Appropriations for FY2001: Foreign Operations, Export Financing, and Related Programs
Released: 2001-04-04T00:00:00

Key Policy Staff

CRS Division abbreviation: "FDT" = Foreign Affairs, Defense, and Trade Division.

Most Recent Developments

For the most controversial FY2001 Foreign Operations issue - internationalfamily planning - Congress increased spending to $425 million. Lawmakers,however, restricted the obligation of funds until after February 15, 2001. OnJanuary 22, 2001, two days after taking office, President George W. Bush issued aMemorandum to the USAID Administrator directing him to "reinstate in full all ofthe requirements of the Mexico City Policy in effect on January 19, 1993." Aseparate statement from the President's press secretary stated that President Bushwas "committed to maintaining the $425 million funding level" for populationassistance "because he knows that one of the best ways to prevent abortion is byproviding quality voluntary family planning services." On February 15, 2001,USAID released specific policy and contract guidelines to implement the President'sdirective. These guidelines were re-issued by the White House on March 28 in orderto block an early congressional vote to overturn the Mexico City restrictions.

Previously, on November 6, 2000, President Clinton signed into law a $14.9 billion Foreign Operations Appropriations for FY2001 ( P.L. 106-429 ; H.R. 4811 ). The spending measure includes both regular FY2001requested programs as well as selected FY2000 supplemental funding proposals thatCongress had rejected earlier in the year. The enacted legislation falls about $550million, or 3.5%, below the President's combined FY2000 supplemental/FY2001requests, but is substantially higher than the roughly $13.4 billion spendingmeasures passed by the House and Senate during the summer. Moreover, P.L.106-429 fully funds several top Administration priorities, including $435 million forinternational debt relief under the Heavily Indebted Poor Country (HIPC) initiative. Congress further boosted funding for several global health programs, including $315million for HIV/AIDS and $60 million for malaria control.

Introduction

The annual Foreign Operations appropriations bill is the primary legislativevehicle through which Congress reviews and votes on the U.S. foreign assistancebudget and influences executive branch foreign policy making generally. (1) It containsthe largest share -- about two-thirds -- of total international affairs spending by theUnited States (see Figure 1 ). The legislation funds all U.S. bilateral developmentassistance programs, managed mostly by the U.S. Agency for InternationalDevelopment (USAID), together with several smaller independent foreign aidagencies, such as the Peace Corps and the Inter-American and African DevelopmentFoundations. Most humanitarian aid activities are funded within Foreign Operations,including USAID's disaster program and State Department's refugee relief support. (2) Foreign Operations includes separate accounts for aid programs in the former SovietUnion (also referred to as the Independent States account) and Central/EasternEurope, activities that are jointly managed by USAID and the State Department. Security assistance (economic and military aid) for Israel and Egypt is also part of theForeign Operations spending measure, as are smaller security aid programsadministered largely by the State Department, in conjunction with USAID and thePentagon. U.S. contributions to the World Bank and other regional multilateraldevelopment banks, managed by the Treasury Department, and voluntary paymentsto international organizations, handled by the State Department, are also funded inthe Foreign Operations bill. Finally, the legislation includes appropriations for threeexport promotion agencies: the Overseas Private Investment Corporation (OPIC),the Export-Import Bank, and the Trade and Development Agency.

From the perspective of congressional oversight and involvement in U.S. foreign aid policy making, the Foreign Operations bill has taken on even greatersignificance during the past 15 years. Congress has not enacted a foreign aidauthorization bill since 1985, leaving most foreign assistance programs withoutregular authorizations emanating from the legislative oversight committees. As aresult, Foreign Operations spending measures developed by the appropriationscommittees increasingly have expanded their scope beyond spending issues andplayed a major role in shaping, authorizing, and guiding both executive andcongressional foreign aid and broader foreign policy initiatives. It has been largelythrough Foreign Operations appropriations that the United States has modified aidpolicy and resource allocation priorities since the end of the Cold War. Thelegislation has also been a key tool used by Congress to apply restrictions andconditions on Administration management of foreign assistance, actions that havefrequently resulted in executive-legislative clashes over presidential prerogatives inforeign policy making.

Status

Table 1. Status of Foreign OperationsAppropriations, FY2001

President Clinton submitted his FY2001 federal budget request to Congress on February 7, 2000, including funding proposals for Foreign Operations Appropriationsprograms. Subsequently, House and Senate Foreign Operations Subcommittees heldhearings, including testimony from Secretary of State Albright, Treasury SecretarySummers, and USAID Administrator Anderson. The Senate AppropriationsCommittee bypassed subcommittee markup, and ordered reported S. 2522 on May 9. Because of disputes over scheduling and the opportunity by theminority to offer amendments to other legislation, the Senate delayed taking up S. 2522 . Those problems were settled and the Senate approved S. 2522 on June 22. The House Foreign Operations Subcommitteemarked up its companion bill, H.R. 4811 , on June 20, followed by fullCommittee approval on June 27. The House approved H.R. 4811 onJuly 13 (239-185). House and Senate conferees filed a conference report for H.R. 4811 on October 24 ( H.Rept. 106-997 ). Congress approved thereport on October 25, the House by a vote of 307-101 and Senate by a vote of 65-27. President Clinton signed into law H.R. 4811 on November 6, 2000 ( P.L.106-429 ). (3)

Foreign Operations Funding Trends

As the United States has adjusted its foreign and defense policy to a post-ColdWar environment, one of the major foreign assistance challenges for Congress andexecutive branch policymakers has been to formulate the most effective foreign aidprogram amidst a tightening resource base. A dominant characteristic of ForeignOperations funding trends in the most recent years has been the degree to which foreign policy contingencies and international disasters have created demands foradditional resources beyond those originally requested by the President. Congress approved substantial amounts for FY1999 and FY2000 through "emergency" orsupplemental appropriation mechanisms, amounts that are over and above what isenacted in "regular" Foreign Operations bills.

After peaking at $20.7 billion in FY1985, Foreign Operations appropriations began a period of decline, falling to about $12.3 billion in FY1997. Foreign aidspending cuts were especially sharp in FY1996 when Congress cut funding by $1.15billion, nearly 9% from the previous year. Many government and non-governmentexperts argued that these budget reductions seriously undermined U.S. foreign policyinterests and limited the ability of American officials to influence overseas events.

After Foreign Operations funding levels fell again in FY1997 -- although by much smaller amounts -- the State Department and other executive agencieslaunched an aggressive campaign to reverse the decade-long decline in the foreignpolicy budget. This effort coincided with congressional approval of a near $1 billionincrease for FY1998, setting Foreign Operations appropriations at $13.15 billion. Foreign Operations funds rose again to $15.4 billion in FY1999 when lawmakers, atthe urging of the White House, added nearly $900 million in the final days of the105th Congress and another $2.1 billion for Central American hurricane relief andKosovo emergency assistance in supplemental funding.

Amounts enacted for FY2000 - $16.5 billion - were also augmented by late-year "emergency" add-ons recommended by the President, including $1.8 billionfor the Wye River/Middle East peace accord and $1.1 billion supplementalassistance, mostly for a new counternarcotics initiative in Colombia. As shown in Table 2 , the amount for FY2000 is the highest in six years and the largest fundinglevel, in nominal terms, for Foreign Operations since FY1985. Nevertheless, whencalculated using constant dollars - taking into account the effects of inflation -FY2000 Foreign Operations amounts are 47% less than the high point of FY1985,15% less than the annual average appropriation during the late 1980s, and 3% lessthan FY1992, a year that might be considered the first post-Cold War foreign aidbudget. FY2000 Foreign Operations spending level represents 0.91% of the entirefederal budget and 2.8% of total discretionary budget authority. By comparison,these same figures in FY1985 were 2% and 4.6%, respectively.

Table 2. Foreign Operations Appropriations, FY1994 to FY2000 (discretionary budget authority in billionsof current dollars)

* FY1999 excludes $17.861 billion for the IMF.

Foreign Operations, the FY2000 Budget Resolution, and Section 302(b) Allocations

Usually, Appropriation Committees begin markups of their spending bills only after Congress has adopted a budget resolution and funds have been distributed to theAppropriations panels under what is referred to as the Section 302(a) allocationprocess, a reference to the pertinent authority in the Congressional Budget Act. Following this, House and Senate Appropriations Committees separately decide howto allot the total amount available among their 13 subcommittees, staying within thefunctional guidelines set in the budget resolution. This second step is referred to asthe Section 302(b) allocation. As noted above, foreign policy funds are appropriatedwithin four bills with Foreign Operations having the largest share of around 67-70%in most years.

How much foreign policy money to allocate to each of the four subcommittees, and how to distribute the funds among the numerous programs remain decisionsexclusively reserved for the Appropriations Committees. Nevertheless, overallceilings set in the budget resolution can have significant implications for the budget limitations within which the Foreign Operations subcommittees will operate whenthey meet to mark up their annual appropriation bills.

The FY2001 budget resolution that cleared Congress on April 13 ( H.Con.Res. 290 ) strongly indicated that the Foreign Operationssubcommittees would receive a significantly reduced Section 302(b) allocation fromthat assumed in the President's budget. H.Con.Res. 290 sets a $20billion target for total international affairs discretionary budget authority, a figureabout 12% below the request. (4)

On May 4, House and Senate Appropriations Committees released Section 302(b) funding allocations for each of their 13 appropriation bills. In the House,Foreign Operations programs received $13.28 billion, sharply below the President's$15.1 billion request ($14.8 billion if Plan Colombia funds were enacted, as theywere, in FY2000; see footnote 3). The allocation was over $3 billion less than totalamounts approved for FY2000 and $213 million below the "base" FY2000appropriation, after deducting the Wye River/Middle East peace money. The Senatepanel approved a slightly higher Foreign Operations level - $13.39 billion. But thiswould still be insufficient to fund increases sought for FY2001, and at best, wouldresult in an overall total slightly below a "freeze" as compared to the FY2000 "base"amount.

Practices in the past few years suggest, however, that the initial 302(b) allocation for Foreign Operations, as well as other spending bills, would changesignificantly, especially at the latter stages of the appropriations debate. In 1999, forexample, House and Senate Foreign Operations Subcommittees received allocationsof $12.6 billion and $12.7 billion, respectively, levels which established the ceilingfor House and Senate passed bills ( H.R. 2606 and S. 1234 ). Nevertheless, following a Presidential veto of H.R. 2606 because of lowfunding levels and continued White House pressure to raise foreign aid spending,during end-of-the session negotiations, Congress agreed to $15.3 billion for ForeignOperations. Much of the additional funds were designated as "emergency"appropriations, amounts that did not count against allocation limits.

Although the early 302(b) allocation for Foreign Operations resulted in House and Senate bills of around $13.3 billion, the Administration pressed for additionalfunding throughout the process. Between June and October House and SenateAppropriations Committees filed numerous revisions to the original 302(b)allocations, culminating on October 25 in a new Foreign Operations level of $14.9billion. This subsequently allowed Congress to approve on the following day a $14.9billion Foreign Operations appropriations for FY2001.

Foreign Operations Appropriations Request for FY2001 and Congressional Consideration

In February 2000 President Clinton asked Congress to appropriate $15.1 billionfor FY2001 Foreign Operations. There were two basic ways in which to compare theproposal with existing spending for FY2000. The first was to make a straightcomparison between enacted FY2000 Foreign Operations levels and the FY2001request. Using these reference points, the FY2001 budget recommendation wasabout $1.4 billion, or 8% less than total FY2000 appropriations. Another means ofcomparison, and one that was frequently used by congressional Budget andAppropriations Committees, was to compare funding for foreign aid programscontinuing from year to year, that would deduct appropriations provided underspecial circumstances, such as emergency requirements, one-time, unique initiatives,or supplemental funding. For FY2000, Congress approved under an emergencydesignation a one-time, $1.8 billion aid package for Israel, Jordan, and Palestiniansin support of the November 1998 Wye River/Middle East peace accord. Congressfurther enacted in P.L. 106-246 an additional $1.1 billion in FY2000 ForeignOperations supplemental spending, mostly for counternarcotics in Colombia. Underthis second comparison approach, which adjusts the FY2000 appropriation level from$16.5 billion to $13.5 billion, the FY2001 Foreign Operations request was 12% higher than FY2000 spending.

Table 3. Summary of Foreign Operations Appropriations (Discretionary funds - in millions of dollars)

Note: For comparative purposes and to conform to the account structure of the FY2000 and FY2001 enacted Foreign Operations, some funding in the FY2001request and Senate bill have been shifted: UNICEF, GAVI, Inter-AmericanFoundation, and African Development Foundation amounts requested for FY2001are included in development aid under title II. Senate funding for UNICEF, approvedin title IV, is also shifted to development aid in title II.

* Pursuant to the Consolidated Appropriations Act, FY2001 ( H.R. 4577 ), signed into law on Dec. 21, 2000, most FY2001 appropriation bills, includingForeign Operations, are reduced by 0.22%. For Foreign Operations, there will be acut of about $33 million from the $14.897 billion level.

** FY2001 includes combined FY2000 supplemental and FY2001 requests for debtrelief.

Major Changes to Funding Proposed for FY2001

The President's budget plan raised funding levels for nearly every Foreign Operations account. Those receiving the largest increases or which representedspecial Administration initiatives included:

Export-Import Bank - The $214 million, or 26% funding increase for Eximbank activities in FY2001 might have actually supported a smallerlevel of U.S. exports than in FY2000, according to the Administration. OMB issueda new risk assessment methodology, effective for FY2001, which determines theamount of appropriated funds necessary to back Bank lending and insuranceoperations. Because of higher risk levels for some potential countries, Eximbankestimated that the FY2001 appropriation would fall 14.5% below the equivalentcurrent appropriation.

USAID development assistance - Overall bilateral development aid would have grown by nearly $350 million, or 18%. Most of theincrease would support Administration initiatives to bolster family planning programs (+45%), HIV/AIDS funding (+39%), and democracy promotion (+24%),and to launch two new environmental activities protecting tropical forests andpromoting cleaner energy sources. (See more below under specialissues.)

Debt reduction for poor developing nations - The FY2001 request included $262 million for debt reduction, $238 million of which supportedU.S. participation in the Heavily Indebted Poor Country (HIPC) initiative. This wasmore than double debt relief appropriations for FY2000, although Congress rejecteda $210 million supplemental request for a U.S. contribution to the HIPC Trust Fund. For the FY2000 supplemental and FY2001 regular appropriation combined, theAdministration sought $435 million for HIPC (See more below under specialissues.)

Nonproliferation, Anti-terrorism, Demining, and Related Programs account (NADR) - The Administration sought a $136 million, or 63%increase for an assortment of counterproliferation and anti-terrorism programs inFY2001. Of special note was the doubling of resources for activities aimed atfighting terrorists, including money to establish a new anti-terrorism training facilityfor foreign officials. The account also projected a $20 million increase - to $55million - for payment of heavy fuel oil to North Korea as part of the Korean EnergyDevelopment Organization (KEDO) designed to block North Korea's nuclearweapons development program. A June 5, 2000 budget amendment added $41.2million to the account for a contribution to the costs of the trial in the Netherlands ofthe Lockerbie bombing suspects.

Voluntary contributions to International Organizations - The FY2001 request increased U.S. contributions to about 20 organizations by $83million, or 45%. Nearly all of the additional resources would support the U.N.Development Program (+$10 million) and a new Global Alliance for Vaccinesand Immunizations (GAVI) initiative ($50 million). The U.N. Population Fund(UNFPA) contribution would remain the same at $25 million.

Multilateral Development Bank contributions - Overall, the budget proposed a $235 million, or 24% increase for U.S. commitments to the WorldBank and regional multilateral development banks (MDBs). Most of the additionalfunding ($140 million) would go to the Global Environment Facility, anorganization for which the United States had fallen into significant arrears due tocongressional reductions in recent years.

Congressional Debate on Foreign Operations Spending

Summary of Debate. The first congressional action on the Foreign Operations Appropriations for FY2001 occurredon May 9 when the Senate Appropriations Committee marked up and reported S. 2522 . The legislation also included FY2000 supplemental fundingfor various Foreign Operations programs. (5) The fullSenate approved the measure onJune 22. The House Foreign Operations Subcommittee marked up its companionbill, H.R. 4811 , on June 20, followed by full Committee endorsementon June 27. The full House approved the measure on July 13. Subsequently, theSenate took up H.R. 4811 on July 18, deleted the House-passed text, andinserted the text of S. 2522 . On October 24, House Foreign OperationsSubcommittee Chairman Callahan introduced a new bill - H.R. 5526 - reflecting agreements reached during informal Foreign Operations conferencecommittee discussions. On the same day, the full conference committee met andissued a report ( H.Rept. 106-997 ) incorporating the text of H.R. 5526 into H.R. 4811 . Congress approved the report on October 25, the Houseby a vote of 307-101 and Senate by a vote of 65-27. President Clinton signed thelegislation on November 6 - P.L. 106-429 . (6)

FY2000 Supplemental. On June 29, Congress passed an $11.2 billion supplemental spending measure ( P.L. 106-246 ; H.R. 4425 ), including $1.094 billion in Foreign Operations funds. Mostof money - $1.019 billion - supported the full FY2000/2001 Administration requestfor a counternarcotics initiative in Colombia. The legislation also provided $50million in additional economic aid to Kosovo, Croatia, and Montenegro ($251million requested), and $25 million for southern Africa flood relief ($200 millionrequested). H.R. 4425 further rejected the President's supplementalrequest for a $210 million contribution to the HIPC Trust Fund, an initiative toprovide multilateral debt relief to the world's poorest nations. Congress reconsideredand approved HIPC funds and portions of other rejected supplemental requests,however, in October when lawmakers made final decisions on FY2001 ForeignOperations spending levels.

Senate action. As approved by the Senate, S. 2522 provided $13.4 billion for Foreign Operations programsin FY2001. The amount was about $110 million less than FY2000 enacted, aftersubtracting from FY2000 the one-time, $1.8 billion emergency aid package for Israel,Jordan, and the Palestinians in support of the Wye River/Middle East Peace Accord,and the recently approved supplemental. (7) The Senaterecommendation fell about$1.7 billion, or 11%, below the President's (at that time) $15.1 billion FY2001request. Nearly every account was funded below the Administration's request, andseveral were reduced from FY2000 enacted amounts:

USAID operating expenses ($510 million) was $10 million below enacted and requested amounts. At this level, USAID would most likely facethe choice of reducing plans for growth in either staff salaries and benefits, overseassupport costs, or information technology enhancements.

Former Soviet Union aid ($775 million) declined by about $65 million compared with enacted and proposed levels. But because earmarks in S. 2522 for Ukraine ($175 million), Georgia ($94 million), and Armenia($89 million) were slightly higher than amounts requested, the overall accountshortfall likely would have fallen most heavily on aid to Russia, proposed at $162million.

Inter-American Foundation received no funding in S. 2522 for FY2001. The legislation further authorized, but did notrequire, the President to abolish the Foundation. Last year, Congress also authorizedthe President to terminate the Inter-American Foundation, appropriating $5 millionfor the small, grassroots development organization, an amount believed to besufficient to cover existing grants and contract obligations, and to conclude any otheroutstanding operations of the Foundation. The President, however, did not exercisethis authority, and requested $20 million for FY2001 programs. The SenateAppropriations Committee believed that there would be enough funds carriedforward into FY2001 that would cover Foundation terminationcosts.

Peace Corps . As proposed by the Committee bill, Peace Corps funds ($220 million) would have fallen below FY2000 enacted ($245 million) andFY2001 requested ($275 million), and would undermine Administration efforts toachieve a 10,000 Peace Corps volunteer target. During floor debate, an amendment(Dodd) was approved, providing an additional $24 million to be drawn from otherparts of the bill and allowing Peace Corps levels to remain at roughly the FY2000level.

Debt reduction resources to support the Heavily Indebted Poor Country Initiative (HIPC) - $75 million - were significantly less than the combined$475 million FY2000 supplemental/FY2001 request. The most immediate effectwould have been to delay final debt relief for Bolivia because of funding shortfallsin the HIPC Trust Fund. (See below under Major Spending and PolicyIssues.)

International narcotics control appropriations ($220 million) were roughly $90 million below enacted and requested amounts. This would notaffect Plan Colombia, which was funded elsewhere, but would cut by nearlyone-third continued funding for other anti-drug initiatives.

Peacekeeping operations funds ($85 million) were well below FY2000 ($153 million) and FY2001 proposed ($134 million) amounts. The SenateAppropriations Committee assumed no funding for operations in Haiti ($4 million). Cuts recommended in S. 2522 might also have jeopardizedAdministration plans to support OSCE activities in Kosovo and train and equip anAfrican crisis peacekeeping force.

World Bank, International Development Association (IDA) contribution of $750 million would have added about $85 million to arrears owed bythe U.S. S. 2522 further cut funding for the Global EnvironmentFacility, Asian Development Bank, African Development Fund, and othermultilateral organizations.

In a few areas, S. 2522 increased Foreign Operations spending over enacted amounts, supporting in some cases Administration priorities. The majorSenate Committee initiative was the creation of a Global Health account withindevelopment assistance spending. This account, which incorporated much, althoughnot all, of the Child Survival and Infectious Disease fund, represented acomprehensive funding approach to protect global health, attack poverty, and shieldAmericans from infectious diseases easily transmitted across borders. The $691million appropriated in S. 2522 (including a Senate floor amendmentadding $40 million to the Committee recommendation) provided earmarks forHIV/AIDS ($255 million), malaria ($65 million), tuberculosis ($51 million), and aU.S. contribution ($50 million) to the Global Fund for Children's Vaccines. Foranother key economic aid issue - population assistance - S. 2522 earmarked $425 million within development program funding which, whencombined with resources from other accounts, would total about $482 million. Thiswas $110 million higher than FY2000 spending, but below the request of $541million. S. 2522 further replaced abortion-related restrictions thatapplied to FY2000 funds with language that would permit the White House to restoreprevious family planning policy in which no U.S. funds can be used for performingor promoting abortions, but no conditions are imposed on how foreign organizationsspend funds raised from non-U.S. Governments sources. (See below under MajorFunding and Policy issues for more discussion of development assistance populationaid.)

House action. As approved by the House on July 13, H.R. 4811 provided $13.3 billion, about $200 millionless than the FY2000 Act (after subtracting from FY2000 the one-time, $1.8 billionWye River/Middle East peace aid package and the enacted supplemental), and $1.8billion, or 12%, below the President's (at the time) $15.1 billion FY2001 request.

As is the case with the Senate bill, many accounts fell below the Administration request:

USAID development assistance (other than Child Survival) ($1.258 billion) was roughly $250 million below the request.

USAID operating expenses ($509 million) was $11 million below enacted and requested amounts. As noted above, USAID would confrontseveral options to cut operations in order meet the reducedappropriation.

Former Soviet Union aid ($740 million) declined by about $95 million compared with enacted and proposed levels. The House panel allocateda percentage (12.5%) of the account total for Armenia and Georgia, resulting insimilar amounts as earmarked by the Senate. The House bill, however, did notearmark funds for Ukraine, providing somewhat more flexibility for the StateDepartment in making its country allocations for Russia and other former Sovietstates.

Foreign Military Financing (FMF) was reduced during House debate by $242 million to $3.268 billion, $270 million below the request. The cutswere part of off-set packages that allowed for an increase in debt reduction andHIV/AIDS funding. Not only would the House-passed amount squeeze FMFrequests for new members of NATO, Partnership-for-Peace nations, and Jordan, butalso falls $12 million below the combined $3.28 billion request for Israel andEgypt.

World Bank, International Development Association (IDA) contribution of $566.6 million was about $270 million below the requested amount. The House measure further reduced by significant levels proposed U.S. contributionsto the Global Environment Facility, Asian Development Bank, African DevelopmentFund, and other multilateral organizations. Overall, the House measure included $1billion for multilateral assistance, one-third less than requested and 25% belowFY2000 amounts.

As has been the case in House Foreign Operations spending bills since 1995, the legislation placed priority on child survival and infectious disease activities. TheHouse bill approved $886 million, $74 million above the request and $117 millionhigher than FY2000 levels.

Initially, H.R. 4811 , as reported, had provided $82.4 million in debt reduction resources to support the Heavily Indebted Poor Country Initiative (HIPC),a level that, like the Senate's, was well below the combined $475 million FY2000supplemental/FY2001 request. During floor debate, the House adopted anamendment (Waters, 216-211) that raised this amount to $238 million, $24 millionbelow the FY2001 request, but still far less than the combined request.

Conference agreement. As enacted, Congress approved $14.9 billion for Foreign Operations spending in FY2001. (8) Thetotal, however, includes not only amounts requested for this year, but also severalitems proposed as FY2000 supplementals. Prior to reaching agreement, House andSenate conferees reconsidered some of the FY2000 supplementals that lawmakersrejected earlier in the year, and included about $470 million as part of the $14.9billion total. After adjusting the combined President's request to include bothFY2000 supplementals and regular FY2001 proposals, the $14.9 billion ForeignOperations appropriations falls about $500 million, or 3.5% below theAdministration's request. Nevertheless, P.L. 106-429 represents a substantialincrease over the roughly $13.35 billion funding bills passed previously by the Houseand Senate. Moreover, P.L. 106-429 fully funds several top Administrationpriorities, including HIPC debt relief contributions. Major items enacted in theFY2001 Foreign Operations bill include:

HIPC debt relief is set at $435 million, as requested in both FY2000 supplemental and FY2001 requests. In addition, H.R. 4811 authorizes the United States to support the full IMF gold revaluation transactionwhich provides the Fund with the necessary resources to cancel debt owed by HIPCqualifying countries.

Global health programs receive substantial funding increases under the enacted legislation, with spending on HIV/AIDS activities climbing to$315 million. Malaria ($50 million), tuberculosis ($45 million), and GAVI ($50million) are also funded at or well above the requestedamounts.

The Child Survival and Disease Program Fund is funded at $963 million, nearly double the level of six years ago and one-third more than inFY2000. Child survival programs are earmarked at $295 million, UNICEF at $110million, and basic education at $103 million.

USAID development assistance falls about $200 million, or 13% below the President's request, but $90 million, or 7% higher than inFY2000.

Family planning assistance is set at $425 million, the highest level since FY1995, but below the President's $541.5 million request. None of thefunds, however, could be obligated until February 15, 2001. As many expected,President Bush elected, on January 22, 2001, to apply abortion restrictions as acondition of eligibility for foreign organizations to receive USAID grants. OnFebruary 15, USAID announced guidelines for implementing the re-imposed MexicoCity policy conditions under which all FY2001 population aid funds willfall.

USAID operating expenses increased in the enacted legislation to $520 million, the same as FY2000 and requested forFY2001.

Inter-American Foundation receives $12 million, less than the $20 million requested, but higher than last year's $12 million appropriation. Once again, Congress grants the President discretionary authority to abolish theFoundation.

Serbia aid is funded at up to $100 million, but cannot be obligated after March 31, 2001, unless the President certifies that, among otherthings, the Yugoslav government is cooperating with the International CriminalTribunal regarding the investigation and transfer of thoseindicted.

Peace Corps receives $265 million, up $20 million from FY2000.

Foreign Military Financing (FMF) is restored to $3.545 billion, slightly above the requested amount and $125 million higher than FY2000. This will provide full funding for Israel, Egypt, and Jordan. Conferees further added$31 million for southeast Europe that had originally been requested as an FY2000supplemental.

Multilateral Development Bank contributions increase significantly over earlier House and Senate-approved amounts, although the totalfalls about $200 million below the request. The World Bank IDA receives $775million, the same as in FY2000, but $60 million less thanproposed.

Major Policy and Spending Issues in the Foreign Operations Debate

In addition to funding decisions made by Congress in the Foreign Operationsappropriation bill, the annual spending measure also includes a wide range of policyprovisions that frequently raise contentious foreign policy disagreements between thePresident and Congress. As mentioned above, because Congress has not enactedforeign aid authorization bills for over a decade, the Foreign Operationsappropriations legislation often becomes the vehicle for debate on the conduct ofU.S. foreign policy more generally. Many of these policy provisions take the formof conditions or restrictions on how the President can use money included in thespending bill. Many of these provisions are opposed by the Administration asexcessively limiting its ability to manage American foreign policy. Thelegislative-executive policy differences have in the past delayed the enactment of theForeign Operations bill or have prompted a presidential veto.

Among the most significant funding and policy issues raised during congressional debate in 2000 on the Foreign Operations appropriation measure wereconflicting executive-legislative branch development assistance strategy prioritiesand new Administration initiatives, restrictions on international family planningprograms, regional and country aid allocations, and efforts by the Administration tosecure funding to reduce debt burdens of the poorest developing countries.

Development Aid Policy Priorities

Since the end of the Cold War, a recurring debate has focused on what should replace the anti-communist foreign aid rationale of the past 50 years. A morefundamental question raised by some, especially critics of development assistance,is whether the United States needs to maintain an active, globally focused economicaid program. Many of these critics argue that aid can be transformed into a smaller,more targeted, and often privatized instrument to support only the highest priorityU.S. foreign policy interests.

Although there has been no definitive consensus on priorities, the Clinton Administration has strongly supported the retention of an activist foreign aid policywhich can be used to bolster a variety of U.S. foreign policy initiatives around theworld. In early 1994, USAID released its blueprint for a post-Cold War developmentaid policy, based around the goal of "sustainable development," and its four strategiesof promoting economic growth, stabilizing global population, protecting theenvironment, and advancing democracy. More recently, USAID added a fifthstrategy aimed at developing human capacity through education.

Since adopting these strategies in 1994, USAID has maintained that they operate as inter-linked, mutually reinforcing elements of an overall U.S. effort to promote theadvancement of market economies and democratic transitions in developing nations. Officials argue that U.S. aid is justified until countries reach a point of sustainabilitythat no longer requires external aid. Funding reductions, congressional restrictions,and fluctuating Administration priorities, however, have required USAID to alter themix of resources devoted to each of the strategies, raising questions over whether theintegrative, mutually reinforcing rationale can be maintained. Congress, for example,

limited development aid for population programs in FY1996-FY2000 to roughlytwo-thirds of the amount provided in FY1995. (See below for more discussion onfamily planning restrictions.) Further, the State Department's Bureau of GlobalAffairs has in the past placed a high priority on environment programs and pressedUSAID to allocate the maximum amount possible to such activities. As a result, theenvironment sector of sustainable development has not declined as much as it mighthave otherwise.

Table 4. USAID Goals (inmillions of dollars)

Source: USAID. Amounts in this table represent total USAID economic assistance funded across several Foreign Operations accounts, including DevelopmentAssistance, Child Survival and Diseases, Economic Support Fund, Eastern Europe,and Independent States of the former Soviet Union.

* Includes a one-time, $450 million Wye River/Middle East Peace economic package for Jordan and the Palestinians. Excluding this special supplemental, FY2000 totals$5,517 million. The FY2000 estimate does not include supplemental funds approvedin P.L. 106-246 for counternarcotics programs in Colombia and Balkan assistance.

A central theme for the past five years has been differences between Congress and the executive branch regarding funding levels for programs supporting childsurvival, basic education, and efforts against HIV/AIDS and other infectiousdiseases. Despite cutting overall development aid in FY1996-FY1997 by about 23%from FY1995 levels, Congress earmarked children and disease programs at amountsequal to or somewhat greater than those allocated in FY1995, making the cuts on allother elements of sustainable development closer to 30%. Congress reduced thePresident's FY2000 development aid request by $80 million overall, but lawmakersset funding targets for child survival and infectious disease activities $18 millionhigher than proposed. As a result, USAID cut funding for economic growthprograms by $49 million, environment projects by $37 million, and democracypromotion activities by $18 million below what the agency had planned for FY2000. (9)

Congressional proponents of the child survival priority argue that even though budget pressures require the United States to reduce or hold the line on foreign aidspending, the protection of children remains a core American value demanding thatcuts should be implemented without putting at risk the lives and well-being of smallchildren in developing nations. They further point out that the spread of infectiousdiseases poses a direct threat to U.S. citizens, and that American national interestsrequire continued support for global efforts to reduce or eliminate such illnesses.

Although agreeing with the importance of child survival and infectious disease programs, USAID officials apply a broader definition to the terms, arguing, forexample, that efforts to protect small children go well beyond immunizations andaccess to other health services. The quality of a child's life, they assert, also isdetermined by an array of other factors, including the degree of relative stability insociety, protection of the surrounding environment, access to adequate shelter, andimplementation of sound economic policies that will ensure jobs and economicopportunities in the future. Consequently, they contend, that the "squeeze" that thesetargets place on other areas of sustainable development partially undermines thesuccess of other programs that benefit children.

FY2001 Request. As has been the pattern the past few years, USAID's economic assistance request for the Agency'sfive main objectives in FY2001 reduced or maintained at FY2000 levels funding forseveral congressional priorities while increasing aid overall by $377 million, or 7%(after excluding from FY2000 the one-time Wye River/Middle East peace package). The $5.9 billion request would have cut funds for child survival programs by $25million and infectious diseases, other than HIV/AIDS, by $7 million from FY2000appropriations. (10) The proposed budget furtherheld spending steady formicroenterprise and reduced amounts for agriculture and food security programs by$18 million. (11) Both of these latter activities aretargets of special congressionalinterest.

USAID requested significant increases for several other sustainable activities, plus funding to launch a few new initiatives:

Programs combating the spread of HIV/AIDS , especially in Africa, were a major priority of the Administration, both within USAID and acrossother Federal agency budgets, including Health and Human Services, Center forDisease Control, and DOD. Vice President Gore announced in January 2000 that theUnited States would increase spending to $325 million in FY2001, up $100 millionfrom existing levels, for AIDS education, prevention, and treatment in Africa, India,and other areas. HIV/AIDS funding from USAID development aid accounts wouldgrow by nearly $50 million, or 28% in FY2001. Congress has also made AIDSfunding a priority in recent years. Numerous bills were introduced in 2000supporting and/or expanding the Administration's initiative, and one - H.R. 3519 ; P.L. 106-264 - was enacted into law authorizing $300million for HIV/AIDS programs. (12)

Population assistance represented the largest single funding increase for FY2001, rising by $169 million, or 45% from FY2000 amounts. Lastyear, the White House reluctantly accepted new congressional restrictions on abortionand eligibility of foreign family planning organizations implementing USAIDpopulation programs. The Administration wanted to restore family planningassistance funding to levels enacted for FY1995, the year before Congress and thePresident began to engage in contentious debates over abortion and internationalfamily planning. (See next section for further discussion on thisissue.)

Environmental funding would have grown significantly in two environmental sectors under the Administration's request - for biodiversity and fora new clean energy initiative. Last year, Congress directed USAID to restorebiodiversity funding to the same proportion of development assistance funds itreceived in FY1995. While USAID met the roughly $100 million congressionaltarget for FY2000 under the proportional requirement, the Administration sought a$26 million, or 27% increase for FY2001. USAID also planned to launch a new,$30 million clean energy initiative.

Congressional action. The Senate approved bill, S. 2522 , set USAID economic assistance - combining allaccounts supporting the Agency's development goals - at $5.8 billion, about $100million below the request. For sustainable development assistance specifically, theSenate measure set the budget roughly mid-way between FY2000 enacted andFY2001 requested levels. The $2.17 billion sustainable development appropriation(an amount that for comparative purposes includes UNICEF contributions), wasnearly $230 million, or 12%, higher than FY2000 spending. The centerpiece of theSenate proposal was the creation of a new $691 million account for Global Health. The Global Health account replaced the Child Survival and Infectious Diseaseline-item in the FY2000 measure, incorporating most, although not all, child-relatedprograms. (13) In several respects, the new accountsupported many of the fundinginitiatives proposed in other legislation (see footnote 9) and in the Administration'srequest. Committee earmarks and report recommendations allocated resources forseveral priorities, including HIV/AIDS, tuberculosis, malaria, polio and maternalhealth. For other non-health development activities, S. 2522 directedthat USAID allocate at least $310 million (across all accounts) for agricultureprograms, $11 million higher than FY2000 amounts. Population assistance alsowould have increased under S. 2522 , although not to the level proposedby the Administration. (See Table 5 below for specific amounts and comparisonswith House, Administration, and enacted levels.)

Although earmarks and directives in S. 2522 protected and increased resources for Senate priorities, especially in the health area, the overallfunding level for USAID sustainable development programs would have resulted incuts for other, non-earmarked activities, such as those for private markets anddemocracy promotion. USAID calculated that development programs not earmarkedin S. 2522 would fall by about 21% from FY2000 allocations and bynearly one-third from the FY2001 request.

Table 5. Funding for Selected USAID Programs (tentative estimates across all accounts - in millionsof dollars)

a. No earmark.

b. No earmark, but recommendation for higher spending.

As passed by the House , H.R. 4811 would provide $5.63 billion across all economic aid accounts for USAID goals, a level about $266 million, or4.6% below the request. For sustainable development activities specifically, theHouse measure approved $2.144 billion, nearly $200 million less than requested andabout $25 million less than the Senate. The House measure maintained the ChildSurvival/Disease account at $886 million, an increase of $159 million over amountsenacted in FY2000, and, like the Senate measure, included a number of earmarks anddirectives increasing a number of priorities, especially in health and childrenprograms. (See Table 5 for specific amounts and comparisons with Senate,Administration, and enacted levels.)

Although the House continued its practice of recent years of providing higher funding for children activities and cutting requests for other development objectives,the Committee's report acknowledged the need for broader social and economicdevelopment. The Committee encouraged USAID to increase spending on economicgrowth and private sector programs aimed at increasing the number of jobs,educating the population, and providing better health care in developing nations. TheHouse panel further encouraged increased funding for agriculture activities and amicroenterprise program of $152 million. Nevertheless, with the number ofearmarks and priorities in the children and health sectors endorsed by the Housepanel, USAID would most likely need to make substantial reductions in a variety ofnon-health program areas.

Enacted legislation increases USAID funding above levels approved earlier by the House and Senate, and protects, and in some cases adds to amounts for activityof special congressional interest. Overall USAID administered programs in supportof its five key goals are set at $5.835 billion, about $60 million, or 1% less thanrequested, but $200 million and $35 million higher than passed by the House andSenate, respectively. Sustainable development funds total $2.268 billion, also morethan $100 million higher than approved earlier by the House and Senate. Nevertheless, congressional directives and earmarks allocating USAID funding willalter, in some cases significantly, how the Agency distributes appropriated resourcesamong the five core goals. Child survival, health, including HIV/AIDS, and basiceducation will receive substantially higher amounts than requested. Because ofoverall reductions, protection for priority activities, and some spending limitations,funding for private sector, environment, family planning, and democracy programswill fall below proposed levels, and possibly under FY2000 amounts. USAIDdecisions on how to allocate FY2001 appropriations are underway, but will not likelyfinalize until early next year. Table 5, however, provides a tentative estimate of howsome of the key USAID programs will be funded, especially those for whichCongress has included specific earmarks in P.L. 106-429 .

Population and Family Planning Assistance

Another aspect of the discussion regarding policy priorities of U.S. development aid is the continuing controversy regarding international family planning restrictions. For FY2001, the President sought $541.6 million for USAID population programs,a $169 million, or 45%, increase over FY2000 levels. The White House furtherproposed a $25 million U.S. contribution to the U.N. Population Fund (UNFPA), thesame as appropriated for FY2000. U.S. international family planning programs hadbeen one of the largest growth areas of the foreign aid budget in the early 1990s. From an average of about $250 million in the late 1980s, FY1995 spending acrossall Foreign Operations accounts totaled approximately $541 million. In the followingyears, when Congress deadlocked over abortion-related restrictions and U.S.population aid policy, a situation that blocked movement of the entire ForeignOperations bill, lawmakers adopted interim provisions that, among other things,strictly limited the amount of funding for USAID family planning programs. Theappropriation cap of $385 million enacted in each of FY1997-FY2000 is roughlytwo-thirds the amount provided in FY1995.

The principal dispute over population assistance, however, goes well beyond funding issues, centering more directly on abortion-related activities of foreignrecipients of USAID grants. For over 15 years, Congress has engaged in contentiousdebates over U.S. international family planning policy, often as part of the ForeignOperations Appropriations.

Family Planning and Abortion Restrictions. The debate over international family planning policyand abortion began nearly three decades ago when Congress added a provision to theForeign Assistance Act of 1961 prohibiting the use of U.S. appropriated funds forabortion-related activities and coercive family planning programs. During themid-1980s, in what has become known as the "Mexico City" policy (because it wasfirst announced at the 1984 Mexico City Population Conference), the Reagan, andlater the Bush, Administrations restricted funds for foreign non-governmentalorganizations (NGOs) that were involved in performing or promoting abortions incountries where they worked, even if such activities were undertaken with non-U.S.funds . Several groups, including International Planned ParenthoodFederation-London (IPPF-London), became ineligible for U.S. financial support. Insome years, Congress narrowly approved measures to overturn this prohibition, butWhite House vetoes kept the policy in place. President Clinton in 1993 reversed theposition of his two predecessors, allowing the United States to resume funding forall family planning organizations so long as no U.S. money was used by thoseinvolved in abortion-related work.

During the past five years, the House and Senate have taken opposing positions on the Mexico City issue that in each case held up enactment of the final ForeignOperations spending measure. The House position, sponsored by RepresentativeSmith (N.J.) and others, supported reinstatement of the Mexico City policy restrictingU.S. aid funds to foreign organizations involved in performing abortions or inlobbying to change abortion laws or policies in foreign countries. The Senate, on theother hand, has rejected in most cases House provisions dealing with Mexico Citypolicy, favoring a position that leaves these decisions in the hands of theAdministration. Moreover, Administration officials routinely said that PresidentClinton would veto any bills that included the House-passed Mexico City restrictions,a threat he carried out in October 1998 when he rejected legislation authorizingfamily planning programs that included Mexico City policy ( H.R. 1757 ).

Unable to reach an agreement satisfactory to both sides, Congress adopted interim arrangements for FY1996-FY1999 that did not resolve the broad populationprogram controversy, but permitted the stalled Foreign Operations measure to moveforward. The annual "compromise" removed House-added Mexico City restrictions,but reduced population assistance to $385 million, and in several years, "metered"the availability of the funds at a rate of one-twelfth of the $385 million per month.

The FY2000 debate, however, concluded far differently than the previous four years. As Congress and the White House searched in November 1999 for a finalFY2000 budget agreement, international family planning and population aid issuesbecame one of the last and most contentious aspects of the negotiations. Congressional leaders insisted that if the President wanted Congress to approvelegislation authorizing the payment of nearly $1 billion of U.S. arrears owed to theUnited Nations, the White House must also accept revised Mexico City languageadding abortion restrictions to U.S. population assistance policy. In order to removethe obstacles to U.N. arrears payments, a reluctant President Clinton agreed to theabortion restrictions, marking the first time that Mexico City conditions had beenincluded in legislation signed by the President. (Enacted in the Foreign OperationsAct for FY2000, H.R. 3422 , incorporated into H.R. 3194 ,the Consolidated Appropriations Act for FY2000, P.L. 106-113 ).

Under the terms of Section 599D of H.R. 3422 , private foreign non-governmental and multilateral organizations must certify that they neitherperform abortions nor lobby to change abortion laws in foreign countries in order toreceive USAID population aid grants in FY2000. Section 599D allows the Presidentto waive the certification requirement for up to $15 million in grants to groups thatwould otherwise be ineligible, but with the penalty that $12.5 million of the $385million population aid appropriation would be transferred to child health programs. The restrictions apply only to FY2000 and expired on September 30, 2000.

One day after signing the legislation, the President exercised his waiver authority (November 30, 1999), thereby reducing FY2000 population aid funds to$372.5 million. He further instructed USAID to implement Section 599D in a waythat will minimize the impact on U.S. funded family planning programs. Underagency guidelines, all non-U.S. NGOs (whether non-profit or for-profit) andmultilateral organizations that are prime contractors, grantees, and cooperativeagreement recipients must certify (and collect the same certification from theirsub-contractors) that they will not engage in three types of activities with eitherUSAID or non-USAID funds from the date they sign an agreement to receiveFY2000 USAID population funds through September 30, 2001:

perform abortions in a foreign country, except where the life of the mother would be endangered, or in cases of forcible rape orincest;

violate the laws of a foreign country concerning the circumstances under which abortion is permitted, regulated, or restricted;or

attempt to alter the laws or governmental policies concerning circumstances under which abortion is permitted, regulated, orrestricted.

If an organization declines to certify, or does not return the certification form, it will be ineligible to receive FY2000 USAID population funds.

Except for the loss of $12.5 million in funding, it appears that on a programmatic basis, the certification requirement has not had a significant impact onUSAID family planning programs. A key issue has been whether the $15 million intotal grants allowed under the waiver authority was sufficient to cover all foreignorganizations that declined to certify regarding their involvement in abortion-relatedactivities. Although there is still some uncertainty about how many groups have notresponded because they disagree with the certification terms, IPPF-London and theWorld Health Organization have refused. At some point, USAID will review thecases of all foreign organizations that have not responded or declined to certify - ninecurrently - and decide how to allocate the $15 million available to such groups. Agency officials believe that they will not exceed the $15 million cap.

Critics of the certification requirement oppose it on several grounds. From an administrative standpoint, they say it will increase USAID costs to manage familyplanning programs because of the additional paperwork and will delayimplementation of projects. (USAID has contracted with John Snow, Inc. to trackthe certification process.) They further believe that family planning organizationswill cut back on services because they are unsure of the full implications of therestrictions and do not want to risk losing eligibility for USAID funding. Opponentsalso believe the new conditions will undermine relations between the U.S.Government and foreign NGOs and multilateral groups, creating a situation wherethe United States challenges their sovereignty on how to spend their own money andimposes a so-called "gag" order on their ability to promote changes to abortion lawsand regulations in developing nations. The latter, these critics note, would beunconstitutional if applied to American groups working in the United States. Supporters of the certification requirement argue that even though permanent lawbans USAID funds from being used to perform or promote abortions, money isfungible; that organizations receiving American-taxpayer funding can simply useUSAID resources for permitted activities while diverting money raised from othersources to perform abortions or lobby to change abortion laws and regulations. Thecertification process, they contend, stops the fungibility "loophole."

President Clinton said he would oppose any attempt to extend the abortion restrictions beyond September 30, 2000. Supporters of his position introducedseveral bills in 2000 that would effectively reverse the Mexico City language, byeither:

making the eligibility requirements for NGOs and multilateral organizations no more restrictive than those that apply to foreign governments( H.R. 3634 and S. 2380 );

subjecting foreign groups (concerning the use of non-USAID funding for advocacy and lobbying activities) to the same restrictions imposed onU.S. NGOs, and maintaining their eligibility so long as these groups do not engagein health or medical services in violation of the laws of the country in which theyoperate or which would violate U.S. law if provided here ( H.R. 4211 ).

Supporters of the certification process pressed for continuation of the restrictions in the FY2001 funding bill in order to further institutionalize them.

UNFPA Issues. Congress further enacted for FY2000 restrictions on U.S. contributions to the U.N. Population Fund(UNFPA). During the Reagan and Bush Administrations the United States did notsupport UNFPA, a policy reversed by President Clinton in 1993. At issue areUNFPA programs in China, a country where there have been continuing reports for many years of coercive family planning practices. During the mid-1990s, Congressreduced UNFPA contributions by the amount the organization spent in China, butwhen UNFPA ended its China program in 1997, the controversy subsided. UNFPA,however, reinstituted activities in China soon thereafter, resulting in the withholdingin FY1998 of $5 million for UNFPA and the enactment for FY1999 of a totalprohibition on the U.S. $25 million contribution, so long as the organizationremained active in China. Congress restored the $25 million earmark for UNFPA inFY2000, but under terms that required a deduction of $3.5 million (the cost ofUNFPA's 2000 program in China).

Coercive Family Planning Practices and Peru. A new element in the family planning issue added during theFY1999 debate emerged following reports that Peru, where USAID has populationaid programs, had established national targets for tubal ligations and vasectomies. There were also allegations that some Peruvian health workers may have conditionedthe receipt of food and medical care on the acceptance of sterilizations. USAIDmaintains a policy of strict voluntarism for family planning programs it supports, andopposes the use of performance-based quota systems. The Agency says that Peru'sgovernment has instituted significant reforms in its family planning programs,including criteria that ensure voluntary informed consent. To reinforce U.S. policiesopposing programs based on coercive practices or quota systems, Congress adoptedfor FY1999 an amendment by Representative Tiahrt that more precisely defines theterm voluntary family planning programs, and establishes criteria for USAID to applyregarding the voluntary nature of its population projects. These same provisionswere continued in the FY2000 appropriation. (14)

Congressional Action. S. 2522 earmarked $425 million for population assistance out ofdevelopment assistance funding, a level which, when combined with resources fromother accounts, would provide about $482 million for family planning activities. This is significantly higher than for FY2000, but below the Administration's $541million request.

On the issue of abortion conditions, section 590 of S. 2522 deleted restrictions applying to FY2000 funds, substituting language that would have theeffect of restoring previous Clinton Administration policy on foreign NGOs andmultilateral organization eligibility for USAID population aid grants. Specifically,the conditions stipulated that such organizations:

shall not be subject to requirements regarding how they use non-U.S. Government funds for advocacy or lobbying activities that are morerestrictive that those that apply to U.S. NGOs which receive economic aid grants;and

shall not be ineligible for USAID grants solely on the basis ofhealth or medical services provided with non-U.S. Government funds so long as suchservices do not violate the laws of the country in which they are provided or wouldnot violate U.S. Federal law if provided in this country.

It is generally held that under the Constitution, U.S. NGOs cannot be restricted from using their own funds to advocate policy positions they support. The first newcondition would essentially extend that protection to foreign NGOs and multilateralorganizations. The second condition would not disqualify an organization fromreceiving USAID grants for performing abortions with its own money if abortion orwhatever medical service it provided was legal in the country in which it operated,and that the service would be legal in the United States if performed here.

H.R. 4811 made no change in current law, allowing the restrictions established in the FY2000 appropriations to continue. Duringsubcommittee markup, the Foreign Operations panel rejected (7-8) an amendment byRepresentative Lowey to remove the abortion restrictions from the bill. A similaramendment during full Committee mark-up also failed 26-34, and, on the Housefloor, another amendment was rejected (Greenwood, 206-221) that would haveremoved the restrictions. H.R. 4811 further continued currentconditions on UNFPA contributions. The bill provided $385 million for populationassistance, far below the President's $542 million request. Based on reports ofcontinuing coercive family planning practices in Peru, the House measure requireda series of new investigations and reports by USAID and its Inspector General in aneffort to strengthen application of the Tiahrt amendment, not only in Peru, but in allcountries where USAID maintains family planning programs.

Foreign Operations, as enacted, met the Administration's requirement for removal of the abortion-related restrictions, a policy, however, that has subsequentlybeen altered through executive action by President Bush. None of the $425 millionappropriation could be obligated until after February 15, 2001, a provision thatallowed the new President to decide which policy to apply. On January 22, 2001,two days after taking office, President Bush issued a Memorandum to the USAIDAdministrator rescinding the 1993 memorandum from President Clinton anddirecting the Administrator to "reinstate in full all of the requirements of the MexicoCity Policy in effect on January 19, 1993." The President further said that it was his"conviction that taxpayer funds should not be used to pay for abortions or advocateor actively promote abortion, either here or abroad." (15) A separate statement from thePresident's press secretary stated that President Bush was "committed to maintainingthe $425 million funding level" for population assistance "because he knows that oneof the best ways to prevent abortion is by providing quality voluntary family planningservices." The press secretary further emphasized that it was the intent that anyrestrictions "do not limit organizations from treating injuries or illnesses caused bylegal or illegal abortions, for example, post abortion care." (16) On February 15, the dayon which FY2001 population aid funds became available for obligation, USAIDissued specific policy language and contract clauses to implement the President'sdirective. The guidelines are nearly identical to those used in the 1980s and early1990s when the Mexico City policy applied. (17)

For UNFPA, the FY2001 appropriations includes an earmark of $25 million, as requested, but with the requirement that the amount will be reduced by howevermuch UNFPA spends in China. Conferees did not address the issue of coercivepractices in Peru or strengthening the Tiahrt provisions.

Regional Allocations of U.S. Foreign Aid

Although the Middle East has received by far the largest proportion of U.S. assistance over the past three decades -- 55-60% of bilateral aid appropriated inForeign Operations spending measures in most years -- allocations to other regionshave fluctuated considerably, especially since the end of the Cold War. Asia, whichreceived substantial assistance in the 1980s associated with the presence of U.S.military bases in the Philippines, had its share drop from 16% to 4% by the late1990s. Latin America, had its share fall from 16% to 6% following the end ofconflict in Central America in the early 1990s. Africa's proportion has remainedabout the same -- 7 to 9% -- a development that disappointed those who argued thatthe world's poorest region should receive higher priority, especially with thereduction in emphasis on security assistance. U.S. aid to the emerging democraciesand market-oriented economies in Eastern Europe and the former Soviet Union,where the United States had no programs prior to 1990, grew to represent over 16%of American bilateral assistance funded in the Foreign Operations bill by the end ofthe decade.

A number of observers, including some Members and congressional committees, believed these shifts in regional aid allocations had swung too far. Thiswas particularly true in the cases of Asia and Latin America, given the Asianfinancial crises and significant U.S. interests in promoting economic development inLatin America in order to counter the trend of rising illegal immigration to the UnitedStates. Foreign Operations appropriation measures in recent years have emphasizedthe need to maintain or increase assistance especially to Latin America, and morerecently, to the Philippines, Thailand, and Indonesia which were most directlyaffected by the regional economic downturn. Others argued that not enough has beenreallocated to Africa to meet the region's unmet needs and to promote futureU.S.-African trade opportunities.

When the share of bilateral Foreign Operations funding for the Middle East exceeded 60%, some in Congress began promoting the view that there should besome limits to the amount provided. If the Administration wanted to pursue newMiddle East peace initiatives using foreign aid as an implementing tool, they argued,resources should be found either within existing Middle East programs or providedon top of overall aid appropriations, rather than being taken from other regions.

Table 6. Regional Allocations of U.S. Aid (In millions of dollars; % of bilateral total in ForeignOperations)

Source: USAID. Amounts in the this table exclude food aid funded in the Agriculture Appropriations measure.

* FY1999 includes Central America hurricane reconstruction ($613 million).

** FY2000 includes supplemental funding for Plan Colombia ($1.1 billion), Balkanaid ($50 million), and southern Africa flood relief ($25 million).

Accordingly, for FY1998 Congress took steps to legislate a cap on Foreign Operations resources for the Middle East. At the initiative of RepresentativeCallahan, Chairman of the House Foreign Operations Subcommittee, lawmakersstipulated in the FY1998 funding measure (Section 586 of P.L. 105-118 ) that selectedMiddle East nations and regional programs could not receive more than $5.4 billionof the total appropriation. For FY2000, the Middle East aid cap was lowered to $5.3billion. Shortly after Congress initiated a Middle East aid ceiling, Israel put forth inJanuary 1998 a plan to cut aid received from the United States over the next 10 to 12years. Under the Israeli plan, the United States would reduce economic aid by $120million each year for about ten years, while increasing military assistance by $60million annually. At the end of the period, Israel would be receiving an annualappropriation of $2.4 billion in military aid but no longer receiving any economicassistance. If done over a 10-year period, U.S. aid to Israel would fall $60 millioneach year in net terms, with a total savings of $600 million by 2009. Since FY1999,Congress has supported the $60 million net reduction of aid to Israel, also adding asimilar $40 million economic aid cut for Egypt.

The President's FY2001 Foreign Operations request reflected several of these regional allocation views expressed by Congress in recent years. Highlights of theAdministration's recommendations included the following.

Creation of the Development Fund for Africa Account. (18) After a 5-year absence, thePresident proposed tore-establish a separate Foreign Operations account for African aid and to increasebilateral funding (including economic and military assistance) by 16% over FY2000levels. In the late 1980s, Congress and the Administration launched a joint initiativeto create special legislative authority for U.S. economic aid to Africa. TheDevelopment Fund for Africa (DFA -- authorized in Chapter 10 of the ForeignAssistance Act of 1961) was intended to extend more flexibility to USAID programmanagers and to protect aid resources for Africa from being transferred to otherregions as new foreign policy crises unfolded. At its peak, the United Stateschanneled about $800 million annually through the DFA.

Although the DFA authorization law remained in force, Congress ended the practice of a direct DFA appropriation in FY1996, funding Africa's assistance out ofworldwide development aid and child survival accounts. Following PresidentClinton's visit to Africa in 1998, during which he pledged to restore U.S. aid tohigher levels provided in previous years, the Administration proposed a direct DFAappropriation account for FY2000. Congress rejected the DFA recommendation butapproved sufficient development funds so that Africa's level grew from $703 millionin FY1999 to $737 million estimated for FY2000.

The FY2001 request once again sought the restoration of the DFA account, that when combined with child survival funds would allocate $836 million to Africa, anincrease of $99 million. Although some of the additional assistance would supportthe HIV/AIDS initiative, family planning and other health activities would receivesubstantial increases. The request for activities financed under the Economic SupportFund, an aid account used for political and security purposes, rose by one-third overFY2000, largely for democracy and economic growth initiatives for countries intransition. Military aid would have grown from about $20 million in FY2000 to $27million, with the largest increase for stabilizing regional security situations throughthe promotion of democratic transition within the militaries of countries such asNigeria, and to assist African forces participate in regional peacekeeping operations. Nigeria, which is one of the State Department's four worldwide aid "focus" countriesfor FY2001 (along with Ukraine, Indonesia, and Colombia) would be the largest ($81million) African recipient of economic and military assistance (excluding food aid),followed by Uganda ($54 million), Mozambique ($47 million), and Ethiopia ($41million).

Increased Funding for Asia. The FY2001 foreign aid budget proposed significant increases in assistance programsthroughout the Asian region. The $568 million requested was nearly $137 million,or 32% higher than allocations for FY2000. This follows a 17% increase in FY2000year for Asia compared with FY1999. The higher amounts would be drawn inroughly equal levels between development and ESF accounts. Of particular prioritywere economic growth programs aimed at helping economic recovery in southeastAsia. Indonesia, another of the Administration's four aid "focus" countries, wouldbe by far the largest recipient of U.S. economic assistance ($130 million). Another$10 million was scheduled for East Timor. India ($72 million), Bangladesh ($69million), and the Philippines ($45 million) follow as other leading economic aidrecipients in the region. For each of these three, the FY2001 proposed allocationswere roughly 50% higher than those for FY2000.

Modest Increases for Most Latin America Programs; Major Counternarcotics Initiative for Colombia. Aidallocations for Latin America surged in FY1999, largely due to the $613 millionemergency relief package approved to aid the victims of Hurricane Mitch that struckCentral America in late 1998. Assistance to the region increased again for FY2000due to a $1.1 billion add-on for counternarcotics in Colombia. For FY2001, regulareconomic, anti-drug, and military assistance for Latin America would total $754million. Counternarcotics aid continued to be a primary focus of assistance to LatinAmerica, accounting for 29% of total resources in the FY2001 request.

Overshadowing continuing Latin American aid programs has been the FY2000/2001 $1.1 billion counternarcotics initiative for Colombia and other drug-producing nations in the region. (Including resources requested from Defense andJustice Department budgets, "Plan Colombia," as the initiative has been labeled,totals $1.272 billion over two years.) The major, and arguably most controversial,component ($600 million) of the initiative is "Push into Southern Colombia,"designed to help the Colombian government extend anti-drug efforts throughoutsouthern Colombia where coca cultivation is expanding and where Colombianguerrillas operate. This would include training and equipping two new armycounternarcotics battalions and purchasing Black Hawk and Huey helicopters totransport them. On June 29, Congress cleared for the White House ( P.L. 106-246 )a $1.3 billion supplemental for Colombia ($1.1 billion in Foreign Operations funds)that closely matched the President's funding request but imposed a number of policychanges and conditions on the assistance. (19)

Peru and Bolivia, each scheduled to receive $98 million in FY2001, top the list of Latin American aid recipients. Haiti ($51 million) and Guatemala ($50 million)were also prominent aid recipients planned for FY2001. Colombia, however, hasemerged in recent years as one of the main benefactors of U.S. assistance worldwide,representing the fifth largest recipient in FY1999 behind Israel, Egypt, Jordan, andUkraine. With passage of the counternarcotics initiative, Colombia has become thethird top aid recipient worldwide for FY2000.

Middle East Aid Reduced Slightly for FY2001. The President's FY2001 foreign aid request for theMiddle East reduced slightly - from $5.278 billion to $5.216 billion - U.S.assistance to the region when compared with regular programs for FY2000(excluding Wye River accord funding). This is largely the result of continuing forthe third year a ten-year plan to downsize aid to Israel and Egypt. The $2.82 billionfor Israel would be $60 million less than earmarked for FY2000, and the $1.996billion for Egypt was $40 million below FY2000 levels. (20) Enactment for FY2000 ofa one-time, $1.8 billion Wye River/Middle East peace accord aid package supportingIsrael, Jordan, and the Palestinians, pushed total Middle East aid levels far higher inthat year. No equivalent initiative was proposed for FY2001. (21) Palestinian assistancein FY2001 was scheduled for $100 million, up from the FY2000 $85 million regularprogram.

Another element of the FY2001 Middle East recommendation concerned Egypt's request to receive part of its military assistance early in the fiscal year ratherthan over a much longer period of time as payments become due for defensepurchases. For a number of years, Congress has directed that economic and militaryaid for Israel be disbursed within the first month of a new fiscal year, allowing Israelto invest the funds and earn interest prior to using the money to service debt owed tothe United States and make payments on military procurements. Last year, theAdministration asked Congress to allow Egypt to receive $475 million in "earlydisbursements," an action that would have increased Foreign Operations outlays byan equivalent amount. With extremely tight limits on outlays for FY2000, theAppropriation Committees could not accommodate the request. Instead, however,Congress added $25 million for Egypt under the Wye River aid package, an amountroughly equal to the interest Egypt would have gained from an early disbursement. For FY2001, the Administration proposed a somewhat different mechanism toachieve the same purpose: that Egypt receive by October 31, 2000 (or within 30 daysof enactment of the appropriation, whichever is later) the amount of military aid thatOMB estimates will be disbursed to Egypt throughout FY2001. Egypt would placethe funds in an interest-bearing account at the Federal Reserve, and earn about $25to $30 million during the course of the year. The advantage of this plan from abudget standpoint was that it would not increase outlays over current projections.

Flat Budget Request for Russia and Other Former Soviet States; Increase for Kosovo. After several years of disputesbetween Congress and the President over proposals to sharply increase assistance toRussia and the other nations comprising the former Soviet region, theAdministration's FY2001 request of $830 million for economic assistance was nearlyidentical to amounts allocated for FY2000. Distribution among recipients, however,changed somewhat from FY2000. Russia's bilateral aid would fall from $178million to $162 million, while Ukraine, another Administration aid "focus" country,would see its assistance rise from $160 million to $171 million. U.S. assistance toArmenia and Georgia, countries which have received higher levels in the pastbecause of congressional earmarks, would be cut in FY2001, to $75 million and $86million, respectively. These reductions, as well as those for Russia and Moldova,would be offset by increases for most other former Soviet states, with Azerbaijangrowing from $31 million to $55 million. (22)

Table 7. Leading Recipients of U.S. Foreign Aid: FY1999 - FY2001 (Appropriation Allocations; $s in millions)

*Includes regular amounts for Israel, Egypt, Jordan, and the Palestinians, plus the Wye River peace accord: Israel-$1.2 billion; Egypt-$25 million; Jordan-$200million; Palestinians-$400 million.

** Once allocated, FY2000 supplemental funds will increase amounts for thesecountries.

Note: Data exclude food aid, a program not appropriated in the Foreign Operations bill. With food aid included, the rank order above would change somewhat. Foodaid for FY2001 includes Peru-$30 million; India-$92 million; Bangladesh-$43million; and Bolivia-$22 million. Moreover, because of a large food aid programs,Ethiopia and Haiti would also rank among the lower 5 of this top 17 list.

For other former eastern bloc and European countries, the FY2001 request proposed an increase of $57 million, or 10% in economic aid, primarily to extendadditional support to Kosovo, Croatia, and Montenegro. Foreign Military Financinggrants would nearly double to $95 million, with levels for new NATO membersPoland, Hungary, the Czech Republic rising by 50%. Partnership for Peace countrieswere scheduled to receive $62 million in FMF grants for FY2001, up from $33million in FY2000. (23)

Congressional Action. House, Senate, and enacted bills for FY2001 made several changes to the Administration'sregional and country aid proposals.

Africa. Congress rejected the President's request to re-instate the Development Fund for Africa, as requested, butfunds development programs for sub-Saharan Africa out of the worldwidedevelopment assistance and child survival accounts. Because Congress increasedhealth and child survival funding levels, most of which target Africa, and made onlymodest cuts for other bilateral development spending, Africa development aidallocation of $794 million fell close to but below the proposed $837 million level. The House-passed bill had required USAID to allocate the same proportion ofdevelopment aid to Africa in FY2001 that it did for FY2000. Although theconference report made no mention of this requirement, if applied to the enacteddevelopment assistance funding totals, Africa would have received about $900million in FY2001.

Asia. Based on initial Administration aid allocations, Asia will receive slightly more - about $600 million of the funds in P.L. 106-429 - than what had been requested. The enacted measure further includesdirectives for specific countries and activities.

Burma - directs that $6.5 million, as requested, be provided to Burmese exiles and refugees for education, health care, and politicalinitiatives.

Cambodia - recommends $20 million (up from $16.8 million requested) addressing HIV/AIDS, education, and environmental needs, but avoidingdirect assistance to the central government.

Indonesia - earmarks $5 million for economic rehabilitation in the Aceh region, and encourages USAID to support economic restructuring anddecentralization programs throughout Indonesia, and especially in theMoluccas.

East Timor - earmarks $25 million for reconstruction and income-generating projects, higher than the $10 millionrequest.

North Korea - urges the State Department to support $250,000 for South Korean NGOs involved in democratization efforts in North Korea. Thiswould be in addition to the $55 million approved for the Korean EnergyDevelopment Organization (KEDO).

Latin America. H.R. 4811 , as enacted, limits additional assistance to the Haitian government until theSecretary of State reports that Haiti has held free and fair elections to seat a newparliament. The House bill had placed high priority on Latin American fundinglevels, directing that the Administration allocate at least the same amounts in FY2001for the region as it did for FY2000. Conferees, however, did not discuss this issue. Initial allocations for Latin America, excluding counternarcotics aid, suggest that theregion will be slightly higher than for FY2000 but about $10 million less than the$750 million request.

Middle East. The enacted FY2001 Foreign Operations spending bill continues the 10-year phased reduction in aid toIsrael and Egypt, as proposed, and authorizes that a portion of Egypt's militaryassistance be transferred to an interest bearing account. H.R. 4811 alsodirects that $25 million be provided for programs benefitting the Iraqi people, $12million of which must go for food, medicine, and other humanitarian purposes.

Israel's planned $250 million sale to China of an airborne early warning aircraft became a significant issue during House Committee consideration of theappropriations measure. Because of the proposed transfer of the Phalcon airborneradar system, delivery of which was expected in October 2001, Chairman Callahanoffered a provision withholding $250 million in FY2001 aid to Israel until theSecretary of State certified that the sale was terminated or it did not pose a nationalsecurity threat. The amendment was defeated (6-9). Chairman Callahan proposedthe same amendment at full Committee markup, but the House panel approved asubstitute amendment expressing the "sense" of Congress that the China sale couldthreaten both Taiwan and the United States and urged Israel to terminate the sale. (24) On July 12, Israel announced it had cancelled the sale.

Independent States of the Former Soviet Union and East Europe. As enacted, H.R. 4811 reduces slightly- to $810 million - the former Soviet aid account, representing an increase from the$775 million and $635 million passed earlier by the Senate and House, respectively. Amounts for Eastern Europe are set at $600 million, about mid-way between Houseand Senate-passed levels. These regional totals have resulted in higher allocationsfor Croatia, Montenegro, and Serbia than requested, but reductions for several formerSoviet states including Azerbaijan, Kyrgystan, and Moldova. The Administrationallocated slightly more to Russia - $168 million - than had been requested, althoughthe level is down from $187 million in FY2000. The legislation includes severalcountry earmarks that set funding at or above amounts proposed by the President:

Ukraine - $170 million, down slightly from the $173.5 million request.

Armenia - $90 million, up from the $75 millionproposal.

Georgia - $92 million, higher than the $85.8 millionrequest.

Unlike the Senate bill, the conference agreement does not earmark funds for Montenegro or Croatia, but encourages the Administration to allocate at least $89million for Montenegro and $65.7 million for Croatia. These totals would includeregular FY2001 funding, plus portions of the $75.8 million Congress also approvedfor the Balkans that had earlier been considered but rejected as an FY2000supplemental. Lawmakers also added $34 million in military aid for the region thathad also been proposed as an FY2000 supplemental. Reflecting recent changes inthe political leadership of Serbia, the bill provides that up to $100 million inassistance may be used for Serbia. Nevertheless, the funds cannot be obligated afterMarch 31, 2001, unless Congress is notified that the Yugoslav government iscooperating with the International Criminal Tribunal regarding the investigation andtransfer of indicted war criminals.

For other countries, H.R. 4811 limits aid allocations or attaches conditions that must be met prior to distributing the funds:

Russia - maintains conditions on aid to Russia if it does notterminate sales of nuclear reactor and related technology to Iran, and adds a newcondition withholding assistance if Russia is not cooperating with internationalinvestigations of war crimes in Chechnya or providing access to Chechnyan refugees. These conditions affect 60%, rather than last year's 50%, of aid allocated to theRussian central government.

Kosovo - no assistance can be made available for Kosovo until the Secretary of State certifies that U.S. obligations and expenditures of funds do notexceed 15% of total amounts from all donors.

Bosnia - limits to $80 million ($90 million requested) FY2001 assistance.

Debt Reduction Initiatives for Poor Countries (25)

Providing debt relief to poor developing nations that borrowed in the past from the United States, other creditor governments, and international financial institutionsemerged as one of the key foreign aid issues in 1999 and continued as a White Housepriority in 2000. At the Cologne Summit in June 1999, G-7 leaders endorsed asubstantial expansion of the Heavily Indebted Poor Country (HIPC) Initiative largelyalong the lines of policy changes recommended by the United States and Britain. TheWorld Bank and IMF, institutions that manage HIPC debt relief, adopted theseenhancements in September. In late 1999, Congress approved some of the legislationrequested by the Administration for full U.S. participation in HIPC, but left severalmatters incomplete, primarily those associated with the cancellation of multilateraldebts. In 2000, the White House sought congressional approval for authorizing andappropriating issues left over from 1999.

For the past decade, the United States has engaged in various forms of debt relief for developing nations, resulting in the cancellation of about $14.7 billion offoreign debt. Much of it -- $10.1 billion -- resulted from special cases involvingkey U.S. national interests: for Egypt in 1990 ($7 billion), for Poland in 1991 ($2.5billion), and for Jordan in 1995 ($635 million). U.S. debt reduction policy for othernations based strictly on need has been guided by the principle that eligible countriesmust have demonstrated a strong and sustained commitment to economic policyreforms prior to receiving debt relief. Under budget rules instituted in 1992,Congress has had to appropriate funds in advance representing the costs of cancelingdebt. The cost determination methodology is based on a complicated formula thattakes into account, among other things, the loan's net present value, its interest rate,and the likelihood the loan will be repaid. For especially poor countries withparticularly large debt overhangs, the appropriation requirement may be quite smallrelative to the loan's face value -- perhaps 10% or less.

When it was introduced in 1996, HIPC was hailed as the first arrangement that included relief from debts owed to the World Bank, the IMF, and other internationalinstitutions, organizations that hold over 25% of debt owed by the most heavilyindebted nations. Previously, multilateral organizations had declined to participatein debt cancellation, arguing that it would increase their costs of raising new moneyto lend, expenses that would have to be passed on to borrowers. Forty-one countries-- mostly in Africa -- are eligible for HIPC, although only those determined to have"unsustainable" debt would qualify for HIPC terms.

The initial HIPC framework came under heavy criticism in early 1999, especially among non-governmental organizations and religious groups working indeveloping countries. They charged that HIPC terms were not deep enough -- that90% or 100% of bilateral debt owed should be canceled, and that six years was a fartoo long qualification period for full HIPC relief. They further believed that thenon-sustainable debt criteria, based largely on a ratio of a country's debt-to-exports,was too high and therefore excluded many countries that were also in need of debtrelief. Some critics opposed the economic reform requirements and argued forunconditional debt reduction. A number of organizations further advocatedinstituting mechanisms that would ensure that savings realized by debtorgovernments would be channeled into spending on basic services, such as health andeducation, that would improve the quality of life of the very poor. Many of thesearguments were reflected in legislative initiatives launched in 1999, including H.R. 1095 (Debt Relief Poverty Reduction Act of 1999), H.R. 772 (Hope for Africa Act), H.R. 2232 (Debt Reliefand Development in Africa Act of 1999), and S. 1690 (Debt Relief forPoor Countries Act of 1999). Complicating the expansion of HIPC and enactmentof these bills, however, was the large additional costs that would be associated withefforts to broaden, deepen, and accelerate HIPC or U.S. bilateral debt reductionpolicies.

Following agreement to expand HIPC and insert a strong poverty reduction requirement, President Clinton amended in September 1999 his pending FY2000foreign aid request, increasing debt relief from $120 million to nearly $1 billion overfour years. Congress agreed to $123 million for bilateral debt cancellation at theParis Club in 2000 but rejected the $600 million proposed for HIPC Trust Fundcontributions, FY2000-FY2003 ( H.R. 3422 , as incorporated into P.L.106-113 ). (26) The President had also askedCongress to allow the United States tosupport an IMF plan to draw on resources in a contingency fund and to re-value someof its gold holdings at current prices through an off-market gold sale that would allowthe IMF to cancel HIPC debts owed to the Fund. (27) Congress authorized the use ofthe contingency fund but placed a restriction that the IMF could only use 9/14ths ofthe gold transaction "profits" for HIPC debt relief ( H.R. 3425 , asincorporated into P.L. 106-113 ).

Legislative Issues in 2000. The Administration asked Congress to approve items carried over from 1999:

HIPC Trust Fund $210 million contribution as an FY2000 supplemental appropriation;

HIPC bilateral and multilateral debt relief request of $225million for FY2001;

Tropical forestry debt relief initiative of $37million;

HIPC bilateral and multilateral debt relief advanceappropriation (FY2002/2003) of $375 million;

Authorization for the U.S. to participate in the HIPC TrustFund; and

Authorization permitting the U.S. to support the full use of theIMF for gold transaction profits for debt relief.

Administration officials were especially concerned about appropriations for the HIPC Trust Fund contribution. They argue that the absence of a U.S. payment hadconvinced other creditor governments to hold back their own pledges until the U.S.acted. They further contended that while most of the existing Trust Fund pledgeswere earmarked for African nations that would be among the earliest qualifiers,resources for Latin American debt relief - for Bolivia and Honduras - were notavailable. Without a U.S. contribution, they said, a debt workout for Bolivia hadbeen delayed because of inadequate resources. Critics of multilateral debt relief,including some in Congress, argued, however, that before the U.S. contributes to theTrust Fund, multilateral institutions should agree to suspend new lending to HIPCcountries for a period of time once they received debt relief so that they would notreturn to a severely indebted state.

Congressional Action. Prior to consideration of the FY2001 Foreign Operations spending measure, lawmakers dealtwith other aspects of the HIPC requests. In the FY2000 supplemental appropriation( H.R. 4425 ), Congress rejected the President's request for the HIPCTrust Fund. Supporting other Administration requests, however, the Senate ForeignRelations Committee reported on April 7 legislation ( S. 2382 )authorizing U.S. participation in the HIPC Trust Fund and U.S. approval of the entireIMF off-market gold sale mechanism. That bill, after referral to the Senate BankingCommittee, did not receive full Senate consideration.

S. 2522 provided $75 million in debt reduction for FY2001, far below the combined FY2000/2001 requests for $472 million. The legislationpermitted the Administration to use the resources for either bilateral debt relief orcontributions to the HIPC Trust Fund. Because several HIPC countries were nearingconsideration for HIPC eligibility, it was possible that reduced funding in S. 2522 , if enacted at that level, would have resulted in further delaysfor debt workout negotiations.

H.R. 4811 provided $238 million for debt reduction. The House Appropriations Committee bill had provided $82.4 million for debt reduction, wellunder the Administration's request. During floor debate, however, the Houseadopted an amendment (Waters, 216-211) that increased the debt relief allocation by$155.6 million. As reported by the Committee, however, H.R. 4811 required that before any U.S. contribution to the HIPC Trust Fund, theAdministration must report to Congress that the HIPC beneficiary country would notreceive any new market-rate loans from international financial institutions for 30months or concessional loans for 9 months. The Administration opposed theselimitations. The House Committee expressed support for economic reformsundertaken by Bolivia and Mozambique, and its expectation that all of the debtreduction funds for HIPC would go to these two countries. The House measurefurther indicated that $13 million of the debt reduction appropriation was reservedfor the Tropical Forestry debt initiative.

The enacted bill provides a total of $448 million for debt reduction, consisting of $435 million for HIPC (the combined FY2000 supplemental and FY2001 regularrequest) and $13 million for the Tropical Forestry initiative. Of the HIPC funds,roughly $75 million will be used for bilateral debt relief and $360 million as a TrustFund contribution. Countries which will receive benefits from U.S. contributionsmust first agree not to borrow at market rate terms for two years. The limitation onconcessional financing, as passed by the House, was dropped from the conferenceagreement. Instead, conferees endorsed consideration of a policy in which the WorldBank's International Development Association would expand grant assistance toHIPC countries. The legislation further includes new reporting requirementsregarding implementation of the HIPC initiative that will allow Congress to monitoractions taken in the coming year more closely.

P.L. 106-429 does not, however, approve the full U.S. pledged commitment to the HIPC initiative. The Administration is asking Congress in the FY2002 ForeignOperations budget for an additional $224 million HIPC Trust Fund contribution. Because Congress authorized in H.R. 4811 only $435 million of thetotal $600 million Trust Fund pledge, additional authority may be sought in the 107thCongress.

For Additional Reading

Foreign Operations Programs

CRS Issue Brief IB88093. Drug Control: International Policy, by Raphael Perl.

CRS Report RL30830 . International Family Planning: The "Mexico City" Policy , by [author name scrubbed].

CRS Issue Brief IB96008. Multilateral Development Banks: Issues for the 106th Congress , by Jonathan Sanford.

CRS Issue Brief IB86116. U.N. System Funding , by [author name scrubbed].

CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for Congress , by [author name scrubbed].

Foreign Operations Country/Regional Issues

CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues , by Raymond Copson.

CRS Issue Brief IB95077. The Former Soviet Union and U.S. Foreign Assistance , by [author name scrubbed].

CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance , by Clyde Mark.

CRS Issue Brief IB91141. North Korea's Nuclear Weapons Program , by Larry Niksch.

Selected World Wide Web Sites

CRS Current Legislative Issues: Foreign Affairs http://www.crs.gov/products/browse/is-foreignaffairs.shtml

Export-Import Bank http://www.exim.gov/

Inter-American Development Bank http://www.iadb.org/

International Monetary Fund http://www.imf.org/

Peace Corps http://www.peacecorps.gov/

Trade and Development Agency http://www.tda.gov/

United Nations Children's Fund (UNICEF) http://www.unicef.org/

United Nations Development Program (UNDP) http://www.undp.org/

United National Population Fund (UNFPA) http://www.unfpa.org/

U.S. Agency for International Development http://www.info.usaid.gov/

U.S. Department of State http://www.state.gov/

World Bank http://www.worldbank.org/

World Bank HIPC website http://www.worldbank.org/hipc/

Appendix -- Detailed Foreign Operations Accounts

Table 8. Foreign Operations Appropriations: DiscretionaryBudget Authority (millions of dollars)

* NOTE: Pursuant to the Consolidated Appropriations Act, FY2001 ( H.R. 4577 ), signed into law on Dec. 21, 2000, most FY2001 appropriation bills, including ForeignOperations, are reduced by 0.22%. For Foreign Operations, there will be a cut of about $33million from the $14.897 billion enacted level.

a. FY2000 enacted includes $1.1 billion in supplemental FY2000 Foreign Operations funds approved in P.L. 106-246 ( H.R. 4425 ).

b. The account structure for development aid differs among versions of the bill. This table showsa consistent and comparable account structure based on the FY2001 conference agreement. Forthe Administration's request, this means adding amounts to development aid for theInter-American and African Development Foundations, GAVI, and UNICEF, which arerequested in other accounts. For the Senate it means the addition of $110 million for UNICEFwhich S. 2522 funded under the International Organizations account in title IV.

c. For FY2001, the Administration requested a separate account under development aid for Africa (the Development Fund for Africa, or DFA). Africa aid is also proposed within the ChildSurvival account. The total amount requested for Africa -- DFA plus Africa/Child Survival-- is $837 million. This compares to $738 million appropriated for Africa in FY2000 withinthe Child Survival and Development Assistance Fund accounts.

d. Initially requested and/or approved by the House or Senate as an FY2000 emergencysupplemental appropriation. Included in Title VI of P.L. 106-429 as an emergency FY2001appropriation.

e. Transition Initiative funds included in Disaster Assistance account for FY2000, FY2001 request,and Senate FY2001 bill. Approved by the House and enacted for FY2001 as a separateaccount.

f. Congress approved for FY2000 a one-time supplemental ESF ($450 million) and FMF ($1.375billion) package supporting the Wye River/Middle East peace accord with aid for Israel, Jordan,and the Palestinians.

g. The Administration request and Senate bill included the Ireland Fund as part of the EconomicSupport Fund.

h. FY2000 supplemental enacted in P.L. 106-246 . The President's FY2001 request included $256million for Plan Colombia. Congress incorporated portions of the follow-on $256 millionFY2001 Plan Colombia proposal in the FY2000 supplemental. Because additional PlanColombia funding had already been accommodated and was not part of the final FY2001debate, the $256 million has been removed from the President's FY2001 request.

i. IFAD was funded in FY2000, FY2001 request and the Senate bill out of development assistanceand international organizations and programs accounts. The House and FY2001 enacted billsestablished IFAD as a separate account.

j. For comparative purposes and to conform to the account structure enacted for FY2000 andFY2001, UNICEF funds ($110 million) have been deducted here and added in the developmentaid subtotal in title II. The Administration's $50 million FY2001 request for GAVI has alsobeen shifted from here to title II, as enacted.

k. Pursuant to sequestration requirements in P.L. 106-113 , the amounts for FY2000 are reduced by$19 million.