Foreign Affairs, Defense, and Trade Policy: Key Issues in the 107th Congress

Order Code RL30776

CRS Report for Congress

Received through the CRS Web

Foreign Affairs, Defense, and Trade Policy:

Key Issues in the 107th Congress

Updated February 27, 2001

nae redacted and nae redacted, Coordinators

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Foreign Affairs, Defense and Trade Policy:

Key Issues in the 107th Congress

Summary

Among the 107th Congress’ first orders of business will be dealing with the

initiatives–both domestic and foreign policy–proposed by President Bush throughout

his presidential campaign.

The 2000 congressional campaigns suggested that the agenda of the 107th

Congress will be largely domestic: Social Security, health care, education, taxes, and

military pay were prominent in campaigns across America and on post-election news

programs. Indeed, many issues discussed in this report will be affected by the

resolution of a contentious battle for the presidency. In the Congress, the 50-50 split

in the Senate and the close party ratio in the House, along with new House committee

chairmen, also will affect the agenda. With less time to organize the presidential

transition, and with upcoming Senate votes on executive branch nominations, the

107th Congress will have to split its time between administrative actions and policy

concerns.

The 107th Congress will help define the U.S. role in the world within the

framework of increasing globalization and its effects on U.S. foreign and security

policy. A key issue on the congressional agenda will be a debate over how and when

to use economic aid and sanctions to achieve U.S. foreign policy goals and objectives.

Another focus will continue to be the extent of U.S. involvement in conflicts and

crises worldwide, and under what conditions the U.S. is willing to commit military

forces and resources to such conflicts. A third category of concerns is the post-Cold

War proliferation of weapons of mass destruction, and the related debate over the

development, testing, and possible deployment of national and theater missile defense

systems.

Numerous other foreign affairs, trade, and defense issues will face the 107th

Congress. In addition to those mentioned above, important themes may include the

U.S. role in international peacekeeping; emerging economic globalization and its

effect on trade and finance issues facing the United States; and a debate over the state

of military readiness, proposed force structure increases, how much to spend on

defense and how to set priorities among major defense programs, as well as defense

spending in general.

The first session of the 107th Congress may act on the FY2002 budget resolution,

defense authorization and appropriation bills, and will consider legislation to authorize

spending for Department of State and other foreign policy programs and personnel

by passing or waiving the biannual foreign relations re-authorization legislation. The

107th Congress will review U.S. foreign aid priorities and participation in international

organizations, participate in Quadrennial Defense Review 2001 and the

Administration’s plans for weapons modernization and achieving efficiencies in

defense operations.

Contents

Overview–Globalization and International Security . . . . . . . . . . . . . . . . . . . . . . 1

U.S. Foreign and Security Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Economic Sanctions and U.S. Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . 3

Foreign Assistance Budget and Policy Issues . . . . . . . . . . . . . . . . . . . . . . . 5

Foreign Debt Reduction: the Heavily Indebted Poor Country

(HIPC) Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Foreign Policy Management and the Budget . . . . . . . . . . . . . . . . . . . . . . . . 7

International Family Planning: Abortion Policy and Funding Issues . . . . . . 9

International Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Peacekeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Security Threats: Nuclear, Biological, and Chemical Weapons . . . . . . . . 13

United Nations Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Global Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Global Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

International Disease Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

International Narcotics Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

International Organized Crime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

International Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Regional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Trade and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

India and Pakistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Korean Peninsula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

The Balkans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

The Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Peace Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Persian Gulf Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Trade and Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Export-related Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Export Administration Act Renewal . . . . . . . . . . . . . . . . . . . . . . . . . 35

Export-Import Bank Reauthorization . . . . . . . . . . . . . . . . . . . . . . . . 36

Foreign Sales Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Import-related Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Andean Trade Preference Act (ATPA) . . . . . . . . . . . . . . . . . . . . . . . 37

Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

International Monetary Fund Reform . . . . . . . . . . . . . . . . . . . . . . . . 38

Renewing the Generalized System of Preferences . . . . . . . . . . . . . . . 39

Trade Adjustment Assistance (TAA) Renewal . . . . . . . . . . . . . . . . . 39

Trade Remedy Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Negotiations and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Bilateral and Regional Free Trade Agreements . . . . . . . . . . . . . . . . . 40

Fast-Track Negotiating Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

A Free Trade Area of the Americas (FTAA) . . . . . . . . . . . . . . . . . . . 41

Vietnam Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Defense Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

The Defense Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Efficiencies in Defense Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

The Changing U.S. Defense Industrial Base . . . . . . . . . . . . . . . . . . . 44

Military Base Closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Outsourcing, Privatization, and Infrastructure Initiatives . . . . . . . . . . 46

Military Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Personnel-related Concerns in Recruitment and Retention . . . . . . . . 49

Missile Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

NMD and the ABM Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Modernization Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Personnel, Pay, Benefits, Quality of Life . . . . . . . . . . . . . . . . . . . . . . . . . 53

Abortion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Homosexuals in the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Military Family Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Quality of Life Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Women in the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Quadrennial Defense Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Army Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Information Warfare (IW) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Tactical Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Use of Force and Contingency Operations . . . . . . . . . . . . . . . . . . . . . . . . 58

Foreign Affairs, Defense and Trade Policy:

Key Issues in the 107th Congress

Overview–Globalization and International Security

(name redacted), Specialist in International Relations

(name redacted), Specialist in National Defense

The new President and the 107th Congress are facing early challenges in foreign,

defense and trade policy, including unfinished business from the last Congress, a new

election in Israel, and ongoing transboundary concerns. Congressional action will be

shaped by competing visions of the appropriate U.S. role in the world. The decade

since the collapse of the Soviet Union has brought profound changes in the

international environment. The United States has been left as the sole superpower in

a less predictable world than the one defined for a half century by the U.S.-Soviet

balance of power. Years of uninterrupted U.S. economic expansion have

strengthened the U.S. position as the dominant world power, with an unprecedented

ability to exert its influence. U.S. leadership is sought and welcomed, even as it

arouses wariness of U.S. hegemony. At the same time, the world is not static and we

are witnessing the rise of new power centers in Asia and Europe. Chinese power is

on the rise, even as Russian power seems to be waning, and Europe continues fitfully

towards integration.

The emerging global economy, built on a revolution in science, technology,

communications, and the unprecedented movement of people, ideas, and goods across

national boundaries, has profoundly changed international relations and the ability of

governments to control developments even within national borders. International

developments have an impact on domestic policy as never before. The benefits of

globalization are far reaching, spurring world productivity, economic growth, and

access to information. Advances in communications, information technology, science,

and medicine are likely to continue and even accelerate in the coming years. Along

with the benefits come significant new challenges that may require further legislative

action. Globalization brings economic dislocations in some areas and activates

political, environmental, and cultural concerns. Transnational threats such as

terrorism, cyber-terrorism and warfare, international crime, the spread of weapons

of mass destruction, the spread of contagious diseases, environmental problems, and

the potential for financial instability are on the rise. Global developments lend

themselves less and less to control or influence by individual governments, yet

mechanisms to act jointly and across borders are still weak, as countries are reluctant

to cede sovereignty to international entities. The 107th Congress will address many

issues associated with globalization.

How Congress deals with specific problems of national security, foreign policy

management, foreign aid, relations with international organizations, regional hot

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spots, trade and economic policy is closely tied to the unresolved debate over the

appropriate U.S. role in the world at the beginning of the 21st Century. Profound

differences on this question are mirrored in congressional debate. Many believe that

strong U.S. leadership within multilateral institutions will be necessary to find

cooperative solutions to world problems. Others are suspicious of these organizations

and reluctant to compromise U.S. freedom of action. The debate extends to issues

such as the role of U.S. alliances and the question of when and where the United

States should intervene with military force. Should U.S. forces be used only in

defense of vital national interests or as a broader policy instrument? Should they

participate in peacemaking, peacekeeping, nation-building, or humanitarian

interventions?

There is more consensus than many realize among politicians and analysts about

the broad outline of U.S. defense policy in the early 21st Century: continuing and

somewhat increasing the small upturn in defense spending which began in FY1999;

maintaining nuclear weapons capabilities needed for a decreased, but still required,

deterrence regime; containing potential adversaries with forward-deployed forces in

Europe, Northeast Asia, and the Persian Gulf; and adapting the theories and concepts

of the computer-driven “Revolution in Military Affairs” (RMA) to actual forces and

operations, so as to maintain and increase our already formidable militarytechnological and organizational superiority over our adversaries.

Expressing these principles in specific programs and budgets generates

controversy. How, for instance, are even modest increases in defense spending to be

carved out of predicted budget surpluses already marked for Social Security

protection, tax reduction, debt retirement, and other domestic legislation? Are the

forces we have, even if their readiness is improved, sufficient to fight one, let alone

two, major theater wars without incurring tremendous casualties, and possibly

temporary defeats, in the process? Is, in fact, the requirement that the U.S. forces be

sized and structured to fight and win two nearly simultaneous major theater wars a

valid one? Many wish to deploy ballistic missile defense (BMD) systems, but

reconciling development of a BMD capability with great reluctance to let this

particular “genie” out of the arms control “bottle” will be difficult.

Too little spent on new technologies from the RMA, and we risk being saddled

with obsolete hardware later in the century. Too much, and for all of the dazzling

experimentation and future promise being shown, we might not have enough force

structure in the “here and now” to go to war and win. In short, the defense issues

facing the 107th Congress will be ones of deciding how to do what the Congress, the

new Administration, and the American public want to do. This will become apparent

as Congress acts on the FY2002 budget resolution, foreign relations authorization,

defense authorization, and appropriation bills for DOD, State Department, and foreign

operations throughout 2001.

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U.S. Foreign and Security Policy

Economic Sanctions and U.S. Foreign Policy

Dianne E. Rennack, Specialist in Foreign Policy Legislation

The 107th Congress inherits from its predecessors a continuing debate about how

and when to use economic sanctions in furtherance of foreign policy or national

security goals. The use of economic sanctions – coercive economic measures taken

against one or more countries or entities to force a change in policies, or at least to

demonstrate a country’s opinion about the other’s policies1 – has generally been

supported by both the Congress and the President as an option to combat proliferation

of weapons of mass destruction, terrorism, aggression, drug trafficking, or human

rights abuses. In the 105th and 106th Congress, however, legislation was introduced

to reform the way economic sanctions are used in foreign policy. Reform proposals,

advocated by U.S. business and farm lobbyists, would require or encourage the

President or Congress to exhaust other foreign policy tools – diplomatic, political or

cultural – first; to make the use of sanctions more transparent, so that the anticipated

costs and benefits are understood beforehand; to engage Congress more fully in the

decisionmaking process heretofore left primarily to the Executive Branch; to target

the sanctions to minimize the impact on people in a targeted country who are not

viewed as part of the problem; and to require a regular review of sanctions regimes

with an eye toward easing or lifting the restrictions.

The 106th Congress considered more than 150 legislative proposals to impose

new sanctions, ease current regimes, or overhaul the entire process that the legislative

and executive branches employ when considering the use of sanctions in national

security or foreign policy. The 106th Congress enacted legislation to ease sanctions,

including (1) authorizing the President to lift or modify sanctions imposed against

India and Pakistan in the wake of their nuclear weapons tests, (2) granting normal

trade relations status to Albania and Kyrgyzstan, and (3) granting permanent normal

trade relations status to China. Most notably, the 106th Congress passed the Trade

Sanctions Reform and Export Enhancement Act of 2000 (P.L. 106-387) to limit the

President’s authority to impose sanctions that would restrict the export of food,

agricultural commodities, medicines, or medical devices to targeted countries.

The 106th Congress also enacted legislation to impose new sanctions or fine-tune

existing sanctions regimes, including (1) the Iran Nonproliferation Act; (2) the North

Korea Threat Reduction Act, also pertaining to Nonproliferation; (3) the Foreign

Narcotics Kingpin Designation Act, to freeze U.S.-based assets; (4) the Trafficking

Victims Protection Act, targeting those involved in trafficking of women and children

for sex or slavery; and (5) new restrictions on travel to Cuba. (See sections on the

Persian Gulf and Cuba, below)

Expectations for sanctions consideration in the 107th Congress derive from a

combination of unfinished work and current world events. In each of the following

instances, a larger question of engagement vs. isolation as a viable foreign policy

1

As generally defined in Carter, Barry E., International Economic Sanctions: Improving the

Haphazard U.S. Legal Regime. Cambridge: Cambridge University Press, 1988. p. 4.

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strategy likely will affect the debate. Legislation to reform the way sanctions are

imposed, implemented, and lifted is expected to be introduced early in the 1st session.

Advocates for sanctions reform, in the Congress and in the business community, have

stated their continued resolve to enact legislation. Nonproliferation watchdogs

promise to be active. Nonproliferation issues are considered unfinished by many visa-vis the People’s Republic of China, for example, included in the debate in the 106th

Congress over that country’s permanent normal trade relations status. Recent

proliferation-related events in North Korea and Russia also might lend themselves to

legislation early in the 107th Congress.

U.S. foreign policy toward Iran and Libya will have renewed attention in 2001,

at a minimum when reauthorization of the Iran and Libya Sanctions Act is raised.

Some amount of discontent was stirred when, as a compromise to enact the food and

medicine exemption from sanctions policy, travel to Cuba was further restricted. (See

Cuba , below.) Advocates supporting more normal or open relations with Cuba may

introduce legislation to lift the travel ban or, at least, rededicate the new restriction

imposed in 2000. Each year for the past several Congresses, legislation has been

introduced to normalize all aspects of U.S.-Cuba relations.

In mid-2000, the State Department announced that it would no longer use the

term “rogue state” to describe “countries of concern.” Some perceive this as a

beginning of a process of revamping the U.S. approach to countries judged to be

supporters of international terrorism. If such a reorganization is undertaken,

Congress could play a significant role in defining what constitutes a “terrorist state.”

At a minimum, the 107th Congress is likely to take up a reauthorization of the Export

Administration Act (EAA), in which basic components of the current policy toward

terrorist states are found.

In 2000, the Supreme Court ruled against states and localities making foreign

policy by imposing their own sanctions regimes. Late in the 106th Congress,

legislation was introduced to reinforce this ruling. The issue of state and local

sanctions may continue in the 107th Congress. The 105th Congress enacted the

International Religious Freedom Act to incorporate standards of religious freedom

and protection of religious minorities in U.S. foreign policy. The Act established,

within the State Department, the Office of International Religious Freedom. Some

anticipate that the Members of the 107th Congress will give great attention to the

Office’s annual report, due September 1, and recommendations for imposing

sanctions against transgressor states. Finally, events in the Middle East resulted in the

106th Congress, in its waning days, considering legislation to “oppose the unilateral

declaration of a Palestinian state, to withhold diplomatic recognition of any Palestinian

state that is unilaterally declared, and to encourage other countries and international

organizations to withhold diplomatic recognition of any Palestinian state that is

unilaterally declared.”2 The issue may invite legislative action early in the 107th

Congress.

2

S. 3250, Peace through Negotiations Act of 2000, introduced on October 26, 2000. See also

H.R. 5522, introduced on October 19, 2000.

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CRS Products

Economic Sanctions to Achieve U.S. Foreign Policy Goals: Discussion and Guide to

Current Law, by (name redacted) and (name redacted), CRS Report 97-949

Economic Sanctions: Legislation in the 106th Congress, by (name redacted), CRS

Report RL30384

Nuclear, Biological, Chemical and Missile Proliferation Sanctions: Selected Current

Law, by (name redacted), CRS Report 98-116

Foreign Assistance Budget and Policy Issues

Larry Q. Nowels, Specialist in Foreign Affairs

U.S. foreign assistance programs support a broad range of American foreign

policy interests, including promoting the expansion of democracy and open market

economies, combating global health challenges, fighting poverty and other causes of

instability in developing nations, countering terrorism, drug trafficking, weapons

proliferation, and other transnational threats, supporting peace efforts in the Middle

East and elsewhere, contributing to humanitarian needs of victims of natural disasters

and conflict, and advancing U.S. economic opportunities in emerging economies.

Congress plays an important role in shaping American foreign aid policy and spending

priorities through annual enactment of the Foreign Operations Appropriations bill.

Moreover, the legislation frequently becomes an important instrument for

congressional participation in broad aspects of U.S. foreign policy decision-making

on numerous issues.

Over the past decade, American policymakers and Congress have struggled in

their attempt to agree on a new core foreign aid rationale to replace the strategicallyoriented justification of the Cold War. In the recent past, the President and Congress

have shared common priorities for using foreign aid to respond to humanitarian and

emergency global requirements, counter global health problems, including HIV/AIDS,

and support Middle East peace initiatives. On other issues, however, there is far less

agreement. Among the most contentious matters in recent foreign aid debates are

international family planning policy and whether abortion restrictions should be

incorporated, aid conditions for Russia, Yugoslavia and other recipients, strategies for

blocking North Korea’s nuclear weapons development, and the organizational

structure of the U.S. Agency for International Development (USAID).

Overall foreign assistance funding levels have also been a source of sharp

disagreement between the two branches. In FY1996/97, Congress cut foreign aid

spending by over 10% to about $12.3 billion. Resources have increased to nearly

$16.5 billion in FY2000, after President Clinton vetoed the original foreign aid

appropriations because of inadequate funding. Much of the higher spending,

however, has been concentrated on unforseen international emergencies or one-time

special initiatives, such as Central American hurricane relief, Kosovo humanitarian

assistance, Colombia counternarcotics aid, or Middle East peace-related transfers.

Except for global health programs and poor country debt relief initiatives, few longerterm, continuing foreign aid objectives have received increased funding in recent

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years. House and Senate preliminary approval earlier this year of roughly $13.3

billion in Foreign Operations bills for FY2001 – 12% less than the President’s $15.1

billion request – prompted further veto threats. Congress ultimately agreed to $14.9

billion, including several top Presidential priorities for HIV/AIDS and debt relief.

The 107th Congress will confront a number of foreign aid policy and funding

challenges, including the likely continuation of disputes over international family

planning and congressional earmarks and aid restrictions that the Executive branch

has said undermine the President’s ability to conduct foreign policy. A new

Administration is likely to undertake a review of broad U.S. foreign aid policy

objectives and may seek congressional authorization for alternative approaches. The

organizational structure of agencies managing foreign aid programs, especially the

relationship between USAID and the State Department, might also be revisited in the

new Congress. How much of the budget to allocate for foreign assistance will come

under close scrutiny, and if the experience of the past three years repeats itself,

Congress could confront emergency supplemental foreign aid spending requests early

in the new session. President Clinton asked the 106th Congress to provide an

additional $750 million in military assistance for Israel, Egypt, and Jordan, but a

decision on whether to fund the proposal was pushed into 2001.

CRS Products

Africa: U.S. Foreign Assistance Issues, by (name redacted), CRS Issue Brief

IB95052.

Appropriations for FY2001: Foreign Operations, Export Financing, and Related

Programs, by Larry Q. Nowels, CRS Report RL30511.

The Former Soviet Union and U.S. Foreign Assistance, (name redacted), CRS Issue Brief

IB95077.

Multilateral Development Banks: Issues for the 106th Congress, by Jonathan Sanford,

CRS Issue Brief IB96008.

Foreign Debt Reduction: the Heavily Indebted Poor Country

(HIPC) Initiative

Larry Q. Nowels, Specialist in Foreign Affairs

Mounting debt burdens in poor African, Asian, and Latin American nations have

undermined efforts to stimulate economic growth and to finance basic social programs

aimed at poverty reduction. Over the past decade, the United States and other

creditor governments have engaged in numerous debt rescheduling and cancellation

schemes for governments that demonstrate a commitment to sound economic and

social policy reforms. The most recent of these debt relief arrangements – the Heavily

Indebted Poor Country (HIPC) initiative – was launched in 1996, and included for the

first time the participation of the World Bank, the IMF, and other public international

financial institutions that hold more than one-third of debt owed by the 41 HIPCdesignated nations. Critics, including Jubilee 2000 and other religious and nongovernmental organizations, charged, however, that HIPC did not offer sufficient debt

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relief, excluded several debt-strapped countries, and required a lengthy qualifying

period during which poverty continued to mount.

In 1999, led by the United States and Great Britain, the G-7, and subsequently

the World Bank and IMF, agreed to significantly expand HIPC terms to roughly

double the costs of the initiative. Under “Enhanced HIPC,” as much as $90 billion

of poor country debt could be cancelled, cutting annual debt service by roughly onehalf and re-directing the debt “savings” to investments in education, health, clean

water and other priority sectors. About 20 countries are expected to qualify at least

at a preliminary stage by the end of 2000, while 32 of the 41 HIPC countries may

eventually receive benefits.

The United States pledged $920 million for the HIPC initiative over four years,

including a $600 million contribution to the HIPC Trust Fund which will facilitate

debt write-offs by regional multilateral financial institutions such as the African

Development Bank and the Inter-American Development Bank. The $435 million

sought by the Clinton Administration for FY2001 became one of the top foreign

assistance funding priorities this year. Congress approved the entire HIPC request,

but required qualifying countries to agree not to borrow at non-concessional interest

rates for two years and directed the Treasury Secretary to explore options at the

World Bank to increase grant assistance to HIPC nations.

During the 107th Congress, lawmakers are expected to consider a $240 million

funding request which would complete the U.S. $600 million commitment to the

HIPC Trust Fund. Congress may also monitor implementation of HIPC agreements

with early qualifying countries, focusing especially on whether governments are

following economic reform conditions and if debt savings are being invested in

poverty reduction programs through a transparent, participatory decision-making

process with the full involvement of civil society.

CRS Products

Debt and Developing in Poor Countries: Rethinking Policy Responses, (name redacted),

CRS Report RL30449

Debt Reduction: Initiatives for the Most Heavily Indebted Poor Countries, by Larry Q.

Nowels, CRS Report RL30214

Foreign Policy Management and the Budget

(name redacted), Specialist in Foreign Policy and Trade

The first session of the 107th Congress will be required to consider legislation for

foreign policy authorization and another for funding the State Department (within the

Commerce, Justice and State and Related Agencies bill). Every two years Congress

must reauthorize spending for the Department of State, foreign policy programs, and

personnel by passing or waiving the biannual foreign relations reauthorization

legislation. In addition, each year Congress must appropriate State Department and

related agency funding. Typically, these bills become vehicles for a full range of

CRS-8

foreign relations-related provisions.

For example, foreign policy agency

reorganization was mandated in 1998 by the foreign relations authorization act (P.L.

105-277). The 106th Congress passed its foreign relations authorization legislation

(P.L. 106-113) that included authority for the Department of State to spend

significantly more on embassy security through FY2004.

Throughout the 1990s, both the Administration and Congress sought to

reorganize the U.S. foreign policy agencies with goals of streamlining their work and

attaining budgetary savings. A number of proposals to reorganize the Department of

State culminated in the Foreign Affairs Reform and Restructuring Act of 1998

(division G, P.L. 105-277). The Act required abolishing the U.S. Information Agency

(USIA) and the Arms Control and Disarmament Agency (ACDA), merging their

functions into the Department of State, and maintaining a separate international

broadcasting entity–the Broadcasting Board of Governors (BBG). The Act did not

merge the U.S. Agency for International Development (USAID) into the Department

of State, but did require USAID to reorganize and come under the authority of the

Secretary of State. The 107th Congress could consider renewed proposals to: 1)

merge USAID into State to better coordinate U.S. foreign policy with foreign aid and

2) unify administration of all agencies’ Foreign Service operations.

Annual appropriations issues in the 106th Congress focused on embassy security

(due to the August 7, 1998 bombing of two U.S. embassies in Africa) and possible

budget savings derived from the foreign policy agency reorganization. The FY1999

State Department budget included a budget supplemental of $1.56 billion for overseas

embassy security needs. Since Congress has provided full funding for embassy

security over the past two years, no budget savings resulting from reorganization is

evident. On the contrary, the State Department’s FY2001 appropriation (P.L. 106553) represents an increase of $750 million over the FY2000 enacted level and $97

million more than the President requested for the State Department and related

agencies for FY2001.

In response to the 1998 embassy bombing, the State Department established a

review panel, the Overseas Presence Advisory Panel (OPAP), which reported its

concerns and recommendations on how to increase security at U.S. overseas facilities.

The 107th Congress may consider these recommendations, as well as some experts’

concerns that, as security at U.S. government targets is tightened, risks for American

tourists and businesses may grow. In addition to security issues, the Foreign Service

continues to respond to criticisms of inadequate minority hiring and insufficient

foreign language and management skills prior to hiring. Some of these issues also are

being addressed by the Government Performance and Results Act (GPRA) process.

CRS Products

Embassy Security: Background, Funding, and the FY2001 Budget, by (name re

dacted), CRS Report RL30662

State Department and Related Agencies: FY2001 Appropriations, by (name re

dacted), CRS Report RL30591

CRS-9

International Family Planning: Abortion Policy and Funding

Issues

Larry Q. Nowels, Specialist in Foreign Affairs

Since 1965, U.S. policy has supported international population planning based

on principles of voluntarism and informed choice that gives participants access to

information on all methods of birth control. This policy, however, has generated

contentious debate for nearly three decades, resulting in frequent clarification and

modification of U.S. international family planning programs. In the early 1970s,

Congress added a provision to the Foreign Assistance Act of 1961 prohibiting the use

of U.S. appropriated funds for abortion-related activities and coercive family planning

programs. During the mid-1980s, in what has become known as the “Mexico City”

policy (because it was first announced at the 1984 Mexico City Population

Conference), the Reagan, and later the Bush, Administrations restricted U.S. funds

for foreign non-governmental organizations (NGOs) that were involved in performing

or promoting abortions in countries where they worked, even if such activities were

undertaken with non-U.S. funds. Several groups, including International Planned

Parenthood Federation-London (IPPF-London), became ineligible for U.S. financial

support. In some years, Congress narrowly approved measures to overturn this

prohibition, but White House vetoes kept the policy in place. President Clinton in

1993 reversed the position of his two predecessors, allowing the United States to

resume funding for all family planning organizations so long as no U.S. money was

used by those involved in abortion-related work.

Since 1995, international family planning policy and the abortion question has

been the most contentious issue in annual congressional foreign aid debates. The

House has routinely voted to reinstate the Mexico City policy while the Senate has

favored a position leaving the decision in the hands of the Administration. Moreover,

President Clinton has threatened to veto any bill that includes the House-passed

Mexico City restrictions. Unable to reach an agreement satisfactory to both sides,

Congress adopted a series of interim arrangements for FY1996-1999 that did not

resolve the broad international family planning controversy, but permitted the stalled

Foreign Operations appropriations measure to move forward. The annual

“compromise” removed House-added Mexico City restrictions, but reduced

population assistance to $385 million, and in several years, “metered” the availability

of the funds at a rate of one-twelfth of the $385 million per month.

The FY2000 debate, however, reached a different conclusion on the international

family planning question. Congressional leaders insisted that if the President wanted

Congress to approve legislation authorizing the payment of nearly $1 billion of U.S.

arrears owed to the United Nations, the White House must also accept revised

Mexico City language adding abortion restrictions to U.S. population assistance

policy. In order to remove the obstacles to U.N. arrears payments, President Clinton

reluctantly agreed to the abortion restrictions, marking the first time that Mexico City

conditions had been included in enacted legislation.

For FY2001, President Clinton sought a substantial increase in population

assistance – $541 million – and vowed to veto any legislation that continued Mexico

City abortion restrictions. Unable to resolve opposing House and Senate positions

CRS-10

on the family planning issue, Congress agreed to leave the decision up to the new

President. Under the terms of P.L. 106-429 (Foreign Operations Appropriations,

2001), none of the $425 million for population assistance may be obligated until

February 15, 2001.

As many expected, on January 22, 2001, President George W. Bush issued a

Memorandum to the USAID Administrator rescinding the 1993 memorandum from

President Clinton and directing the Administrator to “reinstate in full all of the

requirements of the Mexico City Policy in effect on January 19, 1993.” President

Bush further said that it was his “conviction that taxpayer funds should not be used

to pay for abortions or advocate or actively promote abortion, either here or abroad.”

A separate statement from the President’s press secretary stated that President Bush

was “committed to maintaining the $425 million funding level” for population

assistance “because he knows that one of the best ways to prevent abortion is by

providing quality voluntary family planning services.” The press secretary further

emphasized that it was the intent that any restrictions “do not limit organizations from

treating injuries or illnesses caused by legal or illegal abortions, for example, post

abortion care.”

During the next few weeks, USAID, State Department, and Justice Department

officials will draft specific policy language and contract clauses to implement the

President’s directive. The starting point, according USAID, will be regulations in

place on January 19, 1993. Some changes, however, may occur if more recent legal

decisions or statutes require modification. Because some overseas programs are

reported to need immediate financial transfers, officials have expressed hope that the

new policy language can be put into effect by February 15 when funds become

available. Congress will have an opportunity to debate the President’s new policy,

most likely when the Foreign Operations Appropriations bill for FY2002 comes up

for consideration.

CRS Products

International Family Planning: The Mexico City Policy, by (name redacted), CRS

Report RL30830

U.S. International Population Assistance: Issues for Congress, by Larry Q. Nowels,

CRS Issue Brief IB96026

International Financial Institutions

Jonathan E. Sanford, Specialist in International Relations

The International Financial Institutions (IFIs) include the World Bank and the

four regional development banks and the International Monetary Fund (IMF). In the

106th Congress, action on the IFIs occurred on two fronts. The first comprised

funding for the IFIs and for the program aimed at forgiving debt owed by Heavily

Indebted Poor Countries (HIPCs). (See section on debt reduction, above) The second

involved proposals for changing the policies and structures of the IFIs. (See IMF

Reform, below.) In both 1999 and 2000, Congress cut U.S. funding for the World

CRS-11

Bank and other multilateral development bank (MDB) programs substantially from

the President’s request. In 1999, the President vetoed the appropriations legislation

on grounds that he believed the cuts for MDB programs had been too great. In 1999

and 2000, most of the cuts were restored in the final legislation that the President

signed into law.

The Administration also sought authority for a U.S. contribution to the HIPC

trust fund and language which would enable the IMF to use certain blocked funds–

profits from an earlier gold sale– for the HIPC program. Congress withheld this

permission in 1999 but included it in the final 2000 appropriations legislation as part

of a broad agreement on IFI policy issues. Leading Members of the majority had

sought to effect major changes that would make their loans more costly to borrowers

and access to IFI credit more conditioned on countries implementing major marketoriented economic reforms. Agreement to adopt these changes would have to be

approved before the HIPC contribution and gold sale funds would be approved. In

the end, Congress approved the latter two measures without specific conditions.

However, the Secretary of the Treasury was required to report periodically on the

progress being made towards the implementation of certain reforms or policy goals.

Initiatives may come forward in the 107th Congress that aim to seek major

changes in the IFIs along the lines discussed above. Alternatively, proposals may be

made to include standards associated with environment and labor issues as necessary

factors in the IFI loan process. Strong U.S. initiatives of either type may result in

conflict with other major IFI member countries who have quite different views about

IFI priorities.

CRS Products

International Monetary Fund (IMF), Debt Relief, and Gold: Check List of CRS

Products, by Sherry B. Shapiro, CRS Check List CL40033

IMF Reform and the International Financial Institutions Advisory Commission,

by (name redacted), CRS Report RL30636

Multilateral Development Banks: Issues for the 106th Congress, by (name redac

ted), CRS Issue Brief IB96008

Peacekeeping

Nina Maria Serafino, Specialist in International Security

For nearly a decade, Congress has been sharply divided over a broad range of

issues related to U.S. worldwide peacekeeping and related security commitments,

several of which will most likely be a focus of the 107th Congress’ debate on

international security. The crux of the recent controversy in Congress is the

desirability of U.S. military forces’ participation in such operations, particularly the

9,800 troops serving in two NATO Balkan operations in Bosnia and Kosovo, relative

to the costs and strains of such participation. The issue of positioning U.S. troops

under the operational control of U.N. commanders seems less pressing now, when

CRS-12

some 35 U.S. troops serve in U.N. operations, than during the 1990s, when, at peak,

over 3,000 U.S. did so. (The Bosnia and Kosovo operations are under NATO and

not U.N. control.) However, questions are still raised about the utility of several ongoing U.N. peacekeeping operations (which total 15 operations, involving nearly

38,000 troops from 88 other countries, to which the U.S. contributed almost $500

million in FY2000), particularly those in Kosovo, East Timor, Sierra Leone, and the

Democratic Republic of the Congo.

Debate in the 106th Congress over U.S. peacekeeping deployments centered on

the 4,200 U.S. troops serving in Kosovo under NATO, at an estimated FY2000 cost

of $1.7 billion. Arguing that European nations were not carrying their fair share of

the burden, many Members of Congress made several attempts to limit the length of

and spending on the U.S. deployment there, but these efforts did not prevail. Other

Members countered that European nations were providing over 80% of the assistance

to Kosovo, and worried that attempts to withdraw U.S. forces would undermine

NATO and U.S. leadership. In providing $2.0 billion in supplemental funding for

FY2000 Kosovo costs in the FY2001 military construction appropriations bill (P.L.

106-246), Congress removed House provisions that would have allowed a cutoff in

funding for U.S. deployments in Kosovo after July 1, 2001. However, Congress

subsequently limited FY2001 spending in Kosovo to $1.65 billion, with a waiver

allowed under certain conditions, and required a series of reports on European

assistance and on efforts to resolve the Balkan situations. For a discussion of

congressional actions regarding U.N. Peacekeeping Operations, see the section of this

report on United Nations reform.

Debate over the appropriate U.S. role and amount of U.S. assistance in

peacekeeping efforts in general, and in the Balkans in particular, is expected to

continue, especially given President George W. Bush’s stated reservations regarding

open-ended “nation-building” missions involving U.S. ground forces. The high costs

of international peacekeeping and related U.S. security commitments, which totaled

over $4 billion in FY2000, and their effects on the readiness of U.S. forces will be

other sources of concern. The initiation of a new Quadrennial Defense Review (QDR)

process in early 2001 may provoke an extensive debate on force size and structure

related to peacekeeping activities, also encompassing whether, where, and under what

circumstances U.S. troops should be deployed on such missions. Continuing

congressional scrutiny of issues regarding U.N. operations can be expected, as

discussed below.

CRS Products

Peacekeeping: Issues of U.S. Military Involvement, by (name redacted), CRS Issue

Brief IB94040

United Nations Peacekeeping: Issues for Congress, by (name redacted), CRS

Issue Brief IB90103

U.S. Forces and Multinational Commands: PDD-25 and Precedents, by (name red

acted), CRS Report 94-887

CRS-13

Security Threats: Nuclear, Biological, and Chemical Weapons

Robert G. Shuey, Specialist in Foreign Policy and National Defense

Steven R. Bowman, Specialist in National Defense

Congress, the Administration, and our allies are debating the best combination

of policies to counter threats posed by nuclear, biological, and chemical (NBC)

weapons. Those policies include maintaining strong and credible deterrence,

employing active and passive defenses, maintaining alliances and multilateral regimes,

preventing foreign acquisition of dangerous materials and technology, engaging with

potential adversaries, negotiating reductions and control of weapons, neutralizing

terrorist groups, imposing sanctions and providing incentives, and promoting regional

peace. Since the Cold War a number of developments have challenged past policies:

the demise of the Soviet Union as the primary threat; the acquisition of NBC weapons

by more countries; the information technology revolution; the increased availability

of weapons material, technology, and engineers; globalization of business and finance;

and an evolution of missile defense technology. Confronting the 106th Congress were

the 1998 nuclear tests by India and Pakistan, missile tests by North Korea, Iran, and

Pakistan, and continuing transfers of nuclear and missile technology by Russia, China,

and North Korea. Congress acted on a number of issues related to NBC weapons,

as summarized immediately below. Missile defense also was emphasized by the 106th

Congress, as discussed below under Defense Policy.

Russian nuclear and missile technology exports to Iran led Congress to pass the

Iran Nonproliferation Act (P.L. 106-178) authorizing the President to impose aid and

trade sanctions against proliferating companies or organizations. Congress also

supported DOD’s Cooperative Threat Reduction and associated programs to help

secure NBC weapons, material, and technology in states of the former Soviet Union.

One exception to this support, however, has been Congress’s restriction of funds for

a CW destruction facility in Russia, citing a lack of confidence in Russia’s ability to

fund the facility once constructed.

The People’s Republic of China has acquired technology from the United States

that harms U.S. national security, according to the congressional Cox Committee

which released its declassified report in May 1999. The DOD authorization for

FY2000 (P.L. 106-65) included several provisions on export controls that had been

recommended by the report. In 2000, Congress also passed a trade bill to authorize

nondiscriminatory treatment (Permanent Normal Trade Relations) to China and to

establish a framework for trade relations between the U.S. and China (P.L. 106-286).

Although other proposals to restrict trade to China were introduced, none passed.

On North Korea, the Speaker’s Advisory Group issued a detailed report in

November 1999 describing the threat posed by North Korea to U.S. national security.

The North Korean Threat Reduction Act of 1999 (in P.L. 106-113) prohibits a

nuclear cooperation agreement between North Korea and the United States unless the

President determines North Korea is in compliance with certain commitments and

does not have a nuclear weapons program.

Congress also authorized the President to waive economic sanctions on India

and Pakistan for detonating nuclear explosive devices or for other activities related

CRS-14

to nuclear weapons (P.L. 106-79). Though Congress could not agree on a thorough

revision of the Export Administration Act (EAA) of 1979 (S. 1712), it approved a bill

(H.R. 5239) that extends the EAA until August 2001. In October 1999, the Senate

voted against advice and consent to the ratification of the Comprehensive Test Ban

Treaty. The FY2001 defense authorization bill requires the administration to conduct

a comprehensive nuclear posture review and report the results to Congress in

December 2001. It also calls for a plan for the long term sustainment and

modernization of U.S. nuclear forces with a report to Congress by April 15, 2001, and

a report by July 1, 2001 on the requirement and capabilities to defeat hardened targets

and stockpiles of NBC weapons.

It appears likely that in 2001 Congress will review the development, testing, and

perhaps deployment of national and theater missile defense systems. It will probably

again consider ways to prevent countries such as Iran, Iraq, and North Korea from

developing NBC weapons and delivery systems, and ways to prevent entities in

countries such as China, Russia, and North Korea from transferring NBC weapon and

missile technology to other countries. Revisions of the Export Administration Act

and possibly new sanctions and incentives to prevent further proliferation of NBC

weapons and missiles will likely be discussed. Special attention may be focused on

U.S. exports of satellites, high-performance computers, encryption systems, and

conventional weapons. Congress may respond to positive or negative NBC weapons

and missile developments in North Korea, Iran, Iraq, Pakistan, India, or elsewhere.

Programs to counter the threat of NBC weapons in the hands of international

terrorists are likely to be considered (see the Terrorism section, below), as are the

status and credibility of U.S. deterrence against hostile states and terrorist groups.

The States which are parties to the Biological Weapons Convention will meet in 2001,

and are expected to adopt a new protocol intended to enhance convention compliance

and non-proliferation efforts. The protocol has been under negotiation for five years

and is expected to spark significant debate over the issues of international

inspections, export controls, and protection of proprietary commercial information.

If the protocol is adopted, the President will decide when it will be submitted to the

Senate for its advice and consent.

Because recent political, economic, and technological developments have

generated support for significantly different policy approaches for countering the

NBC weapon threat, Congress or the Administration may initiate a broad review of

options, priorities, and their application to geographic regions.

CRS Products

Weapons of Mass Destruction, Nonproliferation, and Arms Control: A Checklist of

CRS Products, by Sherry B. Shapiro, CRS Checklist 40035.

CRS-15

United Nations Reform

(name redacted), Specialist in International Relations

United Nations reform, as variously defined, has drawn the attention of many in

Congress and the executive branch as well as in other U.N. member governments.

Congressional views and expectations on the need for United Nations reform have (1)

resulted in significant arrearage in U.S. contributions, especially to U.N. peacekeeping

accounts, and (2) led to Congress’ specifying conditions to be met before the release

of U.S. funds appropriated to reduce most of these arrearages. Two areas of desired

change are: (1) a reduction of U.S. assessment levels for contributions to the U.N.

regular budget and U.N. peacekeeping accounts, and (2) the continuation of

zerobased budgeting both by the United Nations and by certain U.N. specialized

agencies.

On November 29, 1999, Congress passed, and the President signed, legislation

setting forth the conditions for U.S. payment of its arrears, or outstanding

contributions, to the United Nations for regular budget and peacekeeping accounts

(the oft-called Helms-Biden package). The amount appropriated and subject to these

conditions was $926 million, including $819 million in cash payments and $107

million in credits from the United Nations. As of the start of 2001, the United States

had paid the first increment of $100 million, after certifying that the relevant

conditions had been met.

Congressional funding in 2000 of the President’s full request (FY2000

supplemental request of $107 million and FY2001 request of $738.6 million) for the

Contributions to International Peacekeeping Activities (CIPA) account had been

problematic. Congressional committees had expressed concern over increasing costs

and expanding activities of U.N.-conducted peacekeeping operations and had

disagreed over the use of U.N. peacekeeping operations in internal conflicts in Africa,

including those with cross border impacts. In late October 2000, Congress

appropriated $846 million for CIPA, the amount the President had requested.

On December 23, 2000, U.N. members, during the 55th session of the U.N.

General Assembly reduced the U.N. assessment level for the United States from 25%

to 22% for the U.N. regular budget. It was expected that the assessment level for

U.N. peacekeeping accounts would go down to 28.14% for the January-June 2001

period and further reduce to 25% by 2004. Since the 2001 level was higher than the

25% in the Helms-Biden conditions, Senator Helms introduced legislation, S. 248, to

amend these conditions, increasing the peacekeeping assessment level to 28.15%.

The Senate passed S. 248, by a vote of 99-0, on February 7, 2001. Passage by the

House would clear the way for the release of “traunche 2 funding” of $475 million

for U.S. arrears.

Areas for possible attention in 2001 include continuing congressional review of

the implementation of the reform conditions set forth in the 1999-enacted legislation;

continuing review of the executive branch process for support of new or expanded

U.N. peacekeeping operations, now being conducted by the General Accounting

Office in its report on how Presidential Decision Directive 25 has been applied; and

review of U.N. peacekeeping reform proposals presented in the Report of the Panel

CRS-16

on United Nations Peace Operations (the Brahimi report) and the U.N. SecretaryGeneral’s plan to implement its recommendations.

CRS Products

United Nations Peacekeeping: Issues for Congress, by (name redacted), CRS Issue

Brief IB90103

U.N. System Funding: Congressional Issues, by (name redacted), CRS Issue Brief IB86116

Global Issues

Global Climate Change

Susan Fletcher, Senior Analyst in International Environmental Policy

Concerns that the increase in “greenhouse gases” in the atmosphere has caused

warming of the Earth’s climate have led to a number of international responses, as

well as issues of interest to the U.S. Congress. The 1992 United Nations Framework

Convention on Climate Change (UNFCCC), which the United States has ratified,

contained voluntary commitments by all parties to that treaty to take steps to reduce

their emissions of greenhouse gases, primarily carbon dioxide produced by burning

of fossil fuels and wood (as well as five other gases from other sources). Congress

has been primarily concerned with the issues connected with the 1997 Kyoto Protocol

to the UNFCCC, which contains legally binding emission reductions for 38

industrialized nations, including the United States. The Senate passed S.Res.98

before the Kyoto Protocol was completed, warning that the United States should not

sign a treaty that would harm the U.S. economy or did not include commitments for

developing countries. Congress has held oversight hearings on many aspects of the

economic impacts and scientific findings related to climate change generally and the

Kyoto Protocol specifically. Legislation was introduced in previous congresses

related to needed scientific research, policies on domestic credit for activities to

reduce carbon emissions or increase carbon sinks (discussed below), and to limit the

activities of the government that could be regarded as implementing the Kyoto

Protocol before it has been approved.

The United States signed the Kyoto Protocol in 1998, but it was not submitted

to the Senate for its advice and consent by the Clinton Administration in recognition

of S.Res. 98. The United States was seeking to obtain “meaningful participation” of

developing countries, and it had been participating in the continuing negotiations to

agree on rules governing various aspects of how the Protocol would operate. These

rules have key relevance to economic impacts of U.S. commitments, in particular,

how much the United States could rely on “flexibility” mechanisms that would reduce

domestic measures needed to meet its commitments, through trading emission

“credits” with other countries and relying on its extensive forest and agricultural lands

to absorb carbon, acting as “sinks.” In November 2000, negotiations held in The

Hague, Netherlands, were expected to resolve a number of political and operational

issues on how the Kyoto Protocol would work. However, these negotiations

collapsed when some of the key issues regarding flexibility mechanisms and use of

CRS-17

carbon sinks eluded political agreement among ministers from developed countries.

A large congressional delegation attended these negotiations, and it appears likely that

Congress will continue to conduct oversight hearings and consider legislation related

to the issues of climate change generally, and the Kyoto Protocol negotiations

specifically.

CRS Products

Global Climate Change, CRS Electronic Briefing Book; on the CRS Web site at

[http://www.congress.gov/brbk/html/ebgcc1.html]

International Disease Response

Lois B. McHugh, Analyst in Foreign Affairs

The 106th Congress and the Clinton Administration focused on the growing

threat of infectious disease, especially HIV/AIDS, primarily in Africa. (See Africa,

below.) The United States responds to the health needs of developing countries

primarily through the foreign aid program. But because diseases cross national

borders, other agencies, such as the Center for Disease Control and Prevention (CDC)

and the Department of Defense are also involved in medical programs as part of their

missions.

Health expenditures are made through various foreign aid accounts, with the

bulk of aid provided as part of the Child Survival and Disease account. USAID

estimates that health spending provided in all accounts of the foreign aid legislation

(not including population programs) will total $836.9 million in FY2000 and $795.3

million in 2001. This includes $260.2 million for HIV/AIDS, $63 million for

infectious disease, and $110 million for UNICEF.

Congress has been very supportive of international health assistance,

appropriating at the request level or higher with wide bipartisan support. Several

bills adopted in the 106th Congress address international health. P.L. 106-429, the

Foreign Operations Appropriation, enacts by reference legislation providing $860

million for international health programs. This includes $300 million for HIV/AIDS,

and $125 million for infectious disease. In addition, PL 106-259, the Department of

Defense Appropriations Act includes $10 million to be used for HIV prevention

education activities in Africa.

International health issues will continue to be of interest to the 107th Congress

as the world becomes increasingly interconnected. Infectious disease, particularly

HIV/AIDS, has been incorporated into international discussions and activities of many

international agencies and will continue as a major issue worldwide for the foreseeable

future.

Another health issue likely to arise is the proposed Framework Convention on

Tobacco Control. Negotiations on the new treaty began in the fall of 1999. It is

expected to be opened for signature by 2003, but will be debated in the World Health

Organization throughout the next two years.

CRS-18

International Narcotics Control

Raphael F. Perl, Specialist in International Relations

International political and economic instability, especially political turmoil and

ethnic strife in third world and former communist states where police capabilities have

been drastically reduced, provide fertile ground for expansion of a wide range of

criminal activities. One such criminal activity, illicit production and smuggling of

narcotics, remains an important area of concern for Congress.

Increasingly, drug trafficking organizations, terrorist organizations, and other

international criminal groups cooperate with each other to facilitate illicit cross-border

and transnational activities. Intergovernmental cooperative efforts to combat such

criminal enterprises are often slow and cumbersome.

Generic issues likely to be the focus of attention in the upcoming Congress

include (1) the President’s March 1 certifications for major drug producing or

transiting countries (an annual certification as to a country’s cooperation in

international drug control efforts is required of the President under the Foreign

Assistance Act of 1961; a negative certification may result in loss or reduction of

foreign assistance); (2) the effectiveness of current drug interdiction policies; (3) the

rising importance of drug cartels in Mexico and their potential destabilizing effect on

that country; (4) the growing relationships between drug traffickers, terrorists, and

other organized criminal groups; and (5) North Korean drug production and

trafficking activity. Moreover, U.S. relations with Burma, the world’s largest source

of illicit opium and heroin, are strained over lack of narcotics control cooperation and

human rights violations. Prospects for immediate improvement in relations with

Burma do not appear promising.

An issue of growing importance in the 107th Congress is expected to be the

effectiveness of implementation of Plan Colombia, the congressionally funded (fiscal

year 2000-2001) $1.3 billion counter-narcotics effort for Colombia and neighboring

states (P.L. 106-246). The massive aid package reflects U.S. concern that an

increasing supply of heroin and cocaine is undermining demand-reduction efforts in

the United States. Curbing the inflow of these drugs is therefore a key priority for

both domestic and foreign policy. As the largest supplier of cocaine and a major

supplier of heroin, Colombia is central to these efforts. (See Latin America, below)

The U.S. initiative will present major challenges and opportunities to policy

officials in both the United States and the northern Andean countries. U.S. counternarcotics policy is unlikely to be completely successful (a victory in the war against

drugs seems unlikely) until the seemingly insatiable demand for drugs in the U.S.

market is curbed. However, if the Colombian initiative is seen as failing completely,

it could undermine U.S. prestige and influence in the western hemisphere. Moreover,

perceived failure might weaken the U.S. public’s willingness to support future foreign

policy and aid initiatives linked to counter-drug objectives.

Assuming that the drug interdiction efforts have at least a modest effect in

reducing the level of coca cultivation and production, the key challenge for

policymakers will be how to adapt to the social and economic consequences of

success. A major challenge is how to ensure that the coca cultivation, trafficking

CRS-19

activities, and insurgent operations from Colombia are not simply displaced into

neighboring states.

CRS Products

Colombia: U.S. Assistance and Current Legislation, by Nina Serafino, CRS Report

RL30541

Drug Control: International Policy and Options, by (name redacted), CRS Issue Brief

IB88093

Ecuador: International Narcotics Control Issues, by Raphael Perl, CRS Report

RS20494

Narcotics Certification of Drug Producing and Trafficking Nations, by (name reda

cted), CRS Report 98-159

North Korean Drug Trafficking: Allegations and Issues for Congress, by (name reda

cted), CRS Report RS20051

International Organized Crime

(name redacted), Specialist in International Relations

In recent years, Congress has demonstrated its concern over international

organized crime through legislative and oversight activities. The 106th Congress

passed significant legislation targeting the three most lucrative activities of

international organized crime groups: drug trafficking, money laundering, and

international trafficking in humans (especially for the sex trade). P.L. 106-246, the

Columbia Aid Package, was signed into law on July 12, 2000 and provided $1.289

billion in emergency supplemental appropriations for narcotics control. The Victims

of Trafficking and Violence Protection Act of 2000 (P.L. 106-383), a comprehensive

bill related to trafficking in humans, was signed by the President on October 28, 2000.

Neither the 105th nor the 106th Congress enacted a comprehensive package of

legislation proposed by the Clinton Administration in 1998 as part of its announced

“International Crime Control Strategy.”

Whether or not a comprehensive international crime fighting package is taken

up again in the 107th Congress, transnational crime is likely to be on its agenda, given

the scope of the problem. A growing share of organized crime in the United States

has foreign connections. International criminal organizations are forming

opportunistic links across borders, including drug cartels (discussed below) and even

terrorist groups (discussed below). As a result, international organized crime is

viewed increasingly as a national security threat in addition to a law enforcement

challenge.

The State Department has the lead U.S. role in dealing with international crime

abroad. However the FBI, traditionally a domestic crime fighting agency, is

establishing an increasingly active presence internationally. The FBI now has offices

in many countries and has established an FBI academy in Budapest, Hungary, to train

CRS-20

foreign law enforcement officials. Congress must deal with annual funding and

oversight of these rapidly growing activities.

CRS Products

Trafficking in Women and Children: The U.S. and International Response, by (name r

edacted) and Grace (Jea-Hyun) Park, CRS Report RL30545

International Terrorism

Raphael F. Perl, Specialist in International Relations

Steven R. Bowman, Specialist in National Defense

The October 12, 2000 terrorist attack on the U.S. Navy destroyer Cole in Aden,

Yemen, has given renewed focus to Administration and congressional concern about

the threat of international terrorism. In the aftermath of the Cole bombing, the

Defense Department and the Navy initiated a number of inquiries. The House and

Senate Armed Services Committee held initial hearings on the incident in late

October. The attack raises potential issues for the 107th Congress concerning (1)

procedures used by the Cole and other U.S. forces overseas to protect against

terrorist attacks; (2) intelligence collection, analysis, and dissemination as it relates to

potential terrorist attacks; and (3) U.S. anti-terrorism policy and options for U.S.

response if and when perpetrators are discovered.

The issue of possible terrorist use of nuclear, chemical, or biological weapons

in the United States has attracted great attention in Congress, the Executive Branch,

and among the general public. In FY2000, Congress appropriated $1.45 billion for

defense against weapons of mass destruction, and the FY2001 budget request totaled

$1.55 billion, spread among fourteen federal agencies. The primary focus has been

on assisting state and local emergency response personnel, improving civilian medical

surveillance and treatment capabilities, and intensifying pharmaceutical research, to

counter the effects of these agents. Given the rapid increase in funding and the

unusual range of local, state, and federal agencies involved, the issue of effective

interagency coordination remains a significant legislative concern. There is also a

growing number of critics who maintain that the likelihood of such a terrorist attack

is low, and that over-reaction to this threat has led to excessive and indiscriminate

funding. Low-probability threat estimates notwithstanding, the potentially severe

consequences of a nuclear, chemical, or biological attack make it unlikely that

legislative attention will diminish.

On June 5, 2000, the National Commission on Terrorism (N.C.), a

congressionally mandated bipartisan body, issued a report providing a blueprint for

U.S. counter-terrorism policy with both policy and legislative recommendations. It

generally argues for a more aggressive U.S. strategy in combating terrorism. Critics,

however, argue that N.C. conclusions and recommendations ignore competing U.S.

goals and interests; i.e , that a more “aggressive” strategy might lead to the curbing

of individual rights and liberties, damage important commercial interests, and widen

disagreements between the U.S. and its allies over using the “stick” as opposed to the

CRS-21

“carrot” approach in dealing with states that actively support or countenance

terrorism.

The report’s recommendations were the subject of extensive hearings in the 106th

Congress and could stimulate strong congressional interest in counter terrorism policy

in the first session of the 107th Congress. Likely areas of focus include (1) the pros

and cons of a more proactive counter terrorism policy; (2) possible enhancement of

state sanctions policy; and, (3) the coordination of U.S. federal counter terrorism

response. The Administration and Congress are likely to take up further measures to

deter and punish terrorist acts and to reduce U.S. vulnerabilities, particularly to

potential attacks with chemical, biological, or nuclear weapons, that could cause mass

casualties. A review of U.S. policy, organizational mechanisms, and the adequacy of

consultation with Congress is also possible.

CRS Products

National Commission on Terrorism Report: Background and Issues for Congress, by

Raphael Perl, CRS Report RS20598

North Korea: Terrorism List Removal?, by Larry Niksch and Raphael Perl, CRS

Report RL30613

Terrorism: CRS Electronic Briefing Book; available on the CRS Web site at

[http://www.congress.gov/brbk/html/ebterl.html]

Terrorism, the Future, and U.S. Policy, by (name redacted), CRS Issue Brief IB95112

Terrorism: Near Eastern Groups and State Sponsors, by Kenneth B. Katzman, CRS

Report RL30643

Terrorism: U.S. Response to Bombings in Kenya and Tanzania-A New Policy?, by

(name redacted), CRS Report 98-733

Terrorist Attack on the USS Cole: Issues for Congress, by Raphael Perl and Ronald

O’Rourke, CRS Report RS20721

Regional Issues

Africa

Raymond W. Copson, Specialist in International Relations

HIV/AIDS. The HIV/AIDS epidemic in sub-Saharan Africa, which has already

killed nearly 16 million people, will likely be an important concern in the 107th

Congress, as it was in the 106th. Many involved in the struggle against the epidemic

are advocating a “scaling up” of the international response to HIV/AIDS so that HIV

infection rates can be broadly reduced in Africa through prevention programs, as has

already been achieved in Uganda. Many are urging increased support for preventing

mother to child transmission of the disease and for providing care, including care for

orphans. There is also some backing for expanded HIV/AIDS treatment programs,

CRS-22

particularly programs that prolong lives by treating opportunistic infections with

inexpensive medications. It seems probable that some Members of Congress will

advocate measures to assure that the United States is a leader in “scaling up,”

although others may be skeptical of the chances of success against the disease or may

urge that other donors should share more of the burden. In August 2000, the 106th

Congress enacted the Global AIDS and Tuberculosis Relief Act of 2000 (P.L. 106264), which authorized increased development assistance spending for HIV/AIDS

programs worldwide. Contributions were also authorized to the International AIDS

Vaccine Initiative (IAVI) and to a proposed AIDS trust fund administered by the

World Bank. Appropriators provided funding for these initiatives, which some

Members and committees will likely monitor in the 107th Congress.

Trade and Development. The 106th Congress enacted the African Growth

and Opportunity Act as part of the Trade and Opportunity Act of 2000 (P.L. 106200), in order to promote African economic development through increased trade.

Members who supported this legislation will likely monitor its implementation in

order to assure that Africa benefits from its provisions; and some may advocate

expanding trade benefits for Africa through new legislation. Others will be concerned

with ensuring that new or existing legislation does not harm U.S. business or workers.

As in past Congresses, some may advocate increases in development assistance and

other aid programs for Africa, in view of the region’s serious problems in health,

employment, education, and other sectors. Others will argue that competing

budgetary priorities must constrain aid to Africa and other regions.

Other Issues. Other African topics that might be subjects of hearings and

legislation include the human rights situation in Sudan; peacekeeping and conflict in

several countries, such as Sierra Leone and the Democratic Republic of the Congo

(DRC); and ways to strengthen democratic forces in Nigeria, Zimbabwe, Côte

d’Ivoire, and elsewhere. Allegations that President Charles Taylor of Liberia has

become a source of instability in the West African region could be a source of

concern. As in the 106th Congress, some may support efforts to strengthen control

of the illicit diamond trade, which seems to play a key role in fueling conflicts in West

Africa, the DRC, and Angola.

CRS Products

Africa: U.S. Foreign Assistance Issues, by (name redacted), CRS Issue Brief

IB95052

AIDS in Africa, by (name redacted), CRS Issue Brief IB10050

Congo (formerly Zaire), by (name redacted), CRS Issue Brief IB96037

Sudan: Humanitarian Crisis, Peace Talks, Terrorism, and U.S. Policy, by Theodros S.

Dagne, CRS Issue Brief IB98043

U.S.-Sub-Saharan Africa Trade and Investment: Programs and Policy Direction, by

(name redacted), CRS Report RS20063

Zimbabwe: Current Issues, by (name redacted), CRS Issue Brief IB10059

CRS-23

Asia

Issues concerning U.S.-China relations dominated the Asian policy agenda of the

106 Congress and are likely to do so in the 107th Congress, as well. Underlying this

and other issues related to Asia were a number of ideological and party differences

plus policy struggles with the Administration – many of which are likely to carry over

into the 107th Congress. Broadly speaking, these differences emanate from four major

developments: (1) the ongoing realignment of security relationships and economic

ties following the end of the Cold War, including the rise of China as an important

regional and economic power that is more open to international trade; (2) the residual

effects of the 1997-1999 Asian financial crisis, as well as Japan’s ongoing economic

and political weaknesses, (3) the unexpectedly rapid pace of change in the Korean

peninsula, which has generated congressional concern and also raised anxiety in the

Northeast Asian region about the future U.S. military role in South Korea and Japan,

as well as broader regional power relationships, and (4) a nuclear arms race between

India and Pakistan.

th

China. ((name redacted), Specialist in National Security Policy; Kerry B.

Dumbaugh, Specialist in Asian Affairs; Wayne Morrison, Specialist in

International Trade and Finance; (name redacted), Analyst in Asian Affairs)

Long-standing U.S. policy to engage the People’s Republic of China (PRC) politically

and economically may continue to be controversial in Congress. The 106th Congress

enacted legislation in 2000 granting the PRC permanent normal trade relations

(PNTR.), thus providing an end to the rancorous annual debate over China’s trade

status that had continued since 1990. However, the bill also established a new

commission to report annually on the PRC’s human rights record, as well as other

measures designed to improve congressional oversight on U.S. policy toward the

PRC. The 106th Congress also grew increasingly leery of PRC intentions toward

Taiwan. In part, this was due to the island’s watershed presidential election in March

2000, which brought to power Chen Shui-bian, leader of the Democratic Progressive

Party, a party that advocates Taiwan’s independence from China. In February 2000,

PRC leaders issued a new policy statement on Taiwan which some saw as

demonstrating a greater willingness to use force to reunify Taiwan with China. Some

in the 106th Congress came to favor formal efforts to strengthen U.S.-Taiwan relations

in ways sure to antagonize the PRC further, complicating U.S. relations with both

Beijing and Taipei.

The possible accessions of the PRC and Taiwan to the World Trade

Organization (WTO) in 2001 are expected to be of major interest to the 107th

Congress. P.L. 106-286 grants PNTR status to China once it joins the WTO, as long

as the President certifies in a report to Congress that the terms of PRC’s accession are

at least as favorable as the November 1999 U.S.-China trade agreement. It also

ensures that WTO trade agreements would apply to trade between the United States

and the PRC. Many Members have expressed support for the PRC’s WTO

membership – but under terms that would require it to significantly liberalize its trade

and investment regimes. Additionally, many Members have expressed support for

Taiwan’s WTO membership and have concerns that Beijing might try to block

Taipei’s accession. P.L. 106-286 calls on U.S. trade negotiators to push for a motion

in the WTO General Council to make Taiwan’s WTO entry application the next order

CRS-24

of business following the consideration of the PRC’s application, and to strongly

oppose attempts by any WTO members to block Taiwan’s accession.

Congress may continue to monitor protests in the PRC by Falun Gong

practitioners and demonstrations by laid-off workers that are continuing in 2001.

Rising Internet usage has facilitated communication and information access for a

growing number of PRC citizens. None of these trends, however, is likely to produce

fundamental changes in the political system in the short run. The PNTR bill enacted

in 2000 contains provisions that criticize the PRC government for oppressing Falun

Gong adherents and for denying workers and others basic human rights; it also

authorizes funding to expand Radio Free Asia’s Internet operations.

Finally, the 107th Congress likely will continue to oversee policies to address the

PRC’s challenges to U.S. security interests. Congressional oversight and

investigations, including that by the “Cox Committee,” have covered alleged transfers

of missile technology by U.S. firms in connection with satellite exports and whether

the Justice Department should take further action regarding investigations that began

in 1997. Also, Congress has watched for progress in the counter-espionage probes

into suspected PRC acquisitions of U.S. nuclear weapons and missile secrets.

Congress has increasingly asserted its role in providing for Taiwan’s defense under

the Taiwan Relations Act, including calling for consultations on arms sales and a look

at operational planning, and considering the “Taiwan Security Enhancement Act.”

Congress is expected to continue assessing the PRC’s military strategy and

capabilities, especially the missile buildup. Other issues likely to be considered include

the establishment of the Center for the Study of Chinese Military Affairs (and the

report on its operation due in February 2001); military exchanges subject to

restrictions in the FY2000 National Defense Authorization Act (and the report on

such exchanges); and PRC weapons proliferation (possibly with reconsideration of

legislation like S. 2645, introduced by Senator Thompson in 2000).

CRS Products

China and Falun Gong: Implications and Options for U.S. Policy, by (name redacted),

CRS Report RS20333

China -U.S. Relations, by (name redacted), CRS Issue Brief IB98018

China - U.S. Trade Issues, by Wayne Morrison, CRS Issue Brief IB91121

India and Pakistan. (Barbara LePoer, Analyst in Asian Affairs) A major

South Asia issue for the 107th Congress will be reassessment of sanctions imposed

on India and Pakistan following their May 1998 nuclear tests, notably whether the

sanctions should be maintained, eased, or broadened. Despite carrot-and-stick efforts

by Congress and the Administration in 1998 and1999 – which eased some economic

sanctions on the two countries – U.S. nonproliferation efforts in South Asia appear

to be at an impasse. Although both India and Pakistan are under self-imposed nuclear

testing moratoriums, neither has signed the Comprehensive Test Ban Treaty (rejected

by the U.S. Senate in 1999), and both countries are continuing production of fissile

material as well as actively expanding their ballistic missile capability.

CRS-25

Moreover, India-Pakistan relations have continued to deteriorate since the 1998

nuclear tests. In mid-1999, the two countries teetered on the brink of a fourth war.

A military coup in Pakistan in late 1999 appears to have further soured relations.

Clinton Administration policy has centered on thawing the vestiges of Cold War

relations with India, while remaining engaged with former Cold War partner Pakistan.

U.S. relations with Pakistan appear increasingly fragile as a result of political

instability, economic deterioration, and Islamic radical pressure emanating from

neighboring Afghanistan. The 106th Congress has been generally supportive of

Administration initiatives to improve U.S.-India cooperation. President Clinton visited

New Delhi in March 2000, and in September 2000, Prime Minister Atal Bihari

Vajpayee paid a reciprocal state visit to Washington. Administration officials and

congressional leaders continue to press India and Pakistan to return to the negotiating

table and halt their nuclear arms race.

CRS Products

India-Pakistan: Arms Race in South Asia, CRS InfoPack IP5251

India-US Relations, by (name redacted), CRS Issue Brief IB93097

Indian-Pakistan Nuclear Tests and U.S. Response, Coordinated by (name redacted

), CRS Report 98-570

Pakistan-US Relations, by (name redacted), CRS Issue Brief IB94041

Indonesia. (( nameredacted), Specialist in Asian Affairs) Indonesia

underwent some political changes during the 106th Congress. It lost East Timor when

East Timorese voted for independence in a referendum vote of August 31, 1999, and

United Nations-approved international peacekeepers entered East Timor in October

1999 in response to post-referendum atrocities committed by pro-Indonesia East

Timorese militia. Democratic elections in 1999 appeared to produce a civilian

Indonesian government after more than three decades of authoritarian, militarybacked rule. The new government seemed incapable of containing the escalation of

violence and disorders throughout the country in 2000. The 106th Congress appeared

to indicate support for self-determination for East Timor. H.Res. 292, passed on

September 28, 1999, supported the results of the East Timorese referendum, called

on the Indonesian government to act against the violence of the East Timorese militia,

and supported the international peacekeeping force.

Foreign operations

appropriations legislation for fiscal years 2000 (P.L. 106-113) and 2001(P.L. 106429) prohibited Indonesian participation in the U.S. International Military Education

and Training (IMET) program and U.S. Foreign Military Financing of U.S. arms sales

to Indonesia. The law provides for resumption of these activities when the President

certifies that the Indonesian government and military have taken judicial action against

East Timorese militia members and Indonesian military personnel responsible for the

post-referendum atrocities and allowed displaced East Timorese in Indonesian West

Timor (over 100,000) to return home. At the end of the 106th Congress, the

Indonesian government and military seemingly had done little to satisfy these

conditions, meaning that the issue possibly could continue into the 107th Congress.

CRS-26

CRS Products

East Timor Crisis: U.S. Policy and Options, by Larry Niksch, CRS Report RS20332

East Timor’s Coming Decision on Autonomy or Independence, by Larry Niksch, CRS

Report RS20256

Indonesian Separatist Movement in Aceh, by Larry Niksch, CRS Report RS20572

Japan. ((name r e dac ted),

Specialist in Asian Affairs) Recent

congressional concerns regarding Japan have centered on allegations of the dumping

of Japanese steel in U.S. markets, the slow progress of deregulation in Japan, and

Tokyo’s inability to revitalize its moribund economy. Other issues of concern to

Congress include court suits by former American civilian prisoners of war seeking

compensation for abuses in Japanese prison camps and forced labor for Japanese

companies, Japan’s decision to expand its whaling activities, and issues in security

cooperation, including the future of U.S. bases in Japan and Japanese participation in

the U.S. Theater Missile Defense (TMD) development program. Partly in response

to a surge in Japanese steel imports, the 106th Congress enacted a provision to the

agriculture appropriations act for FY2001 that requires that antidumping and

countervailing tariff duties be distributed to the affected industries. Given the

apparent slowing of U.S. economic growth in recent months, the 107th Congress can

be expected to give renewed attention to the record U.S.-Japan trade deficit.

Although U.S.-Japan relations remain close, especially at the working level, ties have

been troubled by the inability of a series of unstable coalition governments to reform

the Japanese economy to meet the challenges of economic globalization or to adjust

foreign and defense policy to the realities of a rising China and a possible eventual

reunification of the Korean Peninsula. Japan remains strongly attached to the U.S.Japan alliance, but it is also uneasily aware that American perceptions of Japan are in

flux. Meanwhile, younger Japanese leaders from various parties are calling for a more

independent foreign and defense policy within the framework of the alliance.

Opposition is rising in Japan to the cost and inconvenience of hosting U.S. military

bases, and to what the Japanese view as American efforts to dictate the global trade

agenda.

CRS Products

Japan-U.S. Relations: Issues for Congress, by (name redacted), CRS Issue Brief

IB97004

U.S.-Japan Economic Ties: Status and Outlook, by (name redacted), CRS Issue

Brief IB97015

U.S. Prisoners of War and Civilian American Citizens Captured and Interned by

Japan in World War II: the Issue of Compensation by Japan, by Gary K.

Reynolds, CRS Report RL30606

CRS-27

Korean Peninsula. (Mark Manyin, Analyst in Asian Affairs) When

dealing with U.S. policy toward the Korean peninsula, the 107th Congress will

primarily be concerned with overseeing U.S.-North Korean relations, which improved

markedly in 2000. Following the dramatic inter-Korean summit meeting in June

2000, the U.S. lifted its trade embargo on North Korea and Secretary of State

Madeleine Albright traveled to Pyongyang. In ongoing bilateral talks, North Korea

is seeking removal from the U.S. list of state sponsors of terrorism, which prevents

U.S. backing of Pyongyang’s membership in international aid organizations. Under

the provisions of the Export Administration Act, Congress could block a Presidential

decision to remove North Korea from the terrorism list. For its part, the United

States is pressing Pyongyang to make permanent its temporary moratorium on missile

programs, to demonstrate a commitment to non-proliferation, and to provide evidence

that it is no longer supporting terrorist groups. If North Korea-U.S. and inter-Korean

relations continue to improve, the 107th Congress is also likely to deal with questions

regarding the size and function of the 37,000 U.S. troops stationed in South Korea.

The 107th Congress also will oversee financial assistance programs to North

Korea, which is the largest recipient of U.S. aid in East Asia. Previous Congresses

tied North Korea-related appropriations to requirements that the President certify

progress in negotiations with Pyongyang. Much of the aid has gone toward the

Korean Peninsula Development Organization (KEDO), the multinational organization

created to implement the obligations assumed by the United States under the October

1994 U.S.-North Korea Agreed Framework. Under the Agreed Framework, the

United States is coordinating the provision to North Korea of two light water nuclear

reactors and 500,000 tons of heavy oil annually, the oil shipments to cease when the

reactors are constructed. In return, North Korea is obligated to suspend the

operations of its nuclear facilities, which the United States believed were for

production of nuclear weapons. Presumably, the next U.S. administration will request

additional aid, if it decides to help South Korea develop North Korea’s economic

infrastructure, and/or to help finance satellite launches (in a third country) for

Pyongyang in return for a North Korean pledge to halt its missile program.

CRS Products

North Korea’s Nuclear Weapons Program, by Larry Niksch, CRS Issue Brief IB91141

North Korea: Terrorism List Removal, by Larry Niksch and Raphael Perl, CRS Report

RL30613

U.S.-South Korean Relations, by Larry Niksch, CRS Issue Brief IB98045

Vietnam. (See Vietnam Trade Agreement, below)

The Balkans

(name redacted), Specialist in European Affairs

The 106th Congress was faced with dramatic developments in the Balkans. In

1999, NATO conducted a major air campaign against Serbia in response to Serbian

atrocities in Kosovo. After 78 days of bombing, Federal Republic of Yugoslavia

CRS-28

(FRY) leader Slobodan Milosevic pulled his forces out of Kosovo and a NATO-led

peacekeeping force was deployed there. Almost all ethnic Albanians returned to their

homes, but most ethnic Serbs left Kosovo, and the province’s long-term status

remains in doubt. In 2000, elections in Croatia in January-February, the FRY in

September, and Kosovo in October led to the victory of moderates who want close

ties with the West. In Bosnia, where a NATO-led peacekeeping force has been

deployed since 1996, modest progress was made, but a self-sustaining peace is a

distant prospect.

In 1999, the 106th Congress debated whether U.S. and NATO air strikes in

Kosovo were in the U.S. national interest, and whether the President could undertake

them without congressional approval. In the end, Congress neither explicitly approved

nor blocked the air strikes, but after the fact, appropriated funds for the air campaign

and the U.S. peacekeeping deployment in Kosovo. In 2000, Members unsuccessfully

attempted to condition the U.S. military deployment in Kosovo on congressional

approval and on the implementation of aid pledges made by European countries.

The 106th Congress provided funding for reconstruction in Bosnia and Kosovo

(limiting aid to Kosovo to 15% of the total amount pledged by all countries), aid for

the pro-Western governments in Croatia and Montenegro. (Montenegro is part of the

FRY with Serbia, but its leadership was in opposition to Milosevic.) The 106th

Congress prohibited aid to Serbia while Milosevic was in power, with the exception

of humanitarian and democratization aid. However, after Milosevic’s fall in October

2000, the conference committee on the FY2001 foreign operations appropriation bill

(H.R. 4811), inserted language allowing up to $100 million in aid for Serbia. The bill

adds the condition that no funds can be spent after March 31, 2001 unless the

President certifies that the new government in Serbia cooperates with the war crimes

tribunal, implements its obligations under the Bosnia peace accord, and respects

minority rights and the rule of law.

In its first session, the 107th Congress will consider how much aid to provide for

the reconstruction of Serbia, Kosovo and other countries in the region, and how the

burden should be shared with European countries. It will also establish the conditions

under which that aid should be given, including how strongly to condition aid to

Serbia on cooperation with the war crimes tribunal. Another important issue will be

continuing U.S. troop deployments in the Balkans. Members skeptical of what they

view as an open-ended U.S. military deployment to the Balkans may attempt to set

conditions, deadlines or other restrictions on them. Bush Administration officials

have said that they are reviewing U.S. military commitments worldwide, including in

the Balkans, to see whether reductions can be made. They have stressed that they will

not act precipitately and will consult with U.S. allies in Europe during the review.

CRS-29

CRS Products

Kosovo and U.S. Policy, by (name redacted) and (name redacted), CRS Issue Brief IB98041

Kosovo: Reconstruction and Development Assistance, by (name redacted), CRS Report

RL30452

Kosovo: U.S. and Allied Military Operations, by Steven R. Bowman, CRS Issue Brief

IB10027

Serbia and Montenegro: Current Situation and U.S. Policy, by (name redacted), CRS

Report RL30453

Latin America

(name redacted), Analyst in Latin American Affairs

The 107th Congress is likely to be concerned about three principal areas

regarding Latin America: the stability of the fragile democracies in the region,

cooperation on counter-narcotics efforts, and trade issues. Latin America has made

enormous strides in recent years in democratization, with all but Cuba led by elected

heads of state. Recently, however, tensions in various countries have pointed out

how fragile many of these democracies are. Their weak government institutions are

ill-equipped to deal with challenges to their further development, such as strong, often

autocratic presidents; violent guerrilla conflicts; militaries still uncomfortable with

civilian rule; illegal narcotics trafficking and its corrupting influence; and difficulty in

promoting economic development in the face of widespread poverty and highly

skewed income distributions.

With regard to democracy, Mexico is one country that made great strides in

terms of democratic elections. The party that has ruled Mexico for 71 years lost the

presidential elections in July 2000. The head of the Alliance for Change, Vicente Fox,

took office as President on December 1, 2000. In addition to continued

encouragement of Mexico’s efforts to expand political and human rights, Congress

will monitor trade relations between the two countries under the North American Free

Trade Agreement (NAFTA), and continue to push for greater cooperation on counter

narcotics efforts.

The 107th Congress will continue to conduct oversight on assistance to the

region, and on the implementation of existing restrictions. The new Congress may

debate new conditions or prohibitions on aid to countries such as Peru and Haiti,

where elections have been found to be unfair, and new presidents are assuming office.

For example, former President Jean-Bertrand Aristide was elected again in November

2000 and inaugurated February 7, 2001 in Haiti; and new presidential elections are

scheduled for April 2001 in Peru following the sudden resignation of President

Alberto Fujimori.

Cooperation in counter narcotics efforts is a major issue for Congress in relations

with many Latin American nations, especially Colombia. Having passed the Colombia

Plan, a $1.3 billion counter narcotics package in 2000, Congress will monitor its

CRS-30

implementation and continue to debate whether and how to support Colombia’s

government in its struggle against increasingly powerful guerrilla movements.

Although its assistance to the Colombian military was highly controversial, the plan

as passed by Congress (as part of an emergency supplemental appropriations bill, P.L.

106-246) more than tripled the amount requested for a broad range of human rights

programs, and increased funding for judicial reform and other programs intended to

support the peace process and to strengthen democratic governance in Colombia, with

conferees “...recognizing that protecting human rights and rule of law are central to

the overall goals of Plan Colombia.” Reflecting a concern for regional stability and

a regional approach to counter narcotics efforts, Congress more than doubled the

requested assistance to other countries in the region for counter narcotics activities.

In the area of trade, several issues are likely to be of concern to the new

Congress. The Andean Trade Preference Act is due to expire December 4, 2001.

The 107th Congress will consider the Andean countries’ request to extend the

program, which grants them preferential tariff benefits, and to add Venezuela as a

beneficiary country. A form of NAFTA parity for the Caribbean Basin Initiative

beneficiaries finally passed in the 106th Congress; it will be up to the new Congress

to monitor implementation of the U.S.-Caribbean Basin Trade Partnership Act (P.L.

106-200). The 107th Congress may also monitor ongoing efforts to negotiate a free

trade agreement with Chile, and consider whether to grant the new Administration

fast-track negotiating authority to create a Free Trade Area of the Americas. (See

Trade and Finance, see below)

The 106th Congress passed legislation allowing the sale of agricultural and

medical products to Cuba as part of the FY2001 Agriculture appropriations bill (P.L.

106-387). The bill also placed severe constraints on such sales, however, permanently

prohibiting private financing of agricultural exports to Cuba by U.S. banks or by state

and local governments. Therefore, licensed sales may only occur if Cuba pays in

advance, or if financed by a third country bank. The bill also codified existing

embargo regulations by prohibiting the import of merchandise from Cuba, and travel

for tourism to Cuba. The highly contentious debate over how best to pressure Cuba

to enact democratic and economic reforms is likely to continue in the 107th Congress.

(See Sanctions, above and Cuba, below.)

CRS-31

CRS Products

Colombia: U.S. Assistance and Current Legislation, by Nina Maria Serafino, CRS

Report RL30541

Cuba: Issues for Congress, by (namer edacted) and (name r edacted),

RL30628

CRS Report

Cuba Sanctions, CRS Electronic Briefing Book on Trade, available on the CRS Web site

at [http://www.congress.gov/brbk/html/ebtra108.html]

Haiti: Issues for Congress, by Maureen E. Taft-Morales, CRS Issue Brief IB96019

Mexico-U.S. Relations: Issues for Congress, by (n ame redacted), CRS Issue Brief

IB10047

Peruvian Elections in 2000: Congressional Concerns and Policy Approaches, by

(name redacted), CRS Report RS20536

Trade and the Americas, by (name redacted), CRS Issue Brief IB95017

The Middle East

Peace Process. ((name redacted), Specialist in Middle East Affairs) The

Clinton Administration failed in its efforts to resolve the long-standing Arab-Israeli

conflict. Agreements brokered by President Clinton at Wye River, Maryland in

October 1998 and Sharm al-Shaykh, Egypt in September 1999 resulted in further

Israeli-Palestinian agreements on security measures and phased Israeli withdrawals

from portions of the occupied West Bank. At another conference hosted by President

Clinton at Camp David in July 2000, however, the two sides were unable to resolve

permanent status issues dealing with Palestinian statehood, Israeli-Palestinian borders,

disposition of Palestinian refugees, Jewish settlements in the West Bank and Gaza,

water resources, and Jerusalem. A series of Palestinian-Israeli clashes that began in

late September have further jeopardized the peace talks and fueled anti-Israeli and

anti-U.S. sentiment in the Arab world. Meanwhile, Syrian-Israeli talks, briefly

resumed in December 1999, quickly broke down over questions of Israeli withdrawal

from the occupied Golan Heights. In a nearby area, Israel withdrew unilaterally from

southern Lebanon in May 2000, but some unrest continues on the Israeli-Lebanese

border. All sides await the policies of a new Israeli government under Ariel Sharon,

elected on February 6, 2001.

Congress has continued to appropriate annual foreign aid for Israel, Egypt,

Jordan, and other Middle East entities, while attaching conditions regarding

Palestinian compliance with Israeli-Palestinian agreements. In addition, in February

1999, the President requested $1.2 billion for Israel, $400 million for the West

Bank/Gaza, and $300 million for Jordan to help implement terms of the Wye River

agreement. Of this amount, Congress appropriated $100 million for Jordan under

FY1999 supplemental legislation (P.L. 106-31) and the remaining amounts under

H.R. 3422, the Foreign Operations Appropriations Act for FY2000, which was

CRS-32

passed by reference in P.L. 106-113. Congress also added $25 million for Egypt to

the Wye River funding contained in H.R. 3422 (P.L. 106-113). Congress did not act

on a November 14, 2000 Clinton request for $1.25 billion for Israel, Egypt, Jordan,

and the Palestinians for FY2001 and FY2002.

Should Arab-Israeli negotiations resume, the new Administration might request

additional funding from Congress to help negotiating parties deal with issues of

security and economic stability. For example, Israeli officials have said they might

need multibillion dollar aid grants in the event of a withdrawal from occupied

territories, to cover enhanced security measures and relocation of Jewish settlers in

the West Bank region and Gaza. On the other hand, if the stalemate continues and

tensions increase, unilateral Palestinian steps such as a declaration of statehood would

be likely to prompt initiatives in Congress to ban or restrict aid to Palestinians. In a

related area, Congress is likely to reconsider the U.S.-Jordan Free Trade Agreement,

signed on October 24, 2000 (discussed below).

CRS Products

Israel: U.S. Foreign Assistance, by (name redacted), CRS Issue Brief IB85066

The Middle East Peace Talks, by (name redacted), CRS Issue Brief IB91137

Palestinians and Middle East Peace: Issues for the United States, by (name re dacted),

CRS Issue Brief IB92052

Syria: U.S. Relations and Bilateral Issues, by (name redacted), CRS Issue Brief IB92075

U.S.- Jordan Free Trade Agreement, by (name redacted), CRS Report RL30652

Persian Gulf Issues. ((name redacted), Specialist in Middle East Affairs)

From early indications, it appears the Bush Administration will continue efforts to

enforce economic sanctions against Iraq, contain potential threats from Iran, and

shore up the defensive capabilities of friendly Gulf states. Approximately 25,000 U.S.

military personnel are stationed in the Gulf region to enforce no-fly zones over Iraq,

conduct maritime interception of banned goods to or from Iraq, engage in combined

training activities with Gulf states, supervise prepositioned U.S. military equipment,

and deter threatening moves by Iraq or Iran. Support for sanctions against Iraq has

begun to erode among Arab and some European countries, and the bombing on

October 12, 2000 of a U.S. Navy ship while refueling at the port of Aden in Yemen

underscores the threat posed by terrorist groups to U.S. military personnel and

facilities in the region. Iran, despite a more moderate administration and parliament,

continues to oppose the Arab-Israeli peace process, support terrorist groups, and

develop missile capabilities that could threaten U.S. allies and interests.

In April 1999, the Administration agreed to license sales of food and medical

items on a case by case basis to Iran and other countries affected by a unilateral U.S.

trade ban. Congress included a provision in the conference report on H.R. 4461 (P.L.

106-387, the Agriculture Appropriations Act for FY2001), to authorize credit for

such sales, although Members generally oppose unilateral relaxation of sanctions until

CRS-33

Iran alters its behavior. Regarding Iraq, Congress has included approximately $1.1

billion in FY2001 defense appropriations (P.L. 106-259) to contain Iraq and carry

out related missions. The Foreign Operations Appropriations for FY2001, P.L. 106429, contains $25 million to support activities by the Iraqi National Congress, an

umbrella organization of groups opposed to the Iraqi regime, including the

distribution of humanitarian aid inside Iraq. Of these funds, $2 million is to be

devoted to support indictment of Iraqi President Saddam Hussein as a war criminal.

Congress, which has already held hearings on the explosion involving the U.S.S.

Cole, may further scrutinize issues relating to the deployment of U.S. forces in the

Persian Gulf and the nature of bilateral security arrangements with countries in the

region. Depending on the future direction of Iranian regional policies, steps by a

future administration to loosen trade restrictions against Iran or remove it from the

terrorism list would prompt congressional scrutiny and possible legislation to reverse

such action. With the continued erosion of international support for sanctions against

Iraq, possible moves in the U.N. Security Council to alter these sanctions could lead

to congressional debate and, possibly, to legislation calling on the Administration to

oppose such initiatives.

CRS Products

Iran: Current Developments and U.S. Policy, by Kenneth B. Katzman, CRS Issue Brief

IB93033

Iraqi Compliance with Cease-Fire Agreements, by Kenneth B. Katzman, CRS Issue Brief

IB92117

The Persian Gulf: Issues for U.S. Policy, 2000, by Kenneth B. Katzman, CRS Report

RL30728

Russia

(name redacted),

Specialist in Russian Affairs; (na me redacted),

Analyst in

Foreign Affairs; (name redacted), Specialist in Foreign Affairs

There were a number of developments in Russia and issues in U.S.-Russian

relations that engaged the 106th Congress and are likely to be considered by the 107th.

Vladimir Putin, who was catapulted into the Kremlin following Boris Yeltsin’s

resignation, was elected President in March 2000 by a solid majority that embraced

his military campaign in Chechnya. The economic upturn that began in late 1999 is

continuing: the GDP and domestic investment are growing after a decade-long

decline, inflation is contained, the budget is balanced, and the ruble is stable. Major

problems remain: 40% of the population lives below the official poverty line, foreign

investment is very low, crime, corruption, capital flight, and unemployment remain

high. Russian foreign policy has become more assertive and anti-American, fueled in

part by frustration over the gap between Russia’s self-image as a world power and its

greatly diminished capabilities and by clashes with Washington over Kosovo, Iraq,

NATO enlargement, and Russian missile technology and nuclear reactor transfers to

Iran, among other issues. The military is in turmoil after years of severe force

reductions and budget cuts. Weapons procurement, readiness, training, morale, and

CRS-34

discipline are down sharply. Putin’s government increased defense spending

substantially in 2000. The Putin regime appears to be trying simultaneously to assert

more authoritarian political control, introduce some economic reforms, get generous

debt forgiveness, and strengthen the military – a problematic mix.

The Russian parliament approved the ratification of the START II Treaty in

April 2000. Russia will not, however, allow START II to enter into force until the

United States approves agreements signed in 1997 that would extend the elimination

period in START II and clarify the 1972 ABM Treaty. Moscow also says it may

withdraw from the START II Treaty if the United States withdraws from the ABM

Treaty. This responds to U.S. interest in modifying the ABM Treaty to deploy a

limited National Missile Defense (NMD) system. The Clinton Administration has not

submitted the 1997 agreements to the Senate for its advice and consent to ratification,

in part out of concern that the Senate could reject them because many Members

strongly oppose the ABM Treaty. In the future, the United States and Russia could

continue to negotiate arms control treaties, reduce their forces through informal

agreements, or forgo coordinated arms control and size their forces according to their

own economic and security interests. If the United States continues to pursue a

limited NMD, Russia, too, may pursue alternatives to the formal arms control process

as well as countermeasures to NMD. Action on these issues is likely to await the next

Administration and Congress.

In September 1999, Russia invaded its breakaway republic of Chechnya to halt

what it claimed was widening brigandage and terrorism. Russia’s offensive has been

characterized by many human rights abuses, including indiscriminate bombing that has

led to thousands of civilian casualties and over 200,000 displaced persons. The 106th

Congress publicized and condemned these abuses and urged the Administration to

strongly press diplomatic and other efforts to convince Russia to open peace talks and

to investigate alleged atrocities committed by its troops (H.Con.Res. 206; S.Res. 223;

S.Res. 262; S.Amdt. 3280 to H.R. 4576). Although Russia declared by mid-2000 that

it had re-occupied Chechnya and suppressed organized military resistance, human

rights abuses by Russian forces and attacks by Chechen guerrillas against them have

continued.

The on-going conflict and devastation of the region make most displaced persons

reluctant to return, threatening them with added suffering this winter. Foreign

Operations Appropriations for FY2001 (P.L. 106-429) withholds 60% of planned

funding for Russia until the President determines and certifies in writing that Russia

is cooperating with international efforts to investigate alleged war crimes in Chechnya,

is providing full access to Chechnya for humanitarian aid, and is pulling its weaponry

out of Chechnya in accordance with limits set by the Conventional Armed Forces in

Europe Treaty. It also calls for the obligation of not less that $10 million for

humanitarian aid to displaced Chechens.

During the past decade, the United States has allocated almost $3 billion in

economic assistance to facilitate the transition of Russia to a democratic system and

free market economy. Although most of the aid in recent years has been directed at

developing private sector business and the growth of civil society, the 106th Congress

sought to influence Russia’s actions and make its own policy views known to the

Administration by conditioning aid targeted to the government of Russia. The sale

CRS-35

of nuclear reactor technology to Iran and possible discrimination against religious

minorities were just two of the concerns on which Congress conditioned aid to Russia

during the 106th Congress. During the election campaign, Republican congressional

criticism of the Administration’s implementation of the aid program grew. The 107th

Congress is likely to conduct extensive oversight and review of the Russia aid

program and continue to use aid to influence Russian behavior.

CRS Products

Arms Control after START II: Next Steps on the U.S.-Russian Agenda, by (na m

e redacted)

and (name redacted), CRS Report RL30660

The Former Soviet Union and U.S. Foreign Assistance, by (nameredacted),CRS Issue Brief

IB95077

Russia, by (name redacted), CRS Issue Brief IB92089

U.S.-Russia Moscow Summit, June 3-5, 2000: outcome and implications, by James P.

Nichol, CRS Report RS20604

Trade and Finance

(name redacted), Specialist in International Trade and Finance

Globalization, as defined by the growing integration of the world economy, has

been accelerating and deepening ever since a more open global trading and financial

system was established following World War II. This postwar system helped raise

economic growth and incomes worldwide. However, changes in the level and

composition of trade and investment flows also create winners and losers as

technologies, industries, and employment opportunities rise and fall in their wake.

With the U.S. trade deficit at an unprecedented level, the United States is now more

open and, thus, more sensitive to shifts in the world economy. In this context, the

107th Congress faces a variety of trade issues – multilateral and bilateral – that are

complex and, often, politically sensitive. In addition, the financial crises of the 1990s

demonstrated that the United States is not immune to the effects of abrupt shifts in

international financial flows. Reform of the International Monetary Fund (IMF) and

of the architecture of the international financial system are, therefore, also important

issues.

Export-related Issues

Export Administration Act Renewal. ((name redacted), Analyst in

International Trade and Finance) In the 107th Congress, there will be continued

efforts to rewrite The Export Administration Act of 1979 (EAA79). Efforts to

reauthorize the Act, which regulates the export of dual-use goods and technologies,

have been affected by the continuing tension between national security and

commercial concerns. Since the last expiration of EAA79 in 1994, dual-use export

controls on sensitive goods and technology have been continued and modified by the

CRS-36

President, acting under the authority of the International Emergency Economic

Powers Act. During the 106th Congress, legislation was crafted by the Senate Banking

Committee to rewrite and update EAA79. The Committee held hearings on S.1712,

the Export Administration Act of 1999; it was reported out unanimously in September

1999, but holds were placed on the measure by Senators concerned with national

security aspects of the legislation. Late in the 106th Congress, the Export

Administration Modification and Clarification Act (P.L. 106-508), a measure to

reauthorize and extend EAA79 for one year, was signed into law on November 13,

2000. In the 107th Congress, the Export Administration Act of 2001 (S. 149) was

introduced on January 23, 2001 to rewrite and modernize EAA79. Key issues in the

debate will be the impact of export controls on national security, non-proliferation,

foreign policy objectives and industrial competitiveness; the controllability of

technology; the prospects of multilateral cooperation from our allies; and the most

efficient administrative mechanism to reconcile these different interests.

CRS Products

Encryption Export Controls, by Jeanne Grimmett, CRS Report RL30273

The Export Administration Act: Prospects and Controversy, by (name redacted), CRS

Report RL30689

Export Administration Act of 1979 Reauthorization, by Craig Elwell, Jeanne

Grimmett, and Robert Shuey, CRS Report RL30169

Export Controls: An Analysis of Economic Costs, by Craig Elwell, CRS Report

RL30430

Export-Import Bank Reauthorization. (James K. Jackson, Specialist

in International Trade and Finance) The Export-Import Bank is the chief U.S.

government agency that helps finance American exports. With a budget of nearly $1

billion, the Bank finances around 5% of U.S. exports a year. Eximbank’s main

activity is to provide guarantees and insurance to commercial banks to make trade

credits available to U.S. exporters. Such government-sponsored trade financing,

however, has long been controversial. Eximbank supporters maintain that the Bank’s

programs are necessary for U.S. exporters to compete with foreign subsidized export

financing and also to pressure foreign governments to eliminate concessionary

financing. Eximbank opponents, however, argue that the Bank’s programs serve only

to aid rich multinational firms and that its activities draw from financial resources

within the economy that would be available for other uses. Congress will be faced

with reauthorizing the Bank’s programs before September 30, 2001, which could

spark debate over not only the Bank’s programs, but broader U.S. trade issues as

well, such as the U.S. trade deficit, export promotion, and “corporate welfare.”

CRS Products

Export-Import Bank: Background and Legislative Issues, by (name redacted), CRS

Report 98-568

CRS-37

Foreign Sales Corporation. (David L. Brumbaugh, Specialist in Public

Finance) The Foreign Sales Corporation (FSC) provisions of the U.S. tax code

permit U.S. firms to exempt between 15% and 30% of export income from taxation.

In 1998, however, the European Union (EU) complained to the World Trade

Organization (WTO) that FSC is an export subsidy and so violates the agreements on

which the WTO is based. A WTO panel subsequently supported the EU. Under

WTO procedures, the FSC provisions were required to comply with the WTO

agreements by November 1, 2000, or the United States might face compensatory

damages or retaliatory measures. In November, Congress approved H.R. 4986,

which replaces the FSC provision with an export tax benefit intended to achieve WTO

compliance. However, the EU has stated that it does not believe the new provisions

to be WTO-compatible. It has asked the WTO to rule on the matter and to authorize

retaliatory tariffs if the replacement is not WTO-compatible.

CRS Products

The Export Tax Benefits and the WTO: Foreign Sales Corporations (FSCS) and the

Extraterritorial (ET) Replacement Provisions, by David L. Brumbaugh, CRS Report

RS20746.

The Foreign Sales Corporation (FSC) Tax Benefit for Exporting: WTO Issues and an

Economic Analysis, by David L. Brumbaugh, CRS Report RL30684

Import-related Issues

Andean Trade Preference Act (ATPA). ((nam

e redacted), Specialist in

International Trade and Finance) The Andean Trade Preference Act (ATPA) was

signed into law in December 1991, allowing tariff reductions on selected products

from four Andean nations: Bolivia, Colombia, Ecuador, and Peru. The purpose of the

Act is to improve access of these countries’ exports to U.S. markets, thereby

encouraging Andean workers to redirect their economic efforts away from illicit coca

cultivation and cocaine production toward legal products such as cut flowers, fish,

metals and related goods. The ATPA will expire in December 2001 and the

congressional debate over whether to extend ATPA trade preferences will likely focus

on two overriding issues: 1) its effects on the U.S. economy; and 2) the extent to

which the act’s provisions can be linked to decreased drug related economic activity

and economic diversification and growth in the Andean countries. (See Latin

America, above)

Cuba. (Ian F. Fergusson, Analyst in International Trade and Finance)

U.S. policy toward Cuba during the 107th Congress is likely again to focus on the

process of economic and political reform. Advocates of the continuation of the

economic embargo and political isolation of the regime maintain that constant

pressure on the Cuban government is necessary to achieve reforms. Others argue that

the embargo has failed, and that the economic sanctions have hurt the Cuban people

and diplomatically isolated the United States without affecting the government. The

106th Congress lifted license requirements for food and medicine to Cuba and other

nations on the list of terrorist entities in the FY2001 Agriculture Appropriation (P.L.

CRS-38

106-387). Purchases of U.S. food and medicine cannot be financed by U.S. banking

institutions under the bill, but third country financing of these purchases are permitted.

Also in the agriculture bill, new restrictions were placed on travel to Cuba.

Legislation likely to be introduced in the 107th Congress may continue to reflect

interest in the economic embargo, including such issues as domestic financing for food

and medicine purchases and travel policies. Other legislation may be proposed to

tighten provisions of the embargo or to lift the embargo entirely. (See sections on

Sanctions, above)

CRS Products

Cuba: Issues for Congress, by (name redacted) and (name redacted), CRS

Report RL30628

Cuba: An Economic Primer, by Ian Fergusson, CRS Report RL30837

Cuba Sanctions, CRS Electronic Briefing Book on Trade, available on the CRS Web

site at [http://www.congress.gov/brbk/html/ebtra108.html]

Cuba: U.S. Restrictions on Travel and Legislative Initiatives in the 106th Congress, by

(name redacted), CRS Report RS20409

International Monetary Fund Reform. ((nam

e redacted), Specialist in

International Trade and Finance) In the fall of 1998, the 105th Congress passed

the Omnibus Consolidated and Emergency Supplemental Appropriations Act for

FY1999 (H.R. 4328, P.L. 105-277) in which it increased the U.S. quota of the

International Monetary Fund (IMF) and made a commitment to the New

Arrangements to Borrow (NAB). Given the financial crises in Asia, Russia, and

Brazil, increasing the IMF’s resources was a controversial issue. Many observers

questioned its ability to support international financial stability and doubted the

wisdom of traditional IMF responses to financial crises, particularly IMF

conditionality, or the economic policies it requires of borrowing countries. Congress

created the International Financial Institutions Advisory Commission (the Meltzer

Commission) to evaluate and recommend future U.S. policy toward the global

financial institutions, particularly the IMF. (See International Financial Institutions,

above) The Commission released its final report on March 8, 2000, calling for

clarification of IMF’s mission and operations, enhanced transparency, greater private

sector participation in crisis resolution, deep structural reform of developing country

financial systems, and in particular, restricting lending to very short-term liquidity

needs. How the IMF proceeds to reform internal policies and lending practices likely

will be monitored closely by the 107th Congress.

CRS-39

CRS Products

IMF and World Bank Activities in Russia and Asia: Some Conflicting Perspectives,

coordinated by (name redacted), CRS Report RL30467

IMF Reform and the International Financial Institutions Advisory Commission, by (n

ame redacted), CRS Report RL30635

The International Monetary Fund: An Overview of Its Mission and Operations, by (n

ame redacted), CRS Report RL30575

Renewing the Generalized System of Preferences. ((name redac

ted),

Specialist in International Trade and Finance) The generalized system

of preferences (GSP), authorizing duty-free importation of most products from less

developed countries (LDCs), with enhanced preferences for least-developed

developing countries (LDDCs), is slated to expire on October 1, 2001, and will

require legislative extension and, if deemed appropriate, some modifications. The

GSP covers 146 LDCs, 39 of them LDDCs, and resulted in 1999 in duty-free imports

amounting to $13,681.0 million, accounting for 10.3% of total imports from the

countries involved and 1.3% of all U.S. imports.

The 107th Congress may also wish to deal with legislation, introduced but not

considered in the 106th Congress, designating Northern Ireland and northern border

counties of the Irish Republic as beneficiary countries of the GSP, and with a measure

providing preferential treatment to countries of Southeast Europe, under a program

closely patterned after the Andean preference.

CRS Products

Generalized System of Preferences, by (name redacted), CRS Report 97-389

Generalized System of Preferences, CRS Electronic Trade Briefing Book, available on

the CRS Web site [http://www.congress.gov/brbk/html/ebtra29.html]

Trade Adjustment Assistance (TAA) Renewal. ((nam e red acted),

Specialist in International Trade) Three “Trade Adjustment Assistance” programs

offer either extended unemployment compensation and training benefits to workers,

or technical assistance to firms adversely affected by trade. All three programs were

reauthorized through FY2001 by the Consolidated Appropriations Act, P.L. 106-113,

and will need to be reauthorized by September 30, 2001. The 107th Congress may

consider whether to combine two programs and extend eligibility, so that workers are

eligible for assistance after they lose their jobs because their plant relocates to any

country. Currently only the NAFTA Transitional Adjustment Assistance Program,

(NAFTA-TAAP) offers benefits to workers whose plants relocate – but only if the

plants relocate to Mexico or Canada. Under both NAFTA-TAAP and the original

Trade Adjustment Assistance (TAA) program, workers are eligible for benefits if

imports “contribute importantly” to their job loss. The Administration estimates that

CRS-40

combining the two programs and extending eligibility (plus increasing the spending

cap for training) would add $39 million, or an extra 9% to the projected $415 million

funding for the two programs for FY2001. In 1999, TAA and NAFTA-TAA together

paid unemployment compensation benefits averaging $6632 to 38,000 recipients, and

training benefits averaging $3,133 to 30,000 recipients. The Trade Adjustment

Assistance Program for Firms assisted about 118 businesses in developing and

implementing “recovery strategies” at an average cost of $61,000 per firm.

CRS Products

Trade Adjustment Assistance for Firms, by (name redacted), CRS Report RS20210

Trade Remedy Reform. (William H. Cooper, Specialist in International

Trade and Finance) The 106th Congress considered a number of bills that would

have amended U.S. trade remedy programs for U.S. industries injured or threatened

by injury from unfairly or fairly traded imports. The programs authorize remedies in

the form of temporary high tariffs or other measures. A number of bills were

responses to the U.S. steel industry’s concerns about surges in steel imports in 1998

and 1999 and what industry representatives considered to be the failure of U.S. trade

remedy programs to respond adequately to injurious import surges. The 106th

Congress did pass legislation (P.L. 106-387, the Agriculture Appropriations Bill) to

require countervailing and antidumping duties to be distributed to firms injured by

these trade practices. However, the steel industry has indicated that trade remedy

reform needs to go further, and it will probably continue to press Congress for

additional reforms of U.S. trade remedy statutes during the 107th Congress.

CRS Products

Trade Remedy Law Reform in the 106th Congress, by William H. Cooper, CRS Report

RL30461

Negotiations and Agreements

Bilateral and Regional Free Trade Agreements. (William H. Cooper,

Specialist in International Trade and Finance) Free trade agreements (FTAs) are

arrangements between or among countries that eliminate tariffs and other barriers to

mutual trade. They require congressional approval before going into effect. The

United States has forged several bilateral and regional FTAs, the largest being the

North American Free Trade Agreement (NAFTA) with Canada and Mexico. The

United States also has an agreement with Israel that includes trade with the West

Bank and Gaza. In June 2000, the United States and Jordan began negotiations to

form an FTA, a proposed arrangement that seems to have attracted broad support in

the Congress. The agreement was completed and signed by President Clinton and

King Abdullah on October 24, 2000. But legislation enacting the agreement must

await the next Congress and is expected to be introduced early in the 107th Congress.

On November 16, President Clinton and Singapore Prime Minister Goh Chok Tong

announced that the United States and Singapore would begin negotiations to establish

CRS-41

a FTA. Discussions, but not formal negotiations, have taken place between U.S. and

Chilean officials over establishing an FTA, and some members of Congress have

suggested that the United States should negotiate FTAs with other countries,

including Australia, and New Zealand, and other countries of the Pacific region.

CRS Products

U.S.- Jordan Free Trade Agreement, by (name redacted), CRS Report RL30652

Fast-Track Negotiating Authority.

((name r edacted),

Specialist in

International Trade and Finance) Fast-track negotiating authority provides that,

if the President consults with Congress during negotiation of trade agreements and

notifies Congress before entering into agreements, Congress will consider and vote

on legislation needed to implement the agreements expeditiously, with limited debate,

and no amendment. This authority was granted several times in the past for major

trade negotiations, but it has expired. No major action to renew the authority was

taken during the 106th Congress, but congressional leaders have said that fast-track

renewal will be one of the leading trade issues in the 107th Congress. The debate over

renewal is expected to include discussion of the role of Congress in trade policy and

whether or not to include labor and environment standards as objectives in trade

negotiations.

CRS Products

Fast Track Negotiating Authority, CRS Electronic Trade Briefing Book, available on

the CRS Web site at [http://www.congress.gov/ brbk/html/ebtra9.html].

A Free Trade Area of the Americas (FTAA). ((nam

eredacted), Specialist

in International Trade and Finance) At the second Summit of the Americas, which

took place April 18-19, 1998, in Santiago, Chile, 34 Western Hemisphere nations

formally initiated negotiations to create a Free Trade Area of the Americas (FTAA)

by the year 2005. The goal is to establish an agreement that would reduce barriers

to trade region wide, allowing all countries to trade and invest with each other under

the same rules. Nine FTAA working groups are in the process of drafting the text.

A key U.S. challenge involves crafting an agreement that will promote stability and

development in Latin America and also respond to the diverse political and economic

interests of the United States. The FTAA will be a central focus of debate on

hemispheric integration at the upcoming Summit of the Americas scheduled for April

20-22, 2001 in Quebec City, Canada. Because it is a multilateral agreement and

therefore inherently more complicated to negotiate than bilateral agreements, it may

also be closely tied to any future congressional debate over the need for fast-track

trade negotiation legislation.

CRS-42

CRS Products

A Free Trade Area of the Americas: Toward Integrating Regional Trade Policies, by

(name redacted), CRS Report 97-762

Trade and the Americas, by (name redacted), CRS Issue Brief IB95017

U.S.-Latin American Trade: Recent Trends, by (name redacted), CRS Report 98-840

Vietnam Trade Agreement. (Vladimir N. Pregelj, Specialist in

International Trade and Finance; Mark Manyin, Analyst in Asian Affairs) In

U.S.-Vietnam relations, the primary concern of the 107th Congress will likely be the

U.S.-Vietnam bilateral trade agreement (BTA) which was signed on July 13, 2000.

The agreement provides for the restoration of reciprocal “normal trade relations,”

other bilateral trade-regulating measures as required by law, and comprehensive

additional commitments by Vietnam in the areas of market access, intellectual

property rights, trade in services, and investment. The agreement can enter into force

only if - upon being submitted by the President - it is approved by a joint resolution

of Congress. The language of the resolution is prescribed by law and is to be enacted

by a specific fast-track procedure, applicable to the approval of trade agreements

reinstating NTR on a conditional basis to non-market economy countries. The

procedures involve prescribed, nonamendable operative language, with deadlines for

each legislative stage. After legislative approval (and approval by Vietnam’s National

Assembly), the agreement enters into force by Presidential proclamation and exchange

of notes of acceptance by the parties. Arguments in the congressional debate over the

BTA are likely to focus on Vietnam’s economic and political democratization, human

rights situation, and cooperation in resolving the POW/MIA problem.

CRS Products

Most-Favored-Nation (Normal-Trade-Relations) Policy of the United States, by (name re

dacted), CRS Issue Brief IB93107

Vietnam Trade Agreement: Approval and Implementing Procedure, by (name redac

ted), CRS Report RS20717

The Vietnam-U.S. Bilateral Trade Agreement, by Mark Manyin, CRS Report RL30416

The Vietnam-U.S. Normalization Process, by Mark Manyin, CRS Issue Brief IB98033

CRS-43

Defense Policy

(name redacted), Specialist in National Defense

Congress debates defense policy every year initially in action on defense spending

in the annual congressional budget resolution and, later, when it considers defense

authorization and appropriations bills. Because military readiness was a major issue

in the presidential election campaign, the debate over defense spending may be

particularly significant early in the 107th Congress. Although the military service

chiefs have called for substantial increases in defense spending over the next few

years, congressional action on the defense budget will inevitably be shaped by

competing demands, including tax cuts, Medicare drug benefits, education, and other

priorities. Missile defense may also be on the agenda very early in the 107th Congress

because President Clinton deferred a formal decision on initial deployment of a

nationwide defense in Alaska. The U.S. role in peacekeeping operations in the

Balkans was also a campaign issue, and it raises a number of broader questions,

including relations with allies, and under what circumstances the United States should

be willing to commit its military forces to action in the future. A key defense policy

issue is how to balance funding for short-term readiness, weapons modernization, and

long-term transformation of military forces to cope with future challenges. This issue

may be at the center of a congressionally mandated Pentagon reassessment of defense

policy, called the Quadrennial Defense Review (QDR), that is scheduled to be

completed by September 2001.

The Defense Budget

(name redacted), Specialist in National Defense

In FY1999, funding for national defense increased at a rate greater than inflation

for the first time since FY1985, and spending has continued to climb modestly in

FY2000 and FY2001. The decline in defense spending that began after FY1985, and

that continued for the next thirteen years, was driven initially by pressures to reduce

Federal budget deficits. After the Cold War ended, the Bush Administration proposed

cutting the size of the force from 2.2 million active duty troops to 1.6 million, and, in

a 1990 budget agreement, the Administration and Congress agreed on a cut of about

25% in military spending through FY1995.

The Clinton Administration proposed further cuts in the size of the force,

bringing active duty troop levels to about 1.4 million, and it initially proposed

additional budget cuts totaling about $120 billion over the five years from FY19941999. Subsequently, the Administration periodically added money back to the defense

budget in response to perceived shortfalls, and it allowed the Defense Department to

keep most of the money saved from lower-than-expected inflation. In addition, after

1995, Congress regularly added money to defense budget requests. As a result, after

adjusting for inflation, actual defense spending between FY1994 and FY1999 ended

up being very little different from what the outgoing Bush Administration had

projected over the same period. Much more money, however, went for operation and

maintenance accounts most directly related to short-term readiness, and much less for

weapons acquisition.

CRS-44

Even though funding for readiness-related accounts has continued to climb,

concerns about military readiness have multiplied in recent years. Over the past

couple of years, moreover, Congress has approved substantial pay raises and

expanded personnel benefits in an effort to shore up military recruitment and

retention. The cost of these measures will grow over time. Meanwhile, after several

years of very limited funding for new weapons, senior defense officials, military

service chiefs, and a number of outside analysts argue that money for weapons

procurement, in particular, will have to turn up substantially over the next few years

if the services are to replace rapidly aging weapons as they reach the end of their

planned service lives.

Taken together, all of these factors are creating pressure to increase military

spending substantially. Opinions diverge dramatically, however, on how much more

it is reasonable to invest. For their part, in recent years the military services have

given Congress lists of unfunded priorities, the latest totaling more than $80 billion

over the five years from FY2001-2005. These amounts do not include some very

expensive initiatives, however, including Army proposals to increase the number of

active duty personnel, Navy proposals to add more submarines and surface vessels,

and the full costs of a national missile defense. In view of perceived shortfalls, some

military service chiefs have argued that defense spending should climb from about 3%

of GDP today to 4% or more, an increase of at least $100 billion a year.

Neither the Bush nor the Gore campaigns, however, called for defense increases

of anything approaching that magnitude. Although projected future Federal budget

surpluses appear quite large, competing demands for tax cuts, Medicare prescription

drug coverage, increased education spending, and other priorities also appear

substantial. The need to make choices among proposed force structure increases and

major weapons programs, therefore, may well persist. For Congress, the issue is both

how much to spend on defense and how to set priorities among major defense

programs.

CRS Products

Appropriations for FY2001: Defense, by (name redacted), CRS Report RL30505

Efficiencies in Defense Operations

The Changing U.S. Defense Industrial Base. (Daniel H. Else, Analyst

in National Defense; Gary Pagliano, Specialist in National Defense) The end of

the Cold War precipitated one of the greatest reductions in U.S. defense spending

since the final months of World War II. DOD and the U.S. defense industry have

struggled, coping with smaller defense budgets and changing threats to U.S. national

security. The Cold War’s end also transformed the defense business environment,

marking the rapid worldwide globalization of economics and trade and changes in

DOD policy toward the industry itself. Technological change, especially visible in the

information processing and telecommunications industries, has forced convergence

between civilian and military research and applications. Shrinking defense budgets

CRS-45

worldwide have forced manufacturers of defense products into heightened

competition.

These factors compelled DOD to reassess its half-century relationship with the

U.S. defense industrial base. As a result, DOD policy is changing in two major ways.

First, because the lead in some state-of-the-art product lines had passed from defense

to the commercial sector of the U.S. economy, DOD is reforming the way it buys

equipment. And second, DOD has sought to reform structural aspects of the defense

industrial base itself. Instead of continuing to support excess production capacity

across the board, DOD has focused on preserving defense-unique manufacturing

capabilities, allowing other U.S. defense firms to respond more freely to conventional

market forces.

Congress has traditionally protected economically vulnerable parts of the defense

industry that are critical to U.S. national security, but global changes in the economic

and defense environments are posing new issues for the 107th Congress. First,

continued mergers and acquisitions in the U.S. defense industry raise questions about

maintaining competition. Some maintain that surviving firms have emerged healthier

and more competitive, but others worry about the potential loss of technological

innovation and price competition from fewer companies. Second, defense acquisition

reform has encouraged military use of commercial products in military systems.

Proponents of this approach cite the advantages of rapid access to new technologies

for DOD and the adoption of efficient business practices. Others question the

appropriateness of some products for military applications, and the ability of DOD to

cope with the speed of obsolescence for commercial products. Third, globalization

has increased cross-border flows of information and the availability of technology that

could be used for military purposes.

The result has been pressure for the United States to ease defense-related

technology transfer restrictions that could increase exports of U.S. systems, and help

the U.S. defense supplier base. Critics of this logic, however, worry about the extra

vigilance needed to prevent the unauthorized transfer of U.S. defense technology,

potentially increasing U.S. vulnerabilities. This concern was shown when the Security

Assistance Act of 2000 (P.L. 106-280) was passed requiring that countries desiring

relief from some export licensing requirements must first create a domestic export

control scheme conforming to the U.S. model (including the enactment of relevant

local laws, regulations, and policies) and must execute a bilateral agreement with the

United States, enforceable under international law, to compel adherence to its

provisions.

CRS Products

The U.S. Defense Industrial Base: Trends and Current Issues, by Daniel Else, CRS

Report RL30720

Military Base Closures. (David E. Lockwood, Specialist in U.S. Foreign

Policy and National Defense) A key issue for Members early in the 107th Congress

will be whether or not to authorize new rounds of military base closures. The last

CRS-46

round, initiated in 1995, will be completed by the end of FY2001. For the past four

years, DOD has pleaded for one or two more rounds, but to no avail. The Pentagon

insists that new rounds are necessary in order to bring its base structure reduction

(21%) into equilibrium with its force structure reduction (36%). It argues that

maintaining an excessively large base structure costs money that is desperately needed

to improve military readiness and develop new weapons programs.

Most Members acknowledge the need for additional rounds, but have been

unwilling to authorize establishment of a new base closure commission until

completion of the current congressional term. Two factors have contributed to the

four-year moratorium: (1) continued resentment over President Bill Clinton’s 1995

intervention that prevented the closing of McClellan and Kelly Air Force Bases, and

(2) reluctance to impose hardship on communities that might be targeted for closure

by a new commission. The change in Administrations, however, may provide an

opportunity for Congress to address the issue in a less politically contentious context,

and thereby open the door to one or two new rounds.

CRS Products

Military Base Closures: Time for Another Round?, by (name redacted), CRS

Report RL30051

Military Base Closures: Where Do We Stand?, by (name redacted), CRS Report

RL30440

Outsourcing, Privatization, and Infrastructure Initiatives. ((name r

edacted),

Analyst in National Defense) The Department of Defense (DOD)

is trying to reduce its infrastructure costs to achieve savings that could help finance

future weapons and military equipment modernization. DOD has identified

competitive sourcing competitions between public and private sectors as a key tool

to help reduce costs. Outsourcing and privatization initiatives through the OMB

Circular A-76, and a closely-related initiative, the Federal Activities Inventory Reform

Act (FAIR), have been viewed as one vehicle to improve the efficiency of DOD

business practices, while streamlining their operational capabilities to produce

budgetary savings to fund critical needs in readiness and modernization. Other

innovative strategies, like strategic sourcing, have been pursued in an effort to

generate savings not achieved through the OMB Circular A-76 alone.

Both the 105th and 106th Congresses passed a number of defense reform

provisions that both supported and sought to qualify DOD’s outsourcing and

privatization initiatives. The 105th Congress passed the FAIR Act (P.L. 105-270),

which requires that by June 30thof each year, federal agencies must submit annual lists

of jobs that are potential candidates for outsourcing. Jobs must be classified as either

(1) inherently governmental, (2) commercial, or (3) commercial-exempt. OMB

released the first round of job lists on October 1, 2000. They showed 258,000

employees at 26 agencies, including DOD, qualifying for consideration. According

to OMB, approximately 75% of those jobs could be outsourced. In February 2001,

DOD released its final 2000 inventory of federal jobs that could be performed by

private sector companies. Reportedly, out of some 452,807 civilian jobs that could

CRS-47

be performed in the private sector, approximately 39% of those jobs are likely

candidates for outsourcing.3

The 106th Congress enacted the FY2001 Defense Appropriations Bill (P.L. 106259) which prohibits the conversion of DOD functions from government to contractor

performance unless a “Most Efficient Organization” analysis is completed and

certified to House and Senate Defense Appropriations Subcommittees. The bill

authorizes public-private competitions for depot maintenance and repair work, under

certain conditions. The FY2001 Defense Authorization Bill (P.L. 106-398) mandates

that the Comptroller General conduct two studies on (1) the use of “contract

bundling” in military construction contracts (report due February 1, 2001), and (2)

the policies and procedures governing the transfer of federal commercial activities

from the public sector to the private sector (report due May 1, 2002); additionally, the

Secretary of Defense is required to conduct a study on the impact of purchasing

military parts, components and materials from foreign sources (due one year from bill

enactment.)

The 107th Congress will likely face increased calls for a reshaping of the civilian

defense acquisition workforce due to estimates that some 50% of workers will be

retirement eligible in 2005, and may renew legislative efforts begun in the 106th

Congress to analyze whether public-private defense competitions produce real, longterm savings.

CRS Products

Defense Acquisition Reform: Status and Current Issues, by (name redacted),

CRS Issue Brief IB96022

Defense Acquisition Workforce: Issues for Congress, by (name redacted), CRS

Report 98-938

Defense Outsourcing and the OMB Circular A-76 Policy, by (name redacted),

CRS Report RL30392

Defense Outsourcing and the OMB Circular A-76 Policy and Options for Congress Proceedings from a CRS Seminar, by (name redacted), CRS Report

RL30574

Military Readiness

Edward F. Bruner, Specialist in National Defense

Readiness was a significant military issue addressed by the 106th Congress, and

may well be a key issue for the 107th Congress. During the 2000 presidential and

congressional campaigns, Democratic candidates argued that the Clinton

Administration had made readiness a priority and that U.S. armed forces were

3

Saldarini, Katy. Final Round of Outsourcing Lists Released. Government Executive.

February 12, 2001.

CRS-48

demonstrably the most powerful in the world. Republican candidates argued that the

Administration was wearing out the forces through over use and had allowed many

pockets of unreadiness to develop. The issue is complicated by the need for policymakers to define the “ready for what” questions and military leaders to create

accurate and useful measurements of the situation in the field, where material,

quantifiable factors interact with human, subjective factors. In the last few years,

Congress has legislated that DOD provide monthly readiness reports and the

Pentagon has developed more sophisticated ways to apply unit status reports to

assessments of overall joint force readiness to meet various contingencies. In recent

testimony before Congress, the Joint Chiefs of Staff judged that the force was ready

to execute the national military strategy by winning a first Major Regional

Contingency (MRC), but that the added required ability to win a second MRC would

involve higher risk. Service Chiefs then explained why “first to fight” units were

ready, but that the rest of the force had serious readiness concerns.

The roots of readiness concerns today stem from various defense planning

decisions taken since the end of the Cold War. Notably, the force structure (but not

the infrastructure) was rapidly downsized by more than 30%; the defense budget was

steadily decreased in real terms until FY1999; and military procurement and

recapitalization were significantly reduced in favor of paying for current readiness and

unbudgeted operations in such places as the Persian Gulf, Africa, Haiti, and the

Balkans. A smaller force and greater commitments led to increased operations tempo

for many units and their personnel and equipment.

Even greater stress was felt in high demand, low density specialized units such

as electronic combat aircraft and light infantry. Weapons and vehicles age, require

ever more maintenance, and consume funds that then become unavailable to purchase

new weapons and vehicles – a condition labeled by some as a “death spiral.” Many

training and support facilities have backlogs of deferred maintenance and some

inventories are low; e.g., some fighter pilots are denied realistic training because

equipment such as LANTIRN night navigation pods and selected munitions are not

available at all training ranges. These conditions cumulatively have resulted in

pockets of reduced readiness throughout all Services.

The 107th Congress may consider whether additional measures to improve

readiness are needed and in what priorities. Options include reduction of operational

requirements; increases or decreases in force structure; short term versus long term

readiness; increased funding – for operation and maintenance, procurement, other

procurement, or munitions; or more base closures. All of the material readiness

problems noted above also affect human factors, such as proficiency and morale. For

that reason, the 107th Congress may review or extend actions of the 106th in regards

to personnel recruitment and retention, discussed below.

CRS Products

Appropriations for FY2001: Defense, by Steven Daggett, CRS Report RL30505

Electronic Warfare: EA-6B Aircraft Modernization and Related Issues for Congress,

by (name redacted), CRS Report RL30639

CRS-49

Personnel-related Concerns in Recruitment and Retention. ((name

redacted), Specialist in National Defense) The military services have had

considerable problems since the late 1990s in recruiting and retaining sufficient

numbers of qualified military personnel. Although much less severe than the last

episode of such problems in the late 1970s, these problems have required a great deal

of high-level attention and increased resources before beginning to turn around, at

least in the short run, in late 1999 and 2000. The broad reasons for difficulties in both

attracting new recruits and retaining capable career personnel are similar; in addition,

what a young person hears, accurately or not, about the benefits available to older

career members with families can have an indirect effect on the enlistment decisions

of young, prospective recruits as well. Despite recruiting statistics in 2000 which are

much more encouraging than those of 1999, all of these recruitment and retention

issues will continue to be of great concern to the Congress in 2001, being translated

into legislation in the FY2002 defense authorization and appropriation bills.

Perhaps the single most important immediate factor is the need for the services

to compete with actual and perceived career opportunities in a civilian economy

currently in the midst of an expansion of unprecedented depth and length. To deal

with this problem the Congress increased across-the-board pay levels and a variety of

special pays in bouses–often at a faster pace and with greater concern than that stated

by DOD ( P.L. 106-65, FY2000 National Defense Authorization Act). In 1999, over

DOD objections, Congress also repealed legislation first enacted in 1986 that would

have considerably reduced the retired pay of those career members who would have

begun to retire in 2006, but who were starting to make decisions to stay in or get out

of the service in the late 1990s. In addition to cash compensation, recruiting and

retention are also affected by the extent to which military personnel think they can

afford modern housing of size and sophistication comparable to that in which their

civilian counterparts live; health care for self and family that meets the same criteria;

schools and educational benefits; and a sense of community that, often, civilian

neighborhoods may not provide.

Another major reason for difficulty in recruiting and retention is armed forces

that are too small to provide sufficient units, personnel, and equipment to meet

requirements for both overseas deployments (long-term and unexpected

contingencies) and maintenance of an adequately trained and equipped strategic

reserve in the United States. This has led to overwork, insufficient time for units to

train, and longer periods of family separation, all detrimental to career retention–and

first enlistments, if prospective military recruits get a negative picture from older

family members and friends. Some also suggest that, although it is difficult to

measure, career retention may be affected by concern over “military social issues”

such as DOD policy on homosexual conduct by military personnel and the roles of

women in the military; military deployments for peacekeeping and/or humanitarian

relief purposes; and actions which supposedly make military training insufficiently

rigorous.

CRS-50

CRS Products

Military Health Care: The Issue of “Promised” Benefits, by (name redacted), CRS

Report 98-1006

Military Medical Care Services: Questions and Answers, by Richard A. Best, CRS

Issue Brief IB93103

Military Retirement: Major Legislative Issues, by (name redacted), CRS Issue Brief

IB85159

Missile Defense

NMD and the ABM Treaty. (Steven A. Hildreth, Specialist in National

Defense; Amy L. Woolf, Specialist in National Defense) For several years, the

Clinton Administration considered a plan to begin deploying a National Missile

Defense (NMD) system of up to 100 ground-based interceptors, probably in Alaska,

by 2005. In addition to the interceptors, a number of other radars would have to have

been upgraded and a new missile defense radar constructed as part of the overall

system. The official cost estimate for this system was about $36 billion.

The proposed system was controversial. Some critics charged that the system

was not necessary and too expensive, given the low likelihood of ballistic missile

threats to the United States. On the other hand, some believed the system could not

be deployed fast enough to counter imminent ballistic missile threats. Hence, many

argued that other systems, such as a naval NMD could be deployed more easily, more

quickly, and at less cost. Finally, other technical critics (both supporters and

opponents of NMD) charged that the NMD technology envisioned in the plan was

simply not ready for a deployment decision.

On September 1, 2000, President Clinton announced that he had decided not to

authorize deployment of a National Missile Defense (NMD) system. He stated that

he could not conclude “that we have enough confidence in the technology, and the

operational effectiveness of the entire NMD system, to move forward to deployment.”

Consequently, the planned deployment date of 2005 will slip, but research and

development will continue and the United States will continue to discuss this system

and possible changes to the ABM Treaty, with Russia. The President further stated

that the final decision on deployment would be left to the next Administration.

Officials in the Bush Administration have stated that they will support the deployment

of NMD, and will likely develop a more robust architecture that includes land, sea,

and space-based components.

The Clinton Administration’s planned architecture for NMD was inconsistent

with the limits in the 1972 Anti-Ballistic Missile (ABM) Treaty. According to that

Treaty, the United States can deploy a single ABM site, with up to 100 interceptors,

around ICBM silo launchers or its national capital, neither of which are in Alaska. As

a result, the Administration held discussions with Russia in an effort to modify the

Treaty so that the United States could deploy a limited NMD in Alaska. Russia has

refused to accept any modifications or amendments to the Treaty, arguing that any

CRS-51

changes would upset strategic stability and insisting that the U.S. deployment of an

NMD in Alaska would eventually undermine Russia’s nuclear deterrent. The Clinton

Administration indicated that it might consider withdrawing from the Treaty, if Russia

continued to refuse to mo

This text is long and has been trimmed here. Open the source document for the complete record.