I

104TH CONGRESS

2D SESSION H. R. 4306

To enhance international security by using the resources and expertise of

the international financial institutions and the United Nations to redirect

world military spending to human development.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 28, 1996

Mr. KENNEDY of Massachusetts (for himself and Mr. MILLER of California)

introduced the following bill; which was referred to the Committee on

International Relations, and in addition to the Committee on Banking

and Financial Services, for a period to be subsequently determined by the

Speaker, in each case for consideration of such provisions as fall within

the jurisdiction of the committee concerned

A BILL

To enhance international security by using the resources

and expertise of the international financial institutions

and the United Nations to redirect world military spending to human development.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Demilitarization for

5 Development Act’’.
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1 SEC. 2. FINDINGS.

2 The Congress finds the following:

3 (1) The world’s governments spend

4 $868,000,000,000 each year to support military

5 forces of more than 27,000,000 soldiers.

6 (2) This expenditure for achieving security has

7 itself become a serious threat to security, absorbing

8 12 percent of all government expenditures at a time

9 when citizens in both developed and developing coun10 tries face sharp cuts in programs—such as health,

11 education, research, and job training—that provide

12 the human building blocks for our common future.

13 (3) The United States and other developed na14 tions bear significant responsibility for excessive

15 military expenditures, accounting for 75 percent of

16 world military spending and for 90 percent of arms

17 transfers to developing nations, with the United

18 States being the world’s leader in both categories.

19 (4) The United States and other developed na20 tions jointly have a controlling vote in the Inter21 national Monetary Fund, the International Bank for

22 Reconstruction and Development, and other inter23 national financial institutions that have subsidized

24 excessive military spending in numerous countries by

25 exempting the military portions of a country’s budg26 et from audit and assessment.
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1 (5) Developing nations also bear significant re2 sponsibility for excessive military expenditures,

3 spending $221,000,000,000 each year, or 4 times all

4 receipts of foreign aid from all sources.

5 (6) In the developing world, where more than

6 900,000,000 people cannot read or write, military

7 spending exceeds spending on education.

8 (7) In the developing world, where

9 1,000,000,000 people never see a health professional

10 and where more than 2,000,000 children die each

11 year of preventable infectious diseases, military

12 spending is more than twice as high as spending on

13 health.

14 (8) The lack of transparency, to both a coun15 try’s citizens and to international financial institu16 tions, of the military budget and of military owner17 ship or other forms of involvement in the civilian

18 economy provides refuge for corruption and under19 cuts the international financial institutions’ efforts

20 to promote ‘‘good governance’’.

21 (9) Ownership of businesses and investment

22 funds and other types of financial interests of armed

23 forces in the civilian sector of the economy in coun24 tries as diverse as Chile, China, Ecuador, Guate25 mala, and Indonesia distorts prices and reduces
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1 competition, and also increases the political power of

2 armed forces, thereby posing a threat to the transi3 tion to economic and political freedom in the devel4 oping world that is a primary goal of United States

5 foreign policy.

6 (10) Top-ranking United States and inter7 national officials, including the Secretary of the

8 Treasury, the President of the World Bank, and the

9 Managing Director of the International Monetary

10 Fund, have publicly recognized the urgent need to

11 reduce world military spending, and pledged to make

12 policy changes in their institutions to promote reduc13 tions.

14 (11) Congress and the President have also

15 made the reduction of world military spending a goal

16 of United States foreign policy, and provided for the

17 use of the financial resources and technical capabili18 ties of the international financial institutions to

19 achieve that goal, by enacting—

20 (A) section 60 of the Bretton Woods

21 Agreements Act, which requires the United

22 States Executive Director at the International

23 Monetary Fund to report on methods to pro24 mote reductions in military spending;
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1 (B) the Foreign Operations, Export Fi2 nancing, and Related Programs Appropriations

3 Act, 1993, which, in its statement of managers,

4 urges United States executive directors at all

5 the international financial institutions to use

6 the United States voice and vote to promote re7 ductions in military spending;

8 (C) section 570 of the Foreign Operations,

9 Export Financing, and Related Programs Ap10 propriations Act, 1994, which requires the

11 State Department to report on countries’ ef12 forts to reduce military spending, including re13 gional force reduction talks; and

14 (D) section 1502 of the International Fi15 nancial Institutions Act, which requires United

16 States executive directors at the international

17 financial institutions to take into account, when

18 deciding on loan proposals, the proposed recipi19 ent’s commitment to providing accurate military

20 spending data and ending military involvement

21 in the civilian economy.

22 (12) Despite these high-level statements and re23 quirements in law, no significant progress has been

24 made in establishing either a mechanism for regional
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1 talks on mutual military reductions or mechanisms

2 within the international financial institutions for—

3 (A) verifying through accepted auditing

4 procedures the accuracy of reported military

5 budgets;

6 (B) receiving and assessing the justifica7 tion for various expenditures within military

8 budgets as well as the overall trends and

9 amounts of such expenditures; and

10 (C) ending military ownership and finan11 cial interests in the civilian economy.

12 (13) Dr. Oscar Arias, former President of

13 Costa Rica and 1987 Nobel Peace Laureate, has

14 joined with 67 citizens’ groups around the world to

15 propose a practical plan to achieve the goals of these

16 high-level statements and requirements in law, The

17 Year 2000 Campaign to Redirect World Military

18 Spending to Human Development, which contains

19 the following 6 proposals:

20 (A) The Security Council and General As21 sembly of the United Nations call on all nations

22 to commit to meeting with their neighbors to

23 identify and implement confidence-building

24 measures and mutual reductions in military

25 threats that will reduce the likelihood of future
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1 conflicts. These nations will seek to achieve sub2 stantial reductions in military forces and ex3 penditures by the year 2000.

4 (B) Special envoys be appointed by the

5 United Nations Secretary-General to organize

6 these demilitarization talks in various regions of

7 the world.

8 (C) Every nation meet with its regional

9 envoy to present plans for regional security at

10 reduced force levels. These nations will also

11 participate in negotiations guided by the envoy

12 in order to identify military capacities and im13 plement mutual force reductions. Such negotia14 tions will reduce the threat that nations pose to

15 each other due to the size, proximity, and tech16 nological sophistication of their armed forces.

17 (D) With savings from reduced military

18 spending, all nations, in cooperation with grass19 roots organizations, implement economic re20 forms related to demilitarization, such as the

21 conversion of military to non-military produc22 tion, landmine clearance, community recon23 struction, and the reintegration of demobilized

24 soldiers.
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1 (E) In support of the steps taken toward

2 demilitarization by developing countries, indus3 trialized nations condition their bilateral and

4 multilateral aid to promote demilitarization.

5 They will exchange debt forgiveness for military

6 conversion efforts, provide special funding for

7 programs to assist the demilitarization process,

8 promote full transparency and reductions in

9 military budgets, and bring about the end of

10 military involvement in the civilian economy.

11 (F) All arms-exporting nations agree to a

12 Code of Conduct on arms transfers that would

13 bar exports to nondemocratic governments,

14 countries engaged in armed aggression in viola15 tion of international law, countries that do not

16 fully participate in the United Nations Register

17 of conventional arms, and governments permit18 ting gross violations of internationally recog19 nized human rights.

20 (14) Citizens around the world are signing The

21 Arias Peace Pledge and communicating to their gov22 ernments their support for the proposals of The

23 Year 2000 Campaign to Redirect World Military

24 Spending to Human Development.
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1 (15) The United Nations General Assembly is

2 expected to consider crucial components of this 6-

3 point plan.

4 SEC. 3. PURPOSE.

5 The purpose of this Act is to enhance international

6 security by using the resources and expertise of the inter7 national financial institutions and the United Nations to

8 redirect world military spending to human development.

9 SEC. 4. SPECIAL ENVOYS FOR MUTUAL DISARMAMENT.

10 The President shall instruct the United States Am11 bassador to the United Nations to support in the Security

12 Council, the General Assembly, and other United Nations

13 bodies, resolutions and other efforts to—

14 (1) appoint special envoys for conflict preven15 tion to organize and conduct, in cooperation with ap16 propriate multilateral institutions, mutual disar17 mament talks in every region of the world in which

18 all nations would participate, and to report to inter19 national financial institutions on the degree of co20 operation of governments with these talks;

21 (2) commit each member state to agree to meet

22 with its regional special envoy within 3 months of

23 appointment to deliver and discuss its proposal for

24 regional (and, where appropriate, international) con25 fidence-building measures, including mutual reduc-
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1 tions in the size, proximity, and technological sophis2 tication of its and other nations’ armed forces, that

3 would lead to significant cuts in threat levels and

4 military spending; and

5 (3) commit each member state to agree to con6 tinue meeting with the special envoy and such re7 gional bodies and states as the special envoy shall

8 suggest to complete negotiations on such confidence9 building measures, with the goal of making signifi10 cant cuts in military spending by the year 2000.

11 SEC. 5. ALTERNATIVE SECURITY PLAN.

12 Within 3 months after the date of the enactment of

13 this Act, the President shall prepare and deliver to the

14 Congress and to the Secretary General of the United Na15 tions a report as described in section 4(2) that would de16 tail the changes in other nations’ forces and United States

17 forces that would permit by the year 2000 a 50 percent

18 reduction in United States military spending.

19 SEC. 6. UNITED STATES POLICY AT INTERNATIONAL FINAN20 CIAL INSTITUTIONS.

21 (a) HIGHER PRIORITY FOR DEMILITARIZATION.—

22 Title XV of the International Financial Institutions Act

23 (22 U.S.C. 262o–262o–1) is amended by adding at the

24 end the following:
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1 ‘‘SEC. 1503. PROMOTION OF, AND REPORTING ON, DEMILI2 TARIZATION ACTIVITIES.

3 ‘‘The Secretary of the Treasury shall instruct the

4 United States executive directors at the international fi5 nancial institutions (as defined in section 1701(c)(2) of

6 the International Financial Institutions Act) to promote,

7 and to report annually to the Congress on, the establish8 ment of lending facilities, debt forgiveness programs, and

9 increased funding in lending facilities for demilitarization

10 activities, including auditing of military budgets and re11 duction of military involvement in the civilian economy,

12 the conversion of military to nonmilitary production, land13 mine clearance, community reconstruction, and the re14 integration of demobilized soldiers.’’.

15 (b) CONDITIONALITY OF LOANS.—Title XV of the

16 International Financial Institutions Act (22 U.S.C. 262o–

17 262o–1), as amended by subsection (a) of this section, is

18 amended by adding at the end the following:

19 ‘‘SEC. 1504. TRANSPARENCY OF MILITARY EXPENDITURES.

20 ‘‘Beginning 3 years after the date of the enactment

21 of this section, the Secretary of the Treasury shall instruct

22 the United States Executive Director at each international

23 financial institution (as defined in section 1701(c)(2)) to

24 use the voice and vote of the United States to oppose any

25 proposal that the institution make a loan to the govern26 ment of any country, other than to address basic human
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1 needs, unless the President of the United States deter2 mines that—

3 ‘‘(1) the recipient government has in place a

4 functioning system for, and, in the immediately pre5 ceding year, has conducted, an independent civilian

6 audit of all receipts and expenditures in its military

7 budget and other portions of its national budget that

8 fund activities of the armed forces and security

9 forces;

10 ‘‘(2) the recipient government has provided a

11 summary of the audit to the institution;

12 ‘‘(3) the institution has taken independent steps

13 to confirm that the audit is accurate; and

14 ‘‘(4) the recipient government has prepared and

15 reported to the institution an accounting of all own16 ership and financial interest in revenue-generating

17 enterprises by military institutions and individuals

18 acting on their behalf.’’.

19 (c) REPORT.—The Secretary of the Treasury shall,

20 drawing on other Executive Branch resources as appro21 priate, prepare an annual report to the Congress that—

22 (1) describes and evaluates steps being taken by

23 the International Monetary Fund and the Inter24 national Bank for Reconstruction and Development

25 to comply with section 1504 of the International Fi-
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1 nancial Institutions Act, and of steps being taken by

2 the Executive Branch to implement this legislation;

3 and

4 (2) identifies specific additional measures that

5 need to be taken by the institutions to achieve full

6 compliance, and an action plan to ensure these

7 measures are adopted.

8 SEC. 7. SENSE OF THE CONGRESS.

9 It is the sense of the Congress that—

10 (1) the United States should not provide eco11 nomic assistance, military assistance, or approve

12 arms transfers or related training, to any foreign

13 government at any time during which the United

14 States is opposing loans to that foreign government

15 at international financial institutions pursuant to

16 section 1504 of the International Financial Institu17 tions Act;

18 (2) the President should designate the United

19 States Agency for International Development to be

20 the lead agency for the determinations made pursu21 ant to such section; and

22 (3) the President should report annually to the

23 Congress on the progress made by international fi24 nancial institutions in integrating military spending

25 issues such as those raised in this Act into the loan
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1 review process of such international financial institu2 tions.

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