nurses, themselves, are dedicated to caring for
the physical, mental, and spiritual needs of the African people. Many
have years of experience dealing with the HIV virus.
Short of a medical antidote for the HIV virus, the only true
solution to the AIDS epidemic in Africa--and worldwide--is behavioral
change. While governments, schools, and others seek to educate people
in how to avoid becoming infected by the HIV virus through practical,
safer-sex means, such as use of condoms, these measures are inadequate.
This has been shown to be particularly true as the African crisis has
escalated.
Education is inadequate without the teaching that the only reliable
way to avoid contracting AIDS through sexual contact is by maintaining
a lifelong monogamous relationship. But just as important, we must
recognize that the ability to adopt such dramatic lifestyle changes is
almost impossible without the moral conviction that sex outside of a
marriage between a man and a woman is contrary to God's law.
This crisis will be curbed only when the moral teachings of God's
Word permeate African society. In the matter of AIDS, this will happen
only through the work of the Christian church, and when church and
mission based hospitals and clinics are strengthened and equipped in
their physical, social and spiritual ministries.
Where do we begin? By enlisting the help of all churches across
Africa, and especially the churches involved in health care, because
the Church is in every African community. From there, I believe we must
educate at the local level by enlisting the help of pastors, tribal
chiefs, political leaders, and policy makers at the community level,
informing each group as to the facts about HIV. How is it transmitted?
Who is at risk? etc.
In Kenya, where one out of nine adults is infected with HIV, the
organization I work with, Samaritan's Purse, helps train members of
Africa Inland Mission in Kenya to lead the community in AIDS awareness.
In Uganda and the Congo, Samaritan's Purse provides AIDS training
materials and HIV test kits for potential blood donors. In addition, we
help orphaned children; many of them orphaned through AIDS. While our
efforts are just a drop in the bucket, the combined work of mission
hospitals and Christian relief organizations throughout Africa has
provided healing and comfort to countless individuals.
The Church, and specifically missionary medicine, is the key to
reaching people in Africa, presenting to them the spiritual, moral, and
medical reasons for a monogamous sexual relationship with one person
(of the opposite sex) to whom one is married, and with none other. If
this happened, even then, everyone in the world will still have to face
possible infection by the AIDS virus through blood transfusions.
Everyone in the world will also have to deal with the increased risk of
becoming infected with possibly drug-resistant TB and other ``super-
infections'' which are developing secondarily because of the AIDS
epidemic. This ultimately results from those who persist in passing
this ``always deadly HIV virus'' to others as part of seeking sexual
gratification for themselves. There are biblically based moral
standards that cannot be ignored, and these must be taught if we are to
win this battle. That is why it is imperative for the Church to be at
the heart of this effort.
What can the Congress do? First, I urge you to look favorably on
requests for funding of aid packages to help with the AIDS crisis in
Africa. But be sure that educational efforts include instruction on the
important of sexual abstinence outside of marriage. And, please
consider earmarking substantial funds to strengthen the church and
mission-based hospitals and clinics that hold the key to reducing this
crisis situation.
With God's help, and by looking to Him, I believe He will give us
the answer and show us the way. If we choose to ignore God and His
standards, I believe this plague of biblical proportions will not only
continue to consume millions of Africans but will eventually consume
many millions in this country. We cannot ignore the Hand of God. If we
fail to ask for His help, we will be the ones to suffer.

Senator Frist. Thank you, Mr. Graham.
Father D'Agostino.

STATEMENT OF FATHER ANGELO D'AGOSTINO, NYUMBANI ORPHANAGE,
NAIROBI, KENYA

Father D'Agostino. It is getting late, Mr. Chairman. And I
know we're all tired. I do appreciate your giving me this
opportunity.
So, I will put aside the text and get right to the point,
which is, essentially, what you have just heard.
I have been in Africa for 20 years, now. And I see the
corruption at work. I see the disintegration of governments and
poverty increasing to a dimension that is unimaginable. The
slum sections have grown threefold since I have been there.
So, we must remember that the missionaries have been in
place for over 100 years. They know what they are doing. They
are reliable. They are knowledgeable. They are God-centered and
committed. They are not working for profit. And they are, in
the case of medicine, which I am acquainted with, providing
very good medicine, even in pretty--some pretty dire
circumstances.
So, it is a fact that the USAID did make a token attempt at
providing churches with some kind of help, but it was just a
token. What the--what Franklin just said is--cannot be stressed
enough. Some very direct aid to the church structures--they
have the infrastructures that they have worked out over the
years that we can capitalize on. They can--they are willing to
do it. They want to do it. They are unable to do all they can,
because they do not have the financial resources.
If you could take the example, for instance, of how
Communists was--communism was defeated in some way. But the
avoidance of the governmental structures and having the U.S.
Government funds and aid of food go directly to the church
structures in Poland, I think you will see that that really
contributed greatly to the demise of communism.
And I think it can contribute likewise to the demise of--
the conquering of the AIDS problem in Africa, if we can get
directly to the proven structures that have been able to bring
help to the people. And those are the churches.
Now, in the countries I know, especially Kenya and
Tanzania, there are very well developed structures of churches,
organizations of churches; the NCCK--the National Council of
Churches of Kenya, and the Kenya Catholic Episcopal Conference
that work quite well together and can be used as a conduit to
bring that help to those--to the churches. They--it would be an
excellent ecumenical effort and very much worthwhile.
The thoughts of the Muslim churches--the Muslims have come
in, in cooperation with these churches recently. And also, the
Hindu churches, which are quite numerous in Kenya.
There is one last point I would like to bring up, and that
is the question of condoms, which I would like to leave aside
the fact that in this forum, I--let me speak as a physician.
They do not work in Kenya. They--the reason is the cultural
imperatives. There are cultural demands and--that just make it
an uphill fight. Despite all the millions of dollars that--and
hundreds of millions of condoms have been distributed, there
has been no significant change in the rate of instance of
disease.
There are two countries, Uganda and Senegal, and they are
given as some kind of an example of the success of condoms.
That is--there is some very recent studies to show that, on the
contrary, at the same time the condom campaigns were
instituted--very serious church campaigns for--exactly what
Franklin was just talking about--were instituted--and
especially in Uganda--I know the person, the imminent Irish
Catholic nun physician who devoted her whole life, although she
was a surgeon by training, to setting up behavioral change
programs and were very successful throughout the country.
So, now, they are taking a second look and seeing that
maybe they had just as much or maybe more effect than the
condoms. And Senegal is known to be a religiously oriented
country, too. And so--I do not know as much about that, but I
think that has a lot to do with it, too.
I do agree that poverty, however, is a great contributor to
the whole problem of AIDS. And Dr. Sachs was right in the debt
reduction. But one has to be very, very careful. Just a
straight debt reduction is not going to help anything, except
the corrupt governments already. One has to really think hard
on how to do that debt reduction. Believe me, this--you are up
against some formidable forces, and it has to be really closely
studied before it is put into effect.
That is all I have to say.
Senator Frist. Thank you. Father D'Agostino, how many
children do you have in your orphanage now?
Father D'Agostino. At the moment, we have 70 children. That
is only a drop in the bucket. What we have done is institute a
community-based program to extend the care to these HIV-
positive children in the community, by identifying extended
family members, as was mentioned earlier, and supporting them
in one way or another.
That was started 2 years ago, and recently aided and
abetted by a grant from USAID, which is doing quite well.
Senator Frist. And all of the children are HIV-positive.
Father D'Agostino. Yes. We have--they are all HIV-positive
and orphans.
Senator Frist. And are they--are they treated in any way--
medically treated?
Father D'Agostino. Well, not with the antiretrovirals, no.
We just cannot afford that at all.
Senator Frist. And what do you use?
Father D'Agostino. Just the--the regular antibiotics for
opportunistic infections--Bactrim, Septra, and that sort of
thing.
Senator Frist. And what you have heard today from the
previous panel, do you see that medicines, if the price is low
enough, will be able to infiltrate the structure that you see
on the ground? You are the one witness today who we have heard
from who is really on the ground in Africa, taking care of
individuals.
How do you put this perspective of having medicines? Can
you make them inexpensive enough to where it will have an
impact?
Father D'Agostino. Yes. I think that in our hands and in
the hands of the mission clinics, it will definitely have an
effect, but giving it across the board to prevent children
born--to lower the incidence of the in vitro transmission is
very difficult. The infrastructures are not there. Women come
in and--at the last minute or maybe they deliver at home or in
the bush, and you just--it is very difficult to contact them.
And it is difficult to be able to quantify the--to deliver what
you want to have delivered.
Senator Frist. And the children that are HIV-positive, how
long do they live?
Father D'Agostino. Pardon me?
Senator Frist. How long do they live?
Father D'Agostino. There are two groups. The rapid--the
rapidly progressive disease. They only live, if they are born
HIV-positive, a few months. And then others in our hands live--
well, we have one boy who is 18 years old. If they are given
good nutrition, good all around care and the antiopportunistic
medications, they can live--well, the bulk of them are eight or
nine to ten. And I think that they could live quite a bit of
time, even without the antiretrovirals. But with the
antiretrovirals, it will certainly ensure that their life will
be of normal expectancy.
Senator Frist. And the other funding for your orphanage
comes from where? You mentioned that you have started to get
some money from USAID.
Father D'Agostino. We start--for the first--unfortunately,
5 years ago, when I approached USAID, they turned me down; the
same year they gave $10 million for the preservation of
elephants.
They have changed their tune a bit lately. And as I say, we
are getting some, but the ones that helped us originally were
from Italy, the very generous Swiss Foundation, the Japanese
Government, the Dutch Government, other governments, but not
the United States, until just recently.
Senator Frist. Thank you.
Senator Feingold.
Senator Feingold. Mr. Chairman, you have been so generous
with your time that I am not going to ask this panel any
questions. I am just going to make a couple of comments. And I
do want to say that you have been tremendously generous to do
this long of a hearing. I appreciate it.
I just want to be absolutely sure that as we look at this
problem, we make sure that we do not look at anything that
would reflect on suggesting that the people of Africa are
really to blame for what has happened here.
I would note some of the success stories in Africa--Uganda,
dominantly a Christian country; Senegal, I understand,
dominantly an Islamic country. A country that I was in
recently, where--frankly, a wonderful country, but where things
appear to be in some denial is a dominantly Protestant
country--Namibia.
So, I want to make sure that nothing we say here today
could suggest that somehow this is something that is going to
be solved simply by following any particular religious
approach.
And I would also suggest, in respectful disagreement with
the comments about debt relief, that when you are dealing with
a country, like Nigeria, with such a dramatically, very
cultural, religious and ethnic background, if the President of
that country, as he has done, both to Dr. Sachs and to me and
others, says the debt relief is the thing that they need, and
given the turnaround that has at least begun in Nigeria, I
think we ought to at least listen and hope that maybe that
would have something to do with stopping AIDS in its tracks in
a country that apparently is just on the upsurge now, but does
not have anywhere near the rate of infection of some the
countries in southern Africa.
So, I would just offer that with all respect and gratitude
to the witnesses for being here today. And again, Mr. Chairman,
this has been an outstanding hearing. And I look forward to
working with you and under your leadership to come up with a
package that we could present to the Senate.
Thank you so much.
Senator Frist. Thank you. And again, I think we will have
several questions for this panel, as well.
Mr. Graham, You have mentioned there are 500 or
approximately 500 mission hospitals. We heard Father D'Agostino
say it took USAID a while, and the funding came, and there had
been other priorities in the past. Do you have any impression
of whether or not aid is coming to these mission hospitals, in
terms of addressing the HIV issue?
Mr. Graham. Mr. Chairman, I would say I know of a few of
the hospitals that have received USAID for specific projects.
Usually, they are development projects. But that would be just
a handful out of that 500. Most would not receive a penny from
USAID. And some of that is because they are church-related or--
well, they are all church-related, but that may be some of the
reasons why they have not been given any money.
But as our friend here said, these people are compassionate
people. These doctors and nurses are not there for profit. They
have been called by God to that part of the world. And they are
giving their lives to these people of Africa. And they will do
all they can to save the lives of all Africans.
Let me just say something about debt relief concerning
Nigeria. This country is one of the leaders in human rights
abuses in Africa. In some of the northern states, they are
instituting Islamic law; forcing Christians to become Muslims.
And I would hope that we would not forgive one penny of debt
until they guarantee human rights for all of its citizens and
the freedom to worship God, as all citizens see fit. And I
think that is a very important question.
Senator Frist. Thank you both. As I said in my earlier
comments, it is rare that Congress has such a clear
understanding of making life and death decisions, and to have
both of you before us, really is testimony to that.
The issue of infrastructure: people actually on the ground;
how the resources that are devoted to that continent, to those
nations, are actually used and fulfilled is something that I
hope that we can continue to both oversee and, in part, direct.
It is clear that we need more resources in this entire
arena, but I think it is equally important that we make sure
that the resources that we use are used wisely and in a way
that both prepares for the future, but also carries out our
responsibilities today.
It is clear--and Father D'Agostino, you made it very clear
that we are not going to be able to help everybody in the
classical sense of having any medicine that is going to
successfully treat and cure individuals. And there is much that
we need to do. Yet, based on the information that we learned
today, and hopefully have established a foundation today, we
will be able to develop a cohesive, comprehensive policy on the
part of the U.S. Senate, the U.S. Congress, and the United
States of America.
As we heard, it is a global effort. It is an effort that
requires a lot of strategy, a lot of resources, both
unilaterally and multilaterally.
And I just personally want to thank both of you, who came a
long way to testify today, for your contribution to our better
understanding what is an issue that affects each of us
indirectly, some of us very directly, but affects the world in
a very, very real way.
With that, thank you very much. And I appreciate
everybody's interest today. It is an issue that we will
continue to address in a very aggressive fashion.
We stand adjourned.
[Whereupon, at 5:18 p.m., the hearing was adjourned.]
[Additional questions and additional related statements
follow:]

Additional Questions and Statements for the Record

Responses of Surgeon General Dr. David Satcher to Additional Questions
Submitted by Senator Jesse Helms

Question. What are the biggest barriers to care for HIV in the
developing world?
Answer. It is important to keep in mind that the care and treatment
of person living with HIV/AIDS (PLWHAs) include mental as well as
physical care and treatment. I strongly believe that the one cannot be
separated from the other. However, I will focus on physical care and
treatment in my response.
The following classes of drugs are the most important for the care
and treatment of PLWHAs: anti-infective drugs, anti-cancer drugs,
palliative drugs, and antiretroviral drugs (ARVs). There has often been
a focus on ARVs, but the other classes of drugs are often at least as
important and often more cost-effective.
Most developing countries face one or more of the following
challenges to increasing access to care and treatment: limited
financial resources, problems with prioritization of drug needs,
inadequate health care (medical and public health) infrastructures, and
inadequate distribution and administration systems. In addition, even
when there is access to care and treatment there are issues around
correct and supervised use, adherence, and development of resistance.
It is important not to generalize about all developing countries.
There are many differences among countries even in sub-Saharan Africa.
There are opportunities for the use of all four classes of drugs
including ARVs in a number of developing countries even in the face of
the aforementioned challenges.

Question. What programs have been successful in reducing these
barriers? What programs have already proven successful in making lower-
cost drugs available to people in the developing world?
Answer. Programs based upon public-private partnerships and
focusing on the continuum of medical and public health interventions
from research to prevention to care and treatment has been previously
or potentially successful. Public-private partnerships include two or
more of the following categories of partners: recipient countries
(e.g., countries in Asia, Latin America, and sub-Saharan Africa); donor
countries (e.g., Australia, Belgium, Canada, Denmark, Finland, France,
Germany, Japan, Luxembourg, the Netherlands, Norway, Sweden,
Switzerland, the United Kingdom, and the United States as well as the
European Union); international organizations (e.g., the United Nations
in general, Joint United Nations Program on HIV/AIDS (UNAIDS)
cosponsors UNICEF, UNDP, UNFPA, UNDCP, UNESCO, WHO, and the World Bank
in particular, and regional institutions); nongovernmental
organizations (NGOs) (e.g., AIDS service organizations (ASOs), colleges
and universities, community-based organizations (CBOs), foundations,
private voluntary organizations (PVOs), and professional associations);
and the private sector (e.g., pharmaceutical companies). Two examples
of public-private partnerships are the HIV Drug Access Initiative of
UNAIDS and the Secure the Future Program of Bristol-Myers Squibb.
UNAIDS launched the HIV Drug Access Initiative on November 5, 1997.
The aim of the initiative is to make HIV-related drugs more accessible
to broad sectors of populations in developing countries. The
participant countries in the trial phase of the initiative are Chile,
Cote d'Ivoire, Uganda and Vietnam. The four countries were chosen to
allow for adequate evaluation of the initiative in a variety of
geographic, social, cultural, economic, and structural situations and
to allow for adequate assessment and subsequent adjustments of the
functioning of the new mechanisms and structures being established in a
wide range of settings. The participant pharmaceutical companies are
Bristol-Myers Squibb, GlaxoWellcome, Hoffman-La Roche, Organon Teknika,
and Virco N.V. Participant countries will work to adapt their health
infrastructures to ensure effective distribution and use of the HIV/
AIDS-related drugs, and the participant pharmaceutical companies will
subsidize purchases of the drugs. Cote d'Ivoire and Uganda announced
the arrival of the first shipments of drugs and their distribution on
June 30, 1998.
Bristol-Myers Squibb (BMS) launched the Secure the Future Program
on May 6, 1999. The aim of the program is to find sustainable and
relevant solutions for the management of HIV/AIDS in women and children
and provide resources to improve community education and patient
support. The objectives of the program are to develop and implement
models for managing HIV/AIDS, develop and implement a capacity-building
program for the care and support of HIV/AIDS, and develop and implement
local training programs to strengthen public health capacity. The
participant countries are Botswana, Lesotho, Namibia, South Africa, and
Swaziland. Other participants include the Joint United Nations Program
on HIV/AIDS (UNAIDS), Baylor College of Medicine, Texas Children's
Hospital, Morehouse School of Medicine, the Medical University of
Southern Africa (MEDUNSA), Harvard AIDS Institute, and the
International Association of Physicians in AIDS Care (IAPAC). The two
components of the program are the BMS HIV Research Institute and the
BMS Foundation Community Outreach and Education Fund. BMS has committed
$100 million over five years for the program.

Question. If compulsory licensing of AIDS drugs is permitted as a
response to the spread of AIDS in Africa then what justification is
there for limiting compulsory licensing to AIDS treatment? What is the
rationale for permitting compulsory licensing of AIDS drugs but denying
that policy with respect to other life-saving drugs? If compulsory
licensing is a valid response to the HIV problem, isn't it a valid
response to all health care and infrastructure development problems in
the developing world? For example, couldn't the rationale underlying
the use of compulsory licensing in this context be used to justify
future compulsory licensing of water purification, sanitation and other
environmental technologies, architectural and engineering technologies
to construct earthquake-resistant structures, communications and
computer technology to improve access and delivery of critical human
services (such as in the areas of medicine and education), and the use
of patented medical techniques and processes in developing countries?
Isn't it true that all U.S. holders of patents on products, processes,
and/or techniques that have applications in the developing world could
potentially be subject to compulsory licensing if this precedent is
established?
Answer. It is important to note that the Office of the United
States Trade Representative (USTR) and not the Department of Health and
Human Services (DHHS) develops and implements United States Government
(USG) trade policy. However, the President announced on December 1,
1999 that ``there will be a more direct interaction between USTR and
[DHHS] on health-related intellectual property issues . . . [and USTR
and DHHS] will develop a cooperative approach on health-related
intellectual property matters consistent with [the USG] goal of helping
poor countries gain access to affordable medicines.'' He explained that
the aim of the approach is to ``ensure that the application of U.S.
trade law related to intellectual property, consistent with
international trade treaties, is sufficiently flexible to respond to
public health crises.'' He recognized that ``the challenge of improving
access to treatments without stifling innovation is one that eludes
simple answers.'' He also recognized that ``a modern patent system
helps promote the rapid innovation, development, and commercialization
of effective and safe drug therapies for diseases such as HIV/AIDS.''
He declared that ``sound public health policy and intellectual property
protection are, and must continue to be, mutually supportive.''
However, it would be best to address general questions on USG trade
policy and specific questions on compulsory licensing to USTR. I will
make a few observations.
The Agreement on Trade-Related Intellectual Property Rights (TRIPs
Agreement) of the World Trade Organization (WTO) allows compulsory
licensing under conditions described in Article 31. The conditions
include the following:

(b) Such use may only be permitted if, prior to such use, the
proposed user has made efforts to obtain authorization from the
right holder on reasonable commercial terms and conditions and
that such efforts have not been successful within a reasonable
period of time. This requirement may be waived by a Member in
the case of a national emergency [such as HIV/AIDS] or other
circumstances of extreme urgency or in cases of public non-
commercial use. In situations of national emergency or other
circumstances of extreme urgency, the right holder shall,
nevertheless, be notified as soon as reasonably practicable. In
the case of public non-commercial use, where the government or
contractor, without making a patent search, knows or has
demonstrable grounds to know that a valid patent is or will be
used by or for the government, the right holder shall be
informed promptly;

(g) authorization for such use shall be liable, subject to
adequate protection of the legitimate interests of the persons
so authorized, to be terminated if and when the circumstances
which led to it cease to exist and are unlikely to recur. The
competent authority shall have the authority to review, upon
motivated request, the continued existence of these
circumstances;

(g) the right holder shall be paid adequate remuneration in
the circumstances of each case, taking into account the
economic value of the authorization;

(g) the legal validity of any decision relating to the
authorization of such use shall be subject to judicial review
or other independent review by a distinct higher authority in
that Member; and

any decision relating to the remuneration provided in respect
of such use shall be subject to judicial review or other
independent review by a distinct higher authority in that
Member.

It is important to note that compulsory licensing is only one of a
number of mechanisms which have been suggested to increase access to
care and treatment. Other suggested mechanisms have included the
following: bulk purchasing, drug donations, generic production,
parallel importing, preferential pricing, purchase funds, arid tax
credits.

Question. Wouldn't compulsory licensing undermine the development
of technology for use in the developing world? In fact, as a
development policy, doesn't it limit the incentives for investment in
developing uses that could benefit developing countries? As a response
to health care problems, doesn't compulsory licensing act as a
disincentive to the development of medical and pharmaceutical
technologies for use in the developing world? If this policy is
adopted, aren't the incentives for developing vaccines for AIDS,
malaria and other diseases actually undermined, if not, altogether
eliminated?
Answer. As above, it is important to note that the Office of United
States Trade Representative (USTR) and not the Department of Health and
Human Services (DHHS) develops and implements United States Government
(USG) trade policy. It would be best to address general questions on
USG trade policy and specific questions on compulsory licensing to
USTR. However, as above, I will make a few observations.
Very few medical and public health practitioners see compulsory
licensing as a panacea. Some practitioners see a possible potential use
of compulsory licensing in limited cases under the conditions described
in Article 31 of the TRIPs Agreement.
The United States Government (USG) has worked and will continue to
work to increase incentives and decrease disincentives for the research
into and development of vaccines for AIDS, malaria, and other diseases
for the developing world. The President recently announced the
Millennium Vaccine Initiative. The Millennium Vaccine Initiative has
the following five components:

$50 million in the President's FY2001 budget as a
contribution to the vaccine purchase fund of the Global
Alliance for Vaccines and Immunization (GAVI); Presidential
leadership to ensure that the World Bank and other multilateral
development banks (MDBs) dedicate an additional $400-$900
million annually of their low-interest rate loans to health
care services;
Significant increases in federally funded basic research on
diseases which affect developing nations;
A new tax credit for sales of vaccines for infectious
diseases to accelerate their invention and production; and
A call to our Group of Seven (G-7) partners to join our
efforts to ensure a future market for these vaccines.

______

Responses of Dr. Jeffrey Sachs to Additional Questions Submitted by
Senator Jesse Helms

Question. How would you evaluate and strengthen the
Administration's proposed tax credit scheme for new vaccines, as
announced in the State of the Union speech? Since a number of observers
believe that vaccines for HIV, TB and malaria could be many years off,
should we also try to ``incentive,'' new breakthrough drug therapies
for these three diseases? Finally, should we distinguish the three
disease areas in terms of type or coverage of any new incentive plan?
Answer. By far the key strengthening needed is to internationalize
the program so that all major countries are contributing to the package
of incentives. The participation of the other countries would give
tremendous leverage to the initiative. The Administration should be
encouraged to work with other countries to have them contribute to an
overall international package of incentives. While the tax credit is an
important and worthy step in the right direction, the creation of a
vaccine purchase fund to which each country makes a financial
commitment to the future purchase of vaccines, would probably be a more
straight-forward, long-term strategy for the major countries to
coordinate their actions.
Please note that the legislation introduced by Senators John Kerry
and Bill Frist includes the creation of such a vaccine purchase fund.
Yes, we should also contribute to drug development schemes,
although the design of such schemes would have to be somewhat different
from the vaccine approach. As noted below, the MMV is a useful program
for developing new anti-malarials, but it does need strengthening in
its design.
There is a case for creating distinct incentive funds or tax-credit
allowances for each of the disease categories. Though the details of
how much to segregate or combine the incentive schemes requires some
further elaboration.

Question. What is your view of the GAVI and the MMV? Should. the
U.S. Congress support these programs?
Answer. GAVI is extremely important and can provide a core
institutional framework for all of the global vaccine efforts. The U.S.
should work with GAVI and also contribute directly to GAVI.
The MMV is also a useful initiative for developing anti-malarial
drugs. It should be strengthened, however, to combine the R&D support
that is now in the initiative with some kind of market-incentive
strategy.

______

Responses of Dr. Harvey E. Bale, Jr., to Additional Questions Submitted
by Senator Jesse Helms

Question 1. If compulsory licensing of AIDS drugs is permitted as a
response to the spread of AIDS in Africa; then what justification is
there for limiting compulsory licensing to AIDS treatments? What is the
rationale for permitting compulsory licensing of AIDS drugs, but
denying that policy with respect to other life-saving drugs? If
compulsory licensing is a valid response to the HIV problem, isn't it a
valid response to all health care and infrastructure development
problems in the developing world? For example, couldn't the rationale
underlying the use of compulsory licensing in this context be used to
justify future compulsory licensing of water purification, sanitation
and other environmental technologies, architectural and engineering
technologies to construct earthquake-resistant structures,
communications and computer technology to improve access and delivery
of critical human services (such as in the areas of medicine and
education), and the use of patented medical techniques and processes in
developing countries? Isn't it true that all U.S. holders of patents on
products, processes and/or techniques that have applications in the
developing world could potentially be subject to compulsory licensing
if this precedent is established?
Answer. It is indeed important to note that compulsory licensing of
HIV/AIDS drugs could set a dangerous precedent for using this extreme
measure for other treatments as well. Furthermore, there is the danger
that, if compulsory licensing is used for drugs, this mechanism could
also be used to force U.S. and other patent-holders to give up their
rights to their inventions in many sectors which could have
applicability to problems in developing countries. This spill-over
effect could have a serious impact on industries aside from the
pharmaceutical industry which depend on intellectual property for their
survival.
It must be realized that, in TRIPS, compulsory licensing was
designed to be used only under very stringent conditions in a non-
discriminatory manner, not as a ``cure-all'' for endemic infrastructure
problems in developing countries, which is apparently the aim of some
international activists. It is unfortunate that some governments have
seized upon the arguments given to them by international activists
(that patents are the problem for access) and use them as an excuse for
not taking serious steps to fight the epidemic in their countries.
Indeed, there are cases of countries experiencing explosive growth in
AIDS which prefer to spend their resources on armaments and military
adventurism rather than on health care for people living with AIDS. As
these governments do not themselves set health care as a priority for
their own people, it is wrong to charge that the industry is not doing
enough in the fight against AIDS.

Question 2. Wouldn't compulsory licensing undermine the development
of technology for use in the developing world? In fact, as a
development policy, doesn't it limit the incentives in developing uses
that could benefit developing countries? As a response to health care
problems, doesn't compulsory licensing act as a disincentive to the
development of medical and pharmaceutical technologies for use in the
developing world? If this policy is adopted, aren't the incentives for
developing vaccines for AIDS, malaria and other diseases actually
undermined, if not altogether eliminated?
Answer. Compulsory licensing and other attacks on intellectual
property rights strongly discourage investment and research in the
areas covered by the compulsory license or even threatened with a
compulsory license. Allowing market incentives to proceed without such
counterproductive interventions is vitally important in creating an
environment favorable for developing new vaccines, treatments and
possible cures for HIV and AIDS-related conditions. After all, drug
research and development by the research-based pharmaceutical industry
is financed by companies' own internal resources, and on average it
takes hundreds of millions of dollars to research, develop and test a
new medicine, including treatments for AIDS. Such financing comes about
solely through the revenues generated by existing products already on
the market; if that revenue stream is unfairly curtailed, then funding
for further research will suffer correspondingly.
It is vital that research is not hindered by quick-fix solutions
such as compulsory licensing, parallel trade and other measures which
may sound attractive to some in the short term, but would fatally
retard R&D into HIV/AIDS related medicines in the medium and long-term.
As such innovation is vital for progress in fighting diseases and other
conditions, including those particularly affecting developing
countries, the use of compulsory licensing would dramatically undermine
the incentives for conducting research in this area. In the end, the
ones who would really suffer from these policies would be people living
with AIDS and other diseases for which there is currently no effective
treatment or cure and whose hopes for new developments would be dashed
by such a policy.
Innovation and development through the pharmaceutical industry's
R&D efforts can only continue when there is respect for and
implementation of protection for intellectual property rights which
promote and protect such research. The challenge now is to improve
therapies and the search for cures, continue to extend access to these
breakthrough medicines to all affected populations, and ultimately to
develop an effective vaccine--or several vaccines, which, as UNAIDS
says, is the only way to effectively stop and one day roll back the
spread of the HIV pandemic.

Question 3. What are the biggest barriers to care for HIV in the
developing world?
Answer. In looking into the issue of barriers to access to care, it
must be recognized that a prerequisite for even starting to approach
these barriers is the commitment of national governments in developing
countries to take committed action. Only a committed effort by these
governments can be effective in fighting HIV/AIDS, as the spread of HIV
is very much linked to poverty and underdeveloprnent which make people
more vulnerable to becoming infected with HIV. Furthermore, there are
several barriers to access to health care, barriers which industry can
play only a limited role in overcoming. Indeed, the manufacturers' cost
of pharmaceutical products is small in comparison to the overall
distribution costs required to reach populations affected by AIDS or
even to the retail price paid by the end consumer. The top four
barriers to access can be grouped into the following categories:

Military, Social and Political Issues
Financial Hurdles
Physical Infrastructure Barriers
Unhelpful Micro-Economic Policies

(For a fuller discussion of the barriers to access, please see my
prepared testimony.)

Questions 4 and 5. What programs have been successful in reducing
these barriers? What programs have already proven successful in making
lower-cost drugs available to people in the developing world?
Answers. Several programs have been effective in helping overcome
barriers to access to healthcare and pharmaceutical products in
developing countries. A key element in all of these strategies has been
decisions by national governments in developing countries to take
serious and concrete action to overcome these barriers; the
pharmaceutical industry has worked together with such governments to
complement their efforts to improve health care for their people.
In the fight against AIDS and other diseases or conditions
particularly affecting developing countries worldwide, individual
companies are working in partnership with the public sector and civil
society, particularly in Africa. (For details of individual company
programs, please see my published testimony.) Furthermore, industry-
wide efforts to improve health worldwide in partnership with the public
sector are underway, including the new Medicines for Malaria Venture
(MMV), the Global Alliance for Vaccines and Immunization (GAVI), and
the WHO/CEO Roundtable process. (Further details on these programs are
available in my published testimony). We would urge the Congress and
Administration to financially back the public/private MMV initiative,
joining several other countries that have already done so.
More generally, innovative approaches and more resources will be
needed to attack disease patterns in the poorest countries.
Fortunately, novel approaches are being explored. For example, UNICEF,
WHO, the World Bank and UNAIDS are looking at ways to guarantee a
market for vaccines for diseases predominant in developing countries,
picking up on an idea of creating a fund (to purchase vaccines) raised
initially by Professor Jeffrey Sachs. Other mechanisms should be
explored as well. These include developing policy measures similar in
concept to U.S. orphan drug legislation, which includes tax credit and
market exclusivity provisions.

Question. It was said in the hearing by Dr. Lurie that Navirapine
is the product of the NIH? Could you comment on this and on the more
general question of the role of government vs. industry research in the
AIDS and other disease areas?
Answer. Drug discovery and development are overwhelming conducted
by the research-based pharmaceutical industry, not by governments. To
take the concrete case addressed at the hearing, Navirapine was not a
government-origin drug. In fact, it was discovered at Boehringer-
Ingelheim's laboratories in Ridgefield, Connecticut, and the
development and registration trials were done solely by Boehringer-
lngelheim. The only involvement of the National Institutes of Health
(NIH) was through the cooperation in the use of Navirapine in clinical
trials in Uganda for preventing mother-to-child transmission of HIV.
This use of Navirapine by NIH was only for investigating this specific
application--product development and clinical trials for registration
purposes were all done by Boehringer-Ingelheim.
While NIH and other public-sector researchers are indeed doing very
important work, experience shows that it is industry which discovers
the vast majority of new pharmaceutical substances. Furthermore, only
research-based pharmaceutical companies undertake the very expensive
and lengthy process of trials and development to bring a product to
market. This is especially true in terms of AIDS research. It is
important to recall that, twenty years ago, AIDS was not yet
identified. At that time AIDS was considered untreatable as well as
incurable, subjecting those infected with HIV to certain misery and
untimely death. Today, there are about 15 antiretrovirals on the global
market, all of which were tested, developed and brought to market by
pharmaceutical companies. Ten of them were discovered by industry,
including all of the protease inhibitors and nonnucleoside reverse
transcriptase inhibitors which are key to breakthroughs in triple
therapy.
Furthermore, there are over 100 new AIDS medicines in our
industry's R&D pipeline, including 35 new antivirals and 10 vaccines
for HIV prevention. Such research will, we hope, one day yield:
shorter-course treatments, such as Navirapine from Boehringer-Ingelheim
for preventing mother to child transmission of HIV; more convenient and
tolerable regimens, such as the ``one-pill-a-day'' regimens being
tested by various researchers, including GlaxoWellcome and Bristol-
Myers-Squibb; as well as scientific breakthroughs which could open up
whole new avenues to fight HIV, such as a recent announcement by Merck
scientists that they have found two experimental compounds which were
able to obstruct the activity of an enzyme called integrase that plays
a critical role when the AIDS virus infects cells.

Question. You mentioned the Medicines for Malaria Venture (MMV) in
your statement. Could you provide more details and explain further why
you believe that the U.S. government should support it? How many other
governments are financially contributing? What would be an appropriate
amount to contribute each year?
Answer. The Medicines for Malaria Venture (MMV) is a new approach
to the discovery and development of medicines for malaria, as well as
an innovative example of public/private sector partnership to improve
access to health care in developing countries. It intends to discover,
develop and commercialize antimalarial drugs at prices that are
affordable to the populations worst hit by malaria at a rate of one new
product every five years. If funding targets are reached, it is
expected that the first product to be generated by MMV will be
commercially available before 2010.
The innovative nature of MMV is shown by its being structured like
a small virtual R&D company which will use the pharmaceutical
industry's expertise in drug discovery and development together with
academia's and the public sector's experience in basic biology and
field studies. All processes will be outsourced, but appropriately
managed by a central unit. After discovery of possible compounds with
anti-malarial potential, MMV will identify and license companies to
produce and commercialize successful products on criteria which ensure
appropriate distribution and an affordable price.
Funding for MMV are coming mainly from government funding agencies,
foundations and philanthropic donations. The initial goal for MMV is to
raise US$15 million for 2000, with a target of US$30 million per annum
for the following three years. To date, US$8.75 million have been
raised for 2000, of which US$2.5 million have come from the government
of the Netherlands, US$700,000 from the government of Switzerland, and
US$1.5 million from the United Kingdom government, which has also
pledged US$1.5 million for 2001. The balance of funding for 2000 has
come from WHO's Roll Back Malaria program (US$2.5 million), the
Rockefeller Foundation (US$1.3 million) and the World Bank
(US$250,000). As the U.S. government generally supports programs such
as UNAIDS with a quarter of the program's annual budget, a possible
level for U.S. support to MMV would be US$3.75 million for 2000, rising
to US$7.5 million for subsequent three years.

Question. You noted in your statement the problems with the use of
``compulsory licensing'' and ``parallel trade.'' Could you explain
further your concern and could you give the Committee references in the
literature that would be reliable source materials?
Answer. In recent years, countries have strengthened intellectual
property protection for pharmaceutical products and, as part of this
trend, compulsory licensing policies have been withdrawn from use. The
WTO TRIPS Agreement further narrows the scope of use of these measures
and reflects the global trend to respect the right of innovators to
have a limited period of effective patent protection. One should not
read into the TRIPS Agreement's provisions on compulsory licenses
support for compulsory licenses as a preferred public policy measure.
While the TRIPS Agreement recognizes that there are circumstances that
may require a country to issue compulsory licenses, it also recognizes
that, if abused, compulsory licenses would negate the value of the
market exclusivity provided by a patent. Thus, the TRIPS Agreement,
while not seeking to outlaw compulsory licenses per se, severely
curtails their abusive implementation through an enumeration of
conditions for the grant of compulsory licenses.
There are a number of reasons why governments have come to the
conclusion that compulsory licensing is a threat to good public health
and innovative treatments, and not a solution:

WHO states that about a third of the world's population has
no guaranteed access to quality essential medicines, most of
which are generic, or off-patent copies of originals.
The real challenge to access to medicines is the repair of
the breakdown of the health delivery system in many countries.
In addition, there are hundred, indeed thousands, of unmet
needs that can only be addressed through innovation--e.g., AIDS
and other infectious diseases, cardiovascular disease, cancer,
etc.
The risk of R&D is largely borne by the research-based
pharmaceutical, biotechnology and vaccine industries, which
will invest tens of billions of dollars annually in research
and development.
The only feasible model for promoting innovation in the
high-risk and resource intensive pharmaceutical industry is to
guarantee the innovator an adequate period of exclusive rights.
The limited period of marketing exclusivity provided by
intellectual property rights allow the innovator/patent-owner
to capture revenue from sales of the product; but it does not
grant unfettered discretion over pricing which is a product of
intense competition among companies which have therapeutically-
competitive patented and generic drugs.
In fact, the erroneous ``common sense'' theory that patents,
standing alone, enable a pharmaceutical manufacturer to charge
``monopoly'' prices for a product and thereby restrict access
is fundamentally flawed--in the real world, a wide array of
factors operate to determine ex-manufacture, wholesale and
retail prices of pharmaceuticals: demand, taxes, custom duties,
wholesale and retail margins, cost of delivery, pilferage
rates, etc.
Forcing the patent owner during the limited period of the
patent term to share the potential revenue from sales of a
product threatens the entire innovative cycle and makes
pharmaceutical innovation and delivery a commercial unrealistic
exercise. This is especially true in developing country markets
where the product must be priced at very low level to be
affordable.
Compulsory licensing restrictions that are found in the
TRIPS Agreement reflect the fact that these are intended to
very rarely-employed remedies for situations far outside the
normal market environment.
Most importantly, however, the use of compulsory licenses
does nothing to address the fundamental barriers to access to
pharmaceutical products.
Deficiencies in the health infrastructure that cause
problems in delivering access to pharmaceuticals are not solved
by creating two or more sources of products. In fact, doing so
will erode the incentive for any drug manufacturers, whether
pioneer or generic, to implement that infrastructure.

Simply put, compulsory licenses cannot begin to address the
fundamental problems that create barriers to access to pharmaceuticals
in developing countries, and cannot be portrayed as a solution to
healthcare problems. Rather, compulsory licensing would deny patients
around the world the future benefits of the valuable scientific,
research and development capabilities of the research-based industry
from which new therapies come.
One source of further background information and analysis of the
problems of parallel trade is an article that I prepared and published
in the Journal of International Law and Economics entitled ``The
Conflicts Between Parallel Trade and Product Access and Innovation: The
Case of Pharmaceuticals'' (1998, pp. 637-653). Two other papers are:
Patricia Danzon, ``The Economics of Parallel Trade'' in
Pharmacoeconomics (March 1999); and Barfield, C. and M. Broombridge,
``Parallel Trade in the Pharmaceutical Industry'' in Fordham
Intellectual Property Journal (1999).

Question. The Administration has been ``hot and cold'' on pursuing
strong intellectual property rights when it comes to patented
pharmaceuticals in countries like South Africa. What is your view of
the appropriate steps that this Committee could recommend to the
Administration?
Answer. The Republic of South Africa clearly needs support in its
efforts to improve its public health infrastructure, but actions such
as compulsory licensing or parallel trade will be only
counterproductive. At worst, they will force innovative, research-based
pharmaceutical companies to pull out of the country and stop research
on the diseases and conditions which particularly affect South Africa,
including HIV/AIDS. Indeed, when a country crosses the line and
transgresses its international obligations, as South Africa did in
promulgating Section 15C of SAMMDRA, then other countries, including
the U.S., should take action to bring the offending country back into
line, as the protection of the international rules on intellectual
property benefit the entire system. It must be emphasized, however,
that the industry shares the aims of the government, in that it is
clear that access to quality health care in South Africa must be
improved. It is the means, not the ends, on which we differ with the
South African government.

______

Prepared Statement of the AIDS Vaccine Advocacy Coalition

vaccines for a new millennium act: important steps to develop hiv/aids
vaccine
The AIDS Vaccine Advocacy Coalition (AVAC) applauds the leadership
of Senator John Kerry in developing and introducing the Vaccines for a
New Millennium Act. ``Ultimately, the only way to stop this still
expanding epidemic is with a preventive vaccine. Scientists believe
that a vaccine is possible. And not nearly enough is being done to
develop a vaccine,'' said Rose McCullough, AVAC Executive Director.
``Both direct funding of research by government and industry and
mechanisms that leverage private investment are needed to develop
vaccines for HIV/AIDS and other deadly infectious diseases,'' said
McCullough. The Congressional Research Service of the Library of
Congress states that tax credits for research and development can be
expected to spur investment by the private sector and are justified to
correct failures in the market for these vaccines. She added, ``Using
the taxing power of government to leverage private investment, sends a
clear message to industry from the people and it holds the
pharmaceutical companies to their oft-stated humanitarian goals while
supporting their proven business methods for getting things done
efficiently.''
The Vaccines for a New Millennium Act would take important steps to
distribute existing vaccines; provide a research tax credit to industry
to encourage them to develop a vaccine; create both a purchase fund and
tax credit to help distribute a vaccine, when developed, worldwide; and
create mechanisms for better coordination in the United States and the
world.
AVAC's groundbreaking work to develop the research and development
tax credit concept led to introduction in of the Lifesaving Vaccine
Technology Act of 1999 by Rep. Nancy Pelosi and Senator John Kerry
(H.R. 1278 and S. 1718). Beginning with innovative work by AVAC, IAVI
and the World Bank, intense interest has been kindled in the
desirability of creating a market for AIDS vaccines in advance.
Founded in 1995, AVAC is a coalition of volunteer advocates located
throughout the country. In all of the work that we do, AVAC seeks to
provide a well-informed, independent, and honest critique of current
efforts by the U.S. government, the pharmaceutical and biotechnology
industry, and other sectors toward developing an HIV vaccine. Our goal
is to speed development of HIV vaccines without taking resources away
from basic HIV research, drug development, or other prevention
research. AVAC is a 501(c)(3) non-profit organization, donations to
AVAC are tax deductible.

______

Prepared Statement of Consumer Project on Technology \1\
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\1\ http://www.cptech.org
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Dear Senators Frist and Feingold:
Please include this statement as part of the record of the hearing
on AIDS and Africa.\2\ Our comments will focus on the following topics:
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\2\ The Consumer Project on Technology was created by Ralph Nader
in 1995. CPT has been engaged in extensive reviews of US trade policy
as it relates to medicines and other health care technologies, as well
as research into issues such as costs of development of new drugs, and
the transfer to the private sector of commercial rights to government
funded health care research. Our work on these topics is on the web at:
http://www.cptech.org/ip/health.
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What is US trade policy as it relates to access to
medicines?
What are the concerns of public health groups with regard to
US trade policy?
i. u.s. trade policy and access to medicines
For decades, the US government has advanced the interests of large
pharmaceutical companies in its trade policy. The pharmaceutical sector
is considered a major export industry, and US government trade policy
has been focused almost entirely upon the commercial interests of
companies like Merck, Bristol-Myers Squibb, Pfizer and other members of
trade associations like the Pharmaceutical Research and Manufacturers
Association (PhRMA) and the International Federation of Pharmaceutical
Manufacturers Associations (IFPMA).
Among the features of US policy, as expressed in countless
bilateral negotiations and multilateral fora, are the following:

1. The US government has pushed to end the exemptions for
medicines in national patent laws.
2. The US government has pushed for a minimum term of 20
years in patent laws.
3. The US government has put pressure on governments to
create patent extensions for pharmaceuticals.
4. The US has pushed for a broader scope of patenting, on
issues such as patenting of doses and treatment regimes for
medicines, formulations of medicines, patents on second uses of
medicines, and patents on biotechnology.
5. The US government has been an aggressive opponent of the
use of compulsory licensing of patents on medicines by
developing countries.
6. The US government has objected when other countries have
proposed US ``Bolar'' style patent exceptions for testing of
bioequivalence of generic products.
7. The US government has opposed efforts by developing
countries to require the use of the generic name of a product
on pharmaceutical packaging, claiming this violates company
trademark rights.
8. The US government has opposed the efforts by developing
countries to require generic prescribing, or generic
substitution laws, as a violation of company trademark rights.
9. The US government has opposed efforts by many countries to
impose price controls on pharmaceuticals.
10. The US government has objected to efforts by many
countries to use US style ``managed care'' formularies to
obtain better prices on drugs.
11. The US government is seeking extensive non-patent
regulatory barriers to entry for generic drugs, such as
regulatory exciusive marketing rights for products not
protected by patent.
12. The US government is asking countries to provide 10 years
of commercial exclusivity for data used in regulatory reviews
of the safety and efficacy of pharmaceuticals as a barrier to
entry for generic versions--even though the US laws only
provide five years of data exclusivity.
13. US trade officials oppose laws that would permit parallel
imports of pharmaceutical drugs, thereby denying countries the
ability to get the best world price on branded pharmaceutical
products.
14. The US government has rejected proposals by public health
groups to permit the World Health Organization to use US
government rights in taxpayer funded health care patents, to
expand access to medicines in developing countries.
15. The US government has opposed proposals that the World
Health Organization advise developing countries on intellectual
property policies, as they relate to access to HIV/AIDS drugs.

I could add to the list or simply refer persons to the National
Trade Estimates (NTE) reports of the United States Trade Representative
(USTR), other US government trade publications and CPT's extensive
reports on trade disputes involving pharmaceutical drugs. These can all
be found on the web here: http://www.cptech.org/ip/health.
While US trade officials sometimes claim they are merely protecting
the legitimate interests of investors in intellectual property, the US
positions are often perceived outside the US as extreme, hypocritical,
unfair or protectionist, and increasingly are criticized by the public
health community for the negative impact on access to medicines.
ii. public health concerns regarding u.s. trade policy
The rising concern over the global AIDS crisis has highlighted the
need to change US trade policy. With more than 22 million persons
currently infected with HIV/AIDS in Africa, and millions more in
developing countries outside of Africa, it is clear that the costs of
treatment would be astronomical, if there ever was a serious effort to
do so. A typical HIV/AIDS cocktail in the US costs more than $10,000
per year, for the drugs alone. At just $10,000 per year, it would cost
more than $222 billion per year to provide drugs to the current
population of African persons living with HIV/AIDS, and for significant
portions of the population, this would not be effective without other
investments in health care infrastructure. But even if one has far more
modest treatment goals--the prices of drugs are important--as
illustrated, for example, by the lack of access to fluconazole, an
important, high priced, but cheap to produce, antifungal medicine.
This committee will hear from many informed persons who can
describe the nature of the HIV/AIDS crisis in Africa and other
developing countries. We will simply note the obvious, which is that
this is an overwhelming tragedy that challenges all of humanity to
fashion a response equal to the human suffering.
Certainly the Subcommittee will hear how complex are the problems
in dealing with HIV/AIDS in Africa. There are many aspects of the
problem--poor medical infrastructure, limited budgets, lack of
education, ineffective prevention efforts, discrimination and bias,
employment practices, the need to change sexual behavior, the failure
of African countries to allocate greater funding to health care, the
crushing burden of debt on African countries, the paucity of foreign
aid, the high prices of drugs, the rules for the protection of
intellectual property and bilateral trade pressures to protect the
pharmaceutical industry.
There are many issues that must be addressed to save lives and
limit suffering in Africa. There are no silver bullets, no single
solutions--simply a large list of things that must be done. There
should be no controversy that this list will include changes in US
trade policy, and addressing intellectual property rules. And, while
compulsory licensing and other measures will change private R&D
incentives, it is worth noting that Africa only accounts for about 1.3
percent of the worldwide pharmaceutical market, and that much R&D on
HIV/AIDS related medicines is funded by the US government.
Defenders of current US trade policy sometimes say that the price
of drugs isn't the ``the issue,'' pointing the many other problems. But
as is often said, when someone says it isn't about the money, it is
often about the money, and only a fool would suggest the price of drugs
is not important to people in Africa who are infected, with HIV/AIDS.
Responding to increasing international and domestic criticism of US
trade policies on pharmaceutical drugs, President Clinton announced on
December 1, 1999, that he was removing South Africa from the USTR Watch
list on intellectual property, and that US trade policy would be
changed to facilitate access to medicines. That review is just
beginning, and has produced very few results so far.
the wto trips agreement as a norm for africa
The World Trade Organization Agreement on Trade Related Aspects on
Intellectual Property, known as the TRIPS agreement, is the most
important international agreement on intellectual property rights. The
TRIPS accord is extensive and comprehensive, covering patents,
trademarks, copyright, trade secrets, undisclosed health registration
data and other items. Under the TRIPS, all WTO member countries will
have to extend 20 years of patent protection to pharmaceuticals. The
TRIPS accord places restrictions on government use or compulsory
licensing of patents, and provides countless other protections for the
owners of intellectual property.
However, the US government does not accept the WTO rules as
appropriate for African countries. It seeks much higher levels of
protection--so called ``TRIPS plus'' levels of protection. US policy on
this is itself a seeming violation of the WTO rules. Article I of the
TRIPS says:

Members . . . shall not be obliged to, implement in their law
more extensive protection than is required by this Agreement .
. . Members shall be free to determine the appropriate method
of implementing the provisions of this Agreement within, their
own legal system and practice.

The public health community is split on the degree to which the WTO
TRIPS agreement should be modified to address public health concerns.
There is, for example, much controversy over whether or not poor
countries should be required to have 20 year patents on pharmaceutical
drugs. However, there is much less disagreement on the issue of TRIPS
plus obligations. Given the huge suffering in Africa today, a policy of
requiring TRIPS plus--more than the WTO rules for medicines--is morally
repugnant.
A February 10-12, 2000 meeting of the TransAtlantic Consumer
Dialogue (TACD) produced a set of recommendations on health care and
intellectual property that provide a useful overview of public health
community views on these disputes. I have attached the TACD resolutions
to this letter. We ask the members of this Subcommittee to formally ask
the US government to provide a written response to the TACD
recommendations.
From these recommendations, I would highlight several issues that
are a priority to public health groups.

1. The US and EU governments should not require TRIPS plus
levels of intellectual property protection on medicines. This
is an issue addressed in the Senate version of the African
Trade Bill.
2. The US government should support the call to create a
working group on access to medicines within the WTO. This would
provide an important and needed forum to discuss a number of
important trade related aspects of the access to medicines
problem.
3. The US government should permit the World Health
Organization, UNAIDS or other international bodies to use US
government funded patents in developing countries. It is
shocking and ethically indefensible to withhold use of US
government funded medical inventions in developing countries.
4. The US government should provide the WTO with a
communication supporting an interpretation of Article 30 of the
TRIPS that would permit patent exceptions for production of
medicines for export.

I will elaborate briefly on item 4, concerning patent exceptions
and exports of medicines. Under the WTO rules, governments can issue a
compulsory license to a patent, but in most cases, the use must be
limited to domestic consumption. The practical effect of this is that
only a handful of developing countries will have a large enough
domestic industry to manufacture their own products. Moreover, it is
inefficient if not absurd to think of more than 100 different
manufacturing facilities for each essential medicine that might be a
subject of compulsory licensing.
If one was serious about providing treatments for HIV/AIDS
medicines in developing countries, one would focus attention on those
issues that would lead to the cheapest and highest quality production
of medicines. This would involve:

a. Fast-track compulsory licensing (as has been proposed in
South Africa and the Dominican Republic),
b. Coordinated global procurement, to take advantage of
economies of scale, joint bargaining power and the best
international production facilities, and
c. An agreement by the WTO that patent exceptions for
production of medicine for export would be a reasonable use of
TRIPS Article 30.

Finally, thanks to Senators Frist and Feingold for addressing this
important issue.
Sincerely,
James Love, Director,
Consumer Project on Technology.

[Attachment]

TransAtlantic Consumer Dialogue (TACD)

tacd recommendations on health care and intellectual property
Pharmaceuticals: Access to Medicines in Developing Countries
1. TACD recommends that public health considerations be paramount
in trade policies as they relate to access to medicines.

The US and EU governments should review trade policies to ensure
that developing countries do not face trade related barriers for access
to essential medicines and other medical technologies, in a manner
consistent with the World Health Assembly (WHA) Revised Drug Strategy,
EB103/4, which calls upon member countries:

(1) to reaffirm their commitment to developing, implementing
and monitoring national drug policies and to taking all
necessary concrete measures in order to ensure equitable access
to essential drugs;
(2) to ensure that public health interests are paramount in
pharmaceutical and health policies; and
(3) to explore and review their options under relevant
international agreements, including trade agreements, to
safeguard access to essential drugs;

TACD asks the US, the EU and its member countries to report back to
the TACD on the steps taken to implement the WHA Revised drug strategy
in trade policy.

2. TACD supports the creation of a WTO Working Group on Access to
Medicines.

This working group would identify problems concerning access to
medicines, provide a public health framework for the interpretation of
key features of WTO agreements, and evaluate and propose changes in the
WTO rules that would expand access to medicines.

3. TACD recommends the US, the EU and other developed countries
enter into an agreement to support far higher levels of R&D for
neglected diseases.

Today there is very little research and development on diseases
such as malaria, chagas disease and other illnesses that have an impact
on the poor. R&D efforts for neglected diseases should be designed with
access in mind, and address issues such as reasonable pricing and the
allocation of intellectual property rights.

4. TACD recommends the US, the EU and its member countries enter
into agreements with the World Health Organization (WHO) to give the
WHO licenses to use publicly funded health care inventions in
developing countries.

5. TACD asks the US and the EU to support patent exceptions for the
export of medicines.

The EU and the US should send communications to the WTO supporting
interpretations of WTO TRIPS provisions that would permit patent
exceptions for production of medicines for export, when the legitimate
rights of patent owners are protected in the export market. For
example, patent exceptions should permit the production and export of a
medicine to a country that had issued a TRIPS compliant compulsory
license for medicine. A failure to address this issue will
substantially undermine the usefulness of compulsory licensing of
medicines in countries with small domestic markets.

6. TACD demands that the US and EU governments stop putting
pressures on developing countries to adopt levels of intellectual
property protection for medicines that exceed the requirements of the
WTO TRIPS accord.

This is consistent with Article 1 of the TRIPS, which states that
WTO member countries ``shall not be obliged to . . . implement in their
law more extensive protection than is required by this Agreement.''
Pharmaceuticals: Data Exclusivity and Health Registration Data
1. TACD opposes the harmonization of data exclusivity for
pharmaceutical registration data to 10 years.--The US and the EU both
provide periods of ``data exclusivity'' in the regulatory approval of
pharmaceutical drugs: in the US this is 5 years, in the EU it is 10
years. The EU period was originally designed to compensate for a lack
of patent protection on pharmaceutical in some EU member countries, and
the lack of patent protection on medicines from biotechnology. This
rationale is no longer valid with the new WTO TRIPS rules that require
broad patent protection in all EU member countries.
2. TACD recommends that companies that seek data exclusivity
protections be required to disclose the costs of investments.--Data
exclusivity provisions are part of a growing class of sui generis forms
of protection that are designed to protect investment, rather than
innovation. Because data exclusivity isn't a reward for invention
(which is already rewarded by patents) but rather a protection of
investment, there should be greater transparency of the basis for the
protection and a reasonable relationship between the investment and the
protection.
3. TACD asks the EU and the US to report on trade disputes that are
related to introduction of generic forms of Paclitaxel in the EU
Market.--TACD should be provided with copies of all correspondence and
memorandums that have been sent between the US and the EU or its member
countries on the trade related aspects of Paclitaxel registration in
the EU. The US and the EU should also report to the TACD who invented
Paclitaxel, and who sponsored the clinical trials used for EU and US
marketing approval.
4. TACD asks the European Commission's DG Entreprise to report on
the barriers to entry for generic forms of Paclitaxel in the EU market.
5. TACD asks DG SANCO to report on the public health consequences
of barriers to entry for generic forms of Paclitaxel in the EU market.
Pharmaceuticals: Early Working of Patents and Research Exceptions
1. TACD supports so called ``Bolar'' exceptions in patent laws to
permit firms to test generic drugs and prepare data required for
marketing approval by regulatory agencies, prior to the expiration of a
patent.--This is needed to ensure that consumers benefit from the
timely introduction of competition when patents expire. Health and
safety regulatory measures should not be misused as a barrier against
competition.
2. TACD asks the US and the EU to reject overly restrictive
interpretations of anti-discrimination language in Article 27.1 of the
TRIPS.--Article 27.1 should not be interpreted as requiring a ``one
size fits all'' patent law. The language in Article 27.1, that requires
that ``patents shall be available and patent rights enjoyable without
discrimination as to . . . the field of technology,'' should not be
interpreted as preventing countries from addressing public interest
concerns in patents, when provisions to address those public interest
concerns are consistent with the TRIPS framework. Article 30 of the
TRIPS regarding exceptions to patent rights should be interpreted to
permit countries to address public interest concerns, including those
specifically related to fields of technology.
3. TACD recommends that the EU not require Central and Eastern
European (CEE) countries to eliminate ``Bolar'' exceptions from patent
laws as a condition for EU membership.
Pharmaceuticals: Transparency of Pharmaceutical Economics
1. TACD recommends the US and the EU governments undertake the
following measures:

(i) Any application for data exclusivity should include a
disclosure of the costs of data collection.
(ii) The EU and the US should require firms that market
pharmaceutical drugs in the US or the EU market to disclose,
for each product,
(A) annual global (and national) revenues,
(B) costs of clinical trials, disaggregated by timing
and nature of trial (Phase I, II, III, IV, etc), the
number of patents and the duration of the trial,
(C) when the product involves licenses from third
parties, the royalty payments and terms, and
(D) the role of the government in the development of
the drug, including the awarding of grants, cooperative
research and development agreements, licenses, tax
credits and other subsidies.
(iii) Governments should publish data detailing the
government's own costs of conducting clinical trials, which can
be used as a benchmark for the cost of clinical trials.
(iv) The government should publish reports detailing public
expenditures on the purchase of products developed initially
with public funds.

2. TACD recommends that consumers and policy makers obtain better
information about pharmaceutical economics. One of the most vexing
issues in pharmaceutical policy making is the paucity of data to
justify pharmaceutical industry assertions regarding drug development
costs, profit margins or other relevant economic data. Governments have
been negligent in collecting independent data on pharmaceutical
economics. Accurate data on the economics of the pharmaceutical
industry are needed to evaluate a wide range of government policies,
including, for example:

(i) patent extensions,
(ii) pricing,
(iii) market exclusivity for health registration data,
(iv) orphan drug market exclusivity,
(v) compulsory licensing,
(vi) government technology transfer policies,
(vii) scope of patents, and
(viii) taxes.

There is a substantial public interest in having more detailed
disclosures of private sector R&D investments, to address such
questions as what is the percentage of R&D investments spent on
development of new and innovative products, as opposed to ``me too''
therapies? How much of the private sector R&D budget is spent on non-
essential medicines? What is the private sector allocation of spending
between pre-clinical development, clinical trials, and post approval
R&D? How much R&D is spent on tropical illnesses and other diseases
that affect the poor? How much did the drug benefit from public
subsidies?
tacd position on patents on genetic diagnosis
TACD asks the European governments to immediately apply for
compulsory licenses or to use patent exceptions, permitted under the
TRIPS agreement, to address technologies used for the screening of
genetic diseases.--Consumers and patients are harmed by unreasonable
uses of patents that monopolize the screening for genetically
determined diseases such as the BRCA1 and BRCA2 patents associated with
breast cancer. Public health authorities and laboratories in Britain
and Sweden say that unreasonable use of such patents presents a threat
to the public health, and reduced access to screening procedures.
TACD asks DG SANCO to report on the public health and ethical
consequences of patenting of genes and technologies for screening of
genetic diseases.
tacd april 1999 recommendations on pharmaceuticals
The TACD recommends that the governments of the US and the EU
should consider the following:

1. Regarding World Health Assembly and the World Trade
Organization.
Require that a country engaged in WTO dispute resolution
proceedings be permitted to request a report from the WHO on
the public health aspects of the policies that are subject to
review by the WTO.

2. Regarding Patents and Exemptions for Exports.
Agree that a country may provide exemptions to patent rights
to companies who are exporting the product to another country
where patent rights have expired or where patent rights have
been licensed under compulsory licensing and the legitimate
interests of the patent owner has been protected under Article
31 of the WTO TRIPS agreement.

3. Regarding Parallel Imports of Pharmaceuticals.
Not bring trade sanctions against poor countries who seek to
use parallel imports to obtain cheaper access to
pharmaceuticals.

4. Regarding developing countries and medical patents.
Not use trade pressures against developing countries over
access to essential medicines if those countries have satisfied
WTO/TRIPS requirements for the protection of patents.
Developing counties should not be prevented from using
compulsory licensing to expand access to medicines, if the
compulsory licenses are issued in compliance with Article 31 of
the TRIPS agreement.

5. Regarding compulsory licensing.
Agree that governments, the World Health Organization (WHO)
and the World Intellectual Property Organization (WIPO) should
consult with the academic community, consumer groups and a wide
range of industry groups to determine where compulsory
licensing of medical technologies is needed to overcome market
failures, such as those that are related to complex inventions,
follow on inventions, or for providing access to inventions on
reasonable terms.

______

E-Drug: Letter From NIH Director, Harold Varmus

On September 3, 1999, Ralph Nader, James Love and Robert Weissman
wrote a letter to NIH Director, Harold Varmus, ``asking for NIH to give
the World Health Organization, WHO, access to US government funded
medical inventions.'' On October 21, 1999, Robert Weissman received Dr.
Harold Varmus' response.

Mr. Robert Weissman
Essential Action,
P.O. Box 19405,
Washington, D.C. 20036

Dear Mr. Weissman: Thank you for your recommendation on how the
National Institutes of Health (NIH) could interact with the World
Health Organization (WHO) to provide it with commerical development
rights to NIH-owned and -funded health care patents. As we are both
aware, the licensing of Government inventions has received much
attention in recent months from Members of Congress, patient advocacy
groups, representatives of industry and the press. The public debate
has been galvanized by concerns about the AIDS crisis in developing
countries and the role of anti-AIDS therapeutic drugs in addressing
that crisis.
This proposal, if implemented, would have powerful repercussions on
the current framework for drug development arising from federally
supported basic research.
I am concerned that your proposal that the NIH employ its
``Government use'' license authorities to grant WHO standing authority
to contract for the production of Government-supported inventions so as
to make anti-AIDS drugs available for less cost than offered by
pharmaceutical manufacturers would put the current system at risk
without necessarily resulting in greater accessibility to these drugs.
I am also troubled by the implications of the NIH intervening on behalf
of sovereign foreign governments in a situation in which many of those
governments have the authority to achieve the same result and in which
U.S. intervention on this matter has not been requested.
Moreover, the AIDS crisis in developing countries is a public
health problem involving much broader issues than access to anti-viral
drugs. The question of the supply of drug products must be considered
in the context of the equally important issues of medical
infrastructure, public health programs, treatment monitoring and
compliance, and emergence of drug-resistant HIV strains. Unilateral
action by NIH with regard to NIH-supported patent rights would
consequently be ill-advised and unlikely to succeed.
My specific thoughts on the intellectual property aspects of this
matter follow.

PROGRAMMATIC BACKGROUND

In the early 1980s, Congress enacted the Bayh-Dole Act and the
Stevenson-Wydler Technology Innovation Act (with later amendments,
including the Federal Technology Transfer Act of 1986) to encourage the
transfer of basic research findings to the marketplace. The primary
purpose of these laws is economic development: specifically, to provide
appropriate and necessary incentives to the private sector to invest in
federally funded discoveries and to enhance U.S. global
competitiveness. To implement these mandates, the Department of Health
and Human Services (DHHS) has designated NIH as lead agency for
technology transfer for the Public Health Service (PHS).
While NIH respects and is sensitive to the economic development
intent of the authorizing legislation, it carries out this mandate in
accordance with its public health mission. For inventions developed
within PHS laboratories, NIH (and PHS) Patent and Licensing policies
consider public health needs as well as financial and market forces.
For example, the PHS Patent Policy states that patent protection should
be sought where further research and development is necessary to
realize a technology's primary use and future therapeutic, diagnostic,
or preventive uses. It is well documented that technologies with
potential as therapeutics are rarely developed into products without
some form of exclusivity, given the large development costs associated
with bringing the product to the market. No benefit accrues to the
public if the technology is left to languish and no product reaches the
marketplace.
In conjunction with the patent strategy, the PHS licensing strategy
gives preference to nonexclusive licenses so that market competition
and broad distribution are fostered. Exclusive licenses are granted
when such rights are believed to be necessary to ensure product
development. As to inventions developed with NIH funding, the Bayh-Dole
Act gives NIH grantees and contractors authority to retain title
patents and to license inventions that arise from the NIH funding.
As you have pointed out, the Government has a royalty-free license
to practice and have practiced an invention it owns or has funded on
behalf of the United States and on behalf of a foreign government or
international organization pursuant to a treaty or other agreement with
the United States. This royalty-free license provides the Government
with no-cost use of a technology it invented or funded.
It does not provide rights or access to a licensee's final product.
The Government use contemplated by this provision has been interpreted
generally to include research use, although its full scope has not been
determined.
Providing the owner of the technology (licensor) freedom to do
further research is a common and reasonable provision of exclusive
licenses. To our knowledge, the Government use license has never been
employed as you propose, as a blanket measure to facilitate direct
competition with a commercial licensee.

GRANTING RIGHTS TO WHO

In principle, the U.S. Government can license patent rights to the
WHO. Even if the doubts regarding WHO's authority to practice
inventions under the Government use license could be overcome, I do not
believe that the lack of such a license from the NIH is inhibiting
developing countries from addressing their needs. As you stated, many
of these countries can issue compulsory licenses, and those that have
not enacted that authority to date can do so if they choose. The
economies of scale you mention could be achieved by cooperation among
these countries or direct interaction with WHO. The role of NIH in
these sovereign matters is, appropriately, extremely limited.
NIH can only license or otherwise grant rights to patents in
countries where the agency or its grantees have sought and obtained
patent protection. Presently, NIH holds patent rights in selected
countries to technologies that have contributed to the development of
drugs reported as AIDS/HIV-related treatments.
In those countries where NIH or its grantees have neither sought
nor obtained patent protection, NIH has no intellectual property rights
to be licensed or otherwise granted.
In addition, there is an important distinction between having
rights to a compound and having rights to the fully developed product.
NIH does not license drugs that are ready for marketing. NIH biomedical
technologies are early stage and, in almost all cases, require further
research, development, and testing, usually in combination with other
proprietary technologies, to bring a product to market. To achieve
this, NIH and its grantees license the early technology to companies
that are able to embark in the developmental and regulatory aspects of
drug development.
Without patent protection it is unlikely that the companies would
invest the resources needed to commercialize these technologies.
The distinction between final product and ``raw technology'' is
important because others may well have filed for patents on non-NIH
technologies that are required for the production of the final product.
Therefore, even with NIH-granted rights, WHO or a contract manufacturer
of such products may infringe patents belonging to others. Because it
is the rule rather than the exception that multiple patents cover final
drug products, NIH's granting of rights to the early compound or
invention would be unlikely to significantly improve access to drugs.
Finally, I am concerned that granting rights to WHO for manufacture
and distribution does not address the aforementioned requirement that a
commercial entity develop early-stage compounds into safe and
efficacious drugs. As a practical matter, it is reasonable to assume
that companies will not undertake the development costs of these
inventions if they believe the Government will readily allow third
parties to practice the inventions.
On balance, I am not convinced of the benefit of the standardized
transfer of manufacturing and distribution rights to the WHO or any
other nonprofit organization.
Critical to successful technology transfer is the assurance that
the Government will exercise its intellectual property rights in a
responsible, prudent, and consistent manner. Undermining licensed
intellectual property rights would, I believe, unnecessarily jeopardize
the development of important therapeutic drugs.

NIH AND WHO INTERACTION

Not all technologies that would be of use to developing countries
are currently licensed. In the past, the NIH and WHO have worked
together on licensing joint inventions and in negotiating with third
parties. In one notable instance, NIH approached WHO with the
possibility of manufacturing certain vaccines important to developing
countries.
Unfortunately, limitations of resources did not permit WHO to take
advantage of such an offer. NIH welcomes, and is pursuing, further
discussions with WHO on what can be done to assist developing countries
with health care needs. I have directed my technology transfer staff to
engage WHO on the intellectual property aspects of this matter.
Discussions between my staff and WHO representatives are currently
being facilitated by Dr. Stuart Nightingale of the Food and Drug
Administration.
I appreciate the opportunity to explain our position on this issue.
Sincerely,
Harold Varmus, M.D., Director.

______

Prepared Statement of J. Perriens, M.D.--Paris 1999 Conference on
Community and Home Care for People With HIV Infection

COMPULSORY LICENSING AND ACCESS TO HIV DRUGS

Ladies and gentlemen:
The title of my presentation today is ``Compulsory licensing and
HIV drugs,'' and I will speak in my personal name.
From the previous speaker you will have remembered that patents are
a national affair, and that a compulsory licence can be granted under
certain circumstances, such as a national emergency, or when a patent
holder fails to supply the market with his invention at a reasonable
price.
In a discussion on compulsory licensing it is useful to refer to
the framework in which such discussion should take place. Our goal is
to make HIV drugs more widely available to those who need them. In
respect to the latter, I would like to highlight what our programme,
UNAIDS, said about this at the WTO summit:

The availability of HIV/AIDS drugs, like others, depends upon
at least three main factors:

(i) sustainable financing for drug procurement at the
national level;
(ii) national and local health infrastructure for
delivering drugs and monitoring patient compliance;
(iii) affordable drug prices.

Governments must ensure sufficient financing for procurement and
adequate health system capacity to support care for people with HIV/
AIDS.
Making drugs affordable to those who need them is a formidable
challenge.
High HIV/AIDS drug prices are due, in part, to the fact that many
HIV/AIDS drugs are protected by patents that on one hand are necessary
to allow their development, but that on the other hand allow the
exclusive control of their manufacture and sale.
Patent holders have not yet introduced preferential pricing to the
extent necessary to make the prices of HIV/AIDS drugs consistent with
local purchasing power in many developing coutries.

THE UNAIDS SECRETARIAT POSITION

The UNAIDS Secretariat supports patent protection as an incentive
for innovative research and development of new HIV/AIDS drugs and,
hopefully, the discovery of HIV vaccines, in particular vaccines
suitable for use in developing countries.
At the same time, however, intellectual property rights must be
considered in the context of other social interests, such as the human
rights concerning health and the benefits of scientific progress and
its applications.
The UNAIDS Secretariat further supports:

(1) Preferential pricing of HIV/AIDS goods, including male
and female condoms, and HIV/AIDS drugs and other pharmaceutical
products, so that these products are priced affordably at
levels consistent with local purchasing power.
(2) Reduction or elimination of import duties, customs and
taxes on HIV/AIDS goods, including condoms and pharmaceutical
products.
(3) Measures to promote generic drug competition and the
``early working'' of patented drugs (e.g., the so-called
``Bolar amendment'') so that generic HIV/AIDS drugs can be made
available more rapidly.
(4) The UNAIDS secretariat recognizes that recourse to
compulsory licensing may be necessary, as provided for under
the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS), such as in countries where HIV/AIDS constitutes
a national emergency.

WHY THIS ORDER?

You will have noted that UNAIDS mentioned compulsory licensing last
in the series of actions that should lead to better HIV drug
affordability.
Why is that?
The number one reason is that compulsory licensing can be used only
when a drug or commodity is under patent protection.
The WHO and UNAIDS have just completed a review of the patent
rights on 24 drugs of interest to people with HIV infection.
The preliminary outcome of this review is available as an appendix
to Pascale Boulet's presentation from the WHO/UNAIDS booth.
I would like to share with you what was found out so far about some
antiretrovirals.
WHO nor UNAIDS assert that the data are complete, and welcome
additions, but the:

(1) d4T (Stavudine)--US and EU patents for Stavudine will
expire in 2007 and 2008 (except in France, where protection
will last until 2011). The only developing countries where d4T
(Stavudine) is under patent protection are Egypt, South Africa,
and the Philippines. There appears to be no patent protection
for this drug in countries with a significant generics
industry, such as Argentina, Brazil, Spain, Israel, or India.
At least 2 of them produce their own generic alternative. It
follows that intellectual property protection as such cannot be
blamed for its unavailability or unaffordability in the
majority of developing countries.
(2) Indinavir--US and EU patents for Indinavir will expire in
2012 and 2013. However, this is meaningless for most developing
countries, because the only developing country where Indinavir
is under patent protection is South Africa. Like for Stavudine
there appears to be no patent protection for this drug in
countries with a significant generics industry. Brazil will
start the production of its own generic next year. Intellectual
property protection as such cannot be blamed for its
unavailability or unaffordability in the majority of developing
countries.
(3) Saquinavir--The antiretroviral with the largest patent
protection is Saquinavir, because of a patent delivered by the
OAPI (Organization Africaine de la Propriete Intellectuelle),
and (process) patents in Zimbabwe, Malawi and China. However,
there appears to be no patent protection for this drug in
countries with a significant generics industry, including South
Africa. Intellectual property protection could be blamed for
part of its unavailability or unaffordability in some
developing countries.

I could go on with this list, but let me suffice to state that the
situation of these 3 drugs is fairly typical for other drugs of
interest to PLWH.
While it is clear that at present the scope of compulsory licensing
agreements is limited, it might expand in the future. This potential
led to the activism around compulsory licensing in recent times.
What does this say for the drug access agenda?
Now, if the patent situation of most HIV drugs is not the main
reason for their poor affordability in most developing countries today
(with the notable exception of South Africa), what needs to be done, in
addition to just keeping the provisions of the TRIPS agreement intact
(a likely consequence of the Seattle conference)?
You might have noted that I mentioned ``Preferential pricing'' as
one of the remedies to increase drug affordability.
People in low-income countries simply cannot be expected to pay the
same prices for drugs as people in wealthy countries. The principle of
solidarity, namely that the richer pays absolutely and relatively more
than the poor, is very common in national tax laws. We suggest that the
same needs to be achieved in internationally.
There is a range of options which might be used to achieve
preferential pricing, including voluntary licensing with transfer of
know-how. But one does not even need to go this far: preferential
pricing is already a reality today.
Drug costs in the UNAIDS-facilitated drug access initiative in
Uganda and Cote d'Ivoire, which buys its antiretrovirals exclusively
from the pharmaceutical companies that hold the patents to them in the
USA and Europe, are less than drug costs in Europe or the USA: from
5600 US per year for a year of triple antiretroviral therapy, compared
to approximately 11000 US per year. However, this is clearly still not
in keeping with the local purchasing power.
When we flagged this as the main problem to expand coverage of the
initiative, the more enlightened of our pharmaceutical counterparts
stated that, in order for them to lower their prices, they first of all
need political protection in their home markets. A second equally
essential condition is that measures that prevent exporting of
preferentially priced drugs to their home markets need to be in place
(as was the case for the Drug Access Initiative).
Is this enough? The answer is ``no''.
Experience in the vaccine sector demonstrates that significant
price differentials can be achieved between prices in developed
countries and those in low-income countries. However, these
differentials resulted in affordable developing country prices only
after significant competition from generic manufacturers forced the
prices down.
Experience from countries with ``generic-friendly'' policies
clearly demonstrates that the resulting market competition greatly
increases affordability of medicines for the population, stimulates
genuine innovation within the research-based industry, and encourages
increased production efficiency by the generic industry.
To promote generic drug competition the ``early working'' of
patented drugs (e.g., the so-called ``Bolar amendment'') was given high
visibility in our statement to the WTO.
I suspect that MSF will show data on the price of Zidovudine and
Fluconazole in different markets, and I will therefore illustrate the
point that generic competition is necessary with reference to the
evolution of the price of 2 drugs in Brazil:

A month of ddl costs 46 US in Brazil, and 186 US in the USA,
or 25% of the US price. The evolution of its price over time is
shown on the overhead.
A month of ddC costs 38 US in Brazil, and 207 US in the USA,
or 18% of the US price. The evolution of its price over time is
shown on the overhead.

One of the factors that allowed a progressive decline in the price
of both drugs is that they were produced locally, by state-owned
companies, to whom orders were given as part of international
competitive bidding.
In 1995 prices of these drugs from the original patent holders were
at the same level in Thailand.
While incomplete, because ideally one would like to see more prices
from more sources, the message from them is that, when generic
competition is possible, prices do come down.
Is generic competition enough to make drugs affordable?
A glance at the cost of ARV treatment in Brazil as a fraction of
per capita GDP might make one suspect that, even with all possible
measures to decrease their cost, the antiretrovirals will remain too
expensive for many developing countries, most of which have GDP's much
lower than that of Brazil (where it is almost 5000 US).
To make a long story short, any treatment that costs more than the
per capita GDP in a country is for all practical purposes unaffordable
with very well developed national solidarity mechanisms. If those
mecahnisms are less well developed, the affordability benchmark
probably looks more like a third of GDP. The challenge is therefore to
get prices of antiretroviral therapy down to as low as 200 US a year,
15 to 20 times less than in Brazil.
This should be possible, but is in my view only in collaboration
with those companies who developed the drugs in the first place,
because they would likely be best positioned to get into cost+ pricing
efficiently. (Cost+ pricing factors in only the cost of raw materials,
production facilities, labor and a fixed disclosed profit margin to
produce the goods, not marketing or development costs.)
Surprisingly, what is needed to make this a reality is nothing
spectacular:

(1) Like now, pharmaceutical companies should increase the
extent to which they apply preferential pricing. The limited
value of the pharma market in developing countries makes this
economically viable. To make it politically viable is a
challenge for us all, and should be high on our agenda.
(2) Pharmaceutical companies should continue not to apply for
or forego patent protection for HIV drugs in markets where they
have no intent to recoup their R&D investments, i.e.,
developing countries, so that generic competition will remain
possible. A solemn declaration to this effect could be issued
by those companies that develop drugs of importance to people
with HIV infection. If our pharma partners can work together in
multi-drug clinical trials, some form of voluntary trade civism
should be possible.
(3) Like now, pharmaceutical companies should continue to
compete with generics manufacturers in those markets. To
guarantee that this competition will remain possible, it is
essential that the provision on compulsory licensing in the
TRIPS agreement be preserved and enshrined in national law, in
particular in developing country markets where patents for HIV
pharmaceutical will be requested and HIV is a significant
problem.
(4) Advocacy to ensure that trade contributes towards a more
equitable distribution of economic benefits. This requires
linking trade policies to sound social policies that recognize
health as a global public good. In the pharmaceutical arena,
for example, there is a need to provide sufficient incentives
and patent protection to ensure development of new drugs, while
ensuring affordability and access to existing drugs.

Last, there are actions that need more support. It is my conviction
that in the debate around access to HIV drugs not enough attention went
into the identification of those responsible for the state and the
financing of the public health infrastructure in developing countries.
Who is responsible for ``linking trade policies to sound social
policies that recognize health as a global public good''? Who sets
import duties, customs and taxes on HIV/AIDS goods? Who condones
corruption to the extent that prices of drugs at times cost more in
developing than in industrialized countries?
Of course, action needs to be targeted, but in view of the outcome
of the Seattle conference, I wonder whether a continued focus on
compulsory licensing as a tool to reduce drug prices remains needed.

______

Prepared Statement of Benjamin F. Nelson, Director, International
Relations and Trade Issues, National Security and International Affairs
Division, U.S. General Accounting Office

global health--the u.s. and u.n. response to the aids crisis in africa
Mr. Chairman and Members of the Subcommittee:
We are pleased to provide our statement for the record, which gives
our observations on the response by the United States and United
Nations (U.N.) to AIDS in Africa.\1\ This disease exacts an enormous
toll on the developing world, and on sub-Saharan Africa in particular,
where AIDS is a health problem, a development problem, and a
humanitarian tragedy of epic proportion.
---------------------------------------------------------------------------
\1\ The human immunodeficiency virus/acquired immunodeficiency
syndrome or HIV/AIDS is referred to in this statement as AIDS.
---------------------------------------------------------------------------
AIDS has killed almost 14 million people around the world, 11
million of whom lived in sub-Saharan Africa. Two-thirds of the 34
million people who are currently infected with AIDS live in sub-Saharan
Africa, including 1 million children. Despite these alarming statistics
and the efforts of the world community to halt the spread of AIDS, the
epidemic continues to advance (see fig. 1). The World Bank estimates
that 16,000 people become newly infected each day, with the greatest
concentration of new infections in sub-Saharan Africa.
Specifically, this statement will focus on (1) the social and
economic implications of AIDS in Africa and (2) efforts to combat the
disease by the United States and the United Nations. This statement is
based on our 1998 report issued to the House Committee on International
Relations, HIV/AIDS: USAID and U.N. Response to the Epidemic in the
Developing World (GAO/NSIAD-98-202, July 27, 1998) and updated
information we recently obtained from the U.S. Agency for International
Development (USAID) and the United Nations on their programs. In our
work, we reviewed USAID's and the United Nations' AIDS programs and
activities at their headquarters and in the Dominican Republic,
Honduras, India, the Philippines, and Zambia.
Summary
Despite some breakthroughs in treatment and techniques for
preventing AIDS, the epidemic continues to grow. The broader economic
and social consequences are becoming clear--and they are not good. Over
the last decade, the life expectancy in nine African countries declined
by over 17 years due to AIDS. By 2010, the United Nation's Joint
Program on HIV/AIDS (UNAIDS) estimates that 42 million children in
Africa will lose one or both parents to AIDS and that gross domestic
product (GDP) in many countries will decline by as much as 20 percent.
The countries in sub-Saharan Africa are among the poorest in the
world and have a limited capacity to address the epidemic. The United
States and the United Nations have made some important contributions to
the fight against AIDS. USAID supported research that helped to
identify interventions proven to prevent the spread of AIDS and UNAIDS
has played an important role as an advocate for increased spending for
AIDS programs by national governments, private companies, and donors.
However, the World Bank estimates that $1 billion a year is needed by
the world community to address the epidemic in Africa--more than three
times the current level of spending.

Figure 1.--The Spread of AIDS Over Time In Sub-Saharan Africa, 1982-97

Figure 1.--The Spread of AIDS Over Time In Sub-Saharan Africa, 1982-
97--Continued

The devastating social and economic consequences and human tragedy
of AIDS have not been felt anywhere as severely as in the countries of
sub-Saharan Africa. With only 10 percent of the world's population,
sub-Saharan Africa carries the burden of more than 80 percent of AIDS
deaths worldwide, losing 5,500 men, women, and children each day. Hard-
won gains in life expectancy, child survival, education, and economic
development are eroding in many countries on the African continent.
According to the World Bank, the life expectancy in nine African
countries with AIDS infection rates over 10 percent has declined by 17
years, from 64 to 47 years of age. In many countries in the region,
infant mortality is expected to double over the next decade. UNAIDS
officials estimate that the impact on productivity, profitability, and
foreign investment will result in growing losses in GDP, reducing GDP
by as much as 20 percent or more in some sub-Saharan countries by 2010.
Barclays' Bank and British Petroleum have stated that they hire two
people for every job, assuming that one will die of AIDS.
Many African families are overwhelmed by the burden of caring for
victims of the disease. In some parts of the region, pregnant women
have extremely high infection rates--for example, 73 percent of the
pregnant women in Beit Bridge, Zimbabwe are infected with AIDS.
According to U.S. Agency for International Development (USAID)
officials, children are forced to become heads of household, unable to
attend school because they must try to find food for their siblings.
Currently, there are approximately 8 million African AIDS orphans and
UNAIDS estimates that 42 million children will lose one or both parents
to AIDS in the next decade (see fig. 2). These children are at serious
risk of physical and sexual abuse as well as other forms of
exploitation, including child labor abuse and organized crime group use
as drug couriers. According to USAID officials, many orphaned children
resort to prostitution for money to buy food. As a result, while many
children are born HIV-negative, their fight for survival puts them at a
serious risk of becoming infected by the disease.
The countries of sub-Saharan Africa are among the poorest countries
in the world and their national capacity to respond to this epidemic is
limited. While they have increasingly demonstrated leadership in
fighting the epidemic, the entire health budget in many countries in
sub-Saharan Africa is about $20 per person each year. In countries
where less than half of the citizens have access to any form of health
care, up to 80 percent of the beds in urban hospitals are filled with
AIDS patients. USAID officials estimate that, on average, countries in
Africa are contributing about 5 percent of the cost of their national
AIDS programs. But even the most optimistic experts hope to increase
the percentage that national governments can commit up to 30 percent of
the total.

Figure 2.--Cumulative Number of African Children Who Have Lost One or
Both Parents, June 1998

U.S. and U.N. Efforts to Combat AIDS
Donor nations like the United States and multilateral organizations
like the United Nations are the largest sources of finance for
national-level AIDS programs in Africa, spending about $300 million a
year on AIDS in Africa. USAID and UNAIDS have made important
contributions to the fight against the epidemic. USAID supported
research that helped identify interventions proven to prevent the
spread of AIDS. USAID's efforts have helped slow the spread of the
disease in target groups such as truck drivers, sex workers, men who
have sex with men, and intravenous drug users. To bolster these
efforts, funding for the agency's AIDS program has increased from
$117.5 million per year in 1997 to $200 million in the year 2000 (see
fig. 3), and the program has been expanded from 18 to 52 countries--27
of which are in Africa. While primarily focusing on research and
prevention in the 1990s, USAID has extended its program to include
projects that address care for AIDS victims, mother-to-child
transmission, health infrastructure, and support for AIDS orphans. In
addition, USAID is working with the Departments of Defense, Health and
Human Services, and Labor to attack the disease on all fronts.

Figure 3.--USAID AIDS Funding 1986-2000

[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
AFRICA

na na 55.2 60.3 77.1 25.5 23.3 23.7 30.6 40.4 58.9 51.1 51.1 56 104.7
----------------------------------------------------------------------------------------------------------------

TOTAL

11.1 50 34.6 47.1 48.5 78.4 96.7 124.4 112.8 120.6 117.8 117.5 121 125 200
----------------------------------------------------------------------------------------------------------------
Source: USAID, February 2000.

At the United Nations, UNAIDS was established to coordinate the
efforts of U.N. cosponsoring agencies \2\ to address the broad range of
sociological and developmental factors that affect the spread of the
disease. UNAIDS created ``theme groups'' in the field as the forum for
coordinating projects undertaken by the cosponsoring agencies. These
theme groups consist of representatives from all U.N. agencies working
in the field on AIDS projects. UNAIDS officials report that they have
also begun to include field representatives from bilateral donor
agencies in the theme groups. UNAIDS has played an important role in
advocacy, attempting to raise the level of awareness of the problem
among national leaders and encouraging additional spending by donors
and the private sector. In addition, UNAIDS has provided information on
the techniques that have been effective in addressing AIDS. After a
difficult start, UNAIDS has undertaken a number of efforts to improve
the coordination of U.N. agencies in the field, and U.N. resources
devoted to AIDS have increased. The United Nations Development
Program's Regional Bureau for Africa recently increased the allocation
to its regional AIDS project based in South Africa by $1 million. The
United Nations Children Fund established 14 additional posts in Africa
focused primarily on prevention programs for young people and the
prevention of mother-to-child AIDS transmission.
---------------------------------------------------------------------------
\2\ UNAIDS' cosponsoring agencies include the United Nations
Children's Fund the United Nations Drug Control Program; the United
Nations Development Program; the United Nations Population Fund the
United Nations Educational, Scientific and Cultural Organization; the
World Health Organization; and the World Bank.
---------------------------------------------------------------------------
The World Bank, one of the cosponsoring agencies of UNAIDS, has
increased its global commitment to AIDS from $28.7 million in 1997 to
$391.5 million in 1999. It has also initiated a significant program
devoted to fighting AIDS in Africa, announcing that it will reexamine
all existing African programs to ensure that they include projects to
address AIDS and ensure that resources can be made available quickly
for AIDS projects. However, the World Bank estimates that a significant
increase in global spending is necessary--at least $1 billion a year--
to provide basic prevention and blood safety programs, to care for
people living with AIDS, and to begin to develop safety nets for AIDS
orphans.
Mr. Chairman and Members of the Subcommittee, this concludes our
statement for the record. I hope that this information will help the
Committee as it deliberates the focus and size of any foreign
assistance directed toward combating AIDS in Africa.

PROPOSED EMERGENCY ANTIDRUG ASSISTANCE TO COLOMBIA

----------

FRIDAY, FEBRUARY 25, 2000

U.S. Senate,
Subcommittee on Western Hemisphere,
Peace Corps, Narcotics and Terrorism,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. Lincoln D.
Chafee (chairman of the subcommittee) presiding.
Present: Senator Chafee.
Senator Chafee. Welcome, ladies and gentlemen. This is the
Subcommittee on Western Hemisphere, Peace Corps, Narcotics and
Terrorism, and a hearing on the proposed emergency antidrug
assistance to Colombia. Today, the subcommittee is holding its
first hearing of 2000 and my first as chairman, and this is a
matter of great importance to Congress and the American people,
the administration's proposal for $1.6 billion in aid to
Colombia to combat drug trafficking.
Certainly the problem with drug abuse in the United States
is severe and complex. In all, it costs our Nation over $100
billion a year. The most recent estimates put the number of
current users of illicit drugs at 13.9 million. There are an
estimated 4 million chronic drug users in America, 3.6 million
chronic cocaine users, which is primarily crack cocaine, and
810,000 chronic heroin users.
Although the trends in drug use in the United States during
the past 20 years are encouragingly downward, today's figures
nonetheless remain substantial. Making continued progress
toward ending this scourge will be time-consuming and
expensive. We do recognize that.
The drug abuse problem here in the United States has led to
a number of questions, including ``where are the drugs coming
from and how can we cut supply''? Today, these questions have
led to Colombia, a nation which has experienced a dramatic
increase in its output, being by far the biggest supplier of
illicit drugs to the United States.
The cultivation of coca in Colombia has doubled between
1995 and 1999, helping make it the source of 80 percent of
cocaine coming into the United States. It has also become a
major source of heroin, going from virtually no production in
1990 to producing enough to meet half the U.S. demand today. In
response to these troubling developments, Colombian President
Andres Pastrana has proposed ``Plan Colombia,'' a $7.5 billion
antidrug program in which Colombia would assume most of the
cost. President Clinton has agreed to join President Pastrana
in this effort, requesting an additional $1.3 billion from
Congress for the U.S. contribution to this plan. Plan Colombia
seeks to dramatically step up the Colombian Government's fight
against drug traffickers, whose influence permeates that
nation.
I am pleased to chair my first hearing of this subcommittee
on a problem of such profound importance to the United States.
Drug abuse has caused immense hardship on millions of
Americans; it has killed good people, broken up families, and
ruined careers. It infects all sectors of society--from the
inner city to the wealthy suburbs. The immense monetary cost of
drug abuse, as I said, $100 billion per year, is compounded by
the immeasurable emotional cost to the people and families it
affects.
This subcommittee recognizes that 75 percent of the funding
in the administration's plan is proposed for fiscal year 2000
supplemental. That appropriations legislation will no doubt be
taken up very quickly by Congress, giving this committee
precious little time to consider the administration's proposal.
Perhaps more importantly, the American taxpayers need to
understand that their tax dollars are being used to
dramatically and quickly escalate a program that will involve
U.S. military personnel training foreign troops that may well
become involved in a shooting war in Latin America.
It is our obligation as Members of Congress to ensure that
this massive proposal is given careful scrutiny. There are many
important questions that need to be addressed in considering
this aid package:
First, what is our overall strategy in this endeavor and
should we establish benchmarks for success?
Second, will the rapid increase in U.S. counterdrug
assistance to Colombia further encourage cooperation between
the Colombian military and that nation's paramilitary forces
that have engaged in human rights abuses?
Third, does the Colombian Government and the nation at
large possess the necessary skilled personnel, legal structures
and other safeguards to prevent corruption and ensure that this
huge amount of U.S. aid is well-spent?
Fourth, how can the administration realistically argue that
Plan Colombia is aimed only at fighting a war on drug
traffickers and not on counterinsurgency?
Fifth, will an increase in U.S. military activity in
Colombia promote latent anti-Americanism in Colombia?
And sixth, what is the potential that this program will
result in U.S. military casualties?
We must try to assess, will the end result at home--that
is, will a military operation to reduce the supply of drugs
coming from Colombia in turn reduce the severity of the drug
abuse problem here in the United States? In my mind, that
question ought to be at the center of any debate on fighting
drugs. Many argue that as long as there continues to be a
demand for illicit drugs here in America, there will always be
a source to supply the product.
I would like to thank the witnesses here today for
providing the subcommittee with the benefit of their informed
views on this aid package. I do look forward to healthy debate.
We do need to be convinced.
Thank you, gentlemen, and welcome.
Seeing no other Senators here this morning, I will call on
Hon. R. Rand Beers. Welcome, sir.

STATEMENT OF HON. R. RAND BEERS, ASSISTANT SECRETARY OF STATE
FOR INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS,
DEPARTMENT OF STATE

Mr. Beers. Thank you very much, Senator Chafee. It is a
pleasure to be here. It is a pleasure to have the opportunity,
with this distinguished team, to represent the administration's
proposal with respect to dealing with the drug problem in
Colombia and the Andean region. I will try to keep my remarks
brief, and ask that my detailed statement be submitted for the
record.
Senator Chafee. So noted.
Mr. Beers. Thank you, sir. I would like to start with the
chart on my right and talk a little bit about the regional
problem, and then center in on Colombia. It is a regional
problem. The chart on the right shows the general areas of coca
that have been under cultivation in Bolivia, Peru, and Colombia
for the past decade, but this is not a static situation. This
is very much a dynamic situation--you can take down the first
chart, please--and the dynamic situation I think is best
represented by the second chart, which shows the change in the
amount of cocaine that is believed to be coming from each of
these countries to supply the world market.
You will notice there that the largest contributor to
cocaine production in 1995 was Peru, and the largest
contributor--and Bolivia was second, and that at the end of
1999 the largest contributor is, in fact, Colombia, by a very
wide margin. What we have seen here is a situation in which
successful programs in Bolivia and Peru, successful programs
undertaken by both of those governments with U.S. assistance,
has dramatically reshaped the drug market in each of those
countries, but the problem with that is that the drugs have
then, or the cultivation, I should say, has then moved most
decidedly into Colombia, and the gains that were made in those
two countries have almost nearly been recouped by the expansion
of the drug crop in Colombia, and that is why the center of
this effort is Colombia.
The drug crop in Colombia contributes a massive amount. We
calculate 80 percent or more of the U.S. market of cocaine
comes to us from Colombia, certainly in the final processing
stage, but the effect of this drug production within Colombia
is much broader than the effect of the drugs themselves on
Colombia society. In addition to the enormous cost to the
United States in terms of its citizenry and its treasure, in
addition to that, within Colombia, this leads to a level of
lawlessness and corruption that this drug production fuels in
Colombia that is a serious threat to Colombian society.
In addition to that, this drug production is also linked up
with the insurgents and the paramilitaries in Colombia who are
also profiting and becoming stronger from this effort.
Estimates are of wide range as to how much money each of these
groups actually derive, but I think a conservative estimate is
that there is probably $100 million worth of profit on an
annual basis that is available for these lawless elements in
Colombian society that is derived directly from this drug
production.
In addition to that, Colombia's economy has been battered
not only by world market changes, but also by the effect of
drug money within Colombian society. They have something called
the black market peso exchange problem in which durable goods
are purchased in the United States and sold below cost within
Colombia, totally disrupting the normal licit economic activity
within that country by having people who are simply trying to
convert their money into apparently clean dollars, or pesos,
and disrupting the Colombian economy.
In addition to that, there is an enormous effect on the
environment. When farmers cut down the rain forest in Colombia
to grow coca, they are cutting down a world resource. When they
pour toxic waste into the river systems of the Amazon-Orinoco
Basins as part of their effort to process these raw products
into finished drugs, they are poisoning the two major river
systems in Latin America, and this cost is often overlooked in
this problem.
This effort, this program, this plan is an attempt to try
to deal with all of these problems. We have success in Peru and
Bolivia. We have a government in Colombia that is prepared to
try to deal with this problem. That has never happened before
in this region, and this is an opportunity that we should not
miss.
The plan that we start from is a Colombian plan. It is a
plan written by the Colombian Government. There was U.S.
collaboration, but I can assure you that the ideas, the
concepts, the plan is a Colombian plan which came from them and
which we helped them put together into one single document.
It is a plan based on $7.5 billion in resources, of which
the Government of Colombia is prepared to provide $4 billion.
It is a plan which we believe is comprehensive in that it deals
with the drug issue, the economy, the rule of law, and the
peace process. It is an integrated plan. It brings together all
the agencies of the Colombian Government that are necessary in
order to deal with this plan, and expects them to act together
in a coordinated fashion, and it is a balanced plan. There is
no area that is underemphasized in our view. We think that it
is the right balance, and it is our intention and effort in the
plan that we are proposing to match this proposal in the same
comprehensive, integrated, coordinated, balanced fashion.
In addition to that, because I have spoken initially of
Colombia, I do not want to leave aside the regional effort.
There is a modest regional component of Plan Colombia, but we
also have a baseline budget. We have a baseline budget in
fiscal year 2000 and 2001 of about $150 million, and that is
for Colombia alone.
In addition to that, we have programs in Bolivia and Peru
which represent programs on the order of $75 million in each of
those countries which are directly or indirectly related to the
drug program efforts, so the baseline plus what is in the
overall plan represent the sum and total of our regional
effort.
I would like to go now to the program itself. Could you
take down that chart, please? And I would like to use this
simple budget chart, which is in some of the congressional
presentation documents, to speak to the overall effort.
What we are proposing is a $1.6 billion package combining
new moneys with current funding. Building on the current
funding of over $300 million, as I said, in fiscal year 2000
and 2001, our request includes $955 million in fiscal year 2000
supplemental funds, and $318 million in fiscal year 2001.
While discussions of this proposal have centered on its
security assistance, roughly 21 percent of this effort will
fund projects to strengthen the economy, assist farmers,
promote human rights, and support other social programs.
Spending between enforcement and social programs becomes more
evenly balanced when the $7.5 billion Colombian proposal is
taken as a whole. This balanced and integrated approach is the
strength of the plan.
The plan has five component parts. The first part we refer
to is the push into southern Colombia. The world's greatest
expansion of narcotics cultivation is occurring in the
insurgent-dominated southern Colombia, which you can see on the
chart of Colombia here. The southernmost green areas are the
areas that I am referring to.
We propose to spend $570 million over the next 2 years to
help train and equip two additional counternarcotics battalions
that will move into this area to protect the CNP as they carry
out their counterdrug mission. The program will include 63
helicopters to enable security forces to provide access to this
remote region.
It will provide another $16 million in developmental
assistance to the people in southern Colombia to try to move
them from illicit to licit cultivation, and there will be an
additional $15 million to help those displaced by the conflict
who will need emergency assistance, humanitarian assistance in
the initial period, and who will then be transported to other
areas of the country where gainful employment will be available
for them.
Second, in terms of interdiction, we are enhancing
Colombia's interdiction ability and believe that this is
essential to decreasing the price per coca leaf and decreasing
the flow of drugs. This component provides $341 million for
radar upgrades and narcotics intelligence for Colombian
security forces. These funds will also provide assistance to
enhance regional interdiction efforts to prevent
narcotraffickers and growers from relocating to other
countries. For example, Peru, Bolivia, Ecuador, but also other
states surrounding Colombia.
Third, there is an assistance package here specifically for
the Colombian National Police [CNP]. The administration
proposes an additional $96 million to enhance the Colombian
National Police's ability to eradicate coca and poppy fields.
It will upgrade existing aircraft, purchase additional
aircraft, and provide secure bases for operations in the
growing areas. In conjunction with the counternarcotics
battalions, these will also enable the CNP to reach into the
growing areas previously beyond their reach.
This effort builds on a major program of the last several
years and, in particular, the program of fiscal year 1999 which
was provided by the Congress in the Western Hemisphere Drug
Elimination Act.
Fourth, in the area of economic development, totaling $145
million, this includes more than $45 million to provide
economic alternatives for small farmers in Colombia overall,
and $30 million for regional programs outside of Colombia. Also
included are programs to build schools, roads, and clinics.
Local governments will be strengthened through a $15-
million institution-building program. There are funds to
support efforts to protect fragile lands and watersheds. We
anticipate that these seed moneys will encourage other donors
to support this robust program for alternative development,
environmental protection, education, and health, and we are
actively encouraging their support at this time.
Finally, in terms of boosting government capacity, the
final component provides $93 million. It includes a number of
programs to increase protection of human rights by supporting
NGO's, creating human rights units within the CNP and the
prosecutor's office, and offering protection for human rights
workers in the country.
It contains more than $20 million in programs to reform the
legal system, train judges, prosecutors, and public defenders,
and expand the capabilities of the Colombian National Police
and other investigative agencies to undertake effective
programs in port security, in anticorruption, in money
laundering, and to extend the effort that resulted in the major
operational activity known as Operation Millennium that
occurred last fall.
In conclusion, Colombia faces a complex and daunting series
of problems. Narcotics is only one, and is linked to the
equally complex issues of the economy, society, and areas of
ineffective government. Colombia is a partner who shares our
counternarcotics concerns, and possesses the will to execute
the needed reforms and operations. Our challenge as a neighbor
is to identify the ways in which we can assist Colombia in
resolving these problems. This is an opportunity that presents
itself to the United States, to the Government of Colombia, and
to the peoples of the Western Hemisphere. Sir, it is an
opportunity we cannot miss.
I thank you, and I look forward to having the opportunity
to answer your questions.
[The prepared statement of Mr. Beers follows:]

Prepared Statement of Hon. R. Rand Beers

Mr. Chairman and Members of the Committee:
I want to thank you for this opportunity to speak to you today
about the situation in Colombia and about the threat it poses to
regional security.
The situation in Colombia is critical. Colombia is increasingly
threatened by well-armed and ruthless narcotics traffickers, supported
by guerrillas and paramilitaries. The Colombian Government is unable to
exert effective control over thousands of square miles of its own
territory. Not only do Colombian people in these areas suffer from the
violence and extortion of the armed groups; they also suffer from the
government's inability to deliver services and the rule of law. As long
as the government cannot operate, children's educational and health
needs will go unmet, Colombia's globally critical environment will be
left unprotected, and farmers will be unable to support their families
through legitimate, protected trade. People in the border areas of
neighboring countries are put at risk by the instability and violence
as well. Unlike in past decades, when Colombia's legitimate economy
performed better than most of Latin America despite the drug violence,
today the impact of the violence on Colombia's investment climate has
plunged the economy into deep recession. The corrosive powers of
narcotics and narcotics money are ever-present threats to the
institutions and economies of the region. The environmental threat may
be even greater as coca growers clear-cut thousands of hectares of
rainforest each year and pour toxins like potassium permanganate,
sulfuric acid and acetone into the Amazon and Orinoco river systems.
The situation in Colombia poses a considerable number of direct threats
to U.S. national security interests as well, not the least of which are
the thousands of Americans killed by drugs and drug-related violence
each year, the losses to our economy from drug-related accidents and
inefficiency in the workplace and the social and human costs of abuse
and addiction.
After strained relations with the tainted Samper administration,
President Pastrana's tenure offers the United States and the rest of
the international community a golden opportunity to work with Colombia
in confronting these threats. In Peru and Bolivia, we have partners
with sustained success combating the drug industry that are eager to
continue working with the United States. We should not squander this
opportunity. What the United States does or does not do for Colombia
over the next several months will have a great impact on the future of
our two countries, the Andean region and our hemisphere.

THE CURRENT SITUATION

Dealing with our own domestic narcotics problem must include
helping Colombia dismantle the drug networks operating on its soil.
Colombia is the world's leading producer of cocaine (two thirds of
Andean coca cultivation occurs in Colombia with even more cocaine being
processed and being transported within its borders) and is an important
supplier of heroin to the U.S. market. We have all seen how these drugs
have poisoned entire American communities, shattering families and
destroying lives.
Colombia has also paid a high price. Illicit narcotics have
corrupted its institutions and provided funding for illegal armed
groups: powerfully armed left-wing guerrillas and right-wing militias
that are perpetuating a 40-year-old insurgency. Today, large swaths of
Colombia remain beyond the control of the Colombian government, and are
incubators of lawlessness, violence and narco-corruption. Efforts to
restore order in these prime coca and opium poppy producing zones are
violently opposed by the narcotics traffickers and the various
guerrillas and paramilitary groups in league with them.
Colombia must re-establish its authority over narcotics-producing
sanctuaries. The country's many social and economic problems cannot be
successfully resolved while narco-financed armed groups flourish in
these lawless zones. Estimates of guerrilla income from narcotics
trafficking and other illicit activities are undependable, but the drug
trade is definitely their largest single source of income. Paramilitary
groups also have clear ties to important narcotics traffickers and
obtain much of their funding from them. Like his FARC counterparts,
paramilitary leader Carlos Castano has publicly admitted taxing the
drug trade. As a result, these groups are well funded and well armed.
The strength of Colombia's armed insurgent groups has limited the
effectiveness of joint U.S.-Colombian counternarcotics efforts. In
order for our counternarcotics programs ultimately to be successful, we
cannot allow certain areas of the country, like Putumayo, to be off-
limits for counternarcotics operations.
There is a need to re-establish government order in Colombia for
human rights purposes. According to the Colombian NGO Pais Libre,
guerrilla, paramilitary, and other criminal groups kidnapped 2,945
people last year, including 51 foreigners. This is a 33 percent
increase from 1998, with the two busiest groups, the FARC and the ELN,
combining for half of the abductions. Kidnapping is neither an
insurgent nor a political statement. It is a crime. Colombia must
disrupt the narco-financing of these groups, regardless of any
political orientation they may claim, if any comprehensive solution to
Colombia's problems is going to succeed.

PLAN COLOMBIA

The Government of Colombia has risen to this challenge and is
confronting these threats. The ``Plan Colombia'' is a package of
mutually reinforcing policies to revive Colombia's battered economy, to
strengthen the democratic pillars of society, to promote the peace
process and to combat the narcotics industry. The strategy combines
existing Colombian policies with ambitious new initiatives in forging
an integrated approach to that nation's most pressing challenges by
strengthening government institutions, promoting economic recovery,
carrying out social reform and boosting counternarcotic efforts. The
United States did consult with the Colombian leadership throughout the
plan's development. But the plan was formulated, drafted and approved
by President Pastrana and his team in Colombia.
Plan Colombia cannot be understood simply in terms of the U.S.
contribution. In all, Plan Colombia is a $7.5 billion program toward
which President Pastrana has pledged some $4 billion of Colombia's own
scarce resources. He called on the international community to provide
the remaining $3.5 billion. In response to this request, the
Administration is proposing a $1.6 billion assistance package to
Colombia. A significant share of our package will go to reduce the
supply of drugs coming into the United States by assisting the
government of Colombia in its efforts to confront the cocaine and
heroin industries. This focus on enforcement-related assistance, the
so-called ``stick,'' will allow other sponsors to provide support for
the ``carrot,'' developmental and humanitarian assistance projects for
which they have special interests and expertise.
Now, the Colombians have asked us to provide support in
implementing the Plan. Just as we consulted with them on ``Plan
Colombia,'' they have consulted with us regarding this proposed
assistance package. The result is a package of assistance that Colombia
needs and can use. The composition of this proposal factors in
Colombian contributions and the expected contributions of other
supporters. International financial institutions are already engaged.
Both the Colombians and we fully expect additional support to be
forthcoming from bilateral and multilateral sources, primarily to
assist economic development and social services.
Our assistance for Plan Colombia is intended to meet the needs that
the other sources cannot. It is based on the shared hope of achieving
peace and prosperity in Colombia through the overall reduction of
illicit drug production and trafficking, thereby allowing the Colombian
government to establish democratic control and provide services and
infrastructure throughout its national territory.
Plan Colombia was designed with the benefit of knowing what has
worked in Bolivia and Peru. With U.S. assistance, both countries have
been able to reduce coca production dramatically. This was achieved
through successful efforts to re-establish government control and bring
government services to former drug producing safehavens. Both Bolivia
and Peru combined vigorous eradication and interdiction efforts with
alternative development incentives for small farmers to switch to legal
crops and other licit ways to make a living. Colombia's aim is to
achieve a similar record of success.
In doing this, we cannot, and will not, abandon our allies in
Bolivia and Peru. Their successes are real and inspired. But they are
also tenuous against the seductive dangers of the narcotics trade. This
is why our Plan Colombia support package includes $46 million for
regional interdiction efforts and another $30 million for development
in Peru, Bolivia, and Ecuador. These countries deserve our continued
support to solidify the gains they have striven so hard to attain. We
have no intention of allowing cultivation and production of narcotics
simply to relocate in an international game of cat-and-mouse.

COLOMBIAN EFFORTS

The Colombian National Police (CNP), under the direction of General
Serrano, has upheld its standing as one of the premier counternarcotics
forces in the world. Now, the Colombian armed forces have adopted a
similar commitment to counternarcotics in support of the CNP's
counternarcotics mandate.
At the same time, important cultural changes are also taking place
within the armed services. Defense Minister Ramirez and General Tapias,
Commander of the Armed Forces, have acted to remedy the tradition of
human rights abuses and impunity that have tainted the military's
international reputation and strained our bilateral relations. Respect
for human rights remains an issue of high priority in Colombia, and the
record shows that the current civilian and military leadership has the
will to tackle this challenge. That said, all assistance to Colombian
security forces will continue to depend on the vetting of all intended
recipients as required by U.S. law.
The new leadership realizes that one of the best ways to attack the
guerrillas is to attack their financing, in the form of narcotics
profits. The Colombian Army has greatly expanded cooperation with and
support to the Colombian National Police, and formed its first
counternarcotics battalion. This battalion is a 950-person unit with a
CNP platoon attached. We must continue working with the Colombian
military to bring their capabilities up to a level where they can
successfully operate alongside the CNP and contribute to the
counternarcotics effort. The CNP alone is simply not large enough or
properly trained to provide the security necessary for major operations
against cultivation and trafficking in southern Colombia.
The need for counternarcotics assistance to Colombia is great and
we will continue to provide it in the form of goods and services.
However, we do not intend or desire to commit U.S. forces in Colombia.
On the ground, our assistance will be limited. We will train approved
units, we will provide technical assistance and we will help develop
programs. Still, there is more we can do. The United States can
continue to urge the international community to support Colombia in
this struggle and we encourage other potential donors to follow the
example of the Administration's proposed $1.6 billion assistance
package.

COMPONENTS OF U.S. ASSISTANCE PACKAGE

The Administration is proposing a $1.6 billion assistance package
to Colombia combining new monies with current funding. Building on
current funding of over $330 million in FY 2000 and FY 2001, our
request for new monies includes a $954 million FY 2000 emergency
supplemental and $318 million in additional FY 2001 funding. This will
result in assistance totaling just over $1.1 billion in FY 2000. Over
the two-year funding life of the proposal, 88 percent of the monies,
roughly $1.383 billion, will go for Colombia specific programs while
the remaining 12 percent, approximately $190 million, will support
projects in neighboring countries and the region. And, while
discussions of the proposal center on the security assistance it
provides, 21 percent of the monies funds projects to strengthen the
economy, assist farmers, promote human rights and generally support
other social programs. What's more, spending between enforcement and
social programs becomes even more balanced when the $7.5 billion Plan
Colombia is taken as a whole. This balanced and integrated approach is
the strength of the plan.
The Administration's proposed assistance package has five
components:
1. Push into Southern Colombia
The world's greatest expansion in narcotics cultivation is
occurring in insurgent-dominated southern Colombia. With this package,
the Administration proposes to fund $600 million over the next two
years to help train and equip two additional special counternarcotics
battalions which will move into southern Colombia to protect the
Colombian National Police (CNP) as they carry out their counter-drug
mission. The program includes 30 Blackhawk helicopters and 33 UH-1N
helicopters to enable the counternarcotics battalions to access this
remote and undeveloped region of Colombia. It will provide $16 million
in developmental assistance, providing technical assistance and
agricultural inputs to the farmers of southern Colombia as well as $15
million to help those displaced by conflict in the region.
2. Andean Interdiction
Enhancing Colombia's ability to interdict air, water-borne, and
road trafficking is essential to decreasing the price paid to farmers
for coca leaf and to decreasing the northward flow of drugs. The
component includes funding $341 million for radar upgrades and to
provide narcotics intelligence to Colombian security forces. It will
support the forward operating location in Manta, Ecuador, which will be
used for narcotics related missions. Additionally, these funds will
provide assistance to enhance interdiction efforts in Peru, Bolivia,
and Ecuador to prevent narcotics traffickers and growers from moving
into neighboring countries.
3. Assistance for the Colombian National Police (CNP)
The Administration proposes additional funding of $96 million over
the next two years to enhance the CNPs ability to eradicate coca and
poppy fields. This will upgrade existing aircraft, purchase additional
spray aircraft, and provide secure bases for increased operations in
the coca-growing centers. The CNP's ability to eradicate cultivation
deep in guerrilla territory and at high altitudes has been hindered by
security concerns and equipment needs. This funding, in conjunction
with the counternarcotics battalions, will enable the CNP to reach into
narcotics-growing areas previously beyond their reach.
4. Economic Development
This element, totaling $145 million, includes more than $45 million
of new funds to provide economic alternatives for small farmers in
Colombia who now grow coca and poppy plus another $30 million for
regional efforts. Also included are programs to build schools, roads
and clinics. Local governments will be strengthened through a $15
million program. There are also funds to support efforts to protect
fragile lands and watersheds. We anticipate that these seed monies will
encourage other donors to support the Colombian government's robust
agenda for alternative development, environmental protection, education
and health. We will actively encourage such support.
5. Boosting Governing Capacity
The final component totals $93 million and includes a number of
programs to increase the protection of human rights by supporting NGOs,
creating human rights units in the CNP and the prosecutor's office, and
offering protection to human rights workers. It contains more than $20
million in programs to reform the legal system and train judges,
prosecutors, and public defenders. It also will enhance Colombian
abilities to attack financial crimes and kidnapping.
conclusion
Colombia faces complex and daunting problems. Collectively, we may
find it convenient to think of Colombia in terms of the narcotics
crisis. In truth, that is only one element and it is linked, in a
fundamental way, to the equally complex issues of economics, society,
and an ineffective government presence in large areas of the country.
At this moment, Colombia is a partner who shares our counternarcotics
concerns and possesses the will to execute needed reforms and
operations. Our challenge, as a neighbor to the north and a partner, is
to identify ways in which we can assist Colombia in resolving its
narcotics-related and other problems. I look forward to working closely
with Congress as we continue to address these critical issues.

Senator Chafee. Thank you, sir. I now call on Hon. Brian
Sheridan. Welcome, sir.

STATEMENT OF HON. BRIAN E. SHERIDAN, ASSISTANT SECRETARY OF
DEFENSE, SPECIAL OPERATIONS AND LOW-INTENSITY CONFLICT,
DEPARTMENT OF DEFENSE

Mr. Sheridan. Thank you, Mr. Chairman, for this opportunity
to come up today and discuss the supplemental.
I am pleased to be up here with Randy and Bill. We have
done a lot of work together over the last few months on
crafting this proposal. I think Randy gave you a very excellent
overview of what the supplemental package looks like, so I will
not plow that ground again. I would just make four quick points
in addition to the written statement that I have provided for
the record.
First, from a Department of Defense perspective, our
purpose in Colombia and in the supplemental is counterdrugs,
counternarcotics. As you stated, Mr. Chairman, earlier,
thousands of Americans are killed every year because of the
hazards of drug abuse. It affects tens of thousands of
families, destroys communities, and tears at the fabric of our
society. UNDCP believes that damages directly and indirectly to
the economy total about $110 billion a year.
So that is the problem that we are seeking to address in
Colombia, and that is the purpose of the Department of Defense
efforts there, that and that alone.
My second point is that the program that we are focusing on
in the Department is designed to destroy drug production in
southern Colombia and the cartels behind it. We work with the
Colombians in developing and executing integrated air, ground,
and river programs in the south. This supplemental provides
additional funding for that. It moves forward some funding we
probably would have gotten in the outyears, but it does not
fundamentally change the types of things that the Department
has been doing in Colombia for quite sometime.
My third point is that some folks have been concerned, and
I think rightfully so, given the very complicated nature of the
situation on the ground in Colombia, that we do not get dragged
into some kind of counterinsurgency campaign, and I am here to
assure you, Mr. Chairman, and all others, that that will not be
the case. The Secretary of Defense has been very clear that he
supports counternarcotics programs, again of the kind we have
been running for 10 years, but he has been equally clear that
we are not interested in getting into a counterinsurgency
campaign. We have been doing this for 10 years. We have highly
skilled professionals down there. We have very strict controls
on where they go and what they do, and I would be happy during
the questions and answers to go into that in greater detail.
My last point is on human rights. Again, many have been
rightfully concerned about the track record of the Colombian
military on human rights. I think it is useful to break the
discussion into three distinct areas. One is how are the armed
forces doing currently on human rights abuses, second, how are
they doing on bringing to justice those accused of past abuses,
and third, what are the extent of their links to paramilitary
organizations in Colombia?
On the first round, current allegations of abuses by the
military forces in human rights have plummeted to nearly
nothing, I mean, in single digit numbers, and I think they have
made great progress there, and I think it is important, while
we talk to them about other areas of improvement, we also
recognize the tremendous progress that they have made in that
area. So concerning the conduct currently of the military
forces in Colombia, they have cleaned up their act, and they
have a very good track record.
In the second area of bringing to justice those accused in
past abuses, there clearly more work needs to be done, but
President Pastrana has done a lot. There have been somewhere
around 15 generals over the last couple of years relieved of
their responsibilities based on these past allegations of
abuses. Is that sufficient in and of itself? No. Is there more
work to be done? Yes. But clearly they are making progress in
that area.
Last, on the issue of links to paramilitaries, this is the
most difficult. It is the most difficult to prove, and it is
also difficult for them to make progress on. Nevertheless, the
President has made it very clear that this is not to be
tolerated. Again, I think just within the last couple of days
he has again condemned paramilitaries for their activities, and
he has made it clear to the armed forces that they are not to
have contact with or in any way collude with paramilitary
groups.
That said, I think the Colombians would be the first to say
that more needs to be done to get that institutionalized
throughout the Colombia military, and on a case-by-case basis
throughout the country I think most people would agree that
some of that tacit collusion does go on, and that must be
stopped, and I think the President and the defense minister
have made it clear that they will continue working on that very
difficult problem.
From our perspective, we think that the current safeguards
we have both on our equipment and our training are sufficient.
We think they strike the right balance between our very sincere
interests in human rights in Colombia, but also with our very
important interest in counternarcotics and the thousands of
American lives that I discussed earlier, so we think the
current conditionality, if you will, that we attach to our aid
strikes the right balance and we are not interested in more so.
Let me just close by saying that the problems in Colombia
took them about 40 years to get into, and they are not going to
be fixed overnight. I think Randy, Bill, and myself have all
worked very hard on this package. We think it is a good
package, but we also do not want to leave anyone with the
impression that sometime, a week after the supplemental gets
passed, suddenly everything is going to be fine in Colombia. It
is a long road. This is a first step. I think it lays the
groundwork for future success, but we should have no illusion
that this is going to be fixed overnight.
With that, Mr. Chairman, I am finished and look forward to
questions.
[The prepared statement of Mr. Sheridan follows:]

Prepared Statement of Hon. Brian E. Sheridan

I am pleased to have the opportunity to testify before this
Subcommittee to discuss the Department of Defense's perspective on the
growing Colombian drug threat as well as our integrated programs
designed to assist the Government of Colombia in its efforts to address
this scourge.
As you are aware, drug abuse is an undeniable threat to our
national security that is measured in thousands of lives lost and
costing our country billions of dollars annually. Reducing the supply
of drugs on our streets is an integral component of our National Drug
Control Strategy and the Department of Defense (DoD) plays a key
supporting role in creating the opportunity for law enforcement
agencies, both our own and those of foreign nations, to interdict the
flow of drugs into our country. DoD is committed to this counterdrug
mission. The programs I will outline today were developed in
conjunction with U.S. Southern Command, our interagency partners and
the Government of Colombia, and form the core of a sound, responsive,
and timely assistance package that will significantly enhance
Colombia's ability to conduct effective counterdrug operations.
Over the past two years Colombia, specifically the area east of the
Andes, has become the center of the cocaine trade, largely as a result
of successful interdiction and eradication efforts in Peru and Bolivia.
The remoteness of eastern Colombia and the lack of government control
in large areas of this region has precluded Colombian interdiction
operations to the point that the expansion of coca growing areas,
especially in the Putumayo Department, has progressed virtually
unchecked. Most of the world's coca is now grown in Colombia and over
eighty percent of the cocaine consumed in the U.S. is manufactured in
Colombia. The United States, the nation with the greatest cocaine
demand, currently consumes over 200 metric tons annually from the
Andean region.

SOURCE ZONE PROGRAMS

To disrupt illegal cocaine cultivation and production throughout
the source zone, DoD, working with host nations and our interagency
partners, has developed and selectively implemented a threat based,
intelligence driven, counterdrug interdiction strategy which has
focused on air, riverine/coastal, and ground programs. DoD has worked
closely with source zone nations to improve their organic air
interdiction capability by funding upgrades to their aircraft that
conduct counterdrug missions. To support the detection and monitoring
(D&M) of airborne traffickers, the Department has fielded Relocatable
Over-the-Horizon Radars (ROTHR), and deployed ground based radars along
with airborne tracker aircraft equipped with air-to-air radars.
Our counterdrug riverine and littoral efforts have provided
equipment and training support to source zone nations, thereby
facilitating effective operations along the vast river networks of the
Amazon basin, a major supply route for precursor production chemicals.
Finally, DoD's ground interdiction assistance has concentrated on
training selected military units, consisting of human rights-vetted
personnel, in the light infantry tactics they require to support law
enforcement interdiction and eradication operations. These source zone
programs have been enhanced through the development of intelligence and
command and control networks. These efforts, in conjunction with law
enforcement and eradication programs, have proven to be successful in
both Peru and Bolivia, however, the conditions necessary to implement a
coordinated response throughout the Colombian cultivation and cocaine
production regions have not been met--until now.

PLAN COLOMBIA

Colombian President Andres Pastrana has developed a comprehensive
and integrated approach to address Colombia's current problems. This
plan, known as ``Plan Colombia,'' would strengthen the Colombian
economy and democracy while fighting narcotics trafficking. Further,
this plan demonstrates that Colombia is moving forward aggressively,
exercising its political will to address, and ultimately solve,
domestic problems that have persisted for decades. The U.S. has a vital
material interest in the success of this plan. We must now step forward
with the Government of Colombia by enhancing our current strategy,
based on proven source zone interdiction programs. This effort is
responsive to Plan Colombia and consistent with current U.S. policy.

COLOMBIAN SUPPLEMENTAL SOURCE ZONE ENHANCEMENTS

The proposed fiscal year 2000 supplemental request will provide the
resources necessary to promote essential facets of the Department's
assistance to Colombian interdiction efforts. We feel that the
supplemental is a balanced and executable plan--not without challenges
which I will address later--that is necessary to attack the
strategically vulnerable aerial cocaine transportation network while
expanding ground interdiction and eradication operations into the
densest coca cultivation areas of the Putumayo region. Let me outline
for you how this supplemental funding would enhance each of our
baseline counterdrug programs in Colombia in support of our overall
source zone strategy.
Air Interdiction
Colombia requires aircraft that can track drug traffickers engaged
in aerial smuggling. The supplemental will fund the installation of
air-to-air radars in two Colombian aircraft. These radars will provide
the Colombian Air Force the organic ability to conduct terminal aerial
intercepts of drug smugglers. Aerial intercepts are intricate
operations and require adequate ground based coordination. Therefore,
the supplemental will also fund the upgrade of the Colombian Air Force
radar command and control center as well as additional ground based
radars to assist in detecting and sorting aircraft operating in eastern
Colombia. Critical to this air interdiction effort are supplemental
initiatives, under State Department authority, that will upgrade
Colombian Air Force counterdrug aircraft for the air intercept mission.
The supplemental also requests funding for U.S. Customs Service
airborne early warning aircraft upgrades to ensure that these crucial
platforms will continue to be available for the source zone
interdiction mission.
Basing airborne D&M aircraft, as well as aerial intelligence
collection platforms, close to the historical airborne smuggling routes
is of the utmost importance to the successful implementation of the
integrated strategy in Colombia. For this reason, funding for the
forward operating location (FOL) at Manta, Ecuador, is included in the
supplemental. General Wilhelm will expound on the operational
requirements; however, I want to ensure that you understand that the
Department views the completion of the site upgrades to the Manta FOL
as a critical component of the overall source zone effort.
Ground Interdiction
The supplemental funding focuses extensive resources on improving
Colombia's counterdrug ground interdiction programs. The Department has
completed training of a counterdrug battalion that is now operational
in the Putumayo region. The supplemental will support the training and
equipping of two additional counterdrug battalions that will be
operational by the end of this calendar year. Funding, if appropriated,
will also be used to develop a suitable counterdrug brigade
headquarters to oversee the operation of the three counterdrug
battalions.
The Colombian National Police (CNP) will be conducting counterdrug
interdiction and eradication missions in remote regions of the country
where the coca growing fields are located. Therefore, the counterdrug
battalions will require adequate airlift to move troops to support the
CNP. The required helicopter lift is provided for under State
Department authority, however, DoD will use proposed supplemental
funding to establish the necessary Colombian Army aviation support
infrastructure. Enhanced counterdrug intelligence collection efforts
are also required to develop and plan counterdrug operations.
Consequently, the supplemental will provide sufficient funding in this
area to further enhance the intelligence programs that already serve as
a foundation for our source zone strategy.
All these programs that I just outlined build on our current
strategy--no change in DoD policy is required to execute the programs
funded by this supplemental. There is nothing new here for DoD.
However, there will be challenges to confront in the course of our
efforts to attack the center of the cocaine industry in eastern
Colombia. It will not be easy, but it is worth the effort. Let me share
with you my concerns.

DEPARTMENT OF DEFENSE CONCERNS

Colombian Military Organization
First, the Colombian military, by their own admission, is not
optimally structured and organized to execute sustained counterdrug
operations. They are heavy on ``tail'' and short on ``tooth.'' They
need to better coordinate operations between the services and with the
CNP. The military has limitations based on resources, training
practices, lack of joint planning and operations. The restructuring of
the military is essential if Colombia is to have continuing operational
success against the drug threat. The Colombian military needs help and
we plan to use a small portion of supplemental funding towards this
end.

Human Rights
I am also concerned, as are many others in Congress, about human
rights. The practices and procedures that the U.S. government has put
in place, often at the behest of concerned Members of Congress, and the
example set by the small number of our troops training Colombian forces
has had an impact, as have President Pastrana's reforms. This is a
success story. While we must remain vigilant, and there is undoubtedly
room for improvement, I am concerned that if extensive conditional
clauses are included in the supplemental appropriations language, that
we could inhibit or mitigate the overall effectiveness of U.S.
assistance to Colombian. We need to work together, Congress and the
Administration, to address this concern. I am also alarmed by the
reported dramatic increase in human rights violations attributed to
both the paramilitaries and insurgents--this is symptomatic of
Colombia's crisis in general and, as I see it, a call for action. The
Colombian government needs the resources and training to address this
problem and the supplemental represents a significant contribution on
the part of the U.S.

Counterdrug vs. Counter Insurgency
Lastly, let me address the ``targets'' of this supplemental
package, and our source zone strategy as a whole. The targets are the
narco-traffickers, those individuals and organizations that are
involved in the cultivation of coca and the subsequent production and
transportation of cocaine to the U.S. The Colombian military will use
the equipment and training that is provided by this supplemental
request, in conjunction with the assistance that has already been
delivered, to secure perimeters around CNP objectives--coca fields and
cocaine labs--so that the CNP can safely conduct interdiction and
eradication operations. Only those armed elements that forcibly inhibit
or confront these joint military and CNP operations will be engaged, be
they narcotraffickers, insurgent organizations, or paramilitaries.
I know that many are concerned that this aid package represents a
step ``over the line,'' an encroachment into the realm of
counterinsurgency in the name of counterdrug. It is not. The Department
has not, and will not, cross that line. While I do not have the time to
elaborate on all of the restrictions, constraints, and reviews that are
involved in the approval of the deployment of U.S. military personnel
on counterdrug missions, in Colombia and elsewhere, it suffices to say
that it is comprehensive. I personally look not only at who is
deploying and what they are doing, but at the specific locations to
which they are going. Furthermore, each and every deployment order
states, in no uncertain terms, that DoD personnel are not to accompany
host nation personnel on operational missions. This will not change. As
I have said, this supplemental does not require a change in U.S.
policy. Is there risk to U.S. personnel providing counterdrug support?
Yes there is. Is the risk increased as a result of the programs being
enhanced by the supplemental? The answer is no.
The Department of Defense enthusiastically supports this
supplemental. U.S. Southern Command and my office participated
extensively in its formulation. It integrates fully our source zone
strategy, affording the opportunity to enhance those counterdrug
programs that have proven successful in Peru and Bolivia. President
Pastrana has asked for international support to address an internal
problem that has international dimensions--fueled in part by our
country's demand for cocaine. It is time to move forward and, I hope,
with congressional support, that we can do so soon.

Senator Chafee. Thank you. Mr. Ledwith.

STATEMENT OF MR. WILLIAM E. LEDWITH, CHIEF OF INTERNATIONAL
OPERATIONS, DRUG ENFORCEMENT ADMINISTRATION, WASHINGTON, DC

Mr. Ledwith. Chairman Chafee, it is a pleasure for me to
appear today to testify on the narcotics crisis in Colombia. I
will keep my remarks brief, and request that my written
statement be submitted for the record.
We at DEA believe that the international trafficking
organizations based in Colombia who smuggle their illegal drugs
into our country pose a formidable challenge to the national
security of the United States. DEA is proud to play a key role
in the U.S. Government's strategy to assist Colombia in the
counterdrug effort.
The witnesses here today, taken together, will give you a
broad picture of the current situation in Colombia and the U.S.
Government's plans to deal with it. I am here to comment on the
law enforcement aspects of dealing with the international drug
trafficking organizations currently operating in Colombia.
DEA's mission in Colombia, as in other foreign postings, is to
target the most powerful international drug syndicates that
operate around the world, supplying drugs to American
communities, and employing thousands of individuals to
transport and distribute their drugs.
International drug syndicates headquartered in Colombia and
operating through Mexico and the Caribbean control the sources
and the flow of drugs into the United States. Virtually all of
the heroin produced in Colombia is destined for the United
States market. In fact, Colombia has over the past 5 years
become the leading source of heroin in the United States.
Recent DEA statistical data indicates that as much as 75
percent of the heroin seized and analyzed by Federal
authorities in the United States is of Colombian origin.
Over half of the cocaine entering the United States comes
from Colombia through Mexico alone and across U.S. border
points of entry. Colombian drug trafficking groups are no
longer the monolithic organizations they were over most of the
past two decades. Experienced traffickers who have been active
for years but worked in the shadow of the Cali drug lords have
proven adept at seizing opportunities to increase their role in
the drug trade.
In addition to trafficking their own cocaine, the
organizations operating out of Colombia supply almost all of
the cocaine to the Mexican crime syndicates. The Mexican
organizations purchase cocaine from the Colombians, as well as
accepting cocaine in payment for transportation services from
Colombian groups.
This change in the manner in which business is conducted is
also driven by the new trafficking groups in Colombia, who have
chosen to return to the Caribbean in order to move their
cocaine to the United States. The Colombians have franchised to
criminals from other countries a portion of the mid-level
wholesale cocaine and heroin trade on the east coast of the
United States. Colombian groups remain, however, in control of
the sources of supply. Their subordinates operating in the
United States and not the Colombians are now the ones subject
to arrest, while the top-level Colombians control the
organization with increasingly encrypted communications.
Colombia has always been the world's No. 1 producer of
finished cocaine hydrochloride. Colombia now has the
distinction of also being the world's largest producer of
cocaine base. Over the past several years, Colombian
cultivation and cocaine production have been increasing
dramatically. Colombian traffickers continue to become more
self-sufficient by increasing cocaine base production within
Colombia itself to offset the decline in base previously
brought in from Peru and Bolivia.
There continues to be deep concern in DEA, as in the rest
of the administration and in the Congress, about the connection
between the FARC and other groups in Colombia and the drug
trade. The presence of the insurgents in Colombia's eastern
lowlands and southern rain forests, the country's primary coca
cultivation and cocaine processing regions, hinders the
Colombian Government's ability to conduct counterdrug
operations.
The frequent ground fire sustained by Colombian National
Police eradication aircraft operating in insurgent-operated
areas shows the extent to which insurgent units will go to
protect the economic interests of their local constituents.
Some insurgent units raise funds through extortion or by
protecting laboratory operations. In return for cash payments,
or possibly in exchange for weapons, the insurgents protect
cocaine laboratories in southern Colombia.
Recent DEA reporting indicates that some FARC units in
southern Colombia are indeed directly involved in drug
trafficking activities, such as controlling local cocaine base
markets. Some insurgent groups have assisted drug trafficking
organizations in transporting and storing cocaine and marijuana
within Colombia. In particular, insurgent units protect
clandestine air strips in southern Colombia.
The Colombian National Police continue to pursue
significant drug investigations in cooperation with the DEA. On
October 13, 1999, the Colombian National Police, the Colombian
Prosecutor General's Office, DEA, and the U.S. Department of
Justice, carried out Operation Millennium. Millennium was a
long-term complex investigation targeting the inner workings of
several of the most important international drug trafficking
organizations operating in Colombia and Mexico.
This operation resulted in the indictment and arrest of one
of the former leaders of the Medellin drug cartel, Fabio Ochoa-
Vasquez, along with 30 other extremely significant defendants.
Once extradition of these defendants to the United States is
completed, that operation will be the most successful and
significant drug enforcement event since the elimination of the
Medellin cartel.
DEA will continue to direct assets and resources at the
command and control structures of the major drug trafficking
organizations operating throughout Colombia. All DEA programs
in one form or another will focus on the identification and
immobilization of major drug trafficking organizations
operating throughout Colombia.
To further augment these objectives, programs such as the
Andean Initiative, Sensitive Investigations Unit, and the
intelligence collection programs will be the primary support
for DEA's enforcement efforts. These units will be encouraged
to work simultaneously with DEA domestic offices in coordinated
transnational investigations targeting all aspects of these
organizations so as to maximize both the effect and the return
on our investment.
To conclude, we can and should continue identifying and
building cases against the leaders of the new criminal groups
from Colombia. A number of initiatives hold particular promise
for success. The special program of vetted units funded by the
U.S. Congress under the vetted unit initiative will make it
possible to continue to conduct high-level drug investigations
in Colombia and the regions without fear of compromise. These
units are by far DEA's most important investigative tools.
We intend to carry out even more of the cutting edge
sophisticated investigations like Millennium as part of a joint
Department of Justice Criminal Division, DEA, and Colombian
National Police bilateral case initiative. Such operations
benefit from the closest possible cooperation between the DEA
and the Colombia National Police. These operations will
effectively demonstrate that even the highest level traffickers
based in foreign countries cannot manage drug operations in the
United States with impunity.
DEA intends to fully support Plan Colombia. This support
will include intensified investigations at the highest level of
the drug trafficking organizations. DEA will continue to work
closely with specially trained and vetted Colombian law
enforcement units, other Colombia law enforcement agencies, and
Colombian prosecutors to initiate joint investigations at the
highest level.
Colombia faces dramatic challenges to the rule of law, many
of which are directly related to drug trafficking. Plan
Colombia addresses many of these elements. The support to
multilateral investigations, counterdrug units, and money
laundering sections of the justice initiative portion of Plan
Colombia can support DEA, Colombian National Police, DOS, and
Colombian prosecutors' efforts to fight drug trafficking in
Colombia. Other sections of the justice initiative of Plan
Colombia can provide indirect support to DEA, Colombian
National Police, DOS, and Colombian prosecutors' efforts to
investigate major Colombian drug trafficking organizations.
These sections include support to money laundering, asset
forfeiture, training for police prosecutors and judges,
security for victims and witnesses, prison assistance, and
procedural and legislative reform to the Colombia legal system.
Thank you for the opportunity to testify before your
committee today. I will be happy to respond to any questions
that you may have, sir.
[The prepared statement of Mr. Ledwith follows:]

Prepared Statement of William E. Ledwith

Chairman Chafee and members of the Subcommittee. It is a pleasure
for me to appear here today to testify on the narcotics crisis in
Colombia. We in DEA believe that the international trafficking
organizations based in Colombia who smuggle their illegal drugs into
our country pose a formidable challenge to the national security of the
United States. DEA is proud to play a key role in the U.S. Government's
long-range strategy to assist Colombia in the counterdrug effort.
DEA is well aware that Colombia not only faces a drug trafficking
crisis, but also is torn by an economic crisis and a generations-long
civil conflict. There are, to be sure, regional and hemispheric
concerns for stability rising from the current situation in Colombia.
There is a wide range of witnesses here today who can, taken together,
give you a broad picture. I am here to comment on the law enforcement
aspects of dealing with international drug trafficking organizations
operating in Colombia.
We have the highest confidence in the observations and conclusions
we will share with you today. When DEA operates in foreign posts, we
work within the legal systems of our host nations, of course in accord
with U.S. law, and in cooperation with our host nation police agency
counterparts. During our investigations, in partnership with our host
nation counterparts, we gather and collect a wide range of information,
including drug intelligence, on the trafficking organizations, which we
target.

1. DEA TARGETS INTERNATIONAL ORGANIZED CRIME

DEA's mission, in Colombia as in other foreign postings, is to
target the most powerful international drug syndicates that operate
around the world, supplying drugs to American communities, and
employing thousands of individuals to transport and distribute drugs.
The most significant international drug syndicates operating today are
far more powerful and violent than any organized criminal groups that
we have experienced in American law enforcement. Today's major
international organized crime drug syndicates are simply this new
century's versions of traditional organized crime mobsters U.S. law
enforcement officials have fought since the beginning of the Twentieth
Century. Unlike traditional organized crime, however, these new
criminals operate on a global scale.
Members of international groups headquartered in Colombia and
Mexico today have at their disposal the most sophisticated
communications technology as well as faxes, internet, and other
communications equipment. Additionally, they have in their arsenal;
aircraft, radar-equipped aircraft, weapons and an army of workers who
oversee the drug business from its raw beginnings in South American
jungles to the urban areas and core city locations within the United
States. All of this modern technology and these vast resources enable
the leaders of international criminal groups to build organizations
which--together with their surrogates operating within the United
States--reach into the heartland of America. The leaders in Colombia
and Mexico, by creating organizations that carry out the work of
transporting drugs into the United States and franchising others to
distribute drugs, themselves try to remain beyond the reach of American
justice. The traffickers also have the financial resources necessary to
corrupt law enforcement, military, and political officials in order to
create a relatively safe haven for themselves in the countries in which
they make their headquarters.
As complex as these communications arrangements of organized crime
groups are, U.S. law enforcement agencies have been able to exploit
their communications by using court-approved telephone interceptions.
With the top leadership of these organizations in hiding beyond the
immediate reach of U.S. law enforcement, we have directed our resources
at their organizational structure, and their transportation and
distribution elements in the United States.
We have been able to identify, indict, and in many cases arrest,
international drug traffickers because the very feature of their
operations which makes them most formidable--the ability to exercise
effective command and control over a far-flung criminal enterprise--is
the feature that law enforcement can use against them, turning their
strength into a weakness. However, it must be noted that the spread of
encryption technology threatens to remove this essential investigative
tool from our arsenal, and poses, in our view, a threat to the national
security of the United States because it will hamper law enforcement
efforts to protect our citizens from drug trafficking organizations
operating abroad.
The international drug syndicates headquartered in Colombia, and
operating through Mexico and the Caribbean, control both the sources
and the flow of drugs into the United States. The vast majority of the
cocaine entering the United States continues to come from the source
countries of Colombia, Bolivia, and Peru. Virtually all of the heroin
produced in Colombia is destined for the U.S. market. In fact, Colombia
has over the past five years become the leading source of heroin in the
United States. Recent statistical data indicate that as much as 75% of
the heroin seized and analyzed by Federal authorities in the United
States is of Colombian origin. For the past two decades--up to recent
years--crime groups from Colombia ruled the drug trade with an iron
fist, increasing their profit margin by controlling the entire
continuum of the cocaine market. Their control ranged from the coca
leaf and cocaine base production in Peru, Bolivia, and Colombia, to the
cocaine hydrochloride (HCl) production and processing centers in
Colombia, to the wholesale distribution of cocaine on the streets of
the United States.
Colombian traffickers continue to import cocaine base from the
jungles of Bolivia and Peru, but in ever decreasing amounts. Coca leaf
production has increased dramatically within Colombia itself, however
the traffickers move the cocaine to the large cocaine HCl conversion
laboratories in southern Colombia. The vast majority of the cocaine
base and cocaine HCl destined for the United States is produced in
these laboratories. Many of these activities take place in the southern
rain forests and eastern lowlands of Colombia. Most of the coca
cultivation in Colombia occurs in the Departments of Guaviare, Caqueta,
and Putumayo. This cultivation occurs in areas where there is limited,
if any, government control or presence. Cocaine conversion laboratories
range from smaller ``family'' operations to much larger facilities,
employing dozens of workers. Once the cocaine HCl is manufactured, it
is either shipped via maritime vessels or aircraft to traffickers in
Mexico, or shipped through the Caribbean corridor, including the
Bahamas Island chain, to U.S. entry points in Puerto Rico, Miami, and
New York.
Over half of the cocaine entering the United States continues to
come from Colombia through Mexico and across U.S. border points of
entry. Most of this cocaine enters the United States in privately-owned
vehicles and commercial trucks. There is new evidence that indicates a
few traffickers in Mexico have gone directly to sources of cocaine in
Bolivia and Peru in order to circumvent Colombian middlemen.
Drug trafficking in the Caribbean is overwhelmingly influenced by
Colombian organized criminal groups. The Caribbean had long been a
favorite smuggling route used by the Cali and Medellin crime groups to
smuggle cocaine to the United States. During the late 1970s and the
1980s, drug lords from Medellin and Cali, Colombia established a
labyrinth of smuggling routes throughout the central Caribbean,
including Haiti, the Dominican Republic and the Bahamian Island chain
to South Florida, using a variety of smuggling techniques to transfer
their cocaine to U.S. markets. Smuggling scenarios included airdrops of
500-700 kilograms in the Bahamian Island chain and off the coast of
Puerto Rico, mid-ocean boat-to-boat transfers of 500 to 2,000
kilograms, and the commercial shipment of multi-tons of cocaine through
the port of Miami.

2. CURRENT COLOMBIAN DRUG TRAFFICKING GROUPS

Colombian drug trafficking groups are no longer the monolithic
organizations they were over most of the past two decades. After Miguel
Rodriguez Orejuela and his confederates in the Cali Cartel were brought
to justice by Colombian authorities in 1995, new groups from the North
Valle del Cauca began vying for control of the lucrative markets on the
United States East Coast, previously dominated by Rodriguez Orejuela.
Experienced traffickers who have been active for years--but worked in
the shadow of the Cali drug lords--have proven adept at seizing
opportunities to increase their role in the drug trade. Many of these
organizations began to reactivate traditional trafficking routes in the
Caribbean to move their product to market.
DEA's focus on the Cali organization's command and control
functions in the U.S. enabled us to build formidable cases against the
Cali leaders, which allowed our Colombian counterparts to accomplish
the almost unimaginable--the arrest and incarceration of the entire
infrastructure of the most powerful crime group in history. Although
the incarceration of Cali traffickers may continue to direct a portion
of their operation from prison they are no longer able to maintain
control over this once monolithic giant. Now, the independent groups of
traffickers from the Northern Valle del Cauca have replaced the highly
structured, centrally controlled business operations of the Cali
Cartel. These new groups tend to be smaller and less monolithic,
however, they continue to rely on fear and violence to expand and
control their trafficking empires.
DEA has identified the major organizations based on the northern
coast of Colombia that have deployed command and control cells in the
Caribbean Basin to funnel tons of cocaine to the United States each
year. Colombian managers, who have been dispatched to Puerto Rico and
the Dominican Republic, operate these command and control centers and
are responsible for overseeing drug trafficking in the region. These
groups are also directing networks of transporters that oversee the
importation, storage, exportation, and wholesale distribution of
cocaine destined for the continental United States.
In addition to trafficking their own cocaine, organizations
operating out of Colombia supply almost all of the cocaine to the
Mexican crime syndicates. The Mexican organizations purchase cocaine,
as well as accepting cocaine in payment for services, from Colombian
groups. This change in the manner in which business is conducted is
also driven by the new trafficking groups in Colombia, who have chosen
to return to the Caribbean in order to move their cocaine to the United
States.
Mexican organized crime syndicates now control the wholesale
distribution of cocaine in the western half and the Midwest of the
United States. Moreover, the Colombians have franchised to criminals
from the Dominican Republic a portion of the mid-level wholesale
cocaine and heroin trade on the East Coast of the U.S. The Colombian
groups remain, however, in control of the sources of supply. The
Dominican trafficking groups, already firmly entrenched as low-level
cocaine and heroin wholesalers in the larger northeastern cities, were
uniquely placed to assume a far more significant role in this multi-
billion-dollar business.
The Dominican traffickers operating in the U.S., and not the
Colombians, are now the ones subject to arrest, while the top level
Colombians control the organization with sophisticated
telecommunications. This change in operations reduces profits somewhat
for the syndicate leaders. It succeeds, however, also in reducing their
exposure to U.S. law enforcement. When arrested, the Dominicans will
have little damaging information that can be used against their
Colombian masters. Reducing their exposure, together with sophisticated
communications, puts the Colombian bosses closer to their goal of
operating from a political, legal, and electronic sanctuary. Colombian
drug traffickers' efforts to reduce their exposure is clearly linked to
the 1997 change in Colombian constitutional law which, once again,
exposes the Colombians to extradition to the United States for drug
crimes.
Colombia has always been the world's number one producer of
finished cocaine HCl. Colombia now also has the dubious honor of also
being the world's largest producer of cocaine base. These changing
dynamics highlight the fact that Colombian cocaine trafficking
organizations continue to dominate the international cocaine trade.
Over the past several years, Colombian coca cultivation and cocaine
production have been increasing dramatically.
Net cultivation in 1998 was 101,800 hectares, yielding an estimated
437,500 MT of leaf--equal to 435 MT of cocaine base. New data obtained
from DEA's Operation BREAKTHROUGH has since been used by the CIA Crime
and Narcotics Center (CNC) to recalculate how much cocaine may have
been produced in 1998 from Colombia's domestic coca crop. Much of the
difference is because DEA has recently provided new data based on
recalculation of alkaloid content, crop yield, and lab efficiency in
Colombia.
For the above reasons, in official figures released earlier this
month, the CNC now estimates Colombia's potential cocaine production in
1998 at 435 metric tons, compared to the previously announced 1998
estimate of 165 metric tons. As also announced, using the updated
cocaine production formula based on the new Operation Breakthrough
results, the CNC now estimates Colombia's potential 1999 cocaine
production from Colombia's domestic coca crop to be 520 metric tons,
based on cultivation of 122,900 hectares of coca.
In historical perspective, in 1989 Colombia had 42,400 hectares net
cultivation in coca, after eradicating 640 hectares, and produced
33,900 MT of leaf. Although there was no official estimate for that
year, a comparable amount of leaf would yield slightly over 65 MT of
HCl. It may appear from these statistics that Colombian production of
HCl has increased from 65 MT to over 435 MT in ten years. We must bear
in mind, however, that the 1989 estimate and the 1998 or 1999 numbers
are based on different calculations, methodology, and levels of
confidence. We have, so far, worked the new formula backward in time
only as far as 1995. The ten year increase might not, therefore, be
quite as dramatic as it appears. Net Coca cultivation was about 50,000
hectares in 1995, and has doubled since then--at the same time as net
cultivation decreased in Bolivia and Peru. Interdiction programs like
Peru's operation AIRBRIDGE, which denied Peruvian airspace to
traffickers flying cocaine base into Colombia, forced traffickers to
utilize alternative routes and methods--such as using better
communications security during their flights, flying from closer to the
Peruvian border and through Brazilian airspace, and using riverine
routes. The Colombian traffickers also sought to become more self-
sufficient by increasing cocaine base production within Colombia
itself, to offset the decline in base previously brought in from Peru
and Bolivia.

3. COLOMBIAN CRIME GROUPS IN THE U.S.

Colombian cocaine trafficking groups in the U.S.--consisting of
mid-level traffickers answering to the bosses in Colombia--continue to
be organized around compartmented ``cells'' that operate within a given
geographic area. Some cells specialize in a particular facet of the
drug trade, such as cocaine transport, storage, wholesale distribution,
or money laundering. Each cell, which may be comprised of 10 or more
employees, operates with little or no knowledge about the membership
in, or drug operations of, other cells.
The head of each cell reports to a higher manager who is
responsible for the overall management of several cells. The regional
director, in turn, reports directly to one of the drug lords of a
particular organization or their designee based in Colombia. A rigid
top-down command and control structure is characteristic of these
groups. Trusted lieutenants of the organization in the U.S. have
discretion in the day-to-day operations, but ultimate authority rests
with the leadership in Colombia.
Upper echelon and management levels of these cells are normally
comprised of family members or long-time close associates who can be
trusted by the Colombian drug lords--because their family members
remain in Colombia as hostages to the cell members' good behavior--to
handle their day-to-day drug operations in the United States. The
trusted personal nature of these organizations makes it that much
harder to penetrate the organizations with confidential sources. That
difficulty with penetration makes intercepting criminal telephone calls
all the more vital. They report back to Colombia via cell phone, fax
and other communications methods. Colombian drug traffickers
continually employ a variety of counter-surveillance techniques and
tactics, such as fake drug transactions, using telephones they suspect
are monitored, limited-time use of cloned cell phones (frequently a
week or less), limited use of pagers (from 2 to 4 weeks), and use of
calling cards. The top level managers of these Colombian organizations
increasingly use sophisticated communications, posing a severe
challenge, to law enforcement's ability to conduct effective
investigations.

4. INSURGENTS' INVOLVEMENT IN THE DRUG TRADE

There continues to be deep concern in DEA, as in the rest of the
Administration and in the Congress, about the connection between the
FARC and other groups in Colombia and the drug trade. The Colombian
government is now engaged in responding to this challenge. DEA will
continue to closely monitor the situation.
An alliance of convenience between guerillas and traffickers is
nothing new. Since the 1970s, drug traffickers based in Colombia have
made temporary alliances of convenience with leftist guerillas, or with
right wing groups. In each case, this has been done to secure
protection for the drug interests. At other times, the drug traffickers
have financed their own private armies to provide security services.
Some insurgent and paramilitary groups have, in fact, become little
more than bands of well-armed thugs selling their services to drug
traffickers.
The presence of the insurgents in Colombia's eastern lowlands and
southern rainforest--the country's primary coca cultivation and cocaine
processing regions--hinders the Colombian Government's ability to
conduct counterdrug operations. The frequent ground fire sustained by
Colombian National Police eradication aircraft operating in insurgent
occupied areas shows the extent to which some insurgent units will go
to protect the economic interests of their ``local constituents''
(i.e., coca farmers and drug traffickers). Likewise, insurgent attacks
continue to pose a threat to CNP personnel, supported by the DEA
conducting operations, against clandestine labs. Some insurgent units
raise funds through extortion or by protecting laboratory operations.
In return for cash payments, or possibly in exchange for weapons, the
insurgents protect cocaine laboratories in southern Colombia.
The most recent DEA reporting indicates that some FARC units in
southern Colombia are indeed directly involved in drug trafficking
activities, such as controlling local cocaine base markets. Some
insurgent units have assisted drug trafficking groups in transporting
and storing cocaine and marijuana within Colombia. In particular, some
insurgent units protect clandestine airstrips in southern Colombia.
There remains, however, no information that any FARC or ELN units have
established international transportation, wholesale distribution, or
drug money laundering networks in the United States or Europe. Northern
and central Colombia continues to be the primary base of operations for
paramilitary groups. Recent reporting, however, indicates that
paramilitary groups have become more active in southern Colombia.
Most of these paramilitary groups do not appear to be directly
involved in any significant coca, opium poppy, or marijuana
cultivation. Paramilitary leader Carlos Castano has recently admitted,
however, that his group receives payments--similar to the taxes levied
by the FARC--from coca growers in southern Colombia to protect them
from guerrillas, according to press reporting.
Several paramilitary groups also raise funds through extortion, or
by protecting laboratory operations in northern and central Colombia.
The Carlos Castano organization, and possibly other paramilitary
groups, appear to be directly involved in processing cocaine. At least
one of these paramilitary groups appears to be involved in exporting
cocaine from Colombia.

5. LAW ENFORCEMENT ACCOMPLISHMENTS

The Colombian National Police is a major law enforcement
organization with a long and honored tradition of integrity. Under the
direct command of General Rosso Jose Serrano, the CNP has become
recognized for its dedication, patriotism and commitment to integrity.
The CNP has introduced fundamental changes in the force in order to
make it a thoroughly modern and efficient institution within the
context of Colombia and the international community.
General Serrano has been an effective advocate on behalf of the
thousands of loyal and dedicated Colombian National Police officers
within the ranks. He has encouraged their motivation, even in the face
of the tragic losses of over 900 fellow police officers in the last
three years alone. The fact that the CNP, and other members of
Colombia's law enforcement community, were able and willing to pursue
operations against the drug underworld is a testament to their
professionalism and dedication.
All of the top Cali drug lords either have been captured by the
CNP, have died, were killed, or have surrendered to Colombian
authorities. These unprecedented drug law enforcement successes were
the culmination of years of investigative efforts by the CNP, with
active support from DEA. Unfortunately, Miguel Rodriguez-Orejuela and
his associates, who comprised the most powerful international organized
crime group in history initially received shamefully short sentences
for their crimes. In January 1997, Gilberto Rodriguez-Orejuela was
sentenced to 10 years in prison on drug trafficking charges. As a
result of Colombia's lenient sentencing laws, however, Gilberto may
serve only five years. Miguel, originally sentenced to 9 years, was
later sentenced to 21 years on Colombian charges based on evidence
supplied by the United States Government in the Tampa, Florida,
evidence-sharing case. Miguel is expected to serve less than 13 years
in prison. The Colombian judicial system must be strengthened so that
the traffickers, once convicted, are sentenced to terms commensurate
with their crimes.
The CNP continues to pursue significant drug investigations in
cooperation with the DEA. The CNP is also aggressively pursuing
significant counterdrug operations against cocaine processing
laboratories, transportation networks, and trafficker command and
control elements. We expect these operations will result in
prosecutions in both Colombia and the United States.
On October 13, 1999, the CNP, the Colombian Prosecutor General's
Office, DEA, the U.S. Attorney's Office and Department of Justice
Criminal Division carried out Operation Millennium. Millennium was a
long-term, complex investigation targeting the inner workings of
several of the most important international drug trafficking
organizations operating in Colombia and Mexico, and smuggling their
product into the United States. This operation resulted in the
indictment and arrest of one of the former leaders of the Medellin drug
cartel, Fabio Ochoa-Vasquez along with 30 other extremely significant
defendants. Operation Millennium effectively targeted major cocaine
suppliers who had been responsible for shipping vast quantities of
cocaine from Colombia through Mexico into the United States. Millennium
targeted drug kingpin Alejandro Bernal-Madrigal, who, by his own
admission, had been smuggling 30 tons, or 500 million dosage units, of
cocaine into the United States every month. U.S. law enforcement
authorities seized more than 13,000 kilograms of cocaine during the
last two weeks of August alone.
The U.S. Government has requested extradition of all 31 defendants.
The criminal acts for which they were arrested all took place after
December 17, 1997, the effective date of Colombian legislation allowing
for renewed extradition of Colombian nationals. It has long been the
case that the greatest fear of these major traffickers is that they
could face extradition to the U.S., efficient trials, and conviction to
terms commensurate with the enormity of their crimes.
Once the extraditions to the United States of the Millennium
targets is completed, that operation will be the most successful and
significant drug enforcement event since the elimination of the
Medellin cartel. Operation Millennium would simply not have been
possible without the dedicated cooperation of the CNP and the Colombian
Prosecutor General's Office.

6. OVERVIEW OF PRIORITIES AND PROGRAMS

Due to the precarious and ever-changing dynamics of the cocaine
trade in South America, the DEA Bogota Country Office (BCO), in
conjunction with the United States Embassy in Colombia, developed
strategies to identify, investigate and dismantle major drug
trafficking organizations. The DEA South American Regional Plan (SARP)
and the United States Mission Performance Plan (MPP) are the primary
strategies developed by the BCO and U.S. Embassy in Colombia to direct
and guide DEA and U.S. counter-drug efforts in Colombia. In essence,
the SARP and the MPP prioritize targeting the significant drug
trafficking organizations operating throughout Colombia. The SARP and
MPP are the foundation of the BCO Work Plan. Essentially, the BCO Work
Plan is based on the premise that the organizations controlling the
manufacture and transportation of cocaine HCl are the most vulnerable
elements of the drug trafficking organizations. As such, the BCO
directs available resources at these factions in an effort to identify
and ultimately immobilize them.
Based upon the BCO Work Plan, the BCO will enhance resources in the
area known as the Colombian Source Zone. This is an area southeast of
the Andes mountains characterized by few roads, no rail transportation,
very little commercial air traffic, many clandestine airstrips and an
extensive river system linking this area to Peru, Brazil and Venezuela.
The BCO and United States Country Team believe that by augmenting
resources in the Colombian Source Zone, the amount of cocaine HCl
available for transportation to the United States will be significantly
reduced.
As in the past, the BCO will continue to direct assets and
resources at the command and control structures of major drug
trafficking organizations operating throughout Colombia. These
organizations operate primarily northwest of the Andes Mountains and
throughout major Colombian cities. These organizations also control
transportation of cocaine HCl from the Colombian Transit Zone (that
area adjacent to both Colombian coasts) to the United States, as well
as other countries, for eventual distribution.
As alluded to earlier, the BCO has noted a significant increase in
seizures of Colombian heroin, both in Colombia and the United States.
The BCO will strengthen its resources dedicated to targeting the
organizations controlling the manufacture and transportation of heroin
from Colombia to the United States.
All BCO programs, in one form or another, will focus on the
identification and immobilization of major drug trafficking
organizations operating throughout Colombia. To further augment these
objectives, programs such as the Andean Initiative, Sensitive
Investigations Unit, and Intelligence Collection will be the primary
support for the BCO's enforcement efforts. These programs will be
further enhanced through the Information Analysis/Operations Center
(IA/OC). All programs targeting major drug trafficking organizations
will be in conjunction with the United States Embassy counterdrug
strategy and the MPP.
Furthermore, the Sensitive Investigation Units, Heroin Task Force,
Operation Selva Verde and other units such as the Commando Especial del
Ejercito will be tasked to initiate significant investigations
targeting the command and control structure of the major drug
trafficking organizations. These units will target organizations
operating in the Colombian Source Zone and other areas of Colombia. The
units will be encouraged to work simultaneously with DEA domestic
offices in coordinated transnational investigations targeting all
aspects of these organizations so as to maximize both the effect and
the return on the investment. In addition, the BCO will continue to
enhance and promote host nation and regional counterdrug cooperation
throughout the area.
To attain each of the goals set forth in the 2000 SARP, it is the
BCO's conviction that joint investigations between Colombian and U.S.
authorities will garner the most significant and damaging results
against international drug trafficking organizations. As revealed in
Operation Millennium, such endeavors require extensive coordination
among a myriad of agencies, both in Colombia and the United States,
respectively. Given this, the BCO is continuing to break new ground in
this area and believes several significant investigations will result
from this continued cooperation.

7. CONCLUSION: HOPE FOR THE FUTURE

By way of conclusion, we can and should continue to identify and
build cases against the leaders of the new criminal groups from
Colombia. These criminals have already moved to make our task more
difficult by withdrawing from positions of vulnerability and
maintaining a much lower profile than their predecessors. A number of
initiatives hold particular promise for success:

The U.S. Embassy's Information Analysis/Operations Center
(IA/OC) will be increasingly utilized to coordinate and analyze
tactical information regarding the activities of drug
trafficking groups active in the Colombian territories south
and east of the Andes Mountains. The IAOC is comprised of
personnel from the DEA Bogota Country Office and the U.S.
Military's Tactical Analysis Team. Support and staffing also
are provided by the Defense Attache Office and the State
Department. Furthermore, the IA/OC will remain instrumental in
the continuance of DEA's support for the host nation
communications intercept program, which provides intelligence
about the organizations controlling the manufacture and
movement of cocaine. This organization should be the focal
point for counterdrug intelligence and law enforcement
cooperation in Colombia.

The special program of vetted units, funded by the U.S.
Congress under the Vetted Unit Initiative, will make it
possible to convert existing partially vetted units of the CNP
into fully vetted teams. These teams of investigators will work
closely with DEA and will conduct high level drug
investigations in Colombia and the region without fear of
compromise. This program is, by far, our most important
investigative tool.

We intend to carry out even more of the cutting-edge,
sophisticated investigations like Millennium, as part of a
joint DoJ Criminal Division/DEA bilateral case initiative with
our Colombian counterparts. Such operations benefit from the
closest possible cooperation between the DEA and CNP. These
investigations will continue to lead to the dismantling of
major portions of the most significant drug trafficking
organizations operating in Colombia today. Operation Millennium
successfully targeted traffickers who had previously operated
without fear of capture or prosecution in the United States,
believing that only their low-level operatives were at risk.
These operations effectively demonstrated that even the highest
level traffickers based in foreign countries can not manage
drug operations inside the United States with impunity.
Operation Millennium was made possible by direct support from
the governments of Colombia and Mexico, in addition to
collaborative efforts between the DEA and foreign law
enforcement agencies. These operations underscore the
importance of cooperation among international drug law
enforcement agencies.

DEA will continue to work closely with specially trained and
vetted Colombian task force units to develop joint cases, such
as Operation Millennium. Plan Colombia provides for specific
support for these types of initiatives, including training and
support for a counter narcotics task force and an anti-money
laundering and asset forfeiture task force. We look forward to
supporting these training programs and then working with our
Colombian counterparts in the day-to-day investigative work,
which leads to successful cases.

DEA supports Plan Colombia. DEA will continue to work
closely with specially trained and ``vetted'' Colombian law
enforcement units, other Colombian law enforcement agencies and
Colombian prosecutors to initiate joint investigations such as
Operation Millennium.

Colombia faces dramatic challenges to the rule of law, many
of which are directly related to drug trafficking. Plan
Colombia addresses many of these elements. The support to
multilateral investigations, counter drug units and money
laundering sections of the Justice Initiative portion of Plan
Colombia can support DEA, Colombian National Police, DAS and
Colombian Prosecutors efforts to fight drug trafficking in
Colombia.

Other sections of the Justice Initiative of Plan Colombia can
provide indirect support to DEA, Colombian National Police, DAS and
Colombian Prosecutors efforts to investigate major Colombian Drug
Trafficking Organizations. These sections include support to money
laundering and asset forfeiture, training for police prosecutors and
judges, security for victim and witnesses, prison assistance and
procedural and legislative reforms to the Colombian legal system.
The DEA remains committed to our primary goal of targeting and
arresting the most significant drug traffickers in the world today. In
particular, we will continue to work with our partners in Colombia--and
throughout the world--to improve our cooperative efforts against
international drug smuggling. The ultimate test of success will come
when we bring to justice the drug lords who control their vast empires
of crime which bring misery to the nations in which they operate. They
must be arrested, tried and convicted, and sentenced in their own
countries to prison terms commensurate with their crimes, or, as
appropriate, extradited to the United States to face justice in U.S.
courts.
Thank you for the opportunity to testify before the Subcommittee
today. I will be happy to respond to any questions you may have.

Senator Chafee. Well, thank you very much. I personally
have not been to Colombia. I am just curious, you gentlemen--I
know you have been working together on this Colombian aid
package for the past number of months. Have any of you spent
any amount of time in the country?
Mr. Sheridan. I think we have been there six times since
September, and over the years I think probably a very
significant amount of time.
Mr. Ledwith. I travel there with great frequency, sir. I
was stationed there for 3 years from 1992 to 1995. I had the
distinct privilege of working with the Colombian National
Police on the Pablo Escobar and Medellin cartel and Cali cartel
investigation. I have the absolute highest regard for the
police and military of Colombia.
Mr. Beers. I have been there about 10 times in the last 2
years.
Senator Chafee. In Mr. Beers' submitted testimony--I did
not necessarily pick on it here orally today--but you say that
there is a need to reestablish government order in Colombia for
human rights purposes. According to the Colombian NGO,
guerrilla, paramilitary and other criminal groups kidnapped
2,945 people last year. This is a 33 percent increase from the
previous year, 1998.
Also, you probably agree that about a third of the country
is under control of the insurgents, leading to the perception
that the country is chaotic, and steeped in corruption. I know
you spent a number of years there. Can you dissuade me of that
perception, especially based on the commonality of kidnappings?
Mr. Beers. Let me take a start, but I think we all may have
answers to this, sir. With respect to the issue of kidnapping,
it is absolutely correct the amount of kidnapping that goes on
in Colombia is a very serious and significant problem. This is
not a new problem, but it is an increasing problem, and it is
one of the issues that we and the Colombians would like to deal
with. There is, in fact, a small but I think very useful anti-
kidnapping component of this particular proposal.
With respect to the issue of control and chaos, let me say
two things about that. First, with respect to the issue of
control, I would not go so far as to say that the FARC or the
insurgents or the paramilitaries control 40 or 50 percent of
the country, but I would say that it is true that the
government does not control those areas of the country on a
day-to-day basis.
If the government chooses to assert its force in an area,
it almost always is able to move into an area and control that
area for the time that it is willing to spend there, but when
it is not there, it is not true that the FARC or the insurgents
or the paramilitaries are in complete control, or it is more
true that they have the freedom to move around without having
to fear government activity.
With respect to the issue of chaos, this lack of control in
this area of the country, which is essentially the area of the
country east of the Andes, is the area of principal coca
cultivation, and that is why it is the area, because it is not
an area of government control and the insurgents and the
traffickers are able to operate with relative freedom in that
particular area, but it is not leading to chaos in Bogota. It
is not leading to the imminent collapse of the Colombian
Government, or the FARC or the ELN marching into Bogota and
taking over the country.
It is a serious issue, but it is not a terminal issue at
this point in time in any of our views, but it is certainly an
issue which deserves our attention and our support for the
Government of Colombia.
Mr. Sheridan. I would agree with that.
Mr. Ledwith. If I may, sir, regarding kidnapping there is
absolutely no question that Colombia suffers from the
abomination of kidnapping. I think there are components of this
package that would assist the Colombian National Police in
dealing with that issue.
Speaking to corruption for a moment, sir, I had the
opportunity to work with countries throughout the world. That
is how I have spent the last 7 years in Bolivia, Colombia, a
variety of places. The Colombian National Police and their
ability to conduct investigations is almost unsurpassed
anywhere else in the world. The integrity that they bring to
their investigations, the vetted unit concept particularly, the
fact that for well over a year they were able to conduct an
operation such as Millennium aimed at the most significant
members of the trafficking organizations completely legally,
utilizing vetted prosecutors, vetted judges, it was an
amazingly complex piece of work, and they managed to do it for
well over a year.
The fact that the Colombian Government is willing to
extradite these people to the United States, which is the thing
that major drug traffickers around the world fear the most, is
quite an accomplishment also for the government.
I feel that this is a government that we can work with
very, very effectively. The people have bled and suffered for
40 to 50 years. I have lost a lot of close personal colleagues
and friends during my tenure there. I just had lunch recently
with friends from Colombia who are talking about the
destruction of their country, the threat to the very economy
and fragile nature of their country from this. It is a really,
really significant threat to Colombia, sir.
Senator Chafee. Anything to add, Mr. Sheridan?
Mr. Sheridan. No, only that 85 percent of the cocaine that
enters the United States comes from Colombia, so our national
interest is in taking out that drug production, and the other
problems are significant, but our focus is on the drug side.
Senator Chafee. My next question involves the Colombian
Government's Plan Colombia, a $7.5 billion plan of which the
American component is $1.3 billion. For a poor country such as
Colombia, how is it going to come up with its share of that
$7.5 billion? Is that realistic at all?
Mr. Beers. Sir, we have worked with the Colombian
Government and worked to understand their inputs into this
process. They have a serious economic problem there. They have,
as a result of that serious economic problem, gone to the IMF
and asked for $2.7 billion lending facility which will allow
them to deal with balance of payments offsets that are
necessary in order to sustain that economy in the world
environment.
As part of that, they have been asked to undertake a number
of austerity measures by the IMF. They involve two aspects that
I think are critically important. The first is that they have
been asked to look seriously at their overall budget, not just
the budget that is related to Plan Colombia, but their overall
budget, and they have been asked to make some reductions in
that budget, and they have taken those cuts in a variety of
ways, including some cuts in the area of security, but they
have put together a budget that the IMF believes is a credible
budget.
The IMF has, in conjunction with that, asked them to make
sure that when they have set that budget they have a revenue
path that will allow them to get there, and that is the basis
on which the IMF has made this lending facility available. We
have confidence that the IMF has done its job appropriately.
There may be some slips on this issue, but we believe that that
represents a serious commitment to actually go forward not only
with Plan Colombia but in fact, with the larger effort to in
fact run a government in Colombia in very difficult times.
Mr. Sheridan. Mr. Chairman, if I could just add one point
to Randy's. Besides the financial contribution they are making,
I think it is important to note that every day it is the
Colombian police and military that are out there undertaking
the counternarcotics operations that we ultimately benefit
from, so over the last 10 or 15 years probably hundreds of
Colombian policemen and military personnel have died in the
line of duty performing counterdrug work.
So there is a financial contribution to this effort, but
there is also the human resource, and who is on the front line
performing these very dangerous operations every single day,
and that is what they do, and I think it is important not to
lose sight of that, because that commitment is very
substantial.
Senator Chafee. Thank you very much. If the IMF lends them
$2.5 billion--is that accurate?
Mr. Beers. $2.7 billion.
Senator Chafee. So they are still a ways away.
Mr. Beers. No, sir. That is not money that goes to pay for
Plan Colombia. That is when they have a balance of payments
deficit the IMF covers that balance of payments deficit in
international currency transactions. This is not money that
pays for programs in Colombia. The Colombian Government is
required to present the IMF with a budget package and a revenue
stream from Colombian national resources, or from international
financial institutions, that show that they can, in fact, pay
for the budget that they are saying they will agree to with the
IMF if they will cover the balance of payments deficit.
Senator Chafee. I think that the cost is one of the
staggering elements of this proposal. I mean, even for a
wealthy country such as the United States, $7.5 billion is an
enormous amount of money, and our contribution, $1.3 billion,
is enormous, relative to our allocations of foreign aid
elsewhere. I believe in your testimony earlier, Mr. Beers, you
said that $75 million, only $75 million, is being allocated to
our anti-drug efforts in Peru and Bolivia.
Mr. Beers. Seventy-five million each, yes, sir.
Senator Chafee. And that is a fraction of the $1.3 billion
the Americans are putting toward this effort. Perhaps this is
an opportunity for any one of you to describe the success of
our efforts in Peru and Bolivia.
Mr. Beers. Let me take a start, sir, but I know Bill and
Brian can make major contributions.
The overall effort, if you want to measure it simply in the
amount of coca cultivation in each of these two countries, has
basically been reduced by 66 percent in Peru since 1995, and by
55 percent in Bolivia since the latter part of 1997, during the
Banzer administration. These represent reductions that I think
many of us who have worked in this area would never have
thought were possible, particularly in the Bolivian case, in
the timeframe in which it occurred there, the result of
programs that were implemented by these governments, some in
conjunction with us, over the last decade that came to fruition
fortunately in this particular timeframe.
In the case of Peru, we profited significantly from a major
air interdiction campaign that the Government of Peru undertook
to prevent narcotrafficking flights from Colombia to Peru to
pick up loads of cocaine, raw coca product, to return to
Colombia for final processing. Those flights were disrupted
significantly so that the price of coca leaf collapsed in Peru
and farmers no longer found it profitable to continue to
cultivate coca in the same gold mine mentality that existed
before.
As a result of that, farmers abandoned fields. This was not
a case of having to go and eradicate the fields. The farmer
simply abandoned the fields and began to look for other
economic activity, and that is when alternative development
programs began to flow in. That is one example. That is an
example that we are profiting from, one that we are applying,
that the Colombians are applying to this effort in Colombia.
Second, in Bolivia, the program had a longstanding 12-year
base of alternative development activity that has been
occurring there. That alternative development activity sought
to get coca farmers to cut down the coca and replace it with
legitimate agricultural activity.
For about the last 10 years the farmers cooperated in
cutting down that crop and planting another one, but there was
no incentive not to move some place else and begin that same
coca crop in another nearby area, so that they were complying
with the government but still maintaining their coca income.
What has happened there that is different is the government has
said, we are no longer going to accept any coca being grown in
this country, so we are going to go in, and we are going to cut
it down. We are not going to make this a voluntary program. We
are going to make this an involuntary program.
So built on the base of knowing how to have a legitimate
agricultural economy in the coca-growing areas, the involuntary
eradication has made these major inroads in the brief 2\1/2\
years that it has been underway. Again, the lesson of the
combination of alternative development and enforcement
activities is a lesson learned from Bolivia. It is being
transported into the Colombian programs.
Senator Chafee. What is the United States' involvement in
both of these cases?
Mr. Beers. In the first case, we provided intelligence
support to the air interdiction program that was conducted by
the Peruvians, and we have provided some of the alternative
development funds in Peru.
In the case of Bolivia, we provided the alternative
development funds over the years, but we have also supported
their enforcement effort, and in particular have supported the
enforcement effort that is going on right now with equipment
and per diem kinds of rations and shelter for the cutters who
are a mobile work force operating in the coca-growing areas.
Those were modest amounts of money. You are correct in
pointing that out. They had an enormous pay-off. Now, part of
the reason they had an enormous pay-off was to some extent
traffickers accepted this effort and did not contest it to the
degree that they might, because they fell back to Colombia.
Now we have gotten to the bottom line. We have no illusions
that the effort in Colombia is going to be as easy as the
effort in Peru and Bolivia appeared to have been, because we
are getting now to the last bastion of coca production in the
Andean region.
And while it is possible that they could try to expand out
of this to other countries, the cost, the time, the effort to
do that will be much more significant than the fall-back to
Colombia and to an existing coca cultivation, and more
importantly the heart of the processing effort that the
Colombian traffickers have always enjoyed with respect to the
production of final product cocaine, HCl, for the world market.
Senator Chafee. Do you think it would be inaccurate to say
that the strong internal governmental action in Peru and
Bolivia drove the growers to Colombia, where there is a more
sympathetic government?
Mr. Beers. I would say that the traffickers fell back to
Colombia because the areas of the country that we are talking
about are beyond government control.
Yes, to some extent during the previous administration,
when this process began, it was a government which we had
serious concerns about their corruption and their narcotics
trafficking sympathies, but this process has continued with the
Pastrana administration, and we have to be frank about that,
but it has continued because we and the Pastrana administration
would both say that the area of the country that it occurs in
is an area in which the government does not assert effective
control at this point in time.
Senator Chafee. The cost is still troubling to me, as well
as the potential for success as we move into the southern
region of the country. I think it would be common sense that if
a government had an insurgency against it, there would be
temptation to use the military hardware and the aid to redirect
the mission from drug interdiction to counterinsurgency. That
temptation would just be overwhelming. Can you comment on that?
Mr. Beers. We are not saying that this effort may not
encompass activities that involve conflict with the guerrillas.
The guerrillas in the coca-growing areas are part and parcel of
the drug trade. They are assisting in the cultivation and
transportation and processing. We have clear evidence of that,
and they are profiting directly from that, and we have no
illusion that they are simply going to walk away from this and
accept the reassertion of government control in an area of
major economic enterprise for them.
Insofar as they choose to stay and resist the government
effort, this program is designed to deal with them just as it
is designed to deal with the traffickers. This is not, however,
a program to remove the insurgency from the country at large.
This is a program to focus on the counternarcotics effort. If
the guerrillas, if the paramilitaries choose to be involved as
traffickers, they will be treated as traffickers.
Mr. Sheridan. I would just say that there is a whole
regimen of end use monitoring that is associated with the
equipment that is provided. All of the individuals that we
train are vetted. The counterdrug battalions we are training
have a very specific focus, as Randy said. They are dedicated
to counterdrug operations in southern Colombia, and the
Putumayo and Caqueta, where we have this explosion in
cultivation, so we are comfortable that this equipment will not
be misused and these forces will not be misused.
Senator Chafee. My last question is you said, Mr. Sheridan,
in you opening statement that this is not--I believe it was in
your opening testimony. This is not going to be solved
overnight, and of course that is the quagmire question. What
are our benchmarks? What do you see as benchmarks for success
and progress in this massive aid program?
Mr. Sheridan. Well, I think the Colombians and Plan
Colombia have articulated, as far as I am concerned, the only
benchmark that matters within the next year or so. They want to
curb the explosion in cultivation and then start that on a
downward trend, and I believe out to the year 2007 they hope to
reduce cultivation by----
Mr. Beers. Sixteen years, 50 percent. That is the objective
in Plan Colombia. If we can do it faster, we will try
everything we can, but we do not think that is an unrealistic
projection, either. It is a little longer than the Peruvian
program took. This is a tougher problem. This is certainly
longer than the Bolivian program has taken but this is a far
tougher problem.
Mr. Sheridan. But we do, Mr. Chairman, we have timetables
for the sequencing of equipment coming online, units being
trained and so forth, and we have that in considerable detail,
but at the end of the day those benchmarks have to do with
programmatic implementation. What matters, and the only thing
that matters, is drug production, and as we have seen in Peru,
as we have seen in Colombia and other areas in the past, and in
Bolivia, when these programs are working you will know it.
There is no shortage of information.
Remember in Peru, when the air bridge denial program
started, we had it in 100 different ways that they were having
real problems, so I do not think it is going to be very
difficult a couple of years down the road to figure out if this
thing is on the right track or not.
Senator Chafee. Conversely, if the American advisors have
some casualties, or the Hueys or the Blackhawks fall into the
wrong hands, are we in it for the long haul?
Mr. Sheridan. I can only speak for the Department of
Defense. We have been working with the Colombian military since
1989, and we are confident with our role. We know exactly what
our role is down there. We expect it will remain as it is
today, and we intend to stay with it.
We do not intend to escalate our role. We do not intend to
change the types of activities that we do perform down there.
We provide training support. We provide intelligence support.
We provide minor engineering support, usually contracted out,
by the way, to local construction companies. It is all indirect
support. At the end of the day, as I described earlier, it is
the Colombian police and military who go out and conduct
counterdrug operations. The U.S. military is not with them, and
I do not see any change in that in the future.
Mr. Beers. Sir, the administration has presented you with a
2-year funding proposal. That is the remainder of this
administration, and that is the reason that it is only a 2-year
proposal at this point in time. The Pastrana administration
looks at Plan Colombia as a program for the remainder of the
Pastrana administration, and that is 3 years, but DEA and INL,
we have been doing this for years, and we are going to continue
doing this. This is not a short-term program. This is a first
step proposal.
Senator Chafee. It is a daunting task. Anything else to
add?
Mr. Ledwith. Well, sir, speaking of benchmarks, certainly
any reduction, a reduction in drug production is a benchmark
the DEA would be looking for, and also a reduction in the
strength of the drug-trafficking organizations headquartered in
Colombia. There is a clear recognition that as long as there is
a demand in the United States, there will be groups that will
take advantage of this demand to make money. This is a greed-
based crime.
What we wish to do is ensure that none of the organizations
grow to the strength, the financial resources, the corruptive
potential to own a government, to own a Congress, to influence
the judiciary, to be able to change the constitution, to
preclude extradition. This is really our interest.
We recognize clearly we will be up against traffickers for
as long as there is demand in the United States. We wish to
ensure that the drug-trafficking organizations that we are up
against are the weakest and most diluted that are humanly
possible. The analogy I would make is, we have to take the
field against these people. We do not want to take the field
against the New York Yankees. We want to take the field against
the Toledo Mud Hens every time we take the field, and this is
possible.
We cannot allow them to accumulate this tremendous wealth,
this tremendous corruptive potential and this tremendous
influence, and that is the argument for continuously attacking
them on an organizational level.
Senator Chafee. Well, thank you, gentlemen, very much.
Anything else?
Mr. Beers. No, thank you, sir.
Senator Chafee. Thank you very much. A noble and daunting
task, as I said. We will take a break while we change panels,
and the record will remain open for further testimony or
questions of the witnesses.
[Responses to additional questions for the record follow:]

Responses of Assistant Secretary Rand Beers to Additional Questions
Submitted by Senator Biden

Question 1. What is the anticipated timeline of the following that
will be funded under the supplemental request:
Production of the Blackhawk helicopters;
Training of Colombian pilots for the Blackhawk helicopters.

Answer. By conservative estimate, the first UH-60 Blackhawk would
be off the assembly line approximately fourteen-to-eighteen months
after the contract with Sikorsky has been finalized. We expect that
two-to-three aircraft will be delivered each month after that until the
order is complete. Actual delivery times could be faster, but will
depend greatly on the state of the production line when funding becomes
available. By the same token, the delivery schedule could be further
extended if funding is not available until after the current contract
expires.
Colombian pilots will need six-to-eight weeks of transition
training to make the move from other helicopters to the UH-60.
Transition training will begin before delivery of the first aircraft so
that crews are available as the aircraft are constructed.
DoD has put together a site survey team that is, among other
activities, helping Colombia determine the precise schedule for
aircraft deliveries and pilot training.

Question 2. Will the United States retain title to the aircraft
provided under the supplemental?

Answer. Yes, our standard practice is to retain title to aircraft
provided for counternarcotics support.

Question 3. In October 1999, the Secretary of State determined,
pursuant to Section 2(b)(6) of the Export-Import Bank Act of 1945, that
the sale of five UH-60 (Blackhawks) under the Act would be in the
national interest of the United States. The determination further
stated that the helicopters would be used ``primarily for anti-
narcotics purposes,'' as required by the Act.
Have the UN-60s been delivered to Colombia? If not, when
will they be delivered?
What types of counter-narcotics operations will the Air
Force use these helicopters to engage in?

Answer. Yes, those aircraft have been delivered and are in
operation with the Colombian Air Force (FAC). The FAC participates in
counternarcotics missions by providing support to personnel on the
ground and plays a major role in aerial interdiction efforts. These
aircraft are intended to provide security support in the event that the
spray planes are fired on. However, because the FAC has not yet
finished securing the armament for these helicopters, I understand that
they are currently providing airlift. Please note that that transaction
is between the GOC, EXIM Bank and Sikorsky helicopter. They are not
part of an assistance package and INL, while aware of the transaction,
is not a party to it.

Question 4. Please describe how the end-use monitoring of U.S.-
provided equipment is conducted by Embassy Bogota.
How many personnel in Embassy Bogota are engaged in such
monitoring activities? Will the number of personnel in Embassy
Bogota increase in order to assist in implementation of the
supplemental proposal?
How do they conduct such monitoring?
How often do they make site visits to conduct such
monitoring?

Answer. There are two personnel in Embassy Bogota officially
assigned to end-use monitoring (EUM) duties: one with the Narcotics
Affairs Section (NAS) and the other in the Military Group (MilGp).
Unofficially, however, all NAS personnel and advisors who spend time in
the field participate in the EUM process. In addition, the Embassy has
been given approval to hire an EUM Assistant and an auditor to work in
the NAS. The need for these two positions was identified prior to the
development of the proposed assistance package and is not a response to
it. We are confident that no new positions, beyond these two, will be
needed as a result of the package.
Currently, much of the monitoring is effectively performed by NAS
advisors in the field who work daily with their Colombian counterparts
and oversee the use of USG donated equipment. There is also a system in
place through which the CNP provides inventories to the NAS, who then
compares them against its own inventories and sends personnel on site
visits to perform spot checks. Whenever irregularities surface, the
official NAS EUM advisor informs the appropriate Colombian authority in
writing requesting an explanation and coordinates the development of a
solution to avoid similar discrepancies in the future. Specific EUM
site visits generally occur once or twice per year. This number is
expected to increase now that the EUM officer has been relieved of some
collateral duties and with the addition of an EUM assistant.

Question 5. Please describe the implementation of the Leahy
Amendment in Colombia.
How is the vetting of units conducted?
Is there on-going monitoring of units assisted by U.S.
funding?
Are there records maintained on the number of individuals
rejected during such vetting?
What constitutes a ``unit'' under the Leahy Amendment?
What happens if a member of the counter narcotics battalion
commits a human rights abuse? Would funding for the entire
battalion be cut off?

Answer. Embassy Bogota regularly receives information on human
rights violations from a variety of government agencies, NGOs, press
reports, and international organizations and maintains records of this
information. When a unit is being considered for training, the Embassy
checks its own records and also refers the names to the Colombian
government to determine if the unit has any record of gross human
rights violations. Once the Embassy has concluded this process, the
State Department in Washington searches its own records for information
on such violations. If any alleged violations are uncovered, the
Department, in consultation with the Embassy, asks the following
questions:

(a) Are the contents of the allegations credible?
(b) If so, do such allegations constitute a gross human
rights violation?
(c) If so, was the unit in question involved in the alleged
incident(s)?

If all of the questions are answered in the affirmative, the
Department then reviews the actions taken by the Government of Colombia
to bring the perpetrators to justice, and determines whether they
constitute effective measures. This monitoring does continue after the
initial approval of a unit.
Because human rights vetting is conducted by unit, records of units
that do not meet the Leahy standard are maintained at the U.S. Embassy
in Bogota.
Section 564 of the Foreign Operations, Export Financing and Related
Programs Appropriations Act for FY00, often referred to as the Leahy
Amendment, does not define what constitutes a unit. For the purposes of
implementing the amendment in Colombia, the Department generally
considers the unit proposed for training to be the unit to be vetted.
This could be a brigade, a battalion, or an individual in the case of
individual training.
Like all other units receiving USG assistance, the counternarcotics
battalion (CNBN) is subject to section 564's provisions. If the
Department of State finds that there is credible evidence that a member
of the CNBN has committed a gross human rights violation, assistance to
the unit would be suspended until such time as the Secretary of State
determines that the Government of Colombia has taken effective measures
to address the violation.

Question 6. How many U.S. personnel in Embassy Bogota are engaged
in assisting in the implementation of the Leahy Amendment?
Do you anticipate increasing the number of personnel in
Embassy Bogota to assist in implementation of the supplemental
funding?

Answer. In reality, implementation of the Leahy Amendment entails
effort by personnel throughout the Embassy. While the responsibility
for Leahy-associated human rights vetting resides within the Political/
Economic section, employees in other offices are encouraged to report
any accounts of human rights violations that they come across in the
media or elsewhere. In addition to the officer designated to coordinate
this monitoring activity, two additional human rights positions have
been authorized for post.
A staffing increase for the Embassy is expected. Mindful of
security and budget concerns, Embassy Bogota and the parent U.S.
government agencies here are coordinating to determine the minimum
number of new positions needed. Currently the United States has in
Colombia:

approximately 280 U.S. citizens assigned to the regular
Embassy staff;
generally not more than 80 U.S. citizen temporary duty
civilian employees at any one time;
a uniformed military temporary duty component that
fluctuates between 80-220 individuals depending on the training
work load.

We estimate that the latter numbers will be adequate to carry out
our support for Plan Colombia as proposed to the Congress in the
emergency supplemental. We intend no major increases in military or
civilian personnel in Colombia, although some agencies, such as USAID,
might see small increases in staff.

Question 7. The supplemental request proposes that Section 482(b)
of the Foreign Assistance Act would be waived.
Why is this waiver necessary?

Answer. As written, Section 482(b) provides for defensive armament
of counternarcotics aircraft, USG personnel and USG contractors only.
The waiver is necessary so that we and the Department of Defense can
provide Colombian security forces with the protection they require.

[Pause.]
Senator Chafee. Welcome to the second half of our panel. I
would like to especially welcome and open the testimony with
Hon. Michael Skol. Welcome.

STATEMENT OF HON. MICHAEL SKOL, SKOL & ASSOCIATES, WASHINGTON,
DC

Mr. Skol. Thank you, sir. Mr. Chairman, thank you very much
for inviting me to testify here today on this very significant
issue. I will make some brief remarks and ask that my written
testimony be entered into the record.
Mr. Chairman, I know both Colombia and Vietnam very well, I
have lived in both countries. I have not visited Vietnam in a
great many years, but I go to Colombia all the time, and I
mention this at the outset because I know the comparison is on
the minds of many people, and rightfully so, because they think
they see in this situation that ``one quagmire seems like
another quagmire.'' I mention this because I thought I would
today talk about why I think the situation in Colombia is
nothing like what the situation was in Vietnam, when the United
States did find itself entering into a long-term quagmire and
losing proposition.
I have been involved in Colombian affairs one way or
another for a great number of years. First, in my career in the
Foreign Service I was stationed in Colombia for 2 years from
1985 to 1987, and since then, in my Foreign Service career I
had one job after another which touched very closely on
Colombia and on drug affairs.
Since I retired from the Foreign Service 4 years ago I had
been until very recently the chairman of the U.S.-Colombia
Business Partnership, which is an association of some of the
largest U.S. companies with interests in--investment or trade--
in Colombia. I will be speaking today on behalf of the U.S.-
Colombia Business Partnership, but also from my own
perspective.
My first point is that I believe very strongly that the
package that the Clinton administration has submitted is a good
package. It is a balanced package, and it is a package that
will do the job for U.S. interests in Colombia. Overwhelmingly
these interests are antidrug interests, stopping the flow of
drugs from the country from which most of the drugs come in the
first place, and are increasingly coming.
I believe that the job, the task is achievable. This is
very important. The Congress authorizes a great deal of money
on programs, some of which do not meet the goals for which they
are authorized. I believe that this will not happen in
Colombia. As you yourself, Mr. Chairman, pointed out, the
successes in Peru and Bolivia have been extraordinary, much
faster than the predictions even of the people who sat before
this committee a few years ago asking for money for Bolivia and
Peru. Both countries have seriously undermined the power of the
narcotics cartels to move drugs northwards to the United
States.
It is achievable also because of the nature of the
Colombian National Police, Colombian Army, the two principal
recipients of the helicopters and other military style
equipment that are being provided by this package. I know of no
police force anywhere in Latin America, and quite possibly
anywhere in the world, as continuously effective and noncorrupt
as the Colombian National Police. I believe that our
involvement through this package with the Colombian Army is
likely to do the same thing for the improvement of the
efficiency and respect for human rights of the Colombian Army
as our involvement helped to do the same thing with the
Colombian National Police. The statistics, the record is
extraordinarily clear.
It is also important to look at the nature of the Colombian
people, what they want, what they desire. They want very much
to be rid of both drugs and the terrorism represented by the
two large guerrilla groups, but they also very much want to do
this in a respectable, legal, and human-rights-respecting way.
This is not the United States that is imposing a tradition of
respect for law and human rights on Colombia.
Now, there have been violations. There continue to be
violations of human rights, but the point is that it is the
Colombian national political character, and the character of
the Colombian people themselves, which are self-imposing
respect for human rights and the desire to do things in the
right way.
But I also fear that if U.S. support, as, for example,
envisioned by the package, is not forthcoming there will be
Colombians who will lead themselves toward a lesser of two
evils. There are many Colombians who will prefer to see the
paramilitaries do away with the guerrillas, rather than to see
the guerrillas continue to gain in strength.
This would be a terrible decision. This would be a Faustian
bargain which the United States should have no part in, and
which the Colombian Government does have no part in, and does
not want. But one could see down the road, if the right kind of
assistance is not forthcoming, and the guerrilla movements
become stronger and stronger in that country, I can see a time
when wrong decisions could be made by the Colombian people
because they are desperate to do away with both drugs and
guerrilla movements.
Let me comment just very briefly on the very sensitive
question that you, Mr. Chairman, asked of the previous panel.
Isn't it a fact that some of this equipment, some of the
helicopters will be used inevitably against the guerrilla
groups, the FARC and the ELN, and the answer, bluntly, is
absolutely yes. That is the intention. I no longer work for the
U.S. Government. I can be just a bit more frank in what I say.
That is the intention of this assistance package, the military
and the helicopter component of it. Why? Because the only way,
the only logical way to get at the drug growing areas in
Colombia today in the south and the east is by the Colombians
fighting their way through the guerrillas to the drug-growing
areas. These areas are being protected by guerrilla armies, and
using the allusion of someone in the panel before about the New
York Yankees and the Toledo Mud Hens, I believe, the fact is
that you need a major league team to go after the guerrilla
movements right now if you are to sweep them away in order to
get at drug trafficking.
The answer to your question is that yes, as long as the
guerrillas continue to protect the drug cartels in these vast
areas that are not currently under the control of the
government, those guerrilla movements should be undermined,
should be attacked, and should be, because they are allies of
the drug traffickers.
Now, I think it is also important that a side effect of all
of this is a very, in my opinion very positive effect on the
peace negotiations. For the last year to 18 months the peace
negotiations frankly have not gone very far, basically,
according to most analysts, because the guerrillas see their
strength, their options as improving over the next months and
years. Why then should they negotiate now?
I believe that the provision of the military and police
assistance in this package will go a long way toward persuading
the FARC and the ELN that right now is the time to negotiate,
not when the Colombian Army and the Colombian National Police
are substantially stronger, and could fight better on the
battlefield. This I see as a side effect of the provisions of
this assistance package, and I mention it because I have seen
too many people say that the United States would be endangering
the peace process by injecting more military might into the
hands of the Colombian Army and police.
Well, it has never worked that way before. If you look at
the situation, no progress up to now, the guerrillas believe
their situation is getting better. The net effect of this
package will be to persuade the guerrillas in fact to
negotiate. Hopefully they will decide to do that, rather than
take on an increasingly effective Colombian Army and National
Police.
I believe another factor here, Mr. Chairman, that is
extraordinarily important, is President Pastrana and his team.
We all had to live through the previous administration of
President Samper. We were all relieved when President Pastrana
was elected, and we have not been deceived in what he is doing,
what his intentions are, and the risks that this man and his
administration have taken.
The dismissal of senior military officers, generals accused
of human rights violations. The embrace of human rights
conditionality written into U.S. legislation--not resistance to
it, but actually going through the process of vetting units and
improving the human rights performance of the army. The
extradition of senior drug traffickers to the United States.
This is something that many previous Colombian leaders were
frightened into not doing, and now Pastrana is doing it.
The creation of the safe haven zones for the guerrilla
groups. Some people, including many in this room, do not agree
with that, but it was a risk taken in the name of peace and in
doing something eventually about drug trafficking.
What he has done for open markets and foreign investment. I
could go on in praise of President Pastrana. My point is that
we will rarely find a leader so willing to do what we want a
leader to do in a country with problems that directly affect
U.S. interests.
Let me just go very quickly--I am taking too much time
here--about Vietnam. I was in Vietnam a long time ago, 1968-
1970, and everything about that experience is in deep contrast
to what I see today in Colombia. First and most importantly the
Colombians do not support the guerrillas. They do not support
the FARC. They do not support the ELN. Their support is less
than 3 percent, according to reliable and consistent polling.
This was, believe me, not the case in Vietnam, where a great
many people in South Vietnam saw the inevitability of and
seemed to accept the North and the Viet Cong winning.
The difference in the competence of the National Police,
the army, in contrast to Vietnam. The home-grown human rights
and democracy nature of Colombia. Perhaps most important, this
is a country that if you were very careful, you had good
binoculars, you might even see from south Florida. It is very
close to the United States. Very much closer than Vietnam.
Colombia is one of the largest countries, and one of our
best trading partners. It is right there in front of us, and it
is not on the other side of the world. Its significance is not
because it is a domino, or any other game. It directly affects
the interest of the United States in terms of peace, in terms
of democracy, in terms of human rights, in terms of trade, in
terms of the protection of American investments that are there
and, most importantly, in terms of drugs.
Mr. Chairman, I believe that this package deserves the
support of the Congress. Thank you.
[The prepared statement of Mr. Skol follows:]

Prepared Statement of Ambassador Michael Skol

Mr. Chairman, thank you for inviting me to testify here today. My
name is Michael Skol. I was a Foreign Service Officer for thirty years,
which included several positions where I came to know well both
Colombia and our national struggle to end the flow of drugs into the
United States. From 1985 to 1996 I was, in order, Deputy Chief of
Mission in Bogota, the State Department's Director of Andean Affairs,
Deputy Assistant Secretary for South America, Ambassador to Venezuela,
and Principal Deputy Assistant Secretary for Latin American Affairs.
Shortly after I left the Service in 1996 to enter the field of ``anti-
corruption services'' in the private sector, I was elected Chairman of
the then new U.S.-Colombia Business Partnership, an association of many
of the largest U.S. companies with interests in Colombia. I will be
speaking today both in representation of the Partnership and on my own
behalf. I should also point out that I am registered under the Foreign
Agents Registration Act for work I am now doing for the Bolivian
Government, although I do not believe there is any conflict of interest
in my testifying about Colombia today.
My continuing years of experience leads me to one overriding
conclusion: that the Clinton Administration emergency anti-drug
assistance package for Colombia is urgently needed in the defense of a
number of overlapping significant U.S. interests, beginning with the
one concern uppermost in all our minds: stopping the movement of
narcotics into our country. I believe the aid contemplated will indeed
lead to that goal, by providing Colombia's own police and armed forces
the muscle required to eradicate or interdict drugs in areas now
controlled by guerrilla movements too locally powerful to be dealt with
by ordinary means. The task is achievable: look at what has happened in
Peru and Bolivia. And note how effective Colombia's National Police, as
well as the army, have been when given the tools they need to fight a
well-armed enemy.
But it's also true that the unique circumstances of Colombia today
form a context in which an integrated U.S. assistance program would
serve a number of other interests, including the defense of democracy
and human rights and the successful negotiation of a peace agreement
with the guerrillas. The package would also significantly advance the
kind of vital economic development fostered by the presence of U.S. and
other foreign investments which must have security to survive and
prosper.
The Colombian people have made repeatedly clear--in elections, in
polls and through remarkable public demonstrations--that they want to
be rid of drugs and terrorism alike. They have shown that they want
very much to accomplish that objective by respectable means and not by
physically or conceptually dismembering their democratic state. They
easily prefer--as we should--assistance and other support from friends
like the United States over a devil's bargain with para-military groups
or a flirtation with the militarization of their own government or the
abandonment of basic human rights precepts in the conduct of an often
brutal war. We have the means, and the Congress has the legislative
power, to help assure that things are done ``the right way'' in
Colombia.
And that means in the peace arena as well. Just as will the flow of
drugs, the cause of peace can be directly influenced by a well-balanced
package of assistance, including for the military and police. The
United States has the strongest possible interest in helping the
situation to move toward negotiated resolution. And that will most
probably only happen when the FARC (Revolutionary Armed Forces of
Colombia) and the ELN (Army of National Liberation) come to understand
that now is the time they can get the most at the bargaining table, not
at some point in the future when additional U.S.-provided helicopters
and training have helped make the army and the National Police far more
capable in the field. Look to the last 18 months for evidence of
willingness to bargain absent such a leveling action. A continuation of
the present circumstances where drug-connected guerrillas perceive
their strategic situation as improving is in nobody's interest but
theirs. And peace in Colombia would obviously be the most dramatic blow
possible to the violation of human rights there.
The companies of the U.S.-Colombia Business Partnership see an
additional, important set of interests positively affected by a
comprehensive assistance package such as the one being proposed. They,
too, are taking risks in their trade and investment, but the belief
that dealing in and with Colombia makes good economic sense for both
Colombians and Americans has led both U.S. businesses and the Colombian
Government to act as vigorously as possible to defend, promote and
bolster that trade and investment. It is, however, a fact of Colombian
life that government forces simply do not now have the overall strength
adequately to fight drugs and assure full territorial integrity in all
the places that have to be secured. Military and police aid will help
open the security umbrella more widely.
The nature of the Administration of President Andres Pastrana, and
our relationship with it, make this the ideal time to have a very
positive impact on how all these interest play out in Colombia.
President Pastrana has repeatedly demonstrated his essential commitment
to the protection of human rights, to peace and to cooperation with the
U.S. on drugs and other issues. Look at the risks he has taken: the
dismissal of senior military officers accused of rights violations, the
effective embrace of human rights conditionally on previous aid, the
extradition of drug traffickers to the U.S., the creation of safe haven
zones for guerrilla groups during negotiations, policy decisions
favorable to open markets and foreign investment despite internal
opposition. Some may disagree with one or the other specific tactic,
but the whole represents an unprecedented synthesis of what we have
always told ourselves we want to see in a friend and a leader. If
nearby Colombia and like-minded President Pastrana do not merit the
strongest possible support from the United States, what more distant
and less congenial country and chief of state do?
But many wonder, even if Pastrana and his nation are worth
supporting, where will this kind of cooperation eventually lead our
country? Will a program of aid to Colombia in fact thrust the United
States into ``an Andean Vietnam''? That fear must be confronted, the
mythology punctured.
I knew Vietnam, and Colombia is no Vietnam.
I was a junior Foreign Service Officer at Embassy Saigon during
1968-70. Traveled the mid-part of the country, reporting on attitudes
and political developments. I came in time to believe that the U.S.
effort was doomed to failure--so did the majority of my colleagues in
the Political Section at the time. (By the Spring of 1970 an informal,
regular internal poll clearly predicted the fall of the South ``in five
years.'' Remarkably prescient, especially when compared to what
Washington was saying publicly).
We found that most South Vietnamese only weakly supported the
government and (perversely for us) regarded a Viet Cong/North
Vietnamese victory not only as inevitable but, somehow, as ``just.''
U.S. assistance and direct involvement was all that stood in the way of
a Communist triumph. When that support ended, so did the hollow
government we left behind.
Years later, I came to know Colombia. I have often in my own mind
compared the two experiences and have regularly concluded that American
aid, such as in the present package, is decidedly unlikely to get us
into a quagmire of the Vietnamese or any variety.
Let me cite a few of the significant differences: First, very much
unlike the Viet Cong, neither of the guerrilla groups in Colombia have
any support among the Colombians (3 percent, according to consistent
polling). The FARC and the ELN hold territorial power only because of
armed might and terrorist threats, both made possible by dollars
``earned'' from drug trafficking and what is (frighteningly) called
``commercial'' kidnapping. There is nothing even remotely considered
``just'' about the country's guerrillas or drug cartels. On the other
hand, Colombians overwhelmingly support democratic government;
thousands of them have died defending it.
Secondly, the Pastrana administration and any likely successors in
Colombia are fully committed to the preservation of their own democracy
in the face of the drug and guerrilla challenges. They are not
surrogates for anybody else's war, cold or otherwise. They are fighting
and will continue to fight independently of U.S. aid. They do not want
and would not accept American troops fighting their battles for them.
If our additional assistance is not forthcoming, or even if all U.S.
aid were to stop altogether, Bogota would not fall as Saigon did,
because the Colombians are consciously rallying around their national
goals. But it is, of course, in the American interest that Colombia do
a lot better than just not collapse.
Thirdly, the Colombian Army and National Police are competent,
proven forces, limited basically by lack of the materiel needed to deal
with extraordinarily well-financed enemies. In recent years, the
Police, with U.S. hardware and intelligence help, have become what is
widely acknowledged as the best police force, certainly the most
successful anti-drug force, south of Texas. The National Police are
fighting proof that Colombia needs helicopters and the like, not
American soldiers, to win the battles ahead--or to convince the
guerrillas that now is the time to negotiate.
Fourthly, the drive to improve the country's human rights record,
and to develop governmental presence and alternative development in
outlaw territories comes from Colombia itself, from President Pastrana,
his team and the citizenry as a whole. There has been prodding from
Washington, and there rightly will be conditions attached to any new
assistance. But the record of initiative and improvement is clear.
Democracy, human rights, and market-centered economic development are
integral elements of Colombian political culture, not an imposition
from the outside, easily discarded when the benefactors are not
looking.
Fifthly, this is not a nation on the other side of the earth, whose
strategic importance for the United States is defined as being a player
in a game of dominoes. Colombia is just across the Caribbean, the
fourth largest country in Latin America, one of our best trading
partners. It's where our cocaine--and increasingly the heroine--come
from. Where many of its 40 million people can become desperate enough
about their country's situation to seek refuge northward. What happens
there has a direct impact on us here. Not theory. Uncomfortable fact.
Finally, this is a situation in a stage where what we can
legitimately offer is commensurate with what it will take to make a
difference in the outcome. $1.3 billion in helicopters and the like can
tip the Andean scales, while another 100,000 Americans soldiers, and
another, could not do the job in South East Asia.
Mr. Chairman, Colombia is Colombia. It is an ally reaching out to
us that is more than willing to employ its own resources toward our
common objectives. It is lead by a courageous president who wants to
work with the United States, a leader who understands the meaning of
drug corruption--whose very election was in large measure a repudiation
of his predecessor's narco-corrupt behavior. It encompasses a nucleus
of U.S. interests which we would be wise to defend now rather than
later at greater cost. Colombia and President Pastrana clearly merit
the backing of the Congress in the form of support for the President's
aid package.

Senator Chafee. Thank you, sir. I regret President Pastrana
is not here to hear your kind words of praise.
Mr. Vivanco, welcome.

STATEMENT OF MR. JOSE MIGUEL VIVANCO, EXECUTIVE DIRECTOR,
AMERICAS DIVISION, HUMAN RIGHTS WATCH, WASHINGTON, DC

Mr. Vivanco. Thank you, Mr. Chairman. Thank you very much
for this invitation to participate in this hearing. I would
like to offer my statement as well for the record to this
committee, as well as the most recent report \1\ that our
organization, Human Rights Watch, has on elaborating on human
rights in Colombia. I would like to use this opportunity, Mr.
Chairman, to make some just very brief remarks regarding how we
assess the current human rights conditions in Colombia.
---------------------------------------------------------------------------
\1\ See: http://www.hrw.org/hrw/reports/2000/Colombia/
---------------------------------------------------------------------------
First, we believe that the United States has a unique
opportunity here to reach out to Colombia and support a
democracy in danger. Many Colombians have risked their lives to
defend their nation from many threats. Some who have chosen
public service have even lost their lives to political and
criminal violence. Certainly the United States has an interest
in helping Colombia's elected leaders regain control of the
regions now contested by armed groups on the right and the
left.
Illegal drug trafficking fills the pockets of all sides in
this war and contributes significantly to the level and the
scope of violence, but Colombia's predicament is too
complicated for simple solutions. Any aid proposed for Colombia
should reflect not only its intricate history but also the many
levels of violence at work there, among them paramilitary
groups, guerrillas, and drug traffickers. Human Rights Watch
has fully documented the abusive behavior of Colombian
guerrillas responsible for massacres, executions, torture,
kidnapping, extortion, and death threats.
In addition, the FARC has executed soldiers and police
agents who have surrendered or been captured. Currently, the
FARC has over 400 police and military prisoners, and we have
called for their humane treatment, and we have protested these
kinds of actions.
Unfortunately, there is another major source of violence in
Colombia, one that should deeply concern this committee. That
is the state itself through its security forces. Human Rights
Watch, the State Department, even in the report, the human
rights report that has been issued today, the United Nations,
the Human Rights Commission of the OAS, and other independent
groups have long reported on the abusive behaviors of the
Colombian military and police. Colombia's security forces have
been linked to serious violations, among them massacres,
executions, torture, disappearances, and death threats.
I would like to first discuss the human rights situation of
the Colombian National Police. The police continue to be
implicated in human rights violations. There have been cases
where officers captured and execute suspected guerrillas. In
areas where paramilitaries are present, police have been
implicated in joint army-paramilitary actions and have
sometimes supplied information to them to assemble death lists.
For instance, government investigators concluded in 1998 that
police organized and deployed paramilitaries responsible for at
least 30 killings in 1996 and 1997.
It is important to note, however, that these activities do
not for the most part go unnoticed, or unpunished. According to
our research, General Rosso Jose Serrano and the National
Police have taken human rights concerns seriously and do not
tolerate abusive officers in their ranks.
Today, 11,400 agents of the police implicated in human
rights abuses, criminal activity, corruption and other crimes
have been discharged from the force and put at the disposition
of Colombian courts for trial and punishment. Using Decree 573,
passed in 1995, General Serrano can summarily fire officers
accused of abuses if there is convincing evidence against them.
Unfortunately, the same cannot be said for Colombia's
military. Military leaders have yet to take the firm, committed
action necessary to clean up their forces and to ensure that
human rights abusers do not act with tacit or open state
approval. Human Rights Watch has detailed a recent and
compelling evidence of continuing close ties between the
Colombian Army and paramilitary groups responsible for gross
violations of human rights, which have been submitted to this
committee.
Far from moving decisively to break ties to paramilitaries,
Human Rights Watch evidence strongly suggests that the
Colombian military high command has yet to take the necessary
step to accomplish this goal. Human Rights WAtch information
implicates Colombian Army brigades operating in the country's
three largest cities, including the capital, Bogota.
If Colombia's leaders cannot or will not help these units
support for paramilitary groups, the governments' resolve to
end human rights abuses in units that receive U.S. security
assistance must be seriously questioned.
That is why it is crucial for this Congress to place strict
conditions on all security assistance to Colombia, including
intelligence-sharing, and adding new language to strengthen the
current Leahy amendment. These conditions should require
explicit actions by the Colombian Government at all levels
between the Colombian military and paramilitary groups. Other
groups that have contributed to members of the Colombian
military have been decreasing in recent years, but over the
same period the number and the scale of abuses attributed to
paramilitary groups operating with the military's acquiescence
or open support have skyrocketed.
Thank you, Mr. Chairman. I would welcome your questions.
[The prepared statement of Mr. Vivanco follows:]

Prepared Statement of Jose Miguel Vivanco

Chairman Helms, Senator Biden, Members of the Committee:
It is a pleasure to be with you today. Thank you for inviting me to
convey to the Committee our concerns about the human rights
implications of U.S. security assistance to Colombia. I know the
Committee is most interested in having time for an exchange, so my
opening remarks will be brief. I also have submitted, for your record,
a copy of our most recent report \1\ on Colombia, entitled ``The Ties
That Bind: Colombia and Military-Paramilitary Links.''
---------------------------------------------------------------------------
\1\ The report can be accessed on the Internet: http://www.hrw.org/
hrw/reports/2000/Colombia/
---------------------------------------------------------------------------
I would like to thank the Committee, on both sides of the aisle,
for taking the time to examine in detail the proposed aid package to
Colombia. Today, the United States has a unique opportunity to reach
out to Colombia and support a democracy in peril. Many Colombians have
risked their lives to defend their nation from many threats. Some who
have chosen public service have even lost their lives to political and
criminal violence.
Certainly, the United States has an interest in helping Colombia's
elected leaders regain control of the regions now contested by armed
groups on the right and the left. Illegal drug trafficking fills the
pockets of all sides in this war, and contributes significantly to the
level and scope of violence.
But Colombia's predicament is too complicated for simple solutions.
Any aid proposed for Colombia should reflect not only its intricate
history, but also the many agents of violence at work there, among them
paramilitaries, guerrillas, and drug traffickers.
Unfortunately, there is another major source of violence in
Colombia, one that should deeply concern this Committee. That is the
State itself, through its security forces. Human Rights Watch, the
State Department, the United Nations, and other independent groups have
long reported on the abusive behavior of Colombia's military and
police. Colombia's security forces have been linked to serious
violations, among them massacres, extrajudicial execution, torture,
forced disappearance, and death threats.
I would like to first discuss the human rights situation of
Colombia's National Police. The police continue to be implicated in
violations. There have been cases where officers capture and execute
suspected guerrillas. In areas where paramilitaries are present, police
have been implicated in joint army-paramilitary actions and have
sometimes supplied information to them to assemble death lists. For
instance, government investigators concluded in 1998 that police in La
Ceja, Antioquia, organized and deployed paramilitaries considered
responsible for at least thirty killings in 1996 and 1997.
Police have also stood by while paramilitaries select and kill
their victims. Over a four-day period in October 1997, for instance,
the Anti-Narcotics Police based in Miraflores, Guaviare failed to
apprehend or even question the paramilitaries who killed at least four
people. Police frequently and publicly describe whole populations as
guerrillas or sympathetic to them and withdraw police protection, in
part as punishment for their perceived allegiance. This is especially
apparent after guerrilla attacks on towns.
It is important to note, however, that these activities do not, for
the most part, go unnoticed or unpunished. According to our research,
Gen. Rosso Jose Serrano and the National Police have taken human rights
concerns seriously and do not tolerate abusive officers in the ranks.
To date, 11,400 officers implicated in human rights abuses, criminal
activity, and other crimes have been discharged from the force and put
at the disposition of Colombian courts for trial and punishment. Using
Decree 573, passed in 1995, General Serrano can summarily fire officers
accused of abuses if there is convincing evidence against them.
Unfortunately, the same cannot be said for Colombia's military.
Military leaders have yet to take the firm, committed action necessary
to clean up their forces and ensure that human rights abusers do not
act with tacit or open state approval. Human Rights Watch has detailed,
recent, and compelling evidence of continuing close ties between the
Colombian Army and paramilitary groups responsible for gross human
rights violations, which we have submitted to this Committee.
Far from moving decisively to sever ties to paramilitaries, Human
Rights Watch's evidence strongly suggests that Colombia's military high
command has yet to take the necessary steps to accomplish this goal.
Human Rights Watch's information implicates Colombian Army brigades
operating in the country's three largest cities, including the capital,
Bogota.
If Colombia's leaders cannot or will not halt these units' support
for paramilitary groups, the government's resolve to end human rights
abuse in units that receive U.S. security assistance must be seriously
questioned.
Together, evidence collected so far by Human Rights Watch links
half of Colombia's eighteen brigade-level army units to paramilitary
activity. These units operate in all of Colombia's five divisions. In
other words, military support for paramilitary activity remains
national in scope and includes areas where units receiving or scheduled
to receive U.S. military aid operate.
That is why it is crucial for this Congress to place tough
conditions on all security assistance to Colombia. These conditions
should require explicit actions by the Colombian Government to sever
links, at all levels, between the Colombian military and paramilitary
groups. Abuses directly attributed to members of the Colombian military
have decreased in recent years, but over the same period the number and
scale of abuses attributed to paramilitary groups operating with the
military's acquiescence or open support have skyrocketed.
The following are the actions that Human Rights Watch believes the
U.S. should require the Colombian government to take before receiving
aid:

devising and implementing a comprehensive and public plan to
investigate, pursue, capture, and bring to justice paramilitary
leaders, one that provides sufficient resources and guarantees
the necessary political support to accomplish these goals;
providing a significant increase of funding for the Attorney
General's Human Rights Unit, including increased support for
the Witness Protection program, travel, communications
equipment, increased security, and improved evidence-gathering
capability;
establishing the ability at the regional and local level to
respond to threats of massacres and targeted violence,
including the creation of a rapid reaction force to investigate
threats and killings, and to take steps to pursue and apprehend
alleged perpetrators in order to bring them to justice;

Research done by Human Rights Watch shows clearly that
intelligence-sharing remains the most pervasive and common method of
collaboration between the Colombian military and paramilitary groups,
with grave consequences for human rights. Intelligence is by definition
a central function of any army, and is clearly so in the case of the
Colombian military. Addressing the problems such information-sharing
poses defies a unit-by-unit approach. Therefore:

observing the aim of the Leahy Amendment, the United States
should apply human rights conditions to all intelligence-
sharing, to ensure that information is neither shared with
human rights abusers nor with those who will pass it to
paramilitary groups that violate human rights;
for the purposes of compliance with the Leahy Amendment, the
United States should make it clear that aiding and abetting any
paramilitary group would result in a unit being disqualified
for receipt of further U.S. aid or training until effective
measures are taken to investigate and punish violations;
any increase in security assistance should mean a
proportionate increase in civilian staff assigned to the U.S.
Embassy and State Department to oversee compliance with human
rights conditions. Staff should be required to meet frequently
with not only military and government sources of information,
but also independent human rights groups, the church, and aid
organizations. The goal must be to gather as much information
as possible about reported human rights violations;
a report on monitoring activities in countries where the
Leahy Amendment applies should be a regular part of the State
Department's annual report on human rights and should be
available for independent review.
The ``effective measures'' set out in the Leahy Amendment
should be interpreted to include, among other measures, the
rigorous application of the August 1997 ruling of Colombia's
Constitutional Court, which requires that crimes against
humanity allegedly committed by military personnel be
investigated and tried in civilian courts. Neither the military
nor the Superior Judicial Council charged with resolving
jurisdictional disputes have abided by this ruling to date.
as a condition of U.S. security assistance, the Government
of Colombia should first require the military to respect
civilian jurisdiction in cases involving credible allegations
of human rights abuse by military personnel, including cases
where officers are accused of conspiring to commit or
facilitate murders and massacres by paramilitary groups. In
this way, President Pastrana can ensure that such cases are
sent to civilian courts, best equipped to investigate them
impartially and guarantee due process.

We have additional recommendations that we include in the report
submitted to the Committee today.
I would like to conclude by noting that I believe that the United
States has a positive message to send Colombia. By supporting President
Pastrana in his efforts to fortify democracy while at the same time
combatting the illegal groups that cause so much terror and suffering,
the United States sends a powerful message that the rule of law applies
to all whether they wear a uniform or dress in civilian clothes.
Thank you and I would be pleased to try to answer any questions.

______

Human Rights Watch,
1630 Connecticut Ave., NW, Suite #500,
Washington, DC, February 24, 2000.

Senator Trent Lott,
U.S. Senate Majority Leader,
U.S. Senate, Washington, DC.

Dear Senator Lott: I wish to draw your attention to information
obtained by Human Rights Watch that provides detailed, abundant, and
compelling evidence of continuing close ties between the Colombian Army
and paramilitary groups responsible for gross human rights violations.
We strongly urge you to support strict conditions aimed at upholding
respect for human rights on all U.S. security assistance provided to
the Colombian military.
This information was compiled by Colombian government investigators
and Human Rights Watch. Several of our sources, including eyewitnesses,
have requested anonymity because their lives are under threat as a
result of their testimony.
Far from moving decisively to sever ties to paramilitaries, our
evidence strongly suggests that Colombia's military high command has
yet to take the necessary steps to accomplish this goal. Our
information implicates Colombian Army brigades operating in the
country's three largest cities, including the capital, Bogota. If
Colombia's leaders cannot or will not halt these units' support for
paramilitary groups, the government's resolve to end human rights abuse
in units that receive U.S. security assistance must be seriously
questioned.
In previous Human Rights Watch reports and documents, we have
detailed credible and compelling evidence contained in government and
other investigations of continuing ties between the military and
paramilitary groups in the Fifth, Seventh, Ninth, Fourteenth, and
Seventeenth Brigades.
Together, evidence collected so far by Human Rights Watch links
half of Colombia's eighteen brigade-level army units (excluding
military schools) to paramilitary activity. These units operate in all
of Colombia's five divisions. In other words, military support for
paramilitary activity remains national in scope and includes areas
where units receiving or scheduled to receive U.S. military aid
operate.
We have drawn this information to the attention of the appropriate
Colombian government ministers and officials, and have urged them to
take immediate action to address these continuing problems in
accordance with existing Colombian law.
Based on the enclosed evidence, Human Rights Watch found that:

As recently as 1999, Colombian government investigators
gathered compelling evidence that army officers set up a
``paramilitary'' group using active duty, retired, and reserve
duty military officers along with hired paramilitaries who
effectively operated alongside army soldiers and in
collaboration with them;
In 1997, 1998, and 1999, a thorough Colombian government
investigation collected compelling evidence that army officers
worked intimately with paramilitaries under the command of
Carlos Castano. They shared intelligence, planned and carried
out joint operations, provided weapons and munitions, supported
with helicopters and medical aid, and coordinated on a day to
day basis. Some of the officers involved remain on active duty
and in command of troops;
There is credible evidence, obtained through Colombian
government investigations and Human Rights Watch interviews,
that in 1998 and 1999, army intelligence agents gathered
information on Colombians associated with human rights
protection, government investigative agencies, and peace talks,
who were then subjected to threats, harassment, and attacks by
the army, at times with the assistance of paramilitary groups
and hired killers;
There is credible evidence that this alliance between
military intelligence, paramilitary groups, and hired killers
is national in scope and is able to threaten key investigators
in the Attorney General's office and the Procuraduria;
The brigades discussed here--the Third, Fourth, and
Thirteenth--operate in Colombia's largest cities, including the
capital. Their commanders are considered among the most capable
and intelligent, and are leading candidates for promotion to
positions of overall command of divisions, the army, and
Colombia's joint forces. If Colombia's leaders cannot or will
not halt support for paramilitary groups in these units, it is
highly questionable to assume that they will be more successful
in units that are less scrutinized or operate in rural areas,
including units that receive U.S. security assistance in
southern Colombia;
As these cases underline, Colombia's civilian investigative
agencies, in particular the Attorney General's office, are
capable of sophisticated and hard-hitting investigations.
However, many investigators assigned to cases that implicate
the army and paramilitaries have been forced to resign or to
flee Colombia;
At least seven officers mentioned in the attached report are
School of the Americas graduates. Training alone, even when it
includes human rights instruction, does not prevent human
rights abuses. It must be accompanied by clear and determined
action on the part of the Colombian government to bring to
justice those in the military who have committed human rights
abuses, to force the military to break longstanding ties to
paramilitary groups, and to ensure that the Colombian Armed
Forces are subject to the rule of law, including the August
1997 Constitutional Court decision that mandates that security
force personnel accused of committing crimes against humanity
are tried in civilian courts.

Given the poor record of the Colombian military, it is particularly
important that human rights safeguards form a centerpiece of U.S.
policy and that concerns about the control and the direction of
security assistance be directly and thoroughly addressed.
The Leahy Amendment established a vital precedent for requiring
adherence to human rights standards. Below, we set out measurable
benchmarks that the United States should require of Colombia before any
further U.S. security assistance is made available. These benchmarks
should be used as a basis for monitoring compliance and for immediately
suspending aid in case of any breach.
1. All U.S. security assistance should be conditioned on explicit
actions by the Colombian Government to sever links at all levels,
between the Colombian military and paramilitary groups. Abuses directly
attributed to members of the Colombian military have decreased in
recent years, but over the same period the number and scale of abuses
attributed to paramilitary groups operating with the military's
acquiesence or open support have skyrocketed. U.S. assistance should
not be provided either to those who directly commit human rights abuses
or to those who effectively contract others to carry out abuses on
their behalf.
The actions that the Colombian government should be required to
take include:

devising and implementing a comprehensive and public plan to
investigate, pursue, capture, and bring to justice paramilitary
leaders, one that provides sufficient resources and guarantees
the necessary political support to accomplish these goals. The
U.S. Secretary of State should report to the U.S. Congress at
three-month intervals to certify that measurable progress,
including the capture and prosecution of paramilitary leaders
according to Colombian law and with full guarantees of due
process, is taking place;
providing a significant increase of funding for the Attorney
General's Human Rights Unit, including increased support for
the Witness Protection program, travel, communications
equipment, increased security, and improved evidence-gathering
capability. The work of Colombia's Attorney General's office
has contributed significantly to the protection of human rights
and accountability for serious crimes, including crimes
committed by Colombia's guerrillas. Yet prosecutors and
investigators continue to run deadly risks. Many have been
forced to leave the country because of threats against their
lives, leaving the fate of crucial cases in jeopardy;
establishing the ability at the regional and local level to
respond to threats of massacres and targeted violence including
the creation of a rapid reaction force to investigate threats
and killings, and to take steps to pursue and apprehend alleged
perpetrators in order to bring them to justice;

With regard to U.S. training of Colombian military and police, we urge
you to ensure that:

all U.S. advice and training includes detailed instruction
regarding the obligation of all members of the military and
security forces to uphold Common Article 3 of the Geneva
Conventions and Protocol II. Training should include
hypothetical situations that reflect Colombian reality, and
students should be closely evaluated on their understanding and
application of international humanitarian law. Specialists from
the International Committee of the Red Cross should be invited
to contribute to such training;
all existing training materials are reviewed in coordination
with representatives of the International Committee of the Red
Cross, the Defensoria del Pueblo, the office of the U.N. High
Commissioner for Human Rights, the Colombian Attorney General,
and a representative of independent human rights groups, to
ensure that they reflect the highest standards of protection
for human rights and international humanitarian law;
all trainees, whether of officer rank or below, receive
appropriate instruction in human rights and international
humanitarian law.

2. The information submitted by Human Rights Watch shows clearly
that intelligence-sharing remains the most pervasive and common method
of collaboration between the Colombian military and paramilitary
groups, with grave consequences for human rights. Intelligence is by
definition a central function of any army, and is clearly so in the
case of the Colombian military. Addressing the problems such
information-sharing poses defies a unit-by-unit approach. Therefore:

3. The ``effective measures'' set out in the Leahy Amendment should
be interpreted to include, among other measures the rigorous
application of the August 1997 ruling of Colombia's Constitutional
Court, which requires that crimes against humanity allegedly committed
by military personnel be investigated and tried in civilian courts.
Neither the military nor the Superior Judicial Council charged with
resolving jurisdictional disputes have abided by this ruling to date.

as a condition of U.S. security assistance, the Government
of Colombia should first require the military to respect
civilian jurisdiction in cases involving credible allegations
of human rights abuse by military personnel, including cases
where officers are accused of conspiring to commit or
facilitate murders and massacres by paramilitary groups. In
this way, President Pastrana can ensure that such cases are
sent to civilian courts, best equipped to investigate them
impartially and guarantee due process;
the United States should require that the Colombian military
set up an independent review committee, composed of high level
representatives from the Attorney General's office and the
office of the Procuraduria to assess whether there is credible
evidence of human rights abuse against individual officers and
soldiers. If such credible evidence is found, the individual
should be immediately suspended and the case sent to the
civilian courts for prosecution. If found guilty, the
individual should be permanently dismissed from the security
forces;
to reinforce sanctions on abusive security force members,
the United States should conduct a review of all visas granted
to military personnel and ensure that individuals against whom
there is credible evidence of human rights abuse or support for
paramilitary groups have their visas revoked or are denied
visas to enter the United States;
to strengthen accountability, the United States must urge
Colombia to reform the rules governing investigations and
disciplinary proceedings carried out by the Procuraduria. The
Procuraduria is the government agency that oversees the conduct
of government employees, including members of the military and
police, and can order them sanctioned or dismissed. Currently,
however, delays in investigation mean that many investigations
into serious human rights crimes must be shelved due to
excessively short statutes of limitations. Also, the crime of
murder is not included as a reason for dismissal. Even when the
Procuraduria finds that a member of the security forces has
committed murder, it can recommend no more stringent punishment
than a ``severe reprimand,'' simply a letter in the
individual's employment file;
the United States must require that Colombia void the
statute of limitations for investigations into crimes against
humanity and other, related human rights violations.

4. Further, the United States should urge Colombia to pass and
rigorously enforce laws that protect human rights including laws
penalizing forced disappearance, unlawful detention, and torture.
Legislation that officially recognizes and supports the work of the
Attorney General's Human Rights Unit should also be supported by the
U.S. Embassy in Bogota.
5. Human rights defenders are among the most at-risk groups in
Colombia. The United States should support their work by increasing
funding for non-governmental groups that apply for assistance from the
Agency for International Development. Funds should help strengthen
their ability to investigate and report on human rights violations.
6. The United States should provide increased funding for
Colombia's forcibly displaced, not only those who may be forced to
abandon their homes because of future coca eradication efforts.
Currently Colombia ranks third in the world in terms of the number of
forcibly displaced people. Aid should be channeled through the church
and independent aid and human rights groups rather than the government,
in view of the latter's previous failure to follow through with
promised assistance.
Please feel free to contact me if you require further information.
Sincerely,
Jose Miguel Vivanco,
Executive Director.

Senator Chafee. Mr. Vivanco, could you explain how your
organization documents these instances of human rights abuses,
assassinations and tortures? It seems like a dangerous
environment to be in. What is the credibility of this
documentation?
Mr. Vivanco. The gathering of information on human rights
abuses, as well as violations of international law committed by
guerrilla groups in Colombia, is very dangerous. To collect
this information not only for international organizations, but
also and especially for local human rights groups in Colombia,
is dangerous activity.
Now, the methodology of the investigation that we use
includes, obviously, examination of the human rights conditions
in the field, which means that we are constantly traveling to
Colombia, interviewing witnesses, victims, relatives of
victims, judges, prosecutors, detectives, policemen, former
members of the police, or the intelligence apparatus of
Colombia, and even former members of paramilitary groups. We
even had the chance at some point to interview the leader of
paramilitary groups of Colombia, Mr. Carlos Castana, and have
confronted him with the evidence that we have managed to
collect.
In addition, we use to corroborate information ongoing
investigation that is available in the office of the chief
prosecutor of Colombia, specifically the human rights unit that
is conducting investigations on many, many cases of human
rights abuses.
Senator Chafee. Thank you. You are the executive director
of Human Rights Watch, Americas Division, and I assume you have
risen up through the ranks. Have you personally had experience
documenting these types of abuses? Could you share some of
those experiences?
Mr. Vivanco. Mr. Chairman, it is also part of my job to
participate in the whole process of the evaluation of the
evidence, the analysis of the information. I have personally
been in Colombia many, many times. I had the opportunity to
meet with Presidents of Colombia on several occasions, and to
discuss our findings.
Normally, our findings--I mean, the facts, or the merits,
if you want, of our reports are never contested in Colombia.
Normally, the response of the Colombian civilian authorities is
to assure that they will do whatever they can to reduce this
level of violence, but so far we have been careful enough to
include information that fortunately has not been questioned in
Colombia.
Senator Chafee. Well, thank you very much. In your opening
statement you talked about armed groups on the right and the
left. Maybe either of you could address that, armed guerrillas
both right wing and left wing. What is the status, and where do
they operate?
Mr. Skol. Well, the two big guerrilla groups are the FARC,
the larger of the two groups--the ELN is the Army of National
Liberation, a smaller group. They operate east and south of the
Andes, in a vast area of the country. The paramilitaries----
Senator Chafee. Do you consider both of them, leftist?
Mr. Skol. Well, I have my doubts as to how left they really
are any longer. They both started out as leftist groups. They
have had in the past support from Fidel Castro. I would
consider them today more feudal, primitive gangs, parallel to
the paramilitaries in many ways. When they kidnap, they do not
kidnap to make a political point. They kidnap, and it has
become--it is a terrible phrase, but it is very popular in
Colombia--``commercial terrorism.'' They kidnap people to hold
them ransom, to get the money and to use the money to kidnap
more people and to buildup power.
They are feudal gangs more than anything else. They claim
to have a 1960's Latin American revolutionary platform, and
they do to a certain extent, and they have made certain demands
along these lines when they have seen fit to approach the
negotiating table, but I would characterize them more as
criminal terrorists, drug-protecting gangs, in fact, than true
revolutionaries.
The paramilitaries were created originally as self-defense
forces against the guerrilla groups. Farmers, ranchers and
others who had the money hired private armies, but these have
turned into a lot more than self-defense. They have become
aggressive, criminal gangs. Gangs is perhaps the wrong word.
Armies, feudal armies in Colombia. They also are involved, many
of them, in the protection of drugs.
There is nothing much good to say about either side, either
extreme, but it is a little dangerous and too simplistic to
call them right wing and left wing. They flap around and do
terrible things on all sides to anyone who gets in their way,
or anyone who has money, or anyone who is trying to stop drug-
trafficking.
Senator Chafee. I suppose the natural followup question,
this involves the first panel's testimony about negotiating
with these groups. Listening to you, that would sound almost
impossible.
Mr. Skol. It is extraordinarily difficult. The FARC and the
ELN are not disorganized. They are highly organized. They have
pay scales, they have pensions, they have e-mail, they have
rest and recreation. They are in many ways, or most ways,
better paid and better taken care of than the soldiers who face
them in the Colombian Army. They are very well-off, but they
have claimed they want to sit down and negotiate. They just
have to be persuaded that it is in their interest to do so.
President Pastrana has staked his political career, his
Presidency on the notion that there can be negotiation. There
is no such intention on the part of the government to negotiate
with the paramilitaries. They are seen as beyond the pale of
negotiation. That is the policy of the Government of Colombia.
But most Colombians, certainly the Colombian Government,
President Pastrana, the U.S. administration, believe that in
the long run drug-trafficking will diminish and human rights
violations will disappear only when the guerrilla warfare also
goes away. The best way, the least bloody way for that to
happen is for both sides to believe it is in their interests to
negotiate, and that has not happened yet on the side of the
guerrillas. They say so. We are waiting to see. I believe,
again, that one of the side effects of this package may be to
convince them that now is the time, before the army is
stronger.
Some of the same impossible things have been said about
previous negotiations with gangs and others who did not
originally want to negotiate. We have said it about the Middle
East. We have said it about Ireland. We used to say it about
Central America. Negotiations are possible. The first rule is
that both sides have got to see something in it for themselves
to go to the negotiating table.
Mr. Vivanco. Mr. Chairman, if I may, I would like to add a
couple of comments. Certainly, I do not agree with all the
views of my good friend, Ambassador Skol, on Colombia. I do
believe that the guerrillas have very strong, extremist
ideological views, leftist in the traditional way, and the
paramilitary groups are also very much motivated not only by
criminal interests but also by this ideological interest as
well.
We also believe that the best option for Colombia's future
is a negotiated agreement, a peaceful solution, a negotiated
settlement with these groups. It is a very difficult option. It
is not going to happen overnight, but certainly we are
concerned that if you see Colombia only as a country where you
have just violence and narcotics, and that is just the picture
of Colombia, without understanding that as a part of the
equation you have tremendous and very serious problems of
justice, social justice as well as access to justice--which
means impunity in Colombia. Impunity feeds all of this violence
and corruption.
Colombia is perhaps in the region of the country that
enjoys the highest level of impunity for all sorts of crimes,
according to the official figures, the number of cases that are
not successfully investigated and punished by the judiciary in
Colombia are close to 97, 96 percent per year, so this is
something that needs to be addressed, and it is also, I think,
part of a picture, the big picture when you refer to Colombia.
Senator Chafee. Well, thank you. That is, I guess, the crux
of our dilemma. A country that is crying out for judicial norms
is, at the same time, a country that does not have them. It is
also a country into which we are going to be allocating a huge
amount of United States aid.
I do not have any further questions. Thank you very much
for your time. I appreciate it.
There being no further business to come before the
subcommittee, we stand adjourned.
[Whereupon, at 11:40 a.m., the subcommittee adjourned.]
[Additional questions for the record follow:]

Additional Questions for the Record

Responses of Hon. R. Rand Beers to Additional Questions Submitted by
Senator Jesse Helms

COLOMBIA SUPPORT

Question 1. Despite spending a half a billion dollars in recent
years, cocaine and heroin production has actually increased in that
period. If Congress decides to fund your strategy, where will Colombian
cocaine and heroin production be at the end of 2000 and 2001?
Answer. While total production in Colombia has increased at an
explosive rate (with a 20 percent increase last year alone), those
increases have, as a general rule, occurred outside of the areas of our
focused efforts. That is why this supplemental package is so important.
It will allow for the expansion of counternarcotics operations into
areas that are beyond the reach of current efforts without sacrificing
performance in current areas of operations. In addition to expanding
current eradication efforts to new areas, the supplemental will improve
Colombia's interdiction capabilities and give new impetus to
alternative development and other social programs.
Expectations are positive for the programs supported by the
package, in part because they are based on the lessons learned in our
counternarcotics cooperation with the governments of Peru and Bolivia.
Since 1995, despite the explosive growth in Colombian coca cultivation,
regional cultivation has declined because of the successes in those two
countries. Over that time period, Peru has reduced its coca crop by 66
percent and Bolivia by 55 percent. Colombia hopes to match that
performance, with the first meaningful reductions as early as 2001.

Question 2. Please describe the level of corruption within
Colombian institutions, society and business. How has that corruption
complicated U.S. anti-drug efforts? What steps will you take to ensure
that U.S. funds and efforts are not squandered due to corruption in
Colombia?
Answer. While corruption is a problem in Colombia, it does not
present a significant obstacle to U.S. counternarcotics operations
there. We are continuing to work with Colombian officials to resolve
allegations, of corruption within a USG-funded program with the
Colombian National Police.
Colombia has an elaborate system of controls that should keep
resources from being improperly diverted. The system includes a
Comptroller General empowered to conduct audits, an Attorney General
(Procurador) who serves as a government-wide inspector general who can
remove government officials from office, and a powerful and independent
prosecutor (Fiscal). These institutions have offices at both the
national and local levels. In addition, for police and military
assistance items, USG agencies maintain extensive ``end use
monitoring'' to prevent improper diversion of transferred resources.

Question 3. Please provide a detailed description of the process
for testing and using mycoherbicides to combat illicit crops in
Colombia. What is the current status of these efforts? When will the
Colombian government and the UNDCP sign an agreement for implementing
this program? Should the U.S. make the testing of mycoherbicides a
condition for receiving U.S. aid?
Answer. The UNDCP is currently negotiating with the Government of
Colombia to establish a test program in Colombia to be overseen by an
international panel of experts. The project proposal also calls for the
selection of an international consultant who is familiar with ``global
developments and application'' of mycoherbicide research and it calls
for the Government of Colombia to identify a suitable scientific
organization to undertake the research. Some of the project's specific
objectives are: to determine whether the fungus is present in southern
Colombia; and if so, to test it on small plots to ensure that it poses
no risks to crops or important native plant species in the Andean
region. Colombia has not yet signed the agreement to allow testing.
However, the U.S. Department of Agriculture has conducted its own
testing of mycoherbicides and we respectfully defer to them for an
explanation of the testing process.
The Department of State is pleased that UNDCP and the Government of
Colombia are negotiating this project, and we are encouraging both
sides to reach an agreement as soon as possible. However, we should not
make this new technology a condition of the assistance package.

Question 4. The Administration justifies the increased anti-drug
support to the Colombian military because the guerrillas are
increasingly involved in drug trafficking. What specific, substantial
evidence can you present that the guerrillas are involved in the drug
trade? How has their involvement in this illicit activity changed in
the last year? Why did President Andres Pastrana tell CNN network, in
an interview broadcast on February 27, that his government does not
have specific evidence implicating the guerrillas in the drug trade?
Answer. Guerrilla and paramilitary leaders have publicly admitted
to taxing the narcotics trade. Additionally, there is evidence that
they are more actively involved: providing protection for crops, and
encouraging cultivation. We would be happy to arrange a classified
briefing to discuss details of this.
Any questions about statements by President Pastrana should be
directed to the Government of Colombia.

Question 5. Some observers have raised the concern that this
increased anti-drug aid--particularly to the military--involves our
government in the middle of an internal conflict. How would you respond
to these concerns?
Answer. U.S. policy is not shifting from cooperating with the
Colombians on the regional counter-drug fight to assisting their
counter-insurgency efforts. As President Clinton stated clearly, our
policy in Colombia is to support President Pastrana's efforts to find a
peaceful resolution to the country's longstanding civil conflict and to
work with the Colombians--along with other regional partners--on
fighting illicit drugs. Furthermore, Colombians designed Plan Colombia
and the counternarcotics components will be implemented by the
Colombian police and military. There are no plans to commit U.S. forces
to implement militarily any aspect of this Plan.
Clearly, drugs and the insurgency are linked financially. Narcotics
money funds the guerrillas, funds the paramilitaries, and fuels the
violence that is tearing at the fiber of Colombian society. One added
benefit to the increased counternarcotics efforts could be the breaking
of these financial links.
The objective of Plan Colombia's counternarcotics component is to
confront and disrupt the narcotics trade. As long as the paramilitaries
and guerrillas maintain connections to the narcotics trade, they are
valid targets for counternarcotics units, regardless of the political
orientation they may claim. As these groups divest themselves of
narcotics ties, they should be able to avoid engagements with
Colombia's counternarcotics forces.

Question 6. What rules will apply on how the Colombian government
can use U.S.-donated helicopters or ammunition? Please explain the
real-world scenarios in which these weapons might be called upon in
counterinsurgency operations. What controls, if any, will the U.S.
government retain over U.S.-donated materiel?
Answer. All counternarcotics assistance provided by the United
States Government is subject to the human rights requirements of
Section 564, Foreign Operations, Export Financing and Related Programs
Appropriation Act for FY2000. In keeping to the letter and the spirit
of that legislation, all units to receive assistance are vetted for
human rights violations. No assistance is provided to individuals or
units against whom there is credible evidence of gross human rights
abuses.
Colombia has an elaborate system of controls, which should keep
resources from being improperly diverted. The system includes a
Comptroller General empowered to conduct audits, an Attorney General
(Procurador) who serves as a government wide inspector general who can
remove government officials from office, and a powerful and independent
prosecutor (Fiscal). These institutions have offices at both the
national and local levels. In addition, for police and military
assistance items, USG agencies maintain extensive ``end use
monitoring'' to prevent improper diversion of transferred resources.
All counternarcotics assistance provided by the USG is meant
exclusively for counternarcotics purposes. Because of their ties to the
drug trade, guerrillas and paramilitaries may be engaged in the course
of operations, but the operations would be counternarcotic in nature.
In addition, U.S.-provided aircraft are generally permitted to conduct
mercy flights and search-and-rescue missions with embassy concurrence.

Question 7. The Colombian government has withdrawn its security
forces from the so-called ``demilitarized zone.'' Is there any evidence
of new cultivation or production of drugs in that DMZ in the last year?
How many anti-drug missions, if any, have been conducted in the DMZ in
the last year?
Answer. There is evidence of 10,000 to 12,000 hectares of coca
under cultivation in the demilitarized area. Although two
counternarcotics missions were conducted shortly after the creation of
the zone, there have been no further counternarcotics operations there.

Question 8. As Colombia becomes more effective in containing coca
and heroin, isn't it predictable that the cultivation will shift to
neighboring countries? Shouldn't more aid be directed to neighboring
countries, as well?
Answer. Concerns over narcotic industry relocation are the reason
that the supplemental package includes additional funds to support
Colombia's neighbors. There is also a cultural factor that mitigates
the threat of large-scale migration of drug crops to those specific
countries. Like Bolivia and Peru, Colombia already had a history of
coca cultivation when the industry shifted there. The shift of
cultivation represented the expansion of an existing practice; not the
introduction of a new one as it would in Brazil, Venezuela, and
Ecuador.

The shift to Colombia from Peru and Bolivia was narcos
falling back on their base--where most of the processing
already took place--falling back not only to a remote area but
one where the FARC has kept the government out.
It is not easy to move to an area without narco
infrastructure and transportation networks; it is not easy to
move given lag time to grow coca, which requires 18-36 months.
We will use intel to watch. We will begin work with
governments to respond. We do not need a lot of dollars for
this readiness posture.

Question 9. Isn't the anti-drug mission a law enforcement function?
Do the National Police agree that the army should now be involved? What
is the track record of cooperation between the Police and army? How
will we ensure coordination using U.S. aid?
Answer. The Colombian National Police (CNP), under the direction of
General Serrano, continues to be one of the premier counternarcotics
forces in the world. Now, the Colombian armed forces have adopted a
similar commitment to counternarcotics in support of the CNP's
counternarcotics mandate. The proposed assistance to the Colombian
military is designed specifically to help it support the CNP's
counternarcotics mandate by providing the protection from illegal armed
groups necessary for the CNP to complete its mission. While the
counternarcotic mission is clearly within the CNP's purview, the
security problem is more military than law enforcement in nature. The
CNP, even with a counterdrug force of some 2,500 and support from its
air wing, is not trained, structured, or staffed for the task.
Furthermore, the militarization of the police force runs counter to the
democratic traditions of both our countries.
The Colombian military, meanwhile, is not now sufficiently equipped
to carry out this important mission in support of the CNP, especially
in the area of air mobility. We must continue working with Colombian
military elements to bring their capabilities up to a level where they
can successfully operate alongside the CNP and contribute to the
counternarcotics effort.
The Colombian Army has greatly expanded cooperation with and
support of the Colombian National Police. A key example is the
formation of its first counternarcotics battalion in 1999. This
battalion is a 950-person unit with a CNP platoon attached. Such
cooperation between the military and police is still a fairly new
phenomenon in Colombia, but the commanders, Generals Serrano and
Tapias, are committed to its success. This is a Colombian effort, not
solely a police or military effort, and we believe this package is well
tailored to make the entire Colombian government effort more effective
and more secure for both police and military personnel. That said,
cooperation and coordination will be an issue between the two
institutions that will need to be nurtured, just as is true in other
countries including our own.

Question 10. Is there any other detailed plan that lays out
``benchmarks'' or ``targets'' on eradication or interdiction so that we
can measure the effectiveness of our strategy and aid? Please provide a
copy of the written plan that describes a timetable for the delivery of
assistance and the targets that will be met over the same period.
Answer. A key strategic planning document is the Government of
Colombia's National Strategy to Strengthen the Fight against
Narcotrafficking. The composition of the package has also been
influenced by the USG's Interdiction Planning Guidance, produced by the
United States Interdiction Coordinator. Benchmarks specifically for
Plan Colombia are currently being developed.

______

Responses of Ambassador Michael Skol to Additional Questions Submitted
by Senator Jesse Helms

Question 1. Please describe the level of corruption within
Colombian institutions, society and business. How has that corruption
complicated U.S. anti-drug efforts? What steps should we take to ensure
that U.S. funds and efforts are not squandered due to corruption in
Colombia?
Answer. The level of corruption within Colombian public
institutions has been high, primarily due to the enormous corruptive
influence of drug traffickers and guerrilla groups. Through bribes,
threats and demonstrative violence these outlaws have subverted large
parts of the Colombian system, particularly the judiciary, many public
office holders from the national congress to the local level, and parts
of the armed forces. The name of the infamous Senator Santofimio, for
example, has entered the vocabulary as a synonym for extraordinary
corrupt behavior, and the Constitution of 1991 was clearly modified to
eliminate extradition of Colombians as a result of direct payments by
the traffickers to Constituent Assembly members. Anti-drug operations
in the past have been regularly compromised. The process reached its
peak during the Presidency of Ernesto Samper, during which many
Colombians were shocked out of their relative complacency by the
obvious fact that drug corruption had reached all the way to the
Presidency and had had a direct impact on a presidential election. At
the same time, much non-drug or guerrilla-related activity was also
caught up in the general decay of the judicial and governmental system,
so that corruption (as well as other crimes) usually went undetected
and unpunished. On the other hand, a solid segment of the system did
remain resistant to corruption. The National Police, and any number of
individuals in the executive, the office of the Fiscal (permanent
special prosecutor), many judges are examples. And the private sector
has all along earned a reputation of considerable responsibility and
rectitude.
The overall situation in government began to change with the
election of President Pastrana in 1998, partly as a reaction to the
Samper disgrace. The appointment of clearly honest and courageous
individuals to key posts (including in the Defense Ministry and army),
the creation of a Presidential Anti-Corruption Office which has
developed innovative methods of anti-corruption control, continued
judicial reform, and the President's willingness to take action against
even ranking people accused of wrongdoing are signs of potential
improvement. Change is happening, but until the power of the
traffickers and guerrillas is seriously reduced, the corrupting
pressure will continue.
In order to prevent corruption from squandering U.S. funds and
efforts, we must insist--and President Pastrana has agreed--that the
same kind of internal vetting, constant monitoring and ruthless
willingness to act against offenders that has characterized the
National Police be insisted upon with regard to the army. Certain kinds
of civilian controls--as for example the use of the Internet by the
Presidency's Anti-Corruption Office to monitor and make transparent all
activity connected with major purchases--can usefully be engaged vis-a-
vis the use of funds connected with U.S. assistance. And the Congress
could accelerate the trend begun regarding Central American post-
hurricane assistance, in the mandated use of relevant private sector
(meaning U.S. private sector) anti-corruption tools and services (as,
for example, the ``Independent Private Sector Inspector General''
concept).

Question 2. Opponents of U.S. security aid to Colombia argue that
we are militarizing anti-drug programs. But what alternative is there
if the other side--the narcotraffickers--relies on and funds the well-
armed guerrilla groups? How would you characterize or quantify the
level of complicity of the guerrillas in the drug trade?
Answer. There is no alternative. It is the drug traffickers who
have militarized the drug trade. It would be tactically and logically
foolish to act as if the drug trade had remained a straightforward
``cops-and-robbers,'' albeit in the jungle. The drug-guerrilla combine
is an army, and only an army can deal with it. The precise involvement
of the guerrillas in the drug trade has been the subject of
considerable, mostly sterile, debate. The guerrillas offer direct
continuous and very profitable protection for the production,
manufacture and traffic of drugs. They are an integral part of the
operation. They are no less drug traffickers themselves because they
carry guns rather than coca paste.

Question 3. Some observers have raised the concern that this
increased anti-drug aid--particularly to the military--involves our
government in the middle of an internal conflict. How would you respond
to these concerns?
Answer. Our government is already rightly involved in the conflict
against drugs, and we had better stay right there if we expect to do
anything about the problem. That conflict now and for some time has
involved the guerrillas--by their choice, not ours or the Colombian
Government's. It is a fact that anti-drug interdiction or eradication
cannot take place in areas where the guerrillas have so much relative
power that current levels of government (police) forces are incapable
of doing their job. The shortest route against the narcotics trade in
Colombia is by helping the Colombian military and police level the
playing field against the guerrillas--or become obviously ready to do
so--so that these guerrillas (as a result of negotiations or defeat)
are no longer standing in the way.
It is also important to note that the concept of ``internal
conflict'' is invoked by many in the U.S. and elsewhere to project an
image of civil conflict, with the ``opposition'' to the government in
the form of guerrillas who have some kind of legitimacy in representing
groups or citizens in armed struggle. This is a myth. Overwhelmingly
(consistently 97% in the polls) of Colombians reject the guerrillas;
these outlaw groups represent next to nobody. They impose their will by
force alone. They are less party to a classical ``internal conflict''
than they are, in effect, unloved aliens in their own land.

Question 4. Regarding the peace talks, what evidence is there that
the guerrillas are genuinely committed to a peaceful, definitive end to
the conflict?.
Answer. Little or none. Ever since the ``peace process'' began even
before President Pastrana's inauguration, the guerrillas, especially
the FARC, have evidently preferred the status quo to any movement in
the direction of peace. They see their fortunes (in monetary and
philosophical terms both) only as improving into the future. Why
negotiate seriously? Make impossible demands, continue to fight in
places of their choosing, and build their strength ever greater. The
most important element of the ``Plan Colombia'' and of U.S. assistance
is to help break this cycle, convince the guerrillas that the army and
police will become stronger and more capable of displacing them.
Convince them that it is in their interest to negotiate. Until that
happens, no amount of wishful thinking toward peace, or alternative
development, will make any difference at all.

Question 5. Has the Pastrana government taken steps to purge the
military of suspected human rights abusers or those complicit with the
illegal paramilitary groups? Do you think he is sincere about reforming
the security forces, and does he have the power to ferret out problems
wherever they exist?
Answer. Pastrana has indeed taken steps. He has appointed the best
kinds of people to the military high command. He has fired top generals
involved in human rights abuses. He has ordered the active pursuit of
paramilitary forces. The statistics showing the reductions of human
rights abuses alleged to the armed forces have been striking. Pastrana
is most definitely sincere; he has taken political and personal risks
in this endeavor. He and his colleagues, however, do not have the full
power to ferret out all problems, especially given the fact that most
Colombians do not see the paramilitary forces in any way near the
negative light with which they are viewed from Washington. But change
is happening, and at a significant rate. And the U.S. could not
possibly find a leader as committed simultaneously to democracy, human
rights and the war against drugs as Andres Pastrana.

______

Responses of Hon. Brian E. Sheridan to Additional Questions Submitted
by Senator Joseph R. Biden, Jr.

Question 1. In your prepared testimony today, you stated that there
was not time during the hearing to ``elaborate on all the restrictions,
constraints, and reviews involved in the approval of the deployment of
U.S. military on counterdrug missions in Colombia and elsewhere.''
Please elaborate on these restrictions, constraints, and reviews.
Answer. Military support for counterdrug activities has
historically raised issues of sensitivity for the executive branch. As
a result, this issue has received close scrutiny from the Department
and the Secretary of Defense has promulgated additional guidance to
formalize the review and approval of military support to counterdrug
activities. This comprehensive direction was most recently revised in
an October 6, 1998 memorandum and amplified with focused guidance
particular to Colombia in a March 9, 2000 memorandum to the Chairman of
the Joint Chiefs of Staff. Copies of both memorandums are enclosed.
Additionally, as a consequence of section 8098 of the DoD
Appropriations Act, 2000 (Public Law 106-79, Oct. 25, 1999), if the
military support to counterdrug activities includes training then the
recipients of the training are screened to ensure that they are not
violators of human rights. After the screening, a non-DoD member of the
country team must verify in writing that the DOS does not possess
``credible evidence'' of human rights violations by any member(s) of
the unit receiving U.S. training.

The Secretary of Defense

Washington, DC, October 6, 1998

memorandum for secretaries of the military departments
chairman of the joint chiefs of staff
under secretary of defense for policy
general counsel of the department of defense
commanders of the combatant commands
director of administration and management
director, defense intelligence agency
director, national security agency

subject: Military Support to Counternarcotics Activities

This memorandum supersedes the Secretary of Defense (SecDef) policy
memorandum dated September 18, 1989, subject: ``Military Support to
International Counternarcotics Activities.'' The Department of Defense
(DoD) executes its statutory civilian law enforcement counterdrug
support responsibilities pursuant to the National Security Strategy,
the National Military Strategy, and the National Drug Control Strategy.
As a consequence of the evolving tactics of drug traffickers, DoD is
responding to requests by drug law enforcement agencies for increased
training in riverine, coastal maritime, and small unit tactics; for
extension of our training, enhanced intelligence collection, analysis
and dissemination support; and for expansion of our helicopter and
maritime transportation support. Due to this changing operational
environment the application of new technologies and increased levels of
DoD support it is necessary to update and clarify DoD policy regarding
military support to counternarcotics activities both domestically and
internationally. Accordingly the following policies apply to all
Military departments Commander-in-Chief (CINC) assigned forces and DoD
agencies.

DoD personnel shall not deploy or otherwise travel into a
foreign country in connection vith a non-DoD agency request for
counterdrug support or a counterdrug operation unless the
Secretary of Defense or Deputy Secretary of Defense has
approved the deployment or travel, or has specifically
delegated that approval authority to the respective theater
CINC, a Service, or the DoD Coordinator for Drug Enforcement
Policy and Support.
DoD personnel shall not directly participate in law
enforcement activities such as a search, seizure, arrest, or
similar activity. Consistent with this proscription, DoD
counterdrug support to drug law enforcement agencies will be
distinguishable and separate from law enforcement activities
undertaken by the drug law enforcement agents.
DoD personnel are prohibited from accompanying U.S. drug law
enforcement agents or host nation law enforcement forces and
military forces with counterdrug authority, on actual
counterdrug field operations or participating in any activity
in which counterdrug-related hostilities are imminent. DoD
personnel will make every effort to minimize the possibility of
confrontation (armed or otherwise) with civilians.
DoD personnel will not accompany U.S. drug law enforcement
agents, host nation law enforcement forces or host nation
military forces with counterdrug authority to/or provide
counterdrug support from, a location outside a secure base or
area. If included as part of an approved SecDef deployment
order, DoD personnel may proceed to a forward operating base or
area in accordance with the deployment order when directed by
the commander or other official designated by the responsible
CINC.
Counterdrug training or support provided by DoD personnel
must be requested by a U.S. law enforcement agency. If
overseas, counterdrug support must be requested by an
appropriate official of a department or agency of the Federal
Government that has counterdrug responsibilities in that
foreign country. The request must be made by the appropriate
representative of said department or agency on behalf of the
host nation and be approved by the U.S. Chief of Mission.
All counterdrug training or support provided by DoD
personnel must be authorized by statute. It may be provided
only to Federal, state and local law enforcement agencies, or
host nation police, security forces, and military forces that
have counterdrug responsibilities.
The authority delegated in Chairman of the Joint Chiefs of
Staff Instruction (CJCSI) 3710.01, dated May 28, 1993, to
approve counterdrug ground reconnaissance training missions in
support of law enforcement agencies by the U.S. Armed Forces in
federal status in the 54 States/Territories of the United
States, is withdrawn. This withdrawal does not affect DoD
funded National Guard counterdrug ground reconnaissance support
missions, approved in the Governors' State Plans, pursuant to
32 USC Sec. 112.

The approval procedures for military support to counternarcotics
are as follows:

1. The Military Departments and the CINCs of the Unified Commands
will process all requests received directly from non-DoD agencies for
operational military support to counternarcotics activities in
accordance with CJCSI 3710.01. Requests for equipment loans and
transfers should be handled in accordance with applicable domestic laws
and DoD policies and directives.
2. The Chairman of the Joint Chiefs of Staff shall forward requests
for support, with his recommendation, to the Secretary or Deputy
Secretary of Defense through the Under Secretary of Defense for Policy
and the DoD Coordinator for Drug Enforcement Policy and Support. The
DoD Coordinator for Drug Enforcement Policy and Support will forward
the request for support to the General Counsel for review. When the
support will occur outside the United States and its territories, the
DoD Coordinator for Drug Enforcement Policy and Support shall be
responsible for coordinating the request with the Department of State
before its submission to the Secretary or Deputy Secretary of Defense
for approval. DoD personnel shall not deploy or otherwise travel into a
foreign country in connection with such a request unless the Secretary
or Deputy Secretary of Defense has approved the movement, or has
specifically delegated that approval authority to the respective
theater CINC, a Service, or DoD Coordinator for Drug Enforcement Policy
and Support.
3. Messages to the Chairman of the Joint Chiefs of Staff
(Attention: J-3, Joint Staff) concerning requests described in
paragraph (1) should include the following:

a) The identity (name or specific position title) of the
official who requested the support.
b) Mission of the DoD personnel involved and the source of
the DoD supporting personnel (in theater assigned or other than
theater assigned).
c) Numbers of personnel involved.
d) Proposed dates of the operation. Additionally, for
international missions, the arrival in and departure from the
host nation.
e) Status of approval by host country (name and specific
position of host nation official granting approval), U.S.
Ambassador, and appropriate CINC.
f) Explanation of counterdrug nexus of the DoD support
provided.
g) Source of funding.
h) Citation of statutory and other legal authority for
providing the support.
i) Command relationships.
j) Brief review of the risk involved to U.S. personnel.
k) Whether or not personnel will be armed and nature of the
armament.
l) Applicable rules of engagement as well as limitations on
participation.
m) Legal status of U.S. personnel deployed in a foreign
nation.

I do not want to deter initiatives to improve and enhance the
Department's support. However, I want to minimize and consciously
address any new risks. All addressees are to ensure that requests for
Department support, that go beyond the basis tenets in this policy, are
forwarded through the Chairman of the Joint Chiefs of Staff to the
Office of the Secretary of Defense for review and the Secretary of
Defense for approval.
Bill Cohen

The Secretary of Defense

Washington, DC, March 9,2000

MEMORANDUM FOR CHAIRMAN OF THE JOINT CHIEFS OF STAFF

subject: Defense Funded Training in Colombia

For more than ten years, the United States Government has actively
supported the Republic of Colombia's struggle to reduce the quantity of
illicit drugs produced in and transshipped through Colombia's sovereign
territory. In providing counterdrug support to Colombia, DoD has
refrained from becoming involved in Colombia's internal conflict. In
order to preclude confusion or the possibility of any misunderstanding
regarding this noninvolvement policy, I am directing that no DoD
personnel, funds, equipment, or other resources may be used to support
any training program involving a Colombian unit that engages solely in
counterinsurgency operations. This prohibition applies to all training
funded by Defense appropriations including, counterdrug training,
humanitarian demining training, Joint Combined Exchange Training (JCET)
deployments, as well as any training activities conducted under the
Commander in Chief's Initiative Fund. DoD will continue to provide
authorized training and support to multi-mission Colombian units.
Currently, DoD is supporting several new counterdrug initiatives
proposed by President Pastrana's administration, including:

Training, equipping and fielding the inaugural Counterdrug
Battalion and its supporting Joint Intelligence Center;
Enhancing counterdrug riverine capabilities of the newly
organized Colombian Riverine Brigade; and
Upgrading and training the Colombian Air Force for its
counterdrug aerial interdiction role.

The nature and scope of these counterdrug initiatives have
increased public awareness of U.S. military trainers, who are deployed
to dispersed and marginally accessible sites throughout Colombia. This
in turn has raised the risk that DoD personnel inadvertently may come
into contact with insurgents or paramilitary elements.
To reduce such risk, I provided clear direction in my October 6,
1998, memorandum, ``Military Support to Counternarcotics Activities,''
in which I specified that ``DoD personnel are prohibited from
accompanying U.S. drug law enforcement agents or host nation law
enforcement forces and military forces with counterdrug authority, on
actual counterdrug field operations or participating in any activity in
which counterdrug-related hostilities are imminent. DoD personnel will
make every effort to minimize the possibility of confrontation (armed
or otherwise) with civilians.'' That memorandum remains in effect and
provides direction for all military support to counternarcotics
activities, in Colombia and elsewhere.
In light of the expanded scope of DoD support for counterdrug
training in Colombia and the associated risk that it raises for all DoD
activities, please reemphasize to all commanders that DoD personnel
must not accompany U.S. or host nation personnel to, or provide
counterdrug support from, a location outside of a secure base or area.
This restriction applies to all support including counterdrug training.
DoD personnel may conduct their counterdrug support activities only
from bases or within areas that have been determined by a USCINCSO-
designated authority to present a minimal risk of contact with hostile
elements.
Regarding deploying forces not assigned to USCINCSO, DoD personnel
may proceed to a forward base or area only if included as part of a
SecDef-approved deployment order and only after a USCINCSO-designated
authority has determined that the forward base is secure and adequately
protected. To this end, USCINCSO will designate risk determination
authorities in writing for deployments of DoD forces to Colombia. Risk
determination authorities for deployments of non-USCINCSO forces will
be specifically designated in the Request for Deployment Order. All
counterdrug support of Colombia, including military support to drug
law-enforcement agencies, delegated in Chairman of the Joint Chiefs of
Staff Instruction 3710.01, dated May 28, 1993, must be executed
consistent with this direction and my October 6, 1998, memorandum.
Nothing in this direction limits a commander's inherent authority and
obligation to use all necessary means available and to take all
appropriate action in self-defense of the commander's unit and other
U.S. forces in the vicinity.
Willam A. Cohen

Question 2. What is the anticipated timeline of the following that
will be funded under the supplemental request:
Training of the remaining two counter-narcotics battalions;
Answer. The second battalion will commence training in Larandia,
Colombia on or about April 1, 2000 and complete its course of US led
instruction in August 2000. The third battalion will begin its training
in August 2000 and complete its course of U.S. led instruction on
December 2000.

Establishment of the infrastructure for basing and
maintenance of Blackhawks and Huey helicopters provided under
the proposal?

Answer. For both Hueys and Blackhawks, the Colombian Armed Forces
states that they will be able to support depot level aviation
maintenance from Tolemaida, Colombia and intermediate level aviation
maintenance from Larandia, Colombia by December 2000.

Question 3. Please describe the anticipated basing plan for the
Blackhawk helicopters provided under the proposal.
Where will the helicopters be based?
Answer. The Blackhawk helicopters will be based at Tolemaida,
Larandia, and Tres Esquinas, Colombia.

Will all the helicopters be based at the same location?
Answer. No. See above.

Will the helicopters be assigned to individual battalions,
or will they simply be assigned to the entire counter-narcotics
brigade?
Answer. The aviation unit headquarters will be located at
Tolemaida. The aviation unit and its helicopters will be assigned to
and in general support of each counter-narcotics battalion.

Question 4. Please describe the command arrangements of the
counter-narcotics battalion already established, and the command
arrangements of the counter-narcotics brigade that will be established
pursuant to the supplemental request and Plan Colombia.
Answer. Currently, the 1st Counternarcotics Battalion is under the
operational control of Colombia's Joint Task Force-South. Joint Task
Force-South responds directly to the Chief of the Colombian Armed
Forces, General Fernando Tapias. When the Counterdrug Brigade
Headquarters is established at Tres Esquinas in December 2000, it will
assume command of all the counterdrug battalions. The counterdrug
brigade will remain under the operational control of Joint Task Force
South.

Is there a Colombian National Police official in the command
structure? If so, at what level?
Answer. No. However, the Colombian National Police (CNP) assigns
liaisons at all levels of the counterdrug command structure in southern
Colombia. The 1st Counternarcotics Battalion has a CNP liaison, as does
Joint Task Force South. Additionally, the Colombian Joint Intelligence
Center at Tres Esquinas combines intelligence personnel from the CNP
and the Colombian Army in its organizational structure.

Question 5. Is the counter-narcotics brigade part of a larger
Colombian Army unit-i.e., a division? If so, how is it anticipated that
it will interact with the other brigades in that particular division?
Answer. No. At present, there are no larger Colombian Army units
dedicated solely to counter-narcotics operations. However, there are
other general purpose Colombian Army units that conduct counter-
narcotics operations. The counter-narcotics brigade will be under the
operational control of JTF-South at Tres Esquinas along with Colombian
Navy, Marines, Air Force, and CNP.

Question 6. What force protection measures are (a) currently in
place and (b) anticipated in the next year for the counter-narcotics
battalions at their forward operating bases? Are they considered
adequate today?
Answer. Colombia has implemented numerous force protection measures
at the counterdrug battalion's forward operating base in Tres Esquinas
and Larandia, Colombia, and more are planned. The measures include
fighting position improvements, increased lighting, more aggressive
patrolling, and the use of protective berms. Colombian forces are more
active and their force protection posture improves daily. The force
protection measures in place are adequate for the deployment of U.S.
personnel to train Colombian forces who conduct counterdrug operations.
The 7th Special Forces Group and Special Operations Command, South,
conducted the last base defense assessment of Tres Esquinas January 18-
22, 2000. U.S. Southern Command Director of Operations reviews the
status of force protection upgrades weekly.

Question 7. Does existing counter-narcotics battalion have secure
communications radios?
Answer. Yes.

If so, are such radios interoperable with radios of the
Colombian National Police and with other Colombian Army units?
Answer. These radios are compatible with other Colombian Army
units. However, the radios are not compatible with the Colombian
National Police.

If not, are there funds in the supplemental request for such
communications equipment?
Answer. There are funds in the supplemental to address this
incompatibility.

Question 8. In your prepared testimony, you stated that the
Colombian military needs to ``better coordinate operations between the
services and with the CNP.''
What are the key areas where coordination must be improved?
Answer. Previously, the Colombian military and the CNP had separate
missions and operated on their own. Realizing that drug traffickers
work together more effectively than the Colombian military and the CNP,
President Pastrana, General Serrano and General Tapias, have declared
their intent to build a united Colombian team to conduct counterdrug
operations. They have achieved some results at the tactical level where
junior officers, enlisted, and police officers have had the opportunity
to work with each other. Specifically, the CNP have already conducted
two successful joint CD operations with the 1st CD Battalion in the
vicinity of Tres Esquinas. The next higher echelon, the operational
level, requires improvement.

What steps are being taken, or will be taken, to improve
such coordination?
Answer. As stated above, the senior Colombian military and police
leadership understand the efficiencies gained through joint operations.
The next step is to get the operational planners to adopt the joint
Colombian military and the CNP approach to counter-drug operations by
breaking down barriers to communication and teamwork. To do this,
portions of the training of the Counterdrug Brigade Headquarters and
Joint Task Force South will take place in the United States at selected
Combined Training Center locations. This will expose the operational
level leaders to U.S. joint operation procedures so that they may apply
the process to their counterdrug problem.

Question 9. Colombian law prohibits high school graduates from
entering into combat.
Are we working to encourage Colombia to repeal this law?
Answer. Yes.

What specific steps, if any, are they taking to change this
practice?
Answer. DOD has repeatedly urged to the Colombian Armed Forces to
seek a change to Colombian law to modernize Colombian Armed Forces
personnel policies. Also, a DoD sponsored organizational assessment of
the Colombian military has highlighted this issue as a problem. The
Colombian military leadership has promised to take action on this
issue, but no specific steps have been taken to date.

Question 10. The Administration plan calls for 30 Blackhawk
helicopters and 15 UH-1N helicopters, in addition to the 18 UH-1N
helicopters delivered to Colombia in November 1999.
Please justify why this number of helicopters are needed.
Answer. The ground interdiction element of Plan Colombia is
supposed to be a rapid, responsive counter-drug brigade of about 3000
soldiers. It will have three 800 man counterdrug battalions. Joint Task
Force South plans on training, refitting, and resting one battalion at
Larandia, Colombia, while operating one battalion from Tres Esquinas
and the other battalion from smaller forward operating bases throughout
the Putumayo and Caqueta region. Given the lift needs, maintenance
requirements, pilot training requirements, and anticipated available
flight hours, and a target of 2.5 counterdrug missions per month per
company, Colombian aviation staff planners have determined that the
given lift will meet the anticipated operational requirements.

Will the push into southern Colombia be fully operational
before all the helicopters arrive?
Answer. The push into southern Colombia will not be fully
operational until all the helicopters arrive.

Question 11. The supplemental request contains a proposed proviso,
which states as follows:

``Provided further, That any limitations on amounts that an
agency may use for a particular purpose or activity shall not
apply to funds made available under this supplemental Act to
support Plan Colombia.''

What is the purpose of which proposed proviso?
Answer. DoD did not draft the supplemental request. This question
should be directed to the Office of Management and Budget.

What limitation is it designed to waive?
Answer. See the above answer.

THE FUTURE OF THE INTERNATIONAL MONETARY FUND AND INTERNATIONAL
FINANCIAL INSTITUTIONS

----------

TUESDAY, FEBRUARY 29, 2000

U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:35 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Lugar, Hagel, Biden, and
Wellstone.
The Chairman. The committee will come to order. While we
are awaiting the arrival of the distinguished ranking Democrat
on the committee, who has been unavoidably detained, I want to
utilize a moment for a minor personal privilege.
In the audience today we have a distinguished North
Carolinian who back last October received the highest honor
that the United States Navy and Marine Corps can bestow in
peacetime. His name is Daniel Johnson. At the time this episode
occurred he was an ensign in the Navy, a graduate of the
University of North Carolina, and I will make it short, but he
saw that one of his enlisted men was about to perhaps lose his
life, so he stepped in and in the process the enlisted man lost
a leg and he lost both of his.
Now, you know he is not coming in, Mr. Secretary, with a
crutch. Here's a young man who lost both legs, keeps a smile on
his face, and he does not need a crutch. He walks. I want him
to stand up and say hello to these folks. Ensign Daniel Johnson
of Hickory, North Carolina.
[Applause.]
The Chairman. The subject of today's hearing is how to
reform the multilateral development banks, and in particular
the International Monetary Fund. There's unanimity about the
absolute necessity of reforming these banks, and we could not
have two better witnesses to discuss this subject. We are
especially honored to have Secretary of the Treasury Lawrence
Summers with us this morning, and we welcome you, sir.
The second is a long-time friend of all of us. He traveled
all the way from California to be with us. Hon. George P.
Shultz, former Secretary of State and former Secretary of the
Treasury, and Mrs. Shultz are with us this morning, and we
welcome you.
Secretary Shultz, by the way, has raised many excellent
questions about the multilateral financial institutions, and we
look forward to hearing your thoughts, sir. Since the Asian
financial crisis and the subsequent generous quota increase
Congress approved for the IMF in 1998, there has been a growing
debate about the proper role of these institutions.
I believe I should make it clear at the outset that I
believe that the IMF as it now functions is a destructive
institution which usually does more harm than good to countries
it is purporting to help. The IMF imposes unwise austerity
measures on struggling nations, forcing them to adopt
antigrowth economic policies which virtually ensure that they
can never grow out of their debt. Further, the IMF encourages
shady and irresponsible investments by Western speculators,
with the promise of generous taxpayer-funded bail-outs if
things go awry.
For these and many other reasons I believe there is a
growing sentiment that perhaps the time has come simply to
abolish the IMF. We will see. I believe Secretary Shultz shares
many of these concerns about the IMF, and he himself has raised
the possibility of dissolving the IMF, so if the IMF wants to
avoid that fate, it will have to make some changes in the way
that it conducts its business.
The International Financial Institutions Advisory Committee
established by Congress is expected to release some important
reform recommendations any day now, and as a minimum I believe
we must demand that the decisionmaking process of the
international financial institutions like the IMF and the World
Bank be made significantly more transparent, and that we find
ways to ensure that these institutions are held accountable to
the nations who fund them. We must insist that the IMF's
interest rates should be equivalent to private banks, and we
must set standards to prevent IMF loans from subsidizing
behavior that the civilized world ought not to have to
countenance.
The IMF must not subsidize corruption; the IMF must not
subsidize nations which violate civil liberties and basic human
rights; and the IMF must not subsidize nations using
indiscriminate military force, resulting in the deaths of
thousands of innocent citizens.
Now, the IMF has done all of this in the case of Russia. It
must not continue.
In an effort to promote serious reform, the Foreign
Relations Committee has attempted to address many of these
concerns in legislation the committee will consider shortly.
The Technical Assistance, Trade Promotion, and Anti-Corruption
Act is the bill I have in mind. It is our objective to help
make the policies of the multilateral development banks and the
IMF, as well as the governments they lend to, more sound and
more accountable.
[The opening statement of Senator Helms follows:]

Opening Statement of Senator Jesse Helms

The subject of today's hearing is how to reform multilateral
development banks--and in particular the International Monetary Fund.
There is unanimity about the absolute necessity of reform of these
banks.
We could not have two better witnesses to discuss this subject, and
we are especially honored to have the distinguished Secretary of the
Treasury, Lawrence Summers, with us here today. Secretary Summers,
welcome to the Foreign Relations Committee.
After Secretary Summers testifies, we will hear from another
distinguished American, the Honorable George Shultz, who served
President Reagan as both Secretary of the Treasury and Secretary of
State. Secretary Shultz has flown here from northern California, where
he is a Distinguished Fellow at the Hoover Institution.
Secretary Shultz has raised many excellent questions about the
multilateral financial institutions and we look forward to hearing his
thoughts on these questions today.
Since the Asian financial crisis and the subsequent generous quota
increase Congress approved for the IMF in 1998, there was been a
growing debate about the proper role of these institutions.
I believe I should make it clear at the outset that I believe that
the IMF, as it now functions, is a destructive institution which
usually does more harm than good to countries it is purporting to help.
The IMF imposes unwise austerity measures on struggling nations,
forcing them to adopt anti-growth economic policies which virtually
ensure they can never grow out of their debt. Further, the IMF
encourages shady and irresponsible investments by Western speculators
with the promise of generous taxpayer bailouts if things go sour.
For these, and many other reasons, I believe there is growing
sentiment that perhaps the time has come to simply abolish the IMF. I
believe Secretary Shultz and I share many concerns about the IMF, he
himself has raised the possibility of absolving the IMF.
If the IMF wants to avoid that fate, there are going to have to be
some changes in the way in which the IMF conducts its business.
The International Financial Institution Advisory Commission
established by Congress is expected to release some important reform
recommendations any day now.
At a minimum, I believe we must demand that the decisionmaking
process of the international financial institutions like the IMF and
World Bank be made significantly more transparent, and that we find
ways to ensure those institutions are held accountable to the nations
which fund them.
We must insist that the IMF's interest rates should be the
equivalent of private banks.
And we must set standards to prevent IMF loans from subsidizing
behavior the civilized world ought not countenance.
The IMF must not subsidize corruption; the IMF must not subsidize
nations which violate civil liberties and basic human rights; and the
IMF must not subsidize nations using indiscriminate military force
resulting in the deaths of thousands of innocent civilians.
The IMF has done all this in the case of Russia. It must not
continue.
In an effort to promote serious reform, the Foreign Relations
Committee has attempted to address many of these concerns in
legislation the Committee will consider shortly: ``The Technical
Assistance, Trade Promotion, and Anti-Corruption Act.'' It is our
objective to help make the policies of the multilateral development
banks and IMF--as well as the governments they lend to--more sound and
accountable.

The Chairman. Senator Biden.
Senator Biden. Thank you, Mr. Chairman. Congratulations to
the young ensign. You are sitting next to a guy who knows a
little bit about war and battle, too. Maybe he can share some
notes there.
I want to thank you Mr. Chairman and congratulate you for
holding this hearing. Events of the last few years have proven
that there is no foreign policy issue more important than
international financial stability, and everything from the fate
of our nuclear arms control and Russia, the regional stability
in the Far East, to democratization in Latin America, seems to
me depends on a steady sustainable economic growth.
To promote and maintain that kind of economic environment,
it seems to me we need the right policies and the right
institutions to carry them out. In the international arena as
well as our domestic economy there is, of course, private
markets. It is of course the private markets that dominate. But
in the international arena, as well as our domestic economy,
the right kinds of institutions and policies can make all the
difference.
There are three good reasons in my opinion for us to be
here today to hear from Secretary Summers and former Secretary
Shultz on these issues, and the first is there is a debate that
you have raised in part today. There is a debate that still
lingers from the financial crisis that began in 1997, and while
that crisis is still fresh in our memories and while its
effects are still felt in the affected countries, it seems to
me it is right for us to review the response to our
international financial institutions to what has been called
the first economic crisis of the 21st century.
And while that crisis was much briefer and more contained
than at least I thought possible, I think most people thought
possible, it is tempting to just put it behind us and to move
on, but it is a lot more than a memory for the people of the
affected Asian and other countries who have to live through the
painful adjustments that the legacy of this crisis has left,
and the basic reforms that will be needed to minimize the risk
of further financial crisis are far from complete, or in some
places even begun.
But speaking for myself, Mr. Chairman, I am glad that we
had in place the institutions and the resources to respond the
way we did. It may be an interesting academic exercise to
imagine what would have happened without those international
financial institutions, but I would not want to run a real-life
experiment, and I do not think the American workers,
manufacturers, or all of us with retirement savings in
investment funds would want to do it, either. We do not operate
our domestic economy without an elaborate institutional and
regulatory safety net, and I do not think an even more
complicated and more fragile international economy can do
without such a system, either.
Of course, I am sure that we have the talented energy of
the Committee to Save the World that we saw in Time magazine to
answer the phone when these calls came in, but our recent
history has been the focus of our attention, Mr. Chairman. We
ought to remember that fundamental trends in the international
financial system make a review of the IMF and the World Bank
and the regional development banks a priority for us in this
committee.
If anything is clear from the Asian crisis, it is that
investment funds now move easily around the world, more easily
than we ever, at least I ever thought they did, and maybe too
freely, maybe without sufficient information and with too much
risk, but those markets are much bigger and better developed
than they were when the Bretton Woods institutions were created
a half-century ago.
Now, I know this is a point that you and I have made. This
is a point that you have made, Secretary Summers, but it is
only appropriate, it seems to me, for us to stop and reflect on
these new realities, with or without the incentive of the
recent crisis.
And finally, with the departure of the head of the IMF
after 13 years in that spot, it is also time for summing up our
recent experience in considering the future course for the IMF.
As are all human works, these are not perfect institutions. I
do not think anybody thinks they are. They suffer from a lot of
common diseases--mission creep, group think, and the historical
accumulation of bureaucratic rigidities.
In a world of limited resources, it is our responsibility
to operate as efficiently and effectively as possible, but in a
world of risk in my view where I come, at least initially, from
a very different point of view, Mr. Chairman, I do not think we
can do without them.
We cannot ask for better witnesses that we have, as you
said, than the ones we have today. Secretary Summers' speech in
London last December laid out an agenda for what seemed to me
to be fairly responsible reform for the IMF, and his central
personal role in the management of the recent crisis makes his
views indispensable to this discussion.
And finally, former Secretary of State and of Treasury
George Shultz is here. He brings not only his personal
experience working with the IMF and other international
institutions, but his more recent reflects as a distinguished
fellow of the Hoover Institute.
I want to thank them both for joining us today, and I look
forward to hearing from them both.
The Chairman. Thank you. Well, Mr. Secretary, you may
proceed.

STATEMENT OF HON. LAWRENCE H. SUMMERS, SECRETARY OF THE
TREASURY, WASHINGTON, DC

Secretary Summers. Mr. Chairman, Ranking Member Biden,
members of the committee, Mr. Johnson, Secretary Shultz, I am
very pleased to have this opportunity to testify on what I
regard as a vital set of issues facing our country. I have
submitted a rather lengthy statement for the record which, with
your permission, I will just summarize here, Mr. Chairman.
The Chairman. It will be made a part of the record, yes,
sir.
Secretary Summers. I will focus on five issues. First, the
current outlook for the global economy. Second, the continuing
United States support for international financial institutions.
Third, the steps that have been taken following the IMF quota
legislation to strengthen the international financial
architecture. Fourth, our new agenda for reform at the IMF as
embodied in my remarks in London. And fifth, the new framework
that has been put in place for debt relief for the highly
indebted poor countries.
Let me turn first to global economic developments. Looking
around, I think nearly everyone would agree that the global
economic outlook has improved significantly relative to even a
year ago, and very substantially relative to the situation in
the fall of 1998, when Congress focused on issues of IMF
funding and reform in the midst of the Asian financial crisis.
Financial experts are now expecting the economies of Asia,
outside Japan, to grow by more than 6 percent this year. This
turnaround has important implications for growth and for
financial stability in the United States and the remainder of
the global economy. To take just one example, Korean imports
are expected to grow by close to 25 percent this year. Export
growth is expected to be well into double digits in both
Thailand and Indonesia.
Despite these signs of progress in emerging markets and, I
might add, parallel progress in a number of crucial Latin
American countries, it would be a mistake to consider this
improving global trend to be inexorable. In a number of
emerging market countries, notably Ecuador, financial stability
remains elusive, and it will be very important, going forward,
to see stronger growth in Europe and Japan if we are to reduce
the present imbalances in growth among the G-7 economies. Of
course, in the United States we need to guard against
complacency and to preserve our hard-won fiscal discipline.
But I would also suggest to members of the committee that
it would be a mistake to suppose that this recovery was in any
way preordained. The crisis in Thailand and elsewhere from mid-
1997 onward caused immense instability and economic pain for
the countries affected. There is little doubt in my judgment,
however, that these crises would have been deeper and longer-
lasting, and that the implications for American workers,
businesses, and farmers, and the global financial system as a
whole, would have been more severe had it not been for the
international financial institutions, the confidence they
provided, and the policy reforms they supported, especially the
IMF.
To be sure, the battlefield is never perfect, and
reasonable people can debate whether all aspects of the
programs were correct in every instance. Yet there can be
little dispute at this point that where the broad approach to
which countries committed with the IMF was implemented
decisively by international authorities, where there was large-
scale conditioned official support, stability and confidence by
and large returned; governments were able to relax
macroeconomic policies relatively quickly; and economic growth
rapidly resumed.
Where countries were not able to or chose not to meet their
policy commitments, as in Russia, or in the initial stages in
Indonesia, outcomes were much less favorable.
Let me turn to the general case for American support for
these institutions. To be sure--and I will discuss this in just
a moment in much more detail--to say that these institutions
are indispensable is in no way to say that we can be satisfied
with them as they now are. Reforms and change have to be a
continuing priority for the United States, but I feel that
these institutions represent crucial devices for the forward
defense of American interests.
Every dollar that we contribute to the multilateral
development banks leverages more than $45 in official lending
to countries where more than three-quarters of the world's
population lives. With respect to the IMF, appropriations for
the U.S. quota do not result in any net budgetary outlay, yet
they can catalyze significant international financial resources
when financial crises threaten the global economy.
Through their programs and lending, the IFI's promote many
of our deepest values: open and liberalized markets,
transparency and reduced corruption, strengthened property
rights, and a stable environment for private investment.
The United States has only 4\1/2\ percent of the world
population, and 22 percent of its income. In a very real sense,
the future growth in our standard of living will depend upon
growth in the global economy, and that, in turn, will depend a
great deal on whether the kinds of development strategies that
the international financial institutions support are
successful. But once again, to believe that these institutions
are indispensable is not to say that they do not need to be
changed.
There has been a great deal of effort over a number of
years with respect to reform of these institutions. In
significant part, this reform effort has been initiated by the
executive branch, but crucial areas of reform were also
prescribed by Congress in the IMF legislation. Perhaps the most
direct and important reform is a sea change in transparency and
accountability.
This change is perhaps most visible in the IMF's new
policies on the public release of documents. For example, since
last June, there is now a presumption that the full set of
program documents considered by the IMF board--including
letters of intent which detail the policy commitments that
countries have undertaken--will be released to the public.
Similar steps have been taken at the World Bank, with country
assistance strategies--the bank's pre-planning documents for
future lending--now being made public as a matter of routine.
We have also had an impact on program content. Substantial
changes in the scope and nature of conditionality have taken
place placing greater emphasis on the importance of market
opening and liberalization of trade, focusing more on the
development of institutions and policies that will allow
markets to operate, and taking better account of the impact on
the poor of economic adjustments.
We have worked to make good governance a large component of
international financial institution's decisions by
strengthening the link between new lending and borrower
performance, ensuring that resources go to those who will use
them most effectively.
We have at the Treasury web site a more detailed report on
progress in the specific areas that are embodied in the IMF
legislation, but I would highlight in particular our continuing
progress with respect to trade liberalization as included in
the most recent Indonesia program and with respect to labor and
social safety nets, as suggested by our experience in Bolivia.
But there is a great deal of work left to do. Our plans for
the reforms that we support in the IMF start from a single new
framing reality in the global financial system: that the
private sector is the overwhelming source of capital for
growth. As we see in so many areas--ranging from mortgage
finance in industrial countries to building bridges and roads
in the developing world--as private capital markets develop,
the role of the public sector increasingly shifts from
providing finance to providing a framework for strong and
sustainable private sector capital flows. We believe such
evolution is appropriate in the work of the IMF and the
international financial institutions.
Toward that end, we have urged progress in five key areas.
First, a greater focus on promoting the flow of information to
markets and investments. If one looks at the history of capital
markets in the United States, I would suggest that the single
most important innovation was generally accepted accounting
principles, and the resulting accountability and transparency.
Second, greater attention to financial vulnerability, as
well as macroeconomic fundamentals in the work of the IMF. This
in part goes to questions of exchange rate regimes. It goes in
part to questions of mismatches between the duration of assets
and liabilities, such as we saw in many of the Asian countries
with Thailand's banking facility, with Korea's capital controls
that ironically discriminated in favor of short-term capital
and against longer-term capital.
Third, a more strategic financing role for the IMF that is
focused on emergency situations. Going forward, we believe that
the IMF needs to be more tightly focused in its financial
involvement with countries, lending selectively and on short
maturities. We believe the IMF must be on the front line of the
international response to financial crises. It should not be a
source of low-cost financing for countries with ready access to
private capital, or long-term welfare for countries that cannot
break the habit of bad policies.
Toward this end, we have called for a review of IMF
facilities, and this is underway. One step occurred last month,
when the IMF executive board agreed to eliminate the buffer
stock financing facility, and the contingency element of the
compensatory and contingency financing mechanism.
But this process of review of terms of facilities, pricing
of facilities, must in our judgment go further. The IMF's
executive board will be undertaking an initial discussion of
the broad issues involved with the IMF's lending tools in
March.
Fourth, greater emphasis on catalyzing market-based
solutions. In a world of global integration and rising private
capital flows, the IMF's goal and the goal of the international
community must be that a rising number of countries reach the
point where it would be unthinkable that they would encounter a
crisis where they would require financial support from the IMF.
Just as it is now unthinkable that the U.K. or Spain or Italy,
which turned to the IMF a quarter-century ago, would need to do
so today, it should be our aspiration that the IMF make
progress to the point where more and more other countries have
graduated from the possibility of support.
With respect to the private sector, it will be important
that we continue to develop approaches that make it possible
that the official sector, through its conditionality, should
support approaches such as in Korea, and more recently in
Brazil, that enable creditors to recognize their collective
interest in maintaining positions despite individual interests
of particular financial institutions or bondholders in
withdrawing funds.
As we have seen, for example, in Ukraine and Pakistan, it
will be necessary in some cases for countries to seek to change
the profile and structure of their debts to the private sector.
Such agreement should have the maximum degree of volunteerism,
but they should not fill short-term financing gaps in a way
that promises renewed problems down the road.
In accepting that basis, the IMF should be prepared to
provide finance to countries that are in arrears to their
private creditors, but only where a country has agreed to a
credible adjustment program, is making a good-faith effort to
reach a collateral agreement with its creditors, and is focused
on a realistic plan for addressing its external financing
problems.
The IMF is currently preparing a report for the
International Monetary and Financial Committee on ways in which
the broad principles that the G-7 has advocated for private
sector involvement can be implemented.
I also believe that it is important that the IMF be
modernized as an institution. In particular, it is important
that the IMF's operational budget be published, and published
in a transparent way, and I am pleased to report that just last
Friday we won IMF board agreement on this important principle.
My focus, Mr. Chairman, has been on the uncertainties
brought out by the Asian financial crisis involving
international financial institution support for emerging market
countries. If confusion arises at the other end of the spectrum
with respect to countries that cannot attract significant
private capital, the confusion involves the official sector
only in relation to concessional terms. In the past year, the
concern about debt problems in these countries has not been
only to provide debt relief, but also to transform the way in
which the World Bank and IMF operate in these countries more
broadly.
Under the new approach for the poorest countries, the World
Bank will take the lead, and the IMF will have a more tightly
focused role concentrating on the financial stability aspects
in the poorest countries. The new strategy will place greater
emphasis on enduring growth and poverty reduction, on
conditionality that is linked to core priorities such as basic
health and education, and on efforts to enhance government
accountability and transparency.
We are seeing increased evidence that debt relief is
translating directly into increased spending on crucial human
development priorities such as in Uganda, where debt service
savings have financed even larger increases in health and
education and have helped the enrollment in private education.
Similar changes have taken place in Bolivia.
Mr. Chairman, United States leadership was decisive in last
year's enhancement of the HIPC program, and the broader World
Bank and IMF reforms that it inspired. In last year's budget
agreement, Congress made it possible for that effort to
proceed. Congressional leadership is needed again this year if
we are to meet our commitments. The steps agreed to last year
will help us cover roughly one-third of the direct costs to the
United States of implementing the enhanced program, but much
more needs to be done, notably funding the multilateral trust
fund, to which we have yet to make a contribution. Overall,
every dollar of our total request will leverage $20 in
international debt relief.
The Latin American countries will be particularly hard
affected if we do not play our part, and debt relief for
Bolivia, Guyana, Honduras, and Nicaragua will not take place.
That is why the President is making a supplemental request for
the fiscal year 2000 budget, which we hope will be acted on as
soon as possible. We are requesting congressional
authorizations for the IMF to make full use of the earnings on
its off--I emphasize that word, ``off''--market gold sales,
authorization for the HIPC trust fund and appropriations of
$210 million for fiscal year 2000 and appropriations for fiscal
year 2001 comprised of $225 million, $150 million for the trust
fund, and $75 million to meet the cost of reducing our
bilateral loans.
Mr. Chairman, this is a broad and ambitious agenda. It is
something that we have been discussing in conjunction with our
partners in these institutions. It is not an agenda of reform
that will be accomplished in a month or in a year, but it is
one where I think we are making success in bringing about real
change.
If I could conclude with one final thought, Mr. Chairman,
it would be this. I have emphasized, in line with the subject
of these hearings, the importance of international financial
institutions and the importance of international finance, but
for our ultimate objective of a more prosperous and more
integrated world, the choices we make in other policy areas
such as trade policy, will very much complement choices that we
make in these areas. So it is our hope that, as we work to
support strong international financial institutions, we will
also be working to support strong, inclusive trade policies
that are in the interests of all the citizens of the global
economy.
Thank you very much.
[The prepared statement of Secretary Summers follows:]

Prepared Statement of Hon. Lawrence H. Summers

INTRODUCTION

Mr. Chairman, Ranking Member Biden, members of this Committee, I am
pleased to have this opportunity to discuss the ongoing reform of the
international financial institutions, especially the International
Monetary Fund--which I know is of considerable interest to this
committee and other Members of Congress.
Let me focus my remarks on five issues, with particular emphasis on
the last two:

First, the current outlook for the global economy, including
the crisis economies in which the International Financial
Institutions (IFIs) have recently been actively involved.
Second, the case for continued United States support of the
IFIs.
Third, the important steps that the Administration has taken
in recent years to strengthen the international financial
architecture and the IFIs.
Fourth, our new agenda for reform at the IMF.
Fifth, the new framework that we have helped to put in place
for concessional support of the poorest countries as part of
the enhanced debt relief initiative for the Heavily Indebted
Poor Countries--and the urgent need for the United States to
play its part in ensuring that this initiative can move
forward.

GLOBAL ECONOMIC DEVELOPMENTS

Looking around, I think that nearly everyone would agree that the
global economic outlook has improved significantly relative to even a
year ago, and certainly to the fall of 1998 when Congress was grappling
with the issues of IMF funding and reform in the midst of the Asian
financial crisis.

The Korean economy, which two years ago was in the depths of
financial crisis, last year grew by ten percent--and output is
now 4 percent higher than it was before the crisis.
Thailand's economy, which shrank by more than 10 percent in
1998, grew by 5 percent in 1999 and similar growth is expected
this year.
And in Brazil, which just one year ago faced the risk of
severe financial instability following a large, unplanned
devaluation, output is slightly above its pre-crisis level, and
inflation this year is expected to remain in single digits.

Private sector analysts are expecting the economies of Asia,
excluding Japan, to grow by more than 6 percent this year. This
remarkable turnaround has important implications for the growth and
financial stability of the United States and the rest of the world
economy. To take just one example, Korean imports are expected to grow
by close to 25 percent this year, and import growth is expected to be
well into double digits in both Thailand and Indonesia.
In fact, recent private sector forecasts have predicted that every
large economy will achieve positive growth next year. The U.S. economy
continues to show strong, non-inflationary growth. There are signs of
stronger growth in Europe and some moderate improvement in Japan.
Despite these forecasts, it would be a mistake to consider this
improving global trend to be inexorable. In a number of emerging market
economies, notably Ecuador, financial stability remains elusive. And
economic conditions in a number of countries and regions are still
fragile. It will be very important to see stronger growth in Europe and
Japan going forward to reduce the present imbalance in growth among the
G7 economies. And of course, we in the United States must guard against
complacency and preserve our hard-won fiscal discipline.
It would be an equally grave error to consider this recovery to
have been in any way preordained. The crises in Thailand and elsewhere
from mid-1997 onward caused immense instability and economic pain for
the countries worst affected. But there is no question that these
crises would have been deeper and longer lasting, and the implications
for American workers, businesses and farmers and the global financial
system as a whole that much more severe, had it not been for the
International Financial Institutions--especially the IMF.
The programs that the IMF and the international community as a
whole supported in Asia and elsewhere were defined by pragmatism about
the nature of the challenge each country faced and were centered on
strong macro-economic and structural measures to restore confidence.
Certainly, reasonable people can debate whether all of the aspects were
correct in every instance.
At the same time, there can now be little dispute that where this
broad approach was implemented decisively by national authorities, and
where there was large-scale conditioned official support for such an
approach, stability and confidence by and large returned, governments
were able to relax macro-economic policies relatively quickly and
economic growth quite rapidly resumed. Where there was not such a
response, as in Russia or initially in Indonesia, outcomes were much
less favorable.

THE CASE FOR STRONG UNITED STATES SUPPORT FOR THE INTERNATIONAL
FINANCIAL INSTITUTIONS

Since the Mexico crisis in 1994 President Clinton has been
committed to the project that has come to be called the reform of the
international financial architecture--and he has been committed to
change at the IFIs as a crucial part of that effort. As we have said
many times, the global economy has changed immeasurably since these
institutions were founded more than fifty years ago at Bretton Woods,
and it is both right and urgent that the IMF and other IFIs change
along with it.
As I will discuss in a few moments, we have made some important
progress in this area--and we are committed to a deeper set of reforms
going forward, particularly at the IMF. But as we work to reform these
institutions it is important to recognize the crucial respects in which
they defend, protect and enhance America's interests.
Americans and the international community as a whole always--and
appropriately--tend to respond to and focus on the problems that one
can locate on a map, in places such as Kosovo or East Timor. What we
may focus on too little are the things that might help prevent such
problems occurring in the future. That is why our support for the IFIs
and the strong policies that they promote is so important. Quite
simply, they are one of the most effective--and cost-effective--
investments we can make in the forward defense of America's core
interests.

Every dollar we contribute to the multilateral development
banks leverages more than $45 in official lending, to countries
where more than three-quarters of the world's population lives.
With respect to the IMF, appropriations for the U.S. quota
do not result in any net budgetary outlay, yet they can
catalyze significant international financial resources when
financial crises threaten the financial stability and
prosperity of the global economy.

These institutions help promote a more stable world. They can help
to promote vital humanitarian objectives. And, let there be no doubt,
they promote changes that are central to our nation's economic and
commercial future.
Through their programs of lending and advice the IFIs promote open
and liberalized markets; transparency and reduced corruption;
strengthened property rights and a stable environment for private
investment. The United States has 4.5 percent of the world's
population, 22 percent of its income. In a very real sense, the future
growth in our standard of living will depend a great deal on the growth
in our export markets. And that, in turn, will depend a great deal on
whether the kinds of development strategies that the IFIs support are
successful.
For all these reasons, the IFIs are indispensable. But as we have
said many times, that does not mean we have to be satisfied with them
as they now are.
the reform of the international financial architecture and the
international financial institutions
As I described to this Committee last November, the ongoing reform
of the global financial architecture has produced some important
achievements, including, most recently, the creation of the G20. This
grouping, which met for the first time last December, will be a
permanent informal mechanism for dialogue on key economic and financial
issues among industrial and emerging market economies that collectively
will account for more than 80 percent of global GDP.
In addition:

With the creation of the IMF's Supplementary Reserve
Facility, we have changed the terms of the exceptional
financial support that the international community provides,
working to reduce moral hazard with the application of premium
interest rates.
We have catalyzed a major global effort to reduce national
vulnerabilities to crises, with concrete steps to help
countries develop stronger national financial systems and
improved international surveillance, with increased incentives
to pursue sound policies before crisis strikes. These include
the incentives embodied in the terms of the new Contingent
Credit Line, which has several of the features of the SRF, but
was designed to enable the IMF to protect from contagion
countries that had already adopted sound policies.
And we have found new ways to involve the private sector in
the resolution of crises--most notably in the cases of Korea
and Brazil.

More generally, changing the broad orientation of the IFIs has been
an important focus of this Administration and many in Congress in
recent years. In this context we have seen important steps forward on a
number of fronts, including:

A sea change in transparency and accountability.

This is perhaps most visible in the IMF's new policies on the
public release of documents. For example, since last June, in large
part as a result of Administration and Congressional urging, there is
now a presumption that the full set of program documents considered by
the IMF Board--including Letters of Intent--which detail the policy
commitments that countries have undertaken as a condition for IMF
support will be released. Since June 3, 58 arrangements have been
discussed by the Board, and program documents were released in 50 of
these cases.
Similarly, all of the multilateral development banks have in place
mechanisms for public information disclosure and increased public
participation. Increasingly the institutions use their Internet
websites to post a large volume of project information and appraisal
documents and other information. At the World Bank, disclosure of the
Country Assistance Strategies (CASs), the Bank's key planning document
for future lending, is now routine.

New emphases in program content

We have advocated substantial changes in the scope and nature of
the conditionality for IMF and other international official support: to
place greater emphasis on the importance of market opening and
liberalization of trade; to focus more on the development of the
institutions and policies that will allow markets to operate; to take
better account of the impact on the poor of economic adjustments; to
increase national ownership and participation in reforms; and for the
Multilateral Development Banks to place greater weight on
environmental, labor and social issues in the design of programs.
For example, as part of its recent IMF program, Indonesia abolished
import monopolies for soybeans and wheat; agreed to phase out all non-
tariff barriers affecting imports; dissolved all cartels for plywood,
cement and paper; removed restrictions on foreign investment in the
wholesale and resale trades; and allowed foreign banks to buy domestic
ones.

Making good governance a systematic part of IFI operations

We have consistently worked to make governance and effective use of
funds a core part of IFI procedures. Most recently, in light of our
experience in Russia, we have led the call from the G7 for
authoritative and systematic reviews by the IMF and the World Bank to
find ways to strengthen safeguards on the use of their funds in all of
their lending activities.
More generally, at both the IMF and the World Bank we have worked
to strengthen the link between new lending and borrower performance to
insure that the resources go to the serious reformers. As a result, the
institutions now rely on monitorable criteria on issues including
governance, military expenditure review, and anti-corruption efforts to
determining new lending levels. Moreover, all of the MDBs have policies
and programs in place that are designed to improve governance and
eliminate opportunities for corruption--both internally and with
borrowing countries.

Progress in areas highlighted by the IMF legislation

With reference to the IMF in particular, on October 1, 1999,
Treasury submitted to Congress a major report on IMF reform detailing
progress in efforts to increase the IMF's effectiveness in numerous
areas such as increased transparency, strengthening of social safety
nets, implementation of core labor standards, trade liberalization,
promoting good governance, and the environment. This report is
available on the Treasury website at: http://www.treas.gov/press/
releases/docs/imfrefor.pdf.
In addition, with the active support of Treasury and the United
States IMF Executive Director's Office, the IMF cooperated fully in the
GAO's preparation of its report on the financial operations of the IMF,
which was one of the requirements of the IMF legislation. This report
was completed and transmitted to Congress in September 1999
(``International Monetary Fund: Observations on the IMF's Financial
Operations'').
Since the submission of the October report on IMF reforms, we have
seen further progress in a number of areas, including:

Trade. In its most recent Letter of Intent, published on
January 20, Indonesia has pledged to ``maintain a liberal trade
regime, avoid introducing any new trade barriers, and remove
remaining distortionary elements in the trade structure'' and
to eliminate during the program period ``all exemptions to
import tariffs (except those which are part of international
agreements), and remove all existing non-tariff barriers
(except those maintained for health and safety reasons).''
Indonesia's government has further pledged to eliminate its
import monopoly on rice.
Labor and Social Safety Nets. In Bolivia, the authorities,
in consultation with social partners and the International
Labor Organization (ILO), intend to introduce a new labor law
this year that will both enhance labor flexibility and bring
Bolivian labor regulations into line with ILO standards,
particularly those regarding equality of treatment among
genders and labor safety. The USED/IMF has emphasized, both in
the context of Bolivia's program and more broadly, the
importance of ensuring that efforts to enhance labor market
flexibility should include measures to support workplace
representation and strengthen social safety nets.
Environment. In recent Article IV discussions with
authorities in Laos, the IMF raised the issue of sustainable
natural resource management for forestry, water, and
agricultural land to prevent over-exploitation. The IMF
recommended strengthening the forestry regulatory framework and
enforcement as well as a review of logging and export
privileges reserved to military-owned enterprises.

In addition, we have fully implemented the fiscal year 1997
Military Audit Legislation. As part of these efforts, following
consultations with the U.S. Government and the IMF, the Government of
Nigeria reactivated the role of its Auditor General, subjected defense
spending to the same accountability standards as other ministries, and
committed to consolidate all extra-budgetary military expenditures into
the budget. In cases where a country's military audit system does not
meet the standards of the legislation, the United States Executive
Director has opposed IMF assistance.
In a number of areas we can agree that the IMF has moved some way
forward relative to a few years ago. In others, there is a great deal
more work left to do. In accordance with this committee's request and
interests, let me now turn to our plans for deeper reform.

BUILDING A 21ST CENTURY IMF: OUR AGENDA FOR REFORM

Our plans for reforming the IMF start from a single framing new
reality of the global financial system today, that the private sector
is the overwhelming source of capital for growth. As we have seen in so
many areas--ranging from mortgage finance in industrial countries to
building bridges and roads in the developing world--as private capital
markets develop, the role of the public sector increasingly shifts from
providing finance to providing a framework for strong and sustainable
private sector flows.
We believe that the IMF must increasingly reflect that change, with
a greater focus on promoting financial stability within countries, a
stable flow of capital among them, and rapid recoveries following any
financial disruptions.
Reforming the IMF to meet the conditions of a new time will partly
be a matter of policies and procedures. It will also and perhaps most
crucially be a matter of culture and orientation. In London last
December I laid out five core reforms of the IMF's approach in the
emerging economies that we believe are necessary.
These are:

1. A greater focus on promoting the flow of information from
governments to markets and investors

In a more integrated global capital market, IMF surveillance needs
to shift from a focus on collecting and sharing information within the
club of nations--to promoting the collection and dissemination of
information for investors, markets and the public as a whole. And it
needs to pay more attention, not just to the quantity of information
disclosed to markets, but also to its quality.
In the context of countries receiving IMF finance, we believe it is
appropriate that independent external audits of central banks and other
relevant government entities be required and regularly published. We
are working to forge a broad international consensus on this point
going forward. More generally, we believe that substantial deficiencies
in the accuracy and quantity of data that a country discloses should be
noted and highlighted by the IMF in the way that more conventional
macro-economic deficiencies are highlighted.
In this context, I am glad to report that as a result of United
States urging, IMF staff are now working with outside experts to
develop new tools for strengthening their safeguards against misuse of
IMF funds and to support higher quality auditing and information
practices in member countries.

2. Greater attention to financial vulnerability as well as macro-
economic fundamentals

In the wake of recent events, we believe that the IMF needs to
focus much more attention on financial vulnerabilities such as those
that played such a role in causing the crises in Asia.
This will mean, in particular, a greater focus on the strength of
national balance sheets. In this context we believe the IMF should
promote a more fully integrated assessment of a country's liquidity and
balance sheet. To this end, it should work to incorporate more
systematically, in its surveillance, indicators that provide a more
meaningful guide to the adequacy of a country's reserves than simply
their size relative to imports. Work is already under way at the IMF to
explore how this can best be achieved.
By the same token, we believe that the IMF should highlight more
clearly the risks of unsustainable exchange rate regimes. The
presumption needs to be that countries that are involved with the world
capital market should increasingly avoid the ``middle ground'' of
pegged exchange rates with discretionary monetary policies, in favor of
either more firmly institutionalized fixed rate regimes or floating.

3. A more strategic financing role that is focused on emergency
situations

International financial institutions, no less than private
companies, need to focus on core competencies. Going forward the IMF
needs to be more tightly focused in its financial involvement with
countries, lending selectively and on short maturities. It can and must
be on the front line of the international response to financial crises.
It should not be a source of low-cost financing for countries with
ready access to private capital, or long-term welfare for countries
that cannot break the habit of bad policies.
This suggests a number of core imperatives. Let me just highlight
one here: the need for streamlined facilities. In this context we have
supported a thorough review by the IMF's members and its management of
the myriad lending facilities that have been established over time. One
encouraging first step occurred last month, when the IMF Executive
Board agreed to eliminate the Buffer Stock Financing Facility and the
contingency element of the Compensatory and Contingency Financing
Mechanism. But this process must go further.
We believe that a necessary result of the kind of streamlining
would be that the IMF would come to rely on a very small number of core
instruments for the bulk of its lending. These instruments will also
need to be priced appropriately, both relative to each other and
relative to alternative, private sources of finance. For example, in
this context we believe that it would be appropriate to introduce
higher charges for borrowing under standby arrangements, to encourage
recourse to alternative sources of funding. The IMF Executive Board
will undertake an initial discussion of the broad issues involved in
streamlining the IMF's lending tools in March.

4. Greater emphasis on catalyzing market-based solutions

In a world of global integration and rising private capital flows,
the IMF's goal--and the goal of the international community as a
whole--must be that a rising number of countries reach the point where
it would be unthinkable that they should need the financial support of
the IMF, just as it is now unthinkable that the UK or Spain would need
it today. By the same token, at times of crisis, in such a world the
IMF must have an increasingly important role as a facilitator of more
market-based solutions.
In its response to crises, several basic presumptions should now be
guiding the IMF's approach with respect to the private sector.

IMF lending should be a bridge to and from private sector
lending, not a long-term substitute.
Official lending along with policy changes can be
constructive in helping to restore confidence in situations
where a country does have the capacity to repay.
Where possible, the official sector through its
conditionality should support approaches--as in Korea and, more
recently, Brazil--that enable creditors to recognize their
collective interest in maintaining positions, despite their
individual interest in withdrawing funds.
As we have seen, for example, in Ukraine and Pakistan, it
will be necessary in some cases for countries to seek to change
the profile and structure of their debts to the private sector.
Such agreements should have the maximum feasible degree of
voluntarism, but they should not fill short-term financing gaps
in a way that promises renewed problems down the road.
In exceptional cases, the IMF should be prepared to provide
finance to countries that are in arrears to their private
creditors: but only where the country has agreed to a credible
adjustment program, is making a good faith effort to reach a
collaborative agreement with its creditors, and is focused on a
realistic plan for addressing its external financing problems
that will be viable over the medium and longer term.

The IMF is currently preparing a report for the International
Monetary and Financial Committee (formerly Interim Committee) on the
ways in which the broad principles of the G-7 framework for private
sector involvement in resolving crises have been implemented--with a
view to informing further discussion of these issues going forward.
More broadly, we believe strongly that the IMF should establish a
Market Conditions Advisory Group to help it have a deeper knowledge of
the private sector and more systematic access to market trends and
views.

5. Modernization of the IMF as an institution

We further believe that if the work of the IMF is to change, the
IMF itself may also need to change. Specifically, we believe it should
move over time toward both a governing structure that is more
representative and a relative allocation of member quotas that reflects
the changes under way in the world economy--so that each country's
standing and voice are more consistent with its relative economic and
financial strength.
We also believe that the IMF should deepen the commitment to
transparency that is built into its operations, especially by making
the Fund's own financial workings clearer and more comprehensible to
the public. In that context I am pleased to note that just last Friday
we won IMF Board agreement on quarterly publication of the operational
budget--to be renamed the Financial Transactions Plan--with a one
quarter lag.
This would also be consistent with the legislative mandate that was
enacted in last year's authorization of IMF off-market gold sales. The
first such ``FTP,'' covering the period March-May 2000, will be
published in August.

SUPPORT FOR EFFECTIVE POLICIES IN THE POOREST COUNTRIES

The focus of my remarks has so far has been the IMF's work in
emerging market economies. Different issues are posed at the other end
of the spectrum, in the poorest countries, which cannot attract
significant private capital, and can borrow from the official sector
only on concessional terms. In the past year, international concern
about the debt problems of these countries has not only spurred action
to provide deeper debt relief--but has also prompted a transformation
in the way in which the World Bank and the IMF operate in these
countries more broadly.

The new framework for concessional assistance to the poorest

The underlying premise of the new approach is that rapid, enduring
growth and poverty reduction are mutually reinforcing. Just as poverty
reduction is not possible without growth, abject poverty and unequal
access to economic opportunity can impede growth. Experience shows that
countries that fail to educate their children or vaccinate them against
diseases do not grow as fast as those that do.
Under the new approach, the World Bank will take the lead and the
IMF will have a more tightly focused role in the poorest countries. As
a condition for receiving debt relief and new concessional loans,
countries are now required not only to have established a solid track
record of reform, but they also must produce a forward-looking Poverty
Reduction Strategy Paper.
With help from the World Bank, these strategies will clearly define
national poverty reduction goals, such as reducing infant mortality and
malnutrition, and identify the medium term costs associated with
achieving these goals. The IMF will then work with the World Bank to
ensure that the design of the macroeconomic framework is consistent
with the poverty reduction program.
To symbolize the change in the IMF's role in these countries going
forward, the IMF has replaced the Enhanced Structural Adjustment
Facility with the Poverty Reduction and Growth Facility. In designing
the PRGF, a strong effort was made to incorporate suggestions put
forward in past evaluations of the ESAF, many of which echoed concerns
that had been expressed by Members of Congress.
The new strategy that is embodied in the PRGF has the following key
elements:

A much greater emphasis on enduring growth and poverty
reduction as the overarching goal of official support,
including concrete targets for the improvement of basic social
indicators such as infant mortality and literacy.
New mechanisms to ensure that programs have a genuine impact
on the allocation of resources to core priorities such as basic
health and education, and that the additional public funds made
available by reducing debt result in additional poverty
reduction efforts.
Strengthened efforts to enhance government accountability
and transparency, particularly in their fiscal management, and
to encourage civil society participation, and country ownership
of reforms.
An enhanced focus on protecting the poor from the potential
short-term negative effects of economic adjustment and reform.

Recent Progress in the Implementation of HIPC

Given the strong interest of many in Congress in this area, let me
say a little more about the early evidence with regard to the critical
issue of translating debt relief into higher social sector spending.
For example:

Last year, Uganda saved $45 million in debt service under
the original HIPC. As a result, expenditures on health and
education increased by $55 million. This relief helped the
country to double enrollment in primary education in just two
years. Under the enhanced HIPC, going forward Uganda is
expected to receive an additional $650 million in debt relief
in net present value terms.
In 1999, Bolivia saved $77 million in debt service under the
original HIPC, and social sector expenditures increased by more
than $100 million. In 2000, Bolivia is expected to receive $85
million in debt service savings, leading to even greater
investment in urgently needed services. With the enhanced HIPC,
Bolivia's savings will be $850 million greater in net present
value terms than they would otherwise have been.

In this effort we are working hard to ensure reasonable balance
between, on the one hand, the strong humanitarian case for providing
debt relief rapidly and on the other hand, the economic imperative that
the right policies are in place so that debt relief is integrated into
meaningful growth and poverty reduction.
The need for full funding of HIPC
Mr. Chairman, United States leadership was decisive in last year's
enhancement of the HIPC program and the broader World Bank and IMF
reforms it has inspired. With last year's budget agreement, Congress
made it possible for that effort to proceed. But Congressional
leadership is needed again this year to fully meet our commitments.
The steps agreed to last year will help us to cover roughly one-
third of the direct costs to the United States of implementing the
enhanced HIPC. But much work remains to do our share, notably with
respect to the multilateral HIPC Trust Fund, to which we have yet to
make a contribution. Overall, every dollar of our total request will
leverage $20 in international debt relief.
The Latin American HIPCs will be especially affected if we fail to
ensure that the HIPC Trust Fund is adequately funded. To put it
bluntly: if we do not play our part in this area, debt relief for
Bolivia, Guyana, Honduras, and Nicaragua will not happen.
There should be no doubt that any delay in funding for this effort
will have real consequences. For example:

Just two weeks ago, Bolivia became the second country to
qualify for enhanced HIPC. But it will not see a reduction in
its debt payments this year because of the current financing
gap in HIPC. Based on very rough estimates, Bolivia could
therefore forgo as much as $35 million in debt relief this
year, relief that might have been invested in more rapid growth
and poverty reduction. If the financing gap is not filled, it
will forgo an even greater amount of relief next year, of
roughly $110 million, or more than 1 percent of Bolivian GDP.
Mozambique has recently been hit by heavy rains and flooding
that has destroyed crops, left up to one million people
homeless and caused at least $70-80 million in damage to date.
With a very strong record of market reforms, it has already
qualified for HIPC, and it could qualify for enhanced HIPC in a
matter of weeks. Under the enhanced terms, it would receive an
additional $250 million in relief in present value terms over
the next 20 years. But without full funding for the HIPC Trust
Fund this additional relief could be delayed, just when the
country needs it most.

That is why the President is requesting:

A supplemental request for the FY2000 budget of $210 million
and full authorization for the HIPC Trust Fund, without which
qualifying countries such as Bolivia will be left waiting
indefinitely for relief.
Congressional authorization for the IMF to make full use of
the earnings on the profits from off-market gold sales. Last
year, Congress authorized the use of a portion of those
earnings; the remaining 5/14 of those flows needs to be
authorized so that the IMF can meet its commitments to debt
relief as countries qualify.
Appropriations for FY2001 of $225 million for HIPC,
comprising $150 million for the HIPC Trust Fund and $75 million
to meet the cost of reducing our bilateral loans. To underscore
our commitment to seeing this initiative through, the President
has also requested $375 million in advance appropriations in
FY2001 for these two elements of HIPC.

Mr. Chairman, debt relief for the poorest countries is a global
moral imperative. It is also a global economic imperative, at a time
when nearly all of the growth in the world's labor force and
productivity will be in the developing countries--and their success in
a new global economy is going to be important to the success of us all.
The choice we face is a simple one. We can play our full part in
making HIPC happen. Or we can leave this initiative under-funded, and
risk delay--and even a reversal--of economic reform and poverty
reduction efforts in countries that are now working to put their past
failures behind them. I hope that Congress will agree with us that the
right choice is clear.

CONCLUDING REMARKS

Mr. Chairman, in recent weeks we have been talking with IMF members
and management with a view to making all of our reform proposals
happen. As our global discussions on these issues continue, it will be
important to consider not just the role of the IMF, but also the roles
of the World Bank and other development institutions and how these
institutions relate to each other. We intend to outline our proposals
for reforming this aspect of the international financial architecture
in the coming weeks in the lead-up to the Spring Meetings of the IMF
and World Bank.
Let me conclude with one final thought. In line with the
Committee's request, I have focused today on the international
financial institutions. But clearly our most important global economic
objectives today must be economic growth and helping countries to grow
together. And finance is only one important element of achieving that
kind of growth.
Another crucial element of successful development--which can only
become more important as global integration proceeds--will be economic
openness and growth in foreign trade, both for the domestic competition
and innovation that it promotes and the greater interconnectedness of
economies and economies that it creates.
In that context, granting Permanent Normal Trading Relations status
to China as a critical part of its entry to the WTO entry, and passing
both the African Growth and Opportunity Act and the Enhanced Caribbean
Initiative, will be enormously important in the weeks and months ahead,
for America's core interests and for global economic development.
I look forward to working with this Committee and with others in
Congress on these and other crucial international priorities going
forward. Thank you, I would now welcome any questions that you may
have.

The Chairman. Thank you, Mr. Secretary. We are going to try
to get these gentlemen out of here about on time. Suppose we
try to start with a 5-minute round and see how that comes out.
First of all, what do you think about the General
Accounting Office having access to information at the IMF and
the banks to enable it to audit and monitor their operations?
Are you in favor of that?
Secretary Summers. Yes.
The Chairman. So am I. So that's the first brief answer I
have had from anybody in this administration this year.
On March 17, Secretary Rubin, your distinguished
predecessor, told the House Committee on Appropriations, and I
am quoting here, ``There is no doubt that many countries that
borrow from MDBs have serious corruption problems.'' Then he
called corruption the single--now, I am quoting him--``the
single largest impediment now to economic development in
developing countries in many parts of the world.''
Now, are loans provided by the IMF and the banks suspended
if it is discovered that the funds are being stolen, or
diverted for unintended purposes, and as a followup, can you
give any examples of that, if so?
Secretary Summers. Yes. The Russian program has not
disbursed since August and contains a quite elaborate set of
conditions with respect to the imposition of audit safeguards
for new monies extended, and also a quite elaborate set of
conditions with respect to identifying what has taken place
with respect to funding that has been provided in the past.
Other examples include the ongoing discussions between the
IMF and Ukraine, where similar allegations have been made, and
the World Bank's actions with respect to Kenya in response to
allegations of corruption.
Let me say, this is an enormously serious issue, and one of
the things we are working to do with the institutions is to
establish a base requirement that countries that receive
funding through central banks have to have their central banks
audited on a regular basis by external auditors as a safeguard.
I would also say that we are working in a number of other
ways to support reductions in corruption, including through
economic reform. You know when there are no price controls,
there are no black markets and there has been no corrupt
diversion from white markets to black markets. So economic
reform is one crucial element of the strategy.
Reform of the public sector--to put in place the kinds of
basic safeguards of integrity monitoring that are common in
many other countries--is important to the reductions in
corruption. We are also working to support--as we have in the
OECD--other countries taking steps, as they have now committed
by treaty, to criminalize bribery and to stop the tax
deductibility of bribery. This is an additional element in our
approach to corruption. Above all, we need to support policies
of greater selectivity with respect to eligibility for funds in
response to what, I agree with you, Mr. Chairman, is an
enormously serious problem.
The Chairman. Would you give us a list in writing later on
of the instances of that?
Secretary Summers. Yes, sir.
[The following was received in response to the chairman's
request:]

THE IMF'S APPROACH TO GOVERNANCE/CORRUPTION ISSUES

The IMF's 1996 Declaration on ``Partnership for Sustainable Global
Growth'' includes a statement on the need for promoting good governance
in all its aspects, including by ensuring the rule of law, improving
the efficiency and accountability of the public sector, and tackling
corruption, as essential elements of a framework within which economies
can prosper. Subsequently, in August 1997, the IMF published guidelines
on governance, instructing staff to accord a high priority to promoting
good governance, and procedures to be followed in this regard.
IMF support for transparency and free markets is one element of its
efforts to promote good governance. The IMP's fiscal policy advice
promotes transparency and elimination of exemptions. Trade and exchange
liberalization and elimination of price controls can reduce the scope
for corruption. The establishment of central bank independence helps to
end directed credits, preferential lending, and inflationary quasi-
fiscal financing. Private sector development helps to build respect for
contracts and transparent rules of the game.
Inclusion in programs of measures to strengthen governance and
eliminate corruption has become standard operating procedure in Fund
programs in recent years. This includes PRGF (Poverty Reduction and
Growth Facility) programs, which involve a special focus on budgetary
management and transparency. For a growing list of countries, this has
been an important element of the IMF's policy dialogue with national
authorities.

In Cote d'Ivoire, the ESAF program has been suspended since
March 1999 because of IMF concerns about several unresolved
governance issues in addition to serious weaknesses in the
fiscal area and delays in important structural reforms. The IMF
is willing to resume negotiations of the second annual ESAF
with Cote d'Ivoire after these issues are effectively
addressed.
Indonesia's program was suspended until the IMF was
satisfied on issues including whether the Indonesian
authorities conducted a full audit of the banking transactions
involved in the Bank Bali scandal, publicly disclosed their
findings, and committed to prosecuting the wrongdoers.
In the 1999 Article IV discussion of Morocco, the USED noted
the government's decision to participate in a World Bank pilot
project to develop anti-corruption strategies and improve
transparency of government operations.
In Ukraine, the IMF indicated in March that the Ukrainian
authorities undertook a number of transactions with their
reserves in 1997 and 1998 that may have led to the disbursement
of Fund loans based on an overstated level of reserves. The IMF
and Ukraine have tightened Ukrainian reserve management
practices and they are now undertaking detailed audits of the
National Bank's activities for this period. The first of the
audits will be completed and published soon. Ukraine will also
institute more detailed quarterly audits going forward, and it
has agreed to place the proceeds of any new IMF disbursements
in an account at the Fund that can be used only to repay debts.
The IMF and Russian officials hired independent auditors in
the spring of 1999 to investigate the irregular transactions
associated with off-shore subsidiaries of the Central Bank. The
auditors published their findings and indicated that they did
not find evidence of misappropriation of funds. The IMF and
Russia took steps to strengthen Russia's reserve management
practices and also agreed that new IMF tranches would be
disbursed into an IMF account that could only be used for debt
repayment. After these measures were taken, the IMF Board
approved a new program for Russia in July 1999. This program
was delayed in the fall after Russia failed to meet a number of
structural conditions required for continued disbursements.
Uganda, a recipient of debt relief under the HIPC
Initiative, has taken several steps to improve the quality of
governance. The government has increased the budget for its
anticorruption strategy, which has enabled the Office of the
Inspector General of Government to increase its professional
staff from 40 to 100, and to establish regional offices to
investigate allegations of corruption at the district level.
Looking forward, the government is taking steps to reform its
procurement policy, to pass legislation requiring public
officials to disclose their assets, and to make further
improvements in transparency in key areas noted during its
participation in the IMF's exercise on standards and codes.
(The IMF's findings for Uganda are posted on the Fund's
website.)
Kenya's IMF program was suspended in August 1997, primarily
over governance/transparency issues, with other donors
suspending their own programs during this period or shortly
thereafter. While serious efforts to address these governance
concerns were lacking for much of the period since the 1997
decision, the government has taken several steps in recent
months towards meeting IMF concerns, including confirming the
independence of the Kenya Revenue Authority, appointing a new
director of the Kenya Anti-Corruption Authority, and appointing
a well-known opposition figure to reform the civil service. In
light of these developments, the IMF has begun negotiations
with the Kenyan authorities regarding the steps that will be
necessary to establish a firm basis for a new program.
Continued and accelerated improvement in governance will be an
important condition for ongoing Fund engagement.
During the Board discussion of the Kyrgyz Republic's PRGF
request (February 2000), the USED stated her concern about the
lack of transparency and the absence of an anti-corruption
program, and encouraged authorities to build upon the small
steps that are currently being undertaken in the areas of
customs administration, public administration, business
licensing, and the judiciary.

Beyond specific cases, recent experience has further highlighted
the importance of governance issues for the Fund's overall operations.
At the insistence of the United States and other major shareholders and
following deliberations at the 1999 Annual Meetings, the IMF will now
be undertaking an authoritative review of its procedures and controls
to identify ways to strengthen safeguards on the use of its fund. In
addition, the Interim Committee has instructed the IMF to enhance its
support for members' efforts to maintain strong internal financial
controls and tighten supervision and regulation of domestic financial
institutions and off-shore banking centers, including measures to deter
money laundering.
In addition, the United States, along with others in the G-7, will
be pressing the IMF, among other things, to look at the potential to
expand circumstances under which advance repayment can be required and,
more broadly, to pursue enhanced monitoring of policy commitments while
drawings on the Fund remain outstanding but after program
conditionality has ended.

The Chairman. That is very interesting to me. One of the
things that is interesting to me is that a paper prepared for
the International Financial Institution Advisory Commission
suggesting that there are 70 nations receiving IMF structural
adjustment loans for more than 20 years. Even some middle-
income countries--India is one that is cited--have been
receiving IMF loans for more than 40 years. The question is,
should IMF and bank loans be made for projects that could
receive private sector financing?
Secretary Summers. I indicated, Mr. Chairman, in my
prepared remarks, that I feel that the IMF's role needs
increasingly, as private markets develop, to be focused on
shorter-term, more selective response to emergency situations
which represent the kind of situations where private market
funding is much less likely to be available. It was appropriate
that there be very great attention to assuring that
international financial institutions support, rather than
supplant, private sector finance for exactly the reasons you
suggest.
The Chairman. I have two follow-up questions, and I will do
that later. Senator Biden.
Senator Biden. Thank you, Mr. Chairman.
Mr. Secretary, a lot of criticism of the IMF has come both
from the left and the right, and I realize this is a vast
oversimplification, but on the right it is argued the promise
of IMF bail-outs will lull them into a false sense of security
and the lenders, as well as the countries in question, will
engage in more slipshod policies. On the left, the austerity
programs that it imposes on countries are viewed as
debilitating, and they keep these nations poor. Both sides
suggest the IMF has too much influence, and they both need to
have their own agendas for the IMF, and to expand the scope of
its influence. For example, last year's authorization of the
IMF quota, or dues increase, contained conditions, including
requiring the IMF to monitor trade practices of recipient
countries, open domestic markets to competition, monitor labor
practices, environmental impact and lending practice. These, as
you well know, are all called our--these conditions are the
voice and vote, conditions we place on our representative of
the IMF.
Now, you have added your voice to call for the IMF to
return to its sort of core functions. Could you comment on the
proliferation of the so-called voice and vote, and other
conditions imposed on our participation in the IMF in recent
legislation? How does that square with your call for a return
to core functions?
Secretary Summers. Senator Biden, it is a very difficult
question that you ask. It is one that we have wrestled with. On
the one hand, it is important that we respect sovereignty to
the maximum extent. At the same time, it is important that we
act on only the highest priorities in time of crisis.
On the other hand, I think as economists have come to a
deeper understanding of these situations, we have come to
understand that a broader range of issues impact on the
prospect of a country's working through a crisis. Issues like
the quality of its institutions, the quality of its bankruptcy
laws, are much more important to confidence--which is crucial
for resolving crises--than we thought, than we had judged some
years ago.
I think the best approach is the central exercise of
discretion. Each of the issues enumerated in the legislation
will in certain cases be at the very center of the situation,
and where it is at the very center of the situation, it is
appropriate that it be pursued with great vigor. But at the
same time it seems to me that we would not effectively advance
our agendas by insisting on that laundry list of conditions in
every single case. So I think inevitably these situations
require the application of judgment.
Certainly, it has been our intent and objective to carry
through and to meet our obligation of using a voice and vote to
address objectives that have been prescribed. I think we have
done so with some success.
Senator Biden. Let me just--I am running out of time here.
I am just going to get one more question here. The bottom line
here is that we need 85 percent of the outfit, 85 percent of
the weighted vote to vote for a policy to go into effect of any
consequence. We have, what, 17.5 percent of the vote. I would
think that means we can dictate the outcome. Obviously, we can
veto anything we want. If we do not vote, it does not happen.
Take me through briefly, if you can, the steps that take
place inside the institution in order to get structural reform
to happen. I mean, is it merely, we say unless it happens we
are not voting for anything else? The structural reform you are
talking about, what has to happen?
Secretary Summers. Decisions are taken either by the IMF
board or by the Board of Governors, the finance ministers of
the countries that comprise the IMF. Many of the most important
issues, as you suggest, Senator Biden, require an 85 percent
vote, and it is a process of working country by country.
Senator Biden. Does it require an 85 percent vote, or do
expenditures require an 85 percent vote?
Secretary Summers. Particular programs require a majority
vote. Reforms in the institution require, depending upon their
breadth, an 85 percent vote. So it is a process of persuasion.
It is a process of building consensus. It is a process of
compromise, and it is something that we have worked to do very
assiduously.
Our Executive Director at the IMF is in constant dialog
with her colleagues on these issues. But I would caution that
while I think there is a great deal of receptivity to American
ideas, and while I think the broad themes that I have been
talking about are things for which there is considerable
international support, there is understandably a belief that
the institution has to operate with respect to its broad
strategies by consensus.
The Chairman. Thank you. Senator Lugar.
Senator Lugar. Thank you very much, Mr. Chairman.
Secretary Summers, the chairman said in his statement--he
expressed this very clearly--``that the IMF as it now functions
is a destructive institution which usually does more harm than
good to the countries it is purporting to help. For these and
other reasons I believe there is a growing sentiment that it
may be time to simply abolish the IMF.''
The chairman relents a bit in the next paragraph by saying,
``if the IMF wants to avoid that fate,'' which gives you an
opportunity to make the arguments you have today, ``there must
be some changes in the IMF.'' Then he points out, ``the IMF
must not subsidize corruption, must not subsidize nations which
violate civil liberties and human rights, and must not
subsidize nations using indiscriminate military force resulting
in the deaths of thousands of innocent civilians.''
Now, my question is: Is it possible for the IMF to reform
in these ways and, if not, what is the case to be made for
winding up this experiment with the IMF and moving on to a
financial institution that does forward basic American foreign
policy?
In other words, I understand, as you do, the willingness of
the American people to support foreign assistance to other
countries if, in fact, there is movement toward democracy,
toward human rights, market economics, and other fundamentals.
But, there is also an increasing unwillingness to subsidize or
support countries because they have sovereignty or are
attempting to enter the world trade system, but do not have
these values.
I am just wondering whether you or others, who have given a
lot of thought to this subject, have ever considered whether
this IMF experiment may have had its usefulness but may now be
too encumbered by the past or by current situations, and
whether we ought to press on to consider something else in its
place.
Secretary Summers. Senator Lugar, I am convinced that the
international financial institutions make a crucial
contribution to our economic well-being. Without the capacity
to have provided a nation support from the international
financial institutions during 1997 and during 1998, the global
economic situation with which we were dealing would have become
far more serious, with far greater spillovers to American
financial markets, to American export performance, to American
commodities prices, and to the health of our economy.
So I believe it is crucial that there be a capacity for the
United States to support a multilateral response to economic
problems. I believe there is a similar case for longer-term
development, given the importance to our interests of
successful economic development.
You have raised one of an enormously difficult set of
questions having to do with what one might call political
conditionality: the linkage between support in these areas and
concerns that go beyond the question of how well resources are
used. I think it is not possible to set absolute hard and fast
rules.
As you know, there are a number of countries where the
United States is committed by statute--as in the case of states
that have been named as terrorist states--to oppose
international financial institution lending. Our policy of
excessive withdrawal from involvement in countries where we
have objections is sacrificing the possibility of using
economic instruments to bring about changes in countries which,
over the longer term, reflect both our security interests and
our interests in seeing them evolve toward market-oriented
democracies.
Senator Lugar. Well, that is our calculation, though. Maybe
we state that standard, but we may hope for something better.
Is there any case to be made to support or oppose a government
simply because it is an economic issue, as opposed to a
political one?
Secretary Summers. Well--I am not sure that I want to be in
a position of characterizing particular governments here--but I
would say that if one looked at East Asia over the last 25
years, one would say that part of East Asia's transformation
toward a more democratic era with more reliance on market
forces has been the result of programs that have been worked
out with the international financial institutions. A policy of
withdrawal, absolute withdrawal on the grounds that there were
repressive practices--as there surely were in some countries at
some points--would have been a policy that would have denied us
the opportunity to have that kind of positive influence. So I
think we need to be careful about taking absolutist positions.
At the same time--and this has been an increasing theme of
what the international financial institutions have done--we are
providing funds in support of policy reviews that look at
questions of military spending. Concerns for corruption are
increasingly part of these programs. But I think that to use
this assistance in a completely political way might well not
serve our interests.
Senator Lugar. Thank you.
The Chairman. Senator Wellstone.
Senator Wellstone. Thank you, Mr. Chairman.
Mr. Chairman, I do not want to rush through this, but the
Governors are here and there is a meeting with the Minnesota
delegation. I apologize to Secretary Shultz. I will read his
testimony very carefully, and I want to put one question to you
later in writing if I can, Secretary Summers. I will just
highlight this one point and get to my other questions.
On the whole question of debt forgiveness and the Jubilee
2000 initiative, I do have some concern about the
conditionalities attached to the administration's debt
forgiveness plan. I think there have been a couple of internal
IMF and World Bank memos, showing that many countries saw their
external debt increase while they were under structural
adjustment. That's why many groups have concerns about these
conditionalities as well, especially in terms of debt
forgiveness for the poorest countries, the question is whether
there should be debt forgiveness with or without structural
adjustment conditions. I want to put a question to you in
writing if I can, because I want to focus on that.
I do not think the debate, at least in my mind, is about
whether there should be an IMF or not. But I am concerned about
the IMF's focus on austerity measures and high interest rates,
what IMF conditionalities do to people's wages, what they do to
living standards, their effect on infant mortality, their
effect on hunger and malnutrition. I think these are very
legitimate and very important questions. So the question
becomes, not whether there should be an IMF, but what should
the IMF's policies be? The question is, what is the IMF's role?
I want to keep this away from any labels of left, right, or
center. I want to quote from, I think, an important speech that
Joseph Stiglitz gave at the Industrial Relations Research
Association in Boston. He had some interesting things to say
about international financial institutions and workers' rights.
Mr. Stiglitz said, and I quote, ``Workers' rights should be
the central focus of a development institution such as the
World Bank.'' I think you are probably familiar with his
speech, and I think it was an important speech. He argues that
this should be the central focus of a development institution
such as the World Bank because of the positive contribution of
labor unions in stabilizing industrial relations, mitigating
income inequalities, and promoting adult education, civil
rights, health and safety standards, and child labor standards.
My question to you is whether or not you are in agreement
with what Joe Stiglitz had to say, and also whether or not it
is true that institutions such as the IMF and the World Bank,
rather than promoting, have actually been undermining core
labor standards and the development of those standards with
their loan conditionalities. I think that is one of the big
questions. That is part of what this debate is all about.
So No. 1, do you agree with Joseph Stiglitz' analysis as to
the role of labor rights in economic development, and No. 2, do
you agree or disagree with the argument that much of what the
IMF is trying to do undermines these core labor standards?
Secretary Summers. Speaking with respect to recent times, I
would not agree at all with the idea that what the IMF has done
has undermined labor standards or labor unions. Very much the
contrary. It has worked to promote tripartite dialog in Korea,
to support Indonesia's adherence to various of the ILO
standards, and so forth.
The World Bank has been very active in promoting a wide
range of policies that are directed at reducing child labor,
primarily through promoting what I think is the very valid idea
that children should be in school rather than at work. So I
think the idea that a humane, decent society provides for
worker rights has to be at the center of any notion of economic
development. I think increasingly in the work of the
international financial institutions that idea is at the
center.
With respect to your first question, I have not read the
speech from which you were quoting, but as I just indicated, it
is our belief that respect for workers' rights and for workers
has to be at the center of viable economic development
strategies. That is something we have certainly worked to
encourage in the international financial institutions.
Senator Wellstone. So before time runs out, just to be
clear, as far as what Joseph Stiglitz had to say, you do agree
that workers' rights should be a central focus of the
development institutions.
Secretary Summers. Helping workers should be a central
focus of the development institutions, absolutely.
Senator Wellstone. That premise you agree with. You do not
agree that IMF policies have been antithetical to that.
Secretary Summers. Correct.
The Chairman. Senator Hagel.
Senator Wellstone. Mr. Chairman, may I submit other
questions in writing----
The Chairman. Oh, certainly.
Senator Wellstone [continuing]. May I ask the Secretary? I
would like to do that.
The Chairman. As a matter of fact I am going to do the
customary thing and keep the record open so that every Senator
who is present or not present can file questions in writing.
Senator Hagel.
Senator Hagel. Mr. Chairman, thank you.
Mr. Secretary, welcome. I want to read a line from your
testimony this morning because I think it is relevant to the
line of questioning this morning, Mr. Secretary, and then get
to a question.
``We prefer to believe that the work of the IMF is change.
The IMF itself may also need to change.'' Picking up on what
Senators Lugar, Biden, and others have asked about, I would
like to direct two questions.
In the spirit of change and reform for the IMF that this
Congress, along with you and your predecessor, have been
involved with over the last 3 years, is it part of the new
American criteria that the new managing director of the IMF be
someone who, in fact, is committed to this reform, to this
change?
Your testimony is replete with statements like, ``the IMF
should not be a source of low-cost financing for countries with
ready access to private capital, or a source of wealth for
countries who cannot break the habit of bad policies.''
Are we holding out for a managing director of the IMF who
in fact will implement the kinds of reforms that you have
indicated you think are important, and the second part of my
question is, what exactly is America's position on the future
of IMF?
Secretary Summers. You mean on leadership, or on policy?
Senator Hagel. The leadership of the IMF.
Secretary Summers. Let me just say, sir, with respect to
IMF leadership, we have had a consistent position I think for
some months: We want to support a leader of the IMF who has the
requisite stature, the requisite expertise, the requisite
ability to command global consensus and respect, and the
commitment to doing what needs to be done at the IMF. That is
the type of individual that we are looking to support, as we
have made clear on any number of occasions, and the President's
spokesman made clear yesterday.
The existing traditions with respect to selection have
served us very well. So it would be our hope that a European
candidate who met the criteria that I just described would
emerge.
Senator Hagel. In your opinion, not an Asian candidate?
Does it make any difference?
Secretary Summers. The existing tradition has served us
well. Our hope would be that it would be possible for global
consensus to emerge at this point.
Senator Hagel. Isn't--if we eliminate the Asian dynamic in
this, though----
Secretary Summers. You know, our hope would be--I am not
making any absolute statements here--but I think that our
judgment has been that there has been a global tradition with
respect to this selection. I think it is very important that it
is not a choice that is made on any one continent, but a choice
that is made of an individual who is outstanding and who can
command respect and support, and can make tough decisions on
all continents.
Senator Hagel. Again, my first question, is the criteria
for American support of the new managing director of the IMF
going to produce someone who is going to in fact do what you
have said?
Secretary Summers. We believe it needs to be somebody who
can do what needs to be done. I think we tried to lay out in
some detail the type of steps that are necessary. Obviously,
the IMF is an international organization. Any agenda to be
fully implemented has to be called an international agenda, and
so we have to build consensus on these directions.
But I think there is an increasing view on the importance
of supporting not supplanting private sector flows, on
transparency, on selectivity in lending, on private sector
involvement, on an organization operating in a transparent way
with respect to its own finances. Those are certainly important
issues for us as we approach the selection process. As I think
in any choice of leadership with respect to any organization,
it is appropriate to think about the mission and priorities of
that organization.
Senator Hagel. Mr. Chairman, thank you--Mr. Secretary.
The Chairman. Mr. Secretary, thank you so much for coming
up this morning. It has been a pleasure having you. I am going
to have one of my people hand you one question, yes or no. If,
as you leave, you will write the answer on it and give it to
him, I would appreciate it.
Secretary Summers. Thank you.
The Chairman. Thank you very much, and you will be
receiving questions in writing from Senators who are not here
today.
[Responses of Secretary Summers to additional questions
follow:]

Responses of Secretary Summers to Questions Submitted for the Record by
Senator Helms

DIFFERENTIATING IMF AND WORLD BANK FUNCTIONS

Question. The World Bank has increasingly gotten into the business
of making short-term structural adjustment loans to poor countries
rather than focusing on medium- or long-term economic development
activities, as it was originally intended to do. The structural
adjustment loans are supposed to be in the IMF's bailiwick, as I
understand it.
Is the overlap between these institutions intentional? Should they
keep to their original mandates? Or should these institutions be
revamped for the 21st century?

Answer. The IMF and World Bank have distinct but complementary
roles in helping member countries cope with the economic and
development challenges that confront them. Each institution has
particular expertise and strengths to bring to bear on particular
issues.
That said, there has been considerable attention given to greater
delineation of the institutions' roles in order to minimize and
eliminate potentially confusing overlap. We have advocated vigorously
for the institutions to collaborate more closely. Closer collaboration
between the IMF and the multilateral development banks is a key feature
under the Enhanced HIPC Initiative as part of the Poverty Reduction
Strategy Paper (PRSP) process. The PRSP paper, prepared by the HIPC
eligible country in consultation with the IMF and World Bank will serve
as the basic framework to ensure that debt reduction produces
demonstrable progress towards poverty reduction and economic growth.
Preparing the paper in consultation with the IFIs should produce a more
consistent set of policy measures that are cohesive and complementary.
Beyond HIPC, agreement was reached in September 1999 at the Development
Committee to extend this collaborative approach to all poorest
countries, i.e., those eligible to draw on IDA's concessional
resources.
Regarding the need for reform, in our view these institutions would
benefit from some reform in both policies and processes. At the IMF we
have been pressing a reform agenda that emphasizes improved information
flow from governments to markets and investors; increased attention to
financial vulnerability and macroeconomic fundamentals; development of
core instruments and streamlined procedures to provide assistance in
emergency situations; greater emphasis on seeking out market-based
solutions; and increased efforts to modernize the institution.

CONCESSIONARY LOANS AND ``GRADUATION''

Question. Given the number of nations receiving IMF ``structural
adjustment'' loans for more than twenty years:
Should IMF and bank loans be disbursed incrementally as
specific reforms are undertaken by the borrower, or should
there be no conditions on such concessionary loans?
Should a goal of the IMF and the banks be to ``graduate''
countries from reliance on concessionary loans?

Answer. First, regarding the period of time during which certain
countries have been receiving IMF concessional loans, it is important
to distinguish between how often a country comes to the IMF seeking
financing, and the period during which a country is drawing and
servicing its loan. The maturity structure of the IMF's concessional
financing instrument, the Poverty Reduction and Growth Facility (PRGF),
and the instrument to assist countries with deep-seated balance of
payments difficulties of a structural nature, the Extended Financing
Facility, provide for repayment beginning five-and-a-half years after
each disbursement (in the case of PRGF) or four-and-a-half years (in
the case of EFF), and ending ten years after each disbursement. Since
disbursements under one arrangement may be spread over three years, a
country with only one such loan from the IMF would have credit
outstanding over a period of 13 years. That said, there have certainly
been cases of what could be considered excessive repeat use of IMF
financing.
Regarding the relationship between disbursements and reforms, IMF
and MDB loans are in fact linked to reforms undertaken by the borrower.
In the absence of sufficient progress, loans can be (and in practice
often are) interrupted or even terminated. In our view, conditionality
is an essential feature of IFI financing. While no guarantee of
success, conditionality on concessional financing (as on other forms of
IMF financing) is a critical part of encouraging countries to correct
the macroeconomic imbalances and structural weaknesses which give rise
to the need for financing, strengthening the hand of national
authorities committed to reform, and helping ensure that the
institutions are repaid on time.
Regarding ``graduation,'' certainly the ultimate goal of
concessional lending and other forms of development assistance is to
help countries in their efforts to reach a stage where they no longer
require such assistance. Whether and when that goal is reached depend
on many factors. But ultimately, sovereign govemments are responsible
for the decisions that shape the performance of their economies.

NOT ABETTING HUMAN SUFFERING

Question. Should IMF and bank loans be made for projects that would
displace a population involuntarily or harm the culture in areas into
which displaced populations are moved?

Answer. This question relates to the activities of the World Bank
rather than to those of the IMF as the Fund does not engage in project
lending.
Some dislocation of local people can be unavoidable with certain
World Bank infrastructure projects, such as roads, urban renewal, and
irrigation systems. Our own experience in the United States with
dislocation and resettlement arising from public investments has
demonstrated the difficulty and severity of the problem, but has also
provided valuable guidance for others, including the World Bank.
Against this background, we have articulated and pressed
successfully for a formal Bank policy on resettlement base on the
following principles:

1. Project design must minimize dislocation and resettlement,
and the full range of alternatives must be carefufly examined.
2. For any dislocation that is unavoidable, development of a
resettlement action plan (RAP) is required.

A key feature of this resettlement action plan is a strategy that
ensures that incomes or the economic base of those relocated be
maintained or improved as a result of relocation. Beyond the
compensation issue, the RAP also covers other fundamental issues
including consultations, timing, budgeting, implementation, and
monitoring.
Following the lead of the World Bank, all of the regional
development banks also have in place resettlement policies that
stipulate the preparation of RAPs.
Also at the urging of the United States, the World Bank has adopted
a policy on the treatment of indigenous peoples. This policy calls for
ensuring the full respect for each group's uniqueness; minimizing to
the maximum extent possible any adverse effects during the development
process, and assuring that such peoples receive social and economic
benefits that are culturally compatible.

Question. Should loans be made to nations engaged in repression of
political or religious freedom?

Answer. The United States seeks to advance the cause of human
rights internationally through a number of different channels. In the
international financial institutions (IFIS), the United States,
consistent with U.S. legislation, uses its voice and vote to channel
assistance toward countries other than those whose governments engage
in a pattern of gross violations of internationally recognized human
rights, and opposes non-Basic Human Needs (BHN) lending to governments
which engage in a pattern of gross violations of internationally
recognized human rights. In addition, recent U.S. legislation gave the
President the option to direct the U.S. Executive Directors of the IFIs
to oppose and vote against loans primarily benefiting the specific
foreign government determined by the President to have engaged in, or
tolerated, a severe violation of religious freedom. The President
exercised this option for IFI projects benefiting the Sudan.
Our ability to influence which countries receive IFI loans is
limited by the fact that the United States is one member country among
many in these institutions. Nevertheless, we will continue to
vigorously use our voice and vote to advance the objectives set out in
the relevant legislation.

RUSSIA/CHECHNYA

In February 1996, during Russia's first military campaign against
Chechnya, the IMF's Managing Director told a Washington Post
correspondent: ``Are we financing Chechnya? . . . [I]n some ways, yes,
we finance Russia.'' And at a hearing of the Joint Economic Committee
on May 5, 1998, the other hearing witness, George Shultz, said: ``I
think, gentlemen, that through the IMF loans to Russia, we have, in
effect, supported atrocities in Chechnya, and I don't know why we
should want to do that.''
Question. Isn't it unfair to say that IMF funds disbursed to Russia
could only be used to repay old loans, since Russia would be relieved
of financial pressures, therefore subsidizing its recent inhumane acts
in Chechnya? Shouldn't IMF loans to Russia be permanently cut off?

1Answer. The Administration is concerned about Russia's campaign in
Chechnya, and we have cited this concern on a number of occasions.
Last year, IMF funding for Russia was delayed because Russia did
not fulfill a number of structural conditions required for
disbursement. We supported that position.
With the recent inauguration of President Putin, a new government
will be responsible for setting Russia's reform course. Putin and his
economic advisors have indicated that they intend to work with the IMF
and World Bank on an ambitious program of reforms, including measures
to strengthen the rule of law, improve the efficiency of government,
and strengthen a market economy. We encourage President Putin and his
team to work with the IMF and World Bank on a sufficiently strong
program of reforms which could be supported by those institutions and
help build sustainable economic growth in Russia.
We make our decisions on whether to support financing for Russia
based on our national interest, including our interest in a democratic,
stable Russia that is making real progress on economic reform.
new imf managing director
Ouestion. The Frenchman Michel Camdessus stepped down as the IMF's
Managing Director on February 14, 2000. A number of people have
questioned the fitness of the German gentleman being pushed by
Germany's Chancellor as a candidate.
Is it really necessary to reward Germany with the
appointment of a mediocre candidate? Do we have a quota system
for who serves in these roles, so that a German must follow a
Frenchman?
Should the IMF strongly consider appointing Leszek
Balcerowicz, who has tremendous experience having been Poland's
Finance Minister and architect of Poland's transition to a
market economy?

Answer. You will have seen that the first German candidate withdrew
and that, subsequently, on March 23, the Executive Board agreed to
select Mr. Horst Koehler as Managing Director of the IMF. We look
forward to working with Mr. Koehler as we all deal with the critical
and challenging issues facing the IMF.
Regarding the process for selecting the leaders of the
international financial institutions (IFIs), we believe that the
principles of transparency and accountability are increasingly
fundamental to the work of the IMF and other IFIs and should apply to
the process for selecting their leaders. As I indicated in my April 16
statement to the International Monetary and Financial Committee, the
selection process should aim to:

ensure consideration of the highest quality candidates;
take fully into account the views and interests of all
countries, including emerging market economies and the
developing world; and
contribute to the credibility and effectiveness of the
institutions.

______

Responses of Secretary Summers to Questions Submitted for the Record by
Senator Feingold

DEBT RELIEF FOR SOCIAL NEEDS

Question. I strongly support responsible debt relief proposals, and
I believe that debt relief is one of the most important items on the
U.S. foreign policy agenda today. One region that I care deeply about,
sub-Saharan Africa, faces the obstacle of a staggering $230 billion in
bilateral and multilateral debt. Africa's debt service requirements now
take over 20% of the region's export earnings. Even the resources
required simply to manage debt payments strain the capacity of many
governments. Throughout the debate here in the Senate over the African
Growth and Opportunity Act, I argued that Africa cannot become a strong
economic partner when its states must divert funds away from schools,
away from health care, and away from infrastructure in order to service
their debt burden. Please tell me more about how the U.S. and other
creditor countries can ensure that resources freed up by debt relief
will actually be spent on social needs, not on the acquisition of
military hardware.

Answer. The enhanced HIPC initiative, as designed by the United
States with other creditor countries, incorporates a basic commitment
for a more systematic and effective effort against poverty both by the
benefiting countries themselves and by the International Financial
Institutions (IFIs). Specific steps have been built into the enhanced
HIPC initiative to ensure that resources freed up by debt relief are
used for achieving core poverty reduction objectives. These steps
include:

Eligible countries are required to undertake macroeconomic
reforms, implement poverty reduction strategies, ensure
transparency in government operations, and engage in
participatory processes in return for debt reduction.
Countries are expected to develop a poverty reduction
strategy that includes targets and monitorable outcomes. All
HIPCs are expected to develop a Poverty Reduction Strategy
Paper (PRSP) jointly with the IMF and the World Bank, with
participation by civil society, before they reach their
completion point (i.e., the point at which the country receives
the bulk of its assistance under HIPC). Countries coming up
first for a decision point (i.e., the point at which the IMF
decides whether a country qualifies for assistance under HIPC)
must have an interim strategy in place at the decision point.
Public expenditure will be monitored by the IMF through its
Poverty Reduction and Growth Facility (PRGF, formerly the
Enhanced Structural Adjustment Facility, ESAF) programs and the
World Bank through public expenditure reviews.

We agree that the HIPC-eligible countries should maximize their
resource allocations to the social sectors rather than to nonproductive
uses such as military spending, and all current PRGF programs promote a
focus on budget transparency and mechanisms to support protection and
enhancement of social sector spending.
criticisms of timing and conditionality for debt relief
Question. There have been criticisms of HIPC in the past, including
charges that it takes countries too long to qualify for relief and that
the conditions for eligibility are inappropriate. Do you believe that
these problems have been adequately addressed?

Answer. The enhanced HIPC initiative was designed with a view to
addressing many of the criticisms leveled against the original HIPC
initiative. Specifically:

The enhanced HIPC initiative provides faster debt relief.
The timetable for reaching the final stock of debt reduction
has been accelerated, based on the concept of a ``floating''
completion point tied to economic reform and implementation of
a poverty reduction strategy. Debt service payments to the IMF
and World Bank, as well as bilateral creditors, will be reduced
during the first stage of the program before the completion
point.
Five countries (Bolivia, Mauritania, Uganda, Tanzania and
Mozambique) have reached a decision point.
Under the enhanced HIPC initiative, countries are required
to develop a Poverty Reduction Strategy Paper (PRSP) that will
guide the allocation of the resources freed up by HIPC debt
relief to ensure that these resources are directed to basic
priority social sectors rather than to nonproductive uses such
as military spending.

We believe that, without sound economic policies, many countries
are at risk of sliding back into the problems of high debt and slow
growth that have hindered their development and impoverished their
populations. Progress in the areas of improved governance, greater
transparency and participation of civil society is also an important
element in helping countries achieve sustainable growth and stability.

WORLD BANK PRIORITIZATION OF POVERTY REDUCTION

Question. Please assess the World Bank's efforts to make poverty
reduction an important priority in its large-scale lending programs. Is
this a token effort or has it had meaningful results on the ground?

Answer. Economic growth and poverty reduction have the highest
priorities on the World Bank's development agenda. At the same time,
the Bank and its member countries recognize that more must be done to
fight poverty effectively. Consequently, the Bank has been making a
major effort to sharpen its focus on poverty reduction, and Bank
country assistance strategies and its operational activities are now
more clearly directed at poverty reduction than in past years. This
includes greater efforts to promote global public goods such as
combating infectious diseases. More attention is also being given to
improving poverty analysis and to establishing poverty reduction
outcomes to measure development progress. In addition, the Bank is also
working to better integrate the poverty components of impact
evaluations and other development experience into program design and
implementation in order to ensure that the increased emphasis on
poverty translates into sustainable poverty outcomes on the ground.
The World Bank's support for the efforts of its poorer borrowing
countries to develop credible Poverty Reduction Strategy Papers (PRSPs)
is of growing importance. These strategies, developed in a
participatory process with civil society, will form the basis both for
HIPC debt relief and for future flows of concessional assistance. We
believe the PRSP process, initiated at the 1999 Annual Meeting of the
World Bank and the IMF, has enormous long-term potential both in terms
of delivering sustainable development results and in improving the
effectiveness of donor coordination.
In sum, the Bank is making an important contribution to poverty
reduction and is taking steps to strengthen this impact. There has been
major progress but more needs to be done. The United States encourages
and supports this long-term effort.

IMPROVING TRANSPARENCY AND ACCOUNTABILITY

Question. Please assess the progress that the International
Monetary Fund and the multilateral development banks have made toward
increasing transparency and improving accountability in their
operations. What gains have been made, and what more needs to be done?

Answer. It is no exaggeration to say that there has been a sea
change in increasing transparency and improving accountability.
Regarding the IMF, this is perhaps most visible in the Fund's new
policies on the public release of documents. For example, since June
1999, in large part as a result of Administration and Congressional
urging, there is now a presumption that key program documents
considered by the IMF Board--including Letters of Intent--which detail
the policy commitments that countries have undertaken as a condition
for IMF support will be released. Since June 1999, fifty-eight
arrangements have been discussed by the Board, and program documents
were released in fifty of these cases. Release of ``Public Information
Notices'' (PINs) following Executive Board discussions of Article IV
consultations is also becoming much more routine. PINs are also used to
inform the public of Executive Board conclusions following discussions
of a broad range of policy issues and regional surveillance. Detailed
information about the IMF's financial resources and liquidity position
is available on the IMF's Internet website (www.imf.org), as is its
Annual Report. Most recently, on February 25, the Executive Board
agreed that the IMF's Operational Budget--to be renamed the Financial
Transactions Plan (FTP)--will be published quarterly with a one quarter
lag. The first FTP, covering March through May 2000, will be published
in August 2000.
Similarly, all of the multilateral development banks, in response
to strong advocacy from the United States, have made systematic changes
in their operations and procedures to increase public participation,
transparency, and accountability. Key reforms include:

Public consultation rules that give affected people a real,
and in some cases a first, voice in project design;
Inspection Panels that provide a public forum for those
affected and concerned to raise issues about MDB compliance
with their own policies;
Improved information disclosure through more routine release
of documents. For example, as part of the IDA-12 agreement, the
World Bank now makes available Public Information Documents,
Project Appraisal Documents, Environmental Assessments, and
summaries of Operational Evaluations Reports. In addition, each
country assistance strategy (CAS), a key planning document for
future lending, is publicly available unless the Executive
Board votes to keep it private. These documents are available
on the Bank's Internet website (www.worldbank.org) or through
its public information center.
Similarly, the regional development institutions are making more
documents available to the public, via the Internet and their
respective public information centers.
Looking forward, there is room for improvement in a number of
areas. At the IMF, in addition to the steps noted above which increase
the transparency of the IMF as an institution, we would like to see a
greater focus on promoting the flow of information from governments to
the IMF and to markets and investors. This should include, for example,
greater adherence to and compliance with the Special Data Dissemination
Standard and publishing assessments of the strength of countries'
financial systems. At the World Bank, a full review is underway to
determine which additional documents should be made available to the
Executive Board and which should be made available to the public.

WORLD BANK EXTERNAL AUDITS

Question. Do the currently administered external audits of
institutions like the World Bank provide sufficient information to the
U.S. Government with regard to the Bank's operations?

Answer. The financial statements of the World Bank Group and the
regional development banks are audited annually by independent and
internationally recognized accounting firms in accordance with
generally accepted auditing standards. The audit findings are
thoroughly discussed both with the senior management of the
institutions and with the Board. This dialogue provides an opportunity
for the Boards and Managements to examine the reports and to explore in
greater detail the implications of the audit results for mitigating
risks to the institutions. The independence of the auditor is essential
to the integrity of the audit process. The external auditors for the
MDBs are selected through international competitive selection and
periodically the auditing services are rebid.
The most recent external audits of the Asian Development Bank and
the InterAmerican Investment Corporation were done by
PriceWaterhouseCoopers. The Inter-American Development Bank and the
European Bank for Reconstruction and Development were audited by Arthur
Andersen. The African Development Bank Group's external auditor was
Deloitte and Touche, and the World Bank Group's auditor was Deloitte
Touche Tohmatsu.
Overall, we believe that the current external audit process
provides sufficient information for the United States to exercise its
fiduciary oversight responsibilities over the financial condition of
the institutions.

INTERNATIONAL FINANCIAL INSTITUTIONS ANTI-CORRUPTION EFFORTS

Question. While I agree that the international financial
institutions must vigilantly combat any internal corruption through
strong oversight mechanisms, I also believe that they have a role to
play in combating corruption within the countries receiving assistance.
As the Asian financial crisis indicated, corruption is a threat to
international stability. I also believe that it stands in the way of
every development goal that the U.S. pursues abroad. How do the
international financial institutions combat corruption abroad, and are
these practices sufficient?

Answer. Corruption is widely recognized as a serious threat to
economic growth and development. The Asian financial crisis
demonstrated that corruption contributes to a loss of confidence in a
country's economic policies and can precipitate capital flight.
Bribery and corruption lead to spending and investment decisions
that are contrary to stated political and economic objectives.
Corruption undermines the efficient use of capital by distorting and
diverting public investment from priority projects and programs to
personal enrichment. Studies also demonstrate clearly that widespread
corruption discourages private sector investment and results in lower
rates of economic growth.
The international financial institutions, especially the IMF and
the World Bank, are leaders in helping countries to identify, expose
and prevent corruption. The IMF has studied the impact of corruption on
macroeconomic policy-making and financial institutions, and has
incorporated anti-corruption criteria in its economic evaluations and
decisions on providing assistance. The World Bank, Asian Development
Bank, and African Development Bank have good governance or anti-
corruption strategies approved by their respective Boards of Executive
Directors. The EBRD has promoted financial sector reforms, and the
Inter-American Development Bank has included public sector reforms in
its on-going focus on the modernization of the state.
The World Bank has developed new methodologies to help countries
analyze their corruption problems and decide on the best remedial
actions. All of the MDBs are assisting countries in adopting
institutional reforms to promote integrity and reduce corruption. These
efforts include: guidance to encourage appropriate deregulation to
eliminate opportunities and incentives for corruption; privatization of
state-owned enterprises; financial sector reforms that include improved
financial disclosure and supervision; guidance and support to improve
budget processes, financial management and procurement; and enhanced
transparency and reforms in tax, customs, civil service, and judicial
administration.
While we are pleased with the progress in the IFIs in the recent
past, we are encouraging them to give even higher priority to
corruption problems and to provide countries with increased assistance
and positive incentives to promote good governance and prevent
corruption. For instance, the recent IDA- 12 and the African
Development Fund replenishment agreements strengthen the linkage
between new lending and borrower performance, including explicit
consideration of good governance and efforts to combat corruption.

HUMAN RIGHTS AND ENVIRONMENTAL PRACTICES

Question. Whether or not it is the intent of the financial
institutions themselves, the fact is that international financial
assistance can make the difference between whether or not a regime
stays in power abroad. The IMF and World Bank play a legitimizing role
in much of the developing world. How do the international financial
institutions ensure that their assistance programs do not legitimize
disgraceful human rights and environmental practices?

Answer. With our strong encouragement, the IFIs have made good
governance a core issue in their operations, and have strengthened the
linkage between new lending and borrower performance to maximize the
amount of resources that go to the serious reformers. The institutions
have in place monitorable criteria to evaluate borrower performance on
a range of critical issues including governance, military expenditure
reviews and anti-corruption efforts that are used in determining new
lending levels. All of the multilateral development banks have policies
and programs in place aimed at improving governance and eliminating
opportunities for corruption, both internally and with borrowing
countries. The U.S. Executive Directors to the respective IFIs use
their voice and vote in support of a range of priority issues including
strengthening respect for human rights and environmentally sound
practices. Treasury's annual report to Congress on the voting record of
the U.S. Executive Directors to the IFIs reflects the progress made on
giving greater consideration to these and other priority issues.
Similarly, strong and consistent U.S. advocacy has been
instrumental in getting all the MDBs to put in place a wide array of
policies and guidelines to mainstream environmental considerations into
their analytical work and operations. As a result, policies and
procedures that have been adopted include:

Development and maintenance of adequate environmental
capacity for analyzing and managing environmental issues;
Comprehensive integration of environmental issues into the
project development process;
Appropriate environmental review policies;
Transparency and information disclosure policies;
Improvements in consultations with affected and interested
parties;
Effective independent inspection panels;
Protection of indigenous peoples;
Adequate planning and implementation of resettlement
activities;
Strong emphasis on investments for energy efficiency, clean
technology and renewables;
Policies for better management and protection of natural
resources;
Clear project performance indicators, and systematic
monitoring and evaluation; and
Provision of adequate resources for project supervision and
monitoring.

CONSULTATIONS WITH CIVIL SOCIETY

Question. To what extent do the international financial
institutions consult with elements of civil society in the countries
they assist? For example, does the IMF consult with local labor unions
about its strategies?

Answer. Outreach and consultations with those outside of government
(i.e., civil society) is increasingly a routine part of IFI operations.
The benefit of broad participation in the discussion of economic and
development programs is recognized as a key element to increase the
base of support for the program to be undertaken. All of the MDBs have
in place public consultation rules to give affected people a voice in
project design and have in place or are forming Inspection Panels,
which provide a forum to discuss MDB compliance with their own
policies.
In addition, broad consultation and participation as key elements
in World Bank and IMF efforts to assist borrowers in their work on
developing their own Poverty Reduction Strategy Paper (PRSP). This
paper, required for countries to be eligible for HIPC debt relief, will
also guide Bank and Fund future lending programs for all IDA and ESAF-
eligible countries. The country under consideration will design its
PRSP in consultation with the World Bank, the IMF and civil society
through a participatory process. The goal is to ensure that
macroeconomic policies are set with full appreciation of the social
context and that poverty reduction and social considerations are fully
taken into account when setting priorities.
The IMF is increasingly aware of the social dimensions of its
lending programs and economic policy advice. In that regard, the Fund
has taken steps to ensure that policy advice, whether a condition for
lending or not, does not adversely affect social programs. Further, the
Fund strives to strengthen social programs in the context of
macroeconomic adjustment programs. As part of the process of developing
new programs for various countries, including Mexico, Brazil, Thailand,
and Korea, the IMF has discussed labor issues with local authorities.
The IMF and International Labor Organization (ILO) have collaborative
relationship reflected throughout their operations. Fund and ILO staffs
consult regularly on reviews of labor codes, wage policies and social
protection mechanisms. Senior IMF officials have participated in ILO-
sponsored seminars in Korea and Thailand (November 1998), the regional
meeting on social issues in Thailand (January 1999) and addressed the
ILO Governing Body at its March 1999 meeting.

[The following statement was submitted for inclusion in the
record:]

Prepared Statement of Senator Russell D. Feingold

I want to thank Secretary Summers for being here today to discuss
the future of the major international financial institutions. This
hearing has a very ambitious agenda, and I just want to focus on a few
discrete issues for a moment.
First, a word about debt relief. I applaud international efforts to
address the multilateral debt burdens of the world's poorest countries.
Debt relief, with its capacity to free resources for social needs and
to free policy from fruitless cycles of servicing and reprogramming, is
one of the most important foreign policy priorities before this
Congress. I look forward to learning more about the possibilities and
limitations of current plans to pursue debt relief today.
The other major issue on the table today is reform. Many calls for
reform of the international financial institutions focus on issues of
transparency and accountability. Of course, I strongly believe that
internal oversight mechanisms are critically important. But the notion
of accountability is about more than audits and inspectors general. At
the core of this issue is the question of democracy, and the urgent
need to create space for different voices--voices from civil societies
in donor and recipient countries alike--in the international economic
system.
Finally, Mr. Chairman, this new century offers valuable
opportunities to assess the lessons of history and to make a set of
deliberate and reasoned choices to seek a better future. History has
shown that, unless the international community takes political and
human rights issues seriously, we cannot achieve stability or order in
the international system. We have seen instances in which the pursuit
of order has led to injustice, and in the past international financial
institutions have played a role in propping up abusive and exploitative
regimes, subsidizing illegitimate governments and delaying the
inevitable at a terrible human price. It is important to remember that
financial stability is not an end in itself--it is desirable because it
creates the space and opportunity for human achievement and human
development. I hope that serious efforts to think through the future of
the international financial architecture will take this into account.

The Chairman. Now then--you may proceed, sir. It is a
delight to have you back.

STATEMENT OF HON. GEORGE P. SHULTZ, FORMER SECRETARY OF STATE
AND FORMER SECRETARY OF THE TREASURY

Mr. Shultz. Thank you, Mr. Chairman, Senator Biden, Senator
Lugar. It is a pleasure to be back. I have not been here in
well over a decade, and I spent so much time here it almost
feels like homecoming, so I am honored to respond to your
invitation.
You asked me to focus on the IMF, which I will do. I have
three points of criticism, each of which I will illustrate with
an example, and I have eight suggestions about what should be
done, or what should be kept in mind as you consider the
international economic scene.
My principal points can be stated as follows. The IMF
encourages bail-out expectations, and thereby weakens the due
diligence that is critical to the healthy functioning of the
international economy. I think that is a very important point.
Basically it started with Mexico in the mid-1990's, when the
Treasury and the IMF together put together a package of over
$40 billion to meet the Mexican crisis. I might add after
putting it to the Congress and not getting its way in Congress.
What was done with that money? Immediately, the short-term
loans that had been made to the Mexican Government by mostly
U.S. investors were paid off. Those people got high rates of
interest on risky short-term money. The Mexican Government was
not able to pay it off or roll it over, and so they got bailed
out, literally.
The Mexican Government then did the same thing with its own
banks, so it was a gigantic bail-out. The financial people made
out fine. The money did get paid back, but the bail-out
happened, and made a big impact.
I might just say later on, after the Russian default, a
banker friend of mine said--once you are in office you are held
responsible for whatever happens--to me, after you bailed out
investors in Mexico because Mexico was your neighbor, I was
entitled to believe that you would bail me out in Russia,
because Russia has all those nuclear weapons. So do not say
that the bail-out mentality does not spread. It does. It is a
big problem.
So that is my first point, and I think it is a very
important one. I was told I had 10 minutes, so I am rushing
along here.
My second point is that the IMF has, almost as a matter of
logical development, developed programs that are increasingly
intrusive into the economic policies of the countries where it
is involved. And I think it is almost axiomatic that the more
intrusive you are on economic policies, the more involved you
get in the politics of those countries.
The evidence is that the IMF's economic programs are often
wrong, showing that their competence in economics can be
questioned, but that is where their presumed competence lies.
But when they go around the world ministering to the politics
of countries, they do not know what they are doing. Let us take
the example of Indonesia, about which Secretary Summers spoke.
In the case of Indonesia, we had an authoritarian
government where there was a great deal of favoritism of
President Suharto's family and his cronies, so you had a lot of
corrupt practice there. However, over a 20-year period, they
also had something like a 7-percent sustained real growth rate,
and the fruits of that were widely disbursed. The income per
capita in Indonesia rose very, very rapidly. Never mind
legislating great standards. You have to look at what happened
to actual real incomes. They, the people of Indonesia, did very
well.
Also, a tradition of religious tolerance was fostered. This
is the biggest Muslim country in the world, 90 percent Muslim,
and they had a tradition of tolerance of other religions, and
they were rather proud of it. They had a small but very
important ethnic Chinese community that brought lots of money
to Indonesia.
But they were part of the Asian crisis, so the IMF and the
Treasury moved in, and one of their first acts was to call for
the closing of 16 banks. I do not know how you could fail to
foresee that, when you do that, you are going to cause a crisis
in the banking system and runs on banks. It is as simple as A,
B, C. I do not want to say that the IMF deliberately set out to
destabilize Indonesia, but it is hard not to come to that
conclusion.
Lots of things are wrong in Indonesia, but also lots were
right. The intrusiveness of the IMF programs, with their big,
thick documents, telling them in great detail about how they
should manage their policy, required things that were
impossible, and were part of what I think was a great
destabilization there.
I have heard people from the IMF say, well, we helped get
rid of Suharto. I do not think that is a legitimate function of
the IMF. And I do think the management of moving countries from
autocratic regimes to democratic ones is very tricky business.
You remember, Mr. Chairman, in the eighties we had quite a few:
Argentina, Brazil, Chile, South Korea, the Philippines, and
Taiwan. And we had lots of discussions in this committee about
it.
On the whole those transitions came about all right, but
you have got to go from something to something. Otherwise, look
what has happened in Indonesia: Income per capita cut in half,
poverty widespread, religious intolerance on the rise, fights
between Muslims and Christians, ethnic Chinese driven out. I am
told at least $100 billion of ethnic Chinese money is parked
outside Indonesia right now. If you want to do something about
the Indonesian economy, you should think to yourself, how do I
get the Chinese back? That is the big problem.
But at any rate, I think this illustrates the difficulty
when the IMF finds itself enmeshed in the politics of a country
and does not know what it is doing.
My third problem has to do with the IMF's loose charter,
and the very large amounts of money that can be used at the
discretion of the U.S. President and his G-7 counterparts. It
is a very large amount of money now. It is hard to estimate
exactly, but it is certainly on the order of $200 billion.
As we have seen by the pattern of what the IMF does, there
is virtually no limit on how the money can be used. And that is
a temptation to a U.S. President that is very hard to resist.
Example: Russia. In the case of Russia, I think a
misconceived policy was implemented, but anyway it had as its
foundation the idea that we would provide large amounts of
money, and the Russians would reform and become democratic and
become an economically open country. So these funds were
provided with the hope and expectation that that would happen.
Conditions were laid down, and so on.
It is tempting to any country to take the money, because it
is like a gift in the sense that the interest rates charged are
way below any reasonable market rate of interest. It is aid,
that's what it is. That is why they take it. The IMF is the
only consultant in the world that pays you to take their
advice. Most consultants have to meet a market test, and you
have to think their advice is good enough so you will pay for
it. In the case of the IMF, it is the reverse.
At any rate, lots of money was poured into Russia, and I
think misguided. In the meantime, the Russians were taking
money out. And I do not have any personal way of verifying
this, but I have seen very credible estimates, that between
$150 and $350 billion were taken out of Russia. That is Russian
money out of Russia. So when they are taking it out and we are
putting it in, that must tell you something.
Some very bad policies were followed, and of course when
the money goes to general budget support, it supports whatever
the government is doing, including the war in Chechnya. There
is no way around that.
It also, in a more subtle way, it seems to me, tends to
work on you psychologically. You have made these loans to
create some result, and so you wish the result were there, and
you allow yourself to think, well, it really is right around
the corner. And you have your hopes pinned on some individual
like Mr. Yeltsin so you tend to overlook things, and you tend
to take his line. And I think in the process you distort your
view of the reality of the country you are dealing with.
In that connection I would like to read a couple of things
to you. Here is a description of Russia today. I am reading
this.
``A pluralist political system, competing in the world
markets and plugged into the Internet. Does that bear any
resemblance to the Russia that you''----
Senator Biden. Whose description is that, Mr. Secretary?
Mr. Shultz. The President of the United States, writing in
Time magazine, January 1, 2000, just recently.
Now, here is the description of Chechnya. It says, ``we
have a profound disagreement on the treatment of refugees.''
That is all, the treatment of refugees. He says that we
understand that they have to ``liberate Grozny''--that is the
way the Russian Government puts it--and talks about this being
a model for how to deal with other problems involving
terrorists.
I am reading this. This is from Time magazine, and I think
this is what happens to you when you get so involved in another
country's operations and you put so much money and so much of
your own credibility on the line in favor of some results that
are not happening.
I do not think that this is only because of the money that
was there, but it helped. I call it the honey pot problem.
Because when you have a big honey pot of money that can be used
for anything, it is an invitation to a President to say, well,
all right, here is a problem. I will get together with my
friends in other countries and we will use that money for this
purpose, and I think the resulting profligacy with IMF money
has had a bad result, and is unfortunate.
So those are three examples. I could give a lot of other
examples, but those are three that I want to call your
attention to. The enormous amount of money being used to bail
out lenders creates a mentality in the international lending
community that in one way or another they are likely to get
bailed out. And so the private lenders do not do the due
diligence they ought to do.
Second, you get driven, almost, by the size of these
programs to become very intrusive, very detailed in what you
want, and when you do that you are not talking economics, you
are talking about the politics of a country. It would be as
though the IMF came to the United States and told us, you know,
you have problems with Social Security and Medicare, and here
is the way you should fix them, without realizing, anyone would
have to realize that these issues are very delicate politics in
this country. They are not primarily economics.
The third problem is this gigantic honey pot that sits
there and can be dipped into.
So those are my points of analysis, and now let me tell you
what I think ought to be done. First of all, Mr. Chairman, as
you know, I have said for quite a long time, and in a lengthy
address to the American Economics Association about 5 or 6
years ago, but also more recently, that it seems to me it is
time to close the books on the IMF and go about its functions
another way.
Last year I said that and the Congress proceeded to
appropriate, or not appropriate, but to provide funds of about
$18 billion and with contributions from other countries to
total some $80 billion of additional money for the IMF. So I
come to you today and say, all right, I recognize I may not get
my way, and if I do not, here are my suggestions for what
should be done.
First of all, tighten the charter. I was interested, and
welcomed the statement by Secretary Summers that the IMF should
return to its core function, namely, dealing with critical
problems in exchange rate and balance of payments problems in
countries around the world. That is what it started out to be,
and that is its function, and it seems to me if that is what
you want, the charter should say so.
Then you have a limited purpose organization. The money is
there, and it is for this purpose. It is not for any purpose
that anybody wants to use it for. It is just for this purpose.
That is the way you go about appropriations, as I can
vividly recall. The money was provided to me in my various
cabinet posts for certain purposes, and I could not decide,
well, this money is appropriated, when I was Secretary of
Labor, for manpower training programs, but I guess I will use
it for something else. You cannot do that. You have got to use
it for what it is prescribed for.
So tighten the charter, and I think the focus should be on
what Secretary Summers called core function.
I do think there is a need for an international economic
organization with some stature that plays a convener role. That
is, when there is a problem, it is important to have some
organization that can convene the parties. Lenders and
borrowers, bring them together. An individual bank usually
cannot do it. An individual country has a hard time. So an
international organization that can be a convener is useful,
and I think it is probably best if it does not have much money.
So that leads me to my second recommendation, that the
amount of money in the fund be drastically reduced. Now,
obviously, if that happens there has to be a transition. You
cannot just pull the plug on existing programs and commitments
that have been made. They have to be carried forward. But if
the object is clear, the amount of money in the fund can be
brought way down, and you take away the honey pot, and you take
away a lot of the bail-out problems by doing that, and I do not
think that you would miss it.
Third, insist on transparency. Now, there has been a lot of
talk about that, and no doubt some progress on it, because
transparency is the counterpart of accountability, and that
should be on the IMF's internal operations, and it should also
be with respect to the individual country programs.
Sometimes the IMF may have a problem with a country that
does not want transparency. It seems to me the IMF should
insist on transparency, and if the country balks, well then,
that is their choice, but IMF is then not going to be there. So
we need to be able to know what is going on.
Fourth, I think the interest rates on loans should be
raised up to the market, or close to the market so that it is
not a gift. It is a help to a country in making a transition,
and so the interest rate policy needs to be revised.
Obviously sovereign countries have to decide for
themselves, but I think it is increasingly apparent that
countries should be willing to have financial institutions from
outside their own country operating in a country. It helps. It
helps with transparency, it helps on diversification, which is
very important for small countries, and it helps by virtue of
competition in the financial realm, so I think that would be a
key.
I am not going to belabor the issue of exchange rates. It
is a big, complicated subject, but it is clear that it is a
very, very important issue, and I do think that for any
country, a stable and strong currency is very, very important,
and the way in which you achieve that is fundamentally by
having a strong, stable country, an economy to base it on.
There is lots more to be said about that. I just do not want to
omit it.
Then I think it is very important to really examine the
analysis of what is taking place, so that we are clear. I do
not agree with Secretary Summers' analysis of what happened. I
think the chairman is closer to the mark in his statement that
a lot of damage was done. The IMF's prescriptions in Asia for
more austerity were misguided, and they had to change them. It
got off to a bad start. There are a lot of other examples.
I think in the Asia situation it was not so much about hot
money and the new information age, which is very, very
important, but the mistakes that were made were classic
mistakes. That is, too much debt in relation to equity. Borrow
short, lend long, and into illiquid assets. Borrow with hard
currency, lend in a softly pegged currency. Put all those
things together, and you have got the ingredients for a crisis.
It does not have anything to do with the new economy. It has to
do with old problems.
I think it is ridiculous when people say Russia caught
Asian flu. The things that Russia did internally created the
crisis in Russia, not Asian flu, so I think it is important to
get the analysis right.
Finally, we have to keep reminding ourselves of the
importance of sovereign responsibilities. The responsibility of
a country to run its economy in a way that is healthy,
noninflationary, and open. And looking at the world from the
standpoint of the United States, the world looking at the
United States, there is nothing that anybody can do that comes
anywhere near the importance of a noninflationary, expanding,
open United States economy. And if you put that alongside a
European one and a Japanese one, fundamentally the problems
will work themselves through. So these sovereign
responsibilities are very, very important to this country and
elsewhere.
Thank you, Mr. Chairman. I hope I have not gone too far
over my time.
The Chairman. No, you certainly have not.
Mrs. Shultz, your husband has a nodding acquaintance with a
lot of folks in this city. He talks and we nod.
Mrs. Shultz. That is what I hear.
The Chairman. And I felt myself nodding a lot during your
remarks, sir. It is good to have you with us.
I take it that you do not think it unreasonable to insist
that the IMF and the multilateral banks which the U.S. funds
rather generously, as you pointed out, should give the General
Accounting Office access to their books to audit and monitor
their operations. Is that an unreasonable request?
Mr. Shultz. Yes. You would have to negotiate that, because
these are international organizations, and other countries
would want to have their equivalent GAO's also know. But
anyway, I think in the interests of transparency there should
be access.
Senator Biden. You cannot mandate.
Mr. Shultz. You cannot mandate, but you can say, this is
what we want, this is what we intend, and this is what we are
going to insist on.
The Chairman. Do the IMF and the various development banks
typically make loans at interest rates which are actually, in
fact, below prevailing market interest rates? If the answer to
that is yes, roughly what percentage of their loans would you
estimate should be at market loan rates?
Mr. Shultz. The answer is clearly yes, and of course you
have to make a big distinction between the IMF and the World
Bank and the Asian Bank and so on. I think in the case of the
IMF the interest rate should be somewhere near market rates,
recognizing that when there is a time of crisis, a reason why a
country may come to the IMF is that there is no interest rate
at which they could get private money, so that there has to be
some reason there.
But the IMF rates are much too low in my opinion. What you
are trying to do is provide some money that will tide a
country's liquidity problem over until things right themselves,
so I think they should pay a reasonable rate for that, and that
will cause them, among other things, to want to pay the loan
off.
The Chairman. Right. One final question. Let me go back to
May 5, 1998, when you, at a hearing of the Joint Economic
Committee, testified to this effect: Quote, ``I think,
gentlemen, that through the IMF loans to Russia we have in
effect supported atrocities in Chechnya, and I do not know why
we should want to do that.'' Obviously, you still feel that way
about it.
Mr. Shultz. I do not think there is the slightest doubt
that when you support the general budget of Russia you are
supporting, in effect, the things the government does, and the
war in Chechnya is one of the most brutal exercises we have
seen around the world, and it is quite costly, so it is eating
into the general budget of the Russian Government, which has a
hard time anyway collecting taxes, so it has got to be
significant.
The Chairman. Should we cutoff the loans to Russia?
Mr. Shultz. Absolutely.
The Chairman. Well, if I ask another question I will run
over.
Senator Biden. Go ahead.
Mr. Shultz. Well, I think our diplomacy, Mr. Chairman--we
are a little off the point here. I think our diplomacy toward
Russia is very, very important, and we should have a vigorous
interaction with Russia, but sort of paying for that by IMF
loans or some other kinds of loans is the wrong way to think
about it.
We should think about it more in terms of what are our
interests, and rely on them to represent their interests, and
exactly where Russia is going to go is hard to say. They are
going to write their own history. We cannot write it for them.
The Chairman. Senator Biden.
Senator Biden. There are only three of us. Why don't you
follow-up the last question.
The Chairman. I followed up.
Senator Biden. OK. Mr. Secretary, thank you for being here.
I am reminded, listening to you, how of all the witnesses that
have been before this committee over the years, I think you
present your case, whatever that case is, as cogently and
coherently as anyone here. I mean, I do not know how you could
have made your case better and straighter than you did by the
way you laid it out. It is always understandable.
I would like to--and since you are not in the Government I
will not give you written questions and burden you with all the
things you have got to do, but at some point I am sure you are
going to be back here.
I would like to expand on your concern and criticism of the
moral hazard involved in the current role of the IMF and other
international institutions, raising expectations that you can--
not unlike what we did here when we bailed out the savings and
loans and saved a lot of people who were not the little people.
We saved a lot of the big people. What is that old adage? I am
going to get it wrong. If you are big enough, we cannot let you
fail. That is what we do domestically, and we have done that
internationally as well.
Mr. Shultz. I have seen some issues in our own domestic
economy that I think are very instructive to look at in that
regard, because there is always a theory, here is the problem,
and if we do not intervene goodness knows what is going to
happen, and so I have been through quite a few of those things,
and I would be glad to talk about them if you want.
Senator Biden. Well, I would like to pursue that at some
point, but I would like to get specific in the short time we
have. Is there a distinction between the international lending
institutions, particularly the IMF, and what generic condition
we should lend upon? For example, Russia. Russia is not
reforming itself. We all agree with that. Additional loans to
Russia are not of much consequence in terms of getting them to
move toward democratic institutions, setting up internal
institutions that will allow people to rely upon investing
there from tax collection to a uniform commercial code, or some
version of it.
Is there a distinction between when you are loaning money
to a country, an international institution is loaning money to
a country, and an international institution inviting a country
to participate in a trade relationship? For example, WTO. The
Chinese obviously are--I should not say obviously--I believe
are even more antidemocratic in their actions and institutions
than Russia is, yet there are a lot of people calling for them
to be admitted to the World Trade Organization, assuming the
final ``T's'' are crossed and the ``I's'' are dotted in the
international agreement.
What is your position on, for example, the WTO? Should
China be admitted to the WTO?
Mr. Shultz. Yes, I think so, without a doubt.
Senator Biden. Now, I am truly not trying to be
argumentative. What are the distinctions between, obviously,
allowing a totalitarian government to engage in and participate
from and gain benefit from the regime of a World Trade
Organization, and therefore allow them in a more indirect way
to be able to continue their suppressions in Tibet because of
the economic power that they gain as a consequence of
membership there, which is one of the arguments the Senator
makes consistently about whether they should be in WTO or
whether we should lend them money.
Is there a distinction between facilitating them, a country
having resources which are fungible to engage in Chechnya, or
suppression in Tibet, or the arrest of press persons or
dissidents, whether it is done indirectly, through allowing
them access to the World Trade Organization, or it is done
directly in terms of a loan? Is there a philosophic and/or
practical difference?
Mr. Shultz. Yes, I think so.
Senator Biden. Could you tell me what it is?
Mr. Shultz. I would not support IMF loans to China, or
World Bank loans to China.
Senator Biden. You really would not?
Mr. Shultz. I would not.
Senator Biden. You would not?
Mr. Shultz. No. Trade and investment, which is done by
private individuals, is a different matter entirely. China is a
big, important trading partner, but I do not think the case for
the WTO rests primarily on economic grounds, and I know there
are lots of American companies that will be pushing for it
because of the business that they do, and that is
understandable.
I do not think that is the main argument for it. To me, the
main argument is to draw China as much as we possibly can into
the web of rules that characterizes the way the world works in
trade, and I have been going there for quite a few years
periodically, and it is the case that the change in China over
the last 20 years is stunning. It is a totally different
country.
It is a repressive regime, and they are doing some things
that are terrible, and I think the most recent blast at Taiwan
is something we should react to fast. Be clear.
But the more they are drawn into the world of trade, the
more people in China tend to know what is going on around the
world, be involved with other parts of the world, then the more
you see a change in the social and political fabric of China.
Actually, there are elections in most local communities in
China today, who is going to run their locality. Of course,
that is very different. China may be something of a revolution
from the bottom rather than from the top.
So I cannot predict what is going to happen in China, but a
lot has happened. My guess is that there will be some Tiananmen
Square-like things as you go along in this process of the
erosion of central authority. It is in a sense sort of
decentralizing now.
So I would be in favor of Chinese entry into the WTO for
these kinds of reasons.
Senator Biden. I happen to agree with you. I would suggest,
and I am not sure where it takes me on IMF, but I suggest that
if you walk through the streets of Moscow or Leningrad in the
last 5 years they are radically different. As bad as things are
in Russia, they are a hell of a lot better off, in relative
terms, than they were 10 years ago, 15 years ago.
But I appreciate it. Maybe we will get another shot later.
Thank you very much.
The Chairman. Mr. Hagel.
Senator Hagel. Mr. Chairman, thank you.
Mr. Secretary, welcome. You are one of the preeminent
public servants of our time, and we are grateful for your
insight. You also represent a particularly unique perspective
on all of this, based on the public service assignments that
you have had, and your private sector jobs. You blend national
security interests with economic interests and all that is in
between in a way that very few individuals can.
And with that, in your list of things that we should do,
you mentioned the need for some kind of an international
economic organization or institution. Could you frame that up a
little bit? Would it be a scaled-down IMF? You went through a
number of things, less money and transparency, but give us a
little sense of what you mean by some kind of an economic
organization.
Mr. Shultz. Let's call it an IMF without any money.
That is, here you have a problem in a country, say Korea,
in this recent thing, and there were a lot of people that
loaned them money, and there were a lot of people to whom it
was loaned, and what in the end happened was, these groups were
caused to get together and develop a structure of how they were
going to unwind this problem, to work it out. This is typical
of what happens in workouts in the private banking field, when
their loans would go sour. Loan officers have to get together
with people, and they have to try to work it through.
So it is often difficult to convene these parties, and it
is not easy for a country to do it, because they are regarded
as an interested party, and it is not easy for a private
organization to do it, a bank, say, because they have that same
attribute, and so I think it can be quite useful for an
international organization to act as the convener, and hire a
hall, and invite people in, and kind of moderate a discussion
of how you borrowers and you lenders are going to work out your
problem, and they will have to work it through.
And of course, if they have to work it through without
somebody giving them a lot of money to do it with, then the
pain is more apparent, and the lesson of doing your due
diligence is more apparent, but nevertheless, there is a
convener function that can be useful, I think.
Senator Hagel. You noted that the President of the United
States, the current occupant of the White House, his role and
leadership and perspective and policy on this is one that you
do not find yourself in agreement with and, of course, that
issue will be resolved in November.
Mr. Shultz. Well, I have read to you what he said he
believes as of 2 months ago, and I was going to ask you if you
agree with that. This is just a way of saying, do you agree
with this description of Russia? Do you agree with this
description of what is going on in Chechnya? I sure don't.
Senator Hagel. Well, I do not think many of us do, but the
point is, we are going to elect a new President. That new
President will have a new policy. Would you agree, or would it
be your suggestion that the new President form a Presidential
commission to evaluate all of the international financial
organizations that the United States is involved in? Are they
relevant to the challenges of the 21st century? What is their
role in the security stability of the world? these are
questions that we have deferred, not just in this Presidency,
but over the last 20 years.
And I do not, by the way, think there is any point in
belittling anybody for it, but I think we do need to reach out
into the future here and figure out where we are going. Could
you conceptualize any of that, or would it even be important,
or would it be relevant to try to understand this issue and
find some solutions?
Mr. Shultz. I think it would be extremely important, and I
think you are hearing some developing material here. I know
there is a commission authorized by the Congress to examine the
operation of these institutions and to make some
recommendations, and as the chairman noted, as I understand it
it is somewhere near ready to deliver its views, lots of input,
and it seems to me a new administration always has a fresh
start, a fresh chance, and I would hope a new Secretary of the
Treasury, whoever that is, would really make a big effort in
this regard, because I think it is way overdue.
There are some other things that I think organizationally
ought to be done, of comparable scope, but certainly what you
suggest I think would be very important to do.
Senator Hagel. Thank you. Mr. Chairman, may I ask just one
more question.
The Chairman. Certainly.
Senator Hagel. In light of the current administration's
policy, and what we are dealing with here, the chairman is
going to be marking up some legislation I think next month,
would you give us your opinion regarding the issue of highly
indebted poor countries? Are we going in the right direction?
Mr. Shultz. I think that bad debts need to be recognized as
such. That is, people need to live in reality, and there have
been a lot of loans made to desperately poor countries that are
never going to get repaid. That is a reality, and a lot of them
have been extended by the IMF and by the World Bank, and it
seems to me that these organizations should realize that
reality and write them off, just as, if you are running a
private bank and you make a loan, the loan is totally sour,
what do you do? You cannot come to the Congress and say, give
me some money to cancel that debt. You just have to swallow it,
and you say to yourself, I have got to be more careful the next
time.
The World Bank has this ethic that it never makes a bad
loan. They say that. I think it is ridiculous. If they do not
make any bad loans, they are not doing their job, because they
are in a sense supposed to be on the edge of the envelope, and
if you are anywhere near the edge of the envelope in risk, you
are bound to make some loans that do not work, so you should
not just keep them on the books forever and then try to get
them paid off by establishing a trust fund that people
contribute to, and you put the bad loans in there, and then the
bad loans are gotten rid of that way, and you continue to say
you never made a bad loan. I think they should write them off.
Senator Hagel. Do you think the current administration
policy is the correct course on these bad loans, as we refer to
them?
Mr. Shultz. I do not consider myself well-enough informed
in precise detail, but I know, having been in these positions,
that bad loans are a problem, because they are sort of there,
they are a running sore, they are not going to get repaid, and
yet they overhang the situation, and make it hard to grapple
with the reality that is there and try to get that economy
moving forward. It is hard for people to adopt the kind of
policies they would like to adopt.
So I think bad loans are bad loans. I think we had
policies--let me say something--I am not criticizing this
administration particularly, but in the 1980's there were a lot
of bad loans out to Latin American countries, and in response
to that, it started with Mexico, but Brazil, Argentina and so
on were involved, through the IMF with the Fed and the Treasury
loans were made and conditions put, largely saying to people
you need to have austerity so you do not have a lot of imports.
You need to lower your exchange rates so you can sell exports,
generate foreign exchange to be able to pay off the loans.
I thought at the time, but in retrospect certainly it was
bad advice. It helped the banks. They were very overexposed,
and they had 4 or 5 years--people kicked the can down the road,
people had 4 or 5 years to get their balance sheets in order,
and then finally, in what became called Brady bonds, the
reality was recognized and the market decided whether it wanted
to pay 10 cents on the dollar, 20 cents, 80 cents, or whatever,
the market prices, and then Latin Americans started to move
forward.
But in the meantime, people I think characterized that as a
lost decade in Latin America, and I do not think it needed to
be so, if people had just faced the reality that these loans
are no good, and you have got to go on from there, and as far
as large bank exposures in the U.S., making them vulnerable and
making us nervous, well, that is a problem for us to face with
those banks, not to in a sense have the people of Latin America
lose a decade, as they did.
It is interesting, incidentally, that Chile got into
trouble, too, in that period, and nobody would help them. IMF
would not help them, we would not help them, because Pinochet
was a pariah, although they had--the ``Chicago Boy's'' economy
was there. So they had to solve their own problems, which they
did. It was hard, but by the mid-1980's they had the only
healthy economy in Latin America, whereas all the economies
that we helped were miserable. There has got to be some kind of
a message there.
Senator Hagel. Thank you. Mr. Chairman, thank you.
The Chairman. Mr. Secretary, it is so good to have you
sitting there again, and to see you again, and to meet you,
ma'am, and I hope that we can dream up another reason to have
you cross the country, because it is always a joy to hear you.
Mr. Shultz. Thank you, Mr. Chairman.
The Chairman. Thank you for putting up with us today and,
as you know, the record will be kept open so the Senators may
file written questions, and when you have time, if you would
respond to those, I would appreciate it.
Mr. Shultz. Thank you, Mr. Chairman.
The Chairman. If there be no further business to come
before the committee, we stand in recess.
[Whereupon, at 12:30 p.m., the committee adjourned.]

ADMINISTRATION OF FOREIGN AFFAIRS BUDGET FOR FISCAL YEAR 2001

----------

WEDNESDAY, MARCH 8, 2000

U.S. Senate,
Subcommittee on International Operations,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:33 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Rod Grams
(chairman of the subcommittee) presiding.
Present: Senator Grams.
Senator Grams. Well, good morning. I would like to bring
this hearing to order.
And, Mr. Kennedy, thank you very much for being here this
morning, and our other witness, Mr. Nelson, who will provide us
all the answers on the second panel. Thank you very much.
I realize that budget and management issues are not as
flashy as some of the foreign policy issues that are on the
front burner, but they are, as we all know, very extremely
important.
The administration's budget request should not only reflect
its priorities, but it should also serve as an outline for the
transformation, which we all agree needs to take place in our
foreign policy bureaucracy in order to be effective in this new
century.
The Overseas Presence Advisory Panel report noted that the
poor condition of many of our overseas posts, the folding chair
Embassy in Kiev, which is so crowded that employees must fold
their chairs to get to their desks; the Consular's shack in
Moscow to shelter visa applications because they could not be
accommodated in the Embassy; and the trailer that staff in
Angola have worked in for 8 years; and I think this is
unacceptable, as is the outdated and incompatible information
technology that our overseas personnel must endure.
Now, we do not have an Internet-based network which
connects all agencies and posts. And many employees find the
best way to communicate with their colleagues here in
Washington, DC is from their home computers.
Now, clearly, the overcrowding and the lack of information
technology needs to be addressed. However, it would be a
mistake to treat the symptoms without regard to the underlying
cause.
There has been a long-standing failure of the State
Department to foster a culture of flexibility and innovation
and develop a coherent interagency platform that would allow us
to respond effectively to changing foreign policy priorities.
Now, the panel points out that more funding, if spent in
the same way, will not be adequate. And I want to make sure
that it is not what you are proposing today, just more spending
in the same way.
We need to reform the methods by which we operate overseas
to reflect and accommodate a more complex environment.
Now, as we continue to work together to improve the
security of our diplomatic facilities abroad, we must also work
together to tighten security at the State Department itself,
because, you know, let us face it, if the Russians can rip out
a piece of molding in the State Department on the very floor
that contains the Secretary of State's office and replace it
with a similar one that contained a bug, we do have a problem.
In response to the Secretary of State's remarks and the
testimony of Assistant Secretary Carpenter before this
subcommittee, I introduced a bill to create an Under Secretary
for Security.
In the past, the Bureau of Diplomatic Security has tried to
impose stricter security measures, only to be rebuffed by
diplomats and policymakers. We cannot safeguard our nation's
interests, if we cannot ensure the security of our foreign
policy apparatus.
Now, I know that some of my colleagues, including the
chairman, are very concerned about creating another fiefdom,
and enlarging the bureaucracy. And I share those concerns, and
I am committed to ensuring that this does not happen in this
case as well.
So with that, I would like to welcome our witnesses. As I
mentioned, Mr. Benjamin F. Nelson, who will be on our second
panel this morning, he is the Director of the National Security
and International Affairs Division at the General Accounting
Office.
But our first witness is Patrick Kennedy, who is Assistant
Secretary for Administration at the Department of State.
Mr. Kennedy, thank you very much for being here this
morning.

STATEMENT OF HON. PATRICK F. KENNEDY, ASSISTANT SECRETARY OF
STATE FOR ADMINISTRATION, DEPARTMENT OF STATE

Mr. Kennedy. Thank you, Mr. Chairman.
Mr. Chairman, I have a written statement that I would like
to submit for the record, and with your approval I have a few
oral remarks that I would like to make to open.
Senator Grams. So ordered.
Mr. Kennedy. Thank you.
I very much appreciate the opportunity to appear before you
today to discuss the Department of State's fiscal 2001
operating budget.
The Department appreciates very much the committee's
support and your leadership on some of our most critical
management initiatives including the Embassy security and
counter-terrorism section of the Department's fiscal year 2000-
2001 authorization bill.
Let me first stress that the President's budget request for
fiscal year 2001 is essentially for current services, with the
exception of security and U.N. peacekeeping.
For State Department program accounts, we are seeking a
little over $3.2 billion, primarily for diplomatic and consular
Programs. The President's budget request for Embassy security
and construction is a little more than $1 billion for next year
and $3.5 billion in advanced appropriations through 2005.
The Department, as you know, maintains over 260 diplomatic
and consular posts around the world. These house not only State
Department officials but also serve as platforms for some 30
other U.S. Government agencies, from Defense to Commerce, from
Agriculture to Justice.
But even as we shoulder new responsibilities and staff new
posts in places such as Kosovo and East Timor, the Department's
resources have dwindled in real and in absolute terms.
Our considerable infrastructure of over 13,500 properties
has aged and decayed as construction and maintenance have not
kept pace with growth, as you so well pointed out in Kiev.
This lack of resources has challenged our ability to manage
the Department's global responsibilities despite successful
efforts to improve efficiency through training, information
technology and administrative streamlining.
Last year, Secretary Albright convened the Overseas
Presence Advisory Panel, OPAP, to consider the future of our
Nations's overseas diplomatic presence and to develop practical
recommendations on how best to organize and manage our overseas
posts.
OPAP issued a report in November, which described the
deplorable condition of some of our embassies and consulates
abroad following the erosion of resources through much of the
past decade.
As I address major management initiatives, the changes that
I think we both agree we ought to be undertaking, I will note
their relevance to OPAP's recommendations.
Within days of the bombings in Nairobi and Dar es Salaam,
the Department put together a supplemental request using all
available data for what we knew would be the first tranche of
funding for a long-term effort to upgrade our security posture.
This data has subsequently been refined and the focus
expanded after attacks in Beijing and Skopje, to include both
mob attacks and bombings at all our overseas facilities, not
just Embassy buildings themselves.
With emergency supplemental appropriations provided by the
Congress, the Bureau of Administration's Office of Foreign
Building has successfully undertaken a number of major steps:
Completed three new interim chancellories in Dar es Salaam,
Nairobi, and Doha; five more permanent chancellories are under
construction in Dar es Salaam, Nairobi, Doha, Kampala and
Zagreb; two are in design, Istanbul and Tuni; and sites have
been acquired or selected for two more, Sao Paulo and Rio de
Janeiro.
We have initiated 1,160 security upgrade projects at 250
posts, of which 323 are already completed.
And we have completed property acquisitions to enhance
setback distances at 20 posts, and we are negotiating for 70
other properties at 14 posts.
To enhance the perimeter security program initiated under
the supplemental, the Department is seeking a total of $200
million--$66 million in diplomatic and consular programs and
$134 million in Embassy security, construction and maintenance.
For capital projects, included in our request is $500
million, including $50 million for USAID, to relocate the next
tranche of high-risk.
These funds will be used to provide for design and/or
construction of facilities in Cape Town, Damascus, Rio de
Janeiro, Sao Paulo, Sofia and Yerevan, as well as funding to
meet AID requirements in Kampala and Nairobi. It will also fund
the acquisition of five to eight additional sites.
In spite of the progress made this year, over 80 percent of
our posts cannot be modified to conform to Inman standards.
This is why we are requesting $3.35 billion in advance
appropriations over the next 4 years to replace the highest-
risk, most vulnerable embassies and consulates. These funds
will allow the Department to plan coherently and to continue to
relocate these critical posts.
The Department is exploring OPAP recommendations on
revising the method of funding and administering the design and
construction of our foreign buildings.
I am not convinced of the wisdom of moving responsibility
for foreign buildings from the Department to a new government-
chartered entity that would be governed by a board composed of
agencies with an overseas presence.
Negotiations for land and embassy construction often become
sensitive issues in our bilateral relations with the host
nation. Because building issues cannot but be tightly linked
with foreign policy, this function cannot be separated from the
Department.
I think the most effective, straightforward approach is to
address the conditions noted in the OPAP report that hamper
FBO's effective operations. Therefore, I am encouraged by
OPAP's other recommendations that propose widening the funding
options available to FBO.
OPAP endorsed universality of representation but also
rightly questioned the high costs of deploying American staff
overseas and encouraged wider use of alternative arrangements
that the Department had already begun to explore, including
regionalization of administrative operations and one-person
American presence posts.
Though they noted the potential for savings from all
agencies, they made no specific post recommendations. Thus
following up, an interagency group, working with Chiefs of
Mission, will conduct a review of all agencies' staffing at
seven pilot posts, beginning in Mexico City this month, and
make specific recommendations by June of this year.
We have begun to implement many of their other
recommendations on human resources and training called for by
both OPAP and the McKinsey report.
Personnel rolls shrank in the Department by 11 percent
between 1992 and 1997. And we have only recently stabilized our
employment at attrition levels.
Last year's supplemental, thanks to this committee and
others, filled many staffing gaps in the security area, and the
2001 budget also has modest increases for security staffing.
We are also now training more employees than at any time in
recent memory. And next month, the Department will inaugurate a
new Leadership and Management School at the Foreign Service
Institute.
To continue these efforts, we are requesting $3 million in
2001 to improve functional, language, leadership, security and
management training.
Since the East African bombings, we have been reassessing
every aspect of our security posture. To this end, the
Secretary announced last week that she is exploring the
possibility of creating the position of Under Secretary of
State for Security, Counterterrorism and Law Enforcement.
Assistant Secretary David Carpenter is leading a review of
the Department's structure for addressing these issues and will
recommend a course of action to the Secretary.
Our goal, in keeping with the recommendation of the Crowe
Commission and the OPAP report, is to clarify the lines of
authority, improve coordination among security functions and
assure that a single high-ranking officer can speak for the
Department on security-related issues.
We have also moved quickly to address some of our most dire
security needs. Highlights of these initiatives funded by your
emergency security supplemental include the local guard
program, which has strengthened security for embassies and
consulates with mandatory vehicle inspections worldwide;
additional perimeter guards at 121 posts; and surveillance
detection programs at 154 posts; purchasing 871 walk-through
metal detectors; shipping 230 bomb detectors; and installing
157 x-ray machines.
Also, 11,130 armored vehicles are in the production
pipeline, with 44 armored and 187 lightly armored vehicles
already delivered.
And we have filled all of the 337 positions funded by the
supplemental, including special agents, security engineers and
security technical specialists.
But last year's security appropriation must be followed by
sustained funding in the next decade to finish the job we have
only begun.
The 2001 request for security upgrades in diplomatic and
consular programs is $410 million. And more than three-quarters
of this amount is for recurring costs associated with these
continuing security initiatives.
The challenge of security extending beyond safeguarding our
physical plant and equipment is great. We are also instilling
in every employee a sense of responsibility and accountability
for safeguarding the security of our premises at home and
abroad.
The Department has done the following to improve our
security posture domestically: We have implemented a new escort
policy that makes individual employees responsible and
accountable for escorting guests around the State Department
premises.
We have introduced a strict computer password policy. And
the Chief Information Officer and the Assistant Secretary for
Diplomatic Security are reviewing all computer security
procedures to assure that all our employees are fully aware of
the escalating numbers and varieties of cyber threats to the
Department.
Consistent with a key OPAP recommendation, we are focusing
on ensuring that all employees of all U.S. Government agencies
working overseas can communicate with each other efficiently,
as you have noted is a right goal in your own statement.
We are requesting $17 million to begin this process by
creating interagency connectivity at two posts selected from
among the seven right-sizing posts.
In the past, other agencies have been reluctant to join us
on a common computer platform, and we hope that with OPAP's
encouragement this attitude will change.
Building on the Department's successful Y2K rollover, which
many said we would not succeed at, we have an ambitious
initiative underway at the Department to modernize our entire
information technology initiative.
The number of Department employees with Internet access has
increased by 165 percent in the last 3 years. In addition, a
uniform unclassified computer system was fully deployed at 233
posts.
Mr. Chairman, it is a field in which periodic bursts of
funding for updates are not enough. Consequently, our 2001
budget includes a $97 million request for the capital
investment fund.
This funding, in coordination with the $63 million that you
allowed us to have from expedited passport fees, would go
toward upgrades to the Department's global information
technology infrastructure, specialized desktop systems tailored
to the needs of the diplomat, standardized messaging, which can
be used to expand to all agencies, improved Internet access,
and training requirements.
We are also very pleased that OPAP has recognized the many
innovative steps we have taken to improve the delivery of
consular services to our customers, both in the United States
and overseas.
Since 1994, the Bureau of Consular Affairs has been allowed
to keep its machine-readable visa fees, and these--and with
these fees, the Bureau has implemented a comprehensive strategy
to improve automated consular services and enhance U.S. border
security.
In 1999 alone, Consular Affairs completed the worldwide
installation of Y2K compliant machine-readable visa computer
systems at all visa-issuing posts; expanded the border crossing
card program by issuing more than 1 million biometric, machine-
readable cards to Mexican nationals; improved fraud prevention
programs; and deployed more secure photo-digitized passports,
which will completely replace the old version by the end of
2001 at our domestic facilities.
In addition we now have the capability to make available to
INS photographs and completed visa applications through a
centralized electronic data base. This would allow border
inspection officials to verify visas by seeing the actual
documentation that accompanied the issuance. The results of
these initiatives are better service.
In last year's governmentwide National Performance Review,
the Consular Bureau ranked in the top 20 percent for customer
service and program performance and outperformed private sector
service benchmarks in most categories.
Goals for this year include launching a new 1-800 number
that will improve customer services to Americans seeking
passports; reengineering the immigrant visa processing system;
and deploying a comprehensive signage package in consular
sections worldwide.
Finally, we are seeking congressional approval to make our
visa waiver program permanent in its existing form.
Allowing Consular Affairs to retain some of its processing
fees has resulted in an organization now recognized throughout
the U.S. Government for its excellence in customer service and
one that is virtually self-funding.
Consular Affairs shows what the Department can accomplish
when we combine our managerial talents with adequate resources.
Finally, I would like to review the Department's most
significant accomplishment of the past year, the successful
integration of the Arms Control and Disarmament Agency and the
United States Information Agency into the State Department.
In a March 1 hearing before the House Subcommittee on
Commerce, Justice and State, the Department's inspector general
praised the Department's preparations for this massive
undertaking--the largest structural change to the U.S.
Government's foreign affairs administration in decades.
She characterized it as a good investment that resulted in
a smoother transition than would have otherwise been possible.
Although we have already taken the major step of formal
consolidation, the process is not yet finished. To achieve
complete functional and physical integration, we need to have
congressional approval to use prior year balances to pay for
such one-time expenses as the harmonization of computer systems
and the relocation of personnel.
This is no different than in the private sector, where
expenses rise temporarily following a merger. And just as the
private sector undertakes mergers to find savings through more
efficient organization, so do we expect to achieve efficiencies
in future years through a more streamlined foreign affairs
structure.
However, our bottom lines do differ. The private sector is
ultimately looking for bigger profits, while we are looking for
ways to more effectively promote our country's national
interests.
That is why the Secretary has consistently said that
integration was primarily designed to enhance foreign affairs
coordination.
However, the goals of enhanced policy coordination and
cost-savings are not irreconcilable. Rather, we see them as
mutually reinforcing. Thus, I can assure you that cost-savings
is a related goal of integration.
But the savings will be realized through the merger of
administrative operations, not through downsizing, because
there is no overlap in the programmatic functions of ACDA, USIA
and State.
While we can already report efficiencies and savings as a
result of the reorganization, and we have factored these into
our budget request.
Projected rental savings, for example, from vacating
buildings housing USIA personnel in Washington, as well as the
USIA warehouse in New York, should total $2 million in fiscal
year 2001.
And we are also implementing or planning overseas as posts
consolidate facilities in places as diverse as Buenos Aires and
Tiblisi, and Palermo and Hanoi.
We will continue to press forward additional economies in
the future. However, these examples are noteworthy not only for
the cost savings they represent, but also because they
demonstrate that we are managing our resources innovatively and
skillfully.
This sound stewardship of the public trust applies across
the board, as evidenced by the successive unqualified audit
opinions we received in fiscal year 1997 and fiscal year 1998;
and the one we expect for fiscal year 1999, as soon as the
inspector general's office has completed their work.
In conclusion, Mr. Chairman, I have outlined some of the
major management initiatives launched by Secretary Albright.
We are grateful for the constructive efforts that the
Congress has made to help accelerate positive changes in the
Department.
I urge you to support this budget, so that we can build
sufficient momentum to consolidate the gains we have jointly
made.
And I would welcome any questions that you might have, sir.
[The prepared statement of Mr. Kennedy follows:]

Prepared Statement of Hon. Patrick F. Kennedy

Mr. Chairman, members of the subcommittee, thank you for the
opportunity to appear before you today to discuss the Department of
State's Fiscal Year 2001 budget request. The past year has been a
challenging one with many accomplishments for the Department of State.
The Department appreciates the subcommittee's support and your
leadership on some of our most critical management initiatives,
including the improvement of our security posture and the
implementation of the Overseas Presence Advisory Panel (OPAP)
recommendations. We have tackled many difficult management issues head
on to fulfill Secretary Albright's goal of creating a dynamic and
effective Department that supports our nation's diplomats with the
resources they need to promote American security, prosperity, and
values. Today I wish to update you on the progress we have made and the
tasks still ahead of us.
As Secretary Albright said when she testified before you last week,
the need for active American engagement and leadership has grown since
the end of the Cold War. Diplomacy remains America's first line of
defense against threats to the security and prosperity of our nation.
The Secretary has described to you the Department's work to protect
America's national security through our efforts to halt proliferation
of the weapons of mass destruction, facilitate peace efforts in
volatile regions, fight terrorism, and promote democratization. And she
has already told you of our commitment to build American prosperity by
promoting free trade, assisting American businesses abroad,
safeguarding intellectual property rights, fostering the rule of law,
and aggressively promoting anti-corruption efforts in order to level
the playing field for American business.
Let me highlight the fact that, in addition to these strategic
initiatives, the men and women of the State Department directly serve
our citizens every day--even before Americans leave our shores. The
Department maintains almost 260 diplomatic and consular posts around
the world. These posts not only house State officials but also serve as
platforms for about 30 other government agencies, from Defense to
Commerce, from Agriculture to Justice. Our embassies and consulates
house dedicated teams of Americans who defend our national interest in
bilateral dialogues, multilateral negotiations, and international
organizations.
We issue about seven million passports a year to Americans across
the country and provide information about security and travel
conditions for American citizens traveling overseas. Last year we
issued 63 Travel Warnings, 133 Public Announcements, and 354 Consular
Information Sheets to the American public. All of these are available
at our web site, travel.state.gov which received a total of 92 million
visits in 1999.
Our embassies also provide emergency assistance to American
citizens abroad. Last year over 50 million Americans traveled overseas
and over 3 million lived abroad. It is the State Department's
responsibility to maximize their safety to the extent we can and to
assist them in emergencies. Last year, our consular officers issued
passports to a quarter of a million Americans abroad, including 35,000
whose passports were lost or stolen, visited over 5,000 Americans
incarcerated abroad, and assisted more than 6,000 American families to
cope with the death of a loved one overseas. Consular officers carried
out thousands of visits to determine the welfare and whereabouts of
U.S. citizens, including children who have been abducted abroad by one
of their parents. And our consular officers helped more than 16,000
American families adopt foreign-born children.
If a crisis, whether natural or manmade, threatens the lives of
Americans abroad, the Department will step in to coordinate the
evacuations of our citizens. In 1999, a total of 12 missions were put
on evacuation status. Six emergency task forces were set up at the
Department in which consular officers alone worked over 1,500 hours to
assist American citizens in trouble overseas. Of course, those hours
are above and beyond the countless hours that consular officers put in
overseas to deal with these crises.
The Department's consular officers perform critical border security
functions. Our posts serve as gateways to the United States by
processing visa applications for foreign citizens. Last year alone,
consular officers adjudicated almost 9 million immigrant and non-
immigrant visas worldwide. In this and in many other ways, the men and
women of the Department of State serve American citizens as America's
first line of defense against threats to our Nation.
reorganization and responsibilities
One of the Department's major accomplishments of the last year was
the successful integration of the Arms Control and Disarmament Agency
(ACDA) and the United States Information Agency (USIA) into the State
Department. This massive undertaking--the largest structural change to
the U.S. Government's foreign affairs administration in decades--has
proceeded more smoothly than anyone expected. Putting these critical
foreign policy functions under one roof has already enhanced the
consistency and integrity of our foreign policy. But although we have
already taken the major step of formal integration, the process is not
yet complete. There remain outstanding issues to be resolved before the
three organizations become truly integrated into the Department. We
need to have congressional approval to use prior year balances so that
we can achieve functional and physical integration. Workspaces and
computer systems of the three organizations must be fully integrated
before the merger yields the originally envisioned management
efficiencies.
Although integration is still a work in progress, we believe it has
already made the State Department a stronger and more effective
advocate of American interests abroad. But our workload has continued
to increase as America reaps the advantages of remaining engaged in an
ever more complex, competitive, and interdependent world. We opened 40
new posts in the 1990s, many of them precisely because of our foreign
policy successes. For example, following the dissolution of the USSR,
our one Embassy in Moscow was joined by 14 in each of the post-Soviet
republics. We are opening new posts in Kosovo and East Timor to keep
pace with the dramatic changes in those critical parts of the world. We
have had to adjust to the rise of new issues on the international
agenda, from genetically modified organisms to global warming to
peacekeeping in Kosovo. As we shoulder new responsibilities and staff
new posts, the Department needs the resources to manage our
considerable infrastructure overseas (we manage over 13,500 properties
worldwide). This infrastructure requires sustained efforts to construct
and maintain.
The President's budget request for 2001 is essential to our ability
to manage the Department's global responsibilities and continue our
successful efforts to improve efficiency through training, information
technology, and administrative streamlining. As Secretary Albright
said, it is embarrassing that a nation that aspires to lead the world
has such run-down embassies and a hollow diplomatic corps. State
Department employees form an extraordinarily dedicated and talented
team that works around the clock to protect America's security and
prosperity. We owe it to these men and women to provide them the
necessary resources to do their jobs. The Department appreciates the
subcommittee's support for our efforts to arrest the resource decline
of the 1990s. We hope that we can count on you to continue funding
needed reinvestment that provides our personnel with the necessary
tools to respond to the challenges of 21st century diplomacy. Quite
simply, Mr. Chairman, without giving our diplomats the tools they need
and the security they are owed, we cannot do what this nation needs us
to do.
Let me now outline our proposed FY 2001 budget. The Department's
request supports the Administration's determination to promote
America's global leadership, as well as the Administration's firm
commitment to protect U.S. Government personnel serving abroad, improve
the security posture of our overseas facilities, and correct serious
deficiencies in the U.S. Government's overseas infrastructure.

OPAP IMPLEMENTATION

Mr. Chairman, first I would like to highlight the OPAP report both
because I know of your great support of it and because it is an example
of the new approach we have taken to management of the State
Department. Last year, following on Admiral Crowe's valuable
Accountability Review Board report, Secretary Albright convened the
Overseas Presence Advisory Panel under Chairman Lewis Kaden to consider
the future of our nation's overseas diplomatic presence, to appraise
its condition, and to develop practical recommendations on how best to
organize and manage our overseas posts. OPAP issued a report in
November which described the deplorable condition of some of our
embassies and consulates abroad following the erosion of resources
through much of the last decade. Let me describe what we have already
done to implement the report's recommendations in several areas.
As you know, OPAP urged that the Bureau of Diplomatic Security and
the Bureau of Administration's Foreign Buildings Office (FBO) continue
to implement the recommendations of the ARB. Assistant Secretary
Carpenter is overseeing the ARB implementation process. As part of this
process, we are requesting new FY 2001 funding to hire additional
security personnel, continue new embassy construction, and develop a
robust perimeter security program. I will detail these programs later.
The Panel recognized the high costs of deploying American staff
overseas and encourages wider use of alternative arrangements the
Department has begun to explore, including regionalization of
administrative operations and one-person American Presence Posts. The
Secretary of State, together with the other Cabinet Secretaries, has
launched an interdepartmental review of overseas staffing to ensure
that we have the right mix of people at our posts to achieve America's
foreign policy goals. Working with chiefs of mission and country teams,
an interagency working group led by Ambassador Peter Burleigh will
conduct a review of all agencies' staffing at seven pilot posts and
make specific right-sizing proposals by June of this year.
Several additional working groups have also been established to
address the many other recommendations of the OPAP report.
On human resources and training, we have begun to implement many of
the recommendations called for by both OPAP and the McKinsey report,
``The War for Talent.'' We are piloting a 360 degree evaluation system
which will allow employees to give meaningful feedback on the
performance of their supervisors, not just the other way around. To
encourage and promote high performers, we are now allowing officers who
were identified as outstanding employees to bid for positions one grade
higher than their own. And we are working intensively to improve
quality of life by streamlining travel procedures, providing greater
employment opportunity for spouses, and creating more choices for
overseas education of State employees' children.
On information technology (IT), we are focused on ensuring that all
employees of all U.S. Government agencies working overseas can
communicate and collaborate with each other efficiently. We are working
to adopt a flexible approach that will link all overseas staff together
with a common IT architecture. The budget you have before you requests
$17 million to begin this process by creating interagency connectivity
and the application of knowledge management at two posts selected from
among the seven right-sizing posts.
In the case of consular affairs, we are very pleased that OPAP has
recognized the many innovative steps we have taken to improve the
delivery of consular services to our customers both in the U.S. and
overseas. In this regard, the Bureau of Consular Affairs is in the
process of contracting with an internationally-respected consulting
firm to undertake a survey of its overseas customers. Our objective in
this survey is to see how well we support overseas posts in terms of
American Citizen Services. In addition, we continue to expand our
efforts to introduce the concept of ``best practices'' to all of our
consular operations. And I can assure you that the Department looks
forward to working with this subcommittee as all of us grapple with the
issue of whether we should link directly consular workload and
resources by allowing the Department to have full consular fee
retention authority as proposed by OPAP.
The Department is exploring OPAP recommendations on reinventing the
method of funding and administration of our foreign buildings design
and construction. An interagency group headed by the Director of the
Foreign Buildings Office is reviewing all aspects of this issue. In
addition, we at the Department are seeking expert outside advice in
this area and have contracted with a leading consulting firm to examine
various funding options and ways to make FBO a more performance-based
organization. After they report to us this spring, we will review their
findings to determine how best to respond to the OPAP recommendations.

SECURITY

The East Africa Embassy bombings in 1998 made embassy security the
first priority on everyone's agenda. Since then, we have been working
hard to reassess every aspect of our security posture and our ability
to respond comprehensively to threats to U.S. citizens and diplomats
abroad. To this end, as the Secretary told you last week, she is
exploring the possibility of creating the position of Under Secretary
of State for Security, Counterterrorism, and Law Enforcement. In
preparation, Assistant Secretary Carpenter is leading a review of the
Department's structure for addressing these issues and will recommend a
course of action to the Secretary. He is doing so in close consultation
with Mike Sheehan, our Counterterrorism Coordinator, and other senior
officials. The goal of this review, in keeping with the recommendation
of the Crowe commission and the OPAP report, is to identify options
that would clarify lines of authority, improve coordination among
security functions, and assure that a single high-ranking officer can
speak for the Department on security-related issues.
Before reviewing the progress we have made on the most dire
security needs in the aftermath of the embassy bombings, we would like
to express our gratitude for the support your subcommittee and the
entire Congress gave us in passing the Emergency Security
Appropriation, which allowed us to take first steps to counter the
escalating terrorist threat against U.S. personnel and property
overseas. The Department has put that much-needed infusion of security
funds to excellent use.

Some highlights:
Through the Local Guard Program we have strengthened
security for embassy and consulate perimeters with mandatory
vehicle inspections worldwide, additional perimeter guards at
121 posts, and surveillance detection programs at 154 posts.
New security equipment will ensure no posts have outdated
technology. As of January 2000 we had purchased 871 walk-
through metal detectors, shipped 230 bomb detectors and
installed 157 x-ray machines with more in various stages of
procurement. Of the 1,030 armored vehicles in the production
pipeline, 44 fully armored and 187 lightly armored have already
been delivered.
All of the 337 security professionals funded by the
Emergency Security Appropriation have been hired, including
special agents, security engineers, and security technical
specialists.

To combat the escalating cyberterrorist threat:
DS has deployed Regional Computer Security Officers
worldwide to monitor the computer security posture of posts
overseas and help their resident computer staff access the
necessary resources and expertise to solve security problems.
DS has formed a Computer Intrusion Detection Team comprised
of analysts and special agents who respond to computer
incidents and devise appropriate response strategies. This Team
has already foiled a number of hacking attempts.

But despite these improvements, our battle for security is clearly
not over. The threat to U.S. diplomatic personnel and facilities
remains lethal and global, with a 100 percent increase in reported
threats and incidents last year alone. The arrests in Jordan, Canada,
Senegal, Mauritania, and the U.S. during the Christmas/New Year's
period underscore that Usama bin Ladin and his network of operatives
are still seeking opportunities to strike U.S. targets at home and
abroad. Since January 1999, we have uncovered over 500 incidents of
reported surveillance or suspicious activity against our overseas
facilities and personnel.
Therefore, last year's Security Appropriation must be followed by
sustained funding in the next decade to finish a job we have only
begun. The FY 2001 request for worldwide security upgrades in
Diplomatic and Consular Programs is $410 million. More than three-
fourths of this amount is for recurring costs associated with
continuing the program of security initiatives I mentioned earlier.
This $410 million includes $16 million to hire 162 additional security
professionals.

STRENGTHENING THE CULTURE OF SECURITY

But the challenge of security extends beyond safeguarding our
physical plant and equipment. We also need to strengthen the ``culture
of security'' at the Department. That is, we need to ensure that we
have an organizational environment in which every person is not only
aware of the need for security but also accepts individual
responsibility for it.
Following the collapse of the Soviet Union and the end of the Cold
War, the U.S. reduced defense spending and reduced security budgets
because of a diminished threat perception. While the vast majority of
the Department's employees have always complied with security
regulations, they also saw security writ large as somebody else's
responsibility, and thus were willing to leave day-to-day operations
largely in the hands of the Department's security professionals.
Secretary Albright, who has made improvement of the Department's
security posture a primary goal of her tenure, has vigorously
undertaken the difficult task of changing people's attitudes. She
recognized that this is equally important to implementing physical and
technical fixes.
The Department has already done the following to improve our
culture of security:

As the attached chart shows, we have rapidly increased the
number of Crisis Management Exercises to build emergency and
security situation skills among all Department employees.
We implemented a new escort policy that makes individual
employees responsible--and accountable--for escorting guests
around Department premises. Obviously, we all wish this had
been done sooner. But we are confident that our tightened
escort policy has made Main State more secure and encourages
security awareness among all our employees.
We have introduced a strict computer password policy,
ensuring that users create more complex passwords and change
them regularly.
We initiated a Security Training and Awareness Program which
in the last year has briefed over 5,000 Department employees on
information security.
Chief Information Officer Fernando Burbano and Assistant
Secretary Carpenter are reviewing all computer security
procedures to assure that our employees are fully aware of the
escalating number and variety of cyber threats to the
Department.
The Bureaus of Diplomatic Security, Consular Affairs, and
Personnel have jointly instituted new cooperative procedures to
prevent, detect, and investigate cases of consular malfeasance
to assure that all our officers remain dedicated to protecting
the borders of the United States from incursion by unwanted
persons.

BUILDING SECURITY

Of course, after the embassy bombings building security became the
foremost priority for both the Congress and the State Department. With
Emergency Security Appropriation funding, the Foreign Buildings Office
has taken a number of major steps:

Three new interim embassies (Dar es Salaam, Nairobi, and
Doha) have been completed; five are under construction (Dar es
Salaam, Nairobi, Doha, Kampala, and Zagreb); two are in design
(Istanbul and Tunis) and sites have been acquired or selected
for two new buildings (Sao Paulo and Rio de Janeiro).
As of last week, we have initiated 1,160 security upgrade
projects at 250 foreign service posts, of which 323 are already
complete.
In addition to these physical security upgrades, 47 property
acquisitions have been completed to enhance setback at 20 posts
with negotiations on 70 other properties continuing at 14
posts.

The initial costs of the security upgrades were generated in
Washington to respond as quickly as possible to the timing of the
security supplemental. As I said, the appropriated funds were put to
excellent use to reinvigorate our building program to enhance embassy
security, hire new security personnel, purchase sorely needed
equipment, and initiate security awareness and training programs.
Mr. Chairman, last year's much-needed supplemental security funding
was put to good use. But the fact is that despite the progress made
this year, over 80 percent of our posts are not compliant and cannot be
modified to become compliant with Inman standards. This is not a one-
or two-year project. It requires sustained political will and funding.
That is why we are requesting $3.35 billion in advance appropriations
over the four year period FY 2002 through FY 2005 to replace the
highest risk, most vulnerable embassies and consulates. These funds
will allow the Department to plan coherently and to continue the
process of relocating these critical posts based on an analysis of
security posture and threats, the global political situation, and the
executability of those projects. In particular, funding requested in FY
2002 will enable the Department to proceed with the construction of
those projects for which site acquisition and/or design will be
initiated in FY 2000 and FY 2001.
To enhance the perimeter security program initiated under the
Emergency Security Appropriation, the Department is seeking a total of
$200 million--$66 million in Diplomatic and Consular Programs and $134
million in Embassy Security, Construction, and Maintenance. A portion
of these funds will be used to complete upgrades at 22 posts. These
improvements will bring the posts up to better security levels as
envisioned under the Inman/Crowe recommendations. The remainder of the
funds will be used to address substantial technical upgrade
requirements identified at an additional 40 posts.
For capital projects, included in our request is $500 million,
including $50 million for USAID, to relocate the next tranche of high-
risk posts that began with the Emergency Security Appropriation. These
funds will provide for the design and/or construction of facilities in
Cape Town, Damascus, Rio de Janeiro, Sao Paulo, Sofia, and Yerevan, as
well as funding to meet AID requirements in Kampala and Nairobi. They
will also fund the acquisition of 5-8 sites.
Of course, security is not only a matter of fortification. With the
stringent physical security standards now in place, our recently
designed embassies can look more like fortified bunkers than public
buildings. Last November, State co-hosted with GSA a national
conference on the subject of balancing security and openness in federal
buildings, featuring Senator Moynihan and Supreme Court Justice Breyer
as keynote speakers. The consensus opinion was that it is possible to:
one, make embassy design reflect the democratic values of our society;
two, be more respectful of local culture; and three, improve the
buildings' security posture. In cooperation with GSA's Public Buildings
Service, FBO has launched an initiative to update our design criteria
to better achieve all three by phasing in performance-based design
criteria in place of proscriptive security standards. In this regard,
we have begun the practice of hiring prominent local architects to work
with our project teams to ensure our designs are sensitive to the local
culture. Finally, we are in the process of introducing uniform signage
in our consular sections that will be simple, functional, approachable,
and distinctly American.

INFORMATION TECHNOLOGY

Since Secretary Albright took office, the Department has totally
transformed its information technology environment. Critical to that
transformation was the creation of the Department's IT Capital
Investment Fund and its linkage to the Department's strategic plan.
With the leadership of the Chief Information Officer (CIO), the Bureau
of Information Resource Management (IRM) has achieved rapid
modernization even as it successfully tackled the major challenge
presented by Y2K. From an agency that was woefully behind the
technology curve. State has become one that is able to produce--and
execute--five year advance planning for our information systems. These
positive changes have been documented in a recent report from the
National Academy of Sciences on ``The Role of Science, Technology, and
Health in Foreign Policy.''
As indicated in the attached charts, in the last two years the
Department has eliminated the vast majority of legacy e-mail services
and deployed industry standard e-mail to provide commercial grade
messaging with improved delivery times and reliability. We have
completely replaced the Wang dinosaurs that had long restrained the
Department's technological development. Where in 1997 the Department
had 254 Wang systems, we now have only 14. The number of Department
employees with Internet access has increased 165 percent in the last
three years. In addition, a uniform unclassified computer system was
fully deployed to every Foreign Service Officer at 233 overseas posts,
providing a state-of-the-art computing environment.
The recent cyberattacks on prominent ``dot coms'' and government
sites demonstrate the need to establish rigorous and forward-looking
computer security procedures. We at State have been intensely focused
on this issue in the last year. The CIO has recently assumed authority
over computer security issues and in the course of the last year has
implemented the following safeguards to protect our classified and
sensitive information:

Formed incident response teams ready to take action in the
event of a cyberattack.
Created an extensive array of electronic firewalls--a system
that proved effective against the bombardment of e-mails and
viruses we received after the accidental bombing of the Chinese
embassy in Belgrade.
Implemented a comprehensive anti-virus program to protect
the Department from the estimated 200 malevolent viruses that
attack our systems every month.
Introduced a web-based geographic information system that
informs our ranks both domestically and abroad about up-to-the-
minute cyber-threat information.

More must be done, of course, to protect our systems, and Mr.
Burbano will be glad to detail our efforts for you further.
We have also been working hard on the human resources side of IT.
In November 1999, Under Secretary Cohen approved retention and
recruitment bonuses for IT specialists to assure that we could attract
people with the technical skills needed for the next generation of
global communications. We have also narrowed a debilitating vacancy
rate among IT specialists by almost half, though when you consider the
number of employees in training our effective vacancy rate still hovers
around 20 percent.
In addition, the State Department was the only U.S. Government
agency to rise from an ``F'' to an ``A'' on Congressman Stephen Horn's
Y2K report card, and was subsequently hailed as a model for the federal
government. Our systems sailed through the rollover, and the
Department's worldwide online reporting tool enabled the U.S.
Government to keep track of Y2K developments throughout the world in
real time.
To summarize the technological turnaround we have achieved, I might
quote the president of the American Foreign Service Association,
usually a vocal critic of State Department management, who recently
wrote to the ClO: ``You are all, with very good reason, proud of the
achievements of the last twenty months or so. So much has happened in
that time that information technology in the State Department is
virtually unrecognizable from a couple of years ago.''
We thank the subcommittee for providing us the necessary funding to
begin the long-deferred modernization of State Department computer
systems. But a key realization from the Y2K experience was that the
Department had to engage in an almost desperate game of technological
catch-up. A great many of our systems had already aged into obsolesence
by the time we began. Y2K became an effort, which contributed to this.
Now, finally, the Department is approaching the technology curve.
However, Mr. Chairman, IT is a field in which periodic bursts of
funding for updates are not enough. Advances in the field are rapid,
and these advances yield significant advantages for our ability to
communicate with the world. Twenty years ago, a one-time spike in
funding enabled us to buy our then-state-of-the-art Wang systems, but
the subsequent long dry spell in funding prevented investment in new
technology. That episode demonstrates the necessity of a having a
consistent program in place to make sure we stay current.
Consequently, our FY2001 budget includes a $97 million request for
the Capital Investment Fund. The FY 2001 request, in combination with
$63 million in estimated Expedited Passport Fees, is vital to the
Department's strategic effort to upgrade our information technology for
the new millennium. This sum includes improvements to the Department's
global information technology infrastructure, specialized desktop
systems tailored to the needs of the diplomat, standardized messaging,
improved Internet access, and workforce and training improvements. Of
the request, $17 million will be used to begin a program to provide
interagency connectivity among all U.S. government agencies with an
overseas presence. This initiative is consistent with OPAP findings on
the need for greater communication capability among agencies at post.

CONSULAR AFFAIRS

Consular Affairs (CA) is an area that illustrates very well the
impact of up-to-date information technology--and adequate funding--on
service delivery. Over 80 percent of the visitors coming to our
overseas posts are seeking consular services, so more than any other
Department employees consular officers are in daily direct contact with
traveling American citizens and foreign nationals.
Since FY 1994, CA has been allowed to retain its Machine Readable
Visa (MRV) fees, and the bureau has implemented a comprehensive
strategy to improve automated consular services and enhance U.S. border
security. In 1999 alone, CA completed the worldwide installment of Y2K
compliant MRV-2 computer systems at all visa-issuing posts; expanded
the Border Crossing Card program by issuing more than one million
biometric and machine-readable cards to Mexican nationals; improved
fraud prevention programs; and deployed the more secure new photo-
digitized passport, which will completely replace the old passports by
the end of FY2001 at our domestic agencies. In addition, we now have
the capability to strengthen further U.S. border security by making
available to INS photographs and completed visa applications through a
centralized electronic database. This would allow border inspection
officials to verify visas by seeing the actual documentation that
accompanied their issuance.
The result of these innovations is better service, plain and
simple. Whereas visa applicants at our embassy in Mexico City used to
begin lining up at five o'clock--not five a.m., but 5 in the afternoon
the day before--now all Mexican customers seeking consular services
have appointments. They are usually processed within two hours and a
courier service returns their passports. Of course, the lack of long
lines and crowded waiting rooms also yields security and construction
advantages. We have slashed waiting times and red tape, and reached out
to our customers through our award-winning web page and over the phone.
The Department is proud to report that, in last year's government-wide
National Performance Review, Consular Affairs ranked in the top
quintile for customer service and program performance and outperformed
private sector service benchmarks in most categories.
Goals for this year include launching a 1-800 number that will
improve customer services to Americans seeking passports; reengineering
immigrant visa processing; introducing new namecheck algorithms that
will improve the accuracy of data searches made on visa applicants who
have Russo-Slavic names; and deploying a comprehensive signage package
that will improve wayfinding and security in consular sections
worldwide. The Department is seeking legislation to make permanent our
enormously successful visa waiver pilot program. We urge the Congress
to enact a balanced bill that will continue the benefits of the current
program-enhanced trade relations, increased trade and tourism, and more
efficient use of government resources.
In sum, giving Consular Affairs the power to retain some of its
processing fees has resulted in an organization now recognized
throughout the U.S. Government for its excellence in customer service--
and one that is virtually self-funding. CA is a model of what the
Department of State can accomplish when we can combine our managerial
talents with adequate resources.

PERSONNEL AND TRAINING

Still, CA, along with all State bureaus, has suffered from severe
personnel shortages. Even as passport and visa applications have soared
during the 1990s, our workforce shrank. American State Department
personnel rolls shrank by 11 percent between 1992 and 1997 and have
only recently stabilized our employment at attrition levels. Last
year's supplemental filled many gaps in staffing in the security area,
and the FY 2001 budget also has more modest increases in security
staffing. However, let me emphasize that the Department has been hiring
below attrition for 6 of the last 8 years. That kind of hiring pattern
has a cumulative impact measurable only five or more years down the
road, and we are starting to experience severe staffing gaps in certain
ranks and job specialties. We cannot advance U.S. interests abroad
without the human resources needed to do it.
But we cannot just be content to hire warm bodies to fill
positions. We are aware that in the competitive marketplace for top
young talent, the Department must continually improve its training
programs if we are to attract and retain top young talent. We have
taken appropriate steps by launching new programs to train American and
foreign support staff. Last year, 351 Office Management Specialists and
almost 10,000 Foreign Service Nationals received job training at the
Foreign Service Institute (FSI), at regional training sessions, or
through our innovative web-based distance training program. We have
intensified our training program for Equal Employment Opportunity
Counselors, and completed over 100 Crisis Management Training sessions
last year alone to ensure that every Department employee knows what to
do in the event of a security-related emergency at post. In fact, we
are now training more employees--Civil Service, Foreign Service, and
foreign nationals--than at any time in recent memory. And next month,
the Department will inaugurate a new Leadership and Management School
at FSI. To continue these efforts, we are requesting $3 million in FY
2001 to improve functional, language, leadership, security, and
management training.

CONCLUSION

I have outlined for you some of the management initiatives we have
launched under Secretary Albright's tenure. Her firm commitment to
getting our diplomats the resources they need to serve as America's
first line of defense, and her willingness to take innovative
approaches to diplomatic readiness, have made the Department a better
managed organization and a stronger advocate of our national interests.
Critical reforms long deferred in the areas of security, IT, and a
comprehensive assessment of our overseas presence are finally underway,
thanks in large part to your assistance. We are thankful for the
constructive and good-faith efforts Congress has made to work with us
to accelerate positive change in the Department. The last budget of
this Administration is a relatively modest one designed to build
sufficient momentum to consolidate the gains we have made. Because even
in this period of relative peace and unprecedented prosperity,
America's welfare depends on our diplomats' ability to defend our vital
interests, we urge you to support this budget. As the great Will Rogers
said, ``Even if you are on the right track, you'll get run over if you
just sit there.''

Senator Grams. Thank you very much, Mr. Kennedy, for your
statement.
Looking at some of the questions this morning, section 1104
of the Foreign Affairs Reform and Restructuring Act requires a
report to be submitted to Congress that describes the total
anticipated and the achieved cost savings related to the
reorganization of the foreign affairs agencies.
Now, the report must set out cost savings in the categories
of personnel; administrative consolidation, including
procurement; program consolidation; and real property and lease
consolidation. So what is the status of this report this
morning?
Mr. Kennedy. We are in the process--we are working on that
report, and if I could just give you a few examples to
demonstrate our commitment in these areas.
Senator Grams. Yes.
Mr. Kennedy. In the area of personnel, the United States
Information Agency in its last quarter of existence had 2,091
employees. We cross-walked into the State Department 1,889
positions, so we were already taking those aspects into effect.
But that is an example of what we were able to do in the area
of streamlining, working through that.
Senator Grams. Yes.
Mr. Kennedy. In the administrative area, I think I cited in
my testimony, several examples of combining warehouse
facilities at our dispatch agency in New York to get those
overhead savings reduced as much as possible.
In program coordination, Mr. Chairman, that is the field
where we can probably demonstrate the least quantifiable dollar
savings because, as you are aware, the State Department did not
do public diplomacy before the merger, and we did not do arms
control and non-proliferation negotiations.
So when we brought those functional programs into the State
Department, we have achieved better foreign policy goals. We
are now integrating everything that we do with the public
diplomacy aspect.
And the new arms control non-proliferation verification and
compliance cluster is certainly going to be able to promote
U.S. national security interest better, but I am not sure that
I am going to be able to put a dollar figure in this first year
on those programmatic improvements.
Last, in real property, again in my statement, I touched on
examples overseas. We are following the merger between State
and USIA; and ACDA, really was only represented at two
negotiating missions.
Admin officers on their own, with our encouragement, are
already moving to public diplomacy offices onto existing
compounds in order to release those properties.
So you will get a report, and I believe that report is
going to demonstrate to you the commitment that we have to
achieve those savings, because the State Department has a
requirement for $130 million in additional funding each year
just to keep pace with inflation and with no new program
increases in our budgets. Since we are asking for no new
program increases except for security, when we need to go and
expand our public diplomacy efforts in places as diverse as
Kosovo and East Timor, the way we achieve that is finding
savings and then reallocating and reprogramming those savings
to achieve those goals.
Senator Grams. Do you have any idea of when the report will
be released, Mr. Kennedy?
Mr. Kennedy. No, sir. But I--let me get back to you very
quickly on that.
[The following response was subsequently supplied:]

The Department's Congressional Presentation Document (CPD)
for FY 2000 contains an overview of the foreign affairs
reorganization plan, but it was not possible to estimate
anticipated savings because the CPD was submitted to the
Congress several months before the merger occurred on October
1, 1999. Similarly, because the CPD for FY 2001 was released
only a few months after the merger took place, the Department
was not able to report any actual savings. However, the
Department is now beginning to realize the benefits of a more
streamlined organization, and our FY 2002 CPD will include
information on expected and achieved savings.

Senator Grams. OK. The State Department was one of three
Departments which failed to meet the March 1 deadline set by
law for submitting its fiscal 1999 financial statements for
review.
The question is: If you cannot produce a clean audited
financial statement by the required deadline, it begs the
question as to whether the State Department has the tools at
hand to adequately manage the resources in the budget request
that you are making.
Why did the State Department not meet that March 1
deadline?
Mr. Kennedy. Mr. Chairman, that is a very complex question.
Let me say that we provided to the inspector general and to the
Department of the Treasury all the data that was required in--
by the deadline.
The inspector general is now reviewing that material. The
numbers will not change. We believe it is a clean audit report,
and so from one side of the State Department, the report was
submitted, and I will ask the inspector general to notify you
when she will be submitting that report.
But I believe--and I had extensive discussions with the
chief financial officer, Mr. Edwards, who is here with me
today, that the fiscal year 1999 report will result in an
unqualified, i.e., clean bill just as our fiscal year 1997 and
1998 reports also resulted in clean. We have the tools. And we
did get the data into Treasury on time, sir.
Senator Grams. OK. And do you have a timetable, do you
think, on when that would be completed, the reviewed by the IG?
Mr. Kennedy. I believe it will be transmitted to you by
April 1, sir.
Senator Grams. OK.
There is an article from--this is the Washington Post from
Monday, March 6, an article, and the headline was ``Twelve
Agencies Get `Clean' Audits; Senator Thompson `Deeply
Disappointed' Only Half Meet Goal.''
So I am going to have this article entered into the record
as a part of today's hearing.
[The article referred to follows:]

[From the Washington Post, March 6, 2000]

12 Agencies Get ``Clean'' Audits; Senator Thompson ``Deeply
Disappointed'' Only Half Meet Goal

(By Stephen Barr)

Only half of the top 24 federal agencies have won ``clean''
opinions from the government's inspectors general for their fiscal 1999
financial statements, according to a preliminary assessment by
congressional and administration officials.
Although that's the same number that produced clean financial
statements the previous year, administration officials said the overall
audit results reflected substantial improvements and noted that six
agencies received higher rankings than they did a year ago.
The Senate Governmental Affairs Committee, however, took a dimmer
view. The committee noted that the administration failed to meet its
goal of having 18 agencies produce clean statements for fiscal 1999 and
said three, perhaps four, Cabinet departments missed the March 1
deadline for filing the statements.
Committee Chairman Fred D. Thompson (R-Tenn.) said he was ``deeply
disappointed'' that only half of the top agencies produced reliable
statements. ``If agencies couldn't produce satisfactorily audited
financial statements by March 1, they certainly didn't have the
information they needed to manage their operations last year,''
Thompson said.
Although corporations offering stock to investors have been
required to produce audited financial statements for decades, the
government did not have to face such a discipline until Congress
approved the Chief Financial Officers Act of 1990.
The law established the position of CFO in the top 24 agencies and
directed them to produce audited financial statements for their
commercial, revolving and trust accounts, starting in 1997. Congress
hopes the law will bring more financial accountability to agencies and
help stem waste, fraud and abuse.
Agencies have adopted accounting principles recognized by private-
sector groups and started getting their ledgers in order to better
track the handling of about $1.8 trillion in taxpayer dollars that flow
annually into government coffers.
Data provided to the Senate committee by agency inspectors general
showed that:

The departments of Education, Justice and Treasury and the
Environmental Protection Agency received ``qualified''
opinions. In these cases, the inspectors general found that
segments of the financial statements were not reliable.
The departments of Agriculture, Defense, and Housing and
Urban Development, the Agency for International Development and
the Office of Personnel Management received a ``disclaimer of
opinion.'' The designation indicates that auditors could not
determine the reliability of the information contained in the
financial statement.
The departments of Interior, State and Veterans Affairs
missed the March 1 deadline set by law.

Clean opinions, meaning the financial statements are reliable, were
won by the departments of Commerce, Energy, Health and Human Services,
Labor and Transportation as well as from the Federal Emergency
Management Agency, General Services Administration, NASA, National
Science Foundation, Nuclear Regulatory Commission, Small Business
Administration and Social Security Administration, officials said.
At least six agencies increased their rankings compared to a year
ago, officials said. But two, EPA and HUD, which received clean
opinions in 1998, slipped backward.
HUD said work on its financial statement was slowed by the
consolidation of 81 systems into five, which created a huge workload
for the agency and the auditors. A HUD spokesman said the agency's
``books are sound and reliable.''
EPA said two items, primarily technical, could not be resolved to
satisfy its auditors by the deadline. ``All appropriated funds are
accounted for,'' an EPA spokesman said.
Both HUD and EPA spokesmen said problem areas would be resolved
quickly.

Senator Grams. Mr. Kennedy, ICASS, a cost sharing mechanism
at U.S. embassies overseas for the various Federal agencies,
offers the potential for considerable savings because it does
empower each post to be able to select providers, including
local providers, that will provide the best service at the
lowest costs.
Have there been any savings that have occurred since this
program was put in place in 1997? And if so, can you give me
any examples of if this is working and how it is working?
Mr. Kennedy. It is working, Mr. Chairman. What ICASS is is
a menu of services that an agency can buy from and through the
savings, they can achieve a more cost-efficient means of
delivery of service.
I think the best way for me to start would be by pointing
out that under the current services budget this year, we have
been able to keep the posts going overseas, yet the funding
they have received is 1.5 percent less than inflation.
So every post is continuing its delivery of administrative
services though we have cut back 1.5 percent our reimbursement
to inflation.
So I would say, as a former overseas admin officer myself,
that ICASS is an example of how I am able to keep going and
deliver those services consistently, even though my funding is
going down.
Other examples are that it used to be that we had over
1,800 motor vehicles overseas, for which we had no basic
funding source for. They were aged. We had the most ancient
motor vehicles overseas. And we were reduced to paying three
people in Germany to drive around to military bases and collect
7-year-old surplus Army Blazers and pickup trucks. Now, I am
not proud. They ran, so I took them.
Senator Grams. Yes.
Mr. Kennedy. Now, though, through the ICASS process, posts
are billing other agencies and are generating the savings to be
able to produce the funding to procure modern vehicles, and the
operating costs of those vehicles are going down significantly;
thus, even more savings to the taxpayers.
We are combining warehousing operations with USAID in many
locations. We are doing that in Cairo. And I can go on and on
with a litany of examples, where by pulling operations
together, we have achieved these savings. And if you would
like, Mr. Chairman, the Department can submit for the record a
list of specific examples of efficiencies achieved at specific
posts.
Senator Grams. I would appreciate that. I think it would be
good for us to be able to have that on record.
Mr. Kennedy. Absolutely.
[The following response was subsequently supplied:]

EXAMPLES OF POST ICASS SAVINGS

Embassy Berlin now leases a fleet of ICASS vehicles rather
than owning and maintaining them. Post estimates savings of $475,000
over six years.
Embassy Vienna is on its way to outsourcing administrative
supplies for the tri-missions for an estimated savings of $240,000 per
year.
Embassy New Delhi has established a standardized equipment
pool for a savings of $60,000 per year.
Embassy Antananarivo has consolidated the majority of
maintenance and repair operations throughout the Mission. The estimated
cost savings to USAID alone in rent and utilities is $70,000.
Embassy Santiago consolidated and streamlined GSO
operations by not replacing two senior Foreign Service National
employees when they retired in 1997, for an overall savings of over
$100,000.
Embassy Bangkok used the advent of ICASS to review its
administrative staffing operations, eliminating one American position
and realizing savings in excess of $140,000.
At Embassy Paris, invoicing each agency for ICASS costs
led to the recognition by serviced agencies of the high cost of long
distance telephone service, prompting the Administrative Section to
change to an alternative telecommunications service provider with
estimated savings of up to $100,000 annually.
In Lilongwe, Malawi, State and USAID co-located their
warehouses and combined their duty driver systems. (Amount of savings
not specified.)

Senator Grams. And also if it is working, and you
apparently believe that it has shown, you know, some positives,
should any changes be made? Have you seen any shortcomings in
ICASS that could make it even work more efficiently?
Mr. Kennedy. The only change that I think could be
considered would be to make ICASS a mandatory provider of
services overseas.
Now, that, however, runs against one of the initial
predicates of ICASS, which is that it would be a voluntary
approach that all agencies would analyze and determine whether
or not they could--do it more cheaply.
Senator Grams. Yes.
Mr. Kennedy. And I think I would stick with the voluntary
approach, because I want competition. I believe my colleagues
who administer programs overseas, if they have some
competition, it will drive them to better efforts.
I think of the two things that we have under consideration
at--one, we have done, and one, we are looking at--is to use
ICASS as a mechanism to bill agencies and control costs.
For example, the Diplomatic Telecommunications Service,
which saves the American taxpayer immense amounts of money by
buying bandwidth for all agencies in bulk, and then retailing
it to the agencies to allow them to make telephone calls back
to the United States at costs that are significantly under the
somewhat rapacious local PTT charges on a minute-by-minute
basis, uses ICASS as their collection mechanism. So they did
not have to set up a separate billing system.
One of the OPAP recommendations that we are looking at now
is: How and should we bill other agencies for office space that
they occupy overseas?
And the Foreign Buildings Office working group that is
working with an outside consultant is consulting regularly with
the ICASS service center to find out if the ICASS mechanism can
serve as a very easy determining and billing mechanism, because
under ICASS we know exactly how many square feet every
government agency occupies now, because we are billing them for
utilities and cleaning.
And so I think that we need to just continue on down that
road, sir.
Senator Grams. On information technology, in fiscal year
1998 the capital investment fund increased by 249 percent, and
it doubled in fiscal year 1999.
Now, given these enormous increases in funding, why is the
State Department still stymied by the incompatible information
technology systems that we have talked about?
Mr. Kennedy. This----
Senator Grams. This is not unique to the State Department
by the way.
Mr. Kennedy. No, sir.
Senator Grams. I know it is--many other agencies have the
same problem.
Mr. Kennedy. As hard as it may seem to believe of an agency
that is behind the curve, I think internally the State
Department now has no incompatible systems. I can sit at my
desk. I have one keyboard and one screen. Now, there are two
different boxes underneath, one for classified processing,
another for unclassified processing.
But I can reach out on the unclassified system to every
single post in the Foreign Service and anyone in the Washington
area who does--deals in the unclassified arena.
Senator Grams. Worldwide?
Mr. Kennedy. Worldwide, sir.
On the classified arena, I can reach out to about half of
our posts. So there is no incompatibility within the State
Department itself. We have switched to a modern, open systems
architecture, industry standard system.
The incompatibility problem that was addressed by the
Overseas Presence Advisory Panel is that each U.S. Government
agency has its own perspective.
And in the past, agency posts thought--and from their
perspective I can see the rationale--that it was more important
for them to talk to their own headquarters in Washington than
it was to talk to another agency's representatives within the
Embassy.
The State Department over the years has offered other
agencies the opportunity to sign on to what we call Open Net,
which is our unclassified system, but they have declined,
choosing instead to spend their resources to talk to their home
office.
That is why we are very pleased with the OPAP
recommendation and have included a $17 million figure in this
year's budget to put in place at five to seven posts overseas a
common platform based upon the State Department's Open Net
system, which is Microsoft NT based, which is commonly used
everywhere, so that all agencies at that post would be able to
talk to one another.
So this is the direction we are moving in, but as to the
State Department itself, we are integrated. Everyone can talk
to everyone else. If I can add one more point there?
Senator Grams. Sure.
Mr. Kennedy. One of the reasons why the capital investments
fund is seeing an increase this year is what is, in effect,
pent-up demand for improvements for software systems.
In order to ensure, and we were successful, that we would
meet the Y2K deadline, we suspended the upgrade of many
administrative financial and management systems and devoted all
our resources and all our funding, over $200 million, to
ensuring that we would get through the Y2K gate unscathed and
could carry out our mission.
And so there is pent-up demand. In my own Bureau of
Administration, there are a variety of systems that are now a
little bit stale, because I wanted to make sure that they were
Y2K compatible.
And so that is another reason why we are seeking the $91
million this year in the capital investment account, because
that will permit us to achieve economies of scale and economies
in efficiencies of operation, we believe.
But there is this pent-up demand, Mr. Chairman, resulting
from our diverting all funding almost to the Y2K problem, which
we had to do and we accepted that fact.
Senator Grams. Yes. Talking about software, on February 2,
State sent a cable to about 170 embassies asking them to remove
software from their computers that they had been using to
produce a budgeting document known as, The Mission Performance
Plan.
For those of us who are concerned about security issues, it
is hard to understand how the State Department decided to give
sole source contract to citizens of the former Soviet Union to
write software for its computer.
Now, how much has been spent on this software, and what
changes have been made to the contracting process since this
discovery? Is this a problem?
Mr. Kennedy. First of all, Mr. Chairman, if I might have a
second to explain our contracting policy.
Senator Grams. Yes.
Mr. Kennedy. The State Department is a great supporter of
the small business effort in the United States. Every year, we
work with the Small Business Administration to set goals and
priorities in order to ensure that as many contracts as
possible are let to small, disadvantaged, women, and minority
owned businesses.
We had an active contract with an American firm that we
have used for many years, which did both classified and
unclassified work. When it was decided that it would be
necessary to develop a more mechanized, more automated and more
computer-based system in order to meet our Government
Performance and Results Act goals, we turned to this American
company.
This American company subsequently subcontracted with
another American company, based in Virginia whose employees
were foreign nationals, as you rightly pointed out.
But the process started with a Small Business
Administration approved contract with an American small
business. And then we have the subcontract.
My second, I think, important theme here, sir, is this was
an entirely unclassified operation. There was no classified
data. There was no classified material in any way involved in
this activity. We use foreign nationals overseas from time to
time to process and develop unclassified operational material.
That being said, however, it is clearly something that we
need to look at very closely. We suspended that program, and
the Assistant Secretary for Diplomatic Security is looking at
this now to see if we need to change our applications of what
are called the Department of Defense industrial security
procedures to reflect how we deal with contracts or
subcontracts that are awarded for strictly unclassified work.
And that review by Assistant Secretary Carpenter is now
ongoing.
Senator Grams. The fiscal year 2001 budget is calling for a
new $17 million investment in information technology platform
pilot program. What is the recurring cost of this?
Mr. Kennedy. This is a pilot program. The recurring cost
would be on the order, I believe, of about 20 percent. I should
expand on that, if I might.
The $17 million is the pilot program recommended by the
Overseas Presence Advisory Panel, to hook up all agencies of
the U.S. Government together at one post so that they can talk
to each other, just as the State Department can talk to itself.
Most information technology has about a 5-year life cycle
in terms of both hardware and software replacement. And we use
a 20-percent figure, so on a $17 million investment, we would
be talking about a $3 million, $3.5 million cost, starting, of
course, from a new program in about year three or year four.
The $17 million program gets us to, maybe, some 40 posts.
Obviously, we have 260 posts. The Overseas Presence Advisory
Panel estimated that to do this governmentwide, including all
agency arrangements at every post, would cost about a $200
million figure.
And, again, if you use a 20 percent, 5-year life cycle
figure, you would be incurring about a $40 million annual
figure starting in about year five or year six in order to
upgrade that software, so that we would not fall into the same
position the State Department fell into in the early 1990's
when it had literally archaic technology.
Senator Grams. And you mentioned awhile ago about the Y2K.
Has the State Department closed out all of its operations
dealing with Y2K?
Mr. Kennedy. We are closing the books now. And the Y2K
office will be effectively out of business except for one or
two people by the 31st of this month.
We kept a much reduced staff onboard through the 29th of
February because of a peculiarity every fourth century, you get
a leap year problem. And we had to make sure that--though we
did not expect any--that we did not have any Y2K glitches on
February 29.
And except for two small ones that had no impact on
operations or national security, we had none. And so we
released staff, starting literally the first week in January
and we closed it down. And everyone except one or two people
will be gone by the 1st of April, sir.
Senator Grams. OK. In the other area of personnel, has the
State Department begun its development of a long-term plan for
personnel resources as required by section 326 of last year's
State Department authorization bill?
So has the State Department begun the development of that
plan dealing with personnel resources?
Mr. Kennedy. Yes. The Director General, Ambassador Gnehm,
is working with his colleagues. He is using as a base the
information that had been unearthed by the Overseas Presence
Advisory Panel.
[The following response was subsequently supplied:]

WORKFORCE PLANNING FOR FOREIGN SERVICE PERSONNEL

The Department of State has several human resource planning
initiatives either in place or being developed which will enable us to
improve our plans to meet our future Foreign Service personnel needs.
The following are some of the workforce planning projects underway:

1. Overseas Presence Advisory Panel--This panel ``reviewed the value
and appropriate size of the nation's overseas presence in the
coming years and evaluated how best to locate, protect, staff,
equip, and manage overseas posts.''

2. Overseas Staffing Model--This model identifies the staffing
requirements at overseas posts based on specific categories and
criteria. It is reviewed biannually by the Department's Overseas
Staffing Board (a senior management group), which makes adjustments
as required.

3. Foreign Service Workforce Model--A contractor was hired to develop
improved computer based promotion and workforce planning models
which will allow for the projection of promotions, attrition, and
other relevant workforce planning factors for Foreign Service
generalists by cones and specialists by skill group. The target
date for completion of these models is March of 2001.

4. Annual Program Planning/Financial Planning/Congressional Budget
Presentation--This annual process establishes the Department's
strategic goals, priorities, and resource allocations for the next
two fiscal years.

5. Annual Foreign Service Hiring Plan--This budget based process
determines the number of Foreign Service generalists by cone and
specialists by skill group to be hired during the fiscal year based
on the Department of State's approved budget.

6. War for Talent Study--This study was done by the McKinsey Group and
pointed out areas of improvement needed in the Department so that
it can continue to attract, train, promote, and retain top-flight
employees.

7. National Foreign Service Training Center has several initiatives to
train Foreign Service personnel to meet the language, functional,
and technical needs of our overseas posts.

We will analyze information from these projects and develop a long
range workforce plan as required by Section 326 of the 1999 Department
of State authorization bill to be submitted March 1, 2001.

Mr. Kennedy. There was a large study done by the McKinsey
Group, which is a world renowned U.S. consulting firm that
advises on personnel practices and procedures. And they did a
report for the State Department.
And coupled with that, will be the results of the OPAP
study on the numbers of personnel that are needed overseas, as
well as the State Department's overseas staffing model.
Let me get back to you, sir, with the exact date that that
report will be available.
[The following response was subsequently supplied:]

The report will be submitted to the Congress by March 31, 2000, as
required by law.

Senator Grams. I appreciate it. Why does the State
Department feel there is a need for an increase, I believe, it
is 189 full-time employees in fiscal year 2001?
Mr. Kennedy. Most of those employees, 182 of them, are all
in the security-related field. As we move forward, thanks to
your help with the emergency security appropriation, which
allowed us to hire--I believe it was 337 people--security
agents, security engineers, security technicians, and others.
We have deployed those people.
What we have discovered as we have gone further in our
analysis of what we need to make the overseas facilities and
our domestic facilities safer, is that we need some additional
personnel. And it basically boils down into three categories.
We are hiring an additional 80 special agents. Some of
those will be backfilling the Washington office or offices
elsewhere in the United States, where personnel and positions
were moved overseas.
We also discovered that we have basically no surge capacity
whatsoever. When a post overseas is under a specific,
heightened threat, we have been forced to pull agents from
domestic protective activities, or special agents, regional
security officers, from other posts to surge to that post;
therefore, leaving vulnerabilities elsewhere.
The 80 special agents we are hiring will represent an
ability to surge wherever we need it--domestic security,
protective security, heightened investigations on border
security issues, passport and visa fraud.
The next category is security engineers and security
technicians. Operating a security program overseas is very,
very expensive, if you have to depend only upon personnel.
We have discovered that hardware, card readers, cameras,
time lapse recorders, et cetera, are very valuable and cost-
efficient tools, and these systems are deployed in our most
sensitive and classified areas.
They are also deployed around our most sensitive and
vulnerable parameters. And, therefore, we need qualified
American engineers and American technicians in order to make
sure that the equipment is installed and maintained.
And then the last component is support personnel to engage
in faster contracting, in order to get materials out to posts;
logistics personnel to keep the pipeline flowing in a smooth
fashion.
And then to get to the 189 number, we add two employees in
Foreign Buildings; 15 employees, who are carried in our overall
budget, who are not really ours, but are a shift in personnel
for the International Boundary and Water Commission. And I,
respectfully, would have to defer to the Commissioner of IBWC
to answer exactly the uses for which he would deploy those
personnel.
And the only program increase that we have, which are 10
people, into the Democracy Human Rights and Labor and in the
Office of Science, which are obviously very, very important
arenas to deal with human rights, international labor issues,
and scientific issues.
Senator Grams. I think you mentioned 182 for security. And
I have, in my notes, 162. Is that----
Mr. Kennedy. It is 162. You are correct, sir. It is 162 for
security, and then 27 to get to 189.
Senator Grams. OK.
Mr. Kennedy. Yes, sir.
Senator Grams. How many of these employees are expected to
be members of the Foreign Service?
Mr. Kennedy. I would say, of the 162, 125 of them would be
special agents of the Diplomatic Security Service, and the 40
to 45 security technicians would be Foreign Service, because,
in order to make sure that we can respond quickly, we base some
of them in Washington and some of them overseas.
And in order to make sure we do not have to keep people
overseas for their entire career, which is not good personnel
policy, we rotate them back and forth, and to our regional
centers, such as we have in Fort Lauderdale, Florida, that
services Latin America.
Senator Grams. And as with technology, the recurring costs,
what are the estimates that are expected recurring costs in the
future years for these additional employees?
Mr. Kennedy. It is $32 million, Mr. Chairman.
Senator Grams. Per year?
Mr. Kennedy. Yes, sir. That is the tail to keep those
people on the staff and viable with essentially enough travel
money in order for them to perform their duties.
Senator Grams. The budget for 2001 provides for $3 million
in new funding for personnel training. Will any of these funds
be used to provide Foreign Service officers with any kind of
specialized training on the effects of torture and also on how
to identify and interview victims of torture, which is required
now, by law, under section 7 of the Torture Victims Relief Act,
which is P.L. 105-320?
Mr. Kennedy. I am afraid I do not have the answer on the
torture question. I will have to get back to you on that, for
the record.
[The following response was subsequently supplied:]

In support of Section 7 of the Torture Victims Relief Act of 1998
(P.L. 105-320), the Department of State acting through the Foreign
Service Institute (FSI) has taken a number of steps to ensure that
Foreign Service officers receive appropriate training. In the period
since the legislation was signed into law on October 1998 the
Department has concentrated the bulk of its training efforts on
consular and political officers about to depart for assignments
overseas.
We added a special torture victims training segment to the Basic
Consular course (PC-530) which is mandatory for all officers who serve
in consular capacity. This includes almost all junior officers on their
first tour overseas. On average between 350-400 students complete PC-
350 each year. The basic training these officers receive relates to
dealing with and reporting about victims of torture and provides the
foundation for subsequent training.
Experienced, mid-level consular supervisors receive additional
training on torture victims issues in the Advanced Consular course (PC-
532) which is taken by about 35-60 students each year.
Finally, in the consular field, about 100 officers per year who are
likely to serve as ``duty officers'' overseas receive a 6-day
Orientation To Overseas Consular Functions (PC-105) course in which
they receive basic lecture materials on abuse and torture issues and
learn how to bring such developments promptly and properly to the
attention of the appropriate officers at their posts.
For officers working in Washington who have a need to understand
human rights issues such as dealing with victims of torture we provide
a course on global issues (PP-510) twice a year which contains a panel
on tough human rights issues. This segment has included a
representative from the Washington office of the Center for Victims of
Torture. This is an elective or voluntary course and on average we have
between 60-70 students per year who receive this training.
FSI also provides a refresher segment of training on dealing with
human rights issues in FSI's Political Tradecraft course (PP-202) and
Political/Economic Tradecraft (PG-140) which are offered a total of six
times a year to Foreign Service officers being assigned to work for the
first time in political or economic sections at an embassy or consulate
overseas. This training is provided on average to 150 officers per
year. Many of these political officers serve as human rights officers
at posts and thus are the ones who will work with their consular
colleagues on reported cases of torture. The training is provided
either by officers from the bureau of Democracy, Human Rights and Labor
or by non-governmental representatives they recommend.
Torture related issues are raised in a number of FSI's Area Studies
courses, in a range of special round tables, simulations and courses
related to international conflicts and ethnic and religious tensions.
In the basic consular course all students receive a handout that
focuses specifically on recognizing signs of torture. In addition,
lectures, reading and exercises on handling arrests of American
citizens include discussion of cases in which the American prisoner
claims to have been subjected to torture. Consular officials are
instructed on ways of verifying such claims and, subject to the
prisoner's consent, raising the issue with local authorities either
formally of informally. Consular officials are taught to treat such
cases with compassion and sensitivity. Emphasis is placed on the
importance of eliciting information from the victim without causing
further distress. The instructor also emphasizes that any information a
consular officer may develop concerning torture of non-American
prisoners should be given to the post's human rights officer for the
annual human rights report.
The Advanced Consular course includes a session on dealing with
persons who are traumatized, under extreme stress, or mentally ill.
Through discussions and role-plays, professional psychologists teach
consular officers how to deal with traumatized individuals most
effectively, with the goal of obtaining useful information that the
consular officer needs in order to assist the person. This course also
includes individual sessions on refugee, asylum and torture issues,
presented by representatives of the Bureau of Population, Refugees and
Migration (PRM), and the Bureau of Democracy, Human Rights and Labor.
PRM's session reviews the criteria for refugee or asylum status, and
the procedures for processing refugee and asylum claims. PRM speakers
also stress the consular officer's role in handling individuals with
potential claims to refugee status, and the need to protect the
confidentiality of asylum claims in responding to requests for
investigation from INS asylum officers or immigration judges.
DRL presenters specifically discuss the contributions of consular
officers to a mission's human rights reporting on the use of torture
and on cases of religious persecution. In the follow-on courses
provided to political officers, DRL is seeking to provide the same type
of skill focus but adjusted to the roles of human rights officers in
embassy political sections overseas.

Mr. Kennedy. I do know that the purpose of the training is
essentially two-fold: one, make sure our personnel are well
acquainted with the needs for overseas operations. Second, to
provide our personnel with any specialized training required
for the function that they perform, in order to make their
activities overseas as productive as possible.
And, obviously, the training that you are talking about
would be part of that expansion that we need to do to make sure
that our employees are trained to do everything that is
required of them. And I will take this up with Ruth Davis, who
is the Director of the Foreign Service Institute when I see her
this afternoon.
Senator Grams. All right. The State Department has every
intent, I would assume, then, of complying with this new law.
Mr. Kennedy. Mr. Chairman, we comply with the law, sir.
Yes, sir.
Senator Grams. OK. Very good. I would appreciate the
answer, then, when you can give us more details.
Mr. Kennedy. Yes, sir.
Senator Grams. The Overseas Presence Advisory Panel. Now,
the Department of State was required to report to Congress on
the review of findings of the Overseas Presence Advisory Panel,
as you have talked about, 120 days after OPAP submitted its
report. Now, by my reckoning, Congress should have the State
Department's report by this time.
Given that you have justified a number of your budget
requests by stating that they are OPAP recommendations, when
are we going to be seeing the State Department's report,
itself.
Mr. Kennedy. Mr. Chairman, I participated in the drafting
and the report and clearing of other sections. And I think you
will have the report by the end of the month.
Senator Grams. Now, I notice that you listed kind of a long
list of OPAP recommendations; those that the State Department
agreed with, that you supported, but on the other side of the
coin, are there any recommendations from OPAP that the State
Department has decided not to implement or that you have
disagreed with?
Mr. Kennedy. The State Department is, as we have said,
reviewing all the recommendations. The Secretary has indicated
that she is very pleased with all the efforts that OPAP put
into this. Some of the recommendations that they have made have
to be reviewed.
An example of that would be in the foreign buildings area,
where there is an OPAP recommendation to spin the Office of
Foreign Buildings off out of the State Department, and set it
up as a Government corporation.
That is something that we have neither accepted nor
rejected. We are studying it very closely. We believe that the
management of our overseas facilities and insuring their
security is an integral part of the operations of the State
Department, just as the United States Army has its Corps of
Engineers to make sure that Army facilities are up to snuff,
and just as the Navy has the Navy Facilities Command.
There are a number of us in the Department who believe that
the correct way to approach this is to take the hindrances that
were very, very well described in the OPAP report, the
impediments to FBO functioning more effectively, and change
them.
So, we have engaged a major--what used to be called big
eight--I guess it is down to big four--consulting firm with
extensive overseas and domestic experience. And they are
working with me and Patsy Thomasson, who is my Deputy Assistant
Secretary for Foreign Buildings, to find out exactly what is
the right approach.
So, that is an example of something that we are not saying
that we reject their point out of hand, but that we have to
work through the exact details of it to find the best solution
for the American taxpayer.
Senator Grams. Well, unlike Congress, I thought maybe OPAP
might have made some recommendations you did not agree with.
And I just wanted to make sure of that.
The OPAP report also recommends right-sizing the U.S.
Embassy personnel abroad to be more accurately reflecting the
needs and the urgencies of the United States in each location.
So, is there a review process underway now at the
Department of State and with other Federal agencies to review
and adjust the personnel levels at the various overseas posts,
where the manpower meets the needs, so they are not all, like,
cookie-cutters?
Mr. Kennedy. Yes, there is, Mr. Chairman. Peter Burleigh,
who is the former Deputy U.S. Representative to the United
Nations and former Ambassador to Sri Lanka, is heading an
interagency group now, which has already had several domestic
meetings. They are developing a modality and a format. And
Peter will be leading a first team to Mexico City before the
end of this month.
We have selected seven posts that will be pilots for this
activity. And we are involving every U.S. Government agency
that is represented overseas. They have an initial methodology
worked out. They are going to, in effect, test that methodology
in Mexico City, come back to Washington, and then go out and
visit six more posts, and refine that methodology.
And so the goal is to determine, in effect, not a cookie-
cutter staffing model, but to try to come up with a kind of
methodology that can be applied on a worldwide basis, which
will serve as a good benchmark, and test to make sure exactly
where we need to deploy; possibly more commercial and trade
promotion people; maybe more personnel from the law enforcement
community, whether it be the FBI, DEA, or the U.S. Secret
Service; maybe more people with specialities in human rights
abuse analysis.
And so, that effort is underway. We believe that we will
have the methodology fixed and analysis of the seven pilot
posts completed in June, sir.
Senator Grams. Another OPAP recommendation was for the
charging of rent to other Federal agencies at U.S. Embassies to
obtain some compensation for costs or maintenance of the
infrastructure.
Does the State Department agree with this recommendation by
OPAP?
Mr. Kennedy. We are reviewing that now. I can give you my
personal opinion, which is an unqualified yes. I think that if
you look at any business in the United States, or you look at
how the executive branch operates in the United States, the
General Services Administration charges rent.
I happen, out of my own account at the State Department, to
pay over $100 million in rent to GSA every year for domestic
facilities, whose titles reside with the General Services
Administration. And I pay them that fee. And it goes into the
public building fund that is used by GSA.
I think that that is an excellent idea, because it
accomplishes two things. First of all, it is just like ICASS,
which we discussed earlier, and I believe it is a major
success. It sets out the actual cost of doing business
overseas, and levies that charge upon the agency that is there.
So, if agency x occupies 15 percent of a U.S. Government-
owned building overseas, it ought to pay some fee for that 15
percent. And that fee could go into a revolving account that
could be used to construct new buildings, because, as you know,
we do not own enough buildings overseas. And then we are paying
rent and rent and rent into perpetuity.
To that end, another one of the OPAP Commission's working
groups, headed by Patsy Thomasson, who is the Deputy Assistant
Secretary for Foreign Buildings, working with an outside
contractor, a major U.S. advisory and consulting firm, is
working now with other U.S. Government agencies to go through
the modalities of all of this and to decide, should this be
done; how it could be done; how could it be done in such a way
that the overhead is minimized, possibly using an ICASS-like or
ICASS collection mechanism.
So, this is under active review, but I think it would be a
way to allocate the actual costs of operations and an effective
way just as we have done under ICASS.
Senator Grams. Now, if this program were implemented would
the State Department budget--or should it be reduced in any way
because of the collection of rents?
Mr. Kennedy. At the moment, I do not see how we could
reduce the State Department's budget, because there is nothing
in its base now. We have very, very limited funding for the
construction of new buildings.
And so, since this money would go into a construction
account, it might be part of the downstream funding source for
the construction of new buildings; i.e., replacing funds that
we would ask you for, for the construction of new buildings.
But since we have nothing in our base for construction of new
buildings, this would be truly incremental.
Senator Grams. On the security budget, worldwide security
upgrades funding. The funding exists within the diplomatic and
security program account, as well as in the security and
maintenance of overseas buildings account.
Could you explain to me the difference between the two
worldwide security upgrade sub-accounts?
Mr. Kennedy. Yes, sir.
Senator Grams. And why are separate accounts necessary?
I mean, is this just kind of like our budget; too confusing
and could be streamlined?
Mr. Kennedy. I think that the Security and Maintenance of
Buildings account is, in effect, for the bricks and mortar and
the steel and the glass.
And the other account is the non-fixed assets; the salaries
of security officers, the salaries of security engineers,
equipment that is installed at posts, such as cameras,
walkthrough metal detectors, x-ray equipment, bomb detection
equipment, lightly and fully armored vehicles.
So, it is hard goods versus soft goods. That is probably
the wrong choice of words. It is physical plant versus
technical and operational material.
And so, we placed the bricks and mortar in the FBO account,
and in the DS part of the Diplomatic and Consular Programs
accounts are programs account, salaries, and equipment that
enhance security, once you have the bricks and mortar in place.
And I think that that is a good way to do it, because FBO
builds buildings. And diplomatic security, you know, makes them
secure with equipment and people.
Senator Grams. So, your opinion would be to keep them
separate, as they are now.
Mr. Kennedy. Yes, sir.
Senator Grams. OK.
Mr. Kennedy. Because we are able to get additional
synergies by having FBO run an entire account. FBO, also, in
everything it does as part of its routine operations, takes
security into consideration.
So, when they are doing an upgrade at a chancery that is,
say, 50 years old and is in need of an upgrade because its
building systems are worn out or the windows are worn out, it
works the security account at the same time.
So, having the bricks and mortar in one place, in one
account, leads, I believe, to efficiencies in economies at
scale. So, rather than having two cadres of structural
engineers and electrical engineers, why not have one, and have
them work all brick and mortar together?
Senator Grams. And as you mentioned earlier in your
testimony, too, the Secretary of State has indicated that she
is considering the creation of the new post Under Secretary for
Security, Counterterrorism and Law Enforcement.
Now, as I have noted, I have introduced a bill to create
such a position, as well, but I wanted to make sure that it
will not add to the State Department's bureaucracy, as we have
mentioned.
Is the possibility of adding an Under Secretary for
Security being considered as part of a large effort to review
the senior management positions at the Department of State?
Mr. Kennedy. That review, such as you are talking about, is
sort of constantly ongoing, but let me first say that the
Secretary and the entire Department very much appreciate your
support and interest in this.
There is no doubt that we welcome your support, as well as
others, for an Under Secretary for Security, Counterterrorism
and Law Enforcement.
The State Department's senior management, Mr. Chairman,
functions like a corporate board of directors in a major
business. And what we have done is divided that responsibility
up across a number of portfolios, given the wide range of
activities the State Department is engaged in. And in this
post-cold war world, as the Secretary and others form their
initial thoughts on this, consideration was given to a
possibility of dropping one current Under Secretary and
substituting this one.
But if I might, let me just run down that list: The Under
Secretary of State for Political Affairs. I think that we could
all agree that there are too many issues out there, across too
wide a range of activities, to vest the security function in
Under Secretary for Political Affairs, and eliminate that
function.
The Under Secretary of State for Economic and Business and
Agricultural Affairs. I think also, without a doubt, that the
U.S. national security depends as much now on economic security
and trade promotion and trade negotiations and export
promotion, as it does on anything else. So, that one can
arguably be set aside.
Global Affairs. If you look at the issues that we face now
in the environment, human rights, refugees, the promotion of
freedom, the promotion of democracy, the issues that you
touched on earlier about combating torture, scientific efforts,
controlling the global pollution; arguably that one ought to be
set aside, as well.
The Under Secretary for Management. I think the issues we
are talking about today demonstrate that it would be very
difficult, given the State Department's global reach and its
coordination of management issues with some 30 other U.S.
Government agencies who occupy our platform overseas, to
eliminate that one.
Next there is the relatively new Under Secretary for Arms
Control and International Security Affairs that was created
following the merger of Arms Control and Disarmament Agency and
the State Department, in which this committee plays such a
major role. It is very hard to imagine how you could eliminate
that committee with the panoply of non-proliferation, weapons
of mass destruction, other issues.
And finally, the Under Secretary for Public Diplomacy,
which was created by statute and added to the State Department
with the absorption of the United States Information Agency.
So, when you run down the list of the current six Under
Secretaries, it is very difficult to figure out which one, one
would eliminate, given this wide range of activities. And I
think the conclusion of those who looked at it was, there is no
issue that we could step away from.
And therefore, we were required to step up to the fact that
if security is as important as we believe it is, consideration
of an additional Under Secretary is something we have to look
at very seriously.
Senator Grams. So, what I am hearing is that it will not
add to the bureaucracy, and you will drop one to comply with
the bill.
Mr. Kennedy. We would like to have a further discussion
with you about that, Mr. Chairman.
Senator Grams. OK.
Mr. Kennedy. We believe that the addition of a small office
of an Under Secretary for Security Assistance, Law Enforcement,
et cetera, would not increase the bureaucracy, because we would
not be drawing--we would not be coming to you or your
colleagues in Appropriations and asking for additional
positions. We would be realigning positions in the State
Department, just as we do now, to address new and emerging
issues.
And therefore, there would be no increase in the
bureaucracy. It would be a realignment, a restructuring, and we
would like to argue, a more efficient way of doing business.
So, there would be a new Under Secretary, but the bureaucracy
would not be increased. It would, in effect, be streamlined.
Senator Grams. Well, we will enjoy those talks, or at least
the review of it in the plans submitted.
Mr. Kennedy. Yes, sir.
Senator Grams. I appreciate it. Mr. Kennedy, I have no
other questions. And this is always a dangerous thing to say,
but is there anything else you want to add?
I get in a lot of trouble when I am asked that. And
sometimes I say too much, but----
Mr. Kennedy. Sir, you have given me a lot of time to lay
out our concerns. I would just close by saying thank you very
much for your consideration.
You, personally, this subcommittee and the full committee,
have been great supporters of the State Department through some
very, very trying and troubled times. We look forward to your
continued support. I and my colleagues are always at your and
your staff's disposal.
The only thing I could say is that this is a current
services budget. There are no or only minuscule program
increases outside of the security field. And we seek and ask
your support.
Thank you very much, sir.
Senator Grams. Thank you very much, Mr. Kennedy. And I
appreciate your time and your candor in the answers. So, thank
you very much.

[Additional questions for the record follow:]

Responses of Hon. Patrick F. Kennedy to Additional Questions Submitted
by Senator Joseph R. Biden, Jr.

declining refugee admissions
Question 1. With the great number of refugees in Africa and other
troubled parts of the world who must be resettled in another country if
their lives are to be protected and their human needs met, why is the
Administration, after having finally raised the number of refugee
admissions to the U.S. in fiscal year 1999, again requesting a budget
that will continue the downward trend in refugee admissions at a time
of unprecedented prosperity for our country? How did the Administration
arrive at the admissions numbers of 76,000-80,000 that the budget
request will accommodate?
Answer. As we have noted over the past several years, overall
refugee admissions levels have declined from the levels of the early
1990s because the numbers of eligible refugees from our historically
large in-country programs from the Former Soviet Union and Vietnam
continue to decline. In FY 1993, those programs made up 72 percent of
refugee admissions to the United States. In FY 2000, they will
constitute about 26 percent.
At the same time, we have worked diligently over the past several
years to redirect the U.S. refugee admissions program toward
``rescuing'' those individuals around the world most in need of
resettlement because of their current circumstances, regardless of
their location or historic ties to the U.S. Recent examples of this
effort are: the Humanitarian Evacuation Program for Kosovar Albanians;
the program for Afghan women-at-risk in Pakistan and other South Asian
countries; and the recently established Priority Two designations for a
group of Sudanese youth in Kakuma Camp in Kenya (commonly referred to
as the ``Lost Boys''). In addition, over the past two years, we have
more than doubled the admissions ceiling for African refugees and
expanded access to the program to many more ethnic groups and
nationalities.
The refugee admissions level contained in the FY 2001 budget
request was arrived at based on our analysis of the protection and
humanitarian assistance needs of refugees around the worldwide. This is
a preliminary figure. We are still formulating the President's FY 2001
Refugee Admissions proposal which we plan to transmit to the Congress
in May in preparation for the annual refugee admissions Consultations
with the Congress.

FAMILY REUNIFICATION

Question 2. Why is the State Department eliminating the family
reunification priorities? Do you have anything to put in their place
that will achieve the effect of bringing in close family members who
are refugees to join their U.S.-resident anchors?
Answer. The State Department is not eliminating the family
reunification component of the U.S. refugee admissions program for
close family members of permanent residents of the United States. There
are two major family reunion elements in the U.S. programs, Visas 93
and Priority Three (P3). Visas 93 is a statutory authority which
provides for following-to-join status for the spouse and minor
unmarried children of persons admitted to the U.S. as refugees. P3 is
an administrative mechanism for specific nationalities, which are
identified in the annual Report to Congress.
While at one time family reunification for a broad range of family
relationships was the mainstay of the U.S. refugee admissions program,
over the past several years we have restructured the admissions program
to focus on the protection needs of persons currently experiencing
persecution and for whom resettlement appears to be the most
appropriate option. At the same time we have continued to provide
access to resettlement processing for close family members, that is
spouses, unmarried children, and parents (P3 cases) of U.S. legal
residents. We are currently reviewing options for strengthening and
streamlining the P3 process.
As we have worked over the past six years to focus the program on
individuals and groups that have compelling resettlement needs, we
limited broad access to the admissions program for more distant family
members (such as, siblings, grandparents, grandchildren, aunts and
uncles, and cousins). These actions were taken to ensure that
compelling resettlement needs received priority. Regrettably, access to
resettlement consideration through these extended family reunion
mechanisms sometimes generates abuse of the process and numerous
fraudulent claims. Processing such claims disadvantaged legitimate
refugees and was an inappropriate use of the program's personnel and
financial resources. If any of the extended family members has a
legitimate claim to refugee status, they are eligible for resettlement
as a separate case.

EMERGENCY REFUGEE CASES

Question 3. We understand that UNHCR would like greater
resettlement-country participation in the effort to resettle emergency
refugee cases, including from the U.S. How will the State Department
respond to this worthwhile appeal?
Answer. We have recently received the proposal from the United
Nations High Commissioner for Refugees (UNHCR) and we are discussing
the issue with them. As the largest refugee resettlement country, the
United States has historically accepted for resettlement some fifty
percent of all cases identified by the UNHCR as needing resettlement.
Concerning expedited processing of certain cases, we have always
had the ability to quickly process emergency refugee cases. These cases
usually involve security issues and therefore we do not publicize these
resettlement procedures. Additionally, on numerous occasions we have
responded positively to requests from UNHCR for processing of large
groups of particularly compelling cases. For example, we are currently
processing for U.S. resettlement some 1,500 individuals from the
Democratic Republic of the Congo that the UNHCR had identified as at-
risk refugees. Working with UNHCR we coordinated the movement of these
individuals to secure locations in Benin and Cameroon and are
expediting the consideration of their refugee cases. The majority of
the group brought to Benin have already arrived in the U.S.

OVERSEAS PROCESSING AGENCIES: THE PUBLIC/PRIVATE PARTNERSHIP

Question 4. The practice of using American NGO's to assist
processing overseas appears to have worked to the U.S. Refugee
Program's benefit over many years. Why is the State Department moving
away from this very effective public-private partnership?
Answer. Depending on the circumstances, we utilize a variety of
processing arrangements around the world. American NGO's currently
provides overseas processing assistance for sixty-six percent of the
U.S. refugee admissions caseload. Included in this figure is most of
the processing of refugee cases in Africa, the Near East and South
Asia, and the former Yugoslavia.
In some locations, American NGOs would not be allowed to work. This
is the case in Cuba and was true in the Former Soviet Union when that
program was established ten years ago. In certain other locations,
security concerns or the limited size of the caseload indicate that
other arrangements, including direct processing by Embassy staff, are
most appropriate. In other locations, the International Organization
for Migration, because of its established presence in and recognition
by a country, is the most appropriate organization to process certain
caseloads because it also provides all medical clearances and arranges
transportation for approved refugee applicants. This is, for example,
the case in Belgrade.
The Department believes that the ability to utilize a variety of
processing arrangements provides for more efficient processing and
ultimately benefits the refugee populations we seek to assist through
this increasingly diverse and flexible program.

Senator Grams. I would like to call, now, our next witness:
Panel No. 2, Mr. Benjamin F. Nelson, who is the Director of
International Relations and Trade Issues, National Security and
International Affairs Division of the General Accounting
Office.
Mr. Nelson.

STATEMENT OF BENJAMIN F. NELSON, DIRECTOR, INTERNATIONAL
RELATIONS AND TRADE ISSUES, NATIONAL SECURITY AND INTERNATIONAL
AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON,
DC

Mr. Nelson. Good morning, Mr. Chairman. We have----
Senator Grams. Welcome back to the committee, Mr. Nelson.
It is nice seeing you again.
Mr. Nelson. Thanks. With your permission, I have two of the
members of my staff sitting here, so that they can help me
answer any questions you might have about some particular
aspects of the State Department's operations. Ms. Diana Glod
and Mr. Lynn Moore.
Senator Grams. All right. We will have to dig for tougher
questions, then, if you have got all of this help.
But if you have an opening statement, I would like to hear
it or enter it into the record. But good morning.
Mr. Nelson. Yes, sir. I have a short opening statement that
I will go into, and submit my entire statement for the record.
Senator Grams. Without objection.
Mr. Nelson. OK. Mr. Chairman, I am pleased to be here today
to participate in the subcommittee's deliberations on the
Department of State's fiscal year 2001 budget.
The Department is the principal agency for advancing and
protecting U.S. overseas interests. It maintains a network of
over 250 overseas locations to support its mission and that of
about 35 other agencies that have overseas operations.
A substantial amount of State's $3 billion annual budget
for the administration of foreign affairs is spent to support
these operations. These business-type operations range from
providing security for over 50,000 State and other agencies
personnel, to locating suitable housing for American employees
and their dependents.
In recent years, we have done a significant amount of work
examining the ways the State Department carries out its
management and business-related operations--including our
report being released today on State's progress in implementing
immediate security upgrades in the wake of the bombings of U.S.
Embassies in Africa. A list of other relevant reports is
attached to the end of my statement.
I will focus on the management challenges that State faces
in four key areas.
Mr. Chairman, I would like to add that addressing these
challenges is not easy, given the environment in which the
Department operates and the wide range of concerns that must be
taken into account.
These four challenges are: One, improving the security of
U.S. personnel and facilities overseas in a cost-effective and
timely manner.
The second challenge, determining the right size and
location of the U.S. presence in order to improve efficiency of
operations.
The third challenge is continuing to upgrade information
and financial management systems to further improve
communications and accountability.
And last, improving performance planning--to better achieve
mission objectives.
It is worthy to note that the Department has recognized
these challenges, devoted substantial resources toward
addressing them, and has achieved results in many areas.
For example, in the aftermath of the bombings of U.S.
Embassies in Africa in 1998, State, using about $1.5 billion in
emergency supplemental funds, has started to upgrade security
at all of its overseas posts and has begun a major program to
build new facilities that fully meet higher security standards.
Following up on the recommendations of the Crowe report,
State also convened an Overseas Presence Advisory Panel, which
issued a report to the Secretary this past November. The panel
noted that the U.S. presence has not been adjusted to the new
economic, political and technological landscape.
The panel further concluded that a 10-percent reduction in
the size of the overseas posts could generate government
savings of about $380 million annually.
State has established an interdepartmental right-sizing
committee to respond to the panel's recommendations.
Furthermore, consistent with our recommendations, State has
made improvements in its information and financial management
systems. State was successfully able to meet Y2K challenges and
received unqualified opinions on its financial statements for
fiscal years 1997 and 1998.
Further, State's performance plans continue to show
improvements in establishing results-oriented goals and
quantifiable performance measures.
However, despite this progress, State has a number of
remaining challenges in each of these areas.
In our report issued today, we conclude that State has made
progress in implementing certain emergency security
enhancements, but current cost estimates to complete major
upgrades that are included in the package could exceed the
Department's initial estimates by about $800 million, and
projects will not be completed as quickly as the Department had
hoped, due primarily to changing security requirements.
I would like to point out, Mr. Chairman, that these are
requirements that have been evolving as the Department prepared
to upgrade its facilities. These additional costs are not
necessarily the result of mismanagement by the Department, but
the result of further refining the requirements.
Let me move to the overseas presence issue. Although State
has convened an interdepartmental right-sizing committee, it
has not yet indicated what actions it may take to address the
specific recommendations in the Overseas Presence Advisory
Panel report.
I would like to note that the panel's findings are
consistent with our observations from our recent work at the
State Department. We have recommended that State re-examine the
way overseas administrative functions, such as relocating
employees, are carried out.
From our work, we have concluded that State could increase
the efficiency of its operations by regionalizing certain
functions and making greater use of technology and out-
sourcing. Actions in these areas could potentially reduce the
U.S. overseas presence.
State also faces continuing challenges in working with
other U.S. agencies operating overseas to standardize
information technology and to correct longstanding weaknesses
in financial management systems. Investing in compatible
technologies could reduce costs and improve the productivity
and effectiveness of the overseas staff.
Regarding financial management, the Department's
accomplishments here have been noteworthy. The unqualified
opinions in 1997 and 1998 represented major accomplishments;
however, the Department's Office of Inspector General reported,
in September 1999, that State's financial systems did not
comply with certain requirements, including some provisions of
the Federal Financial Management Improvement Act of 1996.
In our view, State needs to continue to make improvements
in its financial management system, so as to provide managers
with information they need to operate in a more businesslike
fashion; that is, make more cost-based decisions.
Moreover, while State has made some improvements in its
Government Performance and Results Act plans, its fiscal year
2000 annual performance plan did not provide a complete picture
of the agency's intended performance for some of its strategic
goals.
It contained only a limited discussion of the strategies
and resources the agency needs to achieve its goals. Also, the
plan did not describe how the Department was going to validate
the data it would use to measure its own performance.
Mr. Chairman, that concludes my opening statement. I would
be happy to take any questions you might have.
[The prepared statement of Mr. Nelson follows:]

Prepared Statement of Benjamin F. Nelson

PROGRESS AND CHALLENGES IN ADDRESSING MANAGEMENT ISSUES

Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to participate in the Subcommittee's
deliberations on the Department of State's fiscal year 2001 budget. The
Department is the principal agency for advancing and protecting U.S.
interests overseas. The Department maintains a worldwide network of
operations at over 250 overseas locations to support its mission and
that of about 35 other U.S. agencies that operate overseas. A
substantial amount of State's $3 billion annual budget for the
administration of foreign affairs is spent supporting these operations.
These business-type operations range from providing security for over
50,000 State and other U.S. agencies personnel to locating suitable
housing for American employees and their dependents.
In recent years, we have done a significant amount of work
examining the way State carries out its management and business-related
operations--including our report being issued today on State's progress
on immediate security upgrades in the wake of the bombings of the U.S.
embassies in Africa.\1\ A list of our other relevant reports is
attached to the end of my statement. My testimony will focus on the
management challenges that State faces in improving its operations in
four key areas.
---------------------------------------------------------------------------
\1\ State Department: Overseas Emergency Security Program
Progressing, but Costs Are Increasing (GAO/NSIAD-OO-83, Mar. 8, 2000).
This report can be accessed at: http://www.gpo.gov under the heading:
General Accounting Office, GAO Reports, and entering report number
NSIAD-00-83.
---------------------------------------------------------------------------

SUMMARY

The State Department faces several wide-ranging and complex
challenges in managing its vast overseas operations. These challenges
include:

improving the security of U.S. personnel and facilities
overseas in a cost-effective and timely manner,
determining the right size and location of the U.S. overseas
presence to improve the efficiency of operations,
upgrading information and financial management systems to
further improve communications and accountability, and
improving performance planning to better achieve mission
objectives.

State has recognized these challenges and has devoted substantial
resources toward addressing them. For example, in the aftermath of the
bombings of two U.S. embassies in Africa in 1998, State, using about
$1.5 billion in emergency supplemental funds, has started to upgrade
security at all of its overseas posts and has begun a major program to
build new facilities that fully meet higher security standards.
Following up on a recommendation of the Crowe reports, State also
convened an Overseas Presence Advisory Panel, which issued a report in
November 1999 to the Secretary of State, calling for substantial
changes in the size, composition, and management of the U.S. overseas
presence. It concluded that the U.S. presence has not adequately
adjusted to the new economic, political, and technological landscape.
Further, the panel concluded that a 10 percent reduction in the size of
the overseas posts could generate government savings of $380 million
annually. State has established an interdepartmental ``right-sizing''
committee to respond to the panel's recommendations. Furthermore,
consistent with our recommendations, State has made many improvements
to its information and financial management systems. It was able to
successfully meet Y2K challenges and received unqualified opinions on
its financial management statements for fiscal years 1997 and 1998.
Further, State's performance plans continue to show improvements in
establishing results-oriented goals and quantifiable performance
measures.
State has made progress in addressing the four areas, but
challenges remain.

In our report issued today, we conclude that State has made
progress in implementing certain emergency security upgrades,
but current cost estimates to complete major upgrades could
exceed the Department's initial estimates by about $800
million, and will not be completed as quickly as it had hoped,
due to increasing security requirements.
Although State has convened an interdepartmental right-
sizing committee, it has not yet indicated what actions it may
take to address the specific recommendations in the Overseas
Presence Advisory Panel's report. The panel's findings are
consistent with our observations from our work in recent years.
We have recommended that State reexamine the way overseas
administrative functions, such as relocating employees are
carried out. From our work, we have concluded that State could
increase the efficiency of its operations by regionalizing
certain functions and making use of technology and outsourcing.
Actions in these areas could potentially reduce the U.S.
overseas presence.
State also faces continuing challenges in working with U.S.
agencies operating overseas to standardize information
technology capabilities and in correcting its longstanding
weaknesses in financial management systems. Investing in
compatible technologies could reduce costs, and improve the
productivity and effectiveness of overseas staff. Regarding
financial management, the Department's Office of Inspector
General reported in September 1999 that State's financial
systems did not comply with certain requirements, including
some provisions of the Federal Financial Management Improvement
Act of 1996. In our view, State needs to continue to make
improvements in its financial management systems to provide
managers with the information they need to operate in a more
business-like fashion and make better cost-based decisions.
Moreover, while State has made some progress in implementing
requirements under the Government's Performance and Results
Act, its fiscal year 2000 annual performance plan did not
provide a complete picture of the agency's intended performance
relating to some of its strategic goals. It contained only a
limited discussion of the strategies and resources the agency
needs to achieve its goals. Also, the plan did not describe how
the Department was going to validate the data it would use to
measure its performance.

ENHANCING OVERSEAS SECURITY

In light of the known threats of terrorism against the American
people and property overseas by groups opposed to U.S. interests,
enhancing the security of embassies and consulates might well be the
most significant challenge facing the Department of State. The August
1998 bombings of the U.S. embassies in Nairobi, Kenya, and in Dar es
Salaam, Tanzania, highlighted the security management challenge for the
Department of State. Immediately after the bombings in Africa, State
deployed teams to Kenya and Tanzania to assess the damage firsthand and
estimate costs for replacements and temporary facilities. It also sent
teams to over 30 other high-risk countries to assess the threats and
possible options to reduce them. Those teams, in coordination with
State's overseas security officers, chiefs of missions, and other
officials, helped State further define its security enhancement
requirements and estimate the costs for upgrading existing facilities
worldwide. State requested and received about $1.5 billion in emergency
supplemental appropriations from the Congress to improve security
quickly at all posts and to begin relocating its most vulnerable
embassies and consulates.
Using funds from the supplemental, State has reestablished embassy
operations in interim office buildings in Nairobi, Kenya, and in Dar es
Salaam, Tanzania, and has signed a contract for construction of new
embassy compounds. These two embassy compounds are scheduled for
completion in 2003 at a cost of about $119 million. Projects to
relocate several other embassies and consulates are also under way
including those in Kampala, Uganda; Zagreb, Croatia; and Doha, Qatar.
In addition, State has made progress in implementing many of its
planned security upgrades, including enhancing vehicle inspection and
security guard programs, hiring additional special agents and other
security staff, and instituting a new surveillance detection program
designed to identify hostile surveillance activities and potential
attackers.
According to State's data, major construction upgrades to improve
the security of existing facilities at 119 posts are likely to cost
significantly more than was originally estimated and are behind
schedule. State estimates that the upgrades and electronic equipment
installations, originally funded at $181 million, and take longer to
complete than projected. State notes that these upgrades could
potentially cost about $800 million more to complete than originally
envisioned due to an increase in requirements and other factors. State
says that to address these additional requirements, it plans to request
additional funds in its fiscal year 2001 and future budgets; realign
funds from other projects; stretch the program over several years; and/
or, where possible, use less costly methods to achieve project
objectives. Further, the current cost estimates for the construction of
embassies initiated as part of the emergency supplemental in Kampala,
Zagreb, and Doha are about $122 million, or about $45 million higher
than original estimates, due to increases in staffing and upgrades in
security requirements. As of December 31, 1999, State had obligated
$972 million and expended $445 million of the $1.5-billion emergency
supplemental appropriations.
In its fiscal year 2001 budget, the Department of State requested
an advance appropriation of $3.35 billion over 4 years (fiscal years
2002 through 2005) to replace its highest risk and most vulnerable
embassies and consulates. State did not identify which embassies and
consulates will be replaced or what the estimated project costs are for
completion. Because of State's past problems in implementing capital
construction programs, we have been asked to evaluate whether the
Department's planning adequately identifies which projects are highest
priority for replacement, their estimated costs, and when construction
can be completed. We have just begun this effort.

OVERSEAS PRESENCE

Another key issue that the Department faces in its everyday
operations is the sheer number of U.S. employees overseas--which
affects security requirements, operating costs, and efficiency. In
recent years, we have repeatedly raised concerns about the need to
reexamine the U.S. overseas presence in light of the changing political
landscape and advances in technology. In 1996, we reported that State
was reluctant to seriously reexamine its overseas presence and the
scope of its activities or to substantially change its business
practices. We encouraged State to expand its use of regional centers
for certain administrative services and explore greater use of Foreign
Service National personnel to reduce staffing costs. In our 1998 report
on overseas housing programs, we noted that some administrative
functions could be performed by the private sector or through other
means that would reduce posts' staffing needs. The security burden is
directly affected by the size of the overseas work force.
We are pleased to note that the Department has moved forward in
examining its overseas presence. Following the bombings in Africa,
State appointed a panel to review overseas operations of the U.S.
government. The panel made a number of recommendations in November 1999
about how to best organize and manage overseas posts. The panel
concluded that the U.S. overseas presence has not adequately adjusted
to the new economic, political, and technological landscape. Many of
these points are consistent with our observations from prior work on
budget, staffing, and related management issues. The panel recommended
that the President establish an interagency committee to determine the
right size and composition of overseas posts. The panel concluded that
reducing the size of overseas posts overall by 10 percent would
generate government savings of $380 million annually.
The panel also recommended that State reform its administrative
services. Our prior work identified several actions State could take to
streamline those services and reduce costs, including outsourcing of
key housing functions and one-stop shopping for relocation services.
State has attempted to reengineer its logistics system, focusing on
direct ordering from the supplier and other actions that eliminated
unnecessary costs and procedures in providing needed goods and
services. It has also implemented the International Cooperative
Administrative Support Services system to provide greater transparency
to the costs of operations. However, it has not broadly embraced the
concept of cost-based decision-making for many of its operations, such
as overseas housing and relocation. Changes in the way State carries
out its administrative functions could reduce the number of overseas
staff.

IMPROVING INFORMATION AND FINANCIAL MANAGEMENT SYSTEMS

Recognizing that it relied on inadequate information and financial
management systems and infrastructures that were generally inadequate
to support State's core foreign policy and administrative functions, in
1997, State developed a 5-year information technology plan to lay out
its overall modernization effort. Our 1998 report on information
resource management questioned State's methodology for making its 1997
estimate that it would cost $2.7 billion over 5 years to modernize its
global information technology infrastructure. Consistent with our
recommendations, State has improved its information technology planning
and investment process and is revising its modernization cost
estimates. Moreover, State reports that it has fully achieved some of
its modernization goals. For example, overseas posts now have modern
computer platforms, the obsolete Wang computer network has been fully
replaced, and its e-mail systems have been consolidated and upgraded.
Despite these efforts, the Overseas Presence Advisory Panel
reported that U.S. embassies are still equipped with incompatible
information technology systems incapable of even the simplest
electronic communications between agencies. It added that most
employees overseas cannot e-mail colleagues in other agencies even in
the same building. The panel recommended that the Department develop
and implement a strategy for standardizing information and
communications networks at all posts while providing all agencies with
the connectivity they require. The panel suggested that a single,
unclassified global communications network to serve all U.S. agencies
with an overseas presence could be built at an estimated cost of $200
million. The Department's recently completed modernization program
overseas, according to State officials, could provide a common platform
at posts for e-mail and other functions if it is accepted by all
agencies at each post. State has included $17 million in its fiscal
year 2001 budget request to develop and deploy interagency information
platforms at about 45 posts overseas.
Regarding financial management, the Department of State has
received an unqualified audit opinion on its Department-wide financial
statements for fiscal years 1997 and 1998. However, its audit report
for fiscal year 1998 issued on September 30, 1999, disclosed that
State's financial management systems were still out of compliance with
certain federal accounting requirements. Principal weaknesses in
State's financial and accounting systems included balances that could
not be reconciled, and balances requiring substantial manual effort to
correct. In addition, State did not meet the OMB's March 1, 2000
requirement to submit fiscal year 1999 audited financial statements.
State officials indicated that they anticipate obtaining an unqualified
audit opinion on its fiscal year 1999 statements. State has drafted a
remediation plan in compliance with the Federal Financial Management
Improvement Act. This plan addresses the actions the agency believes
are necessary to address its internal control weaknesses.
strengthening strategic and performance planning
As required by the Government Performance and Results Act, State
has prepared strategic and performance plans in recent years. The Act
provides a framework for addressing management challenges and providing
greater accountability of State's programs and operations. In its first
strategic plan for foreign affairs, State formulated foreign policy
goals that cover a wide spectrum of U.S. national interests. Our review
of State's performance plan for fiscal year 2000 found that
improvements had been made over the prior year's plans, including the
addition of results-oriented goals, quantifiable measures, and
baselines for many of its performance goals. However, the plan still
had limited usefulness and provided an incomplete picture of the
agency's intended performance for some of its key strategic goals. For
example, State did not provide a full range of objectives, strategies,
external factors, and performance indicators for many of its goals.
Also, its plan did not elaborate on the many cross-cutting issues.
For example, State says it works closely with the U.S. Trade
Representative and the Department of Commerce on specific U.S.
government export promotion efforts without explaining what each agency
will do. We will soon review State's performance plan for 2001 and its
first performance report for fiscal year 1999.
Mr. Chairman and Members of the Subcommittee, this concludes my
prepared statement. I would be happy to answer any questions you may
have.

RELATED GAO PRODUCTS

Overseas Security and Presence
State Department: Overseas Emergency Security Program Progressing,
but Costs Are Increasing (GAO/NSIAD-00-83, Mar. 8, 2000).
Information Management
Department of State IRM: Modernization Program at Risk Absent Full
Implementation of Key Best Practices (GAO/NSIAD-98-242, Sept. 29,
1998).
Year 2000 Computing Crisis: State Department Needs to Make
Fundamental Improvements to Its Year 2000 Program (GAO/AIMD-98-162,
Aug. 28, 1998).
Computer Security: Pervasive, Serious Weaknesses Jeopardize State
Department Operations (GAO/AIMD-98-145, May 18, 1998).
Foreign Affairs Organization and Management
State Department: Major Management Challenges and Program Risks (T-
NSIAD/AIMD-99-99, Mar. 4, 1999).
Performance and Accountability Series: Major Management Challenges
and Program Risks, Department of State (GAO/OCG-99-12, Jan. 1999).
Foreign Affairs Management: Major Challenges Facing the Department
of State (GAO/T-NSIAD-98-25 1, Sept. 17, 1998).
International Affairs: Activities of Domestic Agencies (GAO/T-
NSIAD-98-174, June 4, 1998).
International Affairs Budget: Framework for Assessing Relevance,
Priority, and Efficiency (GAO/T-NSIAD-98-18, Oct. 30, 1997).
Relocation and Housing
State Department: Options for Reducing Overseas Housing and
Furniture Costs (GAO/NSIAD-98-128, July 31, 1998).
State Department: Using Best Practices to Relocate Employees Could
Reduce Costs and Improve Service (GAO/NSIAD-98-19, Oct. 17, 1997).
Strategic and Performance Planning
Observations on Department of State's Fiscal Year 2000 Performance
Plan (NSIAD99-183R, July 20, 1999).
The Results Act: Observations on the Department of State's Fiscal
Year 1999 Annual Performance Plan (GAO/NSIAD-98-210R, June 17, 1998).
Managing for Results: Agencies' Annual Performance Plans Can Help
Address Strategic Planning Challenges (GAO/GGD-98-44, Jan. 30, 1998).

Senator Grams. Thank you very much, Mr. Nelson. I
appreciate it.
A couple of quick questions. You noted in your statement
that the estimated cost to complete State's emergency security
upgrades have grown substantially.
Could you elaborate on the reasons for this and the
potential implications?
Mr. Nelson. Yes. Yes, I can.
As I stated earlier, I think the primary reason for the
increase in the cost estimates is that the Department is better
refining the requirements. As you know, the initial estimates
were done in a rather hurried fashion, after the bombings.
And the Department did not have a data base or information
on each of its posts that--that kind of cataloged the
requirements.
So, the Department had to rush out, get some information,
and now through a more systematic process, the requirements are
being refined. And what is happening is that the estimates--the
new estimates are substantially higher than those that were
initially done by the Department through a rather quick method.
Senator Grams. Are they in line, though, with the needs--I
mean, the estimates, in your opinion? Are the requests
justified? Do they meet the goals? Are they overstating the
goals?
Mr. Nelson. Do you mean the Department's budget request?
Senator Grams. Yes.
Mr. Nelson. I do not have a view on that, because we have
not--we have not gone through a process of trying to
rationalize the Department's budget. What we have done was
focus on being able to report to Congress how much progress
they are making in the security area, with the funds that were
given to them under the supplemental.
We have work underway to try to look at State's capacity to
manage a much larger or longer term embassy construction
program.
What we do know is that at most of the embassies the
Department has done a very good job of putting in place
cameras, x-ray machines, putting film on windows to reduce the
potential for shatter, improved training, and hired more
guards. And so, in those areas, the Department has done a very
noteworthy job.
Senator Grams. Maybe I could say from our side, too, has
the funding been adequate? Our funding of the project, is it
adequate, or are too many dollars appropriated in too short a
period of time, or can they absorb those dollars to do the job
they need to do?
Mr. Nelson. I think, for the long-term construction
program, the items you mentioned should be of concern, as to
whether the Department has the capacity to handle a large
scale, long-term new construction program.
As you know, the Department had some difficulties a while
back. And I think the Department probably does not want to
engage in too much discussion about the Inman program, but I
think there are lessons to be learned from that program.
And when you look at the projects now, where there is new
construction, three of those projects are currently
experiencing some cost increases. So, I think there is reason
to be concerned if we are moving to a long-term program.
But with respect to the items in the supplemental, I do not
think the Department is going to be able to pay for that
package of activities that it wanted to complete within the
$1.5 billion appropriation.
Senator Grams. GAO's report makes it clear that State's
estimated cost for construction of new embassies have increased
significantly; the cost for these new facilities.
What are the potential implications of such cost increases
for the State's plans to initiate a multi-billion dollar
construction program?
Mr. Nelson. Well, as I said, the implications are
tremendous, in terms of cost. The Crowe report made reference
to about a $10 billion program. If we look at--first of all,
let me point out that these are estimates and the size of the
estimates have increased as the Department has gotten better
information. And I would not call them cost overruns in the
traditional sense that we talk about cost overruns.
My point is that our work suggested that the cost of
completing these upgrades is likely to be substantially higher
than was initially estimated.
If the pattern holds true in the longer term construction
program, those costs are likely to be very significant, and
that is why GAO feels that the Department needs to lay out, in
a fairly comprehensive way, its long-term construction program
and obtain the buy-in and support of the Congress. And that
program should include realistic numbers regarding what this
effort is going to cost.
If the increases in the long-term program are anything
close to what we see in the short-term program, the costs are
going to be staggering.
Senator Grams. Do you have an estimate of over/under, or
what is the under-estimated cost, or what has been the
increased estimates in the costs? Is it 20 percent?
Mr. Nelson. Well, it has varied from project to project. I
believe that for some of the projects in the supplemental, that
the increases were in excess of 200 or 300 percent.
Well, I have it here. In three areas of the supplemental,
including relocating high-risk missions, there was a 24 percent
increase. Installing security-related equipment, those costs
have gone up--I should not say costs have gone up--the
estimates have increased by 337 percent.
And security construction for major upgrades, such as
bollards and rails and acquiring adjacent property, those
estimates have gone up by about 500 percent, as to what it
would cost to achieve the objectives that were laid out for the
first money to $1.5 billion.
Senator Grams. Why the huge increases? Just trying to put
it together too quick, or underestimating the need, or--those
are awfully large----
Mr. Nelson. You answered the question. They really did not
have a good handle on how much it would cost, as well as some
of the complexities involved. Acquiring land or getting
approval from government to do certain things, add to the
difficult challenge that they face.
Senator Grams. GAO reviewed the Inman security construction
program in the early 1990's. What are the lessons we should
have learned from that program, which should be considered in
the State's ongoing security enhancement efforts right now?
Not to make the same mistakes, I guess, but----
Mr. Nelson. Mr. Chairman, in that program, there were a lot
of management issues regarding having the capacity, the right
people. The decisionmaking process was pretty cumbersome. There
was continuing disagreement among the different departments
about the site, the location.
There were a number of issues. And the contracting methods
did not provide--give the contractor incentives to operate in
an efficient manner. Those were some of the things that
happened.
But I think the essential lesson for us is to have--if we
are going to embark on a major round of new construction, that
we need to have a plan that clearly lays out a strategy; that
has good cost estimates; and one that can be endorsed and
supported by the Congress, so that we do not have a lull in a
program, the way we had between the Inman program and the
bombings in Africa.
It is our fear that absent a clearly laid-out strategy--and
I know that the Department is concerned about putting something
on paper that will reduce their flexibility.
And I understand the challenges that they face in trying to
improve security. But I think that a plan that lays out a
strategy, has good numbers and good time tables, will increase
the amount of congressional support and keep the pressure on
for accountability. And I think that is a critical issue for
the subcommittee, is having the bases to hold the Department
accountable for achieving some results.
There is a potential to spend lots of money and not achieve
the results that the Congress expects to see.
Senator Grams. Thank you very much, Mr. Nelson.
All right. As you mentioned in your statement, also, GAO
has identified a number of options for State to reduce its
overseas presence and be able to save some money.
Now, could you--would you want to elaborate a little bit on
some of those options that you have talked about?
Mr. Nelson. Yes, sir. One of the things that--I think it is
correct to characterize the Department as being reluctant to
re-examine the way it does business. The Department has--until
recently, has not been willing to do so.
So, we took it upon ourselves to try to examine some of the
functions that State carries out. We call those the business-
type things. But we would not approach or attempt to second-
guess State on the foreign policy matters and how they go
about, you know, doing their business, because I do not think
we have the expertise there.
But we sought to look at some of their business functions.
And we examined things like: How does State relocate people
overseas? How do they find suitable housing for them? How do
they buy furniture?
So, these are business functions. And we thought that that
would be good information out there as to how the business
community approaches these functions. And what we found was
that State has not taken advantage of technology; that some of
its functions, at least as far as we could determine, seem to
be more expensive than is necessary.
And there was a limited involvement by the private sector,
even in places where there is sufficient private sector
capacity--like, for example, in Europe--to provide some of
these services, particularly, like house-finding; that there
are firms out there who can perform some of those functions.
Of course, the net result would be that if you could
contract out more of these functions to the private sector, you
would have fewer administrative support people operating
overseas. And I can imagine that this analogy could be extended
to certain financial operations, as well as some of the
communications activities.
Our work has shown that there are quite a few people
overseas engaging in, sort of, the manual transfer of different
pieces of paper, that if the Department was able to move
forward on its technology program, it may not be necessary to
have that many people overseas to support communications
functions.
Senator Grams. Would this fall under the ICASS-type
opportunities, to take advantage of some of the local
contracting, outside contracting? The flexibility built into
that, would that--is that what you are saying; they are kind of
reluctant to adopt all of those opportunities?
Mr. Nelson. Well, even within--within the State system,
what--rather than relying on one or another Government agency,
what our work seems to suggest is that a large part of deciding
how the function will be carried out should include some
assessment of the capacity of the private sector; not
necessarily another Government agency.
Senator Grams. Are you convinced State will address these
and any other related recommendations that have been raised by
OPAP for right-sizing of the overseas missions?
Mr. Nelson. Mr. Chairman, I can say that we are very
pleased with the actions that the Department has taken to date.
I think the new leadership team at the Department--first of
all, I would like to give them credit for following up on the
Crowe recommendations; for commissioning the overseas panel.
And I think this--these are good first steps for a serious
analytic examination of our overseas presence; one that--based
on asking a series of critical questions about the functions,
activities, and who needs to be overseas to carry them out.
But I think the committee will have to be vigilant in its
dealing with the Department to make sure that there are some
tangible, concrete actions taken in response to the report. We
applaud the Department for taking a serious and analytic look
at the recommendations. And there should be some concrete
actions taken in response.
And I think the--as I said, the committee should be
vigilant in asking the Department to--about those specific
actions.
Senator Grams. In your opinion, what are the State
Department's most serious management problems? Outside the
realm of security issues, of course, but have you been able to
pinpoint any or recommend closer examination of any areas?
Mr. Nelson. I have had difficulty identifying the most
pressing. I think the Department has done a good job of
improving its management of overseas property. I think it has
done a good job of disposing of unneeded, excess real estate.
They have also made tremendous improvements in their financial
management capability.
Three or 4 years ago, the Department's capacity in that
area was not very good. And I think they have done a good job
of improving their financial management capacity.
I still believe that the Department needs to focus on those
business-type functions that I talked about earlier. And that
is, the processes used to relocate people, provide them
housing, and various other support functions that are done
overseas.
Senator Grams. Does it have the internal capabilities to do
this, or would you recommend or should it use some outside
expertise, as well, in order to try and achieve some of these?
Mr. Nelson. I think the Department would be wise to obtain
some outside assistance in trying to rationalize current
functions and current presence.
What GAO did--we could only go so far in our analysis, but
we used a lot of what is available in the private sector to try
to decide whether a function could be better done inside or
out, or even how a certain function was approached by the
private sector.
And since we are in an era of globalization, there are
numerous multi-national firms now that are operating overseas
who have to face some similar challenges. They have to protect
their employees, too. And we think that there are lessons to be
learned from some of the private sector firms.
Senator Grams. What are some of the challenges, Mr. Nelson,
that you feel State is facing to reorganize some of our foreign
policy apparatuses with USIA and ACDA? What problems are they
facing in trying to do that, being folded into State?
Mr. Nelson. Mr. Chairman, we have not examined, very
closely, this--the Department's progress in that regard. We
have expressed concerns about the possibility of duplicating
certain functions, but we have not conducted a very close
examination of the Department's progress.
I do know, from reading the Secretary's various statements,
that it is a challenge to integrate all of those other actors
into State without diminishing their--their intended role
within the U.S. foreign affairs apparatus.
And I also understand that cost savings will not be a
primary--or is not a primary concern at this point in time.
Senator Grams. It was for us, but----
Mr. Nelson. By the Department.
Senator Grams. And finally, just one last question: Do you
think that State has responded favorably to GAO's
recommendations for change based on best practices?
Mr. Nelson. Well, from a GAO standpoint, we would have
preferred a more open or more receptive--more receptivity to
our recommendations. The Department, we understand, operates in
a very complex environment. And the Department is basically
reluctant to go to a zero-based approach to looking at their
operations.
I am encouraged, though, by the response to the Overseas
Presence Advisory Panel.
Senator Grams. OK. Well, Mr. Nelson, I will ask you the
same final question I did Mr. Kennedy. Is there anything else
you would like to add, in addition?
Mr. Nelson. I would just like to conclude that the
Department faces a number of very serious and difficult
challenges. As has been pointed out, some of our overseas
facilities are not in very good shape and may not be of a
status that would be commensurate with the U.S.'s importance in
the world. And I think that this is something that has to be
addressed.
At the same time, I believe that if any funding is provided
to the Department, that the Congress should take steps to make
sure that concrete action and concrete results are achieved,
where we have some embassies that do not meet up to standards,
but also where we have some activities that may be more
expensive than is really necessary.
Senator Grams. Well, Mr. Nelson, thank you very much for
your time this morning, and your testimony. I really appreciate
it.
And just for the record, I would like to leave the record
open for about 3 days, in case any of the members of the
subcommittee would like to--or the full committee would like to
address any questions to you or to Mr. Kennedy for any
clarification of your testimony or answers or any other things
they might decide to ask you about.
And I also would like to submit for the record a letter
from Chairman Helms to the Chairman of the Budget Committee,
Senator Domenici, on concerns about the President's budget
request for the 150 account.
[The letter referred to follows:]

U.S. Senate,
Committee on Foreign Relations,
Washington, DC, March 4, 1999.

The Honorable Pete V. Domenici,
Chairman,
Committee on the Budget,
U.S. Senate,
Washington, DC.

Dear Mr. Chairman: The President's fiscal year 2000 budget is the
first since enactment last October of the Foreign Affairs Reform and
Restructuring Act, which requires the consolidation of the functions of
the Arms Control and Disarmament Agency (ACDA) and the U.S. Information
Agency (USIA) into the State Department. (Consolidation will be
completed prior to the start of fiscal year 2000. I believe this will
strengthen the Secretary of State's ability to conduct foreign policy.)
As a result the State Department has presented a fiscal year 2000
budget that includes an additional 1,943 personnel from these two
agencies, who will now report to the Secretary of State. In addition,
the State Department has more direct oversight over the Agency for
International Development.
State Department Administration of Foreign Affairs Budget
I am convinced that the State Department is not adequately looking
for opportunities to streamline and reduce duplication and overlap in
the consolidation process. In testimony before the Committee last week,
the Secretary of State indicated that the State Department would
achieve savings in the future, but she could not point to any specific
savings. As agencies are eliminated, and functions moved, it seems
incredible that certain duplication cannot be eliminated. For example,
administrative personnel of the previous two agencies surely could be
down-sized. Also, as USIA personnel are integrated into regional
bureaus, all duplication in regional analysts certainly should be
eliminated.
The General Accounting Office (GAO) has long been critical of a
lack of long-term planning by the State Department. Specifically, GAO
has found that the State Department continues to resist setting funding
priorities. Reorganization presents a real opportunity for reductions
to occur in staffing levels while maintaining a vigorous presence
overseas. Budget discipline, when and if implemented, will force at
least some of these needed changes.
Also, the GAO and other independent foundations have found that the
present cable writing and review process may be too cumbersome, given
the widespread use of electronic mail and the possibilities of the
Defense Messaging System for transmitting classified communications. In
addition, the report found that the need for face-to-face diplomatic
meetings might be reduced by using other communication methods, such as
video-conferencing. Again, budget discipline could go a long way to
achieving a streamlined communication system and provide an opportunity
for some reduction in personnel.
The President's budget also requests an advance appropriation of $3
billion for a five-year embassy construction program to begin in fiscal
year 2001. I am concerned that the State Department has not adequately
determined that the security of U.S. personnel abroad must be a
priority. Instead of including a rational five-year plan, commencing in
fiscal year 2000, the President's plan would defer most of the embassy
upgrades until the out years of the plan. As a result it could be a
decade before secure embassies are open for business.
The proposed plan, which provides minimal funding in the first
three years, also would prohibit securing efficiencies in embassy
construction. Given the failure to commit adequate funding in the next
three years under the plan, it will be impossible for the State
Department to secure one contract to both design and build an embassy
or one contract to build multiple embassies in a region.
I am opposed to an advance appropriation for embassy security.
However, I hope the Senate budget resolution will include a multi-year
commitment to securing U.S. facilities overseas. The Committee intends
to mark-up a five year authorization bill for the construction of
secure embassies. Funding would be provided in a new authorization that
could not be tapped for other State Department activities, and would
require the Secretary to certify compliance with optimal security
standards. Although it is impossible for the United States to provide
totally risk-free embassies, the Congress should approve reasonable
funding for minimizing the risk for U.S. personnel overseas.
Foreign Assistance
The President's fiscal year 2000 budget requests $119,000,000 more
for foreign aid programs than the 1999 levels. With a serious
agriculture crisis at home, as well as numerous other domestic
priorities, it is difficult to reconcile the Administration's desire
for more foreign aid. American taxpayers expect Congress to cut foreign
aid unless it directly promotes U.S. national interests.
The Committee has just received the Agency for International
Development's fiscal year 2000 Congressional Presentation documents,
and we are still in the process of reviewing them. Nevertheless, I can
offer several comments that I hope your Committee will consider:
Development Assistance Fund
The Administration's request for another increase for ``sustainable
development assistance'' programs is not justified. According to
President Clinton's 1993 task force on foreign aid reform: ``Despite
decades of foreign assistance, most of Africa and parts of Latin
America, Asia and the Middle East are economically worse off today than
they were 20 years ago.'' Under the stewardship of the Clinton
Administration, the situation has further deteriorated. In fact, A.I.D.
cannot explain how its programs are performing and whether they are
achieving their intended goals. A September 30, 1998 A.I.D. Inspector
General report titled ``Audit of the Status of USAID's Implementation
of the Government Performance and Results Act of 1993'' revealed that,
``USAID will not be able to meet the reporting requirements of the
Results Act since it relies on infrequent, untimely data that is
targeted at measuring results for the development community as a
whole.''
Expanding on the same theme, an October 5, 1998 A.I.D. Inspector
General report entitled ``Audit Quality of Results Reported in the
Global Bureau's Center for Human Capacity Development Results Review
and Resource Request (R4) Report Prepared in 1997'' disclosed that the
``Global Bureau's Center for Human Capacity Development did not report
results which were objectively verifiable, supported, and/or
accurate.'' There are scores of Inspector General reports on country
programs and various functional bureaus which contain virtually the
same findings. Simply put, A.I.D. cannot demonstrate that its
development assistance programs even work, and yet it requests a
funding increase of $119,000,000.
Included in its request for development assistance, the
Administration asks for $482,000,000 for population control and HIV/
AIDS activities, as well as $25,000,000 for the U.N. Fund for
Population Activities (UNFPA). The Clinton Administration has begotten
the largest population control account in U.S. history and is the
world's largest provider of international population control
assistance. Despite this fact, the United Nations and many recipients
of these funds harshly criticized the U.S. Congress at a U.N.
conference in The Hague in February for suspending funds to UNFPA for
fiscal year 1999.
Mr. Chairman, you are fully aware of the horror stories about
Chinese women being forced to abort their babies and undergo forced
sterilization procedures, and UNFPA's longstanding involvement with
China's population control program is precisely the reason Congress
suspended its support. I sincerely hope Congress will stand on
principle and deny UNFPA funds for fiscal year 2000. (In addition to
funding projects from the population control and HIV/AIDS accounts,
these misguided projects are funded also from other accounts, including
Child Survival and Health, Infectious Diseases, Development Fund for
Africa, Economic Support Funds, Support for Eastern Europe and
Democracy (SEED) and Freedom Support Act (assistance to the New
Independent States). A.I.D. should stop misusing these accounts.)
AID Operating Expenses
Congress should scale back significantly the Administration's
$508,000,000 request for AID's Operating Expenses, which is $15,000,000
more than Congress appropriated for fiscal year 1999. As a
``laboratory'' for the Vice President's ``reinvent government''
initiative, AID should be a model of efficiency, but this is not the
case.
A January 1999 General Accounting Office report called ``Major
Management Challenges and Program Risks'' documented problems at A.I.D.
that many of us have suspected for years:

The lack of an integrated financial management system and the
existence of material control weaknesses hinder the agency's
ability to produce auditable financial statements. As in the
pervious year, USAID's Office of Inspector General (OIG) was
unable to express an opinion on the agency's financial
statements for fiscal year 1997. The process of preparing
financial statements and subjecting them to independent audit
is the first step in generating complete, reliable, and timely
financial information for decision makers at all levels.
Without financial integration and strong controls, USAID's
systems do not comply with federal accounting and management
requirements.

Mr. Chairman, I remind you that this devastating analysis of
A.I.D.'s financial mismanagement comes after the Administrator of
A.I.D. spent nearly $100,000,000 on a computerized financial management
system that, according to GAO, ``does not work as intended and has
created problems in mission operations and morale.''
Inter-American Foundation and African Development Foundation
I strongly urge that funding for the Inter-American Foundation--
which has spent more than $1 billion since its creation--and the
African Development Foundation be eliminated. In 1998, the Foreign
Relations Committee forced the Inter-American Foundation to end several
grants to groups in Ecuador clearly identified by the State Department
to be terrorist organizations which had actually kidnaped Americans and
threatened their lives, as well as the lives and safety of other U.S.
citizens while extorting money from them. Abolishing these two
foundations outright, which I have consistently advocated, would save
the taxpayers at least $35 million annually.
United Nations
As you well know, the Congress approved and the President vetoed a
bill by Senator Biden and me to reform the United Nations in exchange
for the payment of arrears to the United Nations. The Committee will
consider the U.N. reform bill again this Congress. The payment plan
calls for $244 million in FY2000 funds, and an additional $107 million
in debt forgiveness. In addition, the President's budget includes more
than $1.6 billion for assessed and voluntary contributions to
international organizations. This does not include other AID transfers
to these organizations for specific programs and activities.
International organizations represent more than one quarter of the
State Department's operational budget. The U.N. Reform bill would
reduce the U.S. assessment and begin a reduction in these expenditures.
Pete, I look forward to your guidance regarding budget resources
within the total 150 foreign affairs account, and am particularly
interested in finding resources within the account for embassy
security.
Sincerely,
Jesse Helms.

Senator Grams. So, with that, again, I want to thank you
very much. I appreciate it. This hearing is concluded.
Mr. Nelson. Thank you.
[Whereupon, at 12:08 p.m., the hearing was adjourned.]

BUSINESS MEETING TO MARK UP THE TECHNICAL ASSISTANCE, TRADE PROMOTION
AND ANTI-CORRUPTION ACT FOR FISCAL YEAR 2001

----------

THURSDAY, MARCH 23, 2000

U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 2:43 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Lugar, Hagel, Smith, Frist,
Brownback, Ashcroft, Chafee, Biden, Sarbanes, Dodd, Kerry,
Feingold, and Boxer.
The Chairman. The committee will come to order, and the
chair is certainly delighted that we have a quorum. Sometimes
we have to wait, and I apologize for being a few minutes late.
In recognition of that, I ask unanimous consent that my
statement, which is written for history, be made part of the
record. Without objection, it is so ordered.
[The opening statement of Senator Helms follows:]

Opening Statement of Senator Jesse Helms

This past November 29, the President signed into law the State
Department authorization bill, which, among other things, resulted in
an historic reform of the U.N. in exchange for partial payment of what
some call ``U.S. arrears.''
Today the Foreign Relations Committee will consider its second
major legislative responsibility--authorization of U.S. foreign
assistance and trade promotion programs. The Technical Assistance,
Trade Promotion, and Anti-Corruption Act is not a foreign aid bill per
se--but it does contain a number of provisions to help the Agency for
International Development operate more efficiently and effectively.
The most recent time a similar bill was enacted into law was in
1985, when Senator Lugar was Chairman of this Committee. Obviously,
enacting this kind of legislation is not easy. But drafting this bill
has been a team effort with valuable contributions from every Committee
member. With this in mind, I hope we may repeat Senator Lugar's
accomplishment some 15 years ago.
During a Foreign Relations Committee business meeting last year,
Senators Lugar, Biden and Sarbanes expressed their strong support for
President Clinton's debt relief proposal that is part of this bill.
Senators Hagel, Grams and others on both sides of the aisle support
this initiative as well. For my part, I would have preferred to go even
further in pushing reform of the international financial institutions.
However, I emphasize that this legislation does not write a blank
check--it imposes meaningful conditions.
During the same business meeting last year, Senators Dodd, Biden,
Brownback, Hagel, and Boxer gave strong support to Senator DeWine's
microenterprise legislation. We have made some important improvements,
and that language is in the bill.
Finally, the legislation before us addresses front and center the
issue of economic sanctions, an issue that prompts strong feelings from
all sides. Many members of this Committee, on both sides of the aisle,
have expressed an interest in finding a compromise that resolves this
important issue. As a result, we have included Senator Ashcroft's
legislation permitting sales of food and medicine to go to pariah
nations otherwise subject to sanctions.
The impetus for this reform comes from our farm community, which is
hurting today, and which is asking us in Congress to look at ways in
which we can expand markets for American farm products. I agree that we
should do everything we can to help American farmers, but we absolutely
must do it in a way that protects the moral and national security
interests of the United States.
Thus, the provision in this bill will allow sales of medical and
farm products to terrorist states--but only on a strictly commercial
basis (i.e., no credits). This is an absolutely vital provision.
Without credits, every dollar these countries spend on American farm
products is a dollar they cannot spend on terror and repression. With
credits, however, the United States would be indirectly subsidizing the
ability of pariah nations to oppress their people and support terrorism
around the world.
Further, the specific mechanism in Senator Ashcroft's proposal for
protecting U.S. security interests is the licensing process--which was
included in the version of the legislation that passed the Senate this
past July with 78 votes--and which I have insisted upon making a part
of this bill. Licensing will allow sales to go forward. But it will
also give the U.S. government a ``safety valve'' to ensure that these
newly authorized sales are not being used for nefarious purposes, or in
ways that are to the detriment of U.S. national security.
While this legislation has been blessed with the input of all
Committee members, there are bound to be further amendments to be
offered. It is my hope that we can move at a steady pace through those
amendments so as to be finished this afternoon.

The Chairman. Senator Biden.
Senator Biden. Mr. Chairman, one of our members has to be
back in her district and she has to catch a plane. I wonder if,
and it's a little out of order, but if we could recognize
Senator Boxer.
The Chairman. Certainly.
Senator Boxer. That is so kind of you, Mr. Chairman. I will
be less than 1 minute, and thank you very much.
I could not be more thrilled because of the inclusion of
the AIDS and tuberculosis sections in this bill. Senator Smith
and I have worked together and, Mr. Chairman, your staff was
just outstanding in helping us, and I am so appreciative.
There are two problems that I am going to have with the
bill. I am not going to say anything about it today except to
identify those sections: the family planning language that I
think is trouble and then an amendment that I know my friend
Senator Ashcroft will be offering on genetically altered foods.
Those are two, but I will wait until the floor, and I do
not even want to put in a negative tone because overall this
bill does a lot of good things. Again, Mr. Chairman, I want to
thank you and the colleagues on my side for yielding me this
time.
The Chairman. On the contrary, I thank you, ma'am.
Let me call on the chief of staff here to explain where we
stand, and let us race it for these folks who need to get away.
Identify yourself for the record.
Mr. Biegun. My name is Steve Biegun. I'm the chief of staff
of the Foreign Relations Committee.
My suggestion, Senator, is we proceed title by title. We
have identified a few amendments from other Senators. That way
we can quickly move through the legislation and complete this.
Senator Biden. Mr. Chairman, would it be appropriate that,
unless you wish to move first, could I just take 3 minutes to
make an opening statement about the bill, at least from my
perspective?
Mr. Chairman, I think this bill is not everything we hoped
we could do, but I think it has accomplished some very
important objectives. First, it authorizes the use of the
remaining proceeds from gold sales by the International
Monetary Fund, along with other funding, to be used to complete
the United States contribution to the Highly Indebted Poor
Countries Debt Relief Program. I realize that you have
accommodated me and others in working through this. It is not
your favorite thing. But I do appreciate it.
Congress authorized part of this program last year and I am
pleased that we are starting to complete the project today. If
we do nothing else of consequence this year in the foreign
assistance program, I think we should do this. Relieving the
debt burden that is borne by the poorest nations will be a
significant contribution to improving the lives of millions of
people in the developing world.
I want to thank you, Mr. Chairman, for working with me and
with Senator Hagel and Senator Sarbanes to reach an
accommodation that is not all that any of us would have wanted,
but it permits a worthy program to go forward, and I think it
makes good economic sense. As so many religious leaders in this
country and around the world have told us, I think it is also
the right thing to do.
The bill also contains a title on microenterprise
development. These programs have proven very successful in many
different parts of the world and I think U.S. support for such
programs should continue and be expanded. Our support for
microenterprises has a profound impact in parts of the
developing world because it provides access to capital that
they would not otherwise have.
I was interested to see that one of those programs that
involved a lady in a very poor village in India--maybe some of
you saw it--where she was able to get a loan for a cell phone,
a cell phone. And she rents out her cell phone and makes more
money renting out that little cell phone in her little
microenterprise than the rest of the people in her village. She
makes four or five times as much as they make in the whole
year. It is that kind of thing we see.
I am also pleased to note that, as the Senator from
California said, the title on HIV-AIDS will be part of the
managers package of amendments. I attended the hearing on AIDS
in Africa, led by--convened by Senator Frist last month, but
also spearheaded by our friend from Wisconsin. It is a big,
big, big problem, and this is a good start.
Mr. Chairman, the bill you have placed before the committee
still contains some provisions that each of us, you and I, do
not particularly like pieces of. But I have made my objections
known to you, Mr. Chairman, but we have decided to leave a
number of these things in the markup and put the issue before
the committee so we will be able to complete votes, keep them
at a minimum and get some movement here.
But I thank you and your staff for the agreement we have
been able to reach on a significant portion of this bill and I
think, Mr. Chairman, that you deserve some credit. I appreciate
it very much and thanks for what you have done.
I yield the floor.
The Chairman. Well, I thank you. I would say that both
staffs have performed admirably on this.
The first order of business is to consider and I hope
approve the managers amendment. It is before all Senators and
was circulated earlier to the staff.
Senator Lugar. I move that it be adopted.
Senator Biden. I second the motion.
Senator Kerry. Mr. Chairman.
The Chairman. Mr. Kerry, Senator Kerry.
Senator Kerry. Mr. Chairman, I am not going to delay the
committee because obviously you want to move on. But I do want
to say, I want to thank you for including in the managers
amendment significant components of Senator Frist's and my
legislation on the vaccine immunization program, on a
contribution to the global alliance, on a contribution to the
international AIDS vaccine initiative, on the World Bank AIDS
prevention trust fund, and on the AIDS prevention programs at
USAID.
I think, Mr. Chairman, this is an enormously important step
by this committee, and I want to thank you for your willingness
to entertain it.
The two components of the legislation that are not in here,
the tax credit, are available to us still, we hope, within the
Africa Growth and Opportunity Act and it may be that we can
still negotiate that. The reason they are not in here is simply
the lack of our jurisdiction. But we have embraced every other
component of the AIDS Africa effort from testimony that came
before the committee, and I think the committee is to be
congratulated for doing that. It is a very significant step by
the Foreign Relations Committee of the U.S. Senate.
Thank you, Mr. Chairman.
The Chairman. Senator, thank you very much for agreeing to
deal with these issues on the floor. That means a lot to what
we are trying to do this afternoon.
The chairman of the Finance Committee and I have an
understanding when it comes to issues of jurisdiction and I
fear that to offer your amendment at this time might jeopardize
that, and we have talked about that.
Senator Kerry. I understand that.
The Chairman. I have a letter from Senator Roth requesting
that we deal with this issue on the floor and I ask unanimous
consent that it be included in the record. Without objection,
so ordered.
[The letter referred to follows:]

U.S. Senate,
Committee on Finance,
Washington, DC, March 23, 2000.
The Honorable Jesse Helms,
Chairman, Senate Foreign Relations Committee,
Dirksen Senate Office Building,
Washington, DC.

Dear Jesse: It is my understanding that the Foreign Relations
Committee may consider an anti-corruption and trade assistance bill. It
has come to my attention that there may be an amendment offered to this
legislation which would make changes to the Internal Revenue Code, and
as such, would clearly be in the jurisdiction of the Committee on
Finance. Furthermore, it would be a revenue measure, which
constitutionally must originate in the House of Representatives. As you
know, if the bill you are considering becomes a revenue measure and the
Senate passes it, the House will not consider it and will return the
bill to the Senate.
Of course, this amendment deals with the very difficult subject of
AIDS in Africa. I do not wish to slow debate on finding solutions to
this epidemic, and this letter should not be taken as a decision on the
merits of the amendment itself. The Senate passed H.R. 434, the Trade
and Development Act of 1999, which includes an amendment offered by
Senator Feinstein relating to the availability of HIV/AIDS
pharmaceuticals in sub-Saharan Africa. I am currently defending the
Senate position on the Feinstein amendment in a conference with the
House, and I look forward to continued debate and new ideas on how the
United States can ease the destruction of this disease in Africa.
Our Committees have worked well together in the past on matters of
jurisdiction, and I ask you to take my concerns into consideration when
the Foreign Relations Committee takes up this matter. Thank you.
Sincerely,
William V. Roth, Jr., Chairman.

Senator Kerry. I would move the amendment.
The Chairman. Is there a second?
Senator Lugar. Second.
Senator Sarbanes. Is this the managers amendment now?
The Chairman. Yes.
Do you want a rollcall vote?
[No response.]
The Chairman. All in favor say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[No response.]
The Chairman. Carried.
All right, now is the time for amendments.
Senator Lugar. Mr. Chairman.
The Chairman. Yes.
Senator Lugar. Mr. Chairman, I have an amendment.
The Chairman. Please, sir.
Senator Lugar. Thank you very much, Mr. Chairman.
I propose a modification to the bill in the form of an
amendment. This is a revised version of my Sanctions Policy
Reform Act, S. 757, which has 39 co-sponsors in both parties. I
propose to add it to Title I of the legislation. I believe that
most members of the committee are familiar with the bill. They
have a copy, I believe, of the text of the bill and I have
written to each one of you about it.
Essentially, my bill is intended to provide a framework for
considering new unilateral economic sanctions--and I stress
``unilateral,'' that is, United States alone--economic
sanctions, and I stress ``economic,'' and I stress
``prospective,'' namely from this point onward. It offers a
framework for considering new sanctions in the executive branch
and to the Congress.
There have been many instances in my judgment in which we
have learned of the adverse effects of sanctions after they
have been imposed and we have not provided for ways and means
of ever terminating them.
My amendment is comprehensive. I appreciate the work of
Senator Ashcroft on this committee and others with regard to
food and medicine and humanitarian goals, but our amendment
really covers everything. It suggests that we, as a Nation, may
want to use sanctions from time to time and we ought to have
that opportunity, both the Congress and the President. But
before doing so we need to explain the rationale of what we are
doing. This is the gist of the amendment, to have some form or
framework so as not to conduct foreign policy on the cheap, or
on impulse.
I ask the support of the committee on the basis of the
strong support of ``U.S. Engage,'' which includes some 670
American businesses that have worked with former Representative
Lee Hamilton of Indiana on the House side and with myself in
the formulation of this legislation over the course of the last
3 years. We have testified before this committee. The chairman
was kind enough to have a hearing.
This has been debated once on the Senate floor as an
amendment to the agricultural appropriation bill and by a close
vote lost, essentially I believe because the chairman of the
Appropriations Committee felt that his bill was in jeopardy.
Let me just say that we do not have that problem today. This is
an appropriate forum, the Foreign Relations Committee. This is
clearly an important area of foreign policy.
Finally, I would just say, Mr. Chairman, that at some point
we have to come to grips, it seems to me, with a reasonable
policy on sanctions reform. I have tried to scale this to a
modest point to avoid including sanctions that now exist. We
will have to work our way through those. But we are only
talking prospectively, only about those sanctions in the future
and the importance, if we do this unilaterally, to have thought
about them in advance.
I stress that unilateral is different from multilateral.
The effect of unilateral sanctions in my judgment in almost
every instance has been they did not work. From the standpoint
of moral outrage, many Members of Congress may wish to support
sanctions anyway simply to indicate how badly we feel about how
a government is treating its people or for other outrages. But
we ought to be under no illusion this has any particular
effect.
There are instances where multilateral sanctions have had
an effect. We discussed some of those in the hearing this
morning with regard to policy on India, Pakistan, and the like.
So I am hopeful, Mr. Chairman, that we could have
consideration of the amendment. I would appreciate the support
of the members.
The Chairman. I know we are all grateful to Senator Lugar
for his longstanding effort on this matter. He knows a great
deal about this subject as the author of the South Africa
sanctions several years ago. I did not happen to agree with him
on that, but I admire his work nonetheless.
Senator Lugar. Well, that was a multilateral sanction
effort that worked.
The Chairman. In my judgment the amendment needlessly
bureaucratizes the process of implementing sanctions and, by
putting up hurdles for new sanctions, appears to me to say that
the President and Members of Congress initiate sanctions maybe
out of ignorance and lack of due deliberation. But the record
shows that Congress takes the matter of placing sanctions on
other nations quite seriously and after lengthy consideration.
For example, the Comprehensive Anti-Apartheid Act was
enacted in 1986, I believe it was, after extensive discussion
and very similar language was introduced in 1981 and some
provisions included in the bill were originally proposed in the
1970's. The Chemical Weapons Control and Warfare Elimination
Act was enacted in 1991, but was originally introduced in 1987
and then again in 1989.
The Iran-Libya Sanctions Act authored by Senator D'Amato
was signed into law in August 1996. You may recall that
Alliance D'Amato introduced comprehensive sanctions bill
related to Iran 3 years earlier.
Finally, the Glenn proliferation sanctions legislation
pertinent to South Asia may be instructive. That legislation
prompts the so-called U.S. Engage business lobby to claim that
Congress acts too hastily on sanctions. But the
nonproliferation sanctions measures upon which it was based
were passed in 1977. But after 13 years of watching the
President waive sanctions based on disputed certifications
about Pakistan, the Congress limited the waiver authority, and
that is slow and deliberate action, I think.
Now here are my friends in the business community. They
come to see me and we shake hands and all of that. But they
claim that there is a sanctions epidemic. I do not think that
is right. CRS found that, instead of 61 new sanctions between
1993 and 1996, as the National Association of Manufacturers
claimed, there were really only 9 new sanctions, and there have
been even fewer since 1996.
So we should use sanctions sparingly, but when we are faced
with heinous repression, military aggression, terrorism, the
proliferation of weapons of mass destruction, Congress would be
wise to keep sanctions as a tool so that we have more
alternatives simply to delivering a diplomatic demarche or
sending in the Marines.
With due respect, I consider it unwise to make so difficult
the use of this tool for serving our interests and moral
principles, and I hope my colleagues will oppose the amendment,
and I will respectfully do so, with my respects for Senator
Lugar, as he noted.
Senator Biden. Mr. Chairman.
The Chairman. Senator Biden.
Senator Biden. I find myself in an unusual position here. I
tend to agree a little more in principle on this with Senator
Lugar than I do with the chairman and those who oppose it. But
I am concerned about a couple aspects of the way the Lugar
amendment--I supported another, broader sanctions approach that
I think did not have some of the liabilities I am about to
speak to.
I am concerned that the Lugar amendment ends up--could end
up, at least, unnecessarily limiting Congress and the
President. Let me explain what I mean. The amendment provides,
for example, that it is not in order to proceed to a bill in
either the House or the Senate that contains a unilateral
sanction--and I agree generally unilateral sanctions do not
work--a unilateral economic sanction, if the President has not
submitted certain reports required under the bill.
Now, this sets up a situation where the President of the
United States can hold up consideration by Congress of a bill
simply by failing to submit a report and then finding one ally
to make a point of order on the floor of the Senate. Now, I do
not want to get too arcane here, but on separation of powers
issues I am not sure I am prepared to give up that, to put our
faith that much in a President's hands.
Second, the bill requires the President to give 45 days
public notice before imposing new unilateral sanctions. Now,
there may be a lot of circumstances in which an instant
imposition of sanctions, unilateral, notwithstanding the fact
they are unilateral, would be necessary to advance the foreign
policy interests of the United States.
Often sanctions have more than one purpose. Typically, we
are trying to deprive a targeted nation of revenues, revenue
that it needs badly and that it needs in order to continue its
bad behavior, and if we wait 45 days to deprive them of that
revenue we may find we put ourselves in a more tenuous position
than we were before that process.
Often, as I said, we are trying to send, as you said, Mr.
Chairman, a political signal, a signal that if delayed is,
quite frankly, of little consequence.
So true, the President can waive the requirements of
advance notice where the sanction would involve the freezing of
assets or the President determines that the national interest
be jeopardized. But if the waiver is so readily applied, then
we have created a meaningless provision here. I mean, in other
words, if he is able to do that then we do not need to have
this provision in the first place, the waiting the 45 days.
I think that real sanctions reform would give the President
a little more--should give the President a little more
flexibility on current sanctions as well, which this does not
do, to meet the changing circumstances more quickly than he can
now.
So although in principle I agree with the Senator from
Indiana that unilateral sanctions rarely, if ever, are of
positive consequence, I am reluctant to at this time, Dick, to
support your proposal, which, as you know, I supported an
alternative broad proposal to this before and we are--as a
consequence here, it is this or basically nothing as a
practical matter right now.
So my inclination is to vote no. If it passes I would like
to be able to work with the Senator on the floor to deal with
some of these things I have mentioned. And if it does not pass,
I would like to work with him to deal with some of these things
to see if we can get a consensus. But you may very well have
the votes at this point anyway.
So I am going to reluctantly, Mr. Chairman, vote no on this
amendment.
The Chairman. Very well.
Senator Lugar. Mr. Chairman.
The Chairman. Senator Lugar.
Senator Lugar. Mr. Chairman, I understand the reasoning of
the distinguished Senator from Delaware, but I am confounded by
that argument. Essentially, the President under my legislation
does have complete authority, if it is in the national
interest, as the Senator pointed out, to waive the procedures.
He can waive the procedures with regard to the economic
sanctions by explicit language in the bill.
Senator Sarbanes. Does the Congress have that authority?
Senator Lugar. No.
Senator Sarbanes. Under your bill?
Senator Lugar. No. This is given to the Chief Executive as
Commander-in-Chief.
Senator Sarbanes. So the Congress could not? The Congress
would be bound by the process?
Senator Lugar. Congress would be bound by the process.
Senator Sarbanes. And the time waiting period?
Senator Lugar. And so would the Executive, except where the
case of national emergency, the powers vested in the President
ought to be exercised.
You know, you cannot have it all ways. I appreciate if
Senators want to have the right to have unilateral sanctions,
to go out onto the floor and thunder away at another country
and in the emotions of the moment try to get something passed.
That is an interesting idea, but it is not always good
legislation in my judgment.
I would say respectfully, thank goodness, since we have
been debating this issue for 3 years we have not done very much
of this. In large part, intellectually the argument has been
won. Why the committee cannot adopt the guidelines so that we
have established in statute what we want to do to develop
better legislation is somewhat confounding.
Nevertheless, I appreciate that Senators want to have this
ability. I would say that that can have an honest difference of
opinion. I for one, believe public policy is better served by
having reasonable guidelines, but retain flexibility in an
emergency for the President.
Senator Sarbanes. Mr. Chairman.
Senator Kerry. Is not the waiver authority----
The Chairman. Senator.
Senator Sarbanes. Go ahead.
Senator Kerry. Is not the waiver authority as to the
reports and not as to the sanction itself?
Senator Lugar. The President can go ahead with the
sanction. We have been through the waiver argument, because the
President, Stu Eizenstat and others have strongly argued this
back and forth between the committees and the administration
for 3 years to try to establish that the President is in charge
when we have an emergency. Nothing in this law is going to
change that.
Some people in the White House believe that they should not
to have to rationalize what they are doing. In other words,
even after having imposed the sanction, they would prefer not
to have to rationalize or explain why they did it.
The Chairman. Senator Kerry.
Senator Kerry. I just wanted--normally we work very closely
together and I find myself often in agreement. But I must say I
do associate myself with the remarks of the chairman and of the
ranking member on this one, for a number of different reasons
that have been articulated.
The Chairman. Very well.
Did you finish, Senator?
Senator Sarbanes. I was just going to make the observation
that it seems to me that what is needed is to exercise prudence
and wisdom in the decision as to whether to seek to impose a
unilateral sanction and not develop a process which in effect
almost precludes doing it in instances in which it may be
advisable.
In fact, the argument that was just advanced that not much
of it has been done recently may reflect some exercise of
prudence and wisdom in making the judgment, and in fact is an
argument not for this provision, but actually an argument
against this provision. And I do not think we ought to
completely eliminate this possibility, this weapon, from the
congressional arsenal in dealing with situations which we may
encounter.
I will make this observation. On occasion these economic
sanctions are a recourse that may make unnecessary recourses of
far more serious consequence, and to eliminate them from the
picture altogether will severely handicap our ability to
respond in certain situations that call for a response.
Senator Dodd. Mr. Chairman.
The Chairman. Senator Dodd.
Senator Dodd. This is turning out to be somewhat of an
interesting discussion here. Maybe I should--maybe some other
members want to be heard on the other side.
The Chairman. No, no. I was just checking to see. OK.
Senator Dodd. Well, with all due respect to the chairman
and my fellow Democrats on this side here, I find myself in
agreement with the Senator from Indiana. Senator Hagel and I
have introduced legislation which is broader, I think, in
perspective than this. Ideally I would prefer, I suppose, that
our proposal were on the table here, but that is not in front
of us now, but this is.
Unilateral sanctions invariably get adopted when you have
an emotional, highly charged situation, and it is usually the
legislative branch in a sense of frustration of wanting to do
something about it. That is normally how it happens. I mean,
something occurs somewhere in the world that is offensive to us
and we are asked, what are you going to do about it, and so we
want to have something we can do about, so we pass a sanction.
We have gone through a relative period of stability around
the world, so we have not lurched to that option, which is all
the more reason why this is an appropriate time to be
legislating on this when we are not confronted with a fact
situation that makes it awkward to vote against it. But
invariably, we will be confronted at some point in the future
with a situation where that option will once again be appealing
to us.
So in a sense what the Senator from Indiana is doing is in
the cool of the moment offering a proposal here that would sort
of make it difficult to do something which invariably does more
harm than good. Whether you like this particular formation of
how to respond to it or some different proposal, I think most
of us agree with the notion that unilateral sanctions have not
worked. Now, there may be some isolated case where in a short
period of time it has.
So, Mr. Chairman, I have great respect for your thoughts on
this, as well as my colleagues Senator Kerry and Senator
Sarbanes, Senator Biden. But I come down, and again at a
relatively close call, and support what the Senator from
Indiana is trying to do here. I think this is the moment to act
on this.
I thank you.
The Chairman. Further comment?
Senator Biden. 60 seconds, Mr. Chairman--oh, excuse me.
Senator Hagel.
Senator Hagel. Mr. Chairman, I will be very brief. I was an
original co-sponsor of Senator Lugar's bill and I think it is
appropriate. I think what Senator Dodd said is exactly right.
Senator Lugar made a point and we all appreciate it, that
rarely is there a choice between the perfect and the imperfect
here. I think Senator Lugar's core value point is exactly
right. We should, while we have the luxury, as Senator Dodd
pointed out, and the time to work our way through this, develop
some kind of coordinated overall framework for what we do and
why we do it, rather than ricochet from crisis to crisis, as we
often do in all administrations.
But I think there is great value and wisdom in what Senator
Lugar is doing. I think it is appropriate and I will support
it.
Thank you.
Senator Biden. Mr. Chairman, 60 seconds, if I may.
I do not disagree with the fundamental premise that
unilateral sanctions in the heat of passion are generally a bad
thing and that unilateral sanctions even not in the heat of
passion are generally an unworkable thing. But I think the
emphasis should be shifted a different way, and that is we
should not make it more difficult for us to be able to impose a
sanction; we should make it easier for the President to waive
the sanction.
The reason I say that is for the following. Sometimes the
purpose of the sanction, notwithstanding the fact it is
counterintuitive in the long term to do what the Congress does,
is exactly what I thought Senator Sarbanes was implying: a way
to let off steam to keep from doing something that is a heck of
a lot more damaging and a heck of a lot more difficult, leaving
the President in the position he can still veto this.
In terms of the balance of power here, we pass a sanction
and the President vetos it, we have to have a super-majority to
overcome it. If the feelings are running that high on the
issue, then you find yourself in the position where if that is
not done and that avenue is cutoff you will find something else
that I think is more difficult.
So as a philosophic matter, I have erred on the other side
of this, erred on the side of not limiting congressional
authority to impose, but increasing the flexibility of a
President to dispose. That is, putting the ability on the
President to be able to waive the sanction under more liberal
circumstances than he now has. And I do not use ``liberal'' in
a philosophic sense; easier to waive the sanction, giving then
us the burden to have to come back to stop it.
So it is a matter of balance here, and I think it relates
to the congressional legislative balance. That is my objection
to, and the reason I did not sign on in the first instance, to
the proposal of the Senator from Indiana, although I do agree
that it would be a good idea if we are able to structurally
change this so that we had something in place that allowed us
out of the conundrum we often find ourselves in, and I will end
with this.
That is, we find a sanction being put in place that may at
the moment have made sense, at that very moment, but then
constituencies get vested in that sanction. Even though the
sanctions--I would offer Jackson-Vanik as an example--no longer
have the relevance and the bite and the impact that they had
initially, that maybe was justified initially.
But now you have a constituency that invested in it. I do
not just mean an ethnic constituency. I mean any constituency--
an economic constituency that is invested in that sanction
remaining. The efficacy of the sanction is long since past, but
what happens is you find now it difficult politically for the
Congress to be able to do ``the right thing'' because there is
a political price to pay to do it now.
That is why again I say the reason to shift to more
latitude to the President is to recognize the reality of the
way legislative bodies function, and that is to allow the
President to save us from ourselves, because the truth of the
matter is, if the President were to lift the sanctions that we
all, that a majority of us basically knew did not make much
sense, but we did not want to go back home and explain it--I
know we are not supposed to say these things out loud, but we
all know this is how it works--then we get the right result and
we are not put on the hook, without giving up what I believe is
a core responsibility and authority that as a legislative body
in the separation of powers doctrine we possess.
That is my rationale. That is the reason, Dick, why I am
going to vote no, and you do not need to hear any more about
what I think about these issues.
The Chairman. Is there further comment?
[No response.]
The Chairman. There being none, the question is on the
amendment. All in favor will say aye.
[A chorus of ayes.]
The Chairman. All opposed, no.
[A chorus of noes.]
Senator Lugar. May we have a rollcall vote?
The Chairman. Pardon?
Senator Lugar. May we have a rollcall vote?
The Chairman. Yes, sir. The clerk will call the roll.
Mrs. Allem. Mr. Lugar.
Senator Lugar. Aye.
Mrs. Allem. Mr. Hagel.
Senator Hagel. Aye.
Mrs. Allem. Mr. Smith.
Senator Smith. Aye.
Mrs. Allem. Mr. Grams.
Senator Lugar. Votes aye by proxy.
Mrs. Allem. Mr. Brownback.
Senator Brownback. No.
Mrs. Allem. Mr. Thomas.
Senator Lugar. Votes aye by proxy.
Mrs. Allem. Mr. Ashcroft.
Senator Ashcroft. No.
Mrs. Allem. Mr. Frist.
Senator Frist. Aye.
Mrs. Allem. Mr. Chafee.
Senator Chafee. Aye.
Mrs. Allem. Mr. Biden.
Senator Biden. No.
Mrs. Allem. Mr. Sarbanes.
Senator Sarbanes. No.
Mrs. Allem. Mr. Dodd.
Senator Dodd. Aye.
Mrs. Allem. Mr. Kerry.
Senator Kerry. No.
Mrs. Allem. Mr. Feingold.
Senator Feingold. No.
Mrs. Allem. Mr. Wellstone.
Senator Biden. No by proxy.
Mrs. Allem. Mrs. Boxer.
Senator Biden. No by proxy.
Mrs. Allem. Mr. Torricelli.
Senator Biden. No by proxy.
Mrs. Allem. Mr. Chairman.
The Chairman. No.
Mrs. Allem. Mr. Chairman, the vote is 8 yeas and 10 nays.
Senator Dodd. Mr. Chairman.
The Chairman. Yes, sir.
Senator Dodd. Title III? Do you have any more amendments on
Title II? I guess you are doing this title by title.
The Chairman. First, are there further amendments to Title
I? Let me get that clear.
Senator Kerry. Mr. Chairman, I just want the record to
reflect, because I did not comment after Senator Biden, I do
not want my vote misinterpreted on that, and I feel very
strongly. But the waiver in this I feel, because the President
does not have the capacity to waive by the Congress nor does he
deal with existing sanctions, and the process I believe is
imbalanced, as Senator Biden has said, but I do not want to
give an impression that we should not try to deal with the
issue. And I share Senator Biden's notion that if something
could be worked through on that--I do not want that vote
subject to misinterpretation.
The Chairman. The record will so show.
Senator Ashcroft. Mr. Chairman.
The Chairman. Senator Ashcroft.
Senator Ashcroft. I have an amendment for Title I if that
is appropriate.
The Chairman. Very well. The Senator will state it.
Senator Ashcroft. First of all, let me just say that the
amendment which I have stems from a bill which I have
previously filed which supports our assisting developing
countries in using scientific principles when they view the
benefits and potential risks of biotechnology.
I want to thank a number of members of this committee for
their help in this respect: the chairman and the ranking member
for their support of this provision, which we thought we might
be in the mark originally, but was objected to. Senator Lugar
has done substantial work on this in the Agriculture Committee.
This bill--this amendment would authorize funds for USAID
to help developing countries use scientific principles when
they view the benefits and potential risks of biotechnology. It
is designed to help us focus on science rather than emotion or
other qualities.
Also, it requests the President to develop a coordinated
policy on biotech for all international institutions that
affect agricultural policy, such as the United Nations, the
WTO, OECD, et cetera, because there appear to be divergent
views in these organizations.
I would like, with your permission, to read just a little
bit of a letter from Ambassador Andrew Young, who has endorsed
this proposal, and I talked to him in a phone call that we were
able to connect. He is in Africa right now. He said: ``Dear
Senator Ashcroft. It is with great pleasure that I write to you
in support of S. 2106.'' I am going to skip some other areas.
He goes on to say: ``I have been involved in outreach to Africa
in support of biotechnology for some time now, realizing the
great potential for biotechnology to help solve problems of
starvation, illness, and environmental degradation in some of
the world's poorest areas.''
I am skipping to another area: ``Innovations such as
vitamin A-enriched maize will help protect future generations
of Africa's children from debilitating diseases such as river
blindness and could even work as a nutritional supplement in
the fight against HIV-AIDS. Similarly, the development of a
virus-resistant sweet potato and cassava will increase yields
for these important food security crops, which are widely
consumed in the developing world. These are only a few of the
examples of how technologies developed in the U.S. address the
needs of a growing global population.''
He goes on to talk about cotton growers in Makathini Flats
in the KwaZulu-Natal, South Africa, and to support the idea
that we should be science-based in our evaluation of
biotechnology and that we should encourage the developing world
to be science-based in this respect.
I would indicate to you that I would like to also submit
for inclusion in the record, along with Ambassador Andrew
Young's letter, one from Dr. Roger Beachy, who is the president
of the Donald Danforth Plant Science Center, and a letter from
L. Val Giddings, the vice president for Food and Agriculture
from the organization BIO.
I personally believe that this is merely to ask that we
foster around the world an opportunity for people to make
intelligent science-based decisions, and I think that is
consistent with the kind of foreign policy and projected
influence that the United States should have.
The Chairman. Without objection, the material referenced by
the Senator will be included in the record.
[The material referred to follows:]

GoodWorks International, LLC,
303 Peachtree St., NE,
Atlanta, GA, March 15, 2000.

Honorable John Ashcroft,
Senate Hart Office Building,
Room 316, Washington, DC.

Dear Senator Ashcroft: It is with great pleasure that I write to
you in support of S. 2106 which supports capacity building for
agricultural biotechnology applications in Africa and other emerging
markets.
As you may be aware, I have been involved in outreach to Africa in
support of biotechnology for some time now, realizing the great
potential for biotechnology to help solve problems of starvation,
illness and environmental degradation in some of the world's poorest
areas. I remain committed to biotechnology as an important tool for
agricultural development, which will allow African nations to feed
their growing populations through sustainable practices in the years
ahead. Innovations such as Vitamin A-enriched maize will help protect
future generations of Africa's children from debilitating illnesses
such as river blindness, and could even work as a nutritional
supplement in the fight against HIV/AIDS. Similarly, the development of
virus-resistant sweet potato and cassava will increase yields for these
important food security crops which are widely consumed in the
developing world. These are only a few examples of how technologies
developed in the U.S. can address the needs of a growing global
population.
Later this year, I hope to visit KwaZulu Natal, South Africa, where
small farmers in the Makathini Flats area are successfully growing
genetically enhanced cotton. I understand that field trials have been
so successful that the number of small growers in the Makathini area
using the genetically enhanced seed has grown from 60 during the 1998-
99 season to more than 600 in 1999-2000. This example of
biotechnology's potential in Africa is particularly appealing to me in
that small family growers make up the vast majority of producers on the
continent, and any advantage to their productivity has an immediate
impact on their quality of life. I believe this type of positive impact
is what we want to achieve through foreign aid and scientific exchange
with Africa and other emerging markets.
But for biotechnology to take root in Africa, the U.S. and other
countries promoting agricultural biotechnology must make significant
investments in education and training abroad. This became apparent to
me over the last year through my work on the Biosafety Protocol to the
Convention on Biological Diversity. The ``Like Minded Group'' of
developing country delegates to the Protocol negotiations, led by a
bloc of African nations, took a strong stance against biotechnology.
The reason for their position was due, in large part, to propaganda and
misinformation distributed by environmental groups that promoted
irrational fears among many delegates. In the absence of scientific
knowledge and understanding about biotechnology, these fears threatened
to close the door on the trade of genetically enhanced goods. The type
of programs supported by S. 2106, which will promote the sharing of
technologies and expertise with the developing world will be extremely
effective in building a basis for acceptance and support of
biotechnology in critical areas of the world. This is vitally important
in our struggle to help African nations achieve sustainable
agricultural practices that provide food security for their people.
Thank you for your time and consideration. Please call on me if I
may be of assistance in promoting this important piece of legislation.
Sincerely,
Andrew Young.

______

Donald Danforth Plant Science Center,
7425 Forsyth Blvd., Suite 3100,
St. Louis, Missouri, March 15, 2000.

The Honorable John Ashcroft,
Hart Senate Office Building,
Room 316, Washington, DC.

Dear Senator Ashcroft: I am writing to offer my full support of
Senate Bill 2106 and to thank you for introducing it. This bill would
provide technical support to train scientists from developing countries
in the areas of agricultural biotechnology and biosafety. It is obvious
that many of our potential partners in developing countries have much
to gain from the application of new technologies in agriculture,
including biotechnology. It is clear, however, that many countries lack
the scientific skills and policy expertise to evaluate safety of new
products. This bill would make it possible to provide training for
those countries to allow them to better evaluate the products of
American agriculture and to begin to develop their own intellectual
strengths in this important area of science.
SB 2106 would help to facilitate the training of postdoctoral
researchers and students at the Donald Danforth Plant Science Center.
The Danforth Center has a highly successful research and training
program called the International Laboratory for Tropical Agricultural
Biotechnology (ILTAB). We expect that SB 2106 would help to support
trainees at ILTAB and the Danforth Center, making it possible for us to
reach more scientists from around the world who will play an important
role in the research, development and biosafety of agricultural
products in their home countries.
I urge your continued support of this bill and look forward to
visiting with you in the future so that we might discuss the Danforth
Center and ILTAB at greater length.
Sincerely,
Roger N. Beachy, Ph.D.,
President.

______

BIO
March 17, 2000.
Honorable John Ashcroft,
Senate Hart Office Building,
Room 316, Washington, DC.

Dear Senator Ashcroft: It is with pleasure that I write on behalf
of more than 900 BIO members in support of S. 2106. This is an
important piece of legislation that will help provide well-deserved
support for the international acceptance of and trade in products
derived through modern biotechnology.
As you may know, there is significant misinformation being
disseminated throughout the world regarding the benefits and potential
risks of biotechnology particularly in developing nations which lack
regulatory infrastructure. In the absence of science-based education
and training programs, fear and misunderstanding may hamper future
trade in genetically enhanced products in these emerging markets. The
Biosafety Protocol negotiations provided a clear example of how such
misinformation can also threaten U.S. business interests. Throughout
negotiations, we witnessed delegates from Africa and other developing
nations taking extreme positions in opposition to biotechnology as a
result of propaganda and ``junk science'' being disseminated by
Greenpeace and other anti-biotech NGO members of the protest industry.
Without credible scientific data available from objective sources to
counter these claims, the misunderstandings only persist.
The U.S. biotechnology industry has already made sizeable
investments in capacity building and outreach to the developing world
through research and training programs, and the development of
genetically enhanced food security crops, such as sweet potatoes,
cassava and maize. However, there is not yet a commercial market for
biotechnology in the bulk of these countries and industry can not
adequately lay the groundwork for future development on its own. In
providing for technical exchange programs and technology transfer
projects, S. 2106 is invaluable in its support of future trade and
commercial activity by U.S. industry in these emerging markets.
Most importantly, however, S. 2106 recognizes the importance of
biotechnology applications in the developing world to help address
problems of starvation, malnutrition, illness and environmental
degradation. The existing and potential benefits of biotechnology are
substantial and significant, and could potentially revolutionize food
security policy in some of the world's poorest nations. By allowing
even the smallest landholders to produce more food on less land at
reduced costs, biotechnology is an empowering tool for the developing
world.
Thank you for your leadership in support of this important
legislation. If I may provide any information or be of any assistance
to you, please do not hesitate to call me.
Sincerely,
L. Val Giddings,
Vice President for Food & Agriculture.

Senator Feingold. Mr. Chairman, if I could respond.
The Chairman. OK, I will yield to the Senator.
Senator Feingold. On this amendment?
The Chairman. Yes, sir.
Senator Feingold. Thank you, Mr. Chairman.
I normally would probably raise a more active opposition to
this amendment at this point, as would Senator Boxer. But the
Senator from Missouri had been told through the process here
that this amendment had been accepted. We had not had a chance
to look at it. But in light of the extremely fair manner in
which the Senator from Missouri has always treated me on this
committee as well as the Judiciary Committee, am I going to not
actively debate it at this point and leave it to the floor,
although if there is a recorded vote I will vote accordingly.
But I am a little concerned about the way in which the
language seems to endorse all agricultural biotechnology. I
certainly respect the wonderful positive things you are trying
to accomplish. But I will leave that to the floor, Mr.
Chairman.
The Chairman. Very well.
I commend the Senator for his amendment. It would require
USAID to develop an exchange program to ensure that other
countries understand fully the rigorous regulatory process in
the United States for ensuring the safety of biotechnology
products. As I understand it, it would mandate a long-needed
coordinated strategy in the Federal Government for negotiation
of international agreements affecting biotech products which
will directly impact U.S. farmers and other related shipping
and production companies.
So I support the amendment.
Senator Biden. Mr. Chairman, I will refrain from saying
more, just to suggest that I think this proposal is based on a
very sensible premise. As I read it, the premise is we should
take advantage of our lead in both food technologies and in
regulatory sophistication to make the benefits of biotechnology
available where they need it the most. I mean, it is as simple
as that to me.
Now, one other point I would like to make, a little red
flag. It may be in another context we can come back, not today
but in another context. I am a little bit worried that we are
adding a new activity and responsibility without making sure we
have the funding to handle it.
To do this is going to take some time, effort, and some
expertise. I do not know enough to know whether or not--I doubt
whether USAID has any objection to this. I do not think they
do. But I wonder. At some point we may come back and maybe the
Senator and I can inquire of them as to are they in a position.
Maybe he knows whether they have the financial wherewithal to
do the job.
That is just a point. You do not have to answer now, but at
some point I would like to know.
Senator Ashcroft. May I just say how much I would
appreciate the opportunity to work with the ranking member
further on this for improvement if we can as we go forward. I
would also be pleased to work with the Senator from Wisconsin
to accommodate. The intention here is to provide a basis for
the United States to help in these distressed areas based on
science and to try and help avoid activities based on fear and
superstition.
My own judgment is that it is in all of our best interests
to do it properly, and I would be glad to work to achieve that.
The Chairman. Very well.
Senator Biden. Mr. Chairman, 5 seconds.
I have no objection to any of the language, I have no
objection at all. I do not want to change anything, except at
some point we are going to have to go back and review whether
or not, whether USAID has enough wherewithal to do what you
want to do.
The Chairman. Is there further comment?
Senator Dodd. Could I, Mr. Chairman.
Again, having listened to a couple of seminars on the
subject matter, I do not claim any great expertise at all. It
is very exciting technology. Two concerns I have, and I am
going to let the amendment, obviously, go forward here. The two
concerns I have, one are the safety issues. This is a whole new
area. It is very exciting and tremendous potential. But as we
have seen many times in the past, some of the new and exciting
ideas have unanticipated consequences. I am hopeful that as we
move forward with this there will be the kind of restraints to
make sure that as we come up with genetically engineered
products here we are going to make sure they are safe. That is
No. 1.
No. 2, as I understand it--and again I can be corrected on
this--a lot of times in genetically engineered products they do
not produce their own seeds. So there is the requirement that,
obviously, with each new harvest, there is a requirement to buy
the seeds. One of the advantages has been in Third World
countries, of course, is that once they start a product they
are able to then produce their own seed products and not have
to constantly purchase new product.
So there is an economic factor here which could be
beneficial, obviously, to those who produce these products, can
raise some serious questions about those who use them in terms
of independence, self-sufficiency.
So again, a couple of issues that I just would be
interested in being enlightened about at some point. I am not
sure I am right about that. I have been told that is the case,
but others may have more information. But I just raise those as
two potential issues that we ought to keep in mind, at least I
would like to keep in mind, as we move forward.
The Chairman. Is there further comment?
[No response.]
The Chairman. Hearing none, the question is on the
amendment. All in favor will say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[No response.]
Senator Feingold. No. And Mr. Chairman, I would note for
the record that Senator Boxer wished to be recorded as in
opposition as well.
The Chairman. I am sorry, I was so busy listening to this
conversation.
Senator Feingold. Senator Boxer and I would both like to be
listed in the record as being in opposition.
The Chairman. Being in opposition. Without objection, it
will be done.
Senator Ashcroft. Mr. Chairman, before we leave Title I, if
we are ready to depart there, I would like to just thank you
for your cooperation in regard to the rules on sanction for
food and medicine. I think we take a giant step forward in this
measure.
There are other members of this committee who have worked
on this for a long time and I will not try to recite them now,
but Senator Dodd, obviously Senator Hagel, Senator--well, I
will not go around the committee. But I thank you, and I
believe that you have helped lead us to a very important
decision and I am grateful.
The Chairman. I have a statement on the Ashcroft amendment
that I ask to be printed in the record.
[The statement referred to follows:]

Statement of Senator Helms on the Ashcroft Amendment

Everyone should be fimiliar with the text of the sanctions reform
provision. It's very similar to the Ashcroft amendment which passed in
the Senate last summer. It defines the licensing for food-related
exports more clearly, and it more clearly defines those crisis
situations that would prohibit delivery of food and medicine--namely
when we are in military conflict with that nation.
Senator Ashcroft's approach was chosen in large part because it
represents the will of the Senate, and indeed of this committee's
membership. Last summer 70 Senators opposed tabling it and it later
passed by unanimous consent.

The Chairman. Are there any amendments to Title--any
further amendments to Title I?
[No response.]
The Chairman. Hearing none, how about to Title II?
Senator Brownback. I have one to Title II, Mr. Chairman.
The Chairman. The Senator is recognized.
Senator Brownback. If we could pass that out, if you have
not picked it up. It is a--before I get into it, too, I want to
say thanks on the sanctions lifting on food and medicine as
well that you put in that Title I provision. That has been
something I know my folks back home have been deeply concerned
about, I have been concerned about, and as you travel around
the world I think that is a very good message, a strong one.
That is a good step forward and that is the reason I am
supportive of what you have done in that particular provision.
Mr. Chairman, in Title II I have got an amendment. What it
would do is allow us to provide non-military education and
anti-corruption assistance around the world. The amendment
ensures that we are able to provide this sort of educational
assistance and anti-corruption training to countries even when
we have denied them U.S. assistance in other areas.
I think these are actually primarily for us--they are also
for other countries, but it would allow us to provide primary
and secondary education into these countries, things such as
books, syllabi, training teachers, language training for
teachers, and training in other basic skills, education
programs as defined in the Foreign Assistance Act. In the anti-
corruption training area, it would allow us to provide training
in such basic things as formulating laws to combat corruption.
Denying U.S. assistance to a country is a right we should
preserve, but we should not be cutting off our ability to
influence countries at a basic level such as education or in
the anti-corruption field as well. Let me give a couple of
examples of what I am talking about. Trafficking in women and
children, a root cause of this is a lack of education. I have
seen it first-hand in Nepal, taking place there. We see
education as a problem in other countries as well.
While we can help in some countries, there are others where
all we can do is stand and watch helplessly because of the
restrictions on our ability to conduct education programs. In a
number of Muslim countries, we find that our not being involved
in education actually hurts our security interest. Iran and
Saudi Arabia are busy setting up certain types of schools in
some places which often are not much more than training camps
for people that would seek to do us harm. The Madrassa school
problem is a growing one in large part because the populations
have no alternatives for education, none whatsoever.
It is clearly not in the U.S. interest to have large parts
of these populations getting only this type of narrow education
that seeks to thwart us and to thwart our interests.
Then in the anti-corruption field, we complain about the
corruption which is so rampant in some of these countries where
we restrict our assistance, but instead of sitting on our hands
and watching the corruption spiral out of control I think we
should be at very least helping with anti-corruption training.
So this amendment is narrowly focused. It is on education,
anti-corruption. It is not military education. It is very
specific about this. It is for helping primary and secondary
education. I have just seen in too many places where if we
would be involved a little bit in education we would not be
subjecting ourselves to the types of problems long-term that we
do.
I am saying, let us step up. Some of the NGO's do this now.
I think we could do more and it really would be in our long-
term best interest to do that.
So with that in mind, I submit this amendment, and I would
be happy to answer any questions that people might have and
would hope for a positive vote.
The Chairman. Well, for my part, I support the Senator's
amendment and I am grateful to him. Anti-corruption is, as he
said, a key theme of the bill and I certainly appreciate your
contribution, Senator.
Yes, sir.
Senator Sarbanes. I have a couple questions I would like to
put to my colleague and then I would like to discuss this. I
take it anti-corruption programs would embrace police power
support?
Senator Brownback. No, no.
Senator Sarbanes. Why not? It seems to me obvious.
Senator Brownback. No, we would not, we would not. What we
are talking about in the anti-corruption programs are
assistance not in developing police forces--is that what you
are talking about?
Senator Sarbanes. Well, you say for anti-corruption
programs and I would presume that an anti-corruption program
would embrace police power.
Senator Brownback. It would be training programs----
Senator Sarbanes. Training police.
Senator Brownback [continuing]. On dealing with corruption.
Senator Sarbanes. Training police?
Senator Brownback. Training forces within there to deal
with corruption. It's not developing a police force, if that is
what--if that is what you are talking about.
Senator Sarbanes. Money for police?
Senator Brownback. For training----
Senator Sarbanes. Police, for training police?
Senator Brownback [continuing]. And dealing with
corruption.
Well, maybe we are dealing in semantics here, but what I am
saying is that you could be able to use this to train them in
dealing with corruption activities in their country, but it is
not in the development of a police force. I mean, for instance
arming a police force, if that is what you are asking about, it
does not do that.
Could you be maybe more specific? Is that what you are
concerned about, is providing arms?
Senator Sarbanes. No, you are the one who is not being
specific, because you are using just this general phrase and
clearly under that general phrase, it seems to me, you would
encompass the police force.
Well, let me ask another question. I take it from what you
said that this would make aid available to Iran for these
purposes?
Senator Brownback. We are limited in this. You cannot
provide it to terrorist regimes within the amendment or
countries that are on the drug list. So that would not--Iran
would not be able to qualify for that.
Senator Sarbanes. Well, you used Iran as an example when
you talked about education.
Senator Brownback. No, I did not use Iran as an example. I
said that they are, Iran and Saudi Arabia, are setting up
certain schools. They are doing this in other countries. What I
am saying is that they are going into other countries and
setting up schools that are training camps. But I am not using
this for Iran. Iran would not qualify for it.
Senator Biden. Would Pakistan--if the Senator would yield,
would Pakistan qualify?
Senator Brownback. Pakistan would qualify for it. It is not
a terrorist, not a terrorist country, not rated as that.
Senator Biden. If Pakistan ends up making that list, which
I think they are moving toward being a candidate for----
Senator Brownback. Then they would not qualify for it.
Senator Biden [continuing]. And then they would not
qualify.
May I ask another question, Senator?
Senator Sarbanes. Sure.
Senator Biden. In let us say Pakistan, which is not on
either the drug list or the terrorist list, does--let me put it
this way. I am informed that under the present Glenn amendment,
for example, on Pakistan the President would be able to waive
the restrictions on governmental aid to non-governmental
schools that the Senator is talking about. In other words, my
staff, who is very knowledgeable about Pakistan and India,
tells me that your characterization of the educational system
in Pakistan is accurate.
But as I understand it, the President now has the
authority, if he wishes to, to waive the existing sanction
legislation for the purpose of aiding those alternative
educational, those alternative educational institutions. Is
that correct?
Senator Brownback. I am being informed by my staff that
section 508 prohibits this from taking place on that specific.
Senator Biden. So we cannot?
Senator Brownback. On that specific one.
Senator Biden. With regard to the anti-corruption piece,
which is the part that, quite frankly, burdens, worries me, let
us take Colombia for example. There is a major aid package to
Colombia we are debating now. But assume there was not; all the
factors still pertain. Colombia has a military, it has a police
force both, that is overwhelmed, but also portions of which
have been corrupt and engaged in activities that are--now, I
happen to, by the way, support the aid package to Colombia.
But under this proposal, if there was a circumstance in a
country--where there is a country not on the terrorist list,
not on the narcotics list, where their police forces--where we
know there are human rights abuses and human rights problems,
that we would be--they would be able to get money to train
their police in anti-corruption efforts. The anti-corruption
would obviously be to deal with organized drug trafficking.
Senator Brownback. Right.
Senator Biden. And yet they are a corrupt operation
themselves, theoretically. Would that--I mean, how do you deal
with that dilemma? Do you understand my point?
Senator Brownback. Well, I think I understand it. What I
was trying to say, and not eloquently, obviously, earlier, is
that we are not arming police, we are not setting up a police
force to deal with corruption, but we are allowing our people
to travel say to Colombia to train people there on dealing with
anti-corruption issues or to work there in that country to deal
with anti-corruption training, and that is what we are trying
to get that training for.
Senator Biden. Mr. Chairman, in the interest of time I will
not continue this, and I appreciate the Senator's cooperation
in explaining his amendment. Correct me if I am wrong, but I
have only become recently aware of this in the last couple of
hours, this amendment, and I have not really thought it
through.
So I would hope the Senator would defer or, if he moves for
a vote, I vote no, in part because I am not sure of the
consequences of it, not because I am positive he is wrong but I
am not sure of the consequences. So when in doubt on
legislation, I tend to vote no. So on this one I would vote no
if we are going to pursue it, and that is because I do not
know.
Senator Brownback. Could I ask of the ranking member?
Senator Biden. Surely.
Senator Brownback. Is it the anti-corruption assistance
portion that troubles you----
Senator Biden. No.
Senator Brownback [continuing]. Or is it the education
portion?
Senator Biden. It is literally what, what it means. For
example, when I first read it I did not even think of what the
Senator from Maryland mentioned, would this mean aid to police
forces. I am thinking non-military, OK, no problem. And I am
thinking anti-corruption, well, that is a good thing. But I am
not sure how that plays out.
I just do not know enough to know what this could be used
for, and because I am not certain--I would be happy to talk
with the Senator about it. I am not asking him to withhold on
my account, but if he does move forward, because I am
uncertain, I will vote no.
Senator Brownback. Mr. Chairman, if I could, Mr. Lester I
am told here is a lawyer with USAID who could answer the anti-
corruption question, is here, and could answer this question
that the Senator has.
The Chairman. I am having a little difficulty hearing the
Senator.
Senator Brownback. Mr. Lester, who is a lawyer that is in
attendance from USAID, could answer the specific question that
Senator Biden and Senator Sarbanes has.
The Chairman. Now, where is Mr. Lester?
Senator Brownback. I believe he is right over here.
Senator Biden. From USAID.
Senator Brownback. From USAID.
The Chairman. Mr. Lester, would you step forward and have a
seat, please.
Mr. Lester. There are two formulations----
The Chairman. Pull the microphone a little closer to you.
Senator Biden. For the record, would you identify yourself.
Mr. Lester. Bob Lester, Assistant General Counsel at USAID.
There are two formulations that the Congress has used in
the past in ``notwithstand'' provisions of law:
``notwithstanding any provision of law,'' which covers the
whole waterfront, and ``notwithstanding any provision of law
that restricts assistance to foreign countries.'' It is that
formulation that is used in this amendment, and we have
interpreted it and there is legislative history to the effect
that this deals with country eligibility, not the kinds of
assistance that you provide but the eligibility of a country to
receive assistance.
So for example, if a country has failed to pay debts owed
to the U.S. Government, normally assistance is barred under
what we call the Brooke amendment. Well, this provision would
allow this kind of assistance, anti-corruption assistance and
education assistance, to go forward.
But this formulation----
Senator Sarbanes. Can you enumerate for us all the
countries that are encompassed within this phrase? Is it an
``open sesame''?
Mr. Lester. I could not right now.
Senator Sarbanes. No, you could not. So we do not know, we
do not know exactly what we are signing onto.
Mr. Lester. What this provision would allow to be provided
would be assistance notwithstanding country sanction, country
prohibitions. It would not get to the issue of and would not
allow assistance, for example, for abortion equipment. That is
a kind of assistance that you provide, a mode of assistance, if
you will, but it does not get to the issue of eligibility of a
country to receive assistance, and that is what the phrase
``notwithstanding any provision of law'' that restricts
assistance to foreign countries has been interpreted to mean.
Senator Sarbanes. But we do not know what countries are
encompassed within this phrase, other than in the generic
sense?
Mr. Lester. That is correct.
Senator Sarbanes. Well, I mean, that is asking a lot, is it
not?
The Chairman. Could I ask the Senator, does this amendment
include, does it include accounting procedures? If you want to
ask your lady, she says it does.
How about tax reform?
Senator Brownback. Yes, I am being informed that it
includes both of those.
The Chairman. Right. Economic transparency?
Senator Brownback. Economic transparency.
The Chairman. Land ownership registration and other
technical assistance programs that are used to fight
corruption, it includes all of those?
Senator Brownback. Yes, that is what I am being informed.
The Chairman. Very well.
Senator Brownback. Mr. Chairman, I thought that this seemed
something that clearly was in our best interest to do, to fight
terrorism and to provide education at the primary and secondary
level. So that is why I think this fits right in with what we
are trying to get done here on a narrow basis and in a key
area.
The Chairman. Well, I agree with you, I certainly agree
with you, and I favor the amendment.
Any further comment?
Senator Sarbanes. Well, Mr. Chairman, I am going to oppose
this amendment because we do not begin to know what countries
are encompassed, and if we really wanted the amendment we
should address the country specific and remove the provisions
and law that restrict the assistance and be able to judge on
that basis whether the country ought to be able to obtain this
aid. This aid could be quite expansive.
Senator Dodd. Can I just add something? That is an
interesting point. I am attracted to it. But as I understand it
now, there are countries that are clearly on the list as
terrorist nations or nations--and I happen to think the drug
certification law is ludicrous, but my opinions aside, if you
are on that list you also do not get this assistance at all.
Senator Brownback. You do not get it.
Senator Biden. Where does it say that?
Senator Dodd. Well, I am asking the question. I mean, I
thought that is what I heard earlier.
The Chairman. The answer was yes.
Senator Dodd. The answer is yes to both of those, right?
Senator Brownback. It is in line 10 of the amendment,
Senator Biden. 490(e) and 620(a) are the two sections, other
than those, the drug----
Senator Dodd. And terrorism.
Senator Brownback. And terrorism.
Senator Dodd. Now, but if you are on the list because you
have not paid your debts, then that is a different kettle of
fish. That one, we are saying that here in that situation, to
provide assistance to deal with corruption, which may in fact
be part of the reason why they have not paid their debts in a
sense, that we are going to try and do something about it.
I just do not have--if this said, look, with terrorist
nations we are going to do this, I would have a real problem
with it, obviously. I could not do that. But if you are going
to--if you are excluding those two and you are getting at the
others--it does not require that the aid be spent there, does
it?
Senator Brownback. No, it does not.
Senator Dodd. So it is not a mandatory provision.
Senator Brownback. It allows it.
Senator Dodd. It allows it to be done, which would still
require an act of Congress to approve it?
Senator Brownback. And an administration to do it.
Senator Dodd. But we would have certainly the right to
preclude the aid going to a country if you were going to make
that case. So it is not a universal application of the law to
every nation that may be on the list.
Senator Brownback. It is not.
Senator Dodd. Except that it absolutely excludes those
nations that are on the drug and terrorism list?
Senator Brownback. That is correct.
Senator Biden. Let me ask one more question, and I do not
want to drag this out, Mr. Chairman. How Russia? If we sanction
Russia on sale of missile technology to Iran and it is clear
Russia has a serious--and that means they do not fall within
either one of these lists, right?
Senator Brownback. That is correct.
Senator Biden. And Russia is in a circumstance where they
obviously have rampant corruption. It is a kleptocracy these
days. Now, would we be able to--would the President,
notwithstanding the sanctions relative to other aid programs,
be able to provide anti-corruption programs to the Russian
Government? And the Russian Government, the question is whether
or not the people that they have are corrupt.
I am not sure how you keep it--if the police are the ones
that are corrupt and if the governmental agencies are the ones
that are corrupt, that have been infiltrated and are corrupt,
do you still provide the aid to them? Could you still provide?
Senator Brownback. Unless it is in those two lists, which
your pulling it out says it would. But that is the situation we
are in today, where you have a lot of corruption within police
forces, and we try to fight it in a lot of countries around the
world. We try to send in people to train on it.
We are saying let us continue to do that except in these
two places, and that this is something that is in our interest.
Senator Biden. Well, I guess what I am saying is the
Congress could pass legislation imposing sanction on a country
because of their corrupt police organizations, and this would
then allow the President to waive that and go ahead and provide
assistance to those very organizations in the name of helping
them not be corrupt.
Senator Dodd. Well, I would make the case--my colleague
raised the issue of Colombia earlier and I appreciate where he
is on the issue of Colombia.
The Chairman. I do not want to lose my quorum here,
gentlemen.
Senator Dodd. All right, I will be fast. The point is I
would make the case to my colleagues that the certification
process which precluded us from dealing with Colombia for a
period of 4 or 5 or 6 years in fact contributed to the very
quagmire that exists today, because we were precluded dealing
from it. Now, there were other factors there.
But in a sense what I think my colleague is suggesting here
is that sometimes the very problems that exist, we then
sanction the country, we cannot get in and deal with the
problem, and so it just gets worse.
Senator Brownback. And we exacerbate it.
Senator Dodd. Then by the time we get around to dealing
with it, it is a far bigger problem.
Senator Brownback. That is my point.
Senator Sarbanes. How many countries are encompassed within
your phrase in lines 8 and 9?
Senator Brownback. I am told there are six on the terrorism
list.
Senator Sarbanes. No. You do not apply your amendment to
them. How many countries----
Senator Brownback. I thought that was what you were asking,
I thought----
Senator Sarbanes. No, I am asking to how many countries and
which ones your amendment applies.
Senator Biden. To whom does your amendment apply?
Senator Brownback. All but those that are on those two
lists.
Senator Sarbanes. No, no, because you would have to make
some determination of provisions of law that restrict
assistance to a foreign country. How many such country are
there?
Senator Brownback. Well, it applies to everybody but those
that are on those two lists currently. And there is, I am told,
six on the terrorism list and two or three that are on the drug
list. So it would apply to all other countries.
Senator Sarbanes. No, because all other countries do not
have restrictions on them.
Senator Brownback. And that would--your question would
change depending on if they have problems with debts that they
have not paid. But we are saying otherwise it applies to all
countries except those two.
Senator Sarbanes. How many countries? How many countries
who now cannot get assistance would be able to get assistance
under this provision, and which countries?
Senator Brownback. I think I have tried to answer it three
times. We have got--it would be nine countries that it does not
apply to and otherwise it would apply to all other countries
from here prospectively forward. If any of them were sanctioned
in the future for non-debt payments----
Senator Sarbanes. Well, how many currently are sanctioned
to which this would apply?
Senator Brownback. I do not know the answer to that
question.
The Chairman. Would you forgive me? May we lay this aside
temporarily and let the chair inquire. Is there another
proposed amendment to Title II?
Senator Dodd. Yes, Mr. Chairman, I have one.
The Chairman. To Title II?
Senator Dodd. Oh, to Title II?
The Chairman. Yes.
Senator Dodd. I am sorry. I have Title III.
Senator Frist. Mr. Chairman, could I just speak to one
section of Title II very briefly?
The Chairman. Sure.
Senator Frist. I believe it is C. I do not have it here. It
is the Sudan Peace Act. We have discussed and talked about it.
It has passed through committee before. I just wanted to re-
emphasize how important this particular subtitle is.
The ethnic cleansing and war in the Sudan has gone on for
16 years, 2 million people dead, 4 million people displaced. It
is something I have felt very strongly about. The whole intent
of the bill is to push the relevant players to the table with a
comprehensive negotiated solution. It does address new tools,
including humanitarian tools. We use all points of pressure.
Because I have been there, I have spent time there, it is
something the Senate has addressed, we have addressed, I just
want to re-emphasize. The hospitals that I have had the
opportunity to work in there have been bombed 3 times in the
last 3 to 4 months, and again I want to emphasize the
importance of this bill, and appreciate your support in
including this in the underlying bill.
The Chairman. There being no other amendment to Title II, I
am going to lay it aside for the time being and go to Title
III.
Senator Biden. Mr. Chairman.
Senator Brownback. Mr. Chairman, could I make sure that we
do get a vote on this while we have a quorum?
The Chairman. Oh, yes. We cannot do anything until we do
something to Title II one way or another.
Senator Brownback. OK. I just did not want to lose a
quorum.
The Chairman. Yes, sir.
Senator Dodd. Thank you, Mr. Chairman.
The Chairman. I hope you will be as brief as possible.
Senator Dodd. I will try and be brief, yes, I will.
First of all, I just want to, before I offer an amendment,
Mr. Chairman, I really do want to thank you immensely. There
are some wonderful pieces of this bill, the underlying bill.
Senator Ashcroft has mentioned on the food and medicine one and
I too want to express my gratitude to you for that provision.
It is tremendously helpful.
The debt relief provisions in this bill I think are one of
the great messages. It may get lost in the news of everything
else, but it is a tremendous gift that this country is giving
to the world in the 21st century, to a lot of the poorest of
the nations, trying to relieve them of that obligation.
Obviously, taking the leadership in that is something which I
think is worthwhile.
The HIV and AIDS are tremendously helpful and I really
commend the chairman for this. This is in your bill and you are
to be commended for it.
Senator Biden. Why do you always say ``the chairman''? What
the heck is the deal here?
Senator Dodd. Well, I am getting to you in a minute, Joe.
And the microenterprise issue, I appreciate that. The
microenterprise issue we talked about last year and I am
grateful. You said you would let it be one of the first
provisions up and you did, and I appreciate that.
And I thank, obviously, my friend and colleague.
Mr. Chairman, I have an amendment here that would delete
language from the committee mark which would abolish the Inter-
American Foundation. You all have in front of you here a rather
hefty looseleaf binder that explains the background and the
history of the Inter-American Foundation. I am not going to go
through all of this, but briefly let me just say to you, this
is an organization that was established in 1969. It is over 30
years old.
In the 30 years, Mr. Chairman, this organization has
provided over--around 4,500 grants in 38 different nations
throughout the hemisphere, the average grant being about
$70,000, dealing with the poorest of the poor in this
hemisphere. It has made a significant difference. It is a $20
million program. It has been at $20 million for the last 5
years. No particular--no increase in that funding at all.
In anticipation of the arguments, Mr. Chairman, that will
be raised, there have been three, four grants in three
countries that frankly were bad, and I will go back over each
one of the three or four grants in three countries: one in El
Salvador, one in Argentina, one in Honduras. But of the 4,500
grants, to have 4 grants in 3 countries over 30 years is not
what I would consider--does not warrant zeroing out the
program.
I will go through each one of those and explain. One of
them I think should not even be listed as part of the four, but
the other three I think were, and the agency responded to them
by terminating the grantees when it occurred. So it was not as
if they sustained it thereafter.
Again, this has been a very worthwhile program. It has made
a significant difference. Its purpose is, the mission as it was
created, the following: to strengthen the bonds of friendship
and understanding among peoples of this hemisphere, support
self-help efforts, designed to enlarge the opportunities for
individual development, stimulate and assist effective and
ever-wider participation of people in the development process,
and to encourage the establishment and growth of democratic
institutions, private and governmental, appropriate to the
requirements of the individual sovereign nations of this
hemisphere.
Some would argue, Mr. Chairman, that because the Foundation
was created in the cold war that, given today's new
geopolitical realities, it has outlived its usefulness. I could
not disagree more. The challenges to governments in our own
hemisphere are in many ways greater today than ever before and,
while we are fortunate that all but one of the nations in this
hemisphere have democratically elected governments, we cannot
ignore the fact that many of them are grappling with serious
economic, social, and political challenges that are putting
enormous pressures on their institutions. And we are seeing
that today in Ecuador, Venezuela, Colombia, not to mention in
Bolivia, Peru, and there is a long list.
Today governments throughout the region are being asked by
their citizens to demonstrate that democracy brings with it
tangible economic benefits to all segments of society. And yet,
as we all know, poverty and economic inequalities loom very
large in nations like Chile, Argentina, and Brazil.
Ironically, at a time when economic development issues are
of critical importance to strengthening support for democracy,
the United States Agency for International Development, our
premier development agency, has virtually no presence in Latin
America and the Caribbean. So that was a program that really
was there for many years. It is virtually gone now from these
nations, with the exception of a few extremely poor countries
with respect to HIV and AIDS health care.
So all the more reason that the Foundation needs to
maintain its presence in the region as a signal that we do care
about democracy, that these nations that have emerged as
democratic nations are fragile in so many cases. And here for
us in a sense to cutoff all ties here because of three or four
bad cases--and I admit they are bad--but after 4,500 that
worked pretty well, I think would be a great retreat for us,
and therefore the Foundation I think plays a very, very
important role. Through its programs, its strengthening
democracy from the ground up, it is critically important to the
future of democracy.
In the Dominican Republic--I cite three examples--it
established and operated two early childhood centers for 1 to 5
year olds in the little town of Esperanza, working with local
civic and business organizations; in Haiti, to work in
cooperation with community efforts in the city of Jacmel, drill
wells, equipped a high school computer center, and built a
bridge. It was in partnership with the local chamber of
commerce in that country.
In Brazil, to establish a youth center in the city of Santo
Andrea to support teacher training initiatives in five
municipalities, working with Federal, state, and local
authorities. And the list goes on.
These are the typical grantees of the 4,500. So I would
hope that as we listen to the arguments against this that we
would understand that this is an institution.
Now, the GAO, based on the chairman's request, is examining
the comprehensive analysis of the Foundation's programs. It
would seem to me that to terminate the program prior to the GAO
giving us a report is a little getting ahead of ourselves here.
If the GAO report comes back in and says there are things that
need to be changed, then we ought to change it. But here we are
going to terminate the program in this bill and we do not even
have the benefit of the GAO analysis of the Foundation.
So again, Mr. Chairman, I would urge that we keep this.
Now, let me just very briefly respond. There are four cases,
and I will very quickly tell you about them, that caused the
difficulties.
The case in Ecuador. I said El Salvador; it was Ecuador.
Several Americans in the process of conducting an environmental
impact study from an oil company were kidnapped by a local
indigenous group in Ecuador to contest their protest that oil
drilling might cause damage to the ecosystem. An active
Foundation grantee who represented a regional indigenous
federation and a former grantee which serves as an umbrella
organization for all Ecuadorian Amazonian indigenous
organizations signed a statement in support of the local group
holding the American hostages.
The Americans were released. The Foundation, on learning of
the issue, terminated the grant. A foolish thing to issue a
letter in support of that.
No. 2, another indigenous group--this is in Ecuador as
well--issued a threatening press release against an American
citizen, Loren Miller, prohibiting him from entering the
Amazonian lands because he was attempting to acquire a U.S.
patent on a rare Ecuadorian plant for medicinal purposes. The
plants are located and controlled in one of the indigenous
regions. The Foundation's grant had expired in 1997 before
Foundation officials became aware of the incident.
In the case of Argentina, a grantee participated in a
demonstration protesting a decision by the local government to
withdraw from self-help housing in the city of Cordoba that it
had originally indicated it would provide. In the course of the
protest, roadblocks were set up and a cathedral was occupied.
The demonstration ended peacefully when local governments
agreed to meet with the protesters. The Foundation terminated
the grant upon hearing of the incident.
In the last case, the case of Honduras, a grantee took part
in a march to express concern about the possible expulsion of
Afro-Hondurans from their coastal homes where they had lived
for generations, but had no clear title to the land, as a
result of the sale of the land to an American hotel concern.
The organizers of the demonstration obtained all necessary
permits for the march. Except for a minor police incident, the
march was uneventful. The Foundation in that case took no
action. I would argue in that case a peaceful demonstration
with permits to allow it should not necessarily have caused the
grantees to be terminated.
Those are the four cases out of 4,500 in 30 years. And I do
not think you terminate an entire program that is doing good
work after that many years, doing that much worthwhile work.
The average grants are $70,000. It makes a huge, huge
difference.
Democracy does not grow by itself. It has to be nurtured.
And without any USAID missions there, with limiting
participation, the Inter-American Foundation is about all we
have got left. If we abandon it and zero it out, I think we
suffer the consequences in some of these fragile countries of
seeing them revert to something other than democracy.
So I would hope my colleagues would restore this program.
Wait for the GAO report to come out, make changes if they are
necessary. But do not terminate an otherwise good program.
The Chairman. Well, let us hear the other side of the
story. Let me make two points on this GAO study since I am the
one who reported it. First, the GAO review is narrowly focused.
The outcome will not tell us anything about whether it is in
the national interest or the taxpayers' interest to keep this
agency going. So to pretend that we have got to sit around and
wait for that in order to save this outfit that ought to be
done away with----
Second, the GAO will have preliminary findings in May or
June, so if the GAO surprises me and comes up with a compelling
reason for keeping the Foundation, which I am absolutely
certain they will not, I promise the Senator we will work with
him on the floor or in conference.
Now then, about the Inter-American Foundation. It has
provided grants to terrorists and anti-American groups in Latin
America who kidnapped American citizens and held them for
ransom. Despite my request, the Foundation refuses to vet its
list of current grantees with the CIA to ensure that taxpayers'
dollars are not going to other terrorists or criminals.
Now, this alone is inexcusable. But to suggest that this is
the main reason the Foundation should be abolished is not the
case. In fact, it is a smokescreen to hide the real problem,
and that is that the majority of Inter-American Foundation
projects do not directly help poor people and the projects are
not sustainable. This is after being in business for 30 years,
costing the taxpayers of the United States more than one
billion bucks.
Furthermore, the head of USAID, a man I respect greatly,
Brady Anderson, sat right there and suggested that the only
difference between Inter-American Foundation and the USAID
projects is that the Foundation's projects are smaller in
scale. The reality is that there is not one Foundation project
that USAID does not already do or could do if asked, and with
better oversight.
The Foundation--now get this--the Foundation's
administrative expenses are 25 percent of its operating budget.
That means all the people who get out the press releases
telling how great the Foundation is. And 6.95 percent for USAID
of operating budgets.
The Foundation is supposed to help poor people, but I must
say that it is becoming a bloated Washington bureaucracy. If
the goal is genuine grassroots economic development
concentrating on self-help programs for poor people, I trust
the Peace Corps will do a better job.
Now, abolishing, I will repeat, the Inter-American
Foundation is consistent with this committee's work to
streamline and reorganize the foreign affairs apparatus for the
21st century. We could do this without cutting the levels of
assistance to Latin America and we can save the taxpayers money
by eliminating the expensive operations of the Foundation's
bureaucracy.
I am opposed to continuing this Foundation.
Senator Dodd. Mr. Chairman, may I just quickly respond to
two things? First of all, with regard to the CIA, I am told the
CIA has no desire, with limited budgets, to get into a vetting
process of the Inter-American Foundation. And in fact what they
do do is----
The Chairman. But it does not make any difference whether
they are or not.
Senator Dodd. Well, I know, but the point is that to have
the CIA do--right now all the grants go through the embassies
in the countries where they are. Now, that may not be
satisfactory to some, but I think it is certainly a more
appropriate use of an agency than it is to have the CIA vet
them.
But second, in a sense on the GAO thing, and I appreciate
the chairman's comments on this, but what I am basically
getting here is I am getting a verdict now and a trial later.
All I am suggesting is that can I have--can I wait, can we get
a delay on that, rather than terminate the program and then see
what happens down the road?
Again, I think three or four cases out of 4,500 grants----
The Chairman. That is an exaggeration, Senator. I am sorry.
Senator Dodd. No, that is a fact number. But anyway, I have
made my case.
The Chairman. Well, you made it.
Senator Dodd. I know you want to move along, so I did the
best I can.
The Chairman. All right. What is the pleasure of the
committee?
Senator Dodd. Can we have a vote?
The Chairman. All in favor say aye----
Senator Brownback. Mr. Chairman, if I could, because I am
truly torn on this, because I hear your arguments and this is
something I have not had a chance to really dig into and to
study as to whether we should do away with it. I normally,
great, let us do away with something, would be the general
attitude that I would have here.
On this one, I need to know more, I think, about whether or
not they are--what all they are doing with the grants and what
they have done over a period of time and if they are reforming
their efforts now or not. That is why I am a bit torn about
whether to actually do that at this point in time or if we
would be better off to look a little bit.
The GAO study, when does it report out? You said it is a
narrow report?
The Chairman. May or June, I am told.
Senator Brownback. May or June, but it is not a broad-based
report?
The Chairman. We did not ask for a broad-based. We asked
for specific things. We know about the rest of it.
Senator Biden. Mr. Chairman, may I? May or June the
findings will be preliminary, but there is no final? When are
we likely to get a final report from them, do we know? Some
time in the summer, OK. I have got it.
Senator Dodd. I said earlier, USAID is basically gone in
the Caribbean and Latin America except for a couple of
countries. This is it.
The Chairman. All in favor of the amendment will say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[A chorus of noes.]
Senator Dodd. Can we have a rollcall vote on that, Mr.
Chairman?
The Chairman. Pardon?
Senator Dodd. Can we have a rollcall vote on that?
The Chairman. The clerk will call the roll.
Mrs. Allem. Mr. Lugar.
The Chairman. Mr. Lugar, aye by proxy.
Mrs. Allem. Mr. Hagel.
The Chairman. No by proxy.
Mrs. Allem. Mr. Smith.
Senator Smith. No.
Mrs. Allem. Mr. Grams.
The Chairman. No by proxy.
Mrs. Allem. Mr. Brownback.
Senator Brownback. Aye.
Mrs. Allem. Mr. Thomas.
The Chairman. No by proxy.
Mrs. Allem. Mr. Ashcroft.
The Chairman. No by proxy.
Mrs. Allem. Mr. Frist.
Senator Frist. No.
Mrs. Allem. Mr. Chafee.
Senator Chafee. No.
Mrs. Allem. Mr. Biden.
Senator Biden. Aye.
Mrs. Allem. Mr. Sarbanes.
Senator Sarbanes. Aye.
Mrs. Allem. Mr. Dodd.
Senator Dodd. Aye.
Mrs. Allem. Mr. Kerry.
Senator Biden. Aye by proxy.
Mrs. Allem. Mr. Feingold.
Senator Feingold. Aye.
Mrs. Allem. Mr. Wellstone.
Senator Biden. Aye by proxy.
Mrs. Allem. Mrs. Boxer.
Senator Dodd. Aye by proxy.
Mrs. Allem. Mr. Torricelli.
Senator Biden. Aye by proxy.
Mrs. Allem. Mr. Chairman.
The Chairman. No.
Mrs. Allem. Mr. Chairman, there are 10 yeas and 8 nays.
The Chairman. Ten yeas and 8 nays. The amendment is
approved.
Is there further amendment to Title II?
[No response.]
The Chairman. There being none--I mean Title III, excuse
me. Are there amendments to Title III?
[No response.]
The Chairman. Hearing none, all in favor of Title III will
say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[No response.]
The Chairman. It is approved.
Is there an amendment to Title IV?
[No response.]
The Chairman. Hearing none, is there a motion to----
Senator Biden. I move Title IV, Mr. Chairman.
The Chairman. I second the motion, and all in favor will
say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[No response.]
The Chairman. Any amendments to Title V?
[No response.]
The Chairman. Hearing none, is there a motion?
Senator Biden. I move Title V, Mr. Chairman.
The Chairman. I second the motion, and all in favor will
say aye.
[A chorus of ayes.]
The Chairman. Any amendment to Title VI?
[No response.]
The Chairman. Hearing none, I will entertain a motion to
approve Title VI.
Senator Biden. I move to approve Title VI.
The Chairman. You second it this time.
Senator Frist. Second.
The Chairman. It has been moved and seconded, and all in
favor will say aye.
[A chorus of ayes.]
The Chairman. Any amendment to Title VII?
[No response.]
The Chairman. Hearing none----
Senator Sarbanes. Mr. Chairman, Mr. Chairman.
The Chairman. Oh, excuse me. I am sorry.
Senator Sarbanes. Mr. Chairman, I have a couple of
questions. I may have a significant problem with a couple
provisions in Title VII. Section 774, I am not exactly clear
what this is intended to accomplish and we have been--it has
been very difficult to get information about it, and I really
think that it ought not to be in the bill. Our colleagues on
the Intelligence Committee have told me that it is not really
necessary, and it seems to me the prudent thing to do would be
to drop it from this legislation.
The Chairman. Does the Senator refer to section 774?
Senator Sarbanes. Yes.
The Chairman. Well, let me say that inclusion of this
provision was jointly agreed to and recommended by the chairman
of the Senate Select Committee on Intelligence and its chairman
strongly supports this provision.
Section 774 corrects an oversight in the Freedom Support
Act. Customarily, activities conducted pursuant to the Title V
of the National Security Act of 1947 are not, are not covered
by foreign policy-related limitations or restrictions on
assistance. The formulation used in section 774 corresponds
directly with that found throughout U.S. law.
For instance, P.L. 106-113, that is to say the Admiral
James W. Nance and Meg Donovan Foreign Relations Authorization
Act for Fiscal Year 2001, section 1132 prohibits the U.S.
Government from providing assistance to any person who is
involved in the research, development, and design, testing, or
evaluation of biological weapons for offensive purposes. An
exception to this prohibition is made for any activity being
conducted pursuant to Title V of the National Security Act of
1947.
Numerous other examples in law are found. The staff
provided for me a brief list of just a few of those examples
and the list will be circulated at this time, if you will. Has
it been circulated?
Mr. Billingslea. Yes, sir.
The Chairman. All right. In other words, section 774 merely
extends this customary practice of exempting activities
reportable under the National Security Act of 1947. And I know,
I know it was not the intent of the drafters of the Freedom
Support Act to impair or complicate the ability of the U.S.
intelligence community to do its work, but unfortunately that
has been precisely the result.
This section will rectify the problem and is entirely
consistent with longstanding practice, and I oppose any effort
to modify or delete this section.
Senator Sarbanes. Well, have we heard from the intelligence
people on this amendment?
The Chairman. Well, we heard from the chairman of the
committee.
Senator Sarbanes. No, from the intelligence agencies?
The Chairman. I do not know whether we have or not.
Senator Biden. Mr. Chairman.
The Chairman. Go ahead.
Senator Sarbanes. What was the answer to that question?
Senator Biden. I beg your pardon.
The Chairman. Give your name and state what they said. In
other words, they said they did not oppose the amendment, but
they did not have the guts to say so. I expect that is what it
amounts to. Go ahead.
Mr. Billingslea. Marshall Billingslea, staff member with
the majority staff of the committee.
Our understanding is that this provision of the bill is
something which the intelligence community is comfortable with.
It reflects longstanding practice. They did not ask the
chairman to include this provision in the bill.
Senator Biden. Mr. Chairman, what this section does makes
some good sense, at least in principle. But when we limit
assistance to another country, we mean foreign aid or military
assistance and not the things that intelligence agencies can
and do do. If an intelligence agency wants to provide something
to Azerbaijan for intelligence collection purposes or if the
President authorizes a covert action program to provide
something, the intelligence community should learn about it and
notify us.
But one of the problems I have with this is again it is
something that I think is better discussed in a closed hearing.
Senator Kerry, who is a member of the Intelligence Committee,
had to leave and as he left he said: Please vote my proxy
against this provision, and indicated that this is not
something he would like to have to discuss and debate in an
open session as to why he thinks that.
Again, I am not suggesting that the chairman is not able to
draw his own conclusions without having to defer to the
Intelligence Committee. But I--again, I am a little bit uneasy.
As I understand it, the CIA is able to do certain things now.
They might theoretically like this broader grant of authority,
but they are not anxious to have any floor fight about this at
this point.
I wonder whether or not--obviously, the chairman has
thought this through more than I have--wonder whether it is not
better to see if reaching some consensus by getting some
briefings here that either does not entail an open debate at
this point and does not get us into some of the policy
questions.
The Chairman. Is the Senator recommending that we withhold
the vote at this time?
Senator Biden. I am. Obviously the chairman, he knows more
about this than I do because he is obviously proposing it and,
hey, he probably has had the advantage of having these meetings
and discussions with the community. But I for one think it
would be better for us to withhold this and proceed with the
bill, and if in fact it is, as it may be, if in closed session
we conclude that this is something that on reflection makes
sense, we could probably reach a consensus on including this.
But I am not committing anybody to that, but I just think
that may be a wiser way.
Senator Sarbanes. We could take it out of the bill now.
Senator Biden. That is what I meant, take it out of the
bill now and make a judgment, and maybe the Senator or the
staff could set up for Senators who have concerns a closed
briefing on this issue.
The Chairman. I would rather just have a vote on it.
Senator Biden. OK, fine.
The Chairman. State what the vote will be on.
Senator Sarbanes. The vote is to strike section 774.
The Chairman. I know that, but I want--where is Steve
Biegun? Our vote will take it out?
Mr. Biegun. Yes, our vote will take it out.
The Chairman. OK. Do you understand?
The clerk will call the roll.
Mrs. Allem. Mr. Lugar.
The Chairman. No by proxy.
Mrs. Allem. Mr. Hagel.
The Chairman. No by proxy.
Mrs. Allem. Mr. Smith.
Senator Smith. No.
Mrs. Allem. Mr. Grams.
The Chairman. No by proxy.
Mrs. Allem. Mr. Brownback.
Senator Brownback. No.
Mrs. Allem. Mr. Thomas.
The Chairman. No by proxy.
Mrs. Allem. Mr. Ashcroft.
The Chairman. No by proxy.
Mrs. Allem. Mr. Frist.
[No response.]
Mrs. Allem. Mr. Chafee.
Senator Chafee. Aye.
Mrs. Allem. Mr. Biden.
Senator Biden. Aye by--aye.
Mrs. Allem. Mr. Sarbanes.
Senator Sarbanes. Aye.
Mrs. Allem. Mr. Dodd.
Senator Dodd. Aye.
Mrs. Allem. Mr. Kerry.
Senator Biden. Aye by proxy.
Mrs. Allem. Mr. Feingold.
Senator Feingold. Aye.
Mrs. Allem. Mr. Wellstone.
Senator Biden. Aye by proxy.
Mrs. Allem. Mrs. Boxer.
Senator Biden. Aye by proxy.
Mrs. Allem. Mr. Torricelli.
Senator Biden. Aye by proxy.
Mrs. Allem. Do you want me to call Mr. Frist?
The Chairman. Mr. Frist.
Mrs. Allem. Mr. Frist.
Senator Frist. No.
Mrs. Allem. Mr. Chairman.
The Chairman. No.
Mrs. Allem. The vote is 9 to 9.
The Chairman. It fails. Very well. Thank you.
That finishes Title VII.
Senator Sarbanes. Mr. Chairman, I have a question and I
need an explanation about section 712. Could someone explain
that to me, what this amendment does?
The Chairman. Certainly.
Identify yourself.
Mr. Billingslea. Marshall Billingslea with the Senate
Foreign Relations Committee majority staff.
Section 712 of the legislation raises the current
limitation on law which governs the transportation of excess
defense articles. Right now a variety of limitations are
imposed on the ability of the United States Department of
Defense to transfer excess defense articles, Section 516 of the
Foreign Assistance Act. One of those limitations is that
defense articles may not be transferred except on a space
available basis on U.S. naval vessels and the weight of the
items to be transferred may not exceed 25,000 pounds.
This amendment raises the weight that may be transported on
a space available basis from 25,000 pounds to 50,000 pounds,
for one simple reason. The Department of the Coast Guard has
begun a process of phasing out a large number of small self-
righting coastal patrol craft. They weigh about 33,000-35,000
pounds. There is going to be about 50 to 54 of these available
over the next 4 or 5 years.
If they are not able to transport the vessels on a space
available basis, other countries will have to pay for some
other means of acquiring the vessels. So the Coast Guard is
concerned that they could be forced to absorb the costs of
extended periods of storage or demilitarization. This is the
purpose of this provision.
This provision was drafted when the Defense Security
Cooperation Agency flagged this provision and a difficulty in
getting three of these boats to the Seychelles.
Senator Sarbanes. Does this provision make it possible for
boats to be sent to any country where they could not now be
sent?
Mr. Billingslea. No, sir. This is a straight space
available increase. It does not touch any other restrictions in
foreign assistance or any other provisions of law. It simply
says, as opposed to previously where the Navy could not put an
item on one of their aircraft carriers that weighed 25,001
pounds, now they can put up to 50,000 pounds of weight onto
that aircraft carrier, provided it is available space, a free
ride.
Senator Sarbanes. What countries is this designed to
benefit, do we know?
Mr. Billingslea. We do not have a list yet from the Defense
Security Cooperation Agency on which countries may seek to
acquire these patrol craft. And they will be phased in. We also
do not have that timeframe, but these 50-odd vessels will
become available over a rolling period of about 4 years.
There have been a number of preliminary indications of
interest in patrol craft and coastal vessels, but we understand
that many interests do not revolve around these particular
vessels.
Senator Sarbanes. Now, by raising the weight so that they
qualify for the shipment, does it then take them out from a
congressional review process?
Mr. Billingslea. This does not affect the congressional
review process under section 516 or any other provision of law.
Under section 516, which governs the transportation of excess
defense articles, there are a series of provisions which govern
how this committee and the Congress is notified of those items
being transferred, and then there are other overlapping
provisions of law which govern transfers of lethal defense
articles, prohibitions on transfers of any form of assistance
to various specific countries, as well as in general categories
of increase, such as state sponsors of terrorism. This does not
affect any of that legislation.
Senator Biden. May I make a point? I quite frankly was
wondering where. In other words, obviously there is a purpose
for this.
Senator Sarbanes. I am wondering about that.
Senator Biden. And quite frankly, I was wondering whether
or not Azerbaijan might be one of the recipients of this. As I
am told by State, the boats that are in question that would be
of benefit to Azerbaijan here are boats that are too large to
get into Azerbaijan by any other means than being shipped by
rail lines. They could not be carried on any existing vessel,
so I am told. And therefore, since those rail lines go through
Russia and since the only purpose that could be rationally
suggested for the existence of the boats would not be in the
interest of Russia initially, that is a highly unlikely
prospect.
The Seychelles are actually the most likely recipient for
matters relating to interdiction and drug interdiction, among
other things, which I do not quite frankly have a problem with.
Senator Dodd. The other two, and I do not know if they are
here, but I can note cases specifically. In the case of
Colombia, I know as part of a program here down in the Yanos
area of Colombia in the flat areas there are just thousands and
thousands of miles of rivers, which are a great source where
the drug trafficking moves. The ability to patrol those rivers
is awesome, literally thousands of miles of navigable waters. I
know that part of the plan or program to provide assistance
includes I think some of these vessels for that particular
effort.
I know Costa Rica also has been, is one of the main
transport facilities, their coast. A lot of it comes off the
coast of Colombia into Costa Rica, and the patrolling, the
ability to patrol out there. Those are two cases I know about,
and I think it would be a positive effect.
We had actually questions from my colleague from Maryland.
Senator Sarbanes. If these boats went to Azerbaijan, for
what purposes could they be used? Do we not have a limitation
on that?
The Chairman. Nowhere in this amendment or in section 516
is Azerbaijan mentioned. I have heard that the administration
is interested in giving boats to that country for
nonproliferation operations and I think I might support that
measure. But that initiative, if it ever happens, must be done
in accordance with all applicable committee procedures and
laws. If Senators want to object to Azerbaijan receiving Coast
Guard vessels, they should do so specifically.
Now, deleting this provision will not affect the
fundamental question of whether to give boats for Azerbaijan,
but it will hurt the U.S. Coast Guard. It will also hurt small
countries who want to receive some of the boats but cannot
afford to pay for the transfer and so are hoping that the Navy
can provide them.
Senator Sarbanes. Well, that is the question I wanted to
get at, is by raising this weight limit is it then possible for
these boats to be transferred by the administration, period?
The Chairman. That is my understanding, but I better check.
Mr. Billingslea. Senator, two points of observation on
this. Raising the threshold would smooth the way for
transportation of these particular patrol craft to Azerbaijan
or any other country if the administration were legally able to
give these boats to Azerbaijan. But there are a series of other
legislative requirements that the amendment does not go to, and
my understanding as of very late today from the Department of
State is that in fact they are talking about other boats that
do not fall within this weight limit.
But the other concern which we did seek to address by this
amendment was a practice of, in all candor, a practice of
ignoring the law by the U.S. Navy engaging in exercises with
various countries that utilized the craft in question and then
they simply left them behind. So that there would appear to be
a variety of legal ways to get excess defense articles from
point A to point B that may not be strictly covered by this
particular provision of the Foreign Assistance Act.
Senator Biden. Mr. Chairman, if I may, again because I was
concerned about the very same thing the Senator is suggesting.
Any boat that could meet the legal requirements of getting to
Azerbaijan is only a boat that could be under 30,000, because I
am told by State, not by Defense, I am told by State that the
larger boats that are the more desirable boats are physically
not able to be transported other than by rail.
If the purpose of the boats is for interdiction, the only
way it could get to Azerbaijan is through the very country for
whom they might be used to interdict, that is Russia. Therefore
the likelihood of any of the kinds of boats we are worrying
about getting to Azerbaijan is highly unlikely, because the
very nation that they might theoretically be used against would
have to provide a flatbed vehicle across their country on their
rails.
That is why I am going to vote for the amendment.
The Chairman. Well, it is not an amendment.
Senator Biden. Excuse me. That is why--excuse me. If there
was a proposal to strike it. That is why I support the
amendment in the bill--the provision in the bill.
Senator Sarbanes. No, I am just trying to clear it up. I do
not think that our relationship with Azerbaijan ought to rest
on the practicalities of Russia because our interests do not
coincide, so I do not particularly place much credence in that.
I just want to be certain I understand what we are doing here
in terms of just taking this weight limit up all of a sudden,
and what opportunities does that open up for the executive
branch that heretofore have been closed to them in terms of how
they interrelate with the Congress.
The Chairman. Do you want to tackle that one?
Mr. Billingslea. Yes, sir. There are a variety of
restrictions that apply in section 516 of the Foreign
Assistance Act. Countries must specifically be made eligible
for receipt of excess defense articles in the first place. So
there is a notification process that occurs. We receive a list
of countries that may receive these items.
Even if a country is eligible to receive excess defense
articles, the Department of Defense is not automatically able
to expend any funds in association with the transfer. That
authority must be specifically given by this committee, and it
is given in a select number of cases. But that list of
countries that are eligible to receive crating, packing, and
handling from the Department of Defense is much smaller.
For example, the bill before the committee now makes
Mongolia eligible for DOD to absorb these transportation costs.
Azerbaijan, for instance, is not an entity which has been made
eligible for absorption of these costs. Therefore the
Department of Defense would not be able to expend any of its
funds in association with the transfer of an item.
Several other various restrictions apply, will continue to
apply with or without this provision. The country, in order to
receive space available transportation, the country in question
cannot receive more than, I believe, $10 million in FMF and
IMET together. So there are a couple of other requirements. It
must be determined that it is in our national interest to do
so.
Then the committee also receives notification of EDA
transfers. Notification comes up and is subject to the
committee hold process.
The Chairman. All right. Is there an amendment to Title
VIII?
[No response.]
The Chairman. Hearing none, all in favor of Title VIII will
say aye.
[A chorus of ayes.]
The Chairman. That winds us up except for the Senator's
amendment. Please let us not lose our quorum.
Senator Brownback. I would like to just go ahead and ask
for a vote on my amendment. I think we have had a long enough
debate, so I would request, I would move my amendment, Mr.
Chairman. I move my amendment.
The Chairman. Very well. The question is on final passage--
--
Senator Brownback. I mean, I move my amendment. I am asking
for a vote on my amendment.
The Chairman. Oh, I am sorry.
Senator Brownback. Let us have a rollcall vote on my
amendment.
The Chairman. You want a rollcall vote, OK.
Senator Brownback. Unless we can get it by voice.
The Chairman. The clerk will call the roll.
Mrs. Allem. Mr. Lugar.
Senator Lugar. Aye.
Mrs. Allem. Mr. Hagel.
[No response.]
Mrs. Allem. Mr. Smith.
Senator Smith. Aye.
Mrs. Allem. Mr. Grams.
Senator Brownback. Aye by proxy.
Mrs. Allem. Mr. Brownback.
Senator Brownback. Aye.
Mrs. Allem. Mr. Thomas.
Senator Brownback. Aye by proxy.
Mrs. Allem. Mr. Ashcroft.
Senator Brownback. Aye by proxy.
Mrs. Allem. Mr. Frist.
Senator Frist. Aye.
Mrs. Allem. Mr. Chafee.
Senator Chafee. No.
Mrs. Allem. Mr. Biden.
Senator Biden. No.
Mrs. Allem. Mr. Sarbanes.
Senator Sarbanes. No.
Mrs. Allem. Mr. Dodd.
Senator Dodd. Aye.
Mrs. Allem. Mr. Kerry.
Senator Biden. No by proxy.
Mrs. Allem. Mr. Feingold.
Senator Feingold. No.
Mrs. Allem. Mr. Wellstone.
Senator Biden. Aye by proxy.
Mrs. Allem. Mrs. Boxer.
Senator Biden. No by proxy.
You want to change your mind?
Senator Brownback. No.
Mrs. Allem. Mr. Torricelli.
Senator Biden. No by proxy.
Mrs. Allem. Mr. Hagel.
The Chairman. Mr. Hagel, aye by proxy.
Mrs. Allem. Mr. Chairman.
The Chairman. Aye.
Mrs. Allem. Mr. Chairman, it is 11 yeas and 7 nays.
The Chairman. Very well. I thank the clerk.
Now then, on final passage, do you want a voice vote?
Senator Biden. Yes.
The Chairman. All in favor say aye.
[A chorus of ayes.]
The Chairman. Opposed, no.
[No response.]
The Chairman. I ask that a short statement regarding the
Ashcroft amendment and a letter from Senator Gorton regarding
the same be inserted in the record. Without objection, it is so
ordered.
[The material referred to follows:]

Statement by Senator Helms on the Ashcroft Amendment

Before this mark up concludes, I would like to in particular thank
Senator Ashcroft for his leadership in winning the committee's approval
of the food and medicine sanctions reforms. His efforts are
commendable.

______

U.S. Senate,
Washington, DC, March 23, 2000.

The Honorable Jesse Helms,
Chairman, Senate Foreign Relations Committee,
Dirksen Senate Office Building,
Washington, DC.

Dear Jesse: As you prepare to mark up the Technical Assistance,
Trade Promotion and Anti-Corruption Act, I would like to signify my
support for your inclusion of the language contained in the Food and
Medicine for the World Act.
Last year, I supported Senator Ashcroft when he attached the
original version of his food and medicine sanctions reform legislation
onto the Fiscal Year 2000 Agriculture Appropriations bill. As a member
of the conference committee on this legislation, I was quite displeased
when these provisions were removed. With my delay in signing the
report, I was secured a commitment that this subject would be addressed
in the future. I am pleased that the future is now.
The Washington state agriculture community stands to benefit with
the relaxation of onerous trade sanctions. Washington is arguably the
most trade dependent state in the nation, and what with nearly 30% of
our commodities being exported, new and expanding markets are essential
and welcomed.
Sanctions relief does not only provide positive domestic
repercussions, but affords a significant international implication.
Food and medicine sanctions do not cripple regimes or dismantle
communist governments. Instead, they hurt our family farmers and keep
food out of the mouths of those who cannot provide for themselves.
In advance, I thank you for your continued support on this issue,
and look forward to working with you to pass this significant
legislation.
Sincerely,
Slade Gorton.

The Chairman. It is perfunctory that the unanimous consent
be made to permit the staff to make corrections as may be
necessary.
There being no further business to come before the
committee, I am delighted doing this: We stand in recess.
[Whereupon, at 4:35 p.m., the committee was adjourned.]