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# Legislative Bulletin.................................................April 16, 2008

**Contents:**

> **H.R. 2634**---Jubilee Act for Responsible Lending and Expanded Debt
> Cancellation---Including Amendments

H.R. 2634---Jubilee Act for Responsible Lending and Expanded Debt
Cancellation (*Waters, D-CA*)

**[Order of Business]{.underline}**: The bill is scheduled to be
considered on Wednesday, April 16^th^, subject to a structured rule
([H.Res.
1103](http://thomas.loc.gov/cgi-bin/query/z?c110:H.Res.1103:/)), making
four amendments in order (summarized below).

**[Summary]{.underline}**: H.R. 2634 would require the Secretary of the
Treasury to begin negotiations within the Paris Club of Official
Creditors (an informal group of the wealthiest countries that helps
provide debt restructuring to indebted countries and their creditors),
the International Monetary Fund (IMF), the World Bank, and other
international financial institutions to:

-   Cancel all debts owed to all the financial institutions by all
    eligible low-income countries;

-   Finance such cancellations from the ongoing operations, procedures,
    and accounts of each institutions;

-   Cancel **all** debts owed to the United States by all eligible
    low-income countries;

-   Ensure that any waiting period for such cancellation is "not
    excessive" (not defined);

-   Ensure that debt cancellation is not paired with reductions in other
    development assistance to the affected countries by the
    international financial institutions and bilateral creditors; and

-   Encourage each eligible low-income country to allocate at least 20%
    of its national budget to such social services as basic health care,
    education, and clean water for all people in the country.

Eligible low-income countries would be those who:

-   Are currently eligible for financing from the International
    Development Association but not the World Bank;

-   Do not qualify for debt relief under the Heavily Indebted Poor
    Countries Initiative (HIPC) or the Multilateral Debt Relief
    Initiative (MDRI);

-   Have "transparent and effective" budget management systems that
    ensure that the savings from debt relief go toward poverty
    reduction;

-   Do not have an "excessive" level (not defined) of military
    expenditures;

-   Have not "repeatedly" (undefined) provided support for acts of
    international terrorism;

-   Are cooperating with international narcotics control efforts; and

-   Do not engage in a "consistent pattern" (undefined) of "gross"
    violations (undefined) of internationally recognized human rights.

The Secretary would have to commence efforts within the international
financial institutions to [limit the conditions for debt
relief]{.underline} for these newly eligible countries, except requiring
a debtor nation to:

-   Take steps (undefined) to ensure that the financial benefits of debt
    relief are applied to anti-poverty initiatives;

-   Make policy decisions through transparent and participatory
    processes;

-   Adopt an integrated development strategy;

-   Implement transparent budget procedures, "good governance"
    (undefined), and effective anticorruption measures;

-   Broaden public participation in, and understanding of, poverty
    reduction;

-   Promote the participation of citizens and nongovernmental
    organizations in the economic policy choices of government; and

-   Produce a publicly-available annual report on how the savings from
    debt cancellation were used.

The President would have to annually report to Congress on the
condition-limitation activities just described.

The bill would also direct the Secretary of the Treasury to immediately
begin efforts to promote more transparent lending processes within the
international financing community. The Secretary would also have to work
to adopt a binding international legal framework that prohibits
creditors from taking financial advantage of debt relief through the
terms of lending to beneficiary countries and that creates an
independent entity to sanction violators of this framework.

The Secretary would also have to seek financing standards that assure,
among other things, the avoidance of new "odious" debt (not defined), as
well as the development of renewable energy and the transition away from
the dependence on oil.

The Government Accountability Office (GAO) would have to conduct an
audit of the debt portfolios of previous governments where there is
"significant evidence" (not defined) that "odious, onerous, or illegal"
loans (not defined) were made to the government.

The full record (redacted as necessary, with explanation) of the remarks
of U.S. executive directors at meetings of the boards of directors of
the international financial institutions regarding debt cancellations
would have to be posted for public viewing on the Treasury Department's
website.

The bill cites as one basis for this legislation the finding by a
January 2007 report by the United Nations Human Rights Council that all
low-income countries should be eligible for debt cancellation.

The bill also contains a sense of Congress that, while pressing forward
on new debt-relief programs, the U.S. should become current in its
existing debt relief obligations, including \$595.8 million for
outstanding arrearages to the International Development Association and
regional development banks.

According to the Financial Services Committee, the bill would extend
debt relief to 24 countries, although Vietnam is declining to
participate, leaving the total at 23 countries. Eight countries would be
immediately eligible, while the remaining 15 countries would need to
improve their human rights and financial management practices to achieve
eligibility. Total debt relief could exceed \$6 billion.

**[Additional Background]{.underline}**: The "Jubilee" in this bill's
title refers to the Jubilee USA Network, an alliance of more than 80
religious denominations and faith communities, and human rights,
environmental, labor, and community groups working for the cancellation
of international debts "to fight poverty and injustice in Asia, Africa,
and Latin America." <http://www.jubileeusa.org/about-us>. The network
cites a biblical basis for its name and activities as follows:

> In the Jubilee Year as quoted in Leviticus, those enslaved because of
> debts are freed, lands lost because of debt are returned, and
> community torn by inequality is restored.
>
> Today international debt has become a new form of slavery. Debt
> slavery means poor people working harder and harder in a vain effort
> to keep up with the interest payments on debts owed to rich countries
> including the US and international financial institutions such as the
> International Monetary Fund (IMF) and the World Bank. The Jubilee USA
> Network brings together people to turn this reality around by active
> solidarity with partners worldwide, targeted and timely advocacy
> strategies and educational outreach. Please join us in working for
> Jubilee justice.

The [Heavily Indebted Poor Countries
Initiative](http://www.imf.org/external/np/exr/facts/hipc.htm) (HIPC)
has relieved about \$50 billion in debt from 33 countries since 1996
(when the initiative was started).

The [Multilateral Debt Relief
Initiative](http://www.imf.org/external/np/exr/facts/mdri.htm) (MDRI),
spawned in 2005 by an agreement among the United States and other G-8
nations, and linked to the HIPC, has cancelled the debts of 22 nations
to the International Monetary Fund (IMF), the World Bank, and the
African Development Bank.

The HIPC focuses on debt reduction and reform, while the MDRI focuses on
debt cancellation for countries who have completed, or will soon
complete, their HIPC obligations.

**[RSC Bonus Fact]{.underline}**: Most debt-relief countries under
existing debt relief frameworks (HIPC and MDRI) are in Africa.
<http://www.imf.org/external/np/exr/facts/mdri.htm>.

**[Committee Action]{.underline}**: On June 7, 2007, H.R. 2634 was
referred to the Financial Services Committee, which held hearings on it
on November 8, 2007. On April 3, 2008, the committee marked up and
ordered the bill reported to the full House by voice vote.

**[Possible Conservative Concerns]{.underline}**: [NOTE]{.underline}:
The following concerns are based on the reported bill; some of the
concerns would be addressed in the Manager's Amendment, summarized
below.

Some conservatives may be concerned at how this bill could allow the
expansion of debt relief eligibility to countries that have supported
international terrorism. Governments that have "repeatedly" (undefined)
supported such acts would not be eligible, but governments that have
supported one act of terrorism, regardless of size, or perhaps
intermittent acts of terrorism, would be eligible.

Similarly, some conservatives may be concerned about how this bill could
allow the expansion of debt relief eligibility to governments that have
violated human rights. Governments that do not engage in a "consistent
pattern" (undefined) of "gross" violations (undefined) of
internationally recognized human rights would not be eligible for the
expanded debt relief; however, governments that have an
[in]{.underline}consistent pattern of gross violations---or a consistent
pattern of [less-egregious]{.underline} violations---would be eligible
for debt relief.

Furthermore, amalgamating [all]{.underline} debts of certain countries
as eligible for cancellation ignores the fundamental premise of the
bill, to address debts that were made under extremely disadvantageous
circumstances. Indebted countries might have legitimate, fair, and
manageable debt obligations that should not be assumed to be unfair,
especially since doing so would make it harder for these countries to
get future loans from wary creditors.

Some conservatives may also object to the bill's description of
privatization conditions and budget reforms (as part of debt
cancellation) as "harmful."

The Secretary would also have to seek financing standards that assure,
among other things, the avoidance of new "odious" debt (not defined), as
well as the development of renewable energy and the transition away from
the dependence on oil. Some conservatives may question the discouraging
of oil, which is plentiful in many low-income countries, and the
encouraging of renewable energy, which may be impractical for these
nations at this stage in their development.

Some conservatives may also be concerned with the bill's negative
approach to "excessive" military expenditures, a term that is left
undefined and a consideration that does not account for future security
concerns that an individual nation may face.

The bill cites as one basis for this legislation the finding by a
January 2007 report by the United Nations Human Rights Council that all
low-income countries should be eligible for debt cancellation. The UN
Human Rights Council, with members such as Angola, China, Cuba, Nigeria,
and Saudi Arabia, has, among other things, become known for its
anti-Israel rhetoric and actions and would likely not be seen as a model
for principles of relieving human suffering by many conservatives.

Lastly, some conservatives have also expressed concern that further debt
relief fails to give poorer nations the long-term assistance they need,
which would best come from encouraging private investment and trade in
those nations. Enhanced debt relief could actually serve to reduce
foreign private investment in poor nations.

**[Administration Position]{.underline}**: The Statement of
Administration Policy (SAP) for H.R. 2634 expresses opposition to the
bill, for similar reasons to those noted above in the "Possible
Conservative Concerns" section, but does not include a veto threat.
<http://www.whitehouse.gov/omb/legislative/sap/110-2/saphr2634-r.pdf>

**[Cost to Taxpayers]{.underline}**: Because Congress must approve any
agreements to cancel bilateral or multilateral debts, CBO reports that
H.R. 2634, *per se*, would have no budgetary impact.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: The bill would expand the number of
countries eligible for international debt relief, directly impacting
U.S. taxpayers.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: No.

**[Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax
Benefits/Limited Tariff Benefits?]{.underline}**: The Financial Services
Committee, in [House Report
110-575](http://thomas.loc.gov/cgi-bin/cpquery/R?cp110:FLD010:@1(hr575)/),
asserts that, "H.R. 2634 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in clause 9
of rule XXI."

**[Constitutional Authority]{.underline}**: The Financial Services
Committee, in [House Report
110-575](http://thomas.loc.gov/cgi-bin/cpquery/R?cp110:FLD010:@1(hr575)/),
cites constitutional authority in Article I, Section 8, Clauses 1 (the
congressional power to promote the general welfare) and 3 (the
congressional power to regulate interstate commerce).

**[Outside Organizations]{.underline}**: The National Taxpayers Union
(NTU) has expressed its opposition to this legislation
[here](http://www.ntu.org/main/letters_detail.php?letter_id=588/) and
has indicated that it will rate this vote in its 2008 ratings of
Congress.

**[Amendments Made in Order under the Rule]{.underline}**: The
structured rule (H.Res. 1103) makes in order the following four
amendments, each debatable for ten minutes.

[*Frank (D-MA)*/ Bachus (R-AL)/ Biggert (R-IL)]{.underline}. Manager's
Amendment. This amendment would:

-   Make all governments who have supported acts of international
    terrorism (as opposed to just "repeatedly" supported such acts, as
    in the underlying bill) ineligible for expanded debt relief under
    this bill;

-   Make all governments who engage in a pattern of gross violations of
    human rights ineligible for debt cancellation, as opposed to just
    those with a "consistent" pattern of such violations (as in the
    underlying bill);

-   Require that countries eligible for debt cancellation under the bill
    must be complying with the State Department's minimum standards for
    combating human trafficking, cooperating with U.S. efforts to stop
    illegal immigration into the U.S., and committed to free and fair
    elections;

-   Clarify that eligible countries must be cooperating ***with the
    United States*** on international narcotics control matters;

-   Clarify that debt cancellation should not be offset by reductions in
    development assistance to other countries eligible for aid from the
    International Development Association;

-   Clarify that no cancellation of debt by an international financial
    institution should harm the financial integrity of the institution;
    and

-   Make various technical and clarifying changes.

[Rohrabacher (R-CA)]{.underline}. This amendment would make ineligible
for debt cancellation under the bill any government that was not chosen
by, and does not permit, free and fair elections.

*[Hastings (D-FL)]{.underline}*. This amendment would add a sense of
Congress that, due to the current humanitarian and political instability
in Haiti, including food shortages and political turmoil, the Secretary
of the Treasury should use his influence to expedite the complete and
immediate cancellation of Haiti's debts to all international financial
institutions, or, if such debt cancellation cannot be provided, to urge
the institutions to immediately suspend the requirement that Haiti make
further debt service payments on debts owed to the institutions. The
amendment notes that Haiti is scheduled to send \$48.7 million in debt
payments to multilateral financial institutions in 2008.

*[Weiner (D-NY)]{.underline}*. This amendment would modify the
qualification for eligible low-income country to include those countries
that are eligible for both International Development Association loans
**[and]{.underline}** World Bank loans (as opposed to just IDA loans in
the underlying bill).

**[RSC Staff Contact]{.underline}**: Paul S. Teller,
<paul.teller@mail.house.gov>, (202) 226-9718