[Congressional Record Volume 144, Number 114 (Wednesday, September 2, 1998)]
[Senate]
[Pages S9825-S9834]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


       FOREIGN OPERATIONS, EXPORT FINANCING AND RELATED AGENCIES 
                        APPROPRIATIONS ACT, 1999

  The PRESIDING OFFICER (Mr. Burns). The clerk will report the pending 
bill.
  The assistant legislative clerk read as follows:

       A bill (S. 2334) making appropriations for foreign 
     operations, export financing, and related programs for the 
     fiscal year ending September 30, 1999, and for other 
     purposes.

  The Senate resumed consideration of the bill.
  Pending:

       McConnell/Leahy amendment No. 3491, to provide that the 
     Export Import Bank shall not disburse direct loans, loan 
     guarantees, insurance, or tied aid grants or credits for 
     enterprises or programs in the new Independent States which 
     are majority owned or managed by state entities.
       Inhofe amendment No. 3366, to require a certification that 
     the signing of the landmine convention is consistent with the 
     combat requirements and safety of the armed forces of the 
     United States.
       Kyl amendment No. 3522, to establish conditions for the use 
     of quota resources of the International Monetary Fund.
       Coats amendment No. 3523, to reallocate funds provided to 
     the Korean Peninsula Energy Development Organization to be 
     available only for antiterrorism assistance.
       McCain modified amendment No. 3500, to restrict the 
     availability of certain funds for the Korean Peninsula Energy 
     Development Organization unless an additional condition is 
     met.

  Mr. McCONNELL. Mr. President, I ask unanimous consent that when the 
Senate resumes consideration of the Kyl amendment No. 3522 that there 
be 40 minutes for debate prior to a motion to table, with the time 
equally divided and controlled in the usual form, with no intervening 
amendments in order prior to a tabling vote.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. McCONNELL. Mr. President, the distinguished Senator from Texas 
has patiently been waiting to offer an amendment.
  The PRESIDING OFFICER. The Senator from Texas.


                           Amendment No. 3500

  Mrs. HUTCHISON. Mr. President, I call up amendment No. 3500.
  The PRESIDING OFFICER. If there is no objection, the pending 
amendment is set aside. If there is no objection, the pending amendment 
will be the McCain amendment No. 3500.


                Amendment No. 3526 to Amendment No. 3500

  (Purpose: To condition the use of appropriated funds to the Korean 
               Peninsula Energy Development Organization)

  Mrs. HUTCHISON. Mr. President, I send a second-degree amendment to 
amendment No. 3500 to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Texas [Mrs. Hutchison], for herself and 
     Mr. McConnell, proposes an amendment numbered 3526 to 
     amendment No. 3500.

  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:
       Add the following proviso: (5) North Korea is not providing 
     ballistic missiles or ballistic missile technology to a 
     country the government of which the Secretary of State has 
     determined is a terrorist government for the purposes of 
     section 40(d) of the Arms Export Control Act or any other 
     comparable provision of law.

  Mrs. HUTCHISON. Mr. President, I will speak briefly about what 
Senator McCain and I are trying to do.
  My amendment says that no funds will be contributed to North Korea 
until the President has certified that North Korea is not providing 
ballistic missiles or ballistic missile technology to a country, the 
government of which the Secretary of State has determined is a 
terrorist government.
  This adds to Senator McCain's amendment which has the same 
prohibition of funding for North Korea if they are continuing to build 
a nuclear weapon.
  Senator McCain and I are clearly saying that the United States will 
not continue to fund an agreement with North Korea that we know is 
being violated. The McCain amendment deals with the nuclear capability 
North Korea appears to be building. It would restrict the use of funds 
for the Korean Peninsula Energy Development Organization pending a 
Presidential certification that North Korea has stopped its nuclear 
weapons program as it has promised to do. My amendment adds the 
requirement that North Korea is not transferring ballistic missile 
technology to other terrorist countries.
  Mr. President, this week, we saw what trying to coerce and reward a 
totalitarian dictatorship will achieve. North Korea launched a two-
stage ballistic missile toward Japan, a country which has provided 
emergency food relief to North Korea and wound up having a ballistic 
missile pass through their air space as thanks.
  North Korea has admitted selling ballistic missiles to raise hard 
currency. It has made repeated threats to restart its nuclear program, 
claiming that the United States has not honored its obligations. 
Recently we learned of evidence that the North Koreans are ignoring 
their part of the agreement and building a new underground site for 
nuclear weapons development.
  I raised concerns 4 years ago when the Clinton administration 
proposed this framework agreement. It seemed to be an all-carrot-no-
stick approach to North Korea. The agreement was to help develop a 
peaceful nuclear program giving them 500,000 tons of heavy fuel oil. I 
was concerned that the nuclear weapons program would continue and that 
the fuel oil that we promised would be diverted to military use. I am 
sorry to say both seem to have occurred. The fuel was diverted almost 
immediately for military use.
  Since signing the agreement, the North Koreans have also continued to 
conduct military operations against South Korea, sending spy submarines 
into South Korean waters and discharging commandos on to South Korean 
territory. This is hardly the behavior of a partner to an agreement, 
and sending them a no-strings gift of 35 million American taxpayer 
dollars is hardly a responsible act for the U.S. Congress to make.
  The North Korean launch this week of the ballistic missile over the 
airspace of Japan was truly a shot across the bow of the civilized 
world. North Korea was warned beforehand that testing this type of 
missile would have a direct impact on our negotiations. They ignored 
the warning. We must make it clear to the North Koreans that we cannot 
and will not disconnect North Korean conventional military activity 
from the nuclear issue. Their failure to meet their obligations not to 
build nuclear weapons, nor to sell the technology to rogue nations, 
cannot be disassociated from our contribution to their country. We must 
stop rewarding dangerous North Korean provocations. This amendment will 
ensure that we do just that.
  Mr. President, I urge adoption of the second-degree amendment to the 
McCain amendment.
  Mr. McCONNELL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Kentucky.
  Mr. McCONNELL. Mr. President, I support the amendment by Senator 
Hutchison modifying the bill's language on funding for the Korean 
Energy Development Organization, which we refer to as KEDO.
  I would like to step back for a moment to 1995, shortly after the 
agreed framework was signed in October of 1994. By March of 1995, there 
was the first evidence that the North Koreans were cheating. In 
hearings before this subcommittee and in writing, I challenged the 
administration's assertions that the North was in full compliance and 
that no U.S. oil was being diverted. Eventually, it became clear that 
the North was cheating and diverting oil. Although new monitoring 
procedures were established, there was no suspension of oil or a threat 
to cut off the program. I am convinced that this is when the North 
learned that they could engage in a pattern of challenge, deception and 
noncompliance without any penalty at all.
  In fiscal year 1997, the Senate had an extensive debate about 
providing U.S. assistance to provide fuel oil to North Korea and to 
support administrative expenses for KEDO. The bill my subcommittee 
reported to the Senate capped funds at $13 million, half the 
administration's request, and provided the funds in three stages, 
requiring certification that the fuel was not--I repeat, not--being 
diverted for military purposes.
  At that time, many of us were uncomfortable continuing any aid to 
this

[[Page S9826]]

terrorist regime, let alone doubling the amount available which the 
administration had requested. In its statement of policy, this is what 
the administration had to say at that time about any curbs, cuts or 
conditions:

       Among our most serious concerns are the restrictions placed 
     on the U.S. contributions to KEDO, especially the funding cap 
     that reduces the request by nearly half. This funding is 
     inadequate to meet our commitment to support the North Korea 
     framework agreement and is unacceptable to the Secretaries of 
     State and Defense. KEDO is one of the pillars of U.S. 
     nonproliferation policy which seeks to ensure strategic 
     stability in the Pacific. Our very modest $25 million request 
     for funds helps continue the reduction of North Korea's 
     nuclear weapons capacity, while leveraging strong 
     burdensharing contributions from South Korea, Japan and other 
     countries. The administration strongly urges the committee to 
     remove the cap . . . and drop the needlessly restrictive 
     certification language.

  Again, that is what they had to say.
  Regrettably, the administration prevailed on this floor in a 73-to-27 
vote allowing full funding for KEDO. So I lost that one, I say to my 
friend from Texas.
  Mr. President, I think it is now safe to say that on both the 
nonproliferation and burden-sharing front, KEDO is a bust.
  All last week, the administration was too busy with bilateral talks 
in New York to brief the committee on the status of negotiations over 
allegations disclosed in the press that the North is building a secret 
facility to house a nuclear reactor replacing the one sealed under the 
Agreed Framework.
  With those talks still underway, as the Senator from Texas pointed 
out, Monday--this week--for the first time in more than 5 years, North 
Korea carried out a flight test of a ballistic missile which the South 
Korean Government estimates has a range of over 1,200 miles. The first 
stage of the missile landed in waters between Russia and Japan, with 
the second stage flying over Japanese territory and falling into the 
Pacific. Understandably, the Japanese have withdrawn their pledge of 
billions of dollars for the construction of an alternative reactor--a 
perfectly logical response to what happened Monday.
  Mr. President, if U.S. funding for KEDO is the pillar of our 
nonproliferation policy and the key to burden sharing, I think it is 
time we start building a new foundation for our policy. Secret nuclear 
facilities, flight testing, ballistic missiles, and who knows what 
other activities are not a nonproliferation policy, they are simply a 
nonpolicy.
  Today, I say to the Senator from Texas, I think her amendment is 
excellent and is exactly the direction in which we should go. The 
administration will complain that these new conditions are not 
consistent with the Agreed Framework, that the North did not agree to 
suspend its nuclear weapons program in return for $30 million, they 
only agreed to freeze part of it.
  Mr. President, it makes no sense for the United States to continue to 
pay for an agreement which fails to protect our allies and our 
interests in the Pacific. Monday's tests, along with the past pattern 
of deception and diversion, should convince all of us we should not 
spend millions more from our limited foreign aid coffers to prop up a 
government determined to acquire and to sell nuclear weapons.
  As I mentioned previously, this is hardly the first time we have 
debated the administration's flawed policy on the peninsula. We have 
had years of compromise, capitulation, and concessions from the 
administration. The North blusters and blackmails; there is tough talk 
followed by no action or, worse still, concessions for more fuel and 
food.
  Thirty-six thousand American troops standing guard in the South 
deserve more than that. Once and for all, it should be absolutely clear 
to the North, we will not pay their way to test, deploy, or sell 
nuclear weapons. We will not pay for the appearance or possibility of 
compliance with the Agreed Framework.
  Again, I commend the Senator from Texas. I think her amendment is 
right on the mark and I congratulate her for it.
  Mrs. HUTCHISON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas.
  Mrs. HUTCHISON. I want to thank the Senator from Kentucky, who is a 
cosponsor of this second-degree amendment, for helping us with it 
because obviously, when the committee was putting together its bill, we 
did not know of North Korea's provocative actions of last week.
  I think it is imperative that the Senate act very decisively to say 
that we are not going to continue to appease a country that is clearly 
selling technology to rogue nations that would harm our own allies and, 
furthermore, is breaking an agreement they made with us in return for 
which we would have assisted the people of North Korea in developing 
peaceful energy sources.
  I hope, with all my heart, that North Korea will back up, that it 
will keep its commitment to stop building a nuclear weapon. I hope that 
it will step back and stop selling ballistic missile technology to 
rogue nations. Then it would be eligible for the money that has been 
fenced in this bill.
  But until they do, it would be highly irresponsible for the U.S. 
Senate to go forward with a no-strings-attached gift of 35 million 
taxpayer dollars that are against the interests of the United States 
and all of our allies.
  Thank you, Mr. President. And I thank the Senator from Kentucky for 
his leadership on this issue.
  Mr. McCONNELL. Mr. President, I thank again the Senator from Texas 
and ask unanimous consent that her amendment be temporarily laid aside.
  I see the Senator from Arizona is here. We have a time agreement on 
his amendment. I yield the floor.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
laid aside. The Senator from Arizona is recognized.
  Mr. KYL. Thank you.


                           Amendment No. 3522

  Mr. KYL. Mr. President, I call up amendment No. 3522. I inquire of 
the Chair as to what the time agreement is.
  The PRESIDING OFFICER. The Senator has that right. The time limit is 
40 minutes equally divided.
  Mr. KYL. Thank you, Mr. President.
  Mr. President, the Senate passed the supplemental appropriations bill 
last March. Included in that bill was a provision to provide $18 
billion in additional budget authority for the International Monetary 
Fund. That funding, as we all know, was eventually stripped out of the 
supplemental conference report because Members could not come to an 
agreement on the funding or on reforms for the IMF.
  Today, of course, we are back debating the foreign operations bill. 
Obviously, we are trying to develop some kind of consensus in going 
forward for the funding of the IMF. Unfortunately, in my view, this 
bill that we are debating right now does not go far enough to move the 
IMF toward reform, including in the areas of transparency and 
bankruptcy reform. It includes conditions much less restrictive than 
those voted out of the Appropriations Committee earlier this year.
  I support the restrictions that were developed by the Appropriations 
Committee. As a result, I am offering this amendment today which, while 
not going as far as I would like, would move the IMF closer to reform 
than the current provisions of the fiscal year 1999 foreign operations 
bill will do.
  As I said, when the Senate debated IMF reform in March, the full 
Senate Appropriations Committee approved, by a vote of 26-2, a series 
of reforms affecting IMF funding. They were not as strong as some of us 
would have liked. But instead of strengthening the provisions on the 
Senate floor, an amendment was offered to weaken them, and that 
amendment passed 84-16.
  Those of us who voted against the weakening amendment in March are 
here today again to request that the Senate vote for this amendment and 
require the IMF and its recipients to use the $18 billion in U.S. 
taxpayer-contributed funds in more open and responsible ways.
  The Kyl amendment changes only one of the reform sections included in 
the foreign operations bill. It does not prevent the United States from 
releasing funding to the IMF. The current IMF language requires the G-7 
nations to publicly agree to seek policies that provide for new 
conditions. But seeking policies is not the same as requiring policies.
  So my provision simply returns to the Senate Appropriations 
Committee-passed language and states that:


[[Page S9827]]


       None of the funds appropriated in this Act under the 
     heading ``United States Quota, International Monetary Fund'' 
     may be obligated, transferred or made available to the 
     International Monetary Fund until 30 days after the Secretary 
     of the Treasury certifies that the Board of Executive 
     Directors of the Fund have agreed by resolution that stand-by 
     agreements or other arrangements regarding the use of Fund 
     resources shall include provisions requiring the borrower [to 
     agree to a set of conditions].

  Passing an amendment that requires a commitment from the board of 
directors of the Fund to pass such a resolution makes more sense than 
just asking for a public commitment to such reforms. The IMF, by its 
nature, is often the antithesis of free market reform. IMF intervention 
often rewards negligent bankers or corrupt or incompetent governments 
and often does not reward individual countries that work through the 
private sector to get through tough times.
  So my amendment, which does not cut off funding for the IMF, would 
nevertheless return to a stricter version of reforms than is currently 
included in this bill. There is a case that some have made that IMF 
funding should be eliminated altogether. I will not try to make that 
case today, although people like Lawrence Lindsay and Allan Metzer of 
AEI, for example, have made a strong argument that much of the money we 
have contributed to the IMF has been wasted. It is true that no money 
has been lost yet, although Lindsay suggests that the IMF is like the 
FDIC in the late 1970s or early 1980s. At that time, the taxpayers had 
not lost any money in the FDIC either.
  If the world is ready to topple into an economic abyss, there 
probably is not much the IMF could do about it in any event. Its $23 
billion in lending in 1997 was about a tenth of the private capital 
flow into developing countries alone. And in any event, there is 
evidence that suggests that the IMF has actually been a barrier to 
economic growth in poorer countries.
  According to Johns Hopkins University economist Steve Hanke, few 
nations actually graduate from IMF emergency loans. Many stay on the 
dole for years on end. One study found of 137 mostly developing 
countries from 1965 to 1995, less than a third graduated from IMF loan 
programs. The Heritage Foundation found that of IMF borrowers from 1965 
to 1995, no more than half were better off than when they started the 
loan programs. Almost all were actually poorer. Almost all were deeper 
in debt.
  So what we are trying to do with this amendment is to restore some of 
the conditions that will ensure that the money American taxpayers have 
worked hard to earn will actually serve a useful and productive purpose 
if contributed to the IMF.
  Clearly, the policies promoted by the IMF are important. Whether debt 
incurred by other nations as a result of IMF intervention is good or 
bad depends on the uses to which that debt is put. If it increases 
productive capital, income increases and the debt can be serviced from 
the increased wealth that is generated. If, however, borrowing is used 
to hold the exchange rate steady so private lenders can flee, there are 
no productive assets from which later interest payments can be made.
  Unfortunately, it is the latter type of policies that are typically 
promoted by the IMF. The IMF promotes trade barriers in order to cut 
current account deficits. The IMF promotes tax increases to reduce 
budget deficits, and currency devaluations to adjust exchange rates. 
The IMF long ago admitted it was not committed to free markets, 
explaining that ``programs have accommodated such nonmarket devices as 
production controls, administered prices, and subsidies.'' These are 
the kind of policies that often bring economies to a halt.
  The better policy is to promote fair and reliable bankruptcy laws, 
transparent and internationally accepted accounting procedures, minimal 
government interference in the allocation of credit, prudent oversight 
of banking systems, and competition among foreign and domestic banking 
organizations. All of these are the kind of reforms that we all agree 
should be pursued.
  But that is as far as the foreign operations bill before us goes. 
Basically, it just says this is what we ought to be doing. It does not 
require the implementation of these reforms in the countries that are 
going to receive the IMF loans. As a result, it does nothing to assure 
that that money will not be wasted. By contrast, my amendment would 
ensure that reforms are accomplished before taxpayer dollars are 
allocated.
  Why is it important to ensure that reform is accomplished first? In 
some cases, IMF programs have effectively subsidized very inefficient 
and even corrupt political systems. Former Secretary of State George 
Shultz suggested in testimony before the Joint Economic Committee 
earlier this year that creditors must be held accountable for their 
mistakes. Taxpayers should not assume the risk of bad decisions or 
those bad decisions will continue to be made.
  That is the sad record, unfortunately, of many of the countries that 
have received these IMF loans in the past.
  Bailouts effectively shield investors and politicians from the 
consequences of their poor economic decisions by ``socializing'' the 
risks and reducing the cost to failure associated with investment. 
Risks are socialized because everyone ends up paying for an individual 
investors' errors; the costs of failure are reduced because either 
directly or indirectly the IMF can compensate investors when their 
investments fail. IMF bailouts, as they are currently constructed, 
encourage investors to engage in activity they would likely avoid if 
there were no IMF to shield them from actions. Investors, not people or 
countries, are being bailed out. We should understand that when we talk 
about bailing out a country, that is really inaccurate. We are talking 
about bailing out investors. In the so-called Mexican bailout in 1995, 
the Mexican people suffered a sharp decline in the standard of living 
there, and there were large increases in unemployment and an overnight 
erosion of the savings. Investors, however, escaped with minimal 
losses.
  Lawrence Lindsay contends IMF bailouts probably make systematic 
contagion more likely in the long run and suggests that the best 
protection we have against bankers overextending themselves to 
imprudent borrowers is the bankers' fear of losing money.
  The amendment I am presenting today is an effort to ensure that these 
poor lending practices are not continuing. Virtually all of us have 
agreed that the IMF needs reform. In fact, we put that reform in the 
amendment that was adopted earlier this year to the supplemental 
appropriations bill. But that amendment rejected the Senate 
appropriations decision, which was made on a 26-2 vote, to have really 
meaningful reforms required--not simply pursued. That is the 
difference--do you try to pursue it or do you guarantee it before you 
give this taxpayer money.
  Let me close with the final thought about what is not at issue 
because of our very real concern about the state of the Russian economy 
now. All of the experts agree that assistance to Russia will only work 
if Russia makes fundamental reforms, the kind of things that would be 
required under my amendment.
  For example, the President in Moscow yesterday urged the Russians--
quoting from a Washington Times story of today--to follow free market 
principles.

  Here is what the President said:

       Investors move in the direction of openness, fairness and 
     freedom . . . you have to play by the rules.

  That is precisely what would be required by my amendment.
  The President said he would not give ``any fresh money unless it 
moves decisively toward reform.''
  The article points out that IMF detractors are not proposing to 
withdraw money that has already been committed. I want to make that 
point crystal clear. We are not talking about not loaning money to the 
Russians, money that has already been committed. We are saying the same 
thing the President of the United States is telling them: You have to 
make a commitment to the fundamental reforms, otherwise the money is 
wasted and we both lose.
  Mr. President, the same thing could be said of other countries in the 
world. These countries are not going to be denied loans if they 
establish the kind of rules of law required for a functioning

[[Page S9828]]

economy. If they don't, all the money in the world will not help them 
anyway. That is true for Russia, as well as it is for the other 
countries that might be receiving IMF loans.
  In conclusion, my amendment simply restores the original committee 
language setting forth reasonable conditions for IMF loans. If we are 
unwilling to do this, then some will suggest that we are simply 
committing $18 billion in taxpayer funds to feel good about having done 
something to help countries having economic difficulties. Let's ensure 
that in approving our contributions to the IMF, that that money will be 
effectively spent.
  I reserve the balance of my time.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. HAGEL. Mr. President, who controls time on the Kyl amendment?
  The PRESIDING OFFICER. Senator Kyl is in charge of 20 minutes. Do you 
rise in opposition or in support?
  Mr. McCONNELL. Maybe it was not clear in the unanimous consent 
agreement, but it was my understanding that Senator Hagel would control 
the time in opposition to the amendment.
  If not, I ask unanimous consent that Senator Hagel control the time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Nebraska is recognized in opposition.
  Mr. HAGEL. Mr. President, I yield myself such time that I will need 
to complete my statement.
  Mr. President, I rise in opposition to the amendment of my friend, 
Senator Kyl. Six months ago this body spoke very clearly and strongly 
on IMF. We voted 84-16 to approve a strong IMF package that has two 
parts: Strong and achievable IMF reforms and the full $17.9 billion 
funding for America's IMF contribution.
  The IMF reform and funding language in the foreign operations bill 
today is identical to the reform package of the Senate-passed bill 6 
months ago. We should not now start second-guessing ourselves and 
undoing what we have done. We should stand by the solid reforms and the 
funding package that won 84 votes in March.
  The Kyl amendment would replace that carefully crafted language with 
a different and untested mechanism for reform, a mechanism that we 
considered but abandoned on the Senate floor early in our negotiation 6 
months ago. I might add, Mr. President, this was after very long and 
detailed consultations with the Federal Reserve Chairman, Alan 
Greenspan, the Treasury Secretary, Bob Rubin, and many others.
  Along with Senator McConnell, Appropriations Chairman Stevens, 
Senator Gramm, Senator Biden and others, I helped craft the reforms 
that passed the Senate. We negotiated the reforms carefully, with the 
involvement of many Senators. It took weeks, many weeks. We worked word 
by word, line by line to present something to this body that was 
achievable, workable. The package we passed in March and includes 
meaningful IMF reforms that are also achievable.
  We recognize that America alone cannot shape the world economy. So we 
required in our reform language the G-7 countries to come together to 
help reform the IMF. These reforms consist of the following: Reforms so 
IMF will require recipient countries to live up to their international 
trade obligations; reform so IMF will require recipient countries to 
eliminate crony capitalism and clean up corruption; reforms that will 
improve transparency of IMF operations, and to encourage bankruptcy law 
reforms in recipient countries.
  Mr. President, these are not funny reforms. These are not patsy, weak 
reforms. The new IMF funding will go forward, but not until the 
Treasury Department succeeds in getting these reforms accomplished at 
the IMF. This is written into the reform legislation. These reforms are 
real and they will make a real difference at the IMF.
  It would be absolutely irresponsible for Congress to shrug off the 
IMF as economies around the globe falter. We should not go backwards. 
America must continue to lead. The Senate must continue to lead. Global 
events, such as we have talked about today, yesterday, and will 
continue to talk about, have demonstrated even more forcefully the need 
for the U.S. to support the IMF.
  Mr. President, the IMF is not perfect. It is not without flaws. It 
needs reform; indeed it needs reform. But, my goodness, at a time when 
we have economic chaos around the globe, we need many confidence 
builders, and the IMF institution in itself will not change this, but 
it will help. If we didn't have an IMF, what would we have? Would the 
United States want to step up to this alone? Would France or Germany? 
The second largest economy in the world--Japan--is in economic chaos, 
with no banking structure. We need some type of a mechanism to help 
address these issues. Asia was burning when the Senate acted 6 months 
ago. Now that fire has engulfed Russia and is spreading to Latin 
America. Our own economy is feeling this heat.
  Mr. President, markets respond to confidence. Markets respond to 
confidence. Our debates today about IMF and other economic issues are 
not just about numbers, or about the arcane comparisons of one reform 
versus another reform. No, these debates are real and they are about 
sending a signal around the world. Is America engaged? Will we continue 
to lead? Or will America pull back? America's interests require us to 
help shore up confidence around the world.
  This debate is about America's interests. This is not esoteric. This 
is about America's interests, America's economic stability and global 
stability. The U.S. suffered a record trade deficit in May, the fourth 
consecutive month. Exports hit their lowest point in 15 months. Over 
the first 5 months of this year, America's trade deficit increased 
nearly 40 percent from the same period last year. Why is that? Many 
parts of America's economy are already feeling the pain of the 
spreading Asian ``flu.'' Wall Street is on a roller coaster ride. The 
farm economy is suffering, largely due to the loss of overseas markets. 
Corn and soybean exports are down more than 50 percent from 2 years 
ago. Wheat exports are down more than 30 percent.
  These economic problems will not be limited to American farmers and 
ranchers, and not even to America's investors. They will ripple through 
the economies of the Midwest and the rest of this Nation. Events around 
the world will continue to affect our economy here at home and global 
stability. When you have global instability, Mr. President, it goes far 
beyond economic instability. Global instability affects everything--our 
national defense, our interests and our economy. The situation in Japan 
is very dangerous. Many economies in Asia are clinging to Japan for 
support. Japan was a direct contributor to the financial package to 
Russia. I don't think I need to spell out to colleagues the disastrous 
effect of a significant downturn in the Japanese economy. Let me point 
out a headline from today's Washington Times: ``Tokyo's Troubles 
Overshadow Russia's: With Bad Economic Decisions, Japan Could Start a 
Worldwide Recession.''
  This is not the time to lose our perspective and diddle and dawdle--
reform versus technicality and reform versus technicality. This is the 
time for America to do the right thing, to step up and lead the world, 
help the IMF and insert the reforms that we passed by 84 votes last 
March.
  I want to close, Mr. President, by quoting the last paragraph of a 
letter from the U.S. Treasury Secretary, Bob Rubin, which he sent to 
the congressional leadership yesterday. He talks about the IMF. He 
talks about how broadly the IMF plays a role across the global economic 
scene:

       More broadly, a fully equipped IMF is in the economic 
     interest of our important trading partners throughout the 
     world. While we agree that the IMF needs reform, and are 
     committed to continuing our strong efforts to achieve 
     meaningful change, it remains an effective and indispensable 
     tool in the management of the international economy. I 
     respectfully urge you and your colleagues to act with the 
     utmost dispatch to pass this legislation.

  Mr. President, the Senate should stand by the leadership that we 
provided on this issue in March. I respectfully suggest that my 
colleagues look at this Kyl amendment and defeat this Kyl amendment. 
Mr. President, I end by saying that when the time on the debate on this 
issue expires, I intend to make a motion to table the Kyl amendment.

  I yield the floor.
  The PRESIDING OFFICER. Who yields time?

[[Page S9829]]

  Mr. HAGEL. Mr. President, I yield 3 minutes to the distinguished 
chairman of the Senate Appropriations Committee, the Senator from 
Alaska.
  The PRESIDING OFFICER. The Senator from Alaska is recognized.
  Mr. STEVENS. I thank the Chair. I came, as a matter of fact, to read 
the letter he has just read. So I will just be very brief.
  I ask unanimous consent that that letter be printed in the Record 
following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. STEVENS. Mr. President, very clearly, this is a matter of the 
image of the United States in the total global economics of today. If 
we retreat from the vote that we achieved last spring, I think we will 
send a terrible message to the world at a time when we should be viewed 
as a leader in trying to restore the economies of the world.
  So I hope this Senate will vote once again to support, providing the 
additional funding for the IMF that it needs, and that we will insist 
that we achieve the agreement of the House on this provision that is in 
the bill.
  This is not the time for us to change our minds. This is a time to 
show the strong will of the Senate, that the United States remains 
clear in its objectives to assure that there are mechanisms to deal 
with international crises such as so many of our global trading 
partners face today.
  I thank the Senator from Nebraska for his leadership. As a matter of 
fact, I thank all of those who come from the Agriculture Committee; 
they have been very forthright and direct in supporting the proper 
position on the IMF. I thank the Chair and the Senator from Nebraska.

                               Exhibit 1


                                   Department of the Treasury,

                                Washington, DC, September 1, 1998.
     Hon. Trent Lott,
     Majority Leader, U.S. Senate, Washington, DC.
       Dear Mr. Leader: As the 105th Congress returns to complete 
     its business in the few weeks remaining before adjournment, I 
     am writing to urge once again that Congress immediately 
     consider and pass the Administration's request for $18 
     billion in critical funding for the International Monetary 
     Fund (IMF).
       Since late last year, we have been urging action on this 
     priority legislation. Events over the last eight months--not 
     to mention the last few days and weeks--underscore the impact 
     on the U.S. economy of developments abroad, including in Asia 
     and Russia. We simply cannot afford any further delay in 
     providing the IMF with the resources it requires to help 
     contain the threat of further financial and political 
     instability around the world.
       Let me be clear, the fundamentals of the American economy 
     remain sound, with continuing good prospects for strong 
     growth with low inflation, but recent developments testify 
     clearly to the impact of global uncertainty on U.S. financial 
     markets and, ultimately, on our economy. While there has been 
     progress in stabilizing economies in countries such as Korea 
     and Thailand, which are implementing strong IMF programs, we 
     have already seen a decline in US exports to key markets in 
     Asia by over 20 percent through June of this year, amounting 
     to over $22 billion worth of exports to key markets in Asia 
     by over 20 percent through June of this year, amounting to 
     over $22 billion worth of exports on an annualized basis.
       Against this backdrop, it is critical that the United 
     States takes the steps necessary to protect the interests of 
     American workers, businesses, and farmers. More broadly, a 
     fully equipped IMF is in the economic interest of our 
     important trade partners throughout Latin America. While we 
     agree that the IMF needs reform, and are committed to 
     continuing our strong efforts to achieve meaningful change, 
     it remains an effective and indispensable tool in the 
     management of the international economy. I respectfully urge 
     you and your colleagues to act with the utmost dispatch to 
     pass this legislation.
           Sincerely,
                                                  Robert E. Rubin.

  The PRESIDING OFFICER. Who yields time?
  Mr. KYL. Mr. President, I inquire how much time I have?
  The PRESIDING OFFICER. The Senator from Arizona has 9 minutes. The 
Senator from Nebraska has 9 minutes 3 seconds.
  Mr. KYL. Thank you. I doubt that we have to take the full amount of 
time in completing this debate. I want to make one critical point. The 
Senator from Alaska, the chairman of the Appropriations Committee, has 
just made the point that the United States cannot retreat from our 
international obligations or we will be sending a terrible message. I 
want to make it very clear that the Kyl amendment doesn't retreat at 
all. In fact, it moves forward.
  The Kyl amendment simply institutes the language that the chairman of 
the Appropriations Committee supported when the committee voted 21-1 to 
ensure that the money lent by the United States would be effectively 
spent by requiring some conditions that will work.
  Now, what the bill before us does is erase those conditions and put 
in some good-sounding language that isn't going to do the trick. As a 
matter of fact, both the lead editorial in the Wall Street Journal 
today, and a lead op-ed piece by David Malpass, the chief international 
economist at Bear Stearns, make the point that this money will not be 
spent effectively if we continue to follow current practices. As a 
matter of fact, from the latter op-ed piece, ``To avoid accountability, 
the U.S. maintains the facade that the IMF is dealing with the crisis 
and that Japan is to blame for much of it.''
  Are we really going to do something about this crisis? I totally 
agree with my friend from Nebraska, Senator Hagel, on the nature of the 
problem, and I believe that we essentially agree on the solution.
  The only difference is how serious we are about implementing the 
solution. Here is the crux of the debate. Under the bill before us, 
there are two key phrases about how we are going to implement the 
funding, how we are going to spend the money and implement the reforms 
that we all agree to.
  One, we are going to seek to implement these reforms--the language is 
on line 2 of page 120: ``and will seek to implement.'' And then down on 
line 19, ``The United States shall exert its influence with the Fund 
and its members to encourage'' these reforms. We are going to ``seek'' 
and we are going to try to ``encourage.''
  That is not going to work. It is the same old thing.
  What the Appropriations Committee voted 26 to 2 to do was to actually 
include the reforms. The language in my amendment says ``shall 
include.''
  Those are the two operative phrases. That is the difference we are 
debating about the reforms we all agree to. The question is, Are we 
going to encourage these other countries that we lend the money to, to 
effect the reforms, or are we going to require that they shall be 
included in the agreement that we enter into with these countries?
  All of us agree about the nature of the problem. We are all just as 
committed to an international economy. We all agree on the solution--
the bankruptcy reforms, the transparency. There is no disagreement 
about that. The only disagreement is, are we going to require it--the 
Kyl amendment that the Appropriations Committee voted 26 to 2 to do--or 
are we going to seek to encourage people to do these things?
  I submit that if all we are going to do is seek to encourage, we are 
going to end up in the same place as we have been, with countries 
spiraling downward and downward and downward.
  The President of the United States had it right when he said in 
Russia yesterday, to get your fair share of investment, you have to 
play by the rules. If that is his opinion--and I know it is, and I 
agree with it--``have to play by the rules'' is a requirement. It is 
not something we are just asking them to do; it is something we are 
going to require them to do. It is our money we are lending to them for 
the good of us all. U.S. taxpayers have some right to insist that it is 
going to be spent wisely. We all agree that it hasn't worked in the 
past. The President is saying to the Russians: What you have been doing 
has not worked. You have to play by the rules.
  The Kyl amendment says that the agreements shall require that the 
reforms be included. The current bill says we will seek to implement 
and will exert our influence to encourage.
  On the one hand, you have a requirement; on the other hand, you have 
the same loose language that will allow these countries to continue to 
slide into economic despair because they don't have the courage or the 
ability to adopt the reforms, and they are not being required to do so 
by the Fund that is lending them the money.
  That is why I urge the adoption of the original committee language 
which will be much stronger and will guarantee that this money will be 
spent wisely.
  I reserve the remainder of my time.

[[Page S9830]]

  Mr. BIDEN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. BIDEN. I ask my friend if he would be willing--does he have any 
time to yield?
  Mr. HAGEL. We have 9 minutes. I would be very happy to yield time. 
How much time?
  Mr. BIDEN. I didn't want to take all that time. Will the Senator 
yield me 4 minutes?
  Mr. HAGEL. All right. Thank you. I yield the distinguished Senator 
from Delaware 4 minutes.
  Mr. BIDEN. Mr. President, the Senate has already spoken on the 
important question of U.S. support for a stronger International 
Monetary Fund.
  Following the essential leadership of Senator Stevens, along with my 
colleague on the foreign relations committee, Senator Hagel, we went on 
record in March, by vote of 84 to 16, to provide full funding for U.S. 
participation in the IMF.
  At that time, we also declined to place unworkable conditions on that 
funding.
  As international lender of last resort, the IMF is right now part of 
our last line of defense against an economic chain reaction that could 
turn the financial turmoil on the front pages of today's newspapers 
into a real global crisis.
  Mr. President, as I have said before, the IMF is certainly not a 
perfect institution. But I have not stopped going to my doctor because 
I think the health care system needs reform.
  The Kyl amendment guarantees indefinite delay in the availability of 
the U.S. contribution to the basic reserves of the IMF, and in turn 
throws into doubt the participation of other nations who look to us for 
leadership.
  This amendment would require that the IMF change its basic rules for 
providing emergency financial support--essentially a change in its 
bylaws--before the U.S. contribution can go forward.
  Those rule changes themselves may well make sense--in fact, the IMF 
already makes such conditions part of the requirements for its loans.
  But the requirement that the IMF must first formally adopt reforms in 
the conditions on countries that receive its funds--conditions, I might 
add, that we here in the United States could not meet in every case 
outselves--is a formula for deadlock and indefinite delay.
  This is the opposite what is required of us at this crucial period.
  As the leading economy in the world, we have a special obligation to 
support this international instutution--that we created, I might add--
charged with maintaining stability in international financial markets.
  The amendment now before us is a formula for delay, at the very time 
when we must act to restore confidence so lacking those markets.
  I urge my colleagues to vote against the Kyl amendment.
  Mr. President, one of the most able Senators in terms of his 
willingness to reason on this floor is the Senator from Arizona, 
Senator Kyl.
  I listened to what he just said about his amendment. He says: Look, 
all we are doing is going to require the IMF to do what the President 
says they should have to do anyway before we lend money. By 
implication, don't throw good money after bad, and so on and so forth.
  What we are doing here is, if we adopt the Kyl amendment, it 
guarantees, in my view, an indefinite delay in the ability of the U.S. 
contribution to the basic reserve of the IMF and throws in doubt the 
participation of other nations who look to us for leadership. Right now 
it is a really simple deal. If we come up with our $18 billion 
commitment in total, roughly, what happens is, we control the outcome. 
No loan can be made. It needs an 85 percent vote. I think we have 18 
percent control.
  Why go ahead and throw sand in the gears here now knowing that we are 
going to, by fiat, in the minds of other nations, amend the way in 
which the IMF runs now without consultation or agreement by the other 
participants who make up 82 percent of the Fund, guaranteeing that this 
thing comes to a screeching halt?
  If in fact the Senator believes the President is right, then he has 
to assume the President is not going to instruct the U.S. 
representative at the IMF to vote for releasing dollars without the 
commitments being met. But what you do now if you adopt the Kyl 
amendment is as good as not coming up with the $18 billion, because the 
other nations say: Hey, look, you once again are unilaterally changing 
the basic rule for providing emergency support, essentially a change in 
the bylaws of the IMF. Where I come from, that is not how you usually 
get cooperation. You don't unilaterally tell the French and the Brits 
and everyone else this is the way it is going to be. You already have 
that power. You have the power. Without the U.S. vote, nothing goes. 
Bingo. Nothing goes.
  It seems to me the way to do this is, let's deal, as my friend from 
Nebraska has been often the lone voice in pointing out with this 
international financial crisis, and still have a little bit of 
confidence. This isn't going to fix the thing. This is just going to do 
in a shot--like a shot of adrenaline, a shot of confidence, we are 
stepping up to the plate. We are not backing away from an international 
obligation, as we see it, for our own safety's sake.
  Then, if we want to sit down with our partners in the IMF and say, 
``Look, it is time to change the bylaws,'' that is a different deal. 
But let's not do unilaterally what is going to, in my view, in my 
opinion, get a response from the other 82 percent of the voting block 
out there saying, ``Hey, U.S., you don't call it. You don't 
unilaterally change the rules.'' You can in effect unilaterally change 
the rules by voting no. You can sit in those meetings and say, ``Look, 
we ain't voting for this deal unless the following conditions are 
met.''
  I respectfully suggest--and I realize my time is probably up--that we 
should oppose the Kyl amendment.
  I yield the floor.
  Mr. HAGEL. Mr. President, I yield to the Senator from Minnesota 1\1/
2\ minutes.
  The PRESIDING OFFICER. The Senator from Minnesota is recognized for 
1\1/2\ minutes.
  Mr. GRAMS. Thank you very much.
  Mr. President, I rise to respectively oppose the amendment by my 
colleague, Senator Kyl. As has been noted before, this amendment would 
reverse all of the progress made on the conditions package negotiated 
among many of us when we supported the $18 billion replenishment for 
the IMF on the Supplemental earlier this year. Senator Kyl's amendment 
includes a negotiating position that was debated, and rejected by 
members of this body. It would, in effect, result in the U.S. share of 
the replenishment being delayed or withheld at a time when IMF 
assistance is needed to help us shore up economies in crisis, now 
expanding well beyond Asia. We need to stabilize and improve these 
markets for our farmers and exporters, whose losses have begun to 
resonate, most recently in our own stock market. As was noted before, 
our agriculture exports are down 30 percent since the beginning of the 
year. This is not the time to play games with IMF funding.
  I believe few of us want to reopen these sensitive negotiations. I 
urge my colleagues to stick to the agreement we passed earlier. It was 
a good one that will result in progress toward improving the way the 
IMF operates. This is not the time for the Senate to reverse its 
leadership on IMF funding. We should stay the course--and urge our 
colleagues in the House and in the White House to do the same.
  I urge my colleagues to oppose the Kyl amendment.
  I yield the remaining time.
  Mr. MACK. Mr. President, I rise to support the proposed amendment and 
urge my colleagues to vote against tabling it.
  The current world economic crises and the International Monetary 
Fund's request for financial replenishment offer us a chance to re-
examine the United States' role in the world economy. If the U.S. is 
going to participate in institutions that influence economic policy 
around the world, then we must exert our influence in strong support of 
sound economic policies, not just rubber-stamp whatever plans 
international bureaucrats cook up. It does us no good to stand idly by 
and let the IMF squander our resources on ill-conceived rescue plans, 
such as the tax-hike package recently foisted on Russia.
  What should the IMF be promoting? The same policies that we support 
here

[[Page S9831]]

in the United States. To name just a few, these include: a monetary 
policy dedicated to long-term price stability, a sensible tax system 
that encourages people to work, save and invest, free and open markets 
and sound banking systems that use consistent accounting methods, have 
transparent balance sheets and lend based on market forces, not 
political pressure.
  The best way to start down this path is to set strong conditions on 
the IMF. This amendment moves us in this direction. In particular, it 
would promote free trade, market-based lending and the fair treatment 
of international investors. I urge my colleagues to vote against 
tabling it.
  Mr. HAGEL. Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. The Senator from Nebraska has 3 minutes 12 
seconds.
  Mr. HAGEL. Mr. President, I yield to my colleague from Kansas 2\1/2\ 
minutes.
  The PRESIDING OFFICER. The Senator from Kansas is recognized for 2\1/
2\ minutes.
  Mr. ROBERTS. Mr. President, I want to refer to the statement made by 
my distinguished colleague and friend from Arizona about the 21-1 vote 
that happened in committee. I must say that it is my observation over a 
weekend of deliberations things were changed in that particular bill 
that we needed to address, and we did. And so the Senate spoke 84 to 16 
to endorse the reforms, and they are not passive reforms, that were 
worked on by a whole group of Senators--Senator Grams, myself, Senator 
Hagel, Senator Biden, Senator McConnell, and Senator Stevens.
  Basically, what are we talking about here? We require consensus in 
regard to achieving these reforms not only with the G-7 nations but the 
37 other nations involved. This isn't just a U.S. IMF program. Under 
the Kyl amendment, he says that we have to micromanage basically from 
Congress, from the U.S. standpoint something called a board of 
executive directors. That process is very slow. We don't have the time 
in regard to that, with the global contagion, maybe the global 
pneumonia, that is occurring right now. So the Senate has spoken 84 to 
16.
  I would point out that the seriousness of this is extremely critical. 
The Senator from Nebraska has talked about what is happening in 
agriculture. It is happening in every segment in regard to the economy, 
not only in this country but all over the world.
  We have a package. We have been meeting here with other Senators 
across the aisle for normal trading status with China, with fast-track 
legislation, with sanctions reform and now IMF. If this amendment 
passes, it is a killer amendment. I don't mean to perjure the 
amendment, but it is a killer amendment. A, it will kill IMF, and, B, 
IMF cannot work under the circumstances of this amendment. And the 
testimony to that certainly comes from Chairman Greenspan and many 
others.
  And so I urge the Senate to stick by that early vote. Again, I would 
mention it was, what, 86 to 14? No, 84 to 16. Well, there were two that 
were off base, but we will get it back.
  I yield back the remainder of my time.
  Mr. HAGEL. Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. The Senator has 45 seconds.
  Mr. HAGEL. I ask that the remainder of my time be allotted to the 
distinguished Senator from Maryland.
  The PRESIDING OFFICER. The Senator from Maryland is recognized for 45 
seconds.
  Mr. SARBANES. I thank the Senator.
  Mr. President, I just want to follow along with what the able Senator 
from Kansas has said. Adoption of this amendment would prevent the 
United States from consenting to a quota increase until all of these 
conditions had been met. These conditions cannot be met immediately. 
That is a guaranteed thing. It means that the United States would, in 
effect, not be carrying through a quota increase.
  We are facing a very serious financial crisis worldwide. One of the 
instruments we have to deal with that is the IMF. We need to pass this 
quota increase, and we need to do it immediately, and we need to 
address this situation. If the IMF is perceived, as it now is, not to 
have the resources with which to deal with the international crisis, it 
will only worsen and intensify the crisis. If anyone wants to ask what 
is the one thing we can do to try to address this crisis, it is to pass 
this legislation without this amendment. I urge my colleagues to oppose 
the amendment.
  The PRESIDING OFFICER. The time has expired for the Senator from 
Nebraska, and the Senator from Arizona has 3 minutes 48 seconds.
  Mr. KYL. I thank the Chair. I won't use all of that time. In my 
remaining time, I, first of all, ask unanimous consent to have printed 
in the Record the two articles from the Wall Street Journal to which I 
alluded earlier.
  There being no objection, the articles were ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Sept. 2, 1998]

                U.S. Needs to Promote Currency Stability

                           (By David Malpass)

       The ruble devaluation has plunged Russia into political and 
     economic upheaval. Already the financial fallout has spread 
     beyond its borders, helping to knock $1 trillion off the 
     value of U.S. equities alone and worsening the now-global 
     currency crisis. Expressed in U.S. dollars, world output will 
     fall more than 2% in 1998, pressuring debtors and hurting 
     corporate earnings world-wide. As we enter the second year of 
     the ``Asian'' crisis, the risk is clear: Countries everywhere 
     that borrowed dollars or produced commodities could collapse.
       The U.S. has the power to stop the contagion and start the 
     recovery, but has not used it. The International Monetary 
     Fund has only added to the problem. Working in tandem, the 
     U.S. and the IMF have lurched from one bad policy idea to 
     another, with no vision, not even any apparent comprehension 
     of the severity of the crisis.


                             Russia Beware

       Their initial approach to Thailand's crisis last year was 
     to promote a limited devaluation, advise Bangkok to raise 
     taxes, and hope for the best--a strategy that had disastrous 
     results in Mexico in 1994. Thailand's per capita income has 
     fallen to $1,800 this year from $3,000 in 1996, and the 
     country is now on its fifth IMF program revision.
       During South Korea's December crisis, the policy evolved 
     into a massive bailout by the U.S., the IMF and international 
     banks that had lent Korea too much money. The Korea approach 
     included a devaluation, a floating exchange rate backed by 
     impossibly high interest rates, rosy IMF economic forecasts, 
     the false hope of export-led growth and a heavy dose of 
     patience. Result: South Korea's economy will shrink to $280 
     billion this year from $485 billion in 1996, a 42% 
     contraction. The IMF has revised its forecast for Korea's 
     1998 growth rate, down to minus 4% in July from plus 2.5% in 
     January. These figures quantify the failure of its floating 
     exchange rate austerity policies. Russia beware.
       By the time the devaluation scythe pointed toward Russia 
     this June, a third U.S. policy had emerged. In a telephone 
     conversation on July 10, Presidents Boris Yeltsin and Bill 
     Clinton agreed on a plan to bail Russia out, this time before 
     the devaluation. However, no measures were included to anchor 
     the ruble. All Russia got was another IMF austerity program--
     a Russian commitment to shrink the economy further by 
     squeezing taxes out of the energy companies, the country's 
     lifeblood. Result: capital flight, a devastating betrayal of 
     the ruble, a standstill on debt payments, and the likelihood 
     of a cold winter for Russians as energy companies prepare to 
     cut off cities and provinces that can't pay their bills.
       Throughout it all, the U.S. has had no policy that would 
     deal with the heart of the global currency problem: a strong 
     dollar and a cycle of devaluations. The current Band-Aid 
     approach includes the following elements: Until further 
     notice, all developing countries are to keep interest rates 
     dramatically higher than they can afford, spreading recession 
     across the developing world. Economies that link their 
     currencies to the U.S. dollar--important ones such as 
     Argentina, Brazil, China and Hong Kong--get no clear guidance 
     on the future value of the greenback. To avoid 
     accountability, the U.S. maintains the facade that the IMF is 
     dealing with the crisis and that Japan is to blame for much 
     of it. The U.S. encourages countries to enact vague and 
     painful ``reforms,'' never mentioning or forcing the one 
     reform that matters most--a policy of currency stability.

[[Page S9832]]

       What, if anything, can the U.S. government do to stop the 
     contagion? First, even if it won't cut interest rates, it can 
     state unequivocally that Washington wants the value of the 
     dollar to be stable and will place a high priority on this 
     responsibility. Simply changing from the current ``strong 
     dollar'' policy to a ``stable dollar'' policy would allow 
     gold and commodity prices to recover moderately from their 
     current deflation-spooked levels and end the talk of world 
     deflation.
       The U.S. should then begin to promote stable money for 
     developing countries at the Group of Seven, the IMF, the 
     World Bank and elsewhere. Consideration should be given to 
     transparent price-rule monetary policies, currency boards, 
     dollarization, currency unions and other techniques that have 
     dependably created growth. Such an effort alone would lift 
     financial markets in many developing countries by 30% or more 
     in a matter of days. Public statements and actions on 
     currencies matter a lot. Across most of the world, financial 
     markets bottomed on June 17 at the exact minute the U.S. 
     intervened to stop the Japanese yen's free-fall. Over the 
     next four weeks, equity markets across the industrialized 
     world hit record highs on the hope that the U.S. cared about 
     currencies and wanted the yen, the Chinese renminbi and the 
     Russian ruble to be stable.
       The correction in world financial markets began in mid-July 
     when it became clear that America didn't intend to follow 
     through. The U.S. gave no sign that the dollar would stop 
     strengthening, further driving down the dollar price of gold 
     and oil. Washington also offered no supportive comments on 
     the renminbi or the yen, contributing to speculative selling. 
     The U.S. declined to make even a simple statement of the 
     obvious--that a Hong Kong devaluation would destroy Hong Kong 
     as a world financial center and was unthinkable. And by July 
     21, details on Russia's IMF program came out showing just 
     another failed austerity package.
       As for Russia, now that it has embarked on the road of 
     devaluation, Moscow should think of how to lessen the blow. 
     There are ways to do this.
       First, Russia should announce a monetary program aimed 
     explicitly at limiting the devaluation and providing future 
     stability for the ruble. It should also use its leverage with 
     the U.S. to fight the IMF penchant for free-floating exchange 
     rates and private-sector austerity. Russia's formal Aug. 17 
     statement was an IMF recipe for disaster. It promised a 
     policy of balanced budgets (meaningless during a recession), 
     high interest rates to fight inflation (inflation is a 
     currency phenomenon, not an interest-rate one) and a floating 
     ruble defined by market prices (meaning it will sink due to 
     neglect). The IMF statement after the devaluation made not 
     one mention of the ruble, complimented Russia on its 
     satisfactory economic progress and promised more funds if 
     Russia carried out its IMF program. These are the same IMF 
     policies that caused the depression in Asia, and prolonged 
     the lost decade in Latin America in the 1980s.
       A new, credible monetary policy would entice capital back 
     into Russia, and the country could then begin to treat its 
     debt crisis with economic growth rather than default, Russia 
     and the world should agree that a free-floating exchange rate 
     is an unworkable policy for the ruble and would lead Russia 
     down the path Indonesia followed.


                           devaluation damage

       When exchange rates float after a devaluation, interest 
     rates have to stay impossibly high to compensate for currency 
     uncertainty. Russia should establish a monetary-policy 
     mechanism in which the amount of liquidity in the economy is 
     regulated by the central bank for the primary purpose of 
     keeping the currency stable. Russia could anchor the value of 
     the ruble against gold, the dollar or the euro, and could use 
     a currency board or an automatic price-rule monetary policy. 
     It should immediately legalize the use of foreign currency, 
     as economist Steve Hanke argued on this page last week. At 
     this point in the ruble's collapse, the key aim is to make a 
     dramatic policy change at the central bank to allow the 
     people of Russia a stable currency as they work to salvage 
     the economy.
       Time and again, the U.S. and the IMF have underestimated 
     the importance of currency stability and the damage caused by 
     devaluations. The devaluationists' promise of a quick 
     recovery in Asia has been dashed, but no constructive policy 
     has emerged. Russia now heads down the same path, dragging 
     others with it. The American farm belt feels the consequences 
     when the dollar appreciates and people in Asia buy less 
     wheat. U.S. towns on the Canadian border feel it when 
     Canadians get priced out of U.S. stores. Yet 18 months into 
     the global currency crisis, the world's biggest economic and 
     military power has no whiff of a policy to address it.
                                  ____


                       Interdependence, After All

              (By Michael Camdessus and Lawrence Summers)

       So U.S. stocks could not go ever upward while the rest of 
     the world falls apart. We have interdependence after all, and 
     what the markets' remarkable voltality--plunging 500 one day, 
     rising 288 the next--is telling us is that the world economy 
     has been terribly mismanaged.
       Secretary Robert Rubin dropped by the Treasury press room 
     after the 512-point drop Monday to say that the fundamentals 
     ``are strong due in part to the sound policies we've been 
     following.'' The market is telling us that the market was too 
     high, he suggests, neither he nor the Federal Reserve feels 
     the need to do anything about it, fishing in Alaska was fun, 
     and Congress should pony up the next installment of funding 
     for the International Monetary Fund.
       There is of course a lot to be said for refusing to panic 
     because of a market drop. Stocks will fluctuate as we've seen 
     in recent days and several hundred points aren't what they 
     used to be. But the Dow Jones industrials are still off 
     nearly 16% from their July high. Historically, a plunge in 
     the stock market predicts recession in the real economy only 
     about half the time. In the other half, economic policy 
     makers get the message in time.
       The last market crash in 1987 reflected disturbances in the 
     world financial mechanism, as is so often the case, arguably 
     as far back as 1929, when the issues were international 
     liquidity and impending protectionism. In 1987, the market 
     crashed when Treasury Secretary Baker went on television to 
     argue with the Bundesbank about which side should adjust to 
     keep the mark and dollar in reasonable alignment. The markets 
     stayed sick through year-end, but recovered when the world 
     central banks staged a huge joint intervention showing that 
     international cooperation had been restored. With this timely 
     demonstration, the real economy escaped without damage.
       This time around the international influences are even more 
     palpable. The Russian devaluation, coming as President 
     Yeltsin was losing power and President Clinton was self-
     destructing, was clearly the immediate spark. In and of 
     itself, neither the value of the ruble nor the output of 
     Russia is important to world commerce. But the message was 
     that we are not yet out of the round of competitive 
     devaluation that started a year ago in Thailand. A continuing 
     worldwide cycle of devaluation and a world-wide collapse in 
     liquidity would be a big event indeed, from which the real 
     economy in the U.S. could not be immune.
       The most likely form of panic right now would be for the 
     Congress to yield to Secretary Rubin's entreaties on the IMF 
     funding. The IMF and what it represents is the problem, not 
     the solution. If we were the Congress, there would be no 
     funding for the IMF without a change in management. IMF head 
     Michel Camdessus should be replaced, along with Deputy 
     Treasury Secretary Lawrence Summers, the U.S. point man in 
     international finance. The needed rethinking is impossible so 
     long as they are there to defend the errors that caused the 
     present world-wide mess.
       It is, of course, always true that economies around the 
     world have their own share of mismanagement. Indonesia has 
     been an exemplar of crony capitalism, and Russia has its 
     tycoonocrats instead of the rule of law. Japan ``pricked the 
     bubble'' into its current deflationary impasse--an example 
     U.S. policy makers should heed well. But such problems have 
     persisted for decades; they were pushed over the brink and 
     into crisis by specific policy errors.
       The first of these was the Mexican bailout masterminded by 
     Mr. Summers. The 1994 devaluation was a disaster for Mexico, 
     where workers still have not reclaimed their share of world 
     purchasing power, especially with the peso just now on 
     another sharp decline. Yet the Wall Street lenders and 
     Mexican billionaires did just fine with their tesobonos--
     short-term dollar-denominated Mexican government paper--
     because Mr. Summers arranged to have them bailed out, 
     including interest at risk-screaming rates like 14%. The 
     lesson the markets had to draw was: Wheee! Crossborder loans 
     are a one-way bet. Throw money at the world. Russia, even.
       This enormous escalation in moral hazard was compounded by 
     sheer intellectual error at the IMF, which persisted against 
     all evidence in believing that devaluations can rebalance 
     economies. Devaluations cause inflation, with all of its 
     economic and social dislocation. What's more, devaluations 
     tend to spread as each country feels it has to ``remain 
     competitive'' in international markets. Mr. Camdessus is on 
     record as repeatedly having advised Thailand not to get its 
     banks and property companies under control, but to devalue 
     the baht. When he got his way, the current crisis dawned.
       What is to be done, now that we see even the U.S. cannot 
     escape unscathed? The first priority is to stop the cycle of 
     devaluation somewhere. Unhappily, Hong Kong authorities have 
     been behaving foolishly, pouring monetary reserves into the 
     stock market. But central bank purchases of shares, like 
     purchases of any other asset, inject Hong Kong dollars into 
     the markets; you defend a currency by restricting domestic 
     liquidity, not creating it. Brazil, the key to whether the 
     cycle will spread to Latin America, seems to understand 
     better.
       The Federal Reserve could ease much of this pressure by 
     creating more American dollars. It is certainly true that the 
     Fed should

[[Page S9833]]

     not be using monetary policy to support the stock market at 
     current levels, any more than it should use monetary policy 
     to combat ``irrational exuberance.'' But the case for easing 
     rests on nothing more or less than a commitment to price 
     stability, since Alan Greenspan's own advance indicators of 
     the price level--foreign exchange, gold and the yield curve--
     are all signaling deflation ahead. The demand for dollars is 
     clearly on the rise, and Mr. Greenspan should accommodate it, 
     rather than restricting the supply of dollars to keep short-
     term interest rates from falling as the market drives long 
     rates down.
       The saving grace of market drops is that they provide time 
     for policy to adjust before the real economy is affected. But 
     around the world ordinary producers and consumers are already 
     suffering, and trouble lies ahead in the U.S. as well if the 
     Treasury, Fed and IMF fail to use this time to get 
     international financial management back on an even keel.

  Mr. KYL. Secondly, Mr. President, I was just advised of an error, and 
I appreciate being advised of that, on line 1 of my amendment. Instead 
of ``line 1,'' it should read ``line 19''--beginning on page 119, line 
19 of the bill. I ask unanimous consent to make that change in my 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KYL. I also ask for the yeas and nays on the amendment, Mr. 
President.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  Mr. KYL. I thank the Chair. I will just conclude with this point.
  The distinguished Senator from Delaware, for whom I have great 
admiration, made the point that the President may instruct our 
delegates to seek these reforms and, indeed, he may but we do not 
currently have the means to insist on them. My amendment would change 
that.
  The distinguished Senator from Kansas made the point that the reforms 
in the current bill are not patsy reforms, and, indeed, he is correct 
in that. As I said, we essentially all agree on the reforms. The only 
difference is whether they are going to be urged upon the nations to 
which the money is lent or they are going to be imposed as requirements 
on the lending of the money. That is what this amendment boils down to. 
Do we ensure that the reforms are included by requiring it, or do we 
simply seek to include them and merely encourage the borrowers to 
engage in the reforms that we all support?
  I think the debate is clear. I urge my colleagues to support the 
amendment and yield back the remainder of my time, Mr. President.
  Mr. HAGEL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. HAGEL. I move to table the Kyl amendment and ask for the yeas and 
nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table the Kyl amendment. The yeas and nays have been ordered. The clerk 
will call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Georgia (Mr. 
Coverdell), the Senator from New Mexico (Mr. Domenici), and the Senator 
from Alaska (Mr. Murkowski) are necessarily absent.
  I also announce that the Senator from North Carolina (Mr. Helms) is 
absent because of illness.
  I further announce that, if present and voting, the Senator from 
North Carolina (Mr. Helms) would vote ``no.''
  Mr. FORD. I announce that the Senator from New Mexico (Mr. Bingaman), 
the Senator from Ohio (Mr. Glenn), and the Senator from Hawaii (Mr. 
Inouye) are necessarily absent.
  The result was announced--yeas 74, nays 19, as follows:

                      [Rollcall Vote No. 256 Leg.]

                                YEAS--74

     Akaka
     Baucus
     Bennett
     Biden
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Chafee
     Cleland
     Coats
     Cochran
     Collins
     Conrad
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Ford
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     McCain
     Mikulski
     Moseley-Braun
     Moynihan
     Murray
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Sarbanes
     Shelby
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                                NAYS--19

     Abraham
     Allard
     Ashcroft
     Byrd
     Campbell
     Enzi
     Faircloth
     Grassley
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Mack
     McConnell
     Nickles
     Santorum
     Sessions
     Smith (NH)
     Thompson

                             NOT VOTING--7

     Bingaman
     Coverdell
     Domenici
     Glenn
     Helms
     Inouye
     Murkowski
  The motion to lay on the table the amendment (No. 3522) was agreed 
to.
  Mr. WARNER addressed the Chair.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The Senator from 
Virginia.


                    Baltic States and NATO Expansion

  Mr. WARNER. Mr. President, I am joined here by my distinguished 
colleague from New York. We would like to bring to the attention of the 
Senate certain language in the report accompanying the bill. And I 
refer to page 40. It is entitled ``Baltic States and NATO Expansion.''

       The Committee has provided $15,300,000 in FMF grant 
     assistance to accelerate the Baltic States integration into 
     NATO.

  This action comes following similar action in last year's statement 
of managers. I ask unanimous consent to have printed in the Record 
excerpts from the text of last year's language.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                    Baltic States and NATO Expansion

       The Committee has provided $15,300,000 in FMF grant 
     assistance to accelerate the Baltic States integration into 
     NATO. The Committee regrets that budget constraints prevent 
     matching last year's levels but remains supportive of this 
     initiative. This assistance supports these democracies as 
     they enhance their military capacities and adopt NATO 
     standards. The Committee believes that FMF should be 
     allocated among the three nations on a proportional basis.
       The Committee has not continued the prior limitations on 
     the international military education and training program for 
     Indonesia. However, the Committee expects the Defense 
     Security Assistance Agency to consult with the Committee 
     regarding any plans to provide IMET to Indonesia, given past 
     human rights concerns and the continued influence of the 
     Armed Forces in Indonesian political and economic affairs. 
     Any participants should be carefully vetted and courses 
     should emphasize civilian control of the armed services.

                           *   *   *   *   *


                           The Baltic Nations

       The conference agreement provides that $18,300,000 should 
     be made available to Estonia, Latvia and Lithuania. These 
     funds are provided to enhance programs aimed at improving the 
     military capabilities of these nations and to strengthen 
     their interoperability and standardization with NATO, 
     including the development of a regional airspace control 
     system. Given progress in economic reform and meeting 
     military guidelines for prospective NATO members, the 
     conferees believe the Baltic nations will make an important 
     contribution to enhancing stability and peace in Europe and 
     are strong candidates for NATO membership.
       The conference agreement retains House language which 
     provides that the obligation of funds for any non-NATO 
     country participating in the Partnership for Peace shall be 
     subject to notification.

  Mr. WARNER. Here the language says:

       These funds [$18,300,000] are provided to enhance programs 
     aimed at improving the military capabilities of these nations 
     and to strengthen their interoperability and standardization 
     with NATO. . . .

  Mr. President, Partnership for Peace, is, I presume, the primary 
means by which these countries could work within the NATO framework. 
But I must say that I regret that this language is so specific as to 
use the word ``grant assistance to accelerate the Baltic States 
integration into NATO.''
  The Senate considered NATO expansion very thoroughly earlier this 
year, at which time I, together with my distinguished colleague from 
New York, expressed our strongest reservations, particularly as it 
related to a timetable of any nature, for further admission of nations 
into NATO.
  This does not spell out a timetable, but it certainly gives them, in 
this language, together with the funds, a recognition which in my 
judgment is inappropriate, certainly at this time when

[[Page S9834]]

the situation in Russia is so tenuous, as explained in the previous 
debate on NATO expansion, and in the context of the Baltic States. I 
will leave it to my colleague further details on that. But it is the 
judgment of the military planners in NATO that providing NATO 
assistance to these countries, should it be necessary, could well 
involve the use of nuclear weapons. I say that because inclusion of 
these nations in NATO at some future date is a matter that will have to 
be considered with great care and thoroughness by all NATO nations.
  I just think at this time to incorporate the language in an act of 
the Congress of the United States, presumably to be signed by the 
President, would send an improper signal into the community of nations 
who are desiring to join NATO at some future date.
  So I basically stated my views on it. I yield the floor, Mr. 
President.
  Mr. MOYNIHAN addressed the Chair.
  The PRESIDING OFFICER (Mr. Hagel). The Senator from New York.
  Mr. MOYNIHAN. I join my revered friend the senior Senator from 
Virginia in this matter and would begin by reminding the Senate that in 
the debate on expanding NATO to include Poland, Hungary and the Czech 
Republic, he forcefully made the point that the administration was 
already talking about a further expansion to the Baltic States. That 
would be a thumb in the eye of the Russians. The language from the 
Committee report which Senator Warner has just read implies that the 
Senate has come to agreement on the matter when it clearly has not.
  Estonia and Latvia have large Russian minority populations and all 
three have tenuous relationships with Russia. Yet it seems to be 
working, considering these three independent nations were held 
``captive''--subsumed by the Soviet Union--for three-quarters of a 
century. Latvia recently dismantled a Soviet radar station, and there 
are some accommodations being made for minorities in these nations.
  Expanding NATO to include the Baltics would be provocative in the 
extreme, as the Russians have made so clear. The Russians who would 
like to continue to make reforms in their troubled country have said: 
``Don't do this.'' Those leaders who seek the greatest liberalization 
of Russian society have said ``Heavens, don't give this weapon to the 
enemies of democracy and market enterprise. Don't put us in a situation 
where nuclear war in Central Europe is not to be dismissed as an 
outlandish improbability.''
  I remarked yesterday, in a statement supporting the International 
Monetary Fund replenishment that the situation of the Soviet military 
is alarming to the point of despair. In Krasnoyarsk, General Alexander 
Lebed, who is now governor there, has, by reports published in Moscow, 
undertaken to pay the Soviet strategic forces located in his Krai. The 
people with their hands on the triggers of the nuclear missiles are not 
being paid. I suggest the first rule of government is: Pay the Army. In 
a situation that is unstable, to take this posture regarding Nato 
expansion is to invite misunderstanding and worse.
  Mr. President, there is nothing we can do to change the report 
language, but I would like to make the point that it has not been 
decided that any of the Baltic states should join Nato. I do not think 
that the term ``accelerate the Baltic States integration into NATO''--
accelerate: faster than planned--such a term is not appropriate.
  If it were possible in conference for the distinguished chairman and 
the ranking member to see that this does not become part of the 
conference report itself or the accompanying statement of managers, I 
think that would serve stability in Central Europe and the security of 
the United States.
  I will make no accusations. The Senator from Virginia and I simply 
say: Do not casually get into a situation that will be thoroughly 
misread and deeply resented by the people we most want to have as our 
friends in Moscow. And particularly not on a day when the President 
himself is there.
  With that, Mr. President, I yield the floor. I see no other Senator 
seeking recognition, so I respectfully suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Roberts). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. HARKIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Iowa is recognized.

                          ____________________