To improve the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

Summary: Authorizes appropriations for FY 2004 for the U.S. payment to the Heavily Indebted Poor Countries (HIPC) Trust Fund administered by the International Bank for Reconstruction and Development (World Bank). Authorizes additional appropriations for payment to such Fund to meet the additional financing needs of the Enhanced HIPC Initiative, provided the Secretary of the Treasury determines that an agreement by certain multilateral financial institutions regarding modification of the Initiative has been reached.

Amends the International Financial Institutions Act to direct the Secretary to commence immediately efforts within the Paris Club of Official Creditors, as well as the World Bank, the International Monetary Fund (IMF), and other appropriate multilateral development institutions, to accomplish certain modifications in the Initiative, including requiring that: (1) the amount of debt stock reduction for a country eligible for debt relief under the Initiative be sufficient to reduce, for a specified period, the net value of outstanding public guaranteed debt of the country and its annual payments due on such debt to not more than specified formulated percentages; and (2) the debt cancellation under such Initiative not be conditioned on any agreement by an impoverished country to implement or comply with policies that deepen poverty or degrade the environment, or that implement user fees on primary education or primary health care, increase the cost to consumers with incomes of less than $2.00 per day for access to clean drinking water, or that undermine internationally recognized worker rights.

Makes ineligible for debt relief any country that: (1) supports international terrorism; (2) engages in gross violations of internationally recognized human rights; or (3) has been designated as a "Tier 3" nation pursuant to the Victims of Trafficking and Violence Protection Act of 2000 for its failure to cooperate on international trafficking in persons prevention efforts. Conditions debt cancellation upon the country's agreeing to ensure that the financial benefits of such debt relief are applied to programs to combat poverty and to redress environmental degradation.

Amends certain Federal laws to prohibit the provision of foreign assistance or the transfer of certain weapons and technology to countries (or persons) that fail to cooperate with the United States on efforts to combat international terrorism.

Directs the Secretary to report to Congress on options to expand debt relief to non-HIPC countries.

SECTION 1. AUTHORIZATIONS OF APPROPRIATIONS FOR THE HIPC TRUST FUND.

    (a) Authorization To Meet Financing Gap in the Enhanced HIPC 
Initiative.--In order to meet the President's commitment to fund the 
United States share of the additional financing needs of the current 
HIPC program, there are authorized to be appropriated to the President 
$75,000,000 for fiscal year 2004, for payment to the Heavily Indebted 
Poor Countries Trust Fund administered by the International Bank for 
Reconstruction and Development.
    (b) Additional Authorization for Funding Conditioned Upon 
Improvement of the Enhanced HIPC Initiative.--In addition to the 
amounts authorized to be appropriated under subsection (a), on a 
determination by the Secretary of the Treasury that the agreement 
described in section 1625 of the International Financial Institutions 
Act has been reached, there are authorized to be appropriated to the 
President such sums as may be necessary for payment to the Heavily 
Indebted Poor Countries Trust Fund administered by the International 
Bank for Reconstruction and Development to meet the additional 
financing needs of the Enhanced HIPC Initiative that result from the 
implementation of the agreement.

SEC. 2. IMPROVEMENT OF THE ENHANCED HIPC INITIATIVE.

    Title XVI of the International Financial Institutions Act (22 
U.S.C. 262p-262p-5) is amended by adding at the end the following new 
section:

``SEC. 1625. IMPROVEMENT OF THE ENHANCED HIPC INITIATIVE.

    ``(a) In General.--In order to ensure that the Enhanced HIPC 
Initiative achieves the objective of substantially increasing resources 
available for human development and poverty reduction in heavily 
indebted poor countries, the Secretary of the Treasury shall 
immediately commence efforts within the Paris Club of Official 
Creditors, as well as the International Bank for Reconstruction and 
Development (World Bank), the International Monetary Fund, and other 
appropriate multilateral development institutions, to reach an 
agreement to modify the Enhanced HIPC Initiative so that the Initiative 
is carried out in accordance with the provisions set forth in 
subsection (b).
    ``(b) Modifications.--The provisions set forth in this subsection 
are the following:
            ``(1) Level of exports and revenues.--
                    ``(A) In general.--The amount of debt stock 
                reduction approved for a country eligible for debt 
                relief under the Enhanced HIPC Initiative shall be 
                sufficient to reduce, for at least each year through 
                2006, or each of the first 3 years after the Decision 
                Point, whichever is later--
                            ``(i) the net present value of the 
                        outstanding public and publicly guaranteed debt 
                        of the country to not more than 150 percent of 
                        the annual value of exports of the country for 
                        the year preceding the Decision Point; and
                            ``(ii) the annual payments due on such 
                        public and publicly guaranteed debt to not more 
                        than--
                                    ``(I) 10 percent or, in the case of 
                                a country suffering a public health 
                                crisis, not more than 5 percent, of the 
                                amount of the annual current revenues 
                                received by the country from internal 
                                sources; or
                                    ``(II) a percentage of gross 
                                national product or other benchmark 
                                which will yield a result substantially 
                                equivalent to that which would be 
                                achieved through application of 
                                subclause (I).
                    ``(B) Limitation.--In financing the objectives of 
                the Enhanced HIPC Initiative, an international 
                financial institution shall give priority to using its 
                own resources.
            ``(2) Relation to poverty and the environment.--The debt 
        cancellation under the Enhanced HIPC Initiative shall not be 
        conditioned on any agreement by an impoverished country to 
        implement or comply with policies that deepen poverty or 
        degrade the environment, including any policy that--
                    ``(A) implements or extends user fees on primary 
                education or primary health care, including prevention 
                and treatment efforts for HIV/AIDS, tuberculosis, 
                malaria, and infant, child, and maternal well-being;
                    ``(B) provides for increased cost recovery from 
                poor people to finance basic public services such as 
                education, health care, or sanitation;
                    ``(C) would have the effect of increasing the cost 
                to consumers with incomes of less than $2.00 per day 
                for access to clean drinking water through--
                            ``(i) decreased public subsidy for water 
                        supply, treatment, disposal, distribution, or 
                        management; or
                            ``(ii) reduced intrasectoral or 
                        intersectoral subsidization of residential 
                        water consumers with incomes of less than $2.00 
                        per day; or
                    ``(D) undermines workers' ability to exercise 
                effectively their internationally recognized worker 
                rights, as defined under section 526(e) of the Foreign 
                Operations, Export Financing and Related Programs 
                Appropriations Act, 1995 (22 U.S.C. 262p-4p).
            ``(3) Foreign government policies.--A country shall not be 
        eligible for cancellation of debt under the Enhanced HIPC 
        Initiative if the government of the country--
                    ``(A) supports acts of international terrorism, as 
                determined by the Secretary of State under section 
                6(j)(1) of the Export Administration Act of 1979 (50 
                U.S.C. App. 2405(j)(1)) or section 620A(a) of the 
                Foreign Assistance Act of 1961 (22 U.S.C. 2371(a));
                    ``(B) engages in gross violations of 
                internationally recognized human rights, such as 
                torture (as defined in section 2340 of title 18, United 
                States Code) or violations of the Convention Against 
                Torture and Other Cruel, Inhumane, or Degrading 
                Treatment or Punishment; or
                    ``(C) has been designated, in the most recent 
                Department of State `Trafficking in Persons Report', as 
                a `Tier 3' nation pursuant to the Victims of 
                Trafficking and Violence Protection Act of 2000 (Public 
                Law 106-386) for its failure to cooperate on 
                international trafficking in persons prevention 
                efforts.
            ``(4) Programs to combat poverty.--A country that is 
        otherwise eligible to receive cancellation of debt under the 
        Enhanced HIPC Initiative may receive such cancellation only if 
        the country has agreed--
                    ``(A) to ensure that the financial benefits of debt 
                cancellation are applied to programs to combat poverty 
                (in particular through concrete measures to improve 
                basic services in education, nutrition, and health), 
                and to redress environmental degradation;
                    ``(B) to ensure that the financial benefits of debt 
                cancellation are in addition to the government's total 
                spending on programs to combat poverty for the previous 
                year or the average total of such expenditures for the 
                previous 3 years, whichever is greater;
                    ``(C) to implement transparent and participatory 
                policymaking and budget procedures, good governance, 
                and effective anticorruption measures; and
                    ``(D) to broaden public participation and popular 
                understanding of the principles and goals of poverty 
                reduction.
    ``(c) Definitions.--In this section:
            ``(1) AIDS.--The term ``AIDS'' means the acquired immune 
        deficiency syndrome.
            ``(2) Public health crisis.--A country is deemed to be 
        suffering `a public health crisis' if--
                    ``(A) the nationwide HIV/AIDS infection rate for 
                the country, as reported in the most recent 
                epidemiological data as compiled by the Joint United 
                Nations Program on HIV/AIDS, is at least 5 percent 
                among women attending prenatal clinics, or 20 percent 
                or more among individuals in groups with high-risk 
                behavior; or
                    ``(B) the country is suffering a health crisis or 
                epidemic, as defined by the World Health Organization.
            ``(3) Decision point.--The term `Decision Point' means the 
        date on which the executive boards of the World Bank and the 
        International Monetary Fund review the debt sustainability 
        analysis for a country and determine that the country is 
        eligible for debt relief under the Enhanced HIPC Initiative.
            ``(4) Enhanced hipc initiative.--The term `Enhanced HIPC 
        Initiative' means the multilateral debt initiative for heavily 
        indebted poor countries presented in the Report of G-7 Finance 
        Ministers on the Cologne Debt Initiative to the Cologne 
        Economic Summit, Cologne, June 18-20, 1999.
            ``(5) HIV.--The term `HIV' means the human immunodeficiency 
        virus, the pathogen that causes AIDS.
            ``(6) HIV/AIDS.--The term `HIV/AIDS' means, with respect to 
        an individual, an individual who is infected with HIV or living 
        with AIDS.''.

SEC. 3. MODIFICATION OF DETERMINATION OF COUNTRIES SUPPORTING TERRORISM 
              UNDER CERTAIN INTERNATIONAL AFFAIRS LAWS.

    (a) Foreign Assistance Act of 1961.--
            (1) General prohibition on assistance.--Section 620A(a) of 
        the Foreign Assistance Act of 1961 (22 U.S.C. 2371(a)) is 
        amended by inserting after ``international terrorism'' the 
        following: ``or has failed to cooperate with the United States 
        on efforts to combat international terrorism''.
            (2) Enterprise for the americas initiative.--Section 
        703(a)(2) of such Act (22 U.S.C. 2430b(a)(2)) is amended by 
        inserting after ``international terrorism'' the following: 
        ``and has cooperated with the United States on efforts to 
        combat international terrorism''.
    (b) Arms Export Control Act.--
            (1) General prohibition on transactions.--Section 40(d) of 
        the Arms Export Control Act (22 U.S.C. 2780(d)) is amended in 
        the first sentence by inserting after ``international 
        terrorism'' the following: ``or has failed to cooperate with 
        the United States on efforts to combat international 
        terrorism''.
            (2) Transfer of missile equipment or technology by united 
        states person.--Section 72(c) of such Act (22 U.S.C. 2797a(c)) 
        is amended by inserting after ``international terrorism'' the 
        following: ``or has failed to cooperate with the United States 
        on efforts to combat international terrorism''.
            (3) Transfer of missile equipment or technology by foreign 
        person.--Section 73(f) of such Act (22 U.S.C. 2797b(f)) is 
        amended by inserting after ``international terrorism'' the 
        following: ``or has failed to cooperate with the United States 
        on efforts to combat international terrorism''.
            (4) Transfer of chemical or biological weapons by foreign 
        person.--Section 81(a)(2)(B) of such Act (22 U.S.C. 
        2798(a)(2)(B)) is amended by inserting after ``international 
        terrorism'' the following: ``or has failed to cooperate with 
        the United States on efforts to combat international 
        terrorism''.
    (c) Export Administration Act of 1979.--
            (1) General requirements.--Section 6(j)(1)(A) of the Export 
        Administration Act of 1979 (50 U.S.C. app. 2405(j)(1)(A)) is 
        amended--
                    (A) in subsection (j)(1)(A), by inserting after 
                ``international terrorism'' the following: ``or has 
                failed to cooperate with the United States on efforts 
                to combat international terrorism''; and
                    (B) in subsection (l)(3)(B), by inserting after 
                ``international terrorism'' the following: ``or to have 
                failed to cooperate with the United States on efforts 
                to combat international terrorism''.
            (2) Transfer of chemical or biological weapons by foreign 
        person.--Section 11C(a)(2)(B) of such Act (50 U.S.C. app. 
        2410c(a)(2)(B)) is amended by inserting after ``international 
        terrorism'' the following: ``or has failed to cooperate with 
        the United States on efforts to combat international 
        terrorism''.

SEC. 4. REPORTS ON IMPLEMENTATION OF IMPROVEMENTS TO THE ENHANCED HIPC 
              INITIATIVE.

    (a) Initial Report.--Not later than 180 days after the date of 
enactment of this Act, the Secretary of the Treasury shall submit to 
the appropriate congressional committees a report describing the 
progress made in concluding the agreement described in section 1625(b) 
of the International Financial Institutions Act (as added by section 1 
of this Act).
    (b) Subsequent Report.--Not later than 1 year after the date of 
submission of the initial report under subsection (a), the Secretary of 
the Treasury shall submit to the Committee on Foreign Relations of the 
Senate and the Committee on International Relations of the House of 
Representatives a report describing the actions taken by countries to 
satisfy the conditions set forth in the agreement referred to in 
subsection (a).

SEC. 5. REPORT ON EXPANSION OF DEBT RELIEF TO NON-HIPC COUNTRIES.

    (a) In General.--Within 90 days after the date of the enactment of 
this Act, the Secretary of the Treasury shall submit to the Congress a 
report on--
            (1) the options and costs associated with expanding debt 
        relief to include poor countries who were not eligible for 
        inclusion in the Enhanced HIPC Initiative;
            (2) options for burden-sharing among donor countries and 
        multilateral institutions of costs associate with expanding 
        debt relief; and
            (3) options, in addition to the Enhanced HIPC Initiative, 
        to ensure debt sustainability in poor countries, particularly 
        in cases when the poor country has suffered an external 
        economic shock or a natural disaster.
    (b) Specific Options To Be Considered.--Among the options for 
expansion of debt relief, consideration should be given to making 
eligible for the relief poor countries for which outstanding public and 
publicly guaranteed debt requires annual payments in excess of 10 
percent or, in the case of countries suffering a public health crisis, 
5 percent of the amount of the annual current revenues received by the 
countries from internal sources.
    (c) Enhanced HIPC Initiative Defined.--In this section, the term 
``Enhanced HIPC Initiative'' means the multilateral debt initiative for 
heavily indebted poor countries presented in the Report of G-7 Finance 
Ministers on the Cologne Debt Initiative to the Cologne Economic 
Summit, Cologne, June 18-20, 1999.