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American Overseas Interests Act : hearings before the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, first session, on H.R. 1561 (Volume Pt. 2) online

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AMERICAN OVERSEAS INTERESTS ACT:

PRIVATE WITNESSES

(PART II)

Y 4. IN 8, 16; AM 3/2/PT, 2

Anerican Overseas Interests Act: Pr. . .

HEARINGS

BEFORE THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION

ON

H.R. 1561



APRIL 4 AND 5, 1995



Printed for the use of the Committee on International Relations







U.S. GOVERNME^^^ PRINTING OFFICE
92-692 WASHINGTON : 1995

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-047498-1



V AMERICAN OVERSEAS INTERESTS ACT:

PRIVATE WITNESSES
(PART II)

I Y 4. IN 8. 16; AM 3/2/PT. 2 ^=— ^— =

Anerican Overseas Interests Act: Pr. . .

HEARINGS

BEFORE THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OP REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION

ON

H.R. 1561



APRIL 4 AND 5, 1995



Printed for the use of the Committee on International Relations



^-ik:.







U.S. GOVERNMENT PRINTING OFFICE
92-692 WASHINGTON : 1995

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-047498-1



COMMITTEE ON INTERNATIONAL RELATIONS



BENJAMIN A. OILMAN, New York, Chairman



WILLIAM F. GOODLING, Pennsylvania

JAMES A LEACH, Iowa

TOBY ROTH, Wisconsin

HENRY J. HYDE, IlUnois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

JAN MEYERS, Kansas

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A MANZULLO, IlUnois

EDWARD R ROYCE, California

PETER T. KING, New York

JAY KIM, California

SAM BROWNBACK, Kansas

DAVID FUNDERBURK, North CaroUna

STEVEN J. CHABOT, Ohio

MARSHALL "MARK" SANFORD, South

Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York

Richard J. Garon, Chief of Staff

Michael H. Van Dusen, Democratic Chief of Staff

Mark S. Kirk, Counsel

Parker H. Brent, Staff Associate



LEE H. HAMILTON, Indiana

SAM GEJDENSON, Connecticut

TOM LANTOS, California

ROBERT G. TORRICELLI, New Jersey

HOWARD L. BERMAN, CaUfomia

GARY L. ACKERMAN, New York

HARRY JOHNSTON, Florida

ELIOT L. ENGEL, New York

ENI F.H. FALEOMAVAEGA American

Samoa
MATTHEW G. MARTINEZ, CaUfomia
DONALD M. PAYNE, New Jersey
ROBERT E. ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
ALBERT RUSSELL WYNN, Maryland
MICHAEL R. McNULTY, New York
JAMES P. MORAN, Virginia
VICTOR O. FRAZER, Virgin Islands (Ind.)



(II)



CONTENTS



Witnesses



Tuesday, April 4, 1995: Page

Dr. Steven Kull, Director, Program on International Policy Attitudes 1

Ambassador Richard Armitage, President, Armitage Associates 4

Mr. Thomas P. Sheehy, Jay Kingham Fellow, Heritage Foundation 5

Ms. Linda F. Powers, Vice President, Global Finance, Enron Development

Corporation 7

Wednesday, April 5, 1995:

Mr. Neal Sher, Executive Director, American-Israel Public Affairs

Committee 20

Ms. Vivian Lowery-Derryck, President, African-American Institute 21

Mr. Julian Simon, Professor, University of Maryland 24

Mr. John Fox, Director, Washington Office, Open Society Institute 30

Ms. Frances Seymour, Senior Policy Officer, World Wil^fe Fund 35

Ms. Victoria Markell, Director of Policy, Population Action International . 37

Ms. Julia Taft, President and CEO, InterAction 46

Mr. John Dellenback, Chairman of the Board, World Vision Relief and

Development 48

Mr. Martin Fergus, District Coordinator for Bread for the World, New

York, 20th District 51

Ms. Maria Otero, Executive Vice President, ACCION International 54

Mr. Hobart Gardiner, President, International Executive Services Corps .. 57
Mr. James Cox, Director, Project Finance, Westinghouse Electric

Corporation 68

Mr. Sy Taubenblatt, Executive Representative, Bechtel Group, Inc 71

Appendix

Prepared statements:

Mr. Steven Kull 81

Ambassador Richard Armitage 86

Mr. Thomas P. Sheehy 89

Ms. Linda F. Powers 94

Mr. Neal Sher 106

Mr. John Fox 157

Professor Jidian Simon 162

Ms. Lowery-Derryck 174

Ms. Frances Seymour 183

Ms. Victoria Markell 192

Ms. Julia V. Taft 203

Mr. John Dellenback 210

Mr. Martin Fergus 216

Ms. Maria Otero 224

Mr. Hobart Gardiner 227

Mr. James Cox 251

Mr. Sy Taubenblatt 264

(III)



THE PRESroENTS E^TERNATIONAL AFFAIRS
BUDGET REQUEST FOR FISCAL YEAR 1996



TUESDAY, APRIL 4, 1995

House of Representatives,
Committee on International Relations,

Washington, DC.

The committee met, pursuant to call, at 3:20 p.m., in room 2172,
Rayburn House Office Building, Hon. Doug Bereuter (vice chair-
man of the committee) presiding.

Mr. Bereuter. The hearing will come to order. Chairman Gil-
man will be detained, and he would like me, as the vice chairman,
to begin. I would like to welcome our witnesses and the audience
to our first hearing with outside witnesses on the international af-
fairs budget and consolidation proposals. We have a number of dis-
tinguished Americans scheduled to testify before the committee.
We hope to listen to their advice and counsel before drafting this
committee's authorization and consolidation bills.

To recap, this committee will consider a consolidation plan in-
volving State Department, ACDA, USIA and AID. How that con-
solidation will take place will be up to members of the committee
and the advice they receive from experts like the men and women
scheduled to appear today.

We will also be looking with the Budget Committee to reduce the
function 150 international affairs budget to meet our deficit reduc-
tion targets. With those goals in mind, I would like to begin hear-
ing from our witnesses. We will be joined, as soon as the vote is
over, I am sure, with other members.

I would tell the distinguished panel of witnesses that your writ-
ten statements will be made a part of the record in their entirety.
We would appreciate it if you would summarize, take the high
points of your testimony, so that we may have an opportunity to
have one or perhaps two rounds of questions. Unless there is some
particular order, I will just call upon you as you are listed here.

The first person would be Dr. Steven Kull, the Director of the
Program for International Policy Attitudes. We will hear from you,
Dr. Kull, and then all of the witnesses before we open it up for
questions. You may proceed as you wish.

STATEMENT OF DR. STEVEN KULL, DIRECTOR, PROGRAM FOR
INTERNATIONAL POLICY ATTITUDES, CENTER FOR INTER-
NATIONAL AND SECURITY STUDIES, UNIVERSITY OF MARY-
LAND

Dr. Kull. Thank you, Mr. Chairman for the opportunity to share
with the committee today the findings from research we have been

(1)



conducting at the Program on International Policy Attitudes of the
Center for International and Security Studies at the University of
Maryland.

Today, I am going to report on the study that we recently com-
pleted on the American public's attitudes on foreign aid. For the
study, we analyzed polling data from other organizations, con-
ducted focus groups, and also conducted our own nationwide poll
of 801 American adults, randomly chosen from across the country.

Contrary to a widely expressed assumption, we found no evi-
dence that most Americans simply oppose foreign aid. Eighty per-
cent of those polled agree that "the United States should be willing
to share at least a small portion of its wealth with those in the
world who are in great need."

Now, in reviewing other polls, we found that when Americans
are posed a dichotomy between foreign aid and solving problems at
home, they will choose solving problems at home as the higher pri-
ority. But, when asked how they want to distribute federal spend-
ing, the overwhelming majority want to give at least some money
to foreign aid. In our poll, only 8 percent wanted to simply elimi-
nate it.

At the same time, most Americans do feel that too much money
is going to foreign aid. In our poll, 75 percent felt that the U.S.
spends too much on it. A slightly lower number, 64 percent, said
that they wanted to cut spending on it.

But, it appears that much of this feeling is based on a
misperception of how much is actually being spent. We asked re-
spondents to estimate what percentage of the federal budget goes
to foreign aid. The median estimate was 15 percent. Fifteen times
the actual number, which is 1 percent. Other polls have found even
higher estimates. A Louis Harris poll found that the average esti-
mate was 33 percent, and in a poll by the Harvard School of Public
Health, 27 percent assumed that foreign aid was the largest item
in the federal budget, larger than defense or socisJ security.

In our poll, we then asked respondents how much they thought
would be an appropriate amount to go to foreign aid. The median
answer was 5 percent of the federal budget. When we asked how
much would be too little, the median response was 3 percent, still
three times present spending levels.

A similar d3mamic appeared when we asked about how much de-
velopment assistance the United States gives relative to other in-
dustrialized countries, as a percentage of its GNP. An overwhelm-
ing majority thinks the United States gives more than other coun-
tries, and an equally overwhelming majority thinks the United
States should spend at least the same as other countries as a per-
centage of GNP. As you probably know, of the 21 OECD countries,
the U.S. ranks last in this regard.

We also tried to find out the response to the actual amount of
spending. Asked how they would feel if they found out the United
States spends 1 percent of the Federal budget on foreign aid, only
18 percent said they thought this would be too much, down from
the 75 percent that had originally said the United States spends
too much.

Later in the questionnaire we told them, in fact, the United
States does spend 1 percent and how much that amount is in total



dollars and for the average taxpayer. In this case, 35 percent said
they still wanted to cut, down from the 64 percent that originally
wanted to cut.

In either case, we ended up with strong majorities that wanted
to either maintain or increase present spending levels.

So, why do people support spending their hard earned tax dollars
on foreign aid? Well, one key reason seems to be that they feel that
it is in their self-interest. Sixty-three percent agreed that in the
long run, helping Third World countries to develop is in the eco-
nomic interest of the United States because many of these coun-
tries will become trading partners that buy our exports.

An even stronger majority embrace moral arguments. Sixty-
seven percent agreed that the United States has a moral respon-
sibility to help poor nations and an overwhelming 77 percent re-
jected the argument that we should only send aid to parts of the
world where we have security interests.

Concurrent with this support in principle, the poll found a num-
ber of reservations about specific characteristics of U.S. foreign aid
spending. One was about the mix of priorities. Respondents wanted
to put less emphasis on using foreign aid to secure strategic allies
or access to bases. For example, modest majorities wanted to cut
military aid and aid to Israel and Egypt.

On the other hand, very strong majorities ranging from 75 to 91
percent wanted to maintain or increase spending on programs that
were clearly aimed at helping the poor, including programs for
child survival, the Peace Corps, humanitarian relief, environmental
aid to poor countries, and general assistance to help poor countries
develop.

A more moderate 72 percent wanted to maintain or increase aid
to former socialist countries. There were also reservations about
the character of some of the recipient governments. Eighty percent
agreed that too much U.S. foreign aid goes to governments that are
not very democratic and have poor human rights records. The
strong majority also expressed concern about waste and corruption.
In focus groups, there was a preference for giving direct services
to the needy, rather than cash handouts to governments that might
not give the aid to those who really need it.

In summary, then, it seems that the values of the American pub-
lic leads them to support foreign aid in principle, though there are
a number of things that they would like to see changed about it.
A very strong majority thinks the United States is spending too
much on foreign aid, but this attitude is based on an extreme over-
estimation of how much is being spent.

When they are informed of the actual level of spending, a very
strong majority wants to maintain or increase spending, especially
for aid that is directed to poor countries. Thank you very much.

[The prepared statement of Dr. Kull appears in the appendix.]

Mr. Bereuter. Dr. Kull, thank you very much. If you have those
charts in a reduced form, they would make an ideal submission by
the committee members to our colleagues in the Congress.

Dr. Kull. They are attached to the testimony.

Mr, Bereuter. Great. I appreciate that very much. I neglected
to say, Dr. Kull, I mentioned that he is with the Program for Inter-
national Policy Attitudes, but I did not say, it is the Center for



IntemationEil Security Studies at the University of Maryland,
where Dr. Kull is a member of the faculty and distinguished aca-
demic, who often writes in periodicals that we read.

The next witness is Richard Armitage, the president of Armitage
Associates. He has served as a senior trouble shooter and negotia-
tion expert for the State Department, Defense Department, and
has been before Congress on many occasions since 1978, following
his distinguished period of military service.

Nice to have you with us again today, and please proceed in a
fashion that you would choose.

STATEMENT OF RICHARD ARMITAGE, PRESIDENT, ARMITAGE

ASSOCIATES

Mr. Armitage. Thank you very much, Mr. Bereuter. Mr. Chair-
man, members, you have done me a great favor, asking my opinion
about matters of reorganization, and I will equally do you a favor
and be mercifully brief.

It is not exactly a state secret that under present management,
the State Department is an area of monumental confusion and dys-
functional disorganization. There has been a proliferation of single
issue policy mavens who are able to constipate the development of
coherent foreign policy. If I were in a position to be able to advise
the President regarding the Helms legislation, I would advise him
to accept it without hesitation.

It seems to me that the Congress can help a lot here in bringing
home to the President the fact that arms control matters and for-
eign aid etc. are tools to aid the development of foreign policy, and
not construction material to be used by empire builders.

Now, equally, if I were in a position to be able to advise Mr.
Helms on his legislation, I would first tell him that it is incompre-
hensible to me that the President would not accept the opportunity
that has been presented to him. But, equally, I would tell Mr,
Helms that I would recommend against him posing this reorganiza-
tion by legislation.

It is not that I find that there is anything unconstitutional or un-
ethical about Congress taking the initiative in this matter, but I do
find it somewhat unseemly that the officer charged with the con-
duct of foreign policy on a matter of this import, would not grasp
the reins, and rather would turn over the initiative to an organiza-
tion whose primary responsibilities are in the area of advice and
consent in authorization and appropriation matters.

Now, regarding the reorganization of foreign aid, again, Mr. Be-
reuter, it is not a secret that I have been an unremitting and unre-
lenting critic of the institution of U.S. Agency for International De-
velopment. My own view is that if the U.S. Agency for Inter-
national Development continues in its present form, it will be
sounding the death knell of foreign aid.

That does not speak, however, to the many good folks who are
fine public servants who serve in U.S. Agency for International De-
velopment, people who very much supported the late Alan Woods
in his efforts at reorganization. People who are suffering the agony
now of watching their agency backslide into the hands of those who
believe that economic development is something which can happen
independent of private sector development.



So, regarding the proposal for reorganization of foreign assist-
ance, I would take the point of view that the Helms resolution mer-
its complete endorsement. I would say to those Democrats who
have been trjdng to make foreign aid more user friendly and have
tried to increase the participation of the private sector in foreign
aid, here is an opportunity to really bring the President in in a co-
operative mode.

I would say to those Republicans, some of whom might be en-
gaged in a desire for reorganization simply to poke their finger in
the President's eye, I would say, try to get the cooperation of the
President on this. If he is not cooperative on this, then perhaps we
ought to prepare to implement this legislation under a Republican
President, starting on 20 January, 1997.

Finally, Mr. Bereuter, my overall theme is one of saying that this
is excellent legislation in my view, but that it ought not to be im-
posed. You might say, well, you are not pleasing anybody up here,
and I would much rather please you and your colleagues, but I
have to be somewhat consistent to the stance I have taken for the
last 17 years or so, as a denizen of the executive branch, where I
very much fought against the imposition of congressional legisla-
tion or mandate in telling the executive branch how to order their
house.

Finally, I would share with the Congress a frustration, and that
is that the absence of Presidential leadership in foreign aiffairs and
such as this is a real dilemma for us, and it is certainly an incon-
venience. But, my own view is and the real issue is that we need
to then elect a leader as President, not to transfer the leadership
to the U.S. Congress.

Thank you very much, sir.

[The prepared statement of Mr. Armitage appears in the appen-
dix.]

Mr. Bereuter. Thank you very much, Mr. Armitage. We can al-
ways count on you for interesting testimony, and I appreciate your
candor. I wish we had more of it from witnesses.

Next, a very distinguished panelist, Thomas P. Sheehy. He is the
Jay Kingham Fellow in International Regulatory Affairs at the
Heritage Foundation. He is coauthor of the Heritage Foundation's
recently released Index of Economic Freedom, a quantitative analy-
sis of economic freedom in ICj. countries, which has received world-
wide attention, specializing in peacekeeping, foreign aid, trade, de-
velopment and African affairs.

Mr. Sheehy, we are pleased to have you here. Please proceed as
you wish.

STATEMENT OF THOMAS P. SHEEHY, JAY KINGHAM FELLOW
IN INTERNATIONAL REGULATORY AFFAIRS, HERITAGE
FOUNDATION

Mr. Sheehy. Thank you very much, Mr. Vice Chairman. My com-
ments will pertain primarily to development assistance. I would
like to bring to the committee's attention the central African coun-
try of Uganda, a major development assistance recipient. Recently,
it was profiled on the front page of the Washington Post. Uganda
has seen its economy grow 8 percent in the last year. Foreign in-



vestments are flowing into Uganda, inflation is dramatically down.
There is a building boom in Uganda underway.

Doing some research for an investment guide I am contributing
to, I discovered that the Ugandan shilling is fully convertible, and
foreign investors can receive a 20 percent return on their invest-
ment in Uganda. This is an amazing story considering Uganda's
history. We commonly associate the country with tribal conflict and
Idi Amin.

Indeed, 10 years ago, Uganda was on par with Rwanda, but it
is no miracle what has happened in Uganda, the secret to their
success. It is quite evident for everyone to see. Uganda is moving
to establish a market economy. Previously banned businessmen
have been allowed to return to the country. Grovemment run coffee
and marketing boards have been disbanded. Foreign investment
has been encouraged. The process for acquiring a business license
has been streamlined.

Not surprisingly, Uganda scored a 2.95 on the Heritage Founda-
tion's recently released Index of Economic Freedom, placing it be-
hind only Swaziland among sub-Saharan African countries. As you
described, Mr. Vice Chairman, the Index is a quantitative guide, it
looks at 10 factors that we have identified as key to achieving eco-
nomic growth. Does the government nationalize property? How well
does it protect it? What is the taxation level, openness to foreign
investment and trade?

Again, Uganda scored quite well. We feel we have identified the
most important elements in terms of promoting development, and
we feel that the Index or its criteria should be used in allocating
development assistance. It only makes sense, and the results, the
strong correlation between market economic policies and economic
growth, are quite evident.

Too often in the past, our development assistance program had
tremendously devastating impacts. It subsidized countries with no
commitment to free market growth. We have seen that in Tanza-
nia. There are Legions of other examples, primarily in Africa. Re-
cently, Czech Prime Minister Vlaclav Klaus complained about de-
velopment assistance. He said it prolonged the time when the need-
ed domestic reforms were undertaken.

We feel that an index applied to development assistance becomes
an excellent tool in gauging the progress toward a free market
economy. We are not alone. Chairman George Ferris of the Ferris
Commission Report recommended that AID use an index to allocate
development assistance. This is the approach of Senator McConnell
and his foreign aid reform plan.

I am not suggesting that we should necessarily assist countries
like Uganda if their democratic values offend us. Clearly, Uganda
is not a democracy. There is no obligation to provide development
assistance. All I am suggesting is, if we are providing development
assistance, movement toward the free market should be the sole
criterion.

Clearly, AID is not moving in this direction. I am very concerned
following the reforms on the Hill with the International Develop-
ment Foundation proposed by Senator Helms. I think it is essential
that all development assistance, including the development assist-
ance that would be administered through the IDF, be keyed to pro-



moting free market reforms. We can have all the tj^jes of successful
projects at the microlevel. Unless a country has its general macro-
economic policies in line, those successes are not going to contrib-
ute to economic growth, or what should be the objective of our de-
velopment assistance program.

Finally, to close, I would suggest that the debate should be about
more than about dollars. I recognize the committee is moving to cut
foreign aid. I think that is an appropriate movement, given the
budgetary constraints, the fact that we are running a national
debt.

However, I would implore that in the move to cut development
assistance, we do not lose track of policy, and look about how to
make some very constructive reforms to the foreign aid program.
I think the results of the Index show that a development assistance
program keyed toward promoting free markets and free market
generated economic growth is the way to go.

[The prepared statement of Mr. Sheehy appears in the appendix.!

Mr. Bereuter. Thank you very much.

Our next witness is Linda Powers. She is vice president of the
Global Finance, Enron Development Corporation, headquartered, I
assume, in Houston. But, we are planning to bring it back to
Omaha, where it belongs. [Laughter.]

Prior to joining Enron, Linda Powers served as Deputy Assistant
Secretary of Commerce for Service Industries and Finance, but I
found it most interesting that you chaired the TPCC, an inter-
agency committee responsible for coordinating our policy on trade
and finance in the multilateral development banks.

I noted that one of the products coming out of that TPCC effort
indicated that USIA, in 1993, received $50 million for export pro-
motion, which is now more than the TDA receives, which strikes
me as a very strange circumstance, if, in fact, that is their whole
story.

I would hope that sometime in your testimony or later, at least,
you will comment specifically on the proposal of the Helms organi-



Online LibraryUnited States. Congress. House. Committee on InterAmerican Overseas Interests Act : hearings before the Committee on International Relations, House of Representatives, One Hundred Fourth Congress, first session, on H.R. 1561 (Volume Pt. 2) → online text (page 1 of 31)