Statement of Administration Policy: H.R. 2939 - Foreign Operations, Export Financing, and Related Programs Appropriations Bill, FY 1990

(Senate Floor)Sponsors: (Byrd (D) WV; Leahy, (D), VT)

The Administration would support passage of H.R. 2939, the Foreign operations, Export Financing and Related Programs Appropriations Act, FY 1990, if floor action eliminates section 582 regarding leveraging of funds. This section would impose serious constraints on the President's ability to conduct foreign policy, and we believe that it would be unconstitutional. If section 582 is in a bill presented to the President, his senior advisors will recommend disapproval.

As the bill is considered on the Senate floor and in conference, the Administration will work to modify or eliminate a number of other provisions to which we have strong objections. Certain combinations of these other provisions together with objectionable provisions in the House version of the bill could also lead the President's senior advisors to recommend disapproval of the bill.

These other provisions, that would restrict significantly the ability of the President to achieve foreign policy objectives that are broadly supported in the Congress and among the American people, are:

• Section 594 and other provisions set limitations on the provision of military and economic aid to El Salvador. These sections would inhibit the President's ability to provide critically needed assistance in a timely manner and threaten a successful outcome in the government's negotiations with the Farabundo Marti Liberacion Nacional (FMLN).
  
  
• The Committee bill earmarks $15 million for the UN Fund for Population Activity (UNFPA). That organization participates in the management of a program in China that involves coercive abortion. The Administration opposes this practice as do an overwhelming majority of the American people. Even if the U.S. contribution to the UNFPA is barred from being spent in China, the United States would still be supporting an organization whose UNFPA/China program is in opposition to U.S. values. Therefore, the Administration must strongly oppose this provision.
  
  
• The Committee bill also reverses the action of the House to reduce the earmarking of funds for specific countries and purposes. For the refugee assistance program, where the ability to respond to changing needs is vital, nearly half of the funds are earmarked. For the Foreign Military Financing Program, the combination of heavy earmarking and the necessary allocation of unearmarked funds to meet international agreements would not permit the provision of any assistance from this account for Central America and for narcotics aid to the Andean countries within the amount available.
  
  
• Section 562 reallocates Panamanian sugar quotas on a discriminatory basis. This is illegal under the terms of the General Agreement on Tariffs and Trade (GATT).
  
  
• An anticipated floor amendment expands the previous arrangements for foreign military debt restructuring in a costly and inappropriate way.

The bill, as acted on by the Subcommittee and the full Appropriations Committee, does reflect cooperation with the Administration in a number of areas. We are happy to have support for the President's initiative for the Philippines, for the Andean anti-narcotics strategy and for Eastern Europe. The bill also provides needed flexibility managing programs such as the pricing of certain military aid, the disposal of excess defense articles, and assistance to Pakistan.

The Administration's concerns about this bill are discussed in more detail in the attachment.

Attachment

(Senate Floor)
September 19, 1989

FOREIGN OPERATIONS, EXPORT FINANCING AND RELATED PROGRAMS APPROPRIATIONS BILL, FY 1990

I. MAJOR PROVISIONS SUPPORTED BY THE ADMINISTRATION

The Senate Appropriations Committee version of the bill has a number of provisions that reflect forthcoming cooperation with the Administration to achieve important foreign policy objectives and effective programs:

• establishment of the multilateral assistance initiative for the Philippines;
• waiver of constraints on the Andean drug initiative;
• support for the private sector in Poland and Hungary;
• removal of a House provision that shifts funds from the economic support fund to development aid;
• extending the Bahrain Stinger buyback deadline;
• fair pricing for certain foreign military aid;
• modified language on the transfer of excess defense articles; and,
• flexibility in providing assistance to Pakistan.

II. MAJOR SENATE PROVISIONS OPPOSED BY THE ADMINISTRATION

A. Language Provisions

Prohibition on Leveraging United States Assistance. Section 582 could be construed to prohibit, among other things, certain forms of consultation between the United States and other sovereign nations regarding actions such nations may wish to undertake Any such limitation on the President's authority to discuss certain issues with foreign governments, or to recommend or concur in courses of action taken with their own resources would be unconstitutional.

Restrictions on Aid to El Salvador. Section 594 and other provisions contain a series of restrictions on aid to El Salvador that seriously constrain administration of the program. The subsection (a) requirement in section 594 to obligate foreign military financing in three separate increments is the most troubling as this schedule does not relate to programmatic needs. These restrictions serve to undermine confidence in the Salvadoran government and threaten a successful outcome in the government's negotiations with the Farabundo Marti Liberacion Nacional(FMLN).

Population Earmark for the UN Fund for Population Activity (UNFPA). The committee bill earmarks $15 million for the UN Fund for Population Activity (UNFPA). That organization participates in the management of a program in China that involves coercive abortion. The Administration opposes this practice as do an overwhelming majority of the American people. Even if the U.S. contribution to the UNFPA is barred from being spent in China, the United States would still be supporting an organization whose UNFPA/China program is in opposition to U.S. values. Therefore, the Administration must strongly oppose this provision.

Earmarking of Funds. For a number of years, the Executive Branch has pointed out that flexibility to allocate funds within constrained amounts for individual budget accounts is critical to conducting foreign policy. The House version of this bill takes steps, albeit limited, to diminish the practice of earmarking funds for specific recipient countries and specific purposes. The Senate Committee version reverses that welcome effort. The most serious impact of the Committee version is on the Foreign Military Financing Program. Earmarks more extensive than in last year's appropriation along with the need to provide unearmarked funds for comprehensive mutual security agreements with the Philippines and Portugal literally use up all the funds. No financing from this account would be available for Central America, for the three countries intended to benefit from the Andean drug initiative nor for any other country. While less extensive, the earmarking of nearly half of migration and refugee assistance could seriously limit the ability of that program to respond to changing humanitarian needs. Many other programs are also seriously impacted by earmarking.

Sugar Quota Reallocation. Section 562 calls for the reallocation of Panama's quota for imports of sugar into the United States primarily to Caribbean Basin countries and the Philippines. This discriminatory reallocation, rather than following a formula, is inconsistent with regulations of the General Agreement on Tariff and Trade which the United States is obliged by agreement to honor.

Foreign Military Sales Debt Restructuring. An anticipated amendment to existing law would permit borrowers under past foreign military sales credit authority to prepay without penalty loans bearing interest rates of eight percent and above. A 90 percent government guarantee would be available to support new commercial borrowing by the beneficiaries. By GAO estimate, the existing program costs the taxpayer as much as $1.5 billion. The proposed unneeded change would increase that cost by $.4 billion.

Restriction on Reductions in Central America Aid. A proviso in the Economic Support Fund language requires that the reduction in the total assistance going to any Central American country be no greater than the reduction for any other country in Central America. This provision prohibits the Administration from adjusting reduced assistance levels to take into account need, other resources flowing into individual countries and countries' own efforts to establish appropriate economic policies.

Ceiling on AID Reimbursement to State Department Administrative Services Abroad. The Senate Committee bill retains last year's $15 million limitation on the amount of AID operating expenses that can be used to reimburse the State Department for Foreign Affairs Administrative Support (FAAS). Under the FAAS arrangement, the Department provides certain administrative services to foreign affairs agencies abroad in order to achieve efficiencies and economies of scale. In line with the request of a congressional committee, the budget provided for increased reimbursement by AID and other agencies to the State Department in 1990. The restriction on AID reimbursements not only frustrates management improvement but also seriously impacts State Department salaries and expenses which were reduced to account for higher payments by AID and other agencies. The Senate has made no provision for restoring funds to the State Department. Absent some change, it is unlikely the Department will be able to provide the full range of services required by AID.

Global Poverty Reduction. Section 592 would require the Administrator of AID to establish a system of quantitative and qualitative indicators of poverty reduction on a country-by-country basis. While poverty reduction and improved quality of life are the ultimate goals of most foreign assistance programs, primary attention needs to be focused on measures to increase economic freedoms and growth, for, without these, the means to accomplish sustained poverty reduction are not created.

IMET Per Capita GNP Restrictions. The bill, for the first time, excludes certain NATO and other countries from receiving International Military Education and Training (IMET) grants. It would make much more sense to hold such a drastic step in abeyance until the related GAO and Administration reports, which the Senate Appropriations Committee has just requested, are completed.