U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

86–151 PDF 2014

S. HRG. 113–140

DIFFERENT PERSPECTIVES ON

INTERNATIONAL DEVELOPMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL 

DEVELOPMENT AND FOREIGN ASSISTANCE, 

ECONOMIC AFFAIRS, INTERNATIONAL 

ENVIRONMENTAL PROTECTION, 

AND PEACE CORPS

OF THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE

ONE HUNDRED THIRTEENTH CONGRESS

FIRST SESSION

MAY 22, 2013

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.gpo.gov/fdsys/

FOREI-43947 with DISTILLER

COMMITTEE ON FOREIGN RELATIONS

ROBERT MENENDEZ, New Jersey, Chairman

BARBARA BOXER, California 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

RICHARD J. DURBIN, Illinois 

TOM UDALL, New Mexico 

CHRISTOPHER MURPHY, Connecticut 

TIM KAINE, Virginia 

BOB CORKER, Tennessee 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JEFF FLAKE, Arizona 

JOHN McCAIN, Arizona 

JOHN BARRASSO, Wyoming 

RAND PAUL, Kentucky 

DANIEL E. O’BRIEN, Staff Director

LESTER E. MUNSON III, Republican Staff Director

——————

SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT

AND FOREIGN ASSISTANCE, ECONOMIC AFFAIRS,

INTERNATIONAL ENVIRONMENTAL PROTECTION

AND PEACE CORPS

TIM KAINE, Virginia, Chairman

CHRISTOPHER A. COONS, Delaware 

RICHARD J. DURBIN, Illinois 

TOM UDALL, New Mexico 

CHRISTOPHER MURPHY, Connecticut 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

JEFF FLAKE, Arizona 

RAND PAUL, Kentucky 

(II)

FOREI-43947 with DISTILLER

C O N T E N T S 

Page

Barrasso, Hon. John, U.S. Senator from Wyoming, opening statement ............. 4

Kaine, Hon. Tim, U.S. Senator from Virginia, opening statement ...................... 1

Lane, William, International Governmental Affairs Director, Caterpillar, and 

copresident, U.S. Global Leadership Campaign, Washington, DC .................. 20

Prepared statement .......................................................................................... 22

Moss, Todd J., Ph.D., vice president for Programs and senior fellow, Center 

for Global Development, Washington, DC ......................................................... 5

Prepared statement .......................................................................................... 8

Murphy, John, vice president for International Affairs, U.S. Chamber of Commerce, Washington, DC ....................................................................................... 14

Prepared statement .......................................................................................... 17

(III)

FOREI-43947 with DISTILLER

FOREI-43947 with DISTILLER

(1)

DIFFERENT PERSPECTIVES ON 

INTERNATIONAL DEVELOPMENT 

WEDNESDAY, MAY 22, 2013 

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT AND FOREIGN ASSISTANCE, ECONOMIC

AFFAIRS, INTERNATIONAL ENVIRONMENTAL PROTECTION, AND PEACE CORPS, COMMITTEE ON FOREIGN

RELATIONS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:30 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Tim Kaine (chairman of the subcommittee) presiding. 

Present: Senators Kaine, Coons, Murphy, and Barrasso. 

OPENING STATEMENT OF HON. TIM KAINE,

U.S. SENATOR FROM VIRGINIA 

Senator KAINE. I am going to call this subcommittee meeting to 

order. I am joined here by my ranking member, Senator Barrasso, 

and expect others to attend. 

I want to welcome our witnesses. We have got a good panel today 

to address the important issues: John Murphy, who is the vice 

president for International Affairs at the U.S. Chamber of Commerce; Bill Lane, who is the copresident of the U.S. Global Leadership Campaign and also the director of the Washington Office for 

Caterpillar. And he has brought a visual aid. I highly approve. You 

guys did not get the memo, Todd and John? Finally, Dr. Todd 

Moss, who is vice president for Programs at the Center for Global 

Development. 

The purpose for this hearing, and it is the first hearing of the 

International Development Subcommittee in this Congress, is 

meant to complement full committee hearings that we have had on 

the President’s fiscal year 2014 international affairs budget request. We have heard as full committee both from Secretary Kerry 

and Administrator Shah about the justification for the budget 

request from within the administration, what they need, what they 

plan to do with it, and how we will be able to measure their success. Those were important hearings. 

I had the opportunity to introduce Secretary Kerry for his first 

major foreign policy address as Secretary of State, which occurred 

at the University of Virginia, the university started by a former 

Secretary of State, Mr. Jefferson, as we call him in Virginia, ‘‘Mr. 

Jefferson.’’ Secretary Kerry made the compelling case for foreign 

aid. 

FOREI-43947 with DISTILLER

2

Foreign aid is about 1 percent of the Federal budget and Secretary Kerry laid out the good that it has done, but also in a changing world the good that it still can do, including an openness to 

change and reform. Foreign assistance has traditionally served 

U.S. national security interests, commercial interests, and also 

addressed global humanitarian concerns. 

During the State of the Union Address in February, President 

Obama laid out a very ambitious goal about the eradication of 

extreme poverty within two decades. We have heard Administrator 

Shah sort of focus on two deliverables in that score, reduction of 

death of children up to age 5 and elimination of hunger, as the two 

measurables that we would work on in this area. 

Today’s hearing is an opportunity to hear now not from within 

the agency and those talented individuals, but to hear a different 

perspective, private sector colleagues who have been in the field, 

but now are kind of looking at it from the outside, and especially 

looking at it from the private sector: What international development does to advance American economic interests and how those 

global interests, those American economic interests, can also be 

yoked to significant global advancement. 

Before we hear from Senator Barrasso and the witnesses, I will 

just set the stage for a couple more minutes. The history of foreign 

assistance investments in this country generally was justified by 

national security concerns. The primary trend-setting U.S. investments through the Marshall Plan and thereafter were a way to 

prevent or slow down Communist influence and secure United 

States support during a cold-war era. 

Post-cold war, there was a need to make a change and the focus 

of foreign aid shifted to the Middle East, to transition to democracy 

in Eastern Europe and the Republics of the former Soviet Union, 

and then more recently to combating illicit drug production and 

trafficking. Without the strong national security rationale that was 

immediate and apparent because of the cold war, the foreign aid 

budgets decreased during the 1990s, and post-9/11 foreign assistance ticked back up because it became a tool in U.S. counterterrorism strategies. 

We also have a very significant effort to focus on commercial 

interests and the humanitarian concerns that occur around the 

country, around the world. As we are talking about humanitarian 

concerns, I know all of us in at least some part of our minds are 

thinking about those in our own Nation that are dealing with the 

horrible weather and tornado tragedy in Oklahoma. Those humanitarian issues are not just elsewhere; they are here as well, and the 

United States has always been a leader in responding to them. 

There has been a huge shift in development assistance in the last 

couple of decades and it is a shift that we ought to mention because 

it affects what we do going forward and how we measure the 

success of what we do. That shift has been where assistance dollars 

come from. Basically the story I would say of the last 20 years has 

been a dramatic increase in private sector resource flows to development assistance. The resource flows from developed to developing countries are currently dominated by private transactions, 

such as foreign direct investment, portfolio investment, philanFOREI-43947 with DISTILLER

3

thropy, remittances. Collectively these account for now 87 percent 

of the global total of development assistance. 

The donor governments and multilateral development assistance 

only account for 13 percent of resource flows. This is a complete 

reversal from decades past, where the governmental assistance 

used to be about 80 percent and total private development assistance at 20 percent. 

Foreign direct investment, just using that, developing countries 

saw a 293-percent increase from 2000 to 2010 in FDI. If you look 

at the 30-year period from 1980 to 2010, the statistics are even 

more stark. The bilateral and multilateral assistance in that 30-

year period grew by 280 percent. Now, this is a global dollar number. But foreign direct investment inflows to developing countries 

grew by nearly 7,000 percent, admittedly from a very low base. But 

you can see where the momentum is going. 

This is happening, the shift of development assistance into the 

sort of private side of the equation, for a number of reasons. The 

recent recession transformed the world economy, including a reordering of relative national economies. Emerging economies, particularly China, have begun to be involved in assistance in new ways. 

Developing countries are seeing more rapid growth, growth of a 

middle class, strong commodity prices. They have liberalized trade. 

Mexico is a wonderful example of a country that is trade liberalized 

and is now a more open economy, making foreign direct investment 

and trade easier. 

Developing countries’ share of global GDP is steadily rising. 

Overseas markets represent 95 percent of the world’s consumers 

and 80 percent of its purchasing power. Now half of U.S. exports 

go to the developing world, and these markets in all likelihood are 

growing and will continue to grow at a faster pace than our traditional trading partners. 

All of those factors have accounted for this tremendous increase 

in the private sector foreign direct investment and the increase in 

development dollars on the private side of the ledger. 

The United States has a number of tools that have facilitated 

this and should continue to: the Export-Import Bank, the Overseas 

Private Investment Corp., the U.S. Trade and Development 

Agency, and the Millennium Challenge Corporation. So truly we 

are in the midst of a dramatic revolution in the way that international development is done. Some of that revolution has been because of smart policy, but some of it has just been because of markets and innovation and the growth of economies, not necessarily 

intentional policy, but just facts on the ground that changed the 

way development assistance is done. 

So we are here today to have the hearing to talk about these new 

perspectives on development assistance in light of the presentation 

of the President’s budget, looking forward to what we should focus 

on. I look forward to hearing from the panel. We have got three 

great witnesses about a number of issues. 

The U.S. Government interest in international development. We 

continue to need to make that case to our public about every dollar 

we spend in the budget. International development is no different. 

How this public-private partnership model is growing and the 

importance of nurturing those partnerships, the way the United 

FOREI-43947 with DISTILLER

4

States can better leverage private partners, and in a public-private 

model what that says in terms of accountability and how we should 

measure the success of our efforts. And always, always, the most 

important question in any hearing like this: How we can improve. 

We can talk about things that are working well. We can talk about 

things that are not working well. But at the end of the day I know 

my ranking member and I and the members of this committee are 

always looking for strategies to help us do a better job, and I hope 

we will hear some creative ideas, both about things that work and 

things that do not, but how we can do a better job, from our witnesses today. 

With that, I would like to turn it over to my ranking member, 

Senator Barrasso. 

OPENING STATEMENT OF HON. JOHN BARRASSO,

U.S. SENATOR FROM WYOMING 

Senator BARRASSO. Well, thank you so much, Mr. Chairman. I 

really appreciate your very thoughtful comments. Thank you for 

your leadership in organizing this hearing. I look forward to working with you during this session of Congress and beyond on this 

very important topic and issue. 

I want to welcome all of our witnesses, thank each and every one 

of you for being here with us today, and appreciate your sharing 

your knowledge and your analysis and your perspectives with our 

subcommittee. 

I really do appreciate, Mr. Chairman, your efforts to have our 

first subcommittee hearing on the examination of the costs and 

impacts of international development assistance. The American 

people are very generous, as you have just stated. Individuals, 

groups, and communities across our country give their time and 

their precious resources to help others, both people to people here, 

as we are seeing now with Oklahoma and the tragedy there, but 

also to people around the world. There is a very long history of people across this Nation generously supporting victims of international disasters, famines, diseases, and wars. 

I hear from a lot of people at home in Wyoming about foreign 

assistance and they want to make sure that—as they ask the questions, they want to know what is the purpose of foreign aid? is it 

effective? how effective is it? is any being wasted? who is it helping? and what value does it add to the United States? This hearing 

is going to provide a great opportunity to discuss these questions 

and find some of the answers. 

In fiscal year 2012 the United States spent over $37 billion for 

international development. That is about a 5.7-percent increase 

from the previous year. About 147 countries received some form of 

bilateral assistance from the United States. U.S. foreign assistance 

is often aimed at promoting democracy and economic development, 

as well as humanitarian efforts, as you have mentioned, Mr. Chairman. 

With the national debt, however, quickly approaching $17 trillion, it is irresponsible for us to just borrow more money to fund 

initiatives if they are failing to provide results or real value for the 

taxpayers. The government must be a good steward of U.S. taxpayer funds. Every government branch and agency needs to be 

FOREI-43947 with DISTILLER

5

carefully evaluated and streamlined to eliminate duplication and 

wasteful spending. So I believe each program must be carefully 

analyzed to ensure it is being designed and implemented in the 

most effective and efficient manner. The time for unaccountable 

government spending must come to an end. 

In October 2012, the USAID’s Office of the Inspector General 

indicated that one of the most significant challenges facing their 

agency is the ability to demonstrate results through performance 

management and reporting. All foreign aid programs need to be 

rigorously evaluated. Most aid programs are not evaluated to determine the actual impact of the assistance. How can we determine 

whether taxpayer dollars are being used wisely when it is unclear 

if it has succeeded or failed. 

So I believe Congress needs, one, to ensure that programs focus 

on U.S. priorities. Congress needs to evaluate the effectiveness of 

all of the programs. We need to support programs that are getting 

real results. We need to eliminate programs that are not working. 

I think these are important issues, so I look forward to hearing 

the testimony of our witnesses, and I look forward to working with 

you, Mr. Chairman. 

Thank you. 

Senator KAINE. Thank you, Senator. 

We will now begin with witness testimony. We will just move left 

to right: Dr. Moss, Mr. Murphy, and Mr. Lane. 

STATEMENT OF TODD J. MOSS, PH.D., VICE PRESIDENT FOR 

PROGRAMS AND SENIOR FELLOW, CENTER FOR GLOBAL 

DEVELOPMENT, WASHINGTON, DC 

Dr. MOSS. Thank you. Thank you, Chairman Kaine, Ranking 

Member Barrasso, distinguished members of the committee. 

U.S. development policy is about more than foreign assistance. 

While it is important to maintain a robust bilateral aid program, 

it is probably more vital that we consider when not to use bilateral 

aid and instead when it might be better to use multilateral channels or when nonaid development tools might be more effective. 

U.S. development policy should be critical in promoting U.S. 

national interests around the world—this includes our security, 

economic, and humanitarian interests—and in remaining actively 

engaged around the world. Unfortunately, our aid and development 

policies have too often underperformed. Yes, there are big successes 

where aid and development policy have helped achieve U.S. policy 

aims; for example, U.S. support for reconstruction in Liberia or 

independence for South Sudan. And clearly well-run aid programs 

can save lives. PEPFAR is today providing life-saving drugs for 

some 5 million people. Those people would not be with us were it 

not for this program. 

But there are also very severe limits on what we can do with aid 

and development policy. We should be very humble about our ability to shape complex systems from the outside. There are also far 

too many examples of shameful failure. The United States promised $3 billion for Haiti to build back better. Yet, some 3 years 

later we have got about 400,000 people still living in tents. 

Mali as well. I had the tremendous honor to work in the State 

Department and I worked closely on Mali, so I know how badly our 

FOREI-43947 with DISTILLER

6

efforts to fight terrorism and promote democracy in that country 

fell short. 

Now, I believe that this disappointing record stems from a structural problem in how the U.S. Government approaches these 

issues. The current administration has launched several very wellintentioned efforts to try to upgrade: USAID Forward, the firstever QDDR, and a separate White House Presidential policy directive on global development. USAID Forward is positive in pushing 

for open data and modern evaluation methods, but overall these 

are very, very modest steps. 

The QDDR, after sapping momentum for aid reform by taking 

more than 18 months, is probably making matters worse by adding 

to fragmentation and confusion in the system. The Presidential policy directive is bold and I believe very much in the right direction, 

but is not really being implemented. So I do not believe that these 

efforts will fix U.S. development policy. 

I also do not believe that these problems can be solved by more 

money, by stronger anticorruption oversight powers, or by another 

bureaucratic layer to try to coordinate U.S. agencies. In fact, I 

think any of these approaches are likely to make our tools and policy even less effective. 

Instead, I see three fundamental problems. First, there are just 

too many Federal agencies involved. Some 24 separate agencies 

report aid to the OECD. While the British model of a singular Cabinet-level development agency does not fit within the United States 

political system, having 24 agencies does not work either. 

Second, foreign aid has too many often-conflicting objectives. Lael 

Brainard, now Treasury Under Secretary, found that U.S. foreign 

assistance had more than 50 different goals. When we have too 

many priorities, then we have none. 

Worse, our objectives are entirely divorced from the appropriations process. Instead of setting goals and a strategy and then allocating resources to meet those goals, our system instead is an 

aggregation of congressional directives and single-issue initiatives. 

Our strategy is just the sum of those disparate parts. So if our 

goals are to support girls’ education in Pakistan or fight malaria 

in East Africa or promote electricity in Tanzania, it might be most 

effective to use AID or it might be better to use the African Development Bank, or perhaps the Global Fund. But our system does 

not allow for that decision, where you would weigh tradeoffs and 

consider these different channels, it does not allow those decisions 

to ever be made. 

The third problem is that the interagency process is broken. The 

interagency that should work out tensions and tradeoffs in U.S. 

policy is, as anyone who works in the Federal Government can 

attest, deeply dysfunctional. Every initiative is a fire drill and 

these require intense direction from a very small and heavily overburdened National Security Council staff. The result is too often 

delay of key decisions, duplication of effort, and ultimately little 

accountability. If all agencies are collectively accountable, then no 

one is accountable. 

The broken interagency also means that we often miss huge 

opportunities to use nonaid tools to meet our foreign policy objectives. Modest tweaks to our immigration policy, for example, could 

FOREI-43947 with DISTILLER

7

probably be a far more efficient development tool in many cases 

than aid programs, but we rarely use it as such. 

So what might make things better? I will suggest three examples. First, limit, do not expand, the number of agencies involved. 

Ideally, the budgets and staff of most traditional international aid 

programs should be moved inside an empowered USAID. DOD, I 

should note, also is not a development agency, so we should avoid 

the temptation to ask them to take on more and more civilian 

tasks. 

Second, to the extent we can we should link the budget process 

to goals and results, perhaps by allowing experimentation with new 

kinds of development models. We should learn from the Millennium Challenge Corporation’s compact model, where objectives and 

indicators are agreed over a 5-year period. So rather than checking 

every receipt and micromanaging projects, the compact is judged 

based on the overall success of meeting the goals. 

Congress could also provide space to experiment with new, innovative, pay for performance contracts where U.S. taxpayers would 

only pick up the tab for bills where actual results were achieved. 

At the Center for Global Development we call this ‘‘cash on 

delivery.’’

Third, we should focus on development finance, which is the next 

wave of development policy and where, frankly, the United States 

is far behind. Since most poor countries are growing quickly and 

many are receiving windfall gains from natural resources, demand 

for traditional grant aid is shrinking. At the same time, the 

demand is growing rapidly for other types of development finance: 

debt, equity, venture capital, and other kinds of patient capital that 

can both leverage private money and be deployed for long-term 

development. 

The good news is that many of these tools already exist. The bad 

news is that they are spread across multiple agencies, including 

OPIC, TDA, USAID, Commerce, Labor, Treasury, USDA, USTR, 

and many more. A simple first step would be to bolster OPIC with 

multiyear authorization, equity authority, and perhaps a modest 

grant window. Even better would be to turn OPIC into a fullservice U.S. development finance corporation by adding things like 

TDA’s feasibility studies window, the USAID’s development credit 

authority, and select programs from other agencies that promote 

the private sector. A U.S. Development Finance Corporation could 

be built at no additional cost to the budget by simply allowing 

OPIC to retain some of its profits. More importantly, this could 

provide a platform for coherence of all these U.S. policy tools in 

support of private sector development. 

An approach like the U.S. Development Finance Corporation 

would not only be more efficient, but is probably necessary if the 

United States is going to achieve our ambitious goals, such as creating business opportunities in the new emerging and frontier markets or promoting electricity in Africa. For all the reasons I have 

outlined, our current system simply cannot deliver on those goals. 

If the United States remains stuck in the past, it will be left 

behind. 

Thank you. 

[The prepared statement of Dr. Moss follows:]

FOREI-43947 with DISTILLER

8

PREPARED STATEMENT OF TODD J. MOSS

Thank you, Chairman Kaine, Ranking Member Barrasso, and distinguished members of the committee. U.S. foreign assistance should be a critical tool for promoting 

U.S. foreign policy and meeting other national security, economic, political, and 

humanitarian goals around the world. It should be a prominent and proud component of projecting America’s power and projecting a positive image of what America 

is all about: the generosity and compassion of our people, the spreading of free market values and economic opportunity, the bedrock belief we hold that hard work can 

provide a better life for the next generation, the inviolable rights of individuals, the 

aspiration that all people everywhere should live free from tyranny. Foreign assistance should be able to play a role in supporting all of these goals and core American 

values. To be clear, foreign assistance can’t deliver any of these goals. But it can 

and should be a useful tool to complement our military and diplomatic and business 

efforts. 

Unfortunately, U.S. foreign assistance has too often not lived up to its potential 

and instead been a perennial underperformer. An underperformer for American taxpayers, an underperformer in supporting U.S. foreign policy objectives, and an 

underperformer in meeting global development goals. Yes, there are successes: U.S. 

support for Liberian reconstruction, U.S. support for the global effort that eradicated river blindness in West Africa, and especially the tremendous success of the 

U.S. fight against HIV/AIDS through PEPFAR, which is providing life-saving drugs 

for some 5 million people. These are 5 million lives directly saved by U.S. foreign 

assistance. But there are also too many examples, even where attention was intense 

and large funds promised, of abject failure. The U.S. effort in Haiti to ‘‘build back 

better,’’ where some $3 billion was promised but 3 years later there are still an 

estimated 400,000 people living in tents is a national shame. U.S. aid to help fight 

terrorism and build democracy in Mali also clearly failed. I had the tremendous 

honor to serve in the Africa Bureau of the State Department in 2007–08 and worked 

closely on Mali, so I know how badly our efforts there fell short—and it is a failure 

for which I bear some responsibility. 

I believe that this disappointing record of U.S. assistance stems from a structural 

problem in how the U.S. Government works. Recent efforts under the current 

administration—a first Quadrennial Diplomacy and Development Review (QDDR), 

a separate White House Presidential Policy Directive (PPD) on Global Development, 

and a set of business reforms within USAID known as USAID Forward—are all well 

intentioned and aimed to help fix the problems that everyone recognizes. But these 

efforts are not working. USAID Forward is too small-ball, while the PPD is bold and 

in the right direction but not being implemented. The QDDR, in addition to sapping 

the administration’s energy on development for more than 18 months, is likely making U.S. policy even more confused. 

To be clear, I do not believe that the problems of U.S. foreign assistance can be 

fixed by more money and more staff. The aid budget may very well be too low, but 

in many places it is too high. The funding levels, which attract so much attention, 

are not fundamentally germane to the problems of effectiveness. I also do not believe that the answer lies with additional investigative powers to root out corruption 

or additional bureaucratic layers to coordinate aid agencies. In fact either of these 

approaches is likely to make the aid system and U.S. policy even less effective. 

I see three fundamental problems with U.S. foreign assistance: 

First, there are too many Federal agencies with aid programs. Some 24 separate 

agencies report aid to the OECD’s Development Assistance Committee. In the latest 

year, just 35 percent of total foreign aid goes through USAID. By contrast, the U.K. 

has a single large aid agency, DFID, that not only is tasked to ensure internal coherence, but also provides a development perspective within the Cabinet to inform 

foreign policy goals. I don’t believe that the British model works in the U.S. political 

system, but I also know that having 24 agencies involved doesn’t work either. The 

QDDR, which embraces uncritically a whole-of-government approach, is probably 

making this worse. 

Second, foreign aid has too many, often conflicting, objectives. Lael Brainard in 

the book on foreign aid she published just before becoming U.S. Treasury Under 

Secretary for International Affairs found that U.S. aid had more than 50 goals.1

That the U.S. has multiple and often conflicting goals is not surprising—foreign policy is complex and cannot be boiled down to a few simple absolute goals. But when 

we have too many goals and priorities, then we really have none. 

To make matters worse, these objectives are entirely divorced from the appropriations process. Rather than setting goals in a national development strategy and then 

allocating resources to meet these goals, multiple single issue initiatives are given 

resources and the strategy becomes the sum of those disparate parts. For example, 

FOREI-43947 with DISTILLER

9

if we want to support reconstruction in Afghanistan or support budget reform in 

Kenya, or fight malaria in Mozambique, there is no obvious or clear way to make 

tradeoffs between these goals or to choose the most efficient mechanism to accomplish them. Sometimes the best way to meet these goals is through the World Bank 

or the Global Fund rather than USAID. But of course U.S. support to the multilateral development banks is made by the Treasury and congressional responsibility 

is with your committee and the House Financial Services Committee, while appropriations are handled by the State and Foreign Operations Subcommittees. This 

leads to a particular disconnect on the House side, with little ability to make clear 

decisions as to whether bilateral or multilateral aid is more effective for particular 

goals. So the direct tradeoff between the Bank, the Global Fund and USAID is never 

made. In short, part of the problem is the sprawling Federal Government and part 

of the problem is Congress. One way to consider the tradeoffs among the various 

bilateral and multilateral vehicles would be to formally consider the options against 

efficiency and alignment with national interests, as the United Kingdom has done 

with its bilateral and multilateral aid reviews.2

Third, the interagency process is broken. The interagency that should work out 

the tensions and tradeoffs among various objectives is, as anyone who works in the 

Federal Government can attest, dysfunctional. Every initiative is a fire drill and requires intense NSS staff direction and oversight. But NSS too small and overburdened to really do more than a few priority tasks. The result is too often delay of 

key decisions, frequent duplication of effort, and little accountability. If there are 

multiple agencies collectively accountable then in reality no one is accountable. And 

critically, the broken interagency combined with narrow mandates often means that 

we miss huge opportunities to use non-aid tools to meet our foreign policy objectives. 

Immigration policy, for instance, is probably a far better and more efficient development tool than our aid program, but we rarely use it as such.3

What steps would make things work better? 

First, limit, don’t expand, the number of agencies involved. Ideally the budgets 

and staffs of most international programs should be moved into USAID. If this is 

too politically difficult, and I suspect it probably is, then agencies should be forced 

to secund staff and pass through their budgets to USAID for those critical projects. 

While the whole-of-government mantra suggests the more agencies involved the better, the opposite is true. The fewer number of agencies involved—and the fewer 

offices of the State Department—the better. Whole-of-government may work in 

small European governments with a handful of agencies and a small number of people who all know each other and can horse-trade to work out problems. This does 

not—and I believe cannot—work in the U.S. context because of the sheer size and 

fragmentation of the Federal Government. 

Second, link the budget process to goals and results—and allow experimentation 

with new models. This would imply Congress granting greater flexibility to the 

agencies to determine allocations and specific projects, but also could provide a 

mechanism for holding those agencies accountable by adding measurable indicators. 

This approach could draw heavily on the MCC’s compact model where objectives and 

indicators are agreed over a 5-year period. Rather than checking every receipt and 

micromanaging the projects, the compact is judged based on the overall success of 

the portfolio in meeting the stated objectives. Congress could even provide USAID 

and other agencies space to experiment with innovative pay-for-performance contracts where U.S. taxpayers would only be picking up the bills for actual achievements. We at the Center for Global Development call this Cash-on-Delivery and see 

it as an opportunity to make aid—and tax dollars—about outcomes, not inputs or 

even outputs, while also building local management capacity and innovation and 

reducing transaction costs.4

Third, development finance is an obvious target for efficiency gains. Some consolidation of agencies with overlapping activities is highly desirable, and the lowesthanging fruit are the various Federal activities to promote private sector development. At a time when most low-income countries are growing quickly and receiving 

windfall gains from resource discoveries, demand for traditional grant aid will be 

diminishing. U.S. development policy must be careful not to remain stuck in the 

past. What countries want, and where the United States is really best placed to 

help, is with other types of development finance: debt, equity, venture, and other 

kinds of patient capital that can leverage private capital and be deployed for longterm development. 

The good news is that many of the tools already exist. The bad news is that they 

are spread across multiple Federal agencies, including the Overseas Private Investment Corporation (OPIC), the Trade and Development Agency (TDA), USAID, Commerce, Labor, Treasury, USDA, USTR, and more. And, like traditional aid, only 

rarely do they work well together. In the 2012 State of the Union, President Obama 

FOREI-43947 with DISTILLER

10

noted the absurdity that there are 12 different agencies that deal with exports and 

pledged to ‘‘merge, consolidate, and reorganize the Federal Government in a way 

that best serves the goal of a more competitive America.’’ What applies to export 

promotion also applies to development finance. 

To be clear, I do not support the merger of OPIC into the Commerce Department—indeed that would be a tremendous mistake because the purposes of those 

agencies are very different. But I do believe a consolidation among the development 

finance tools would be highly beneficial. A first simple step would be to bolster OPIC 

into a full-service U.S. Development Finance Corporation.5 This would imply granting OPIC additional authorities such as multiyear authorization, equity authority, 

and a modest grant window. It could also bring in complementary tools we already 

have in other agencies, such as TDA’s feasibility study window, USAID’s Development Credit Authority (DCA), and international programs of agencies like the Small 

Business Administration. 

A U.S. Development Finance Corporation could be built using existing staff and 

resources and at no additional cost to the U.S. budget by allowing OPIC to simply 

retain its profits. More importantly, a bilateral development finance corporation 

could provide a platform for coherence of U.S. policy tools in support of the private 

sector, allow the U.S. to better compete in new markets, and limit the repeated 

scrambling within the interagency. An approach like the USDFC would not only be 

more desirable from an efficiency standpoint, but is likely necessary if the U.S. is 

going to achieve ambitious goals, such as building market opportunities in the next 

wave of frontier markets or promoting electrification in Africa. For all the reasons 

outlined above, our current system simply cannot deliver those goals. 

The United States must remain engaged with the world, especially in the fastest 

growing markets and emerging regions of the globe. U.S. foreign assistance and our 

other development policy tools must be modernized if we are to succeed, and not 

be left behind by others who are showing more flexibility and more innovation. 

Thank you for the opportunity to testify today.

————————

End Notes

1 Brainard, Lael. 2006. ‘‘Security by Other Means: Foreign Assistance, Global Poverty and 

American Leadership.’’ Brookings Institution Press, Washington, DC. Brainard’s ‘‘Spaghetti 

Bowl’’ of U.S. foreign assistance legislation, objectives, and organizations is attached as Annex 

A. 2 A version of an American multilateral aid review that I completed is attached as Annex B. 

3 Clemens, Michael and Kaci Farrell. 2011. ‘‘Beyond Aid: Migration as a Tool for Disaster Recovery.’’ Center for Global Development, Washington, DC. 4 Birdsall, Nancy and William Savedoff. 2010. ‘‘Cash on Delivery: A New Approach to Foreign 

Aid. Center for Global.’’ 5Forthcoming paper, ‘‘U.S. Development Finance Corporation: Strengthening OPIC to Promote Private Sector Development in Emerging Markets,’’ by Benjamin Leo, Todd Moss, and 

Beth Schwanke. Center for Global Development, Washington, DC.

FOREI-43947 with DISTILLER

11

ANNEX A

FOREI-43947 with DISTILLER


Moss1.eps

US Foreign Assistance Legislation, Objectives and Organizations 

Legislation, Presidential Initiatives and Strategy Papers Foreig" Assistanee Objective. US Foreign Assistance Organizations 

Source: lael Brainard, Security by Other Means (Brookings, 2006) 
12

ANNEX B

FOREI-43947 with DISTILLER


Moss2.eps

Measuring Value for Money in U.S. Contributions to Multilateral Organizations 

An American Version of the British Multilateral Aid Review 

~ 

~ .. 

3.50 

E 3.00 

C 

u:: 

c 

2.00 

1.50 

Figure 1 

UNEP 

• 

Todd Moss and Stephanie Maj erowicz 

July 27, 2011 

U~ PA UNAJDSo U • OHCHR UNIFEM 

UN.oeItA 

AD 10M 

o 

GAVI 

AsDF 

WHO 

UNESCO 

1.5 2.5 

Alignment with U.S. Development Objectives 

AfOF 

3.5 

Notes: Bubble sizes represent relative Us. contributions to each organization in 2009; color-coding represents the quartiles of 

an overall index multiplying scores on both dimensions. 
13

FOREI-43947 with DISTILLER


Moss3.eps

Background: A U.S. version of the UK's Multilateral Aid Review 

In March 2011 the United Kingdom's Department for International Development (DFID) released the 

results of a review of 43 multilateral institutions that receive UK funding. Summarized in Figure 2 below, 

the Multilateral Aid Review (MAR) assesses each institution in terms of the "value for money" to British 

taxpayers, based on indices measuring contribution to UK objectives and organizational strengths.' Each 

index draws on a combination of qualitative evidence and expert opinion polling. 

Value for money of the mutlllateral organisations for UK aid 

3.5 

. ',"0 

. 

CDe 

. ." 

. . 

UNIDO UNIFEM 

. 

10M 

. . ILO fP.O 

. . . 

IStlR UNESCOIiABIlAT 

. IK 

· 'fF 

. . 

PI!)G GAVI 

. ' <Of 

... • + EDF AI'DF GfATM 

. . 

s~~lAO 

. 

IDA . 

E( HO 

UN!lP....... ... + UNICEf PBf WFP UNH Cf!. fTl 

• •• UNFPA .It. ... UNAl DS EFW UNIlAI D ( ERf OHCHR 

• _ WHO UNEP . . tFRC OC HA 

. 

!CftC 

. .5 +---""""··'I""'''---~--~--~---I 

1.5 2.5 3.5 

Contribution t o UK Development Objectives' 

Not e: ' lnciudes numanltafl an obJectIVes 

Figure 2 

very Good 

... Good 

Adequate 

• Poor 

Real-World Impact of the MAR: Importantly, the results impact UK spending all ocations. Partly based 

on the MAR, the UK government has announced funding increases to top performers (IDA, UNICEF, 

GAV!) while those at the very bottom (UN-HABITAT, ILO, UNIDO, UNISDR) are being zeroed out.' 

Methodology for the U.S. MAR: Since no similar exercise exists for the United States, CGD replicated 

a MAR-like exercise for the 26 multilateral agencies that receive U.S. government funds (minimum $5 

million, FY2009). Following the DFID model, we rank each multilateral agency on "alignment with U.S. 

development objectives" and "organizational strengths." 

Alignment with U.S objectives. As a proxy for U.S. development objectives we use the four goals 

articulated by the 2010 Presidential Policy Directive on Global Development: (I) Foster 

sustainable, broad-based economic growth; (2) Focus on governance and public-sector capacity 

I DFID, "Multilateral Aid Review," March 2011 , p. 3. 

http://www.dfid.gov. uklDocuments/publicationsl/mar/rnulti latera l aid review. pdf 

2 FAO, UNESCO, the Commonwealth Secretariat, and the 10M were put on a probationary watch list. See DFID, "Taking 

Forward the Findings of the UK Multilateral Aid Review," March 20 11 . 

http://www .dfid.gov .uk/Documents/publ ications I /marff aking-forward.pd f 
14

Senator KAINE. Thank you, Dr. Moss. 

Mr. Murphy, welcome. 

STATEMENT OF JOHN MURPHY, VICE PRESIDENT OF INTERNATIONAL AFFAIRS, UNITED STATES CHAMBER OF COMMERCE, WASHINGTON, DC 

Mr. MURPHY. Thank you, Mr. Chairman, Senator Barrasso. I am 

pleased to speak today about the importance of funding a robust 

international affairs budget from the perspective of the U.S. busiFOREI-43947 with DISTILLER


Moss4.eps
15

ness community. No priority facing our Nation today is more 

important than putting Americans back to work. As a nation, the 

biggest policy challenge we face is to create the 20 million jobs 

needed in this decade to replace the jobs lost in the recent recession and to meet the needs of a growing work force. 

World trade must play a central role in reaching this job creation 

goal. After all, outside our borders are markets that represent 80 

percent of the world’s purchasing power, 92 percent of its economic 

growth, and 95 percent of its consumers. 

Many Americans are already seizing these opportunities. One in 

three manufacturing jobs depends on exports. One in three acres 

on farms is planted for exports. And nearly 300,000 small- and 

medium-size businesses export today, accounting for more than a 

third of all U.S. merchandise exports. 

Now, in this context the international affairs budget plays a vital 

enabling role for U.S. companies to tap foreign markets to create 

jobs and prosperity at home. The indispensable role this investment makes in national security and advancing our humanitarian 

values is something you both alluded to. 

The business case for the international affairs budget is straightforward. It supports and protects U.S. diplomats who are on the 

front lines of American commercial diplomacy and export promotion efforts. It provides technical advice so developing countries 

can adopt more open and accountable political, legal, and economic 

systems and become better markets for U.S. companies in the bargain. This is more important than ever before because developing 

countries last year purchased more than half of all U.S. exports for 

the first time. 

However, U.S. companies risk falling behind if the Federal Government fails to maintain a significant diplomatic and economic 

presence overseas or to provide American businesses with the 

essential tools to level the playing field. Competition is fierce in 

fast-growing markets in Southeast Asia, Latin America, Africa, and 

firms based in other parts of the world are actively working to 

boost their own market share, and this competition is only becoming more intense. 

Some studies estimate that China’s Government-supported economic development programs in Latin America, Asia, and Africa 

grew twenty-five-fold in the 5-year period from 2002 to 2007. In its 

first official report on foreign aid policy, the Chinese Government 

indicated that its budgeted foreign aid grew by nearly 30 percent 

per year between 2004 and 2009. While the United States and 

most developed countries have been moving away from tied aid, 

China’s development assistance is often contingent on requirements 

to purchase products or services from Chinese companies. For example, the Chinese Government has offered loans to African governments on the condition that they buy telecommunications equipment only from Chinese companies. 

In this challenging environment, unilateral disarmament is not 

the answer. So we need the international affairs budget. Let me 

give some examples. We see this with the Export-Import Bank—

Ex-Im—which provides vital financial guarantees to help American 

businesses export. Last year Ex-Im supported export sales that 

sustained nearly 255,000 American jobs at 3,400 companies. Ex-Im 

FOREI-43947 with DISTILLER

16

is especially important to small- and medium-sized businesses, 

which account for more than 85 percent of its transactions. 

Now, without Ex-Im U.S. companies would be unable to sell their 

goods abroad in many circumstances. Other countries provide their 

own exporters with an estimated $1 trillion in export finance 

through their own official export credit agencies, often on terms 

more generous than Ex-Im can provide. So without Ex-Im American companies would be left at a sharp disadvantage relative to 

the size of their economies. European governments provide three 

times as much official trade finance to their exporters as Ex-Im 

does, and China and India provide four times as much. Further, far 

from being a subsidy for corporations, Ex-Im charges fees for its 

services that generated more than a billion dollars net in revenue 

for the U.S. Treasury last year alone. 

Similarly, OPIC, the Overseas Private Investment Corporation, 

provides U.S. investors with financing, guarantees, and political 

risk insurance when private sector financing is unavailable. Often 

this is in support of key foreign policy objectives. Now, partnering 

with the private sector is a hallmark of OPIC’s work and historically every dollar of OPIC support has leveraged about $2.70 in private sector investment. 

Like Ex-Im, companies that use OPIC’s services pay interest, 

fees, and premiums for those services, and this allows OPIC to 

operate on a self-sustaining basis at no cost to the U.S. taxpayer. 

Last year OPIC earned a net profit of $272 million. 

Now, a third example is the U.S. Trade and Development 

Agency. USTDA works to increase U.S. exports by connecting 

American companies with targeted development projects in emerging companies. Last year it identified $2.2 billion in U.S. exports 

to emerging markets that were directly attributable to its programs. From Thai training grants to strategically timed reverse 

trade missions, USTDA helps U.S. firms compete on an international playing field that is often skewed against them. 

Programs supported by USAID, the MCC, and other multilateral 

development banks offer many other examples, which I will leave 

aside given the short time. Just consider quickly the following 

examples of collaboration between U.S. companies large and small 

and programs supported by the U.S. international affairs budget. 

In 2011 Wal-Mart partnered with USAID on a regional agreement 

in Central America named Tierra Fertil, ‘‘Fertile Soil,’’ to support 

farmers in that region, and the initiative helped farmers diversify 

their crops and improve their quality, all while meeting real market needs. 

Miss Jenny’s Pickles, a small North Carolina business and proud 

U.S. Chamber member, is run by entrepreneurs Jenny Fulton and 

Ashlee Furr. In 2011 they began exporting their pickles to China 

thanks to export finance provided by Ex-Im and their products are 

now available in more than 800 stores across the United States in 

addition to China, and they are now eyeing Canada and Germany 

as potential export markets. 

In conclusion, U.S. companies and the workers they employ need 

the support of these agencies, which are funded by the U.S. international affairs budget. They need them to be competitive. This 

partnership requires sustained sufficient funding. The interFOREI-43947 with DISTILLER

17

national affairs budget strengthens our economy by shoring up 

these export markets, promoting development and good governance, and reaffirming U.S. leadership. At stake is America’s standing in the world, our ability to exert positive influence, our reputation and our brand, and our best hopes of reducing unemployment. 

The U.S. Chamber looks forward to working with members of the 

subcommittee on this and other issues. 

Thank you very much. 

[The prepared statement of Mr. Murphy follows:]

PREPARED STATEMENT OF JOHN MURPHY

Thank you Chairman Kaine, Senator Barrasso, and distinguished members of the 

subcommittee. My name is John Murphy, and I am Vice President for International 

Affairs at the U.S. Chamber of Commerce. The U.S. Chamber of Commerce is the 

world’s largest business federation, representing the interests of more than 3 million 

businesses of all sizes, sectors, and regions, as well as State and local chambers and 

industry associations. I am pleased to speak today about the importance of funding 

a robust International Affairs Budget from the perspective of the U.S. business 

community. 

No priority facing our Nation is more important than putting Americans back to 

work. More than 7 percent of the U.S. workforce is unemployed—a figure that soars 

to nearly 15 percent when those who have stopped looking for jobs and the millions 

of part-time workers who want to work full time are included. As a nation, the biggest policy challenge we face is to create the 20 million jobs needed in this decade 

to replace the jobs lost in the recent recession and to meet the needs of America’s 

growing workforce. 

World trade must play a central role in reaching this job-creation goal. After all, 

outside our borders are markets that represent 80 percent of the world’s purchasing 

power, 92 percent of its economic growth, and 95 percent of its consumers. The 

resulting opportunities are immense, and many Americans are already seizing 

them: One in three manufacturing jobs depends on exports, and one in three acres 

on American farms is planted for hungry consumers overseas. Nearly 300,000 small 

and medium-sized businesses export, accounting for more than one-third of all merchandise exports. 

In this context, the International Affairs Budget plays a vital enabling role for 

U.S. companies to tap foreign markets and create jobs and prosperity at home. Although it represents a little more than 1 percent of all federal spending, the International Affairs Budget is critical to creating jobs, saving lives, and protecting our 

national security. 

As former Defense Secretary Robert Gates has stated, ‘‘America’s civilian institutions of diplomacy and development have been chronically undermanned and underfunded for far too long . . . relative to the responsibilities and challenges our Nation 

has around the world.’’ America must utilize all of the tools and resources it has 

to strengthen U.S. national interests and ensure our global competitiveness. 

THE BUSINESS CASE

The business case for the International Affairs Budget is straightforward. It supports and protects U.S. diplomats, who are on the front lines of American commercial diplomacy and export promotion efforts. Programs funded by the International 

Affairs Budget directly promote sustainable economic reforms in developing countries that ultimately benefit American companies and workers. 

U.S. foreign assistance programs provide technical advice and build stronger political, legal, and economic policy regimes in developing countries that help these 

nations become reliable trading partners. This is more clearly the case than ever 

before, as developing countries last year purchased more than half of all U.S. exports for the first time in years. 

In this vein, the U.S. Agency for International Development (USAID) supports 

programs that help countries improve their business regulatory environments and 

embrace international commerce. These programs can move developing countries 

away from rigid government-controlled economies toward competition and market 

orientation, which in turn creates new opportunities for American companies and 

workers. Similarly, the Millennium Challenge Corporation (MCC) provides grants to 

countries for economic reforms but only if they demonstrate a commitment to democratic governance and economic freedom. 

FOREI-43947 with DISTILLER

18

The International Affairs Budget has also provided modest investments over the 

years in the multilateral development banks (MDBs), including the World Bank, the 

African Development Bank, the Asian Development Bank, the Inter-American 

Development Bank, and the European Bank for Reconstruction and Development. 

In addition to an array of educational and health programs, the MDBs support programs that strengthen governance institutions and build infrastructure that facilitates U.S. investment and exports. 

Over the years, the World Bank and the regional banks have funded successful 

programs to get children into school; build infrastructure to allow entrepreneurs and 

farmers to transport their goods to market; strengthen judiciaries; support private 

sector job creation; and combat measles, diarrhea, malaria, and other preventable 

illnesses. These efforts helped developing countries add two decades to life expectancy, cut the mortality rate of children under age 5 by 50 percent, and reduce by 

half the proportion of people living in poverty. 

American businesses understand these institutions’ vital role in fostering prosperity in developing nations. MDB loans and expertise help developing countries 

become reliable trading partners and open up their markets for U.S. goods. These 

loans come with conditions, such as strengthening transparency, promoting good 

governance, and improving the investment climate. 

The U.S. investment in the MDBs has a huge multiplier effect. For instance, the 

United States has invested $2 billion in the World Bank’s capital base since its creation in 1944. The U.S. funding has leveraged contributions from other donors, 

allowing the World Bank to provide nearly $500 billion in financing and invaluable 

expertise to developing countries. 

BOOSTING TRADE AND INVESTMENT

Other agencies supported by the International Affairs Budget also play a direct 

role in supporting economic growth and job creation at home. For example, the 

Export-Import Bank of the United States (Ex-Im) provides vital financial guarantees 

to help American businesses export. Last year, Ex-Im supported export sales that 

sustained nearly 255,000 American jobs at 3,400 companies. 

Ex-Im is especially important to small and medium-sized businesses, which 

account for more than 85 percent of Ex-Im’s transactions. Tens of thousands of 

smaller companies that supply goods and services to large exporters also benefit 

from Ex-Im’s activities. It’s worth noting that Ex-Im has tripled the amount of exports to sub-Saharan Africa it supports since 2009. 

Without Ex-Im, many U.S. companies would be unable to sell their goods abroad. 

Because other countries provide their own exporters with an estimated $1 trillion 

in export finance through their own official export credit agencies—often on terms 

more generous than Ex-Im can provide—American companies would be left at a 

sharp disadvantage without Ex-Im. Relative to the size of their economies, European governments provide three times as much official trade finance to their exporters as Ex-Im does. China and India provide four times as much. 

Further, American taxpayers can cheer the fact that Ex-Im regularly helps reduce 

the Federal deficit by hundreds of millions of dollars. Far from being a subsidy for 

corporations, Ex-Im charges fees for its services that generated more than $1 billion 

in revenue for the U.S. Treasury last year alone. This is a significant, yet often overlooked, attribute of Ex-Im. 

Finally, Ex-Im loans expose the U.S. taxpayer to little risk because they are 

backed by the collateral of the goods being exported. Borrowers have defaulted on 

less than 2 percent of all loans backed by Ex-Im over the past eight decades, a 

default rate lower than commercial banks. 

The Overseas Private Investment Corporation (OPIC), the U.S. Government’s 

development finance institution, is also a critical agency. It mobilizes American private capital to address major development challenges in emerging markets, often in 

support of key foreign policy objectives. It helps U.S. businesses of all sizes take advantage of lucrative growth markets, and it turns a profit year after year. 

OPIC provides U.S. investors with financing, guarantees, and political risk insurance when private sector funding is unavailable. OPIC’s activities are perhaps most 

notable in Africa: OPIC in 2012 committed $907 million to projects in sub-Saharan 

Africa, helping to create jobs, raise living standards, and stimulate economic growth 

opportunities in the U.S. and abroad. 

Partnering with the private sector is the hallmark of OPIC’s work. Historically, 

every dollar of OPIC support has leveraged about $2.70 in private sector investment. Since 1971, OPIC has supported more than $200 billion of investment which, 

in turn, has generated about $75 billion in U.S. exports and supported more than 

275,000 American jobs. 

FOREI-43947 with DISTILLER

19

OPIC services are not free. Companies that use these services pay interest, fees, 

and premiums for the services, in addition to repayment of principal amounts on 

loans. This allows OPIC, like Ex-Im, to operate on a self-sustaining basis at no cost 

to the U.S. taxpayer. Last year, OPIC earned a net profit of $272 million, and the 

agency has helped reduce the Federal budget deficit for 35 consecutive years. 

OPIC’s authorization has been extended 10 times via a succession of appropriations bills and continuing resolutions. For a period of time in 2008, that authorization lapsed completely, and the agency was unable to process any transactions. This 

has made the investment community wary. The Chamber urges Congress to provide 

OPIC with permanent authorization. Doing so will provide assurance to the business community of OPIC’s long-term involvement in their projects, most of which 

carry tenors of 10 years or more. 

Another important agency supported by the International Affairs Budget is the 

U.S. Trade and Development Agency (USTDA). USTDA works to increase U.S. exports and help companies expand overseas by connecting American companies with 

targeted development projects in emerging economies. Last year, USTDA identified 

$2.2 billion in U.S. exports to emerging markets that were directly attributable to 

its programs. For every $1 programmed by USTDA, the Agency identified over $63 

in exports of U.S.-produced goods and services. 

USTDA’s programs directly support U.S. businesses facing competition from companies subsidized by foreign governments. From tied training grants to strategically 

timed reverse trade missions, USTDA helps U.S. firms compete on an international 

playing field that is often skewed against them. 

USTDA responds directly to the needs expressed by the U.S. business community. 

To better position U.S. firms in the international arena and invest in projects that 

will most likely provide the highest return, USTDA has reprogrammed its funds 

toward priority sectors including energy, transportation, and information and communications technology. Over 90 percent of contracts awarded by USTDA are performed by small businesses. Once U.S. small businesses are introduced to overseas 

export opportunities, many go on to succeed in securing new contracts in foreign 

countries. 

PUBLIC—PRIVATE COLLABORATION

Consider the following examples of collaboration between the private sector and 

programs supported by the U.S. International Affairs Budget:

• PepsiCo, USAID, and the United Nations World Food Programme in 2011 

partnered to improve yields, production, and the availability of healthy food in 

East Africa. The program—dubbed Enterprise EthioPEA—uses chickpea production to address famine and malnourishment in the Horn of Africa and stimulate economic development in Ethiopia. 

• In 2011, Wal-Mart partnered with USAID on a regional agreement named

Tierra Fe ́rtil (Fertile Soil) to support farmers in Costa Rica, Nicaragua, Honduras, Guatemala, and El Salvador. The initiative helped farmers diversify 

their crops and improve their quality—all while meeting real market needs. 

• Working with the Inter-American Development Bank (IDB), The Coca-Cola 

Company has rolled out a program to improve access to clean water in partnership with American entrepreneur Dean Kamen (President of DEKA R&D and 

inventor of the Segway scooter) and the NGO Africare. This collaboration focused on Kamen’s new water purification system, but the partnership with the 

IDB is vital to bringing this technology to communities in need in rural parts 

of Latin America (and Africa through Africare). 

• Miss Jenny’s Pickles, a small North Carolina business run by entrepreneurs 

Jenny Fulton and Ashlee Furr, in 2011 began exporting their pickles to China 

with export finance provided by Ex-Im. Their products are now available in 

more than 800 stores across the United States, and Miss Jenny’s Pickles is now 

eyeing Canada, Hong Kong, and Germany as potential export markets. 

A COMPETITIVE WORLD

The global economy provides many avenues to create American jobs and spur economic growth if the United States builds the necessary foundation to ensure American companies can be competitive. For American businesses and workers to seize 

these opportunities, we must use the full range of available tools to achieve success 

in these demanding environments. 

U.S. companies risk falling behind if the Federal Government fails to maintain 

a significant diplomatic/economic presence overseas or provide American businesses 

with tools that can help level the playing field. Competition is fierce in fast-growing 

FOREI-43947 with DISTILLER

20

markets such as those in Southeast Asia, Latin America, and sub-Saharan Africa, 

and firms based in other regions are actively working to get their own market share. 

This competition will only become more intense. Some studies estimate that China’s Government-supported economic development programs in Latin America, Asia, 

and Africa grew twenty-five-fold in the 5-year period from 2002 to 2007. Indeed, in 

its first official report on foreign aid policy, the Chinese Government indicated that 

its budgeted foreign aid grew by nearly 30 percent per year between 2004 and 2009. 

While the United States and most industrial countries have been moving away 

from tied aid, China’s development assistance is often tied to requirements to purchase products or services from Chinese companies. For example, the Chinese Government has offered loans to African governments on the condition that they buy 

telecommunications equipment only from Chinese companies. 

In this challenging environment, unilateral disarmament is not the answer. U.S. 

companies and the workers they employ need the partnership of the agencies funded 

by the U.S. International Affairs Budget to be competitive. That partnership requires sufficient and sustained funding of these agencies. 

Representing just over 1 percent of Federal spending, the International Affairs 

Budget is an investment that will strengthen our economy by shoring up vital export markets, promoting economic development and good governance, and reaffirming U.S. leadership. At stake is the standing of the United States as the world’s 

leading power, our ability to exert positive influence around the world, our reputation and brand overseas, and our best hopes for escaping high unemployment. The 

U.S. Chamber of Commerce looks forward to working with the members of the subcommittee on this and other issues.

Senator KAINE. Thank you, Mr. Murphy. 

Mr. Lane. 

STATEMENT OF WILLIAM LANE, INTERNATIONAL GOVERNMENTAL AFFAIRS DIRECTOR, CATERPILLAR, AND CO–PRESIDENT, U.S. GLOBAL LEADERSHIP CAMPAIGN, WASHINGTON, 

DC 

Mr. LANE. Thank you, Chairman Kaine, Senator Barrasso. I am 

extremely happy to be here today. I am Bill Lane, Caterpillar’s 

director for government and corporate affairs. I am appearing 

today—but I am also appearing today in my capacity as copresident of the U.S. Global Leadership Coalition, an organization that 

brings together Republicans and Democrats, business and NGO 

leaders, veterans and retired military brass, and faith-based volunteers from across the country. What units our strange bedfellow 

coalition is the conviction that development and diplomacy programs are vital to America’s economy, our national security, and 

our values. 

I am proud to have worked for Caterpillar for the past 38 years. 

As one of America’s most successful exporters, Caterpillar has long 

realized that our prosperity is directly linked to economic currents 

and trends that are occurring outside of our borders. Today trade 

supports more than 38 million jobs in the United States and the 

emerging markets of the developing world are growing at a much 

faster rate than in the developed world. Already, they are the destination of more than half of U.S. exports and, as I said before, 

growing at a much faster pace than what we are seeing in the traditional markets. 

But success in this requires engagement, persistence, commitment, and at times support from the U.S. Government. I recall 30 

years ago American business often said we believe in trade, not 

aid, in effect saying U.S. Government programs should focus on 

reducing trade barriers rather than fostering development. That 

may have been a great sound bite, but it did not fully reflect the 

FOREI-43947 with DISTILLER

21

reality of international commerce. While we believe in the importance of free trade more now than ever before, we also know that 

countries that have been devastated by AIDS or malaria do not 

grow, nor do countries that lack transparency or the rule of law. 

While we must always make sure that U.S. Government resources are spent wisely, the reality of international commerce is 

that trade and aid are often mutually supportive. The State 

Department, USAID, the MCC, OPIC, just to name a few, are funded by just 1 percent of the U.S. budget. At Caterpillar we have 

found that this teamwork approach—working with the government—bears results. Teamwork has been demonstrated through 

private-public partnerships where one can leverage government 

funds with the creativity, innovation, and core business resources 

of the private sector. 

For example, last year Coca-Cola, the largest employer in Africa, 

committed millions of dollars on the continent as part of a new 

partnership with USAID and the Peace Corps to expand sustainable access to clean water. I must say, as part of my work on the 

HELP Commission, of all the brands I saw in this part of the 

world, the Peace Corps has one of the strongest brands I have seen 

anywhere and it really does reflect well on our values and our 

priorities. 

At Caterpillar we are working closely with the global communities to build infrastructure and the International Youth Foundation to train young people in the developing world. 

For me, the best example that illustrates the importance of the 

international budget is Colombia. In the late 1990s Colombia was 

on the verge of being a narcoterrorist state. With the leadership of 

President Clinton and Speaker Hastert, the United States and 

Colombia began a multifaceted partnership called Plan Colombia. 

It was a sustained program that included security and development 

assistance to tackle narcotics-funded insurgency. 

The bottom line is it worked. Thanks to the substantial improvements in the equipping, training, and professionalism of the Colombian security forces, the drug lords and the associated guerrilla 

groups effectively lost control of the countryside. At the same time, 

United States development assistance helped Colombians build 

infrastructure, provide education and medical care, and put in 

place judges and police who respected the rule of law and human 

rights. USAID assisted rural farmers in developing alternative 

crops to the coca plant, which has helped lead to a sharp decline 

in the smuggling of Colombian narcotics into the United States. 

During this same time, United States trade with Colombia tripled, reaching over $14 billion in 2011. The United States is now 

Colombia’s largest trading partner and the free trade agreement 

that went into force last year is expected to add billions more in 

annual commerce between our two countries. 

For the folks living in Peoria, IL, Plan Colombia and the reforms 

embraced by the free trade agreement meant that Caterpillar now 

has a destination that consistently ranks as one of its top 10 export 

markets. Perhaps more remarkably, Americans also have proof 

that in Washington Republicans and Democrats can work together 

over a sustained period of time and get results. 

FOREI-43947 with DISTILLER

22

Mr. Chairman, at Caterpillar we like to say that the road to 

development literally begins with the road. It should go without 

saying that we know how to produce equipment needed to build 

those roads. But it is the development and diplomacy programs 

funded by 1 percent of the U.S. budget that in the broadest sense 

provides the foundation that allows development to take place. 

Like you, we are concerned about getting the most results from 

each Federal dollar spent. We also know how important it is that 

U.S. global leadership and competitiveness be enhanced and not 

undermined. Yet international affairs programs have been cut by 

nearly 20 percent over the past 3 years. This is not in America’s 

best interests. So on behalf of the hundreds of companies that are 

members of the U.S. Global Leadership Coalition, we strongly 

encourage the Senate to oppose further cuts and to invest in a 

strong and effective international affairs budget. 

Thank you. 

[The prepared statement of Mr. Lane follows:]

PREPARED STATEMENT WILLIAM LANE

Chairman Kaine, Ranking Member Barrasso, and members of the subcommittee, 

thank you for the opportunity to discuss the International Affairs Budget. I am 

appearing today in my capacity as copresident of the U.S. Global Leadership 

Coalition (USGLC), an organization that brings together Republicans and Democrats, national security and foreign policy experts, and business, faith-based and 

community leaders all across the country. What unites this ‘‘coalition of strange bedfellows’’—including a ‘‘Who’s Who’’ of America’s leading corporations—is the conviction that the diplomacy and development programs funded in the International 

Affairs Budget are vitally important for America’s economic future, national security, and global influence. 

As director of Caterpillar’s Washington, DC, office, I am cognizant of the difficult 

budget choices the Congress has to make, especially in this onerous fiscal environment. Every government agency deserves scrutiny of its costs and effectiveness. Yet, 

from a business person’s perspective, the International Affairs Budget—which represents a little more than 1 percent of the overall Federal spending—represents a 

smart investment in American global leadership that fuels economic growth and job 

creation at home. 

EXPORTS, AMERICAN JOBS, AND EMERGING MARKETS

For major manufacturers like Caterpillar, it has been clear for some time that 

America’s prosperity is tightly bound to economic currents and trends emerging 

beyond our borders. Overseas markets represent 95 percent of the world’s consumers and 80 percent of its purchasing power. Trade already supports one in three 

manufacturing jobs, and one-third of American agriculture is destined for consumers 

overseas. 

Overall, trade supports more than 38 million jobs in the United States, and

export-related jobs pay, on average, 15 percent more than the average wage. Studies 

indicate that every 10-percent increase in exports is associated with a 7-percent 

increase in employment. 

Half of those exports today are to the developing world, and those markets will 

grow at a far faster pace than many of our more traditional trading partners. In 

sub-Saharan Africa, 17 countries have maintained rates of economic growth of 5 

percent to 7 percent per year for the last decade and African economies are expected 

to nearly double in size to $2.6 trillion by 2020. According to Standard & Poors 

Latin America’s economies grew by more than 3 percent last year—better than the 

U.S. and Europe—with countries like Peru and Chile growing in the 5–7 percent 

range.1 These markets represent tremendous opportunities for American companies 

and businesses. 

THE ROLE OF U.S. GOVERNMENT DEVELOPMENT AND DIPLOMACY

But we can’t do it alone. Businesses succeed in overseas markets in conditions 

where there are stable governments, transparency, predictability, adequate financial 

infrastructure, free market economic policies that allow for competition, and rule of 

FOREI-43947 with DISTILLER

23

law. Those conditions are often lacking in many of today’s emerging nations and 

require a coordinated approach that includes the development programs, diplomatic 

efforts, and trade promotion activities of the U.S. Government. 

In the past some have called for a shift toward ‘‘trade, not aid’’—arguing that U.S. 

Government programs should focus on promoting commerce rather than fostering 

development. Based on my experience in this area, which includes service on the 

2007 HELP Commission, the real answer is ‘‘trade and aid,’’ each of which are 

mutually supporting. 

In these countries the road to development—and the investment, commerce, and 

trade that follow—may begin (literally) with a road. Here I am referring to the basic 

infrastructure that must be improved and, in some cases, created from scratch using 

machinery and expertise often supplied by companies like Caterpillar. In fact, more 

than half of Caterpillar’s exports now go to non-OECD countries, primarily in the 

developing world. 

In all, effective development programs funded in the U.S. International Affairs 

Budget spur economic reform, advance the rule of law, improve governance, and 

raise standards of living—building more peaceful, prosperous societies that desire—

and can afford—American products and services. 

For example, the Millennium Challenge Corporation (MCC) provides economic assistance to developing nations based on a competitive selection process in which the 

countries must show a strong commitment to ruling justly, investing in their 

citizens, and economic freedom. The U.S. Agency for International Development 

(USAID) supports programs that help countries improve their business regulatory 

environments and open their economies to foreign competition. 

The International Affairs Budget also supports the multilateral development 

banks (MDBs), including the World Bank, the African Development Bank, the Asian 

Development Bank, the Inter-American Development Bank, and the European Bank 

for Reconstruction and Development. MDB loans come with conditions, such as 

strengthening transparency, promoting good governance, and improving the investment climate, that open developing markets to U.S. goods and transform them into 

more reliable trading partners. 

COLOMBIA CASE STUDY

The story of Colombia, which has endured a narcotics-funded insurgency for decades, provides an excellent example of ‘‘smart power’’ in action to advance American 

interests and prosperity. 

In 1999 the U.S. and Colombia began a multifaceted partnership called ‘‘Plan 

Colombia’’ involving security, developmental, and governance assistance. 

Back then, the country was engulfed in drug-related violence and lawlessness. In 

fact, about 11,000 Colombian towns had no government presence at all. Since then, 

substantial improvements in the equipping, training, and professionalism of the 

Colombian security forces led to a dramatic decrease in violence and the drug lords 

and their associated guerrilla groups effectively lost control of the countryside they 

had dominated for so long. 

At the same time, U.S. governance and development assistance helped Colombians build infrastructure, medical care, education, and competent judges and police 

who respected the rule of law and human rights. USAID assisted rural farmers in 

developing alternative crops to the coca plant, and with the help of the Colombian 

Government, we have seen a sharp decline in the smuggling of Colombian narcotics 

into the United States. 

Since Plan Colombia began the country’s GDP has averaged close to 4.5 percent 

growth and now ranks as the 4th-largest economy in Latin America. U.S. trade with 

Colombia has tripled since 2000, reaching over $14 billion in 2011. The U.S. is now 

Colombia’s largest trading partner and our exports include machinery, oil, agricultural products, organic chemicals, and plastics. The free trade agreement that went 

into force last year is expected to add billions more to annual commerce between 

our two countries. 

Colombia is one of the top 10 export markets for Caterpillar, and their booming 

mining industry presents the potential for still further growth. The more trucks and 

tractors we sell overseas, the more jobs are created in places like Peoria where those 

vehicles are manufactured. 

These kinds of results are not limited to Colombia. In Vietnam, a trade-acceleration program funded by the USAID led to the revision or enactment of more than 

100 laws and regulations over the course of a decade. The USAID program cost 

roughly $1 million, and since 2001 U.S. exports to Vietnam increased more than 700 

percent. 

FOREI-43947 with DISTILLER

24

PUBLIC-PRIVATE PARTNERSHIPS

In spite of all the progress made in recent years, American good will, innovation, 

and resources are still needed to address the world’s most pressing humanitarian 

and developmental problems. Consider that millions of children die prematurely 

every year from preventable diseases, tens of millions of children are not attending 

school, and more than a billion people are without clean water or basic sanitation. 

These afflictions are holding back entire regions of the world—the regions with the 

most quickly growing populations—from being secure, productive participants in the 

global economy. 

As Bill Gates has said, ‘‘Investing in the world’s poorest people is the smartest 

way our government spends money.’’

One of the more promising developments in recent years has been the increasing 

use of private-public partnerships to provide foreign assistance in more effective and 

creative ways. 

In 1969, 70 percent of financial flows to developing countries came in the form 

of official development assistance and the remaining 30 percent from private 

sources. Today, those ratios have more than reversed, with over 80 percent of financial flows coming from private sources. 

The U.S. Government uses these partnerships to get the maximum impact of 

scarce public funds by leveraging the creativity, innovation, and core business 

resources of the private sector to promote economic growth and opportunity. 

For example, last year Coca-Cola—the largest employer in Africa—has committed 

several million dollars on the continent as part of a new partnership with USAID 

and the Peace Corps to expand sustainable access to clean water.2

In Central America Wal-Mart has partnered with USAID to help farmers in Costa 

Rica, Nicaragua, Honduras, Guatemala, and El Salvador in diversifying their crops 

to meet real market needs. 

In these and many other cases, a modest investment of public funds in partnership with the private sector can substantially improve standards of living in the 

developing world, all of which leads to more promising trade and investment for 

American companies doing business in these countries. 

CONCLUSION

In a ferociously competitive international business climate, the U.S. Government’s 

International Affairs Budget is one of the most cost-effective instruments we have 

to provide a vital link between America’s businesses and workers and some of the 

fastest-growing overseas markets. In this environment the U.S. cannot unilaterally 

disarm, leaving our business at a distinct competitive disadvantage. 

Programs such as the Overseas Private Investment Corporation, the ExportImport Bank, and the U.S. Trade & Development Agency—all funded by the International Affairs Budget—are essential to maintaining a level playing field for our 

companies doing business around the world, boosting U.S. exports overseas and creating more American jobs at home. 

These efforts and other forms of international engagement require adequately 

funded and staffed U.S. embassies, targeted and accountable governance, development, and security assistance programs, and effective export credit and trade promotion agencies—capabilities threatened by deep cuts to the International Affairs 

Budget. Yet, these programs have in fact been cut nearly 20 percent in the past 3 

years. 

Too much is at stake to diminish U.S. global leadership and competitiveness in 

a world that is only growing more interconnected and interdependent—as well as 

more turbulent—virtually every day. 

On behalf of the hundreds of companies that are members of the U.S. Global 

Leadership Campaign, we strongly encourage the members of the subcommittee to 

support the investments contained in the International Affairs Budget—for a more 

secure and prosperous America, for a safer and better world.

————————

End Notes

1http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=12453

50590911. 2http://www.peacecorps.gov/resources/media/press/2129/.

Senator KAINE. Thank you to all the witnesses. 

We will begin two rounds of questions, 7 minutes, and I will just 

begin with one picking up on Mr. Lane’s—actually, a combination 

question. Dr. Moss, you talked about the fragmented nature of the 

FOREI-43947 with DISTILLER

25

number of agencies within the Federal space that work on the 

international development area. In looking at that testimony and 

the chart that you provided, it was the kind of thing that makes 

you think, boy, this is a complicated system. 

Mr. Lane, you talk about Colombia and the obvious success in 

Colombia, and that was a sort of a full-government approach from 

the United States. It involved military, it involved other security 

agencies like DEA, it involved trade, it involved Congress taking 

steps with respect to the free trade agreement, USAID. A lot of different parts of the U.S. Government played a role in this comprehensive plan and it has been a success story. 

So we all agree that the budget is important, needs to be spent 

the right way. We do not want to be overly fragmented. How do 

we wrestle with this question of better organization to get more 

bang for the buck without sacrificing the kind of comprehensive approach that in Colombia’s case has seemed to have been successful? 

Dr. MOSS. When we think about our relations with partners in 

difficult states overseas, we are going to have complex interests. 

We are never going to have a single interest. Agencies that we can 

bring to bear have different objectives. DOD and State, very often 

they are complementary, what they are looking at, but their objectives are very often different. The same with USAID. 

To just give you one example, DOD is obviously going to be interested most in security and looking at very short-term security concerns. USAID, perhaps they are going to take a longer term development perspective. Maybe they are thinking about long-term 

transformation, of trying to build a capable partner over 10 or 20 

years. The State Department is trying to ensure that we have solid 

partnerships with as many friends around the world at the same 

time. So AID might want to focus our resources in places where 

they think they can be transformative over the long term, so they 

would want to perhaps close missions that are too small or are not 

working, whereas State would see our AID missions as part of our 

international diplomacy, part of making friends around the world. 

Their preference would be to spread it around the world. And DOD, 

of course, wants to go where the action is. 

So you have the triple D’s of defense, diplomacy, and development. Sometimes they come together, but very often they do not. 

Perhaps in the case of Colombia these things came together and 

they worked quite well, but those are more often than not the 

exception rather than the rule. So I think we should build the system in a way that can manage those tensions and make those 

tradeoffs, rather than assuming we are all one big happy family, 

we all have the same objectives, and we are all moving in the same 

direction. Those were the exceptions. 

Senator KAINE. Mr. Lane. 

Mr. LANE. Yes, Mr. Chairman. Back in 2006 to 2008 I was on 

the HELP Commission, which looked at the effectiveness of foreign 

aid. I have to say we all came back with various conclusions, but 

some were very revealing. One was where we have a unified mission it really works. In Colombia, when you went and visited the 

U.S. Embassy in Bogota there was a focus. It was a very complex 

mission, but I have to tell you people knew what the objective was 

FOREI-43947 with DISTILLER

26

and everyone was working well together and working well with the 

Colombian Government. 

You move over to Egypt, it was the exact opposite. It seemed to 

be a very bifurcated operation. You go to Honduras, where the 

focus was on infrastructure, ag development, here, too, results that 

were quantifiable and positive. So it really varied quite a bit. 

As far as the reorganization that Dr. Moss talks about, there has 

to be some consolidation that takes place. What is realistic and 

what is not, given the purview of the State Department, is subject 

to debate. But where foreign assistance works, it works. In Africa, 

taking on the plague of AIDS, you went to small towns in northern 

Uganda which were coming back to life and it was because of the 

PEPFAR program. At the time, and this was in 2007, I found that 

President George Bush was more popular in northern Uganda than 

he was in Texas, and I think that is probably still true. 

Senator KAINE. Good example. 

Mr. Murphy, I want to drill down on something. You testified 

about the degree to which other nations provide more export assistance than we do. Was the stat that European nations generally 

about triple and India and China about four times the kinds of 

export assistance to their private sector? If you would elaborate on 

that a little bit? 

Mr. MURPHY. Sure. I was referring in that case particularly to 

trade finance. Just about every country around the world has an 

official export credit agency. In fact, China has three or four of 

them. It has been very notable that there has been a huge increase 

in the resources that countries are making available to finance 

exports. The OECD has estimated there is $1 trillion of this trade 

finance sloshing around the global economy today. In the case of 

China, one estimate is that it provide four times as much as our 

little Ex-Im Bank is providing, and India similarly. 

So what we find is that there are many circumstances where 

U.S. exporters are going head to head with competitors from other 

countries. Those other countries, they have secured the finance 

that they need to make the deal, often on very generous terms. And 

if the U.S. company does not have that same kind of backing, they 

are going to lose the bid. 

There are other circumstances as well. I know a small medical 

device manufacturer in Maryland that has been making inroads in 

the Chinese market. They would be unable to make sales there if 

they did not have export finance from Ex-Im, from the official U.S. 

export credit agency. They would not qualify without that. So it is 

a fundamental reality that American companies often need this 

kind of support. 

Senator KAINE. Hearing your testimony, the notion that we are 

bringing down trade barriers, which is generally something I 

strongly support, that is important. But if the financial assistance 

provided is wildly different among nations, that is a different kind 

of a trade barrier that takes a leveling playing field and makes it 

unlevel again. 

Mr. MURPHY. Yes. I would just add that securing that level playing field is an important goal of this administration, as I understand it. There have been negotiations conducted in the OECD, for 

instance, on large aircraft, and those agreements have resulted in 

FOREI-43947 with DISTILLER

27

aircraft manufacturers in the United States and in Europe being 

obliged to pay much higher fees, such that the financing terms are 

now really on a par with commercial financing. 

So that effort is ongoing. But we also see that, just sticking with 

aircraft for a moment, China is developing a huge domestic civil 

aircraft industry, and there is no sign that they are going to be 

committing in the near term to follow those same kinds of disciplines to keep the financing at a commercial level. 

Senator KAINE. Senator Barrasso. 

Senator BARRASSO. Thank you, Mr. Chairman. 

Dr. Moss, you touched in your testimony the idea of U.S. Government implementing kind of a pay for performance contract in order 

for the U.S. taxpayer to only pick up the bill for actual achievements. You are hearing that discussion now with health care in the 

United States in terms of doctors taking care of patients. I wonder 

if you could just explain a little bit how this approach would work 

to foreign aid. I think you call it ‘‘cash on delivery.’’

Dr. MOSS. Yes, thank you. The traditional way that we measured 

projects was on inputs: How much money did we spend, how many 

things did we deliver? The next level was, which is still a leap in 

many areas, is let us measure outputs. We spent $10 million for 

school construction. Did those schools actually get built? How many 

teachers actually got trained? That would be a big leap forward if 

we were going to say, look, we will pay only for the number of 

teachers trained, only for the number of kilometers of road actually 

built, and we will come after and do that. 

Our system does not handle that all that well because it is contingent finance. It might be multiyear. So certainly we should be 

thinking about flexibility to allow our budget system to handle 

these contingent financial obligations. 

But the golden chalice here is not to go to outputs, but to go one 

step further to outcomes. Outcomes are the real results that we are 

looking at. What the cash on delivery model does is pays for outcomes. What do I mean by that? Let us say we want to support 

girls’ education in Pakistan. What we would pay is not for—we 

would not say how much money are we going to spend on education. We would not even say how many schools are we going to 

build; teachers we are going to train. We are actually going to pay 

for educated girls in Pakistan, by perhaps through how many children have taken an additional test and what are those test results 

published. 

Because what that would do is not only would we only be paying 

for what we hope to achieve, but there is no way sitting in Washington we are going to figure out how do we actually get girls educated in Pakistan. We would put the onus of that onto the 

authorities there to figure out: Is it building schools? Is it training 

teachers? Is it something else? Usually it is something else that we 

do not recognize, and cash on delivery puts that there and also is—

in terms of taxpayer value, it guarantees you are only paying for 

things that you actually get. 

The trick is going to be trying to make this fit within the U.S. 

budget system. 

Senator BARRASSO. You had mentioned so many conflicting and 

competing policy objectives that sometimes you are not able to 

FOREI-43947 with DISTILLER

28

achieve any of them. It is clear that we have to streamline, focus 

our top priorities. When I think about assistance, what objectives 

should be left to others to handle? where should we work on our 

core competencies? Someone mentioned Tanzanian electricity. I had 

a chance to be there with Melinda Gates and see what the Gates 

Foundation is doing there in terms of agriculture work, in terms 

of disease prevention and treatment, early detection. 

How do you see that playing out? 

Dr. MOSS. I think it makes sense that there needs to be a lead 

agency on a particular issue. In the case of electricity in Tanzania, 

it is obvious that a lot of agencies would think that they could take 

the lead. Even DOD might think that they could do that well. But 

really OPIC is the logical agency. OPIC has the expertise and, 

more importantly, they have the business model that can crowd in 

private finance. 

You do not want to do electricity in Tanzania with grant financing. You want it to be commercially viable. But you need that public policy nudge. OPIC would be the logical lead. But given that 

OPIC is a small agency, the State Department—this would not 

make my former colleagues happy—the State Department is very 

expansive and imperial in a sense within the interagency, everybody wants to take the lead. I am sure USAID thinks they could 

take the lead there, too. 

But I do think in projects that should be largely commercial and 

business-driven, an agency like OPIC makes the most sense and 

we need to be able to give them the tools to achieve that. 

Senator BARRASSO. Mr. Murphy, could I ask you about unlawful 

takings. We hear in our office from U.S. businesses concerned 

about property of businesses being expropriated by foreign governments. Do you believe U.S. assistance should continue to be provided to countries that do this sort of unlawful taking of U.S. business assets and properties? 

Mr. MURPHY. I think there are a number of elements of U.S. foreign policy that can and should be brought into play to support 

U.S. companies when they are faced with expropriation. It is a 

matter of public statute, for instance, that the Generalized System 

of Preferences, and the preferential access to the U.S. market it 

provides, should not be given to a country that expropriates without compensation. I think in the area of foreign aid as well that 

is something that should be taken very much into consideration. 

Senator BARRASSO. Mr. Lane, you talked about what we needed 

to do in terms of foreign aid. From your past experience, not just 

from Caterpillar but the commissions on which you served, and you 

talked about economic development, for national security, as well 

as consistent with our values. Then you mentioned the free trade 

agreement with Colombia. I had a chance to visit with President 

Santos in Cartagena in January 2011 and at that time he was saying: The United States has made this incredible investment to turn 

what could have been a narcostate around and they are saying, but 

we were delaying the free trade agreement for extended periods of 

time. And at what point do—sometimes we have invested wisely 

and then, through either a political position that we take or a military position, kind of undermine what another branch of our government is trying to do and accomplish with a country. 

FOREI-43947 with DISTILLER

29

I just wondered if you could comment. 

Mr. LANE. As a businessman, this is a source of frustration,

because what we often find in any kind of negotiations of trade 

agreements or the implementation thereof, we often fall prey to the 

notion that the perfect is the enemy of the good, and at some point, 

you have just got to take a good deal. But often we wait and wait. 

In business we never wait and wait. Once it is a good deal, we take 

it and we start getting results. 

It should not take longer to expand the Panama Canal than pass 

a free trade agreement with Panama, and that is nearly what happened. And by the way, for a couple of years we found that our 

exports to Panama—expanding the Panama Canal was a big deal 

for Caterpillar. Anything that moves that kind of dirt really gets 

our attention—we were at times exporting more to Panama with 

3 million people than to Korea, which is one of the 10 largest 

economies. 

So we wanted a sense of urgency. I think that is what we all 

need to do at some point. It is always seductive to hold out for the 

perfect, but at some point let us take a good deal and move on. It 

took way too long to get a lot of those FTAs through. I hope when 

we move forward with the agreements with Europe and the TPP 

and others we get to a point where we can actually get something 

to where it starts benefiting the U.S. economy and the global economy. 

If I could just end with one observation, in my entire career at 

Caterpillar exports have been important. We have always taken 

export markets seriously. But the places where we used to export 

were developed countries, it was Europe, it was Japan, Canada, 

Australia, and oil-producing countries. Today exports are more 

important to Caterpillar than ever before. Well over half of what 

we produce we export. But over half of our exports now go to nonOECD countries: Colombia, Chile, Peru, South Africa. These are 

important markets that are driving employment in the United 

States, driving employment in Illinois. It is absolutely critical that 

we recognize at some point that, while it is not a perfect process, 

when we engage in countries and we help them develop it pays 

dividends down the road, and at times big dividends. 

Senator BARRASSO. You know, Mr. Chairman, if you get a chance 

to look at the book ‘‘The Path Between the Seas: The Building of 

the Panama Canal,’’ it was the first time a President of the United 

States left the United States during his Presidency, and it was 

Teddy Roosevelt and he was there operating a steam shovel in this 

big picture. I do not know if it was a Caterpillar. 

Mr. LANE. If I could do a commercial, it is a Bucyrus steam

shovel, and we just acquired that fine company about 2 years ago 

and it is just an outstanding organization. We thought we made big 

products until we bought Bucyrus. The steam shovels they produce 

make some of the largest trucks in the world look small. 

Senator BARRASSO. Thank you, Mr. Chairman. 

Senator KAINE. Thank you, Senator Barrasso. 

Senator Murphy. 

Senator MURPHY. Thank you very much, Mr. Chairman, Ranking 

Member. Thank you for holding this hearing. 

FOREI-43947 with DISTILLER

30

I am sorry to the panel that I was delayed in getting here. But 

I trust it has been a good discussion. 

I wanted to maybe raise a general point and open it up to all 

three panelists. Having not heard your testimony, I am not exactly 

sure who to direct this to. As the Arab Spring turns into the Arab 

summer and fall and winter, and as we continue our withdrawal 

from Afghanistan and transition our role in Iraq, we are going to 

be in a position in which we are providing more and more economic 

aid and political support to very new democratic governments and, 

frankly, very imperfect democratic governments. Though we have 

been doing this for a long time, Pakistan probably the best example, we are likely going to be doing it more and more. 

My Pakistani-American friends complain all the time that we are 

sending too much of our aid through that government and that if 

we really want to make a difference in Pakistan we should be putting the money directly into NGOs that are going to be able to 

spend that money more efficiently on the ground. It has always 

struck me that, if you want to simplify it, two reasons for the aid 

we give. One is to directly support the people of the country. Second is to bolster a government that we have an interest in continuing to operate in that nation. 

So I guess I sort of pose this question because, whether it is in 

Pakistan or Afghanistan or Iraq or Libya or perhaps a year or two 

from now Syria, we are going to be constantly confronted with this 

decision about how we balance putting perhaps efficient money on 

the ground directly through service providers versus putting money 

through governments which may have large elements of corruption 

in them, but are vital to our national security interests, thus giving 

us a reason to support them. 

Maybe I will run down the line and get your impressions. I am 

sure the answer will probably be a bit that we have to borrow from 

both columns, but I would love your thoughts. 

Mr. LANE. Senator, allow me to address this from a strategic, not 

tactical perspective, because I think Dr. Moss is probably the best 

one from a tactical. Two months ago I was with former Secretary 

of Defense Gates and he made an observation that really stuck 

with me. He said: You know, when you think of the great revolutions, the American Revolution, the French Revolution, the Russian 

Revolution, the Chinese, with the exception of the American Revolution, the first 10 years went badly. We had a Whiskey Rebellion 

and that was about it. Everywhere else you had enormous excesses. 

We are going to have to show patience with what is going on in 

the Middle East. That means we are going to have to stay engaged. 

We are going to have to constantly readjust our policies. But more 

than anything else, we have to have a sense of consistency and 

patience in order to get results. Whether we do this, whether we 

provide assistance directly or through NGOs or what have you, 

there are better experts on that. But more than anything else, we 

have to make sure that we do not get ourselves in a position where 

it is our way or no way. We have got to stay engaged to make sure 

that that part of the world starts benefiting from the benefits of the 

global economy and democracy. 

Mr. MURPHY. Just a brief comment, but I think your point about 

working with the private sector and nongovernmental organizaFOREI-43947 with DISTILLER

31

tions makes a lot of sense. But it is my understanding that in the 

case of U.S. development assistance actually less than 7 percent is 

actually given to foreign governments per se. So I think that when 

I have had our interactions from the U.S. Chamber with USAID 

and when our member companies have had collaborative programs 

in different countries, I think that leadership at AID has gotten the 

message, and I think there is increasingly less and less of a reliance on simply transferring funds to foreign governments. 

Senator MURPHY. Dr. Moss. 

Dr. MOSS. This gets to the point about what are we actually trying to achieve. If you are trying to have an immediate humanitarian response and the government does not have capacity and 

you do not have confidence, you obviously have to use contractors 

or NGOs. But if the point, as it will be in most of the Arab Spring 

countries, is that we are trying to help build a capable state, going 

around the state actually undermines our long-term objective. 

Actually, I do not think—it is a false choice to say we either have 

to go through NGOs or we have to cut blank checks to governments. Cutting blank checks to governments, that is not going to 

happen, nor should it happen. But there are some pretty innovative 

mechanisms, including what USAID has been doing in Afghanistan, which is probably the toughest environment to operate in, 

which is to have projects that are technically—they are called on 

budget. They are technically part of the ministry, but the money 

does not actually just go to the ministry and then we hope for the 

best. What you actually do is you reimburse on a basis of what 

they actually achieve. 

So this is where I think what I mentioned earlier, that these 

innovative pay for performance contracts can balance the need for 

taxpayer—getting taxpayer value, while also trying to achieve the 

results we are trying to get, which is things like service delivery, 

but also building the capacity of our partner states. It does not help 

for the United States to come in and build a gold standard health 

care system, but when we leave there is nothing left behind. So we 

have to do that slow, hard work with partner governments that we 

are trying to bolster and we have to find mechanisms to link those 

to results. Otherwise we are going to be chasing our tails. 

Senator MURPHY. In my remaining minute here let me make a 

non sequitur to a different issue. I was a member of the Foreign 

Affairs Committee in the House before I came here and in the only 

foreign operations budget that we debated there an amendment 

was attached that passed our committee that said simply this: ‘‘The 

United States could not provide any foreign aid to any nation that 

voted against the United States at the United Nations more than 

50 percent of the time.’’ That passed the Foreign Affairs Committee 

against my objection and many others. 

I just want to ask a simple question: Do any of you think that 

that would be a good United States policy, to condition aid upon 

the particular country voting with the United States more than 50 

percent of the time at the United Nations? 

Mr. LANE. I think in this space you want as much flexibility as 

possible. And whenever you put constraints on that flexibility I 

think it hurts U.S. influence and our ability to get results. So I 

FOREI-43947 with DISTILLER

32

would always be very mindful of a proclamation that takes the 

United States out of the game. 

Senator MURPHY. Mr. Moss. 

Dr. MOSS. I would just add, if our sole objective was to win U.N. 

votes, then that makes perfect sense. But that is way down on the 

list of U.S. national security interests. It is irritating, but it is certainly not our sole objective. 

Senator MURPHY. Thank you. 

Thank you, Mr. Chairman. 

Senator KAINE. Thank you, Senator Murphy. 

We will have a second round of questions and do it as a 5-minute 

round. 

The whole issue of metrics and accountability in measuring the 

success of your investment, Senator Barrasso raised that in his 

opening question. That is something that we should seek across 

every line item in the Federal budget and we need to seek it here. 

But it strikes me that as the model is changing so heavily, where 

less than 20 percent of the expenditures are governmental expenditures and 80 percent private, the question of coming up with the 

right metrics is a little bit challenging, or at least it is a different 

kind of a challenge than existed before. 

Talk a little bit about metrics and accountability in this new 

reality, where the bulk of the dollars are coming from the private 

side? 

Dr. MOSS. The way that a lot of metrics, they have been added 

on on top of all of the other, all of the other oversight, if we think 

about what we are trying to achieve, we think about how little 

leverage we actually have through our aid and development program, and that lots of other things are going on. We are trying to 

just impact events at the margins. These are going to be high-risk 

ventures. None of us here would want to risk our jobs on the success of Project X in rural Afghanistan, because that is going to be 

largely out of your hands. 

It is also that we are trying to achieve difficult things, always 

under short time constraints, with lots of unknowns. So what do 

we want in that situation? We want people to have the flexibility 

to experiment, innovate, try to figure out what is working and 

what is not working, stop doing what is not working and plus up 

what is working. 

But our system—this is what a former USAID administrator 

calls the counter-bureaucracy. The system has made it that everyone is so scared of having a bad project that they are very, very 

risk averse. So it is the specter of the auditor general hanging over 

every project that means that we are not getting creative projects 

and, frankly, if things start going badly, the incentives are not to 

cut things off, but to try to sweep things under the rug a little bit. 

So what I think the answer is to be very, very clear on what the 

objectives of the project or effort will be, try to come up with some 

metrics that you think would indicate success or failure, and then 

we need to step back a little bit and judge it based on those 

metrics. I think of it more like venture capital. No venture capitalist would run a fund where their board was nitpicking every single project, because they would expect 80, 90 percent of those to 

fail. But what you want are those 10-percent winners that are 

FOREI-43947 with DISTILLER

33

going to really hit. That is how we need to think about our development assistance, as venture capital, and we want to judge that 

portfolio. 

That is why I mentioned the MCC compacts, which have indicators, there is a 5-year period, and there are going to be some failures, but a couple of big successes are going to make the entire system work better, and that is the kind of approach that I think we 

should try to give to our development agencies. 

Senator KAINE. Mr. Lane. 

Mr. LANE. If I could, because this is a great question. When we 

were looking at the assistance programs around the world, initially 

when your minders take you out in the field they want to show you 

the best project they have ever seen. So you do that for a while and 

you say: Show us the worst. Show us the biggest waste of American 

tax dollars you have ever participated in. And there is always this 

pregnant pause and then they go: We will show you a U.N. project. 

It always worked out that way. 

But what I think you have right now, I think Raj Shah, Administrator of USAID, has done a terrific job trying to bring in a matrix 

and get a results-oriented programs. But I have found that the best 

programs are where you do not measure success based on any one 

matrix; you do it based on the overall success of the country or the 

program. 

If you were to look at Plan Colombia on a day-to-day basis or a 

month-to-month basis, there would be lots of frustrations. But you 

look at it from a 10-year perspective, it may have been the greatest 

turnaround story of our generation, and you know when it has 

occurred. People start talking about the program, like we need 

another Plan Colombia or another Marshall Plan or what have you. 

During the Marshall Plan there were a lot of problems with the 

Marshall Plan, which no one recalls any more. 

MCC I think really has been a breakthrough policy. It is not 

being funded to the degree that it was envisioned initially, but 

when you see that the countries have a stake and they get to set 

the priorities and they are accountable, you are starting to see sort 

of a template, whether it is microfinance, whether it is ag development programs, whether it is infrastructure, whether it is better, 

more transparency in corporate governance. There seems to be a 

desire all over the world for essentially the same things. 

So I think it is a plus. I think it is something we can really build 

upon. But I would be cautious about having any one measure that 

is going to define success or failure. It is whether you are moving 

the ball down the field, not at what point do you score a field goal. 

Senator KAINE. Thank you. 

Senator Barrasso. 

Senator BARRASSO. Just following up on that, Mr. Chairman,

because I agree with you in terms of the metrics and the accountability. As you just said, Mr. Lane, it has to do with the overall 

success of the country. You used the word ‘‘accountability’’; accountable to whom? Is there a point where—I think, Mr. Moss, you 

wrote about this at one point. Is there a point where too much 

money raised from either other countries, others in the international community that want to be helpful, that too much aid 

FOREI-43947 with DISTILLER

34

detracts from accountability, say to the citizens of the country 

itself? If you could comment a little bit about that. 

Dr. MOSS. Yes. Thank you for that question. Look, whenever anybody faces a windfall gain it changes the dynamics of everything. 

I went in with some neighbors on the $600 million lottery last 

week. We did not win. I think I could handle the pressures of winning the lottery, but I know that that would change all of my relationships. My son is here with me today. He is going to look at me 

differently. I think these relatives and old friends come out of the 

woodwork. 

The pressures become enormous when you have money fall out 

of the sky for you. That is true for aid if you have an external 

donor that is supporting the majority of your funds or if you have 

some offshore natural resource gain and you are all of a sudden 

getting these dividends. You did not do anything to deserve that. 

You are just getting these windfall gains. That undermines, in the 

case of the lottery winner, it undermines your incentives to work 

like a normal participant in society. That works for countries as 

well. 

What countries should be doing is building a vibrant local economy and having a fair and broad-based tax system. When you get 

a windfall gain from the outside, that undermines that system. So 

absolutely, having too much money sloshing around in the system, 

especially in weak states that do not have systems to spend money 

well, can make things much, much worse. I think we need to be 

very, very cautious about that. 

Senator BARRASSO. Thanks. 

Do either of you want to add anything? 

[No response.] 

Senator BARRASSO. Thank you, Mr. Chairman. 

Senator KAINE. Two additional questions that I wanted to follow 

up on. Dr. Moss, in your opening testimony you really focused 

toward the end about the need to ramp up our efforts in development finance. You indicated that we are sort of falling behind. I 

would like you to elaborate a little bit on that. What are other nations doing in the development finance area? You talked about 

some of the assets that we have, but what could we do more and 

why is development finance now such a critical component of a successful development program? 

Dr. MOSS. Thank you. Development finance is the future of

development policy right now. We are still going to need traditional 

grants, but that is not where things are moving. China certainly 

has very large resources and they can bring all kinds of assets to 

bear. OPIC’s competitors, one example, many of them can participate in projects through equity. OPIC is barred from participating 

in equity. They have to use a debt instrument. That puts them in 

a subordinate position. It makes it very difficult for some of the 

other partners to work with them. It is just a minor difference but 

in practical terms it can make a big deal. 

Multiyear authorization. If the agency is always looking for—it 

has got one more year of lifeline, that makes it a little bit more risk 

averse. It makes it viewed as a less reliable partner to outsiders. 

If it had multiyear or, dare I say, permanent authorization, then 

FOREI-43947 with DISTILLER

35

that would make it a better partner on the outside and it would 

give it some more confidence to take some greater risks. 

The reason I think that the time is right here is that, trying to 

reorganize the Federal Government, massive lift. The kinds of proposals that we are talking about with creating a U.S. Development 

Finance Corporation is basically just bolstering OPIC. OPIC is 

most of the way there and you could just take programs that are 

sprinkled across the interagency, put them under OPIC, and get a 

lot more bang for your buck, and I do not think that you would 

instigate all of the antibodies that you always get when you start 

talking about restructuring. 

Senator KAINE. Other thoughts on the development finance side? 

[No response.] 

Senator KAINE. The second question is, from any of you, probably 

the most significant policy change that is part of the President’s 

development budget, foreign aid budget, is the food aid policy 

change. In the status quo, food aid, largely U.S.-produced and U.S.-

flag shipped food aid. The proposal is to mandate that at least 55 

percent of food aid be sort of in that structure, but more of a focus 

on local food production. As I heard Dr. Shah describe it, sort of 

for two purposes: One, the development of an indigenous agricultural sector is one of the best guards against hunger; and second, 

you deal with some of the other—you get food to the ultimate recipients quicker. 

Your thoughts on that policy proposal? 

Dr. MOSS. I am a huge supporter of it. I think it could go further, 

but it is a good first step, and this is both from an efficiency standpoint and from value for the taxpayer. The program is designed to 

reduce hunger and try to prevent hunger in the future. That is 

clearly the way to go. 

Senator KAINE. Additional thoughts, Mr. Murphy? 

Mr. MURPHY. I would just add that, my real background is in 

trade policy and in Geneva at the World Trade Organization, where 

there are efforts under way in connection with having some kind 

of package of deliverables for a ministerial conference at the end 

of the year, the long-running agriculture negotiations are still a 

part of that. It is clear that it is a priority of many countries 

around the world to have some kind of limitations on food aid, 

because—and I cite that—this is a recognition that comes from 

countries that we need approaches that are more similar to what 

the President is approaching when it comes to delivering food aid. 

Otherwise the disruption in local markets could be significant. 

There is a broad, close to a consensus among WTO members on 

that. 

Senator KAINE. Mr. Lane, any additional comment? 

Mr. LANE. The only nuance I would add is—and this would be 

a subject for probably another hearing—but the restrictions, the 

MARAD restrictions dealing with Ex-Im Bank and all sorts of 

transportation, diminishes the value of the bank. It causes bureaucratic slow-ups and much higher costs, and it really does undercut 

the effectiveness or our ability to use the Ex-Im Bank in a lot of 

projects. 

So at some point modernizing the way in which some of these 

agencies work, whether it deals with content requirements or using 

FOREI-43947 with DISTILLER

36

U.S. shipbottoms, is something that could be really reformed and 

allow the agencies to be much more effective. 

Senator KAINE. Great. Thank you. 

Senator Coons has joined us. We had a 7-minute opening round 

and we will just let you roll. 

Senator Coons. 

Senator COONS. Thank you, Senator Kaine. Is this your maiden 

hearing here? 

Senator KAINE. It is. 

Senator COONS. I would like to congratulate Senator Kaine, who 

has joined us on the Foreign Relations Committee and who I very 

much look forward to working closely with on the issues before this 

subcommittee. I chair the Subcommittee on Africa and have in the 

last Congress and this Congress, and am particularly focused on 

how we can be more successful at our development goals, our security goals, and our diplomacy and values goals in Africa. I think, 

if I understand correctly, you have already had a vigorous conversation about some duplication and overreach in our assistance 

agencies, some challenges in terms of focus and efficiency, and the 

potentially very constructive role of the private sector in achieving 

these goals. 

I was with, if I am not mistaken, Scott Eisner of the U.S. Chamber announcing the U.S.-South Africa Business Council just a few 

months ago and see very real potential for better alignment, better 

innovation, better strengthening of our complementary goals in 

development and in economic growth in Africa in particular. 

Mr. Murphy, if I might just start with you. Would you share a 

little bit on how in the context of the continent of Africa the U.S. 

Government and the public sector side could do a better job of 

streamlining and focusing in order to promote an effective and 

meaningful partnership with the private sector, to make sure that 

we are taking advantage of the huge opportunities on the continent? Of course, Mr. Lane, Dr. Moss, I would encourage you to 

comment on that as well. 

I recently came out with a report on the at least 10 agencies that 

have some hand in this: Ex-Im, OPIC, USTDA, and a raft of others. 

Any particular things you would urge us to do on this? 

Mr. MURPHY. Well, Senator, first I just want to say thank you 

for your leadership, particularly with regard to Africa there. I know 

that my colleagues who are focused on that program have greatly 

appreciated that. 

Clearly, the case that can be made here for a more strategic 

approach to U.S. foreign policy objectives and commercial objectives 

in Africa, to wed that together, is a powerful one. So you mentioned 

your efforts in this space and legislation that you have had a hand 

in that the Chamber has supported. What is needed is the kind of 

concerted approach that the United States had in the case of 

Colombia, and we had a very positive conversation about this. 

What worked in Colombia was that an approach was established 

that was bipartisan, that was ongoing over many years, and that 

received adequate resources from across a variety of U.S. Government agencies, and on top of that as well a very important ingredient is that the Colombians, they owned the strategy. It evolved 

over time. It shifted away gradually from military toward—in that 

FOREI-43947 with DISTILLER

37

case—toward a more economic development front, and now of 

course we have just celebrated the first anniversary of the free 

trade agreement and U.S. exports were up 20 percent last year. So 

we are starting to see other kinds of benefits. 

I think we in the private sector would really hold that up as kind 

of a model, that if there can be the staying power of a concerted 

strategy that cuts across different agencies, that engages the private sector, that makes trade and commercial engagement a key 

driver, and that receives adequate resources, those would be the 

top of our list. 

Senator COONS. Well, thank you. You certainly raised an important underlying theme: A strategy that receives adequate resources 

and is sustained. 

If I might, Mr. Lane, as you move to this topic, USGLC has done 

a wonderful job, I think, at building and sustaining bipartisan support—at a time when there is not bipartisan support for much of 

anything here—for what is at times difficult to fight for. The 150 

Accounts are often the target of political rhetoric. 

Help me understand what has made that successful for Caterpillar, for USGLC, and why that is important? 

Mr. LANE. The U.S. Global Leadership Coalition is really sort of 

a unique operation. I have never been involved in something where 

NGOs and businesses work so well together, where actually Republicans and Democrats have sort of walled off the political rancor 

and moved forward in a way that has been positive. 

I like to say, given my experience in Washington and at Caterpillar, that at the time I do not think I appreciated this, but on 

reflection—and I say this as a moderate Republican, if there is any 

left—I now believe Bill Clinton was America’s greatest free trade 

President and George Bush 43 did more to help poor people around 

the world, especially in Africa, and neither one of them got one vote 

for those signature accomplishments. 

It is our objective, ‘‘our’’ objective, in this case the business community: How can we make sure people get rewarded for doing the 

right thing? That is a daunting challenge. But in the realm of foreign assistance I think we are all doing a good job working well 

together in this space, and I really appreciate the leadership that 

you all are showing on this account. 

As far as your question, in Africa one of the most memorable 

visuals I had was going into Kampala, and there was a sign produced, obviously, by someone in the U.S. Government and it had 

the logos of all the different agencies that were doing work. It was 

State Department and it was Commerce and USAID, none of which 

were memorable. The only two brands that really stand out, where 

people outside the United States really get it, one is the American 

flag and the other one is the Peace Corps. Wherever we would 

travel, those were the two strongest brands. Everything else was 

just sort of background noise. 

I would urge to the degree we can do it—and I realize there are 

all sorts of institutional roadblocks—but to the degree we can bring 

things together and have greater focus, whether it is getting the 

signature organizations working together or under one roof, it 

would really help with the effectiveness of delivering results. 

Senator COONS. I think that is a good observation. 

FOREI-43947 with DISTILLER

38

If I might, Dr. Moss, just to your point, I think in your written 

testimony, that U.S. aid—and this is mostly in sub-Saharan 

Africa—has saved roughly 5 million lives. One of the signature accomplishments of the Bush administration was the launch of 

PEPFAR. 

We are today at a point where there are some obvious potential 

ways that we could be more efficient, more streamlined, and thus 

help more people, at a time when we are under persistent budget 

pressure. One of the development models that I think holds some 

real promise is the Millennium Challenge Corporation in terms of 

it having clear standards and clear accountability. In a recent 

meeting with the President of Liberia, she was clearly intimately 

familiar with what had to be done in order to achieve a compact, 

and I think it is a salutary thing to have clear and measurable 

standards and procedures and outcome. 

What has been most successful and what has been least successful about the MCC? It was not listed by Mr. Lane as one of the 

best known, most memorable changes in development policy. 

Mr. LANE. We talked about it earlier. 

Senator COONS. But I do think it has—there was initially—there 

was a lot of wasted time and effort in terms of fighting over 

prioritization and culture. I view it in the few countries I have been 

able to visit MCC projects and in my conversations with folks at 

MCC, it has begun to harmonize and be complementary to the 

other preexisting development structures. 

How is it working out and is it worth sustaining in its current 

form or growing? 

Dr. MOSS. I am overall a very big fan of the MCC. I do not think 

it was an accident that they decided to set up the MCC as a separate agency. They were trying to start fresh and not be bound by 

some of the problems that occur in the existing system that I mentioned earlier. 

But I think the lesson of MCC is not the one that we all expected 

initially. I think it was initially sold as the innovation was going 

to be that eligibility for compacts would be based on clear thirdparty criteria. If you are over the hurdle you are in, if you are not 

over the hurdle you are out. That is useful. There have been some 

fights over that. 

But the real innovation for MCC and where I think you can take 

the MCC model to other agencies and other contexts is this 5-year 

compact, where you have an actual partnership with the partner 

government on the ground, you have a set of agreed metrics, the 

compact is judged over a multiyear period based on those metrics. 

That is the kind of model that can work even in countries that 

would never meet MCC eligibility criteria. 

So I think that we can learn a lot from that. I also think that 

the MCC has pushed the evaluation agenda. Administrator Shah 

has done pretty well within USAID to get an evaluation policy 

within AID. But using a rigorous independent evaluation is the 

way that you can actually figure out, did these results—how were 

they achieved, what lessons could we learn and apply going forward. The MCC has also really led the way there. 

So I think it has really been a tremendous success, but not necessarily in the ways that we always think. 

FOREI-43947 with DISTILLER

39

Senator COONS. Thank you, Dr. Moss. 

If I might just—sort of one last question about how our values 

agenda lines up with our development, diplomacy, security agenda, 

and the role of the private sector. I often say that we are in a race 

in Africa with a number of competitors. China is the most visible, 

but certainly Russia and Brazil and India and others are very 

actively engaged in the continent, see its potential. 

And yet, when an American potential development partner comes 

in, they are often accountable for compliance with the Foreign Corrupt Practices Act and transparency standards, or accountable to 

their shareholders or the American press for environmental impact 

of a proposed development project. So in certain cases they simply 

choose not to. There was one in Uganda recently that I was familiar with where an American oil development company chose not to 

continue with their project, in part because there were some very 

difficult tradeoffs with environmental standards. They stepped 

back and there was I believe a Chinese company right behind them 

willing to take it on. 

In instances where we decline to provide funding for a compact 

because of noncompliance with human rights standards or freedom 

of the press or democracy, following the constitution in terms of 

succession, there are other sources of funding which stand immediately next to us and provide an alternative. 

How can American companies successfully compete in an environment where at times their competitors are not bound by comparable standards in terms of transparency and promoting multiparty democracy and respect for human rights? And how can our 

work through State, AID, MCC, and others reinforce that 

constructively? 

[Pause.] 

Senator COONS. I see no immediate volunteers. 

Dr. MOSS. I actually think the FCPA is a good example where 

a lot of the initial concerns about competitiveness are—it has 

flipped. What the United States has done through the FCPA is 

actually raised the global standard and in a way has helped to protect companies from getting themselves in trouble. I think that if 

we base our rules and regulations on transparency, respect for 

human rights, on our values, and we implement those, we can help 

to raise the bar across the marketplace. 

If there is a company from another country that is willing to 

come in and pay bribes and asset strip to get it done, that is not 

going to succeed in the long term. I do not believe that—I think 

the point is we should take the long view here and not be mercantilist about individual political deals. We should not sell out our 

values in order to get a particular deal, because in the long run if 

we are right the world will move toward standards, just like we 

have seen on anticorruption. 

I do not believe that companies that undermine the rule of law 

to get contracts now will succeed over the long term. Those will 

come back to bite them. That is part of the reason that we went 

with the FCPA in the first place. So I think we should stick to our 

guns. 

Mr. LANE. Senator, the issue has been around for a long time. 

Caterpillar in 1974 was one of the first companies to have a worldFOREI-43947 with DISTILLER

40

wide code of conduct. It was right after the Gulf Oil—I am really 

dating myself now—scandals in the early seventies. 

It is amazing. It occurred, that type of activity, occurred all over 

the world, and it still occurs in some parts of the world. But during 

the same time period, by playing by the rules, it is amazing, you 

still become a successful organization. Where a country really gets 

explosive growth is where they get enough things right where they 

start attracting foreign investment in a big way. When that happens, that is where you see the transformation really take place. 

Earlier we were talking about the promise of the MCC, and I 

really think there is a lot of promise there. But if you could start 

getting a lot of the little things—little things are big things, 

really—right, at some point the combustion takes place and you 

start attracting foreign investment. 

Where we did the biggest deep dive in the HELP Commission 

was in Honduras, and the north-south highway, you had the Port 

of Cortes improvement. You had the ag development programs 

where we were trying to encourage people to grow something other 

than corn and rice and start growing sweet potatoes and cucumbers and what have you. It started raising incomes two, three 

times for farmers that had two or three hectares, and it really 

makes a difference, and at some point the foreign investment kicks 

in. And when it kicks in in a big way, you really do see enormous 

growth, and the first thing that you have when you have enormous 

growth is a need for more infrastructure, and the best way to get 

more infrastructure is to buy Caterpillar products. So let me end 

with a commercial. 

Senator COONS. I will note you are the only witness today who 

brought an actual physical embodiment of the underlying product, 

and you managed to work that in. 

Mr. LANE. The reason why I brought that, just so you know, and 

we spent a lot of time talking about Colombia, but this is a D–11 

bulldozer, the biggest bulldozers in the world. They are produced 

in East Peoria, IL. In Colombia, with the coal mines in Colombia, 

there are more D–11 bulldozers there than anywhere else in the 

world. So it is amazing how this international commerce really 

does lift all ships, even some that are bulldozers that are very 

heavy. 

Senator COONS. One more question if I might, just in closing. I 

will reference back to Dr. Moss’ point. Of course I think we should 

stick to our guns. Of course I think—but I think we need all of the 

taxpayer dollars that we are spending across a dozen agencies and 

with our partners in the private sector we need to be pushing in 

the same direction, and we need to be welcoming and encouraging 

those voices, those institutions, and those groups within developing 

countries, particularly in Africa, which is my primary focus, that 

also have that value, that also have that priority of improving 

worker protection, improving environmental protection, improving 

transparency, because on that playing field I think we will always 

win. 

But in the absence of it, one thing that distinguishes the current 

environment from 10 or 20 years ago is the number of other potential sources of foreign investment that are not asking those questions and are not advancing those interests. That is, I think, someFOREI-43947 with DISTILLER

41

thing that we need to be really focused on and attentive to as we 

try and all pull in the same direction. 

Thank you so much for your testimony today. 

Thank you for the chance to ask questions. 

Senator KAINE. I want to thank my colleagues for participating. 

To the witnesses, you have given us a lot to think about. You have 

made the case very strongly that the U.S. foreign development programs and budget are important. The notion that you mentioned, 

Bill, a bit ago, that in the past you might talk about trade not aid, 

and yet aid done right promotes trade, lays the groundwork for 

trade, builds the road on which then trade occurs, that testimony 

comes through loud and clear. 

You have also given us some examples of things that have 

worked and why, and things that are not working as well as they 

can and how we can improve them. This is an important topic for 

America’s continuous global leadership. We appreciate all your testimony and look forward to doing more work together. 

With that, just as we are about to now vote on the floor, the 

hearing is adjourned. 

[Whereupon, at 12 p.m., the hearing was adjourned.]

Æ

FOREI-43947 with DISTILLER