Foreign Affairs, Defense, and Trade: Key Issues for the 108th Congress
Released: 2003-01-03T00:00:00

U.S. Foreign, Security, and Trade Policy in a New Era

[author name scrubbed], Specialist in International Relations ([phone number scrubbed])

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

In 2003, the 108th Congress is expected to face early challenges in foreign, defense and trade policy. As the global campaign against terrorism continues and a possible war with Iraq looms,Congress must complete action on the FY2003 appropriations bills and begin consideration of thebudget for FY2004. Congressional actions are likely to reflect the reality that the September 11,2001, terrorist attacks on the United States (hereafter referred to as 9/11) have, in some fundamentalways, changed America and the way it looks at the world. For many, 9/11 destroyed the illusion thatthe United States is invulnerable to attack from a determined enemy. The Administration andCongress are shifting U.S. policy and resources accordingly.

The new priorities appear to include the following: First , in order to diminish U.S. vulnerabilities to attack that were exposed by 9/11, a whole new structure for "homeland security"is being built. Second , the United States and a coalition of countries are continuing a worldwidecampaign to destroy Al Qaeda and other terrorist organizations that target U.S. citizens and facilities.While the initial phase of removing the Taliban government and destroying Al Qaeda bases inAfghanistan was successful, the effort to defeat the terrorists is by no means finished. Theintelligence community believes that Al Qaeda is regrouping in Pakistan and elsewhere. Many keyleaders have not been captured or killed and the organization is believed to be capable of mountingnew threats. Third , the United States is intensifying its efforts to remove what the Administrationand many in Congress consider the related threat of weapons of mass destruction (WMD) in thehands of "rogue" governments. The concern is that they might be tempted to use such weaponsagainst the United States and its allies or to supply them to terrorist organizations. The U.S.showdown with Iraq is the main focus at present, but President Bush has identified North Korea andIran, as well as Iraq, as forming an "axis of evil." In October, 2002, North Korean leaders admittedthat they have an ongoing nuclear weapons program in violation of international agreements. Sincethen, they appear to be reactivating nuclear installations shut down under a 1994 agreement and haveexpelled International Atomic Energy Agency inspectors, threatening a full-scale international crisis.

While the world rallied in support of U.S. actions after 9/11, the Administration and Congress must also contend with the fact that many countries are becoming increasingly wary and evenalarmed about how unconstrained U.S. military power might be used and the direction of U.S.policy. Some concern has been present ever since the United States became the sole superpower ina less predictable world, in contrast to the U.S.-Soviet balance of power which existed for half acentury. However, worries seem to have been heightened by the perceived U.S. shift of focus fromthe war against Al Qaeda to Iraq and the "axis of evil"and by the U.S. assertion of a doctrine ofpreemption.

Other countries still seek and welcome U.S. leadership on global issues, but they increasingly complain that the United States is deciding and acting on its own and pursuing narrow self-interests. They see the Administration as consulting partners only after decisions are made, when theirassistance is needed, and without taking their views into account. Such complaints are even voicedby close U.S. allies in Europe and Asia who wonder whether the U.S. is downgrading long-standingalliances as it pursues short-term "coalitions of the willing." International grievances about U.S.unilateralism include a litany of complaints about specific U.S. policies, such as its opposition to theInternational Criminal Court, rejection of environmental agreements like the Kyoto Protocol, andits withdrawal from the Anti-Ballistic Missile Treaty. Some urge the Administration to seriouslyaddress allied differences on these issues; others see U.S. positions as correct and view some of theprotestations as hypocritical and self-centered.

Congress faces other new issues and challenges that are in some ways related. As it deliberates and votes on accepting seven new members into NATO, the 108th Congress may reexamine the rolethat U.S. alliances play in the new circumstances. There is concern among some observers that ifU.S.-allied differences continue to mount, they could begin to erode the foundations of relations. Since the end of the Cold War, there are fewer clear and present dangers that absolutely necessitateformal alliances. Increasingly, voices can be heard in the United States, Europe, Japan, South Korea,and elsewhere that question the need for them. Some in other countries are beginning to see closeassociation with U.S. policy as making them more vulnerable to terrorist or WMD threats. On theU.S. side, some go-it-alone advocates see allies primarily as an impediment to U.S. freedom ofaction, while not contributing much to U.S. strength, especially given that the gap in their militarycapabilities and spending has continued to widen. At present these seem to be minority views. Others would probably still argue that U.S. policy should continue to define U.S. interests in termsof broader shared allied interests. There is concern that the current U.S. preponderance, if not usedin a multilateral way, might be difficult to sustain and could even hasten the emergence of competingpower centers or coalitions. Many would argue that strong alliances are still among the greatest U.S.assets and sources of long-term U.S. political, economic, and military strength.

Congress faces issues concerning continuing U.S. assistance and engagement in Afghanistan, Bosnia, Kosovo, and other recent conflict areas and may also need to prepare for a possiblelong-term and costly military presence in Iraq. This again raises for Congress the controversialquestion of "nation-building" and the appropriate U.S. role in post-conflict peacekeeping andreconstruction efforts. Many argue for leaving such efforts principally to other countries. At present,the United States is drawing down its forces in the Balkans. However, some experts argue that itwould not serve U.S. interests or the prospects for stability in these countries, if the U.S. were towithdraw completely.

Congress will likely review U.S. foreign aid priorities after 9/11 and take up the President's large new foreign aid initiative, the Millennium Challenge Account, which would substantiallyincrease foreign assistance to developing countries with a record of good performance in key areas. The initiative may derive at least in part out of recognition that poverty makes countries breedinggrounds for terrorism and other ills, such as the spread of HIV/AIDS and other infectious diseases. It is believed to be a root cause of strife and instability in many parts of the world.

At the same time, other challenges remain on the congressional agenda. These include oversight of U.S. foreign policy toward regions and countries of the world, including rising powerssuch as China and major countries undergoing significant transition such as Russia. Congress islikely to continue to focus considerable attention and resources to fighting HIV/AIDS and othercommunicable diseases, especially in Africa and Asia. Transnational problems such as internationalcrime, drugs, environmental problems, and human rights concerns remain important congressionalconcerns.

The global economy has profoundly changed international relations and the ability of governments to control developments even within national borders. International developmentsimpact on the domestic policy as never before. The benefits of globalization are considered farreaching, spurring world productivity, economic growth, and access to information. Along with thebenefits come significant new challenges that may require further congressional attention.Globalization brings economic dislocations in some areas. Financial uncertainties threaten differentregions. In the trade area, the 108th Congress will likely face decisions on approving one or morefree trade agreements and monitoring the negotiations on others which the Bush Administration hasinitiated or proposed. The negotiations include bilateral, regional, and multilateral trade liberalizingagreements.

Many believe that strong U.S. leadership in a multilateral framework will be necessary to find cooperative solutions to world problems. Others remain suspicious of international organizations andreluctant to enter into agreements that they believe would cede a degree of U.S. sovereignty to them.

The 108th Congress will confront underlying ambiguity, controversy, and uncertainty regarding the proper directions and priorities for U.S. defense policy when it opens in early 2003-a hugechange from the degree of underlying consensus which marked the opening of the 107th Congressin early 2001. Before the attacks of 9/11, U.S. strategic priorities and military contingency planningwere centered almost exclusively around preparation for possible hostilities with threateningnation-states. Since 9/11, the Department of Defense (DOD) has been waging a war of episodicintensity against active terrorist and terrorist-related forces throughout the world; since early 2002,it has been preparing for a war against Iraq, if diplomatic efforts fail to eliminate any weapons ofmass destruction it may possess.

At the same time, Secretary of Defense Rumsfeld has been vigorously propounding the underlying assumptions of the technology-driven "Revolution in Military Affairs (RMA)," and,accordingly, emphasizing lightness, mobility, technological sophistication, and hardware overfirepower, sustainability, size of the force, and quantity of weapons and units. He has done this overvarying degrees of doubt and opposition from within and without the military services and theirsenior uniformed leadership, the Congress, and nongovernmental commentators and analysts ondefense issues.

The Administration appears to have decided to fight a major war with Iraq if necessary; continue the RMA-driven modernization of the armed forces; and maintain the existing level ofeffort in the war against terrorism centered in and around Afghanistan-without greatly enlarging thesize of the active duty armed forces. The Administration appears to have tacitly decided, so far, toprosecute the current anti-terrorism operations, and possibly the imminent ones against Iraq, withinthe constraints of existing active and reserve military force structure, weapons and equipmentinventory, and personnel strengths. It is not clear how long this level of military effort can besustained without requiring a substantially larger active duty force, and much greater levels ofprocurement spending, so as to avoid gross unreadiness in those forces not actually deployed to partsof the world where hostilities are taking place.

In the background are issues of defense strategy and resource allocation which the terrorism war and related matters have temporarily crowded off of literal and virtual front pages. It was going tobe difficult enough to finance what the Administration regarded as minimally necessary increasesin peacetime defense spending out of then predicted budget surpluses. When hostilities cease, orgreatly diminish in intensity, how will crucial modernization and readiness programs be funded nowthat deficits are back? Are national missile defense (NMD) systems technically feasible, and, if so,are they important enough to command a major part of a constrained defense budget at the expenseof conventional weapons research and development and procurement? How should the United Statessize its conventional forces in an era where the previous benchmarks of "2 ï¿½ wars," "1 ï¿½ wars,""two nearly-simultaneous major theater wars [MTWs]," and/or "winning one MTW and holding inanother" all appear to be sterile remnants of the pre-9/11 era?

Finally, the Administration's stated willingness to "exercise our right of self-defense by acting preemptively" against terrorism, and against either transnational terrorists or nation-states that appearto be preparing to attack the United States with WMD, may have military as well as politicalimplications. Are U.S. military forces, which are almost 40% smaller than they were at the heightof the Cold War in the late 1980s, capable of executing a strategy which could demand morelong-range power projection capability, intelligence collection and evaluation assets, and specialoperations forces than the present force structure? In short, the 108th Congress will be confrontingdefense issues in an atmosphere of uncertainty that has not existed since the collapse of the SovietUnion and the Warsaw Pact a dozen years ago.

The War On Terrorism

International Terrorism

Rensselaer Lee, Consultant in International Affairs ([phone number scrubbed])

[author name scrubbed], Specialist in International Relations ([phone number scrubbed])

The events of September 11, 2001, underscored the significance of international terrorism as a first-order threat to U.S. national security and to U.S. interests at home and abroad. SinceSeptember 11, important steps have been taken by Congress and by the Bush Administration toconfront that threat. Inevitably, however, questions of costs and priorities arise in the conduct ofU.S. counterterrorism policy and Congress will be called upon to address these issues both in thebudgetary process and in specific legislation.

A fundamental and vital issue concerns the allocation of resources between the homeland security and national security aspects of policy: it may be asked, for example, how much emphasisshould be placed on forward defense - striking at Al Qaeda and its affiliates in distant lands, shuttingdown foreign sanctuaries and training camps, cutting terrorists' financial lifelines, and protectinginsecure stockpiles of nuclear materials and weapons - and how much on protecting the U.S. homeland from terrorist attacks. In broad organizational terms, this relates to funding of newDepartment of Homeland Security's activities versus those of the foreign operations of the Defense,State, Energy and Treasury Departments, the FBI, and the CIA. A second major issue concerns thegeneral scope of the Administration's counterterror effort. A question is whether the effort hereshould target terrorist groups widely, including groups with local agendas that do not necessarilysingle out Americans for attack, or whether it should focus on Al Qaeda, which many observers seeas the most immediate foreign threat to U.S. security. A related question concerns the potentialeffects of military intervention in Iraq: would war in Iraq create a backlash in the Islamic world, fuelterrorism or divert significant attention and resources from the international fight against Al Qaeda,as some Administration critics suggest? Or is it a necessary step to prevent Iraq from developingweapons of mass destruction that could fall into the hands of terrorists?

Congressional oversight can play a significant role in evaluating the effectiveness of different policy tools employed in combating international terrorism, as well as their potential diplomatic orpolitical consequences. For example, in given situations, covert action to infiltrate and disruptterrorist leaderships might produce better results and less collateral damage than military strikesagainst suspected terrorist concentrations; addressing possible changes to constraints or guidelinesthat affect activities such as recruitment of informants thus could become a legislative priority. Ithas been argued that applications of certain measures, such as ones calculated to disrupt terroristfinancing, are perceived as broadly anti-Islamic and project a negative U.S. image abroad; hence,ways of minimizing such external costs may be explored. An increased focus on "nation-building"strategies to address the economic and political preconditions of terrorism also might be consideredin crafting an overall counterterrorism policy. Whether the different instruments selected aremutually coherent, and whether in certain situations the risks of using them exceed the expectedrewards are important concerns for Congress and the Administration.

Threat from Al Qaeda and Other Terrorist Groups

[author name scrubbed], Specialist in Middle Eastern Affairs ([phone number scrubbed])

Congress and the Bush Administration are working to ensure that Al Qaeda or other terrorist groups are not able to conduct terrorist attacks in the United States or against U.S. interests abroadon the scale of the September 11, 2001 attacks. There is widespread agreement that the U.S.-led warin Afghanistan has significantly weakened Al Qaeda by denying it a central base, but there arediffering opinions within and outside the Administration over whether Al Qaeda could still conductanother catastrophic attack. Two terrorist attacks in October 2002 - one against an oil tanker off thecoast of Yemen and another in Bali, Indonesia, that killed nearly 200, both of which were allegedlyconducted by Al Qaeda supporters or affiliates - have raised U.S. concerns that Al Qaeda could beregrouping and gearing up for new major attacks. Investigators are attempting to determine whetherattacks on November 28, 2002, against an Israeli-owned hotel (18 killed) and an Israeli passengeraircraft in Kenya (unsuccessful) were the work of Al Qaeda.

An audio-taped threat by Al Qaeda founder Osama bin Laden, released in November 2002, and believed by U.S. officials to be authentic, has apparently confirmed that he is still alive. CIADirector George Tenet told Congress on October 17, 2002, that the recent attacks and threats indicatean Al Qaeda "threat environment" comparable to that which existed prior to the attacks of September11, 2001. At the same time, the Administration has confirmed some recent major arrests of allegedAl Qaeda operatives, including the capture in November 2002 of Al Qaeda's key organizer for thePersian Gulf region. Additional arrests on this scale, over time, may weaken Al Qaeda to the pointwhere it is no longer a significant threat.

U.S. officials say that the effort against Al Qaeda is worldwide and multifaceted, involving diplomatic and financial, as well as military actions. Much of the current U.S. effort is intended tocapture Al Qaeda leadership and operatives worldwide, although U.S. military efforts withinAfghanistan are now focused primarily on shoring up the fledgling government of Afghanistan andpreventing that country's re-emergence as a base for terrorist groups. Further options could includegreater use of armed unmanned U.S. aircraft, such as the Predator that was used to strike a senior AlQaeda operative in Yemen in early November, 2002. Press reports suggest that U.S. intelligence isstepping up activities in the tribal areas of western Pakistan in an effort to find Al Qaeda founderOsama bin Laden and other leaders. Other press reports say the United States might confront SaudiArabia directly in an effort to persuade it to crack down on financial donations by Saudis to Islamiccharities that might, knowingly or unknowingly, be supplying funds to terrorists.

Congress is taking an active role in overseeing the U.S. campaign against Al Qaeda and other terrorist movements. Several hearings have already been held since the September 11 attacks,including those on the warning signs apparently available to intelligence and law enforcement priorto the September 11 attacks. Congress will also likely review Administration attempts to shore upthe anti-terrorism coalition and might provide benefits to key coalition partners, including U.S.foreign assistance and approval of major military sales. Congress might also decide on whether ornot to impose economic or other sanctions against countries deemed uncooperative.

Intelligence Issues

Richard A. Best, Jr., Specialist in National Defense ([phone number scrubbed])

The war on terrorism places significant demands on intelligence agencies. National collection systems designed to provide data about foreign missile silos and large military installations may notbe the best platforms for acquiring information on the identities and plottings of terrorists groups. New approaches may be needed; there will undoubtedly be renewed emphasis on human intelligenceand the need for officers with varied language skills and awareness of different cultures. The statutesand regulations that govern the collection, analysis, and dissemination of information by intelligenceand law enforcement agencies were not written to support the counterterrorist efforts that are nowseen by many as necessary; some changes have been made since September 11, 2001 and Congressmay seek to enact further modifications. There will also be complex issues regarding the appropriatebalance between security and civil liberties as intelligence and law enforcement agencies work moreclosely together. Intelligence for counterterrorism has already had significant budgetary implicationsand may require additional resources or possibly the transfer of funds from other intelligence efforts.

Military Responses

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

Afghanistan. Large-scale military operations have ended in Afghanistan. Small unit operations continue to search for remainingTaliban/Al-Qaeda supporters and their arms caches. The roughly 8,000 U.S. troops and 4,000 troopsof the International Security Assistance Force (ISAF) still encounter sporadic firefights and shellingfrom dissident Afghan forces. The major decision confronting Administration officials andcongressional oversight committees is what role the U.S. military should play, and to what extentit should become involved, in the reconstruction of Afghanistan. Most observers agree thatinternational troops must remain in Afghanistan for the foreseeable future, and that the U.S. militaryshould play a leading role. The central government remains weak and warlords of dubiousallegiances dominate the countryside. The Bush Administration had hoped to turn over thereconstructive period to international peacekeepers and civilian agencies; however, the ISAF willnot operate outside of the capital Kabul, and it has been left to U.S. forces to intercede and mediateinternecine Afghan disputes. In a policy shift, Department of Defense (DOD) officials announcedin late 2002 that U.S. Central Command will begin to send teams of combat soldiers, civil affairsspecialists, and Afghan central government troops to regional centers to stabilize out-lying areas andfacilitate reconstruction projects. Details of the size and scope of these operations have not beenreleased. Though no official estimates of how long U.S. forces will remain in Afghanistan have beenmade, it would appear that the challenges of reconstruction in Afghanistan are even more difficultthan those confronted in the Balkans, where U.S. troops have been stationed for a decade.

Philippines, Gruzia (Georgia), and Yemen. In 2002, DOD began training missions to these countries to assist in combating terrorists in theirremoter regions. The Philippine mission involved about 1,000 U.S. troops and ended in July withonly the partial disruption of the Abu Sayyaf terrorist group. Though there was noticeable oppositionto the U.S. presence among some of the Filipino population, the United States and the Philippineshave signed a Mutual Logistics Support Agreement, and there is continuing speculation U.S. forceswill return in January 2003. In Gruzia (Georgia), the training program will involve about 150 U.S.instructors to improve the Gruzian military's ability to deal with the rebel forces from Chechnya whoare using the Pankisi Gorge as a refuge. Reported links between the Chechen rebels and Al Qaedahave led U.S. officials to consider this operation part of the war on terrorism. In Yemen, another 150U.S. instructors are working to improve the government's anti-terrorism capabilities, and areassisting in the search for Al-Qaeda operatives in the northern tribal areas of the country. Thoughrelatively inexpensive, these activities do place a heavy burden upon the limited personnel resourcesof the Special Operations Command which has been supplying the instructors. If such efforts arecontinued or expanded, additional resources and higher personnel ceilings may be required. If warwith Iraq occurs, these missions may be curtailed.

Covert Operations. Press reports indicate that Secretary Rumsfeld intends to increase DOD's covert operations against terrorists worldwide. Thisis a field which has belonged primarily to the Central Intelligence Agency, and increasingly to itsparamilitary personnel, as evidenced by the November, 2002 missile attack on Al-Qaeda operativesin Yemen. The extent to which increased DOD activity in this area would be complementary orcompetitive to CIA operations remains to be seen.

Budgetary Aspects of the War on Terrorism

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

[author name scrubbed], Consultant in National Defense ([phone number scrubbed])

Since the September 11, 2001 terrorist attacks, the Department of Defense (DOD) has received $30 billion in supplemental appropriations for prosecuting the war in Afghanistan, mobilizingreserves to enhance protection at military installations, increasing intelligence and surveillanceactivities, maintaining combat air patrols over U.S. cities in the months following the attacks,accelerating munitions production, and rebuilding the Pentagon. Of the $30 billion total, about $13billion funded military operations in Afghanistan and related areas. The FY2003 DefenseAppropriations Act ( P.L. 107-248 ) provides $9 billion more for activities and programs associatedwith the war on terrorism, including additional funds for munitions, unmanned aerial vehicles(UAVs), intelligence and communications systems, reserve mobilization costs, and special pay forpersonnel involved in military operations.

DOD requested another $10 billion in the FY2003 defense appropriations bill as a contingency fund for unspecified future military operations. Although the funds were authorized in the FY2003Defense Authorization Act ( P.L. 107-314 ), the appropriations committees did not provide the fundsin the regular FY2003 Defense Appropriations Act ( P.L. 107-248 ), and they did not take up separatelegislation to provide funding.

DOD appears to be financing ongoing costs in Afghanistan as well as the cost of mobilizing forces and deploying equipment for a potential war with Iraq using either supplementalappropriations or regular FY2003 funding. The Administration is expected to request supplementalappropriations to cover those additional expenses either in February, when the FY2004 budget issubmitted, or shortly thereafter. (See the section of this report entitled "Estimates of the Cost of aPotential War with Iraq" for further information.)

Reconstruction of Afghanistan

[author name scrubbed], Analyst in Foreign Affairs ([phone number scrubbed])

The 108th Congress will face funding and oversight issues concerning transitional and reconstruction efforts in Afghanistan, even as U.S. and allied forces continue the hunt for Al Qaedaforces and Taliban leaders. U.S. and international efforts in Afghanistan focus on three areas: first,enhancing security, using the International Security Assistance Force (ISAF), and the future AfghanNational Army and police force; second, developing a political framework for governance andreintegration in the international community; and third, creating an economic reconstruction strategy.

The most serious challenge in Afghanistan today is the lack of security due partly to the fact that former commanders maintain control over their own areas and continue fighting with their rivals. A recent initiative by the Pentagon would expand the role of the U.S. military in Afghanistan tosupport local security and reconstruction. This marks a departure from relying entirely on thedevelopment of an Afghan national army or expansion of the ISAF for security, and engages U.S.forces beyond military action to oust the Taliban and Al Qaeda. Although U.S. soldiers have beeninvolved in a number of small reconstruction projects in Afghanistan, they will now apparently takea more robust approach to the provision of security and reconstruction assistance in areas outsideKabul.

Congress will continue to actively guide developments in Afghanistan through appropriations and oversight. According to the U.S. Agency for International Development (USAID), the U.S.government provided $184.3 million in FY2001, and over $530 million in FY2002, in humanitarianand reconstruction assistance to Afghanistan. No figures for Afghan assistance were provided in theAdministration's budget request for FY2003, although the Administration has said it will spendabout $300 million in FY2003.

The Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 ), which authorizes an additional $3.3 billion for Afghanistan over four years was signed into law on December 4, 2002. Included is$2 billion for humanitarian, reconstruction, and enterprise fund assistance through FY2006; $300million worth of available defense articles and equipment from U.S. military stocks for Afghanistanand other countries and organizations participating in Afghan security; and an additional $1 billionover two years to support ISAF.

With regard to oversight, Congress is likely to maintain an active interest in burdensharing. So far, the international community has recognized that large amounts of aid and resources will berequired in the reconstruction effort. In addition, many observers believe a long-term commitmentwill be necessary if a stable, democratic Afghanistan is to emerge and not fall prey to the twin evilsof drugs and terrorism. While the international donors conference held in Tokyo, Japan in January,2002, generated large aid commitments for reconstruction in Afghanistan, it also produced costestimates of more than $15-$30 billion over the next decade. A total of $1.8 billion was pledged for2002, although some pledges have not yet been fulfilled. There have been some reports that Afghanofficials have complained about the slow pace at which pledged funds were being paid. Others arguethat the problem is due to a lack of absorptive capacity in Afghanistan. Furthermore, the way inwhich funds are distributed - be it multilaterally through U.N. agencies or bilaterally with fundssupporting international organizations and NGOs directly - appears also to be contributing to thedelay.

Possible War with Iraq

Introduction

[author name scrubbed], Specialist in Middle Eastern Affairs ([phone number scrubbed])

The Bush Administration has identified the regime of Saddam Hussein in Iraq as a grave potential threat to the United States. The Administration asserts that Iraq is in defiance of 16 U.N.Security Council resolutions that, among other requirements, mandate that Iraq fully declare andeliminate its weapons of mass destruction (WMD) programs. President Bush has stated that Iraqmust fully cooperate with a new U.N. disarmament effort, or the United States will lead a coalitionto disarm Iraq, presumably through a major U.S.-led military offensive.

The statements by President Bush, coupled with reports of a slow but steady U.S. military buildup in the Persian Gulf, clearly indicate that war against Iraq is likely if Iraq does not fullycooperate with a new U.N. disarmament effort. That effort is being conducted under the mandateof a U.N. Security Council Resolution, 1441, adopted unanimously on November 8, 2002. Theresolution requires a complete declaration by Iraq of all its WMD, and gives U.N. weaponsinspectors new authorities to conduct surprise, unfettered inspections everywhere in Iraq. Theinspections began November 27, 2002, and the inspection organization, UNMOVIC (U.N.Monitoring, Verification, and Inspection Commission) has said it would report to the SecurityCouncil by January 27, 2003 on its findings, as required by the resolution. Many observers believethat the Security Council will be split in its evaluation of the new inspections regime. The UnitedStates and Britain are likely to point to any hint of Iraqi non-cooperation as evidence of Iraq'sintention to hide WMD capabilities. Their past positions in Council debates on Iraq suggest thatFrance, Russia, and China are likely to have less concern about individual Iraqi violations as longas Iraq, for the most part, is cooperating with the new inspections. The outcome of such Councildeliberations could determine whether or not the United Nations authorizes military action againstIraq to enforce its inspection mandates.

The Bush Administration's decision to confront Iraq under a U.N. umbrella has led the Administration to mute its prior declarations that the goal of U.S. policy is to change Iraq's regime,but U.S. officials say regime change remains official U.S. policy and the ultimate U.S. goal, whetheror not Saddam Hussein cooperates with the new inspections effort. Press reports in October, 2002,said that the Administration is recruiting an Iraqi opposition force by using drawdown authoritiesand monies provided in the Iraq Liberation Act ( P.L. 105-338 , October 31, 1998). Such a forcecould support a U.S. attack or work on its own to destabilize Saddam Hussein, whether or not thereis a war against Iraq.

On October 16, 2002, President Bush signed into law H.J.Res. 114 ( P.L. 107-243 ), authorizing the President to use U.S. armed forces to protect U.S. national security and enforceapplicable U.N. resolutions on Iraq. Congress has held several hearings on the possibility of U.S.war against Iraq and is expected to hold further hearings on the progress of U.N. inspections and thecontinuing threat from Iraq. Congress might take an active role in any international debate on Iraqicompliance, as it did in H.J.Res. 114 and a 1998 joint resolution ( S.J.Res. 54 , P.L. 105-235 , August 14, 1998), which stated that Iraq was in material breach of its obligationsunder applicable U.N. resolutions.

Military Options

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

The Department of Defense has officially released no information concerning war planning or preparations against Iraq. There have been, however, significant news leaks which provide someinsights. News reports have indicated that the military options under discussion vary significantlyin their assumptions regarding Iraq military capabilities today, the usefulness of Iraqi oppositiongroups, the attitude of other governments in the region, and the U.S. military resources that wouldbe required.

A possible "heavy" option would involve 250,000 or more troops, and would combine an air offensive with up to four U.S. armored and mechanized divisions. This option is greatly dependentupon the cooperation of other nations in the region for substantial staging areas/airbases and couldrequire months to deploy the necessary forces. A possible "lite" option would entail extensive useof special operations forces in cooperation with indigenous Iraqi opposition forces, coupled with anair offensive to destroy Hussein's most reliable Republican Guard units, command & control centers,and WMD capabilities. This approach assumes that the regular Iraqi army will prove unreliable, andmay even join opposition forces once it is clear that defeat is imminent. With both "heavy" and "lite"options reportedly having been set aside for a variety of reasons, news reports indicate that the planof choice appears to be a blend of the two. Involving perhaps 80,000 U.S. troops, this option appearsto focus not on the size of the U.S. force, but rather upon the diversity of units attacking, and veryclose coordination of air and ground attacks. Indigenous forces would not necessarily play a largerole, though some effort likely would be made through Central Intelligence Agency teams andspecial operations units to gain their cooperation. Particular efforts may be made to isolate andneutralize key Iraqi leadership. Regardless of the option chosen, there are concerns that war withIraq will stretch U.S. military resources given other commitments, including Afghanistan and theworldwide war on terrorism. Special operations forces and other high demand assets may beespecially overtaxed.

Unless there are shifts in the international political scene, it does not appear that U.S. military action against Iraq will feature a coalition similar to that formed for Desert Storm in 1991, and thiscould constrain significantly the options open to U.S. planners. The Persian Gulf states' cooperationwould be particularly vital given the extensive air force facilities and prepositioned equipment there,as would the cooperation of Turkey along Iraq's northern borders.

Iraqi armed forces are significantly degraded from their 1991 levels; however, the possibility of strong Republican Guard resistance in urban areas and Iraq's possible use of chemical and/orbiological weapons, in theater or strategically, present particularly difficult challenges to U.S.planners. Ultimately, the psychological reaction of the Iraqi leadership, armed forces, and civilianpopulation will be major factors in determining the course of any war.

Estimates of the Cost of a Potential War with Iraq

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

[author name scrubbed], Consultant in National Defense ([phone number scrubbed])

The Department of Defense has not provided any estimates of the potential costs of a war with Iraq. The cost of the ongoing mobilization of military forces and equipment for a conflict in Iraq arepresumably being funded using regular FY2003 appropriations with the expectation that a FY2003supplemental would reimburse those accounts.

In September 2002, the Congressional Budget Office prepared estimates of the costs of two illustrative campaigns - a heavy ground option involving 370,000 troops deployed to the region anda heavy air option involving 270,000 troops. Based on CBO's assumptions, the cost of a war thatlasted three months would be between $32 billion and $47 billion. Occupation costs for a yearwould total between $12 billion and $48 billion more. (Congressional Budget Office, Letter toSenator Kent Conrad, Chair, Senate Budget Committee, and Congressman John M. Spratt, Jr.,Ranking Member, House Budget Committee, with attachment "Estimated Costs of a PotentialConflict with Iraq," September 30, 2002. Available at http://www.cbo.gov )

Earlier the Democratic staff of the House Budget Committee prepared an estimate based on costs of the Persian Gulf War of 1991. (House Budget Committee, Democratic Caucus, "Assessingthe Cost of Military Action Against Iraq: Using Desert Shield/Desert Storm as a basis for Estimates,"September 23, 2002. http://www.house.gov/budget_democrats/analyses/spending/iraqi_cost_report.pdf ). Its estimatesranged from $31 billion for a conflict lasting 30 days with 125,000 troops to $60 billion for a conflictlasting 60 days with 250,000 troops. The estimate also calculated that interest costs of increasing thedeficit to finance the war would total an additional $17 to $33 billion over 10 years. The study didnot address occupation or reconstruction costs. With interest included, the total cost for a 60-daywar using 250,000 troops could be about $93 billion over 10 years, near the low-end of the $100billion to $200 billion estimate made by the President's former economic adviser, Lawrence Lindsey. On December 30, 2002, however, OMB Director Mitch Daniels downplayed the Lindsey estimate,suggesting that the cost of a war with Iraq could be about $50 billion to $60 billion.

The Congressional Budget Office and the House Budget Committee Democratic staff estimated only the direct budgetary effects of a war. Neither considered possible economic consequences,which could, in turn, affect federal revenues and outlays indirectly. In November, William Nordhausof Yale University prepared a study that estimated the total economic costs, including the effects ofa possible recession triggered by a protracted war, the destruction of Iraqi oil fields, and the cost ofa lengthy occupation. (William D. Nordhaus, "Iraq: The Economic Consequences of War," NewYork Review of Books , December 5, 2002) Using the CBO and House Budget Committee staffestimates as a starting point, he calculated that total costs could range from $120 billion onoptimistic assumptions to $1.6 trillion on unfavorable assumptions.

Possible Post War Implications

Jeremy Sharp, Analyst in Middle Eastern Affairs ([phone number scrubbed])

A war in Iraq could have major political and diplomatic repercussions for U.S. interests in the Middle East region, namely maintaining the position of an "honest broker" in the Arab-Israeli peaceprocess, securing the support of key Arab countries in the war on terrorism, and bolstering the BushAdministration's efforts to improve the U.S. image in the Arab world. The conduct of any U.S.military campaign and the nature of a new Iraqi government would be the two most decisive factorsin influencing, either positively or negatively, U.S. interests in the Middle East.

If the United States is forced to fight a slow and largely urban war, with heavy Iraqi civilian casualties and a lengthy period of lawlessness and instability, Arab regimes such as Egypt, Jordan,and Saudi Arabia could face moderate to severe levels of civil unrest. These regimes might chooseto restrict media coverage of the war and its aftermath, ban public demonstrations, and arrestIslamists and other opponents. Although many analysts believe that these states have the capacityto control their populations and manage dissent, a sustained period of heightened repression couldengender sympathy for anti-U.S. views, which could erode U.S. efforts to improve regionalperceptions of the United States through public diplomacy. U.S. critics in the region might try toincite hostility toward the United States by drawing parallels between a U.S. occupation of Iraq andthe Israeli military occupation in parts of the West Bank and Gaza Strip. Refugee flows from Iraqcould add to regional instability.

If, however, the United States is able to force a regime change in Iraq without war, or through a short war with minimal civilian casualties, the image of the United States as a "liberator" couldgain more credibility in Iraq and more broadly in the Middle East. A new Iraqi regime could outlinea timetable for greater political freedoms in Iraq, strengthening U.S. efforts to promote democracyand human rights in the Middle East. Some observers argue that developments along these lineswould create a more favorable environment for a settlement of the Israeli-Palestinian conflict. Congress can play an active role in shaping the outcome through its oversight of a possible militarycampaign and rebuilding of Iraq.

Following a war or significant "regime change" in Iraq, the United States will likely seek to influence future internal political and economic developments in that country. Congress may beasked to provide funding for a range of foreign assistance programs that would facilitate U.S.long-range objectives in Iraq. The extent and cost of U.S. programs in Iraq would depend on thepost-war scenario. The Administration may ask Congress to appropriate new funds for refugeesand/or to support coalition partners in the Middle East, who may suffer economically in the eventof regional instability. Congress may also be asked to authorize a program of assistance specific toIraq along the lines of the FREEDOM Support Act of 1992 that authorized aid to the former SovietUnion or the Afghanistan Freedom Support Act of 2002. In considering aid levels, Congress willhave to weigh aid to Iraq against other aid priorities. Some suggest that Iraqi oil resources could beemployed to pay for any long-term development programs; this, of course, would be dependent onthe condition of oil production infrastructure at the end of the war. Others, as in the case of Kosovo,may demand that other donors, particularly those that did not participate in military operations, pickup the majority of costs for post-war activities. Such options would have to be weighed against theadvantages of U.S. control over programs that it itself funds and implements.

North Korean Crisis

[author name scrubbed], Specialist in Asian Affairs([phone number scrubbed])

North Korea's decision in late December, 2002 to restart nuclear installations at Yongbyon that were shut down under the U.S.-North Korean nuclear Agreed Framework of 1994 creates a majorarms control and foreign policy problem for the United States. North Korea's major motive appearsto be to escalate pressure on the Bush Administration to negotiate over Pyongyang's proposednon-aggression pact and/or a new nuclear agreement that would provide new U.S. benefits to NorthKorea. However, re-opening the Yongbyon facilities opens up a possible North Korean intent oroption to stage a "break out" of its nuclear program in 2003 and openly produce nuclear weapons.

The 1994 Agreed Framework obligated North Korea to suspend the operations of its nuclear facilities and allow the secure storage of 8,000 nuclear fuel rods removed from a nuclear reactor inMay, 1994. The United States, in turn, organized an international consortium, the Korean PeninsulaEnergy Development Organization (KEDO), which was to construct two light water nuclear reactors(LWRs) inside North Korea and provide North Korea with 500,000 tons of heavy oil annually untilthe construction of the first LWR was completed. Before North Korea received nuclear componentsfor the LWRs, it was to come into full compliance with its 1992 safeguards agreement with theInternational Atomic Energy Agency (IAEA). Except for the special status given to the Yongbyonfacilities by the Agreed Framework, the Agreed Framework specified that North Korea would abideby the IAEA safeguards agreement with regard to any other nuclear activities and abide by the 1991North Korea-South Korea denuclearization agreement, which specifically prohibited any NorthKorean nuclear program based on uranium enrichment. There reportedly is a "secret minute" to theAgreed Framework. Press reports have said that this secret minute prohibits North Korea fromconstructing any new nuclear facilities.

The Bush Administration speeded up the construction of the LWRs, which had fallen well behind the completion target date of 2003, but it also pressed North Korea to begin a three to fouryear process of complying with its obligations to the IAEA or face a suspension of the LWR project. After the September 11, 2001 terrorist attack, the Administration issued demands that North Koreadismantle its weapons of mass destruction, stop proliferating weapons to the Middle East and SouthAsia, and withdraw its heavy troop concentrations from the Korean demilitarized zone. Thesedemands stressed unilateral North Korean actions to meet U.S. concerns and contained no specificoffers of reciprocal U.S. actions. President Bush's declaration of North Korea as a member of an"axis of evil" began a series of demands to North Korea suggesting penalties if it did not meet U.S.concerns.

The Administration sent Assistant Secretary of State James Kelly to North Korea in early October, 2002, for the first substantive U.S.-North Korea negotiation since December, 2000. Kellypresented the North Koreans with U.S. evidence that North Korea was conducting a secret nuclearweapons program based on uranium enrichment. U.S. intelligence evidence of the secret programhad built up since 1998. The North Koreans surprised the Administration by admitting to theprogram and asserting that they had the right to possess nuclear weapons. The Kelly visit promptedthe Administration to formulate a policy of "containment and isolation" if North Korea did not endthe secret program. The policy consisted of (1) a refusal to negotiate any new nuclear agreementwith North Korea until North Korea ended the secret nuclear program and came into compliancewith the past agreements which it was violating; (2) an unwillingness to engage in any other type ofsustained dialogue with North Korea; (3) assembling an international coalition to pressure NorthKorea, the most important members being South Korea, China, Japan, and Russia; (4) imposing aninitial penalty on North Korea by suspending the shipments of heavy fuel oil to North Korea andwarning of a total termination of the Agreed Framework; and (5) warnings of future internationaleconomic sanctions.

The intensity of North Korea's counter-move in re-opening the Yongbyon facilities again took Administration officials by surprise, by their own admission. North Korea announced through itsofficial media and a letter of December 27, 2002, to the IAEA that it would restart its nuclear reactorand plutonium reprocessing plant that were in operation until 1994 and resume construction of twolarger reactors. The most dangerous follow-up North Korean move would be to move the 8,000stored fuel rods into the plutonium reprocessing plant for the production of nuclear weapons-gradeplutonium. According to estimates by nuclear experts and reportedly by U.S. intelligence agencies,if North Korea began to reprocess the fuel rods, it would take about four months to produce weaponsgrade plutonium and another one or two months to produce four to six atomic bombs. Such actionby North Korea - a nuclear breakout - would put considerable pressure on the BushAdministration's initial policy responses to the re-opening of the Yongbyon facilities.

The Administration's reaction to the re-opening of Yongbyon has been to repeatedly disavow any "military option" such as bombing Yongbyon and state that it is open to diplomatic contact withNorth Korea-but not negotiation of a new agreement. The Administration reportedly is consideringseeking cooperation from an international coalition in instituting economic sanctions against NorthKorea, possibly through the U.N. Security Council and interdicting North Korean shipments ofweapons to Middle East and South Asian countries. Such a strategy would aim at North Korea'sgreatest vulnerability - its already deteriorating economy. The option of economic sanctions,however, is encountering growing resistance from China, Russia, and South Korea. They supportthe general U.S. position on North Korea's nuclear policies, but they have criticized the idea ofeconomic sanctions and have called on the United States to engage in dialogue with North Korea. The South Korean position has come about as a result of growing South Korean public criticism ofthe 37,000 U.S. troops stationed in South Korea and the election in December, 2002, of apresidential candidate, Roh Moo-hyun, who ran on a platform critical of U.S. policies.

Congress approved the Administration's requests for money for KEDO operations from FY 1996 through FY 2002. Congress will take up the relevant foreign operations appropriations billfor FY 2003 in early 2003. In view of the new situation since the Kelly mission to Pyongyang,Congress will have an important decision-whether to continue to provide funds for heavy fuel oiland the operation of KEDO or to discontinue funding and thus add another step toward thetermination of the Agreed Framework.

Weapons of Mass Destruction and Missile Proliferation

[author name scrubbed],Specialist in National Defense ([phone number scrubbed])

Congress continues to confront several challenges related to weapons of mass destruction (WMD): how to defend against possible WMD attacks in light of the terrorist threat and how toprevent further proliferation of WMD capabilities globally and in the case of specific countries -most notably Russia, China, Iraq, Iran, North Korea, India and Pakistan. In addition tononproliferation regimes and treaties, bilateral agreements and export controls, the possibility ofpreemptively eliminating WMD capabilities has gained currency in the Bush Administration andelsewhere in the context of Iraq and the broader war on terrorism.

Since September 11, 2001, increased concerns about a nexus between WMD and terrorism has helped drive strategy and tactics for the war on terrorism. Key issues for the 108th Congress willinclude: a) does the threat of WMD use push us toward preemption? b) if so, does a policy ofpreemption increase the WMD threat to U.S. and allied forces? c) does the threat of preemptionundermine the existing regime of treaties and agreements or does it strengthen those regimes? Closer to home, preparations to defend against a possible WMD attack - for example, an initiativeto vaccinate critical workers against smallpox - will continue to present budgetary, health,infrastructure and homeland security concerns. Congress will continue to be involved in assessingand/or funding programs to enhance detection of WMD-related materials at home, and, possibly,abroad.

A key activity of Congress is expected to be the oversight of funding and programs designed to cut off terrorist access to WMD and WMD-related materials "at the source" - securing materialsat sites around the globe, particularly where terrorism and WMD capabilities intersect. First on thelist of potential suppliers are Russia and former Soviet republics. Since 1991, the United States hasprovided assistance to these states in securing and eliminating nuclear and other weapons of massdestruction through the Nunn-Lugar Cooperative Threat Reduction (CTR) Program. Among theissues that Congress may address when it reviews this program in the coming year are the total levelof funding for non-proliferation assistance to Russia, priority for specific projects, Russia's financialcommitment and cooperation in implementing these programs, and possible CTR-type assistanceto nations outside the former Soviet bloc. The Russian Debt Swap for Nonproliferation Act, whichcreated a new funding stream for nonproliferation programs in Russia, will be an area of oversightinterest.

The 108th Congress will likely face issues related to proliferation of WMD capabilities from Russia, China, and North Korea. In particular, sales of missiles and missile technologies from thesestates, particularly to such clients as Iran and Pakistan, will likely be closely watched, as well asdestabilizing missile deployments like short-range Chinese missiles facing Taiwan. If the AgreedFramework with North Korea fails, North Korea may resume missile testing. Other developmentsof potential interest include the recently signed International Code of Conduct Against BallisticMissile Proliferation, which seeks to complement the existing Missile Technology Control Regimethrough wider membership and incentives for nonproliferation; and potential sales of Arrow or othermissile defense systems to volatile regions like South Asia.

Concern about "secondary proliferation" - that is, states of proliferation concern that produce WMD for sale to other countries - could spark interest in new measures to capture the activities ofthose states outside nonproliferation regimes. Recent reports of Pakistan's provision ofenrichment-related technology to North Korea will raise questions. On the one hand, Pakistan'sassistance in the war on terrorism is considered by some to be important enough to offsetnonproliferation concerns about its own nuclear weapons, but assistance to a nation which theAdministration has characterized as part of an "axis of evil" may be viewed in a different light. TheBush Administration, if it waives the requirement to place sanctions on Pakistan under theSymington amendment to the Foreign Assistance Act (now section 101 of the Arms Export ControlAct), will need to inform Congress of that waiver.

North Korea presents proliferation challenges across the board. In particular, North Korea's admission in October, 2002, of a clandestine uranium enrichment program caused the BushAdministration to suspend heavy oil shipments to North Korea (a key U.S. obligation under theAgreed Framework) beginning in December, 2002. Administration officials indicated that theUnited States intended to terminate the Agreed Framework at that time. North Korea's actions toreactivate its nuclear facilities in late December, 2002, has further exacerbated the situation. The107th Congress continued to provide funding for implementation of the agreement, but the newCongress may review this funding, especially when it takes up the foreign operations appropriationslegislation for FY2003. The Administration continues to press North Korea to take steps towardending missile deployments and sales and its chemical and biological weapons programs.

Finally, the 107th Congress authorized President Bush to use military force against Iraq, in part to enforce Iraq's compliance with U.N. resolutions to eliminate its WMD programs. Given the sevenprevious years of inspections with ambiguous results (1991-1998), the 108th Congress may find itselfin an early debate over the conclusiveness of the inspection results. Further, if war appears to beinevitable, Congress will be keenly interested in how to protect our forces against the use of WMDand how to prevent the further dissemination of Iraq's WMD to terrorists or state sponsors ofterrorism.

Foreign Affairs

Introduction

Susan Epstein, Specialist in Foreign Affairs ([phone number scrubbed])

[author name scrubbed], Specialist in Foreign Affairs ([phone number scrubbed])

The first session of the 108th Congress will consider legislation for foreign policy authorization, as well as budgetary legislation, including the continuing resolution for FY2003 funding and FY2004international affairs appropriations. Every two years Congress is required, by law, to authorizespending for the Department of State, its foreign policy programs and personnel, or waive therequirement. Dovetailed with the biannual authorization legislation are the two annual foreignaffairs appropriations including: 1) Commerce, Justice, State and Related Agencies, and 2) ForeignOperations. Typically, these bills become vehicles for a full range of foreign relations-relatedmeasures. The Administration further plans to submit legislation authorizing a new foreign aidinitiative - the Millennium Challenge Account (see below) - early in the year.

Among the first items of legislative business expected in the new Congress is the enactment of the eleven FY2003 appropriation bills that stalled in 2002. Among these unfinished measures arethe two main foreign policy spending bills covering State Department programs and foreignassistance activities. Last year, the Commerce, Justice, State (CJS) appropriation was reported inthe Senate ( S. 2778 ) but received no action in the House. Senate and HouseAppropriation Committees each reported Foreign Operations bills ( S. 2779 and H.R. 5410 ) that recommended slightly higher amounts than the President requested forFY2003. Following discussions between the White House and congressional leaders since theNovember elections, it appears that there will be pressure, especially in the Senate, to pare backamounts proposed last year for both CJS and Foreign Operations in order to remain within thePresident's overall budget framework in FY2003. The Administration and Congress may seek theuse of supplemental appropriation bills for a more targeted funding approach. Congressional leadersreportedly hope to have the appropriation issues resolved by the end of January.

U.S. Foreign Aid and Development

Millennium Challenge Account. [[author name scrubbed],Specialist in Foreign Affairs ([phone number scrubbed])] Early in the new Congress, lawmakers will be asked by theAdministration to authorize and fund a new U.S. foreign aid initiative - the Millennium ChallengeAccount - announced by President Bush in March 2002. Despite strong records of achievement bysome developing nations and significant advances in several development sectors, such as childimmunization and health, many nations are poorer today despite receiving substantial amounts offoreign aid over the past 40 years. Some critics argue that U.S. aid has failed because of pooraccountability and lack of commitment by developing country governments. Others contend thatU.S. strategic interests often took precedence over development goals, thereby diminishing chancesfor economic results. And for many years, the United States has faced international criticism forcontributing too little of its economic wealth for promoting development among the world's poorestnations.

The MCA, which is characterized by the White House as a fundamentally new and innovative approach to the delivery of bilateral American development aid, is based on the premise thateconomic development succeeds best where it is linked to free market economic and democraticprinciples and policies. Only a small number of countries - less than 20 - that have demonstratedstrong performance in the three areas of good governance, economic freedom, and investments inpeople, will participate in MCA programs. The President's initiative proposes that over a three yearperiod, FY2004 to FY2006, U.S. economic aid will increase by $5 billion over the roughly $12billion current amount, and remain at least at that level beyond FY2006. If fully implemented, theMCA would represent one of the largest increases in foreign aid spending in half a century.

To manage the MCA, the Administration proposes the creation of a Millennium Challenge Corporation, a new independent government entity separate from the Departments of State andTreasury and from the U.S. Agency for International Development (USAID). The White Houseenvisions a staff of about 100, drawn from various government agencies and non-governmentalorganizations. A review board, chaired by the Secretary of State and composed of other cabinetofficials, would oversee operations of the MCC. The President would nominate a CEO to run theCorporation, a position that would require Senate confirmation.

As Congress considers the MCA proposal, debate will likely center around several key questions:

Will MCA criteria better ensure success?

Will the selection process identify the "bestperformers"?

How will the U.S. support needs in non-performingnations?

Does a new government agency need to be created?

Given the mounting budget deficit, can the U.S. afford theinitiative?

Are the MCA goals consistent with those of other international aiddonors?

HIV/AIDS. [Tiaji Salaam, Foreign AffairsAnalyst ([phone number scrubbed])] The United States has significantly increased spending on internationalHIV/AIDS programs since 2000. Many expect the 108th Congress to be active in the area ofHIV/AIDS and global health generally.

According to the Joint United Nations Program on HIV/AIDS (UNAIDS), there are 42 million people living with HIV/AIDS worldwide. There were 5 million people newly infected with thevirus, and 3.1 million people died from AIDS in 2002. Sub-Saharan Africa holds the majority ofpeople living with HIV/AIDS with 29.4 million people infected. Fifty-eight percent of Africansliving with HIV/AIDS are women. The second greatest number of people living with AIDS can befound in Asia and the Pacific, estimated at 7.2 million HIV positive people. More than half of HIVpositive Asians are in India (3.97 million) and China (1 million). Although only 1.2 million peopleare infected with HIV in Eastern Europe and Central Asia, that region has the fastest-growing HIVinfection rates, with an estimated 250,000 new infections in 2002. In Russia, some 200,000 peoplewere infected with HIV in mid-2002, up from 10,993 reported cases at the end of 1998. UNAIDSreports that the registered HIV cases in Russia likely underestimate the actual number of peopleliving with the virus by a large margin, just as in Latin America and the Caribbean, where anestimated 1.9 million people live with HIV/AIDS. In terms of infection rates, it is the second-mostaffected region in the world, after Africa. Finally, there are an estimated 550,000 people living withHIV/AIDS in the Middle East and North Africa.

The Bush Administration proposes to spend $1.32 billion on international HIV/AIDS programs in FY2003, up from $360 million in FY2000. In the 107th Congress, both the Senate and Housepassed versions of a bill ( H.R. 2069 ) to authorize increased HIV/AIDS spending, butthe two versions did not make it to conference. The Senate version called for $2.65 billion whilethe House report called for $1.29 billion.

On September 3, 2002, near the end of the second session of the 107th Congress, the President proposed changes to the FY2003 Department of Health and Human Services (DHHS) Appropriationsand the Foreign Operations Appropriations to add $200 million for his International Mother to ChildTransmission (MTCT) Initiative. President Bush proposed $500 million over three years to preventthe transmission of HIV from mother to child and to build health infrastructure in Africa and theCaribbean. Much of international HIV/AIDS funds come from DHHS and Foreign OperationsAppropriations bills. The House Foreign Operations Committee included funds for the MTCTInitiative in its FY2003 Foreign Operations bill, H.R. 5410 . The Senate ForeignOperations bill ( S. 2779 ), already reported out on July 24, 2002, did not.

The United States is the largest donor to the Global Fund to Fight AIDS, Tuberculosis and Malaria, a new funding mechanism to fight the three diseases. The Global Fund has received $2.1billion in pledges, with the United States pledging $500 million. The first round of grants wereawarded in April 2000 to fund projects totaling $616 million in 40 countries. However, only $700million has been received, with $300 million appropriated by Congress to date. Some may advocatelegislation to increase United States funding to the Global Fund in the 108th Congress while othersmay argue that U.S. allocations to the Global Fund should increase only after others donateadditional money.

Humanitarian Crises and Refugees. [RhodaMargesson, Foreign Affairs Analyst ([phone number scrubbed])] In the 108th Congress, humanitarianassistance maycontinue to have a strong measure of bipartisan support and priority. While humanitarian assistanceis assumed to be urgent food, shelter and medical needs, the very nature of humanitarian disasters- the need to respond quickly in order to save lives and provide relief - often demands anunrestricted definition on both a policy and operational level. While it is impossible to predict whenor where a humanitarian or natural disaster may next occur, three cases clearly of interest toCongress include the potential humanitarian emergency in Iraq, an emerging refugee probleminvolving North Korea, and the ongoing humanitarian concerns in Afghanistan.

Implications of a possible war in Iraq include a potential humanitarian emergency with population movements across borders or within Iraq itself. Currently there are a small number ofnon-governmental organizations in Iraq. UN agencies provide the bulk of humanitarian assistancein the form of food and medicine. Over 60 percent of 24 million people in Iraq rely on monthly foodshipments or government rations. How a war is fought and for how long, whether it is a protracted,urban war with heavy civilian casualties or a shorter war with less impact on the Iraqi people, wouldbe critical factors. Secondly, what type of humanitarian assistance to be provided to displacedpopulations (aid priorities, possible use of oil revenues) and the role of other donors would be ofcongressional interest. Thirdly, how such assistance would be implemented - through U.S.occupation, UN administration, or UN donor assistance - could be major issues. And finally, theimpact of refugee flows on stability in the region and the role of neighboring countries incontributing to post-war efforts would be important.

Congress has become increasingly concerned about the status of the estimated tens of thousands of North Koreans living illegally in China. Since the spring of 2002, over 100 of these individuals,most of whom reportedly have crossed the border in search of food, have entered foreign embassycompounds and requested asylum, mostly from South Korea. While China has allowed theasylum-seekers to proceed to South Korea, it has cracked down on the North Korean migrantpopulation as a whole, reportedly sending thousands back to North Korea in accordance with a 1986border agreement with Pyongyang. There are reports that upon their return to the North, someborder-crossers are subject to detention, torture, forced labor and/or execution. China officiallyconsiders the North Korean border-crossers to be economic migrants, rather than political refugees,and has not allowed United Nations relief agencies access. In the 107th Congress, a number ofmeasures were introduced condemning China's actions and/or calling for the U.S. to assist therefugees. However, none of them was passed.

Population movements continue in and out of, and within, Afghanistan. It is estimated that there are still 3 million Afghan refugees, mostly in Iran and Pakistan. Some date back to previouswars; others are part of the recent conflict. The approximate number of internally displaced persons(IDPs) remaining to date is roughly 750,000. Although nearly two million Afghan refugees wererepatriated in 2002, the total number of people requiring relocation assistance is still considerable. With no sustainable livelihood, many of these refugees are forced to seek assistance either withinAfghanistan or outside its borders. There is some "recycling" of refugees - those who repeatedlycross borders for economic and family reasons, flee because of crime and fighting, or migratebecause of lack of food. Central to successful and sustainable resettlement is a sound economicreconstruction strategy. Among other competing challenges, Congress is expected to activelymonitor progress on reconstruction and the role of U.S. forces in this effort. It may also reviewassistance levels. There is some concern that the budget constraints U.N. High Commissioner forRefugees (UNHCR) is facing (already it has had to reduce its welcome home package) may meaninadequate levels of assistance followed by an increase in refugees crossing back into Pakistan andIran, repeat migration of former IDPs, or an increase in urban refugees. Congress is also likely toconsider burden sharing with other donor countries in its support of the reconstruction effort.

Many in Congress hold that disaster assistance should be provided whenever possible with foreign assistance funds through non-governmental agencies. The role of the military inpost-emergency transition and reconstruction or "nation-building" is still evolving as demonstratedby developments in Afghanistan. The use of Department of Defense funds and personnel maycontinue to be controversial.

U.N. Population Fund (UNFPA). [[author name scrubbed], Specialist in Foreign Affairs ([phone number scrubbed])] U.S. population assistance and family planningprograms overseas have sparked perhaps the most consistent controversy during annual ForeignOperations appropriations debates for nearly two decades. At the moment, the most contentiousissue is whether the United States should contribute to the U.N. Population Fund (UNFPA) if theorganization maintains a program in China where allegations of coercive family planning have beenwidespread for many years. During the Reagan and first Bush Administrations, the United Statesdid not contribute to UNFPA because of these concerns. In 1985, Congress passed the so-calledKemp-Kasten amendment which has been made part of every Foreign Operations appropriationsince, barring U.S. funds to any organization that supported or participated "in the management" ofa program of coercive abortion or involuntary sterilization. The Clinton Administration restoredfunding to UNFPA citing a different interpretation of Kemp-Kasten.

For FY2002, Congress appropriated "not more than" $34 million for UNFPA, but in January 2002 the White House placed a hold on the money pending a review of whether UNFPA's activitiesin China violated Kemp-Kasten. A State Department team concluded in May that while Chinamaintains coercive elements in its population programs, UNFPA does not knowingly support orparticipate in them. Although the team recommended releasing the $34 million, Secretary of StatePowell determined on July 22 to withhold funds from UNFPA. The State Department's analysis ofthe Secretary's determination found that even though UNFPA did not "knowingly" support orparticipate in a coercive practice, that alone would not preclude the application of Kemp-Kasten. Instead, a finding that the recipient of U.S. funds - in this case UNFPA - simply supports orparticipates in such a program, whether knowingly or unknowingly, would trigger the restriction.

Congressional critics of the determination to suspend UNFPA funds support legislation incorporated into the Senate-reported FY2003 Foreign Operations Appropriations bill( S. 2779 ) that would reverse the executive's decision. That measure modified theKemp-Kasten language by requiring a finding by the Secretary of State that an organization "directlyparticipates in the practice of coercive abortion or involuntary sterilizations" before declaring thegroup ineligible for U.S. support. Instead of the current, more implicit standard under whichKemp-Kasten has been interpreted, this new language would appear to set a more rigorous andspecific test for determining whether UNFPA or any other organization fell under the Kemp-Kastenconditions. S. 2779 further appropriated $50 million for UNFPA in FY2003. TheHouse-reported companion measure ( H.R. 5410 ) earmarked $25 million for UNFPA,based, however, on the condition that UNFPA not fund the State Planned-Birth Commission or itsregional affiliates in China.

Because Congress adjourned without enacting the FY2003 Foreign Operations spending measure, the legislation will be re-introduced in the 108th Congress and may be one of the first itemsconsidered in the new session. Whether the Senate Appropriations Committee under a new majoritywill support changes to the Kemp-Kasten language proposed in S. 2779 remainsunclear. Congressional supporters of UNFPA, however, are expected to press for similar legislationrelated to both the unfinished FY2003 appropriation as well as the FY2004 Foreign Operations billthat will be taken up later in the year.

Authorization of World Bank and IDA. [[author name scrubbed], Specialist in International Political Economy ([phone number scrubbed])] In 2003, Congresswill consider legislation to authorize U.S. participation in the thirteenth replenishment of the WorldBank's concessional aid facility, the International Development Association (IDA 13.) It will alsoconsider legislation to authorize U.S. participation in new funding plans for the Asian DevelopmentFund (AsDF) and African Development Fund (AfDF). For IDA 13, the U.S. contribution would be$2.85 billion over 3 years, 20.1% of the total. Legislation authorizing U.S. participation in the IDA13 and ADF replenishments ( H.R. 2604 ) was considered in 2002, but final action wasdeferred until the 108th Congress. Some funds were appropriated in 2002 to partly fund U.S.contributions, but final action on the authorizations is needed for U.S. participation to becomeeffective.

The IDA 13 replenishment is the product of lengthy negotiations, the central issue in dispute being the proposal by President Bush that IDA provide half the aid it channels to poor countries inthe form of grants rather than low-cost loans. Some other donor countries felt very strongly that thisproposal, while well intentioned, would seriously undercut IDA's finances and endanger itslong-term continuity. The IDA 13 agreement provides for 18%-to-21% grants, a compromiseroughly half the President's goal. Administration leaders commend it as a major breakthrough. TheIDA 13 replenishment can go into effect without U.S. participation, but the grant program will notlikely start without U.S. involvement and support.

Focusing on the controversy about grants obscures the other provisions of the IDA 13 plan, on which there was broad international support. It also includes provisions to increase IDAeffectiveness, promote further poverty reduction, and implement new procedures for monitoring andevaluating the success of IDA programs. The plan makes changes in the World Bank's countrystrategy process and IDA's global and regional goals. These include, among other things, increasedemphasis on capacity building to improve governance and combat corruption, more consultationand disclosure, and a tighter link between country strategies, IDA aid and IDA's performance-basedallocation system. The key issue appears to be, not the content of the IDA 13 plan, but concernwhether the World Bank will be able to implement it and realize its goals. To cast light on this,Congress may examine how the World Bank implemented the reform goals in the prior IDA 12replenishment plan.

Economic Sanctions

[author name scrubbed], Specialist in Foreign Policy Legislation ([phone number scrubbed])

The use of economic sanctions - coercive economic measures taken against one or more countries or entities to force a change in policies, or at least to demonstrate a country's opinion aboutthe other's policies - has generally been supported by both the Congress and the President as anoption to combat various threats to the United States. Three recent developments - the war againstterrorism, an international rise in the proliferation of weapons of mass destruction, and confrontationwith Iraq - have had a major impact on all aspects of foreign policy and national security, includingthe use of economic sanctions.

At times, managing terrorism, proliferation, and conflict with Iraq within the framework of current U.S. law has been challenging. Enlisting Pakistan's cooperation and providing foreign aidto that country after events of September 11, 2001, for example, required Congress to enactexemptions from sanctions imposed on Pakistan after its 1998 nuclear tests and after the 1999military coup d'etat. Despite U.S. concerns about human rights, proliferation, or regional stabilityin Central or South Asia, several frontline states in the war against terrorism in those regionsreceived substantial U.S. foreign aid after 9/11.

The 108th Congress may be faced with the issue of which should have a higher priority - proliferation of weapons of mass destruction or terrorism (leaving aside other issues that couldtrigger sanctions, such as democracy or human rights) - and shape U.S. law to address that exigency. In order for Pakistan to receive foreign aid in FY2003, for example, the President is required tocertify that providing such funding facilitates Pakistan's return to democratic rule and such fundingis important to U.S. antiterrorism efforts. In the interim, however, there have been news reports thatPakistan may have provided technology to North Korea that furthered North Korea's pursuit ofnuclear capability. If the President determines that such a transaction occurred between the twocountries, a new round of economic sanctions against both countries would be required by U.S. law. In another recent development, the Administration may have shown its greater determination in thewar against terrorism, when it released Scud missiles to Yemen en route from North Korea, a transferthat violated an agreement between the United States and Yemen. At a minimum, the 108th Congressmight scrutinize recent technology and material transfers to South Asia, with the imposition ofsanctions on both the giving and receiving states a possible outcome.

To aid the fight against terrorism, the 108th Congress might also take up reauthorization of the Export Administration Act of 1979. Efforts to renew this Act - including the authority to create theTerrorist List maintained by the Department of State (the "6(j) list"), restrict trade for foreign policyor national security reasons, impose sanctions for missile, chemical and biological weaponsproliferation - have been plagued by controversy since 1994. Though the Act has been extended forshort periods, and its authorities have been continued by the President invoking national emergencyauthority, the Export Administration Act has needed serious attention since its first expiration in1990. (See section entitled "Export Administration Act")

Transactions between third countries and Iraq might similarly pose challenges for the 108th Congress. Recent reports have either Ukraine or China, or both, providing radar technology to Iraq. Both countries have denied such deals took place. Under current law, third country transactions withIraq could trigger punitive measures from the United States against the third country. Yet Ukraineand China might be considered important to the war against terrorism.

Europe/Eurasia

Overview. [Paul E. Gallis, Specialist inEuropean Affairs ([phone number scrubbed])] Congress is likely to follow a number of policy issues in Europeansecurity, the Balkans, and Russia during the 108th Congress. NATO continues its post-Cold Warevolution, with uncertainty on a number of fronts. The Senate will be asked to consider seven newcandidates, and examine their potential contribution to a military alliance that is seeking to developnew capabilities and assume responsibility for possible engagements outside the traditional Europeantheater. The Balkans remain the principal area of instability in Europe, with U.S. peacekeepingforces engaged throughout the region. The Administration, against the wishes of the allies, isseeking to reduce U.S. force levels in Bosnia, Kosovo, and Macedonia; there is discussion in theAdministration that U.S. forces in the Balkans would better serve U.S. interests if deployed or heldin readiness for service elsewhere around the globe. Russia, despite its continuing militaryweakness, remains of great interest to U.S. policymakers due to its political influence, geographicreach, and potential for future engagement in regions of concern to Washington. Congress is likelyto continue to debate the appropriate balance between the opportunity to secure Russia as a friendable to contribute to the conflict against terrorism and the belief that Moscow's human rightstransgressions and record in proliferation must be addressed.

NATO: Enlargement and Future Missions. [PaulE. Gallis, Specialist in European Affairs ([phone number scrubbed])] Congress is likely to continue to evaluateNATO to determine how the alliance may contribute to combating new threats to the United States,such as terrorism and the proliferation of weapons of mass destruction (WMD). At NATO's Praguesummit in November 2002, President Bush asked the allies to contribute to a new initiative todevelop technologies and weapon systems for fighting terrorism in regions around the globe;however, the allies have been reluctant to increase their defense budgets and to accept an area ofresponsibility beyond Europe. NATO's continuing importance to the United States may hinge onthe allies' acceptance of the new initiatives considered at Prague.

The allies at Prague agreed to consider 7 European countries for membership. In early 2004, the Senate is likely to debate the qualifications of these states, and it must amend the North AtlanticTreaty to admit them to the alliance. As in the last round of enlargement, the Senate may use thedebate to discuss NATO's mission, and whether that mission meets U.S. needs in fighting terrorismand curbing WMD, issues that both houses are likely to address in hearings and floor debates.

The essence of the debate over NATO's future is a return of the long-discussed issue of burdensharing. Congress has long contended that the United States bears a disproportionate shareof the burden of combating threats to allied interests. Because some key allies do not share theurgency of the Administration's perception of the gravity of the threat of terrorism and WMD,Congress and the Administration may find difficult the effort to persuade the allies to upgradedefense capabilities and to accept the possible need for engagement in such areas as the Middle East,North Africa, and South Asia, the regions from which the perceived threat may emanate.

Stability in the Balkans. [[author name scrubbed],Specialist in European Affairs ([phone number scrubbed])] Since 1991, the United States has committed tens ofthousands of peacekeeping troops, billions of dollars in assistance and fought an air war in an effortto bring stability to the Balkans and promote democracy and free markets there. U.S. policymakershave seen stability in the Balkans as an important part of creating a Europe "whole, free, and atpeace," a key U.S. policy objective. On the other hand, although European countries currentlyprovide the lion's share of troops and aid to the region, the Bush Administration has pressedEuropean countries to take on a greater share of the burden, given U.S. commitments elsewhere.

In foreign aid appropriations legislation, the 108th Congress will consider how much aid to provide for the reconstruction of Bosnia, Serbia, Kosovo and other countries in the region, and howthe burden should be shared with European countries. The 107th Congress limited U.S. aid toKosovo to no more than 15% of the total amount pledged by all countries. The 108th Congress willalso debate the conditions under which that aid should be given. In October 2002, U.S. officials saidthey had uncovered "clear evidence" that Bosnian Serb and Yugoslav-government-owned firms hadsold military equipment to Iraq. Possible conditions on aid to Serbia, Montenegro, and Bosnia couldtherefore include ensuring that those governments halt any arms sales and military assistance to Iraqand other countries of concern. Aid to Serbia could also be conditioned on Belgrade's cooperationwith the International Criminal Tribunal for the former Yugoslavia, as the 107th Congress had done.

Congress will monitor the progress of the countries of the region in fighting terrorism. Since the September 11, 2001 attacks, Al Qaeda cells in Albania and Bosnia have been shut down bylocal governments, in cooperation with the United States. However, rampant organized crime andcorruption in the region continue to provide an environment in which terrorists can operate.Members of Congress may consider further reductions of U.S. troop deployments in the Balkans,citing more pressing priorities, such as the war on terrorism. The Bush Administration has graduallyreduced U.S. troop levels in the Balkans, as conditions on the ground have permitted and inagreement with NATO allies and other troop contributing countries. Currently, about 1,900 U.S.troops are in Bosnia and about 4,300 in Kosovo.

Russia and U.S.-Russia Relations. [Stuart D.Goldman, Specialist in Russian Affairs ([phone number scrubbed])] U.S.-Russian relations were transformed afterSeptember 11, 2001, based on cooperation against international terrorism and Russian PresidentPutin's policy of integrating Russia with the West. At the same time, Putin's domestic policiescontinue to combine measures of pro-market economic reform and political authoritarianism. Thenet result has been increased bilateral cooperation and reduced tension in many areas, while strongdifferences remain on some issues.

The 108th Congress will probably deal with a significant number Russian issues related to international security, trade, and political and economic developments within Russia. The Senateis expected to decide on whether to give its advice and consent to the Treaty on Strategic OffensiveReductions, signed in May 2002, a treaty which is widely viewed as fully encompassing the BushAdministration's arms control objectives.

In recent years, Congress has taken a leading role in addressing the dangers of WMD (weapons of mass destruction) proliferation from Russia through such initiatives as the Nunn-LugarCooperative Threat Reduction Program. The 108th Congress will consider the effectiveness andappropriate funding level of this and other threat reduction efforts, including a new initiative, theRussian Federation Debt Reduction for Nonproliferation Act of 2001 (included in P.L. 107-228 ).

Another, more contentious, aspect of Russia's role in nonproliferation and counterterrorism has also drawn strong congressional attention in the past and will likely continue to do so, i.e., Russiantransfers of nuclear reactors and ballistic missile technology to Iran and Russian cooperation withand support of Iraq. Congress in the past has conditioned assistance to Russia on changed Russian behavior on these issues.

The 108th Congress also faces a set of interrelated trade issues: permanent normal trade relations (PNTR) and WTO accession for Russia, application of the Jackson-Vanik Amendment to Russia,the potential for increased U.S.-Russian energy cooperation, and tension over U.S. poultry exportsto Russia and Russian steel exports to the United States.

Congress may choose to weigh in on Russia's Chechen conflict - as a human rights issue, a terrorism issue, and as an international security issue in connection with its impact on neighboringstates such as Georgia, which has been pressured by Russia over harboring Chechen rebel fighters.

The 108th Congress may also continue its predecessors' interests in monitoring Russian developments - and U.S. efforts to influence those developments - in such areas as economicreform, legal reform, religious and press freedom, and human rights.

Latin America

Overview. [[author name scrubbed], Specialist inLatin American Affairs ([phone number scrubbed])] Attention to Latin America in the 108th Congress willlikelyfocus on counter-narcotics efforts, trade issues, and potential threats to democracy and stability. U.S. counter-narcotics efforts in the region will focus on continuation of the Administration'sAndean Regional Initiative supporting Colombia and its neighbors with foreign assistance in theirstruggle against drug trafficking and drug-financed terrorist groups. With regard to trade, now thatnegotiations with Chile for a bilateral free trade agreement are completed, Congress will likelyconsider implementing legislation for the agreement under fast track procedures; in addition,congressional oversight may focus on negotiations for a Free Trade Area of the Americas agreementscheduled for completion in January 2005, and on the beginning of negotiations for a free tradeagreement with Central America. (See section entitled "Trade Agreements and Negotiations") While Latin America has made significant progress over the past two decades in strengtheningdemocratic institutions and practices, several nations have economic and political crises that maythreaten democratic order, particularly Argentina and Venezuela. Cuba remains the region'snon-democratic holdout and Congress will likely continue to debate the appropriate U.S. policyapproach. Haiti's persistent poverty and political instability will remain a concern. Finally,Congress will likely maintain an active interest in neighboring Mexico, with a myriad of trade,migration, border and drug trafficking issues dominating U.S.-Mexico bilateral relations.

Andean Regional Initiative. [Nina Serafino,Specialist in International Security Affairs ([phone number scrubbed])] Both the continuing high levels ofdrug-funded violence in Colombia and the increasing political power of forces opposed to U.S.-funded coca eradication programs in the Andean region challenge U.S. attempts to curbdrug-trafficking and to strengthen democracy in Latin America. Because efforts to cut drugtrafficking have resulted in little or no reduction in the amount of Andean-produced cocaine flowingto the United States, the 108th Congress can be expected to scrutinize the effectiveness of the AndeanRegional Initiative (ARI). The ARI is the Bush Administration's continuation and expansion of theClinton Administration's "Plan Colombia," a development and military strategy for dealing withdrug trafficking in Colombia and its spillover effects in surrounding countries, especially Peru andBolivia. In 2002, the Bush Administration requested, in conjunction with action on FY2002supplemental appropriations ( P.L. 107-206 ), authority to expand U.S. military assistance toColombia beyond counternarcotics in order to address all threats against Colombia's nationalsecurity. The 107th Congress did not grant broad authority in those terms, but it did expand existingauthorities to cover "anti-terrorism" activities and emergency situations.

The 108th Congress' first action regarding the ARI is likely to be a decision on funding for the President's FY2003 $980 million request. In 2002, the House and Senate appropriations committeeseach approved their versions of the FY2003 foreign operations appropriations bill ( H.R. 5410 , S. 2779 ), but there was no further action. Regarding the ARI, the HouseAppropriation Committee's version fully funds the President's request; the Senate AppropriationsCommittee's version cut $94 million from it. Major issues for the future include whether the UnitedStates should further expand assistance to Colombia in combating guerrilla and paramilitary forces,whether the status of human rights conditions in Colombia under President Alvaro Uribe (who tookoffice in August 2002) warrant continued aid, and whether U.S.-funded alternative developmentprojects can provide those who give up growing coca with adequate livelihoods.

Cuba. [[author name scrubbed], Specialist in LatinAmerican Affairs ([phone number scrubbed])] As in past years, the main issue for U.S. policy toward Cuba in the108th Congress will be how best to support political and economic change. In the debate over U.S.policy, there have been different schools of thought about how to achieve that objective. Someadvocate keeping maximum pressure on the Communist government of Fidel Castro by maintainingthe current U.S. embargo until reforms are enacted, while continuing efforts to support the Cubanpeople. Others argue for an approach, sometimes referred to as constructive engagement, that wouldlift some U.S. sanctions they believe are hurting the Cuban people, and move toward engaging Cubain dialogue. Still others call for a swift normalization of U.S.-Cuban relations by lifting the U.S.embargo. Over the past several years, legislative initiatives have reflected these various approaches.In the second session of the 107th Congress, the House approved three amendments to the FY2003Treasury Department appropriations bill ( H.R. 5120 ) that would have eased restrictionson travel, remittances, and commercial agricultural and medical sales to Cuba; final action on themeasure was not completed before the end of the session. In 2003, Congress will likely continue itshigh level of interest in Cuba, with a variety of legislative initiatives regarding sanctions and humanrights that will be of interest to a varied group of American stakeholders with differing interests.

Haiti. [[author name scrubbed], Specialist inLatin American Affairs ([phone number scrubbed])] The main issues for U.S. policy toward Haiti during the108thCongress will likely continue to be how to promote democratic development, economic growth, andpolitical stability in hopes of alleviating poverty, limiting illegal immigration from Haiti, andreducing drug trafficking through Haiti. Almost two years into President Jean-Bertrand Aristide'sfive-year term, election disputes from 2000 remain unresolved, political turmoil has increased, theeconomy is in crisis, and human rights conditions have worsened. Major donors, including theUnited States, have directed aid to Haiti through non-governmental organizations, withholding directaid to the government until Aristide enacts promised political, judicial, and economic reforms.Critics argue that withholding aid to the government is contributing to Haitian poverty, instability,and illegal migration. The Senate Appropriations Committee's version of the FY2003 foreignoperations appropriations bill ( S. 2779 ) would prohibit assistance to Haiti exceptthrough regular notification procedures, and would allow Haiti to purchase defense articles andservices for the Haitian Coast Guard. The House Appropriations Committee's version( H.R. 5410 ) would not require notification procedures except for the Coast Guardpurchases, and would also provide for "not less than $52.5 million" in food assistance programs tobe allocated to Haiti. Enactment of the legislation will be one of the first items on the agenda of the108th Congress.

Mexico. [[author name scrubbed], Specialist in LatinAmerican Affairs ([phone number scrubbed])] Interest in Mexico in the 108th Congress is likely to focus ontrade,migration, border, and drug trafficking issues. Mexico is the United States' second most importanttrading partner, with two-way trade tripling since 1994 under the North American Free TradeAgreement (NAFTA). Mexico shares a busy and highly interrelated border with the United Statesand is the source of numerous undocumented migrants, and a major transit point for the flow of illicitnarcotics to the United States. Relations between the countries were especially warm during the2001 visits of President Bush and President Fox, when hopes were high for some sort of migrationagreement, but they cooled to some extent when migration talks stalled following the September2001 terrorist attacks. In November 2002 bilateral meetings, both countries reaffirmed theirintention to continue talks toward a migration agreement. During the 107th Congress, action focusedon strengthening border security, alien admission policy, and tracking procedures through the USAPatriot Act ( P.L. 107-56 ) and the Enhanced Border Security and Visa Entry Reform Act ( P.L.107-173 ). With a similar security focus, the Homeland Security Act ( P.L. 107-296 ) incorporated theINS/Border Patrol, Customs, and other agencies into the new Department of Homeland Security. In the Department of Transportation Appropriations Act for FY2002 ( P.L. 107-87 ), Congressrequired the Administration to impose stringent safety inspections on Mexican trucks forNAFTA-required access to U.S. highways. In the Foreign Relations Authorization Act for FY2003( P.L. 107-228 ) Congress permanently modified the annual drug certification process, which had beenan irritant in the bilateral relationship, and instead required the President to designate only thosecountries that have failed demonstrably to adhere to international counter-narcotics agreements.

Political and Economic Stability in South America. [[author name scrubbed], Specialist in Latin American Affairs ([phone number scrubbed])] Over the past two years, several South American nations have faced political and economic crisesthat have challenged elected governments and raised concerns for U.S. policy in the region, includingsupport for democracy and economic development, and efforts toward the goal of hemispheric freetrade. Congressional oversight of these issues in the 108th will likely focus on the effects on U.S.interests and the appropriate U.S. policy response. In Ecuador, a democratically elected Presidentwas ousted in a January 2000 coup after a prolonged economic crisis; in November 2002, retiredarmy colonel Lucio Gutierrez, who had once been jailed for his role in the coup, won the presidencyin what were deemed "free and fair" elections. At year end, political tensions in Venezuela (the thirdlargest supplier of foreign oil to the United States) remained high as opposition groups weredemanding a referendum on the rule of President Hugo Chavez, who had been ousted briefly frompower in April 2002 after massive opposition protests. Chavez's rule has been marred bycontroversy as he has revamped Venezuela's government institutions and polarized the nation withhis leftist rhetoric and programs. Argentina's democratic political system has been underconsiderable stress since social protests over the country's deteriorating economy led to theresignation of a democratically elected President in December 2001. The current administration ofPresident Eduardo Duhalde has struggled with a difficult economic situation, which resulted in anagreement to hold the next presidential election several months early, in April 2003. There also hasbeen growing concern about Argentina's economic instability spreading to neighboring Uruguay,Paraguay, and Brazil, where former labor leader Luiz Inacio Lula da Silva was elected President inOctober 2002.

Middle East

Middle East Overview. [Jeremy Sharp, Analystin Middle East Affairs ([phone number scrubbed])] The Middle East poses significant policy challenges that willlikely be key foreign policy concerns in the 108th Congress. Attention is expected to focus on thecontinuing confrontation between Israel and the Palestinians, Iraq's weapons of mass destruction(WMD) programs - and the possibility of a major conflict centering on that issue (see sectionentitled "Possible War with Iraq"), and Middle East aspects of the war on terrorism, including thesituation in Afghanistan. (See section entitled "The War on Terrorism"). The Israel/Palestinianpeace process, the roles of key regional actors, such as Saudi Arabia, Syria, and Iran, and theprospects for regional stability and/or instability will also be important concerns in the months ahead.Congressional hearings may address broader issues such as U.S. public diplomacy efforts in theMiddle East, as well as regional support for religious extremism directed against the United States. Reactions to U.S. policy in the Middle East and elsewhere could also become issues. Finally, U.S.interests in the Middle East, including the security of Persian Gulf oil supplies and defensearrangements in the Gulf, will likely be discussed and could come under review.

Peace Process. [[author name scrubbed], Specialistin Middle Eastern Affairs ([phone number scrubbed])] President Clinton held a summit meeting at Camp David inJuly 2000 in an attempt to reach a permanent peace accord between Israel and the Palestinians, butno agreement was reached there or at subsequent lower level meetings. On September 28, 2000, thePalestinians began an uprising against the continuing Israeli occupation of much of the West Bank,Gaza Strip, and Jerusalem. The violence and the failure of the peace process may have contributedto the election of Ariel Sharon as Prime Minister of Israel in February 2001. Sharon refuses toresume negotiations with the Palestinians as long as there is violence, and Israeli forces have retakencontrol of territories that had been ruled by the Palestinians as a result of interim agreements withIsrael since 1994. Since the September 2001 terrorist attacks against the United States, theAdministration has come to believe that there is a common U.S.-Israeli battle against terrorism. President Bush reflected this view in his June 24, 2002 speech, calling on the Palestinians to electleaders "not compromised by terror" and to build a democracy. He said that the United States wouldsupport the creation of a Palestinian state when Palestinian leaders fight terrorism. The President alsoobserved that as progress is made on security, Israeli forces would have to withdraw to positions theyheld before the Palestinian uprising. He envisioned a final settlement within three years, negotiatedby the parties based on U.N. resolutions, with Israeli withdrawal to secure and recognized borders.To implement the President's vision, Secretary of State Powell has worked with U.N., EuropeanUnion, and Russian counterparts as "the quartet" to develop a comprehensive action plan. A planhas been discussed with the parties, but it is not expected to be revealed until after Israeli electionson January 28, 2003. Israeli-Syrian peace talks collapsed in 2000, when Syria demanded that Israelwithdraw completely to the June 1967 border and Israel refused. Israel withdrew from southernLebanon unilaterally in May 2000, but the Lebanese Hizballah, supported by Syria, contends that thewithdrawal was incomplete and it continues attacks against Israeli forces in the disputed territory.

Congress has continued to appropriate annual foreign aid for Israel and humanitarian aid to the Palestinians. Israel received approximately $2.85 billion in U.S. assistance during FY2002. Withregard to the Palestinians, $72 million was allocated to the Israel-occupied West Bank and Gazaduring FY2002. U.S. aid to the Palestinians is delivered via non-governmental and internationalorganizations but not to the Palestinian Authority (PA) or to the Palestine Liberation Organization(PLO). Congress has supported relocating the U.S. Embassy in Israel from Tel Aviv to Jerusalemand other steps to recognize Jerusalem as Israel's capital. U.S. Administrations have consistentlymaintained that Jerusalem is an issue for the parties to negotiate in a peace settlement.

Since the Palestinian uprising, Congress has focused more on anti-Israeli terrorism than on the stalemated peace process. For example, in S.Con.Res. 88 and H.Con.Res. 280 , both December 5, 2001, Congress demanded that the PA act against terrorists and urged thePresident to suspend relations with the PA and its Chairman, Yasir Arafat, if it does not. In P.L.105-115 , January 10, 2002, Congress called on the President to assess PA/PLO actions and imposesanctions based on his assessment. H.Res. 392 and S.Res. 247 , both May2, 2002, express solidarity with Israel and condemn Palestinian leaders. Legislation introduced, butnot passed, in the 107th Congress would have imposed restrictions on PLO representatives residingin or traveling to the United States. H.R. 5410 , the House-passed version of the ForeignOperations Appropriations Act for 2003, unlike prior legislation, contained a section prohibitingfunds to support a Palestinian state unless the Secretary of State determines and certifies that itsleadership is democratically elected, committed to peaceful coexistence with Israel, is counteringterrorism, and is working toward a comprehensive peace with Israel. This provision was not in theSenate-passed version, S. 2779 . If negotiations were to resume, the Administration andCongress might revisit U.S. relations with the Palestinians with a view to encouraging stability,democracy, and the pursuit of peace.

Africa

[author name scrubbed], Analyst in African Affairs ([phone number scrubbed])

Aid to Africa. The Administration requested just over $1 billion in Development Assistance (DA) for Africa in FY2003. The FY2003 ForeignOperations Appropriations bills reported in the House ( H.R. 5410 ) and Senate( S. 2779 ) during the 107th Congress did not specify amounts for Africa. Both billsbroke the Administration's DA request into a DA component and a component for the ChildSurvival and Health (CSH) Programs Fund. Both provided more for these programs together thanthe Administration had originally requested in DA, suggesting that the Administration's spendingtarget for Africa would have been met if foreign operations expenditures had been appropriated. Amounts that may be specified for DA and Child Survival when FY2003 Foreign OperationsAppropriations legislation is resubmitted remain to be seen, but could be reduced if competingbudget priorities emerge in other areas.

Congressional concern about a growing famine in southern Africa and an emergent one in Ethiopia is likely to continue in the 108th Congress, as is interest in policies to increase goodgovernance and democracy, economic efficiency, and market-oriented economic growth strategiesin Africa. The Administration is proposing to create a new federal organization, the MillenniumChallenge Corporation, to administer a proposed increase of $5 billion in foreign economic aid overthree years beginning in FY2004. Several African nations would likely be beneficiaries.

International Terrorism and Security Assistance. The 108th Congress may be called upon to reassess levels of terrorism-related security assistance forAfrica. African countries have been used by international terrorist groups - including Al Qaeda -as staging and training areas, and as places to attack U.S. and other foreign interests, as well asdomestic African targets. Several African countries have social systems and political cultures thatmay make them vulnerable to influence by violent religious radical groups. U.S. military forces onmissions to track, counter, and prevent terrorist actions are based in the Horn of Africa andreportedly operate elsewhere on the continent. The Administration's FY2003 request for traditionaltypes of military assistance to Africa, such as Foreign Military Financing, and peacekeeping andleadership training, rose slightly or remained roughly equal to amounts in previous years. TheDepartment of Defense and Emergency Supplemental Appropriations Act, 2002 ( H.R. 3338 / P.L. 107-117 ) provided $14 million for HIV-related U.S. military training and humanitarianassistance activities conducted in African nations. Such assistance may be seen as complementingbroader, long-term U.S. efforts to prevent the future growth of terrorist groups and other forms ofreligious and political extremism in Africa by alleviating poverty and fostering social conditions tocounter the growth of such phenomena. Efforts such as these include the Bush Administration'sproposed Millennium Challenge Account (MCA) and the Administration's recent creation withinthe U.S. Agency for International Development (USAID) of the Bureau for Democracy, Conflict andHumanitarian Assistance. The MCA would channel development assistance to selected "bestperforming" poor countries that agree to support policies promoting just governance, investment inpeople, and economic freedom.

Armed and Political Conflicts in Africa. Congress may seek ways to resolve African conflicts, and to ensure that peace is consolidated in countriesemerging from war, possibly through such programs as the Africa Contingency Operations TrainingAssistance (ACOTA), the successor program to the ACRI, or African Crisis Response Initiative.Sudan generated significant interest in the 107th Congress. President Bush signed the Sudan PeaceAct (PL 107-245) in October 2002, and the Administration remains actively engaged in theKenyan-led Sudan peace process. The government of Sudan and the Sudan People's LiberationMovement (SPLM) have signed several agreements in recent months and are expected to resumetalks in early 2003. In Angola, where a long civil conflict ended in early 2002, Administrationofficials have pledged continued U.S. humanitarian assistance, while urging the Angolan governmentto use Angola's oil wealth to fund such needs itself, and to undertake reforms to increase governmenttransparency, accountability, and democratization. Growing civil conflicts in the Ivory Coast andLiberia - where a burgeoning conflict could spill into neighboring Sierra Leone, which recentlyended its own civil war - may attract increasing congressional concern, as may the drawn-out anddesultory peace processes in the Democratic Republic of the Congo and Burundi. Congress is likelyto remain concerned about continuing political violence in Zimbabwe, and to carefully monitorpotentially volatile election processes in the African nations of Nigeria and Kenya.

HIV/AIDS. The HIV/AIDS pandemic in sub-Saharan Africa is raising concerns about political and economic stability across the region. TheUnited Nations Joint Program on HIV/AIDS estimated that 29.4 million Africans were HIV-positivein 2002, including 3.5 million newly infected during the year. Most HIV-positive Africans cannotobtain anti-retroviral drug treatments, and are likely to die within a few years. In southern Africa,the most severely AIDS-affected part of the world, adult infection rates exceed 20% in sevencountries; in Botswana, over 38% of adults are HIV-positive. The USAID estimates that there willbe 20 million African AIDS orphans by 2010, unless the disease is curbed. (U.S. Agency forInternational Development, Children on the Brink, 2002. ) AIDS-related economic production lossesare seen as a key factor contributing to famines threatening much of southern Africa and Ethiopia.AIDS is making major inroads in West Africa, and there is concern that it will cause socio-economicdevastation in Nigeria, Africa's most populous state and an important oil producer.

The 107th Congress increased spending for AIDS-related programs in Africa, but it generally did so indirectly, by authorizing or appropriating funds for the global AIDS programs of USAID, theCenters for Disease Control and Prevention (CDC), and other agencies - which include major Africacomponents - rather than supporting separate Africa-specific programs. (An exception was anHIV/AIDS prevention program specifically for African armed forces, funded through Departmentof Defense appropriations). The Administration's FY2003 request includes proposed increases forbilateral AIDS spending and for a contribution to the new Global Fund to Fight AIDS, Tuberculosis,and Malaria. Many advocate sharply increased U.S. funding for AIDS prevention, care, andtreatment in Africa, but others regard current spending levels as appropriate, given competingdemands on resources, such as mounting AIDS epidemics in Asia, the former Soviet Union, andeastern Europe. If President Bush visits Africa in early 2003, as planned, his trip may focus policymakers' attention on AIDS in Africa and attract new congressional and Administration efforts tocounter the epidemic.

Trade. Congress will likely monitor closely the implementation and impact of the African Growth and Opportunity Act (AGOA), enacted by the106th Congress and amended by the 107th. Some believe that Congress will explorefurther measuresto increase U.S.-African trade and African economic growth. In November 2002, the Administrationnotified Congress of its intention to negotiate a free-trade agreement with the South African CustomsUnion (SACU). Some congressional policy makers may seek to bolster the role that African oilproducers play in maintaining U.S. energy security and oil supply source diversity. U.S. investmentin Africa is concentrated in the oil sector. Much African oil is of high quality and some analystsincreasingly view it as of strategic value to the United States. (See section entitled "TradeAgreements and Negotiations").

Asia

Overview. [[author name scrubbed], Specialist inIndustry and Trade ([phone number scrubbed])] For the 108th Congress, the policy issue with respect to Asiais howto pursue U.S. interests with this half of the world in which countries are extremely diverse inmilitary strength, economic development, political systems, population, ethos, and degree offriendship or hostility toward the United States, and where relations are primarily bilateral becauseof the lack of a strong, broadly encompassing regional organization (such as NATO or the EuropeanUnion) through which to work. The challenges for the United States in the region are first, todiminish the threat of terrorism (as manifest by the bombing in Bali and the Taliban who have fledto Pakistan) second, to reduce the threat of war in hot spots (such as across the Taiwan Straits,between nuclear-armed Pakistan and India, or on the Korean peninsula), third, to contain the spreadof weapons of mass destruction; fourth, to promote stable economic growth and beneficial traderelations (such as China's adherence to World Trade Organization commitments and free-tradeagreements), and, fifth, to continue pressure on countries to improve their human rights and laborrecords and to adopt more democratic institutions.

People's Republic of China (PRC), Hong Kong, and Taiwan. [[author name scrubbed], Analyst in Asian Affairs ([phone number scrubbed]); [author name scrubbed],Specialist in Asian Affairs ([phone number scrubbed]); [author name scrubbed], Specialist in National Security Policy([phone number scrubbed]); Wayne Morrison, Specialist in International Trade and Finance ([phone number scrubbed])] A keypolicy issue for the 108th Congress with respect to social problems in the PRC is how to effectivelypromote human rights within the context of China's rapidly changing economy and society. TheChinese Communist Party (CCP) faces large numbers of disaffected and restive rural and workingclass citizens and ethnic minorities. In response to economic uncertainty and the loss of the CCP'smoral authority, more PRC citizens are turning to religion to fill a spiritual void in their lives. Thegovernment has responded harshly to many unauthorized social organizations, especiallyindependent labor unions and un-licensed spiritual organizations like the Falun Gong movement. Rising unemployment and a sluggish economy in Taiwan have also led to labor protests and socialdivisions there. The intensifying debate in Taiwan between entrepreneurs, who want to expandinvestment in China, and workers, who fear losing their jobs to cheap PRC labor, has complicatedpolicy formulation for President Chen Shui-bian, who is also concerned about maintaining Taiwan'seconomic and political autonomy.

China's preoccupation with economic growth and with domestic problems related to increasing disparities of wealth may make the CCP more apt to emphasize stable relations with the UnitedStates. However, there likely will be a continuation of human rights abuses in China, and Congressmay be called upon to take stands defending the rights of political prisoners and religious followersin China. The 108th Congress will consider Economic Support Fund (ESF) levels for rule-of-law,democracy, and Tibet programs in China in FY 2004-05. The Congressional-Executive Commissionon China will continue to monitor and hold hearings on the PRC's compliance with internationalhuman rights standards and its progress toward a rule of law.

During the 108th Congress, the PRC, Hong Kong, and Taiwan all will face important political challenges that could affect the policy choices and governance of each. Late in 2002, the PRCreplaced most of its senior military and Party leaders, including former Party Secretary Jiang Zemin. Beijing is expected to make equally sweeping changes in senior government leaders in March 2003. U.S. policymakers, then, soon will be facing a new and largely unknown group of PRCdecision-makers whose policy preferences remain uncertain. Many wonder what effect the newline-up will have on U.S.-China relations, remarkably smooth of late. In Taiwan, incumbentPresident Chen Shui-bian will run for re-election in 2004. In the months preceding that campaign,a central issue will be Taiwan's political future - whether to move more toward politicalindependence or toward greater political integration with the PRC. Deep domestic divisions on thistopic are likely to mean continued fractiousness in Taiwan's already tumultuous political scene andcontinued pressure on U.S. officials to support Taiwan. In Hong Kong, after five uneventful yearsliving under PRC sovereignty, the former British colony is contemplating enacting a controversial"anti-sedition law," as required by Article 23 of its de facto constitution, the Hong Kong Basic Law. Some worry that the new law will provide a pretext to crack down on political dissidents, religiousgroups, and other forms of free expression Beijing finds objectionable, any of which could triggerU.S. policy responses under the U.S.-Hong Kong Policy Act of 1992.

Congress has been concerned about several security issues in U.S. policy toward China, including whether the policy is advancing China's cooperation in weapons non-proliferation, peaceand stability in the Taiwan Strait and South China Sea, and the counter-terrorism campaign. Congress has exercised oversight over laws on sanctions, including those affecting satellite exports,as well as renewed military-to-military exchanges; enacted legislation requiring reports onproliferation and China's military buildup; and influenced expanded defense assistance for Taiwan. Options for Congress include holding hearings to assess such aspects of policy toward the PRC andTaiwan, revising laws on sanctions, and reviewing the implications of the increasing trends towardadvanced arms sales to and closer military relations with Taiwan.

U.S.-economic relations with the PRC, Hong Kong, and Taiwan will continue to be of interest to Congress as policymakers seek to promote greater market opportunities for U.S. businesses in thiseconomically dynamic region. December 2002 marks the one year anniversary of the PRC'saccession to the World Trade Organization (WTO). Administration officials report that Beijing'scompliance with its WTO obligations has been mixed. Major points of contention include recentlyissued PRC regulations on agricultural products and services, which U.S. officials charge limitmarket access for foreign firms. Members will likely continue to press the Bush Administration toaggressively seek resolution of WTO-related trade disputes. A key issue for Congress is how muchresources should be allotted to U.S. government agencies that monitor China's WTO complianceand provide WTO-related training in China. Some Members have expressed concern over Taiwan'sgrowing economic dependence on Mainland China for its trade and overseas investment. Data forthe first half of 2002 indicate that the PRC has become Taiwan's largest export market (replacingthe United States, which had been the Taiwan's most important market for many years). SomeMembers have indicated support for the establishment of a free trade agreement between the UnitedStates and Taiwan to promote greater bilateral trade and investment ties.

Pakistan. [[author name scrubbed], Analyst in AsianAffairs ([phone number scrubbed])] The policy issue with Pakistan is how to handle relations with this Muslim,nuclear- armed, front-line state in the Afghan campaign while at the same time searching for AlQaeda who have fled there, reducing the potential for nuclear war over disputed territory in Kashmir,supporting democracy and human rights, and improving relations with neighboring India. Pakistanis an important U.S. ally in the global anti-terror coalition, but the United States is concerned aboutnondemocratic practices there and possible nuclear weapons proliferation activities. Congressaddresses issues with Pakistan primarily through annual foreign assistance authorizations, foreignoperations appropriations bills, sanctions, hearings, and waivers authorizing arms sales.

Most U.S. sanctions on Pakistan (imposed after General Pervez Musharraf overthrew a civilian-led government in 1999 and in the wake of Pakistan's May 1998 nuclear weapons tests)were waived in September 2001. The controversial October 2002 national elections led to theseating of a new civilian government, but Musharraf has been criticized for making constitutionalchanges that could institutionalize a role for the military in governing Pakistan. In the 107thCongress, legislation was introduced aimed at restoring restrictions on aid to Pakistan through theremoval or modification of the President's waiver authority.

The Pakistani government also may have been involved in the delivery of uranium enrichment materials and/or technologies to North Korea. If President Bush determines that such deliveries haveoccurred, all non-humanitarian U.S. aid to Pakistan may be halted under the so-called SymingtonAmendment to the Arms Export Control Act. Other issues of concern include a proposed $1 billionin debt forgiveness, continued cross-border infiltration into Indian Kashmir by Islamic militants, thefuture of Pakistan-U.S. anti-terrorism cooperation, Pakistan's economic reforms, and the recentelectoral successes of Islamist politicians who have expressed strongly anti-American andoccasionally pro-Taliban sentiments.

India. [[author name scrubbed], Analyst in AsianAffairs ([phone number scrubbed])] The policy issue with India is how to improve U.S.-Indian relations as theanti-terror campaign has replaced the Cold War in framing the relationship. In September 2001,President Bush waived nuclear weapons-related restrictions on U.S. aid to India. New Delhi's fullsupport for U.S. anti-terror operations marked the beginning of ongoing security cooperation withthe United States and has led to joint military exercises and the resumption of defense trade. TheUnited States welcomed the state elections in Jammu and Kashmir in October 2002 that resulted inthe ousting of the long-ruling National Conference Party and the establishment of a seemingly moremoderate state government that has raised hopes for peace in the region. Yet the India-Pakistandispute over Kashmir continues to cost lives and keep tensions high, and the nuclear dimensionfurther raises the stakes for regional stability and U.S. interests. In addition, the Congress continuesto have concerns about human rights and religious freedom in India, along with bilateral trade andthe continuation of reforms in the Indian economy, especially those related to foreign investment.

Southeast Asia. [[author name scrubbed], Analyst inAsian Affairs ([phone number scrubbed]); [author name scrubbed], Specialist in Asian Affairs ([phone number scrubbed])] When dealingwith Southeast Asia, Congress will primarily be concerned with overseeing and funding U.S. effortsto combat radical Islamist terrorist groups in the region. Many of these groups, particularly thosein the Philippines, Indonesia, and Malaysia, are known to have ties to the Al Qaeda terrorist network. Since the September 11, 2001 attacks against the United States, a number of violent plots againstU.S. and other Western targets in the region have been discovered or carried out. The mostdevastating attack, the October 2002 bombing of a tourist area of Bali, Indonesia, killed nearly 200,including more than one hundred foreign tourists, most of them Australians. To combat the threat,the Bush Administration has significantly increased intelligence cooperation with Southeast Asiancountries, deployed troops to the southern Philippines to advise the Philippine military, pressedregional governments (particularly Indonesia) to arrest suspected terrorist individuals andorganizations, resumed ties with the Indonesian military, and signed a multilateral counterterrorismagreement with Southeast Asian countries. Although Southeast Asian governments share the UnitedStates' interest in fighting terrorism, some view an increased American military presence in theirregion with ambivalence because of the political sensitivity of the issue with both Islamic and secularnationalist groups. Indonesia is particularly sensitive in this regard, although Jakarta hassignificantly increased cooperation since the Bali bombing.

Aside from its oversight responsibilities, Congress is involved in the anti-terrorist campaign through the appropriations process. Congressional options revolve around decisions regardingfunding levels and conditionality for U.S. assistance. In the case of the Philippines, Congress willconsider Administration requests to provide new military and infrastructure assistance to Manila,which received over $115 million in aid in FY2002. In its FY2003 budget request, the BushAdministration requested over $90 million for the Philippines. Regarding Indonesia, in FY2002 theU.S. provided $12 million in assistance for anti-terrorism police training and made plans to includeIndonesian army officers in the Defense Department's new Counter-Terrorism Fellowship Program. In the still pending FY2003 foreign operations appropriations bill, the House and SenateAppropriations Committees reported language relaxing most of the long-standing "LeahyAmendment" restrictions, which currently ban aid to Indonesia's military until it fulfills severalconditions relating to accountability for reported human rights abuses. The FY2004 requests foranti-terrorism related assistance to these countries may be even larger than the F 2003 request.

Congress also will oversee the Bush Administration's efforts to strengthen economic ties with several countries in the region. The Administration is close to finalizing a free trade agreement(FTA) with Singapore, has begun negotiating an FTA with Australia, and has announced its desireto open FTA talks with other Southeast Asian nations. (See section entitled "Trade") FTAs mustbe approved by Congress in order to go into effect. Additionally, Congress will have an opportunityto review Vietnam's normal trade relations (NTR) status, which Hanoi will receive if the Presidentrenews Vietnam's waiver from certain trade restrictions.

Defense

Introduction

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

Defense promises to be a major focus of attention early in the 108th Congress because of the ongoing war against terrorism and a possible war with Iraq. Early in the year, Congress may beasked to consider supplemental appropriations to cover the costs of these conflicts. TheAdministration may also ask for an unallocated contingency fund to cover unplanned costs ofmilitary operations in the future.

A number of other defense policy issues will also be on the agenda . One issue which may carry over from last year is whether to permit concurrent receipt of military retired pay and veteransdisability benefits. A compromise reached in the FY2003 defense authorization bill ( P.L. 107-314 )provides benefits for military retirees with disabilities determined to be caused by combat orcombat-related injuries. Veterans service organizations want a much broader benefit, which theWhite House has opposed in large part on budgetary grounds.

Other issues include defense versus non-defense spending, how to set priorities among major weapons programs, defense transformation, the Department of Defense's role in homeland security,military end-strength, measures to privatize civilian defense jobs, defense acquisition reform, andmilitary base closures, which are planned for 2005. Missile defense is a perennial matter of debatein Congress, and Congress may also debate whether to permit development of new nuclear weaponsfor missions such as the destruction of deeply buried and hardened targets. Congress will addressthese and other issues initially in action on the congressional budget resolution and later in actionon annual defense authorization and appropriations bills.

Budgetary Issues

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

[author name scrubbed], Consultant in National Defense ([phone number scrubbed])

Last year, the Administration requested the largest one-year increase in defense spending since the early years of the Reagan Administration. Congress approved most of the request, with theexception of $10 billion that the Administration wanted as an unallocated contingency fund for costsof counter-terrorism operations. In the end, the FY2003 budget for national defense is almost $38billion above the originally enacted FY2002 level. Congress also approved more than $16 billionin supplemental appropriations for FY2002. The Administration is projecting continued, thoughmuch more modest, increases over the next few years.

The large increase in spending has not been enough to meet all the demands, however. Funding for weapons acquisition has been a particular matter of debate. Last year, the congressional defensecommittees expressed concern that the Navy requested only five new ships in the FY2003 request,since 8 to 10 new vessels are required on average each year to maintain a fleet of 300 ships. Thebudget for weapons procurement has been projected to grow from about $72 billion in FY2003 toalmost $100 billion by FY2007. But with several new weapons expected to be in production by theend of the decade, funding for weapons modernization remains very tight. This has prompteddebates within DOD and Congress about priorities among some proposed, high profile serviceacquisition plans.

A big constraint on funding for weapons acquisition is that other parts of the budget have grown very rapidly. Congress provided a 4.8 percent pay raise for uniformed military personnel in theFY2000 defense budget, and since then it has approved several measures that have driven uppersonnel costs dramatically. Increases include annual pay raises intended to close the gap betweenmilitary pay raises over the past 20 years and a measure of pay raises in the civilian sector; pay tablereform that provided much larger raises to personnel in the middle ranks to improve retention;increased housing allowances; and substantially expanded retirement benefits, includingDOD-guaranteed health care to 65-and-older military retirees.

Meanwhile, funding for operation and maintenance (O&M) - which finances everything from recruitment and training, to weapons maintenance, base operations, medical care for militarypersonnel and their dependents, and environmental cleanup and compliance - has continued to growat a pace of two to three percent per year above inflation per active duty troop. Taken together,increased personnel and O&M costs take up about two-thirds of the projected increase in defensespending between FY2000 and FY2007.

Several elements add further to the budget debate. Senior Administration officials have placed a very heavy emphasis on defense transformation, which puts a priority on funding for some newinitiatives. Some Members of Congress would like to see a substantial increase in active dutyend-strength to cope with ongoing high demands on the force, particularly with the global campaignagainst terrorism continuing. One solution would be to increase the defense budget beyond what theAdministration has proposed. But an increase in defense spending would add further to the budgetdeficit, and there are many competing demands on the federal treasury.

Defense Transformation

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

Defense transformation can be defined as large-scale, discontinuous, and possibly disruptive changes in military weapons, concepts of operations, and organization that are prompted bysignificant changes in technology or the international security environment. By most counts, therehave been a few or several such transformations in recent history. The Bush Administration andother supporters believe that technological developments make another such transformation possibleand necessary if U.S. military forces are to meet all 21st- century challenges. The Administrationhas made transformation a central theme of its defense planning, and has stated that its FY2004defense budget submission will be the first to fully reflect its defense transformation priorities. TheDepartment of Defense has established an Office of Force Transformation, and the Services havedrafted road maps for implementing transformation in coming years.

Congress has an interest in defense transformation because the process can bring about significant changes in defense programs and budgets. Among other things, transformation can leadto reduced spending on current-generation (so-called "legacy") weapons and supporting capabilitiesand increased spending on next-generation "transformational" systems. There has been considerabledebate over which defense programs should be considered transformational (or legacy) and thereforecandidates for increased (or reduced) spending.

Congress' role is to assess the need for defense transformation, examine the various ways in which U.S. military forces might be transformed, and act on the Administration's proposals fordefense transformation. The primary vehicles for such involvement are the annual defenseauthorization and defense appropriation bills. Key questions for Congress on defense transformationinclude: Is defense transformation necessary? If so, is the Administration's plan adequate? Whatalternatives have been offered? Does the Administration's plan adequately balance transformationagainst competing priorities, such as near-term readiness and procurement of "legacy" equipment? Is there sufficient consensus regarding the meaning of defense transformation? Is the termtransformation being mis-used as an all-purpose tool to justify or condemn certain programs? Inwhat ways might defense transformation make it easier or harder for Congress to conduct oversightof DOD programs?

Congress has several options on defense transformation. It can decide to agree or disagree with its necessity. It can approve, modify, or reject the Administration's funding requests for specificdefense programs on the grounds of whether the Administration has correctly assessed theirrelationship to defense transformation. And it can establish policy goals, terms and conditions forpursuing programs, and reporting requirements that are intended to shape defense transformation andCongress' role in overseeing transformation efforts.

Weapons Acquisitions

Development and procurement of weapons systems for U.S. Armed Forces are important activities that Congress ultimately determines through annual defense authorization andappropriations bills and oversight. As discussed above, DOD is currently emphasizing research anddevelopment for "transformational" systems. Research and development and procurement alsocontinue, however, for purposes of replacing and upgrading current "legacy" force equipment andfor more rapid introduction of "interim" forces that incorporate some transformational capabilities. The precise categorization of systems is probably less important than that the overall balance ofacquisitions provide for a capable force at any time it is required.

Ground Forces. [[author name scrubbed], Specialistin National Defense ([phone number scrubbed])] . The centerpiece of Army transformation efforts is the FutureCombat Systems (FCS), currently an R&D concept only, with a goal for initial production inFY2008. It will fight within a futuristic network of manned and unmanned vehicles on the groundand in the air. Congress will consider whether almost a billion dollars per year is appropriate for aprogram that many consider to be a high-risk effort. Only slightly less is now being provided todevelop an indirect fires component for the FCS to replace the Crusader howitzer after theAdministration canceled it in 2002. Almost a billion dollars annually is also being spent to procureStryker armored vehicles to equip six Interim Brigade Combat Teams, one forming now at FortLewis, Washington. One weapon that will likely attract congressional interest again is theanti-personnel landmine; the Army has reinitiated a quest for alternative systems that might satisfythe Ottawa Treaty banning landmines. The Army and Marine Corps will also have to maintain theirlegacy forces and upgrade their battlefield awareness capabilities, training resources, and logisticssupport. Congress will be asked to make judgements about the proper balance of many expendituresneeded to guarantee U.S. preparedness for ground combat now and in the future.

Naval Forces. [[author name scrubbed], Specialist inNational Defense ([phone number scrubbed])] . Key potential issues for the 108th Congress regardingacquisition ofnaval weapons include the following: Is the Administration's planned size of the Navy adequate forcarrying out the Navy's missions? Does the Administration's FY2004-FY2009 ship and aircraftprocurement plan adequately support the planned size of the fleet? What are the merits of fundingthe acquisition of operational Navy ships through the Navy's research and developmentappropriation account rather than the Shipbuilding and Conversion, Navy (SCN) appropriationaccount, where they traditionally have been funded? What are the merits of using split funding,advance appropriations, or other non-traditional funding mechanisms to procure Navy ships? Whatimplications might these mechanisms have for the full funding policy, which Congress imposed onthe Department of Defense (DOD) in the 1950s to strengthen DOD budgeting discipline and improveCongress' ability to conduct oversight of DOD weapon acquisition programs? Has the Navy broughtunder control the problem of cost overruns on ships procured in previous years? What are the meritsof the Administration's acquisition plans for aircraft carriers, DD(X) destroyers, and Littoral CombatShips (LCSs)?

Aviation. [[author name scrubbed], Analyst inNational Defense ([phone number scrubbed])] . All four military services are pursuing major tactical aviationmodernization programs that will contend for funding in FY2004. The Air Force's topmodernization priority is the F/A-22 Raptor , designed to defeat enemy aircraft and, according tosome, ground-based air defenses as well. At issue is the aircraft's cost, schedule, the number to beprocured, and whether a combination of other manned and unmanned aircraft might more cheaplydo the same job. A $45 billion congressional cost cap on F/A-22 production means that cost andschedule overruns may have to be mitigated by cutting the planned purchase of 295 aircraft.

The Joint Strike Fighter (JSF) is the largest aviation program in terms of overall estimated cost ($233 billion) and numbers (2,900 aircraft). This multi-role aircraft will be produced in threedifferent, but highly common variants to satisfy Air Force, Marine Corps and Navy needs. Eightallied countries are co-developing the JSF and many more may be interested in purchasing it. Atissue is the extent to which the JSF is needed relative to other aircraft such as the F/A-22 and the Navy's F/A-18E/F Super Hornet , which flew missions in Iraq in 2002.

Aerial refueling, and long range bomber aircraft are two additional key aviation modernization issues. All tactical aircraft rely on aerial refueling to boost their combat effectiveness, but the AirForce's KC-135 Stratotanker fleet is old and in need of replacement. Leasing 100 Boeing 767aircraft to replace the oldest KC-135s was proposed in the 107th Congress and proved controversial. This issue, and the lack of modernization funding for long range bombers despite their achievementsin recent military operations, will likely be debated in the 108th Congress.

The Army's only major aviation program is the RAH-66 Comanche armed reconnaissance helicopter, designed to replace two different existing Army helicopter models. In November, 2002,the program was restructured for a sixth time, cutting the number of aircraft in half (from 1,213 to650 helicopters) and reducing the production phase by $12 billion. At issue is whether the Armyneeds an armed reconnaissance helicopter, and if so, the appropriate mix of Comanches, AH-64Apache attack helicopters, and unmanned aerial vehicles (UAVs) currently under development.

The Marine Corps' top aviation priority is the V-22 Osprey tilt-rotor aircraft. Designed to carry more combat troops farther and faster than current helicopters, the Osprey program has experienceddifficulties, including several fatal accidents. After a lengthy hiatus to address several engineeringproblems, the Osprey re-entered its test flight program in June 2002. At issue is whether the Osprey's tilt-rotor technology is mature enough to justify continuing the 458 aircraft, $46 billionprogram, and whether some combination of helicopters could offer a cheaper and safer alternative.

Personnel Issues

Military Manpower. [Robert Goldich, Specialistin National Defense ([phone number scrubbed]); [author name scrubbed], Analyst in National Defense ([phone number scrubbed])] As the108th Congress opens, U.S. overseas military commitments have been growing steadily over the pastdecade. The major forces that the United States has maintained in Europe and East Asia since theend of World War II have been followed by a slow but steady increase in forces deployed to thePersian Gulf region following the Persian Gulf War of 1990-1991, deployments to the Balkansbeginning in 1993 (Macedonia), and a rapid dispatch of expeditionary forces to Central Asia and itsenvirons within days of September 11, 2001 for anti-terrorism operations. In addition, the last fewmonths have seen the buildup of the sizable force needed for a potential major theater war with Iraq. All this has happened while U.S. active duty and reserve military manpower strength has declinedby over 40% from the Cold War levels of the late 1980s.

To meet the requirements of the anti-terrorism operations, almost 130,000 reservists, some of them facing two years of active duty, have been mobilized, and the services have implementedso-called "stop-loss" programs which forbid certain personnel to leave active duty voluntarily. Somespeculate that a war with Iraq could require another 250,000 reservists (Vernon Loeb, "MilitaryForces Ordered to Gulf," Washington Post , December 28, 2002, A1). The collective effect of all ofthese overseas deployments has been to increase the frequency with which many military personnelmust perform overseas tours, often without families; to increase the frequency with which reservistsface a "callup; and to increase the workload of those military personnel stationed in the UnitedStates, as they try to fill the gaps left by deployed units and personnel or as they prepare for futuredeployments. Some particular occupational specialties or types of units - including some foundpredominantly in the reserves - are much more affected by these conditions than others. At present,the potentially negative impact of these factors on military recruiting and retention appear to havebeen offset by the surge in patriotic sentiment after the terrorist attacks on the World Trade Centerand the Pentagon, the sluggish economy, and the enhanced military pay and benefits enacted byCongress since the late 1990s. However, the increased scale of U.S. military operations worldwidehas raised concerns that there is a mismatch between military manpower and the manpowerrequirements of current operations, which could create recruiting and retention problems in the nottoo distant future.

Several proposals have been advanced to ensure that the military services have enough personnel of sufficient quality to meet the requirements of overseas commands. One has been toincrease active duty strength across the board. The conference report on the FY2003 NationalDefense Authorization Act ( P.L. 107-314 ) stated that "active duty end strengths should be increasedsubstantially." The Administration and DOD have so far been opposed to this, mostly on budgetarygrounds. DOD has been pressuring the military services to reduce the number of reservists they haveon active duty to save money. DOD does, however, plan to increase the proportion of "highdemand" units within the active duty force and decrease their proportion in the reserves. If a majorwar with Iraq does take place, however, it is difficult to see how the services can avoid a largeadditional reserve mobilization or a substantially larger active duty force for several years to comein order to garrison and reconstruct a defeated Iraq. Another proposal for reducing manpowerpressures is to reduce the number of U.S. personnel participating in peacekeeping and stabilityoperations, most notably in places like Kosovo, Bosnia, and the Sinai.

Concurrent Receipt of Military Retired Pay and Veterans' Administration (VA) Disability Benefits. [Robert Goldich, Specialist in NationalDefense ([phone number scrubbed]); [author name scrubbed], Consultant in National Defense ([phone number scrubbed])] Passed in the waningdays of the 107th Congress, the FY2003 National Defense Authorization Act ( P.L. 107-314 )provided a new benefit for about 30,000 military retirees whose disabilities are related to action incombat or combat-related situations such as field training or maneuvers. According to the statute,the Department of Defense is required to develop eligibility criteria and procedures for this newbenefit by the end of May 2003. This compromise temporarily resolved a contentious disputebetween the Administration and Congress about lifting the 111-year old prohibition against"concurrent receipt"- the collecting by military retirees of both military retired pay and VA disabilitybenefits at the same time. (Currently, military retirees may receive all of the tax-exempt VAdisability compensation to which they are entitled, but their military retired pay must be reduced,dollar for dollar, by the amount of this VA compensation). Last year, the Administration threatenedto veto the House and Senate versions of concurrent receipt because of concerns about the substantialcost and the potential effect on other federal benefit programs with similar offsets. Faced withcontinued pressure from veterans service organizations for a broader benefit, the issue may berejoined in the 108th Congress when the House and Senate Armed Services Committees plan to holdhearings.

Abortion. [David Burrelli, Specialist inNational Defense ([phone number scrubbed])]. Since the late-1980s, the Administration and Congress have sparredover modifying the provisions and/or laws pertaining to the availability of abortion services via theDepartment of Defense. Under current law, funds available to DOD may not be used to performabortions except where the life of the mother would be threatened if the fetus were carried to term. Further, DOD facilities may not be used to provide abortions except for the same "life of the motherclause" or in cases of rape or incest. Legislative attempts to modify, strike, or strengthen thislanguage have become a routine part of the process of considering the National DefenseAuthorization Act.

Intelligence

Richard A. Best, Jr., Specialist in National Defense ([phone number scrubbed])

The transformation of U.S. defense capabilities has important implications for intelligence agencies. The growing dependence of operational forces on precise, real-time locating data increasesrequirements for information from satellites, manned aircraft, and, especially, unmanned aerialvehicles. There are also additional requirements for communications systems able to rapidly movedata from "sensor to shooter" and for processing and analytical capabilities. Resources devoted toproviding real-time intelligence to the operating forces will have to be balanced against thecontinuing need to give intelligence support to national-level policymakers, including those dealingwith international terrorism. The recent establishment of the position of Under Secretary of Defensefor Intelligence may result in administrative changes within DOD and affect the relationship ofdefense intelligence agencies to the Director of Central Intelligence. (See also the section belowentitled "Department of Defense Role in Homeland Security").

Department of Defense Role in Homeland Security

[author name scrubbed], Specialist in National Defense ([phone number scrubbed])

Robert Goldich, Specialist in National Defense ([phone number scrubbed])

Richard A. Best, Jr., Specialist in National Defense ([phone number scrubbed])

For more than a century, the U.S. military has focused on expeditionary warfare overseas. Its participation in domestic operations has been sporadic and generally in response to natural disasters. With the heightened concern about large-scale terrorism have come efforts to involve DOD moreclosely with federal, state, and local agencies in their homeland security activities. Selected DODresources are unique in the government, both in their size and capabilities, and can be applied to bothdeter and respond to terrorist acts. While the DOD leadership is ready and willing to play asupporting role in these efforts, it wishes to maintain overseas military operations as theDepartment's primary focus, and avoid an inadvertent drain of fiscal, materiel, and personnelresources to the homeland security mission.

In response to the increased focus on homeland security, DOD activated a new combatant command, U.S. Northern Command (NORTHCOM) on October 1, 2002. At the same time, theAdministration is setting up the new Department of Homeland Security (DHS). Exactly how DODand DHS will establish and maintain coordination and cooperation remains to be seen. Thelegislation creating DHS ( P.L. 107-296 ) is silent on this question, and details on NORTHCOMremain scarce.

The intelligence collection and analysis capabilities within the Department of Defense are a substantial portion of the United States' national intelligence assets. They include the NationalSecurity Agency, the National Reconnaissance Office, the National Imagery and Mapping Agency,the Defense Intelligence Agency, and the intelligence and security branches of the individual armedservices. Many analysts assert that the means and extent of cooperation/coordination between DODand DHS will be of great importance to the success of DHS's efforts to provide comprehensiveintelligence analysis. The act establishing DHS created a threat assessment office that will dependin large measure upon intelligence provided by DOD agencies, but requirements for intelligence onterrorists will have to be balanced against ongoing needs for intelligence on traditional geopoliticaland military issues. Providing intelligence support to DHS may raise questions about theinvolvement of DOD in domestic law enforcement efforts, given that the statute creating DHSspecifically retains the Posse Comitatus Act.

The Department of Defense, with its active duty and reserve forces, and the ability to federalize National Guard units upon presidential direction, has the largest and most diversified personnelassets in the Federal Government. As was demonstrated in the months after the September 2001terrorist attacks, they can be used in a variety of security roles, though not without detracting fromother mission capabilities. The role of the National Guard in homeland security has become a topicof particular discussion. Some believe that the National Guard is tailor-made for coping with localand community contingencies, given its traditional role as the militia of the individual states, itsnationwide presence, and its size (nearly half a million people). This has led to calls for greatlyexpanding its role in homeland security. Others argue that the Guard already has important missionsas a federal military reserve force, which cannot be significantly reduced. They also are concernedthat if the Guard were perceived to be an organization with primarily local and domestic missions(rather than having both domestic and foreign warfighting tasks), its ability to recruit and retainsufficient numbers of qualified soldiers could suffer.

Additionally, the Department of Defense remains the greatest federal repository of resources for responding to a chemical, biological, radiological, or nuclear (CBRN) incident. It is anticipatedthat civilian authorities will eventually develop better capabilities to deal with CBRN incidents;however, for the foreseeable future there will be continued reliance upon DOD assets. Indicativeof the competing demands for DOD resources, if the Administration begins military operationsagainst Iraq, active duty DOD CBRN resources may be deployed overseas, and not available fordomestic incidents.

Most DOD research & development related to homeland security is in chemical-biological defense. The FY2003 budget request identified approximately $602 million as DOD funding forhomeland security biodefense: bioweapons defense and countermeasures - $120 million; agentdetection, identification, and monitoring - $300 million; and other unspecified biodefense research- $182 million. Congressional appropriations supported this request in full.

Defense Management and Business Operations Reform

Acquisition Process Reform. [Gary Pagliano,Specialist in National Defense ([phone number scrubbed])] The Department of Defense (DOD) has initiated majorchanges in the defense acquisition process in an effort to make it more responsive to rapid changesin threats, technology, warfighting needs, and the costs of alternative weapons. While Congress hasnot rejected these changes, some key congressional committees have been concerned about theeffects of the new procedures in general, and about receiving adequate information to carry out itscongressional oversight responsibilities in particular. DOD is implementing an approach fordeveloping new weapon systems called evolutionary acquisition with spiral development. The coreidea of evolutionary acquisition is to develop incremental or "block" versions of a weapon, each witha certain amount of useful military capability, that over time form a series ultimately leading to thedesired final capability. Each block includes a phase for conceiving, developing, producing andsustaining a weapon system. Perhaps the most important phase is the second phase (development)which uses spiral development - an iterative process for developing a weapon system's capabilitieswithin a block by encouraging the developer, tester, and user to interact with one another so as torefine the system's operational requirements. The result is a process which contains moreuncertainty than its predecessor, for example in the initial program description and definedbenchmarks of a proposed weapons system. This uncertainty has been reflected in DOD's lack ofclarity in reporting to Congress on these systems in the congressional oversight and appropriationsprocess, which has not changed.

Congress included a number of provisions in the FY2003 Defense Authorization Act (PL107-314) which mandate reports documenting DOD's use of evolutionary acquisition and spiraldevelopment for major acquisition programs. Other provisions required that DOD weapons testingremain independent to ensure accountability in weapons development. While Members of Congressgenerally support initiatives to create a more efficient acquisition process, many worry that the newprocedures take too much discipline and structure out of the traditional acquisition process, andcould potentially lead to technical difficulties, and cost overruns. Expensive weapon programs, suchas the ballistic missile defense, DD(X) surface combatant, and unmanned air vehicle (UAV)programs, costing billions of dollars, are affected by these DOD initiatives. The 108th Congress willlikely face continued challenges in its oversight role of maintaining an acceptable level oftransparency over an accelerating and complex DOD acquisition process.

Defense Outsourcing Initiatives. [Valerie Grasso,Analyst in National Defense ([phone number scrubbed])] The 108th Congress is expected to examine a numberofdefense outsourcing initiatives and may face increased calls for oversight of DOD competitivesourcing policies and initiatives. The Department of Defense has sought to reduce its infrastructurecosts to achieve savings that could help finance future weapons and military equipmentmodernization. It has long relied on competitive sourcing, also called outsourcing, as a tool to dothis. OMB Circular A-76 is used for determining whether commercial activities should beperformed by the private sector or by federal government employees.

The policy of competitive sourcing is a major component of the Bush Administration's Management Agenda, which has identified competitive sourcing as one of five government-wideinitiatives to improve the management and performance of the federal government. The BushAdministration has viewed OMB Circular A-76, and its legislative companion, the Federal Activitiesand Inventory Reform (FAIR) Act ( P.L. 105-270 ), as a management reform tool to meet theAdministration's long-term goal of competing about 425,000 federal jobs, which represents abouthalf of all commercial work performed by the federal government. In March, 2001, OMB directedfederal agencies to compete five percent of all federal jobs considered commercial in nature byOctober, 2002, and ten percent of all federal jobs considered commercial in nature by October, 2003. OMB has not announced a specific competitive sourcing goal for 2004.

To support the Administration's competitive sourcing goals, OMB recently completed its planned overhaul of the federal government's job competition process and released the revised OMBCircular A-76 (FR Doc. 02-29472; published in Federal Register Vol. 67, No. 223, 69769-69774,November 19, 2002). The revision is currently in a "comment evaluation" period; no date for finalpublication has been set.

Key highlights of the proposed Circular include: 1) a presumption that all activities or functions are commercial in nature, unless justified as inherently governmental; 2) a reduction in the lengthof time for the completion of competitions (maximum of one year); and 3) a use of cost-technicaltradeoffs, or "best value" in the awarding of contracts for defense work (versus the awarding ofdefense contracts based on "low costs.)" The use of best value allows the contracting official toconsider technical superiority, quality, innovation, as well as past performance. Implementation ofthe revised circular would significantly affect defense competitive sourcing policy, as a provisionof Title 10, U.S.C. Section 2462 requires that DOD contracts be awarded based on low cost, not bestvalue.

Another major outsourcing initiative, recently announced by the United States Army, will target about two-thirds of the Army civilian workforce. The Secretary of the Army, Thomas White, hasannounced a new initiative called the "The Third Wave" to outsource approximately 214,000 jobsin the U.S. Army (affecting up to 160,000 civilians and up to 60,000 uniformed military personnel). The Third Wave differs from the first and second waves because it includes base operation activities,including logistics, training, information management, and public works.

Base Realignment and Closure (BRAC). [DaveLockwood, Specialist in National Defense ([phone number scrubbed])] On November 15, 2002, Secretary ofDefense Donald Rumsfeld issued a memorandum to senior staff on DOD's transformation initiativeas it applies to a new round of base realignments and closures authorized by Congress in 2001 ( P.L.107-107 , Sections 3001-3007). He stated that "new force structures must be accompanied by a newbase structure," and added that "BRAC 2005 should be the means by which we reconfigure ourcurrent infrastructure [bases] into one in which operational capacity maximizes both war fightingcapability and efficiency." He then directed that the process begin immediately; this was, in effect,the start of DOD's 2005 base closure implementation process.

In his memorandum, the Secretary of Defense stressed the importance of examining opportunities for greater joint activity as a means of achieving a more efficient base structure. It appears that DOD's network of more than 100 laboratories are prime candidates for suchconsolidation. The Secretary of Defense also declared that DOD would not make any bindingclosure or realignment decisions prior to the submission of final recommendations to the newCommission in May 2005. His statement, however, did not exclude the possibility of DODconducting internal, non-binding deliberations at this time.

The new BRAC law, in large part, replicates the previous 1990 base closing statute ( P.L. 101-510 ). Key milestones for the 2005 round are as follows: (1) December, 2003 - the Secretaryof Defense publishes draft selection criteria for closing bases; (2) February, 2004 - the Secretary ofDefense publishes final selection criteria and provides Congress with a force structure plan,inventory, capacity analysis, and certification of the need for BRAC closures; (3) March, 2005 - thePresident, in consultation with congressional leadership, appoints nine members to the new BRACCommission; (4) May, 2005 - the Secretary of Defense sends to Congress and the BRACCommission a list of bases recommended for closure or realignment; (5) September, 2005 - theCommission sends to the President a list of its closure and realignment recommendations; and (6)November, 2005 - the President certifies the Commission's closure/realignment list (if he declines,the whole process is terminated).

The 108th Congress is likely to monitor the ongoing BRAC process. Many Members may be concerned about plans for military installations in their districts and states. One major focus will beefforts by local communities to prevent "base encroachment" - the process whereby bases areprogressively hemmed in by urban growth, competition for airspace, protection of endangeredspecies, and other factors that can interfere with military readiness.

Trade

Overview

[author name scrubbed], Specialist in International Trade and Finance ([phone number scrubbed])

With narrow passage last summer of the Trade Act of 2002 ( P.L. 107-210 ), Congress ended eight years of debate over whether to re-authorize trade promotion authority (TPA), formerly calledfast-track authority. This authority allows the President to submit to Congress legislationimplementing new trade agreements under special legislative procedures that do not allow foramendment. While there is unlikely to be trade legislation over the next two years that will be ofthe magnitude or divisiveness of the Trade Act of 2002, particularly given the outcome of themid-term election, the 108th Congress will have a busy trade agenda. The Bush Administration isexpected to ask Congress to approve free trade agreements (FTAs) with Chile and Singapore andperhaps other countries. In considering whether to approve FTAs submitted by the Administration,Congress will evaluate how these agreements affect the often divergent interests of exporters,import-competing industries, consumers, and workers, as well as the progress of two broader tradenegotiations that are scheduled to be concluded by 2005 - the Free Trade Area of the Americas(FTAA) and the Doha Development Agenda. As U.S. dependence on trade has grown, controversyconcerning the costs and benefits of agreements that accelerate the economic integration of theUnited States with the rest of the world has continued.

The 108th Congress will also take up a number of other trade issues. Efforts again will be made to re-authorize the Export Administration Act where the main controversy concerns the efficacy ofloosening export controls on sensitive goods given today's terrorist threats. In addition, Congressfaces the challenge of bringing varied U.S. laws into conformity with World Trade Organization(WTO) rules. Absent compliance, the European Union and other trading partners could imposesanctions on U.S. exports.

Trade Agreements and Negotiations

Introduction. [[author name scrubbed], Specialistin International Trade and Finance ([phone number scrubbed])] The Bush Administration is negotiating or isproposing to negotiate an unprecedented number of trade agreements. The negotiations includebilateral, regional, and multilateral trade liberalizing agreements. Bilaterally, the United States hascompleted negotiations on an agreement to establish a free trade area (FTA) with Chile, and hasreached an agreement in principle with Singapore for a free trade agreement. The Administrationalso notified Congress of its intention to begin FTA negotiations with Morocco, Central America(Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), the South African Customs Union(South Africa, Botswana, Lesotho, Namibia, and Swaziland), and Australia. In addition, the UnitedStates announced in October 2002 the Enterprise for ASEAN Initiative, a new trade effort with theAssociation of Southeast Asian Nations. This initiative would offer the prospect of bilateral freetrade agreements with ASEAN countries that are committed to economic openness and reforms. Negotiations for two broader agreements - the Western Hemisphere's FTAA and the WTO DohaDevelopment Agenda - are ongoing and scheduled to be concluded by January 2005.

The 108th Congress will likely face the question of whether to approve one or more free trade agreements. It is also expected to monitor negotiations on other free trade agreements and on theWTO Doha Development Agenda. The agreements and negotiations raise several important policyquestions:

Do the agreements and the ongoing negotiations serve U.S. interests?

Is the Administration fulfilling its obligations under the new Trade PromotionAuthority?

Are bilateral and regional free trade agreements and negotiations, on the onehand, and the U.S. multilateral agenda in the Doha Development Agenda, on the other hand,mutually supportive or in conflict?

How are FTA partners chosen and what economic or foreign policy criteriamust be met?

In deciding whether to approve bilateral free trade agreements, Members of Congress may weigh potential costs and benefits to their constituents and to the U.S. economy as a whole. Pointedconcerns may focus on how specific agreements differentially affect the interests of exporters,import-competing industries, consumers, and workers. For example, the Chile and Singaporeagreements are characterized as primarily opening up new markets for U.S. exporters withoutmaking any significant reduction in U.S. import protection. Agreements with Morocco and CentralAmerica, however, could produce strong competition for the U.S. textile and apparel sector, raisingindustry resistance. Committees with jurisdiction over trade agreements, particularly the HouseWays and Means and Senate Finance Committees, may raise questions regarding theAdministration's FTA strategy as well: How are FTA partners chosen? What economic or strategiccriteria must be met? Does the strategy complicate or support efforts to negotiate larger regional andglobal agreements?

Some critics maintain that bilateral FTAs offer limited economic benefits to the United States. Others worry that they could undermine efforts to conclude broader regional and global tradeagreements. While the larger agreements offer greater market opening opportunities for U.S.exporters and service providers, they also would require the United States to cut farm subsidies, andopen up still-protected sectors, such as textiles, faster. The American public's reaction to some freetrade agreements, such as NAFTA, has been chilly.

The Bush Administration maintains that FTAs support larger foreign policy goals, such as bolstering democratic regimes. The Administration also views bilateral FTA's as springboards forconcluding more ambitious regional and global pacts. Agreements with Chile and Central Americaare seen putting pressure on South American countries, particularly Brazil, to negotiate on the FreeTrade Area of the Americas. Progress in the FTAA, in turn, is seen pressuring the European Unionand others to make progress in the WTO trade negotiations.

Congressional Role in Trade Agreements. [[author name scrubbed], Specialist in International Trade and Finance ([phone number scrubbed])] Through its constitutionalresponsibility for the conduct of foreign commerce, Congress has an important role in whether andhow the United States participates in these and other trade negotiations. It decides whether or notchanges under trade agreements, which are negotiated by the executive branch, will be implementedin domestic law.

In 2002, the 107th Congress passed and the President signed the Trade Act of 2002 ( P.L. 107-210 ), which, among other things, granted the President so-called Trade Promotion Authority(TPA), previously known as fast-track authority. TPA allows the President to submit certain tradeagreements for a limited time period to Congress for approval under special legislative procedures. These provide that the Congress must accept or reject the total results of a trade agreement understrict timetables and without amendment provided that the Administration follows rules set out byCongress regarding negotiating objectives, consultations, and other matters. By increasing thelikelihood that Congress will approve trade agreements as negotiated, TPA bolsters the negotiatingleverage and credibility of U.S. trade negotiators.

If Congress determines that the executive branch is not observing the provisions of the trade legislation that it approved last year, it could consider several responses. It could withdraw expeditedprocedures for implementing legislation for trade agreements reached in the WTO negotiations, thusallowing amendment of the legislation. Members also might insist on more active participationthrough access to negotiating documents and as observers at negotiating sessions. The executivebranch probably would oppose both of these responses.

Implementing legislation for the Chile and Singapore FTA agreements is likely to be submitted to Congress this year. Implementing legislation for other bilateral agreements could be submitted in 2004. Regarding the FTAA and Doha Agenda, implementing legislation is not expected to besubmitted, assuming agreements are reached, until the 109th Congress. But the 108thCongress,having an expanded oversight authority as defined in the Trade Act of 2002, will play an crucial roleduring the last phase of the negotiations both through consultations and oversight. Some Membersmight participate as observers at negotiating meetings as well.

U.S.-Singapore FTA. [[author name scrubbed], Specialistin Industry and Trade ([phone number scrubbed])] The United States and Singapore launched negotiations on abilateral FTA in December 2000 and a final agreement is expected to be completed in late 2002. Theagreement would (with a phase-in period) eliminate tariffs on all goods traded between them, covertrade in services, and protect intellectual property rights. Following the anticipated signing of theagreement in early 2003, the White House is expected to send it to Congress for its concurrence andimplementation. The FTA was originally to be patterned after the U.S.-Jordan FTA and containsimilar environmental and labor clauses. The Bush Administration reportedly has negotiatedlanguage more acceptable to it for environmental and labor provisions. Two contentious issues inthe negotiations dealt with textiles (the length of the phase-in period and rules of origin) and capitalflows (the ability of Singapore to curb outflows of capital in a financial crisis). The U.S. TradeRepresentative claims that the FTA has broken new ground in electronic commerce, competitionpolicy, and government procurement and has achieved major advances in intellectual propertyprotection, environment, labor, transparency, customs cooperation, and transshipments. Singaporeis a major trading country; annual exports and imports exceed its GDP. It has a population of 4.4million.

U.S.-Chile FTA. [[author name scrubbed], Specialistin International Trade and Finance ([phone number scrubbed])] On November 29, 2000, the United States andChile announced they would negotiate a bilateral free trade agreement (FTA) that would be acomprehensive commitment to freer trade and investment in the region and directly supportnegotiations of the Free Trade Area of the Americas (FTAA). After passage of Trade PromotionAuthority (TPA) legislation in August 2002, the bilateral negotiations proceeded quickly and onDecember 11, 2002, an agreement was reached. Once implemented, the FTA calls for 87% of allconsumer and industrial goods to be traded duty free immediately between the two countries,including textile and apparel products manufactured from U.S. or Chilean inputs. Also, 75% oftariffs on farm goods and Chile's luxury tax on automobiles will be eliminated within the first fouryears, with tariffs on sensitive goods to be phased out over a period of up to 12 years. Rulesgoverning investment, services trade, dispute resolution and other critical issues to the United Stateswere also liberalized and made more transparent. Under the Trade Act of 2002, President Bush isrequired to give Congress a 90-day notice of his intention to sign the agreement. His signaturemakes way for consideration of trade implementing legislation in the 108th Congress. Chile is arelatively small economy and has a population of 15.5 million.

U.S.-Moroccan FTA. [[author name scrubbed],Specialist in International Trade and Finance ([phone number scrubbed])] The Bush Administration formallynotified Congress of its intent to negotiate an FTA with Morocco on October 1, 2002. Thenotification letter states that the proposed agreement would "support this Administration'scommitment to promote more tolerant, open, and prosperous Muslim societies." While the proposalhas a strong national security and foreign policy rationale, the FTA would also seek to support U.S.economic objectives. These include allowing U.S. agricultural products to compete more effectivelyagainst European agricultural products, which currently benefit from preferential access. FromMorocco's perspective, the FTA could lead to an increase in U.S. foreign direct investment andprovide preferences for textile and apparel exports to the United States. Formal negotiations arescheduled to commence in late January and to conclude in 2003. Morocco is a small economy andhas a population of just over 31 million.

U.S.-Australian FTA. [[author name scrubbed],Specialist International Trade and Finance ([phone number scrubbed])] On November 13, 2002, the BushAdministration notified the Congress that it would begin negotiations with Australia on an FTA 90days from that date. Australian officials lobbied U.S. policymakers for several years forconsideration as an FTA partner, and Prime Minister John Howard raised the issue in meetings withPresident Bush. The Bush Administration expressed interest but, until recently, had not committedto begin negotiations. Underlying the hesitation were U.S. concerns about Australian sanitary andphytosanitary controls that U.S. farmers claim act as barriers to U.S. agricultural exports to Australia.While the U.S. business community strongly supports the negotiations, the American agriculturalcommunity remains skeptical. A group that includes the National Cattlemen's Association expressed"strong reservations" about the negotiations and a second group led by the American Farm BureauFederation said, "We accept the initiation of FTA negotiations with Australia, but that does notnecessarily imply willingness to accept the final agreement." ( Congressional Daily. November 13,2002). Australia is a medium size economy which exports wheat, wool, and meat among otheritems. Its population is 19.5 million.

U.S.-Central American FTA. [[author name scrubbed],Specialist in International Trade and Finance ([phone number scrubbed])] On January 16, 2002, President Bushannounced that the United States would explore a free trade agreement with the five nationscomposing the Central American Common Market (CACM) - Costa Rica, El Salvador, Guatemala,Honduras, and Nicaragua. The first round of negotiations is scheduled to begin January 21, 2003in San Jose, Costa Rica and both sides have expressed optimism that an agreement can be concludedby year end. The Central America Free Trade Agreement, referred to as CAFTA, presents a newchallenge in bilateral negotiations because the five republics must first negotiate among themselvesin order to bring a single position on any given issue to the negotiating table with the United States. Although the Central American countries currently qualify as beneficiary countries under theCaribbean Basin Initiative, an FTA with the United States would potentially allow for furtherreduction in trade barriers, make permanent benefits provisionally guaranteed in legislation requiringperiodic re-authorization, and provide an environment even more conducive for U.S. foreigninvestment. For the United States, proponents of the agreement see it supporting U.S. exports andproviding less expensive imports, advancing the movement toward a Free Trade Area of theAmericas (FTAA), and solidifying deeper regional political and economic reforms that strengthendemocracy and promote stability. Critics have noted that Central America represents only 1% ofU.S. trade and so an FTA will have only a small, if noticeable, affect on the U.S. economy overall,with the possible exception of a few import competing industries that may feel the effects slightlymore.

U.S.-South African Union FTA. [Ian F.Fergusson, Analyst in International Trade and Finance ([phone number scrubbed])] On November 4, 2002, theUnited States Trade Representative (USTR) notified Congress that talks to negotiate a free-tradeagreement (FTA) with the Southern African Customs Union (SACU) would begin in February 2003.SACU is a customs union composed of South Africa, Botswana, Lesotho, Namibia, and Swaziland.The original SACU agreement dates from 1910 and was revised in 1969. A new agreement to morefully integrate the smaller states into decisionmaking for the area, which was previously dominatedby South Africa, was signed on October 21, 2002. The agreement is characterized by free movementof goods within SACU; a common external tariff; and the common revenue pool which isapportioned among the member states. A large degree of economic integration exists among theSACU states because of the agreement, perhaps accounting for the U.S. decision to negotiate an FTAwith SACU, rather than just South Africa. However, South Africa is the dominant economy of theregion, accounting for 87% of the population, and 92 % of the GDP of the customs area. U.S. exportsto SACU totaled $3.1 billion in 2001, led by aircraft, vehicles, construction and agriculturalequipment, and computers. U.S. imports from SACU totaled $4.8 billion, composed of minerals suchas platinum, diamonds, and titanium, textiles and apparel, vehicles, and automotive parts. Potentialobstacles to an FTA with SACU include competition issues related to the South Africantelecommunications industry and government procurement, U.S. textile tariffs and quotas, andintellectual property rights especially with regards to access to HIV/AIDS medicines. South Africacurrently has a free trade agreement with the European Union that, while not including the othermembers of SACU, has been characterized as putting U.S. firms at a competitive disadvantagecompared to their European counterparts.

Free Trade Area of the Americas. [J.F. Hornbeck, Specialist in International Trade and Finance ([phone number scrubbed])] The proposed Free TradeArea of the Americas (FTAA) is a regional trade concept that would include 34 nations of theWestern Hemisphere intent on promoting economic integration by creating a comprehensive(presumably WTO-plus) framework for reducing tariff and nontariff barriers to trade and investment. Formal negotiations commenced in 1998 and the first draft of the agreement was adopted at theThird Summit of the Americas in Quebec, Canada in April 2001. The second draft text was acceptedon November 1, 2002 at the seventh trade ministerial in Quito, Ecuador. The negotiating schedulecalls for a final agreement to be adopted by January 2005, with its entry into force to occur no laterthan the end of the same year.

Five major achievements stand out from the Quito trade ministerial: 1) Brazil and the United States became co-chairs of the Trade Negotiations Committee (TNC), which will guide the finalphase of the overall negotiation process; 2) a new Hemisphere Cooperation Program (HCP) wasestablished to develop resources to help small countries "strengthen their capacity to implement andparticipate fully in the FTAA;" 3) the second draft of the FTAA agreement was released; 4) a timeline was established for the critical market access negotiations; and 5) the final rotation of chairs forthe various negotiating groups was completed. The TNC will meet in April 2003 in Trinidad andTobago and the eighth (next) FTAA ministerial meeting will convene in Miami, Florida in the fourthquarter of 2003; the ninth is scheduled for the following year in Brazil.

Negotiations on agriculture are a critical and sensitive topic for most negotiating members. As was recognized at Quito, the negotiations will have to be done with an eye on parallel discussionsbeing undertaken by the WTO. The WTO deadline for agriculture negotiations is also set forJanuary 2005. Much attention is also focused on how Brazil and the United States will undertaketheir duties as co-Chairs of the TNC, both as leaders of the negotiating process, and as the twolargest economies with significant differences of opinion on many issues, including difficult topicssuch as treatment of steel and agricultural products.

Additional complications include challenges to economic and social progress in Latin America, such as the financial crisis in Argentina, the recent large IMF package for Brazil, and uncertainpolitical conditions in Venezuela and Colombia. Setbacks in these areas raise the potential foreroding stability and the spirit of cooperation that launched the FTAA negotiations.

Multilateral Negotiations: The WTO Doha Development Agenda. [[author name scrubbed], Specialist in International Trade and Finance ([phone number scrubbed])] From November 9-14, 2001, trade ministers from 142 member countries of the World TradeOrganization (WTO) met in Doha, Qatar to decide whether or not to launch a new round ofmultilateral trade negotiations. At the end of that meeting, they agreed on a work program for a newround, called the Doha Development Agenda. Under the work program, negotiators will continueongoing agriculture and services trade talks, as well as address industrial tariffs, intellectual propertyissues, topics of interest to developing countries, and other areas.

At Doha, trade ministers agreed that the negotiations would be carried out under the Trade Negotiations Committee (TNC), which would consist of all WTO members and countriesnegotiating membership. The TNC has met four times: January, April, July, and October 2002. Countries have agreed on a negotiating structure and chairpersons. They face a deadline of May 31,2003 for agreement on formulas and other modalities in the agriculture negotiations and for initialoffers of market access for the services negotiations. They also face a May 2003 deadline for areview of the Dispute Settlement Understanding. The trade ministers agreed at Doha that they wouldtake stock and make several interim decisions at the next ministerial meeting, which is scheduledfor September 10-14, 2003 in Cancun, Mexico. They set a deadline of January 1, 2005, for a finalcomprehensive trade agreement.

The potential benefit of successful multilateral negotiations is projected to be great. A University of Michigan study found that a one-third reduction of current barriers to trade wouldresult in over $600 billion in worldwide economic benefits. While the possible gains in multilateralnegotiations are such a great magnitude, however, reaching agreement among so many countries ishighly difficult. Therefore, policymakers are also seeking more limited economic gains throughbilateral or regional agreements, which are often easier to negotiate.

Export Administration Act

[author name scrubbed], Analyst in International Trade and Finance ([phone number scrubbed])

In the 108th Congress, there will be continued efforts to rewrite and reauthorize the Export Administration Act of 1979 (EAA). The EAA provides the statutory authority for export controlson sensitive dual-use goods and technologies, items that have both civilian and military applications including those items that can contribute to the proliferation of nuclear, biological and chemicalweaponry.

Efforts to renew the Act have been complicated by continued tension between national security and commercial concerns. Some observers contend that current export controls hurt U.S. businessby subjecting technology exports to what they consider a cumbersome and ineffective licensingprocess that costs sales and loses markets to overseas competitors. Others maintain that currentcontrols are not strong enough to prevent the spread of dual-use technologies to adversaries orpotential proliferators, and that EAA legislation, as introduced in the 107th Congress, would furtherweaken this system. Congressional interest in EAA reform has been heightened by questions aboutthe efficacy of export controls in the fight against terrorism and by revelations about theunauthorized transfer of sensitive items to nations restricted by current regulations, including China.

The EAA, which originally expired in 1989, periodically has been reauthorized for short periods of time, with the last incremental extension expiring in August 2001. At other times, the exportlicensing system created under the authority of EAA has been continued by the invocation ofauthorities under the International Emergency Economic Powers Act (IEEPA). In the 107thCongress, two competing versions of EAA emerged. The Senate version ( S. 149 ) waspassed by the Senate on September 6, 2001. Both the House International Relations Committee andthe House Armed Services Committee substantially amended the House version ( H.R. 2581 ) which, as introduced, was substantially similar to S. 149 . To different degrees,the House versions conferred additional authority on the Department of Defense to block licenseapplications and decontrol decisions, tightened the criteria for decontrol of certain items, andmandated the denial of licenses for certain exports. The Administration supported S. 149 and opposed the competing House versions. Negotiations between the Administration, Senate,and House participants to reconcile differences between the versions of the legislation continued forthe remainder of the session without success. Because the substance of this debate has not beenpredominantly partisan in nature, the change in party composition of the 108th Congress is notexpected to alter the dynamics of the debate. The sponsor of the Senate version of EAA in the 107thCongress, Senator Michael Enzi, has indicated that he will reintroduce a version of EAA in the 108thCongress, and other Members may also offer export control legislation. In addition to thereauthorization legislation, the 108th Congress may tackle such issues as the nature and scope ofexport controls on high performance computers, whether commercial communications satellites willremain under the licensing authority of the Department of State or be transferred to the Departmentof Commerce, and the regulation of "deemed exports" - the release of sensitive technology toforeign nationals within the United States.

United States and the World Trade Organization (WTO): Compliance Issues

[author name scrubbed], Specialist in International Trade and Finance ([phone number scrubbed])

[author name scrubbed], Legislative Attorney, American Law Division ([phone number scrubbed])

The 108th Congress inherits several disputes where the WTO has ruled that U.S. laws violate world trade obligations. Barring abolition or significant modification of the statutes in question, theEuropean Union and other trading partners could decide to retaliate on U.S. exports this year or next.

The largest threat involves a WTO ruling that a U.S. export tax benefit, the Extraterritorial Income Exclusion (ETI), and its predecessor - the Foreign Sales Corporation (FSC) - is an illegalsubsidy. Pursuant to the case and the inability of the United States to repeal the subsidy or find aWTO compatible substitute, the WTO in August 2002 granted the EU the right to impose 100%tariffs on $4 billion of U.S. exports to Europe. Some fear that a decision by the EU to retaliate onsuch a large volume of trade - the largest sanction in the history of the WTO - could ignite atransatlantic trade war and deal a devastating blow to the ongoing round of global trade negotiations.

The threat of foreign retaliation against U.S. exports is also a possibility in several other cases in which the United States has been on the losing side of WTO dispute panel rulings. These includecases involving the Antidumping Act of 1916, which provides a private right of action and criminalpenalties against dumping, a copyright dispute where the U.S. was found to violate royalty rights ofEU musicians, and a trademark dispute involving a Cuban rum.

Critics, including a number of Members of Congress, have charged that some of these WTO dispute settlement rulings unfairly infringe on U.S. sovereignty by undermining domestic traderemedy laws. Bush Administration trade officials have expressed concerns that some panel rulings"legislate new obligations and go too far in determining how [WTO] members should comply withadverse panel rulings." In response, some Members reportedly are considering introducinglegislation to establish a commission of former judges to review WTO decisions with a view todetermining whether the WTO is exceeding its authority. Others may support changes in the disputesettlement process that could be proposed and negotiated in the Doha Development Agenda.

Supporters of the WTO dispute resolution process argue that the United States was the chief proponent of creating a stronger and more binding dispute settlement process. They also claim thatthe system works in keeping markets open to U.S. exports, and that U.S. complaints only arise whenthe system chips away at some of the vestiges of U.S. protection. Were the United States or otherleading WTO members to ignore WTO findings, they argue that the dispute resolution process couldbe severely weakened.

Legislation was introduced in the 107th Congress to settle a number of these disputes, but none of the bills was brought to the floor. On the ETI dispute, House Ways and Means CommitteeChairman Bill Thomas introduced legislation ( H.R. 5095 ) that would repeal the ETIand replace it with a series of tax benefits that would primarily help companies with overseasoperations. Many companies that produce and export primarily from the United States are not infavor of this approach. By contrast, Senate Finance Committee leaders are promoting a "negotiatedsolution" to the dispute, perhaps within the context of the Doha Round of negotiations. EU tradeofficials have repeatedly stated that they only want the United States to amend or repeal the ETI ina WTO-consistent manner.

Three different bills were introduced to repeal the 1916 Antidumping statute, but were not acted on. While two of the bills would have terminated pending litigation, the third would havegrandfathered existing court cases, all of which involve EU or Japanese companies. The UnitedStates was to have originally complied by mid-2001, but received extensions from the EU and Japan,the most recent lasting until the adjournment of the past session of Congress. The EU recentlywarned that it would resume retaliation procedures in the WTO if the U.S. failed to repeal the lawin a way that would end all existing court cases.

In the EU's successful challenge of U.S. music licensing legislation, the United States agreed to pay arbitrated compensation of $3.3 million to the EU, though the EU still seeks a change in U.S.law. Congress authorized $50 million in the Trade Act of 2002 for a fund for the payment ofsettlements in WTO disputes, but has not appropriated the funds.

Another WTO panel found earlier this year that the United States violated its WTO obligations in enacting the Continued Dumping and Subsidy Offset Act of 2000 (also known as the ByrdAmendment), which requires the distribution of antidumping and countervailing duties to petitionersand interested parties in underlying cases, and recommended that the United States repeal the statute. While the United States has appealed the panel's findings, a WTO appellate decision upholding thepanel may raise legislative issues for the United States. Were the EU to prevail in the dispute, theUnited States would likely need to indicate its compliance plans to the WTO in the first half of 2003.

The 108th Congress may reconsider legislation to bring the United States into compliance with recommendations and rulings formulated by the Dispute Settlement Body (DSB) of the WTO. Consideration is likely to be given to the ETI export subsidy case, which is the longest standingexample of non-compliance.

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