MUTUAL DEVELOPMENT AND COOPERATION ACT OF 1973

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75B00380R000600170008-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 112
• Document Creation Date: December 9, 2016
• Document Release Date: August 24, 2001
• Sequence Number: 8
• Publication Date: July 20, 1978
• Content Type: REPORT

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MUTUAL DEVELOPMENT AND
COOPERATION ACT OF 1973
REPORT
OF THE
COMMITTEE ON FOREIGN AFFAIRS
TOGETHER WITH
MINORITY AND ADDITIONAL VIEWS
ON
H. R. 9360
TO AMEND THE FOREIGN ASSISTANCE ACT
OF 1961, AND FOR OTHER PURPOSES,
TOGETHER WITH MINORITY VIEWS
JULY 20, 1973.-Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
98438 O WASHINGTON : 1978
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COMMITTEE ON FOREIGN AFFAIRS
THOMAS E. MORG1tN, Pennsylvania, Chairman
CLEMENT J. ZA13LOCK[, Wisconsin
WAYNE L. HAYS, Ohio
L. H. FOUNTAIN, North Carolina
DANTE B. FASCELL, Florida
CHARLES C. DIGGS, JR., Michigan
ROBERT N. C. NIX, Pennsylvania
DONALD M. FRASER, Minnesota
BENJAMIN S. ROSENTHAL, New Yorl:
JOHN C. C ULVER. Iowa
aLEE H. HAMILTON, Indiana
ABRAHAM KAZEN,.TR., Texas
;LESTER L. WOLFF, New York
JONATHAN B. BINGIIAM, New York
GUS YATRON, Pennsylvania
ROY A. TAYLOR, North Carolina
JOHN W. DAVIS, Georgia
OGDEN R. REID, New York
MICHAEL HARRINGTON, Massachusetts
LEO J. RYAN, California
CHARLES WILSON, Texas
DONALD W. RIEGLE, JR., Michigan
WILLIAM S. MAILLIARD, California
PETER H. B. FRELINGHUYSEN, New Jersey
WILLIAM S. BROOMFIELD, Michigan
H. R. GROSS, Iowa
EDWARD J. DERWINSKI, Illinois
VERNON W. THOMSON, Wisconsin
PAUL FINDLEY, Illinois
JOHN BUCHANAN, Alabama
J. HERBERT BURKE, Florida
GUY VANDER JAGT, Michigan
ROBERT H. STEELE, Connecticut
PIERRE S. (PETE) DU PONT, Delaware
CHARLES W. WHALEN, JR., Ohio
ROBERT B. (BOB) MATHIAS, California
EDWARD G. BTESTER, JR., Pennsylvania
LARRY WINN, JR., Kansas
BENJAMIN A. GILMAN, New York
TENNYSON GUYER, Ohio
MARIAN A. CZAaNECEI. Chief of Staff
ALBERT C. P. RESTPHAI., Senior Staff Cea8ultant
HARRY C. CROM ER, Staff Consultant
JOHN J. BRu.DY, Jr., Staff Consultant
JOHN H. SOLIYAN, Staff Consultant
ROBERT K. BOYER, Staff Consultant
HELEN C. ATAT5ns, Senior Staff Assistant
DIANE MIE#EL, titaff Assistant
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CONTENTS
Page
Committee action------------------------------------------------- vii
Purposes of the bill------------------------------------------------- 1
Restructuring economic assistance_______________________________ 1
Other principal provisions of the bill_____________________________ 2
Authorizing appropriations_____________________________________ 3
Committee comment------------------------------------------------ 5 5
Cost estimates----------------------------------------------------
The pipeline------------------------- ---------------------------- 10
Foreign assistance and the U.S. balance of payments------------------- 12
Establishment of review mechanism for refusal of extradition request- _ - _ 13
Provisions of the bill:
Section 2-Change of title of act and. name of agency-------------- 14
Section 3-Policy; development assistance authorizations----------- 14
Statement of policy---------------------------------------- 14
Functional categories:
New section 103-Agriculture, rural development, and nutri-
tion-------------------------------------------------- 18
New section 104-Population planning and health-------- 21
New section 105-Education and human resource develop-
ment------------- --------------------------------- 25
New section 106-Selected development programs _ - - _ - _ _. _ 26
New section 107-Selected countries and organizations---- 27
New section 108-Applicability of existing provisions------ 27
New section 109-Transferability ------------------------ 28
Section 4-Development loan funds_____________________________ 28
Section 5-Technical cooperation and development grants:
Section 5(a)-Authorization limitation ------------------------ 28
Section 5(b)-American schools and hospitals abroad---------- 28
Section 6-Housing guaranties:
Section 6(a)-Worldwide housing guaranties ------------------ 29
Section 6(b)-General provision ---- .------------------------- 29
Section 7-Overseas Private Investment Corporation:
Section 7(a)-Issuing authority----------------------------- 30
Section 7(b)-Agriculture credit and self-help community devel-
opment projects------------------------------------------ 30
Section 8-Alliance for Progress:
Authorization---------------------------------------------
Partners of the Alliance____________________________________ 31
Section 9-Programs relating to population growth: Authorization__ 31
Section 10-International organizations and programs: 31
Section 10(a)-Independent review groups for international
assistance institutions------------------------------------ 31
Section 10(b)-Authorization ------------------------------- 32
Section 10(c)-Indus Basin project__________________________ 32
Section 10(d)-United Nations Children's Fund_______________ 33
Section 10 (e)-Technical and vocational training of Arab refugees- 33
Section 11-Contingency fund:
Section 11(a)-GeneraLauthorization ------------------------ 33
Section 11(b)-Authorization for disaster relief assistance-_-_--- 34 34
Definition of "related assistance"________________________
Section 12-International narcotics control: 34
Section 12(a)-Reports to Congress__________________________
Section 12(b)-Authorization ------------------------------- 35
Section 13-Cooperative economic expansion---------------------- 37
Section 14-Military assistance:
Section 14(a)-Authorization ------------------------------- 38
Section 14(b)-Special authority---------------------------- 40
Section 14(c)-Military assistance to Laos and South Vietnam_ _ 40
Section 14(d)-Local currency deposits----------------------- 41
(III)
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Provisions of the bill-Continued' Page
Section 15--86curity gSection
Section Into national iiiion education _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 41
education and training-
and purpose--------------------- 42
Section 16(b)-Conforming.amendments_____________________ . 43
Section 16(c)-Preservation cf existing actions--____.__-__-__-_ 44
Section 16(d)-Interim fundiing___---r------------ ---------- - 44
Section 17--General provisioner
Section I7(a)-Expropriation..,----------_ ___-__-.,_-----__ 44
Section 17(b)-Prohibitions a ainst furnishing assistance ------ . 45
Section 37(c)-Seizure of fishing vessels__________________ 45
Section 18--Employment of personnel------------------------------ 46
Section 19--Reports and information': Debt status and relief reports- 48
Section 20--Administrative ex oere es ----------------------------- 49
Section 21--Famine and disae~ter relief and African Sahel develop-
ment pro:gram------------------------------------------------ 49
General authorization ---------------------------------------- 49
African Sahel famine and 9isester relief ------------------------ 50
African Sahel development, program____________________.._-___ 50
Section 22--Coordination__---__.--__-____-_ 50
Section 640C-Shipping differential--------------------------- 51
Section 23--Miscellaneous provisicns: annual NATO report --------- .52
Section 24--Indochina postwai re(onstruction_____________________ 52
New Section 801-Statement of policy ------------------------ ,52
New Section 821-Genera( authority-------------------------- .53
Report requested on public safety program_______________ 33
New Section 822-Authorzation---------------------------- ,54
Fiscal year 1974 program summary ----------------------- 54
Vietnam------------------------------------------ 55
Cambodia-----------------------------------.----- ;55
Commodity import program ------------------------ 555
Multilateral stabilization program------------------- 55
Laos ----------------------------------------------- 56
New Section 82.3-Center : or Plastic and Reconstructive Surgery
in Saigon ------------------------------------------------ Jib
New Section 824-Assistance -;o South Vietnamese Children _ - _ _ Ji7
Section 25--Export Development Credit Fund:
Section 25(a)-Establishment of Export Development Credit
Fund ------------------------------------------------- 57
Back.ground------------------ ------------------------- 58
Section-by-section analysis ------------------------------- 59
Section 25(b)(1)-Exclusions from prohibitions on assistance__-- 62
Section 25(b)(2)-Inspector General, Foreign Assistance-------- 62
Section 26--Meaning of references.._____.-________________________ 62
Section 27-Foreign military soles ---- _----------------------------- 63
Subsection (a)(1)-Seizure of1;.S. fishing vessels-------------- 63
Subsection (a) (2)-Eligibility or sophisticated weapons -------- 64
Subsection (b)-Credit sales terms ----------------------------- 64
Subsection (c)-Guarantien----------------------------------- 64
Subsection (d)-Charges a;ainst the ceiling------------------- (4
Subsection (e)-Authorizaiior:--------------------------------- 5
Subsection (f)-Aggregate ceiling ----------------------------- 66
Subsection (g)-Latin American ceiling-----------------------
Subsection (h)-African ceiling.-_----------------------------- 67
Subsection (i)-Waiver of :.?egional ceilings--------------------
Subsection (j)-Annual rerortu-___-_ __.______________________ 67
Subsection (k)-Deposit in gwcranty reserve__________________ 68
Section 28-Fisherman's Protective Act of 1967___________________ 68
Section 29-Revision of Social Progress Trust Fund agreement------ 68
Changes in existing law made by the bill, as reported------------------ 71
Views of Hon. Wayne L. Hays------.--------------------------------- 101
Additional views of Hon. William 13. Broomfield and Hon. Guy Vander
Jagt------------------------------------------------------------- 101
Minority views of Hon. H. R. Gross [Ion. Edward J. Derwinski, Hon.
Vernon W. Thomson, and Hon. J. Herbert Burke____________________ 103
Additional views of Hon. J. Herbert Burke --------------------------- 105
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93D CONGRESS 1 HOUSE OF REPRESENTATIVES REPORT
1st Session No. 93-388
MUTUAL DEVELOPMENT AND COOPERATION ACT
OF 1973
JULY 20, 1973.-Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. MORGAN, from the Committee on Foreign Affairs, submitted
the following
REPORT
together with
MINORITY AND ADDITIONAL VIEWS
[To accompany H.R. 9360]
The Committee on Foreign Affairs, to whom was referred the bill
(H.R. 9360) to amend the Foreign Assistance Act of 1961, and for
other purposes, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
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COMMITTEE ACTION
On May 2, 1973, the President sent to the Congress a foreign aid
message-House Document 92-95-accompanied by a draft bill.
Chairman Thomas E. Morgan, by request, introduced the bill in the
House of Representatives on May 3, 1973, as H.R. 7484.
The measure submitted by the administration called for author-
izations for each of fiscal years 1974 and 1975. The only major legis-
lative changes requested were for a new chapter to establish an
international military education and training program, and for a new
part creating a humanitarian relief and reconstruction assistance
program in Indochina.
The committee opened its hearings on H.R. 7484 on May 15. Sub-
sequently, on May 30, legislation was introduced in the House co-
sponsored by a bipartisan group of 26 committee members. That
measure, H.R. 8258, provided for a major restructuring of the U.S.
bilateral economic assistance program.
In the following days, committee hearings were continued on both
H.R. 7484 and H.R. 8258, terminating on June 13.
In the markup sessions which began on June 19, the committee read
H.R. 7484 for amendment. The provisions of H.R. 8258 were then
adopted as a series of amendments to the administration's requested
legislation, along with other amendments.
Upon conclusion of the markup sessions, Chairman Morgan
introduced H.R. 9360 on July 18. This bill included adjustments in
the authorization levels recommended by the committee as well as
many substantive changes in the existing law. On July 19, the com-
mittee reported the bill favorably by a vote of 31 to 9.
(VII)
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PURPOSES OF THE BILL
Restructuring economic assistance
A principal purpose of H.R. 9360 is a major restructuring of U.S.
bilateral economic assistance programs.
On April 10, 1973, 16 members of the committee wrote to the Presi-
dent expressing the belief that "the time has come to put an end to
foreign aid as it has been conceived and administered in the past."
The letter went on to set down principles on which future programs
should be based.
When the administration's bill failed to reflect any changes, mem-
bers who had coauthored the letter, together with other committee
members, met on a number of occasions to work out new draft legisla-
tion for bilateral economic assistance.
On May 30, that legislation was introduced, cosponsored by a
bipartisan group of 26 committee members. The administration sub-
sequently endorsed the proposal, with suggested changes. After most
of those changes were incorporated in the new legislation, the proposal
was adopted during markup as a series of amendments to H.R. 7484.
In order to reform and reinvigorate U.S. economic assistance to
developing nations the bill would :
1. Focus bilateral development assistance on acute problem areas
and encourage the developing countries to allow the poorest people to
participate more effectively in the development process.
The now much diminished U.S. bilateral aid would be concentrated
on development problem-solving with less emphasis on general purpose
resource transfers. The most common and pervasive development
problems in the poor countries would receive primary emphasis:
food, rural development, and nutrition; population growth and health;
and education and human resources development. Funds are allocated
according to these categories in the new bill. Projects would be selected
which most directly benefit the poorest majority of the people in
these countries and which enable them to participate more effectively
in the development process.
2. Create a new Export Development Credit Fund to expand U.S.
exports to the poorest countries with the further aim of providing ad-
ditional resources for the economic development of those countries
on appropriate terms without increasing U.S. budgetary outlays.
The bill proposes the establishment of a new Export Development
Credit Fund which would make credit available for exports of devel-
opment related goods and services to the lowest income countries
on terms that would (1) enable U.S. exporters to compete, and (2)
be easier for these countries. It would increase U.S. exports thereby
creating an estimated 80,000 new U.S. jobs, and at the same time
would transfer to developing countries resources needed for their
development on more realistic and businesslike terms than those
involved in traditional development lending.
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The fund would be authorized to operate at a level of about '61
billion pcr year for 5 years. As with the Export-Import Bank, it would
be financed by public debt aut2hority. Receipts from past aid loans
would cover the difference betueenthe soft terms charged by the
fund and the relatively harder terms on which the fund borrowed.
3. Improve coordination of all U.S. activities that bear on develop-
ment, including trade, financial policy, and development aid.
Recognizing that U.S. interest in development is affected. by
many U.S). Government actiors, the bill would give the Administrator
of the Mutual Development and Cooperation Agency it major role in
(a) coordinating multilateral arrd bilateral development assistance pro-
grams, and (b) advising U.S. Government agencies on the impact of
their actions on development. To that end, a Development Coordina-
tion Committee would be established, chaired by the Administrator
and. composed of officials front the affected agencies.
4. Change the title of the Foreign Assistance Act to the "Mutual
Development and Cooperation Act" and the name of the Agency for
International Development to the "Mutual Development and Cooper-
ation Agency."
These proposed new name; reflect the emerging view that this
country has a direct self-intere ;t in the development of the low income
countries. These countries constitute the overwhelming majority of the
nations and people of the world and their development affects the
functioning of the world's cooperative systems in such fields as trade,
monetary affairs, and investment.
The United States depends on those systems, and therefore wants
the low income countries to become successful participants which are
both able and inclined to support those systems. The term "Mutual
i)evelopment and Cooperation" describes this emerging interde-
pendent relationship better than AID.
The proposed new name for thf Agency also symbolizes a coopera-
tive style of working with the developing countries. Increasingly, these
countries are able to design and. implement their own development
programs. The bill. calls for greater reliance on the plans of host
countries rather than on plans designed by U.S. officials. In admin-
istering the program, the Agency would make maximum use of priva :e
commercial channels and private educational, cooperative, and vol-
untary institutions.
Detailed elaboration of all the reforms included in the bill may
be found in the section-by-section analysis of the legislation.
Other principal provisions of the bill
H.R. 9360 also authorizes appropriations described in the last section
of this part and proposes a number of substantive changes in the law,
among which are the following:
(1) Increases by $100 million the amount of worldwide housing
guarantee authority, and extends the program two additional
years;
(2) Extends the investrr ent: insurance and guarantee authority
of the Overseas Private Investment Corporation for one additional
year, to June 30, 1975;
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(3) Requires the President actively to seek the creation of
independent audit groups within the United Nations and affiliated
organizations, the World Bank and the Asian Development Bank;
(4) Provides a continuing authorization for appropriations for
disaster relief assistance in the case of extraordinary and sizable
disasters;
(5) Requires quarterly and semiannual Presidential reports to
Congress on all aspects of U.S. international narcotics control
programs and activities;
(6) Requires all military assistance to Laos and South Vietnam
to be authorized under the Mutual Development and Cooperation
Act of 1973-rather than the Department of Defense budget-
after June 30, 1974;
(7) Establishes a separate program of international military
education and training;
(8) Repeals section 620(e) of the act regarding foreign expro-
priation of American property, known as the "Hickenlooper
amendment" ; and
(9) Repeals provisions of the act, the Foreign Military Sales
Act, and the Fishermen's Protective Act of 1967, as amended,
which relate to the seizure of U.S. fishing vessels.
Authorizing appropriations
In addition, H.R. 9360 authorizes the appropriation of funds to
permit foreign assistance programs to continue through June 30, 1975.
The following table compares the amounts appropriated in fiscal
year 1973 with the amounts requested by the executive branch and
recommended by the committee for fiscal years 1974 and 1975.
Fiscal year Committee recommendations
1973 Executive request as restructured by H.R. 9360
appropriation, y
Public Law Fiscal year Fiscal year Fiscal yye74r Fiscal 1975
92-5711 1974 11 11
Economic
Development loans________________ $250,000,000 $201,400,000 $201,400,000 --------------------------
Technical cooperation and develop-
ment grants____________________ 155,000,000 165,650,000 165,650,000 ________________________
Alliance for Progress______________ 227,500,000 236,100,000 236,100,000 _____________---------------
Loans ______________________ (150,000,000) (150,000,000) (150,000,000)--__________________________
Grants_______________________ (77,500,000) (86,100,000) (86,100,000)----------------------------
Po pulation programs_______________ 100, 000, 000 2 116, 000, 000 2 116, 000, 000 -------------- _____________
Reform provisions:
Food and nutrition______________________________________________________ $300,000,000 $300,000,000
Population planning and health___________________________________________ 150,000,000 150,000,000
Education and human resources___________________________________________ 115,000,000 115,000,000
Selected development problems___________________________________________ 93,000,000 93,000,000
Selected countries and organi-
zations _________________________------------------------------------- 60,000,000 60,000,000
American schools and hospitals
abroad_________________________ 25,500,000 10,000,000 10,000,000 320,000,000 3 20, 000,000
Partners of the Alliance______________________________________________________ 968,000 968,000
International organizations_________ 105,000,000 124,800,000 (4) 127,800,000 (1)
Indus Basin:
Loans------------------------ 12,000,000 5)) -- (?) ----
Grants_______________________ 10,000,000 15,000,0 0 15,000,000 15,000,000 15,000,000
Arab refugees______________________________________________________________ 2,000,000 2,000,000
Contingency fund_________________ 25,000,000 30,000,000 30,000,000 30,000,000 30,000,000
Narcotics control________________________________ 42,500,000 (4) 50,000,000 50,000,000
Administrative expenses:
AID_________________________ 53,100,000 53,100,000 53,100,000 53,100,000 53,100,000
State------------------------ 4,221,000 (3) (3) (3) (3)
Bangladesh relief----------------- 100,000,000 --------------------------------------------------------
OPIC reserves- ------- 12,500,000 --------------------------------------------------------
African famine refle-f ----------------------------------------------------------- 30,000,000 --------------
See footnotes at end of table p. 4.
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Fiscal rear Committee recommendations
:973 Executive request as restructured by H.R. 9360
appropnation, ----
Public _aw Fiscal year Fiscal year Fiscal year Fiscal year
Program 92-571 1974 1 1 I
Indochina postwar reconstruction
Vietnam, Cambodia, Laos)__________________________- 632,000,000 -------------- 632,000,000 --------------
Military:
Grant military assistance___________ 550,600,100 652,000,000 -------------- 550,000,000 --------------
Regional naval training------------- 2,500,)00 -------------------------------------------------------
Security supporting assistance------ 600,000,100 100,000,000 -------------- 125,000,000 ____----------
Israel ------------------------------------------------------------------ (50,000,000)--------------
Foreign military credit sales------- 400,000,100 525,000,000 -------------- 450,000,000 --------------
International military education and
training--------------------------------------- s 33,000,000 -------------- 30,000,000 -----------
Subtotal_.-________--_-__________1,553,100,100 1,310,000,000 ______________1,155,000,000 _--------------
I No authorization bill was enacted into law for fiscal year 1973 for security supporting assistance, refugee relief (Banlla- a
desh),military assistancegrants, and foreign military :radii sales. The appropriations for both economic and military assist-
ance for fiscal year 1973 were enacted in Public Law 92-571, making continuing appropriations for the period ending
Feb. 28, 1973, which was extended to June 30, 1973, by Public Law 93-9.
2 The Executive failed to request an authorization of appropriations for population programs. In fiscal year 1973 funds
were appropriated for population programs on the basis of an earmarking provision-not an authorization-in the law.
In marking up the bill the committee included this amount in the authorization. An authorization would have been neces-
sary in any case and thus is included as part of the I xecutive's request in this table.
a Plus $7,000,000 in excess foreign currencies.
4 Open-ended authorization for fiscal year 1975.
s $51,220,009 was authorized in the Foreign Assist !nce Act of 1967 for this purpose. $2,200,000 is the level of the fiscal
year 1974 appropriation request.
Permanent authorization in existing law of such amounts as may be necessary.
7 The second supplemental appropriation for fiscal year 1973 (P.L. 93-50) provided $300,000 for additional costs.
8 The Executive authorization request was open-ended but it was planned to request $33,000,000 in appropriations
V Includes the amoun. specified in footnote 8.
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COMMITTEE COMMENT
After 25 years of foreign assistance-a period of much success and
some failures-the time has come to take a new approach in our
foreign aid programs.
This bill provides that new approach.
It springs from a congressional initiative, including ideas of some
Members who have served in Congress virtually since the first dollar
was spent on European restoration.
As a result of those past programs, Europe was strengthened as a
bulwark against the westward expansion of Soviet communism.
Moreover, during the last decade, many developing nations assisted
by the United States enjoyed more rapid economic growth than the
developed countries did at any comparable period in their history.
Their economies grew at an average rate of 5.6 percent. Manufac-
turing output increased by 90 percent. Food production rose by one-
third.
The gains of the past 10 years, however, have not been adequately
or equitably distributed to the poor majority in those countries.
In some cases, gains have been overwhelmed by excessive population
growth.
Per capita food production is only slightly higher today than it was
a decade ago and mass famine threatens in several regions.
Rudimentary health care is unavailable to the vast majority of
peoples.
Unemployment and underemployment rates of 30 percent, worse
than the depths of the 1930's depression in the United States, are
being experienced.
There are no schools or teachers for 300 million children, more than
the number 10 years ago.
One million people a week are born into the vicious circle of poverty
which plagues most developing countries.
While the dimensions of the problem have grown, the U.S. contri-
bution to development assistance abroad has declined, both in real
terms and as a percentage of our gross national product. (See the
following charts.)
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6
U.S. Official Development Assistance (ODA) Commitments,
FYs 1966-1972
ODA less PL 480 and Supporting Assistanceb
1968 1969 1970
bincludes AID programs (less Supporting Assistance), contributions to international
financial institutions, Peace Corps, and Social Progress Trust Fund.
SOURCES: Data for FY 1966-1971 from Office of Statistics and Reports, U.S.
Agency for International Development, U.S. Overseas Loans and Grants, May 1972;
provisional figures for 1972 from Bureau for Program and Policy Coordination, U.S.
Agency for International Development,
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U.S. Official Development Assistance (ODA) Commitments as a
Percentage of U.S. GNP,
FYs 1966-1972
ODA less PL 480 and Supporting Assistanceb
1967 1968 1969 1970 1971
bincludes AID programs (less Supporting Assistance), contributions to international
financial institutions, Peace Corps, and Social Progress Trust Fund.
SOURCES: Data for FY 1966-1971 from Office of Statistics and Reports, U.S.
Agency for International Development.
This decrease has resulted in large measure from disillusionment in
Congress over seeming lack of effect of past foreign assistance.
The financial situation of the United States is also of concern. In
recent years, the Nation has experienced a chronic balance-of-pay-
ments deficit, an adverse balance of trade, and two devaluations of the
dollar.
Yet foreign assistance is responsible for none of those conditions, and
the long-range interests which made it a good idea in the past remain.
As a nation which consumes 40 percent of the world's annual output
of raw materials and energy, the United States needs access to the
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8
resources of the developing nations which occupy 60 percent of the
land surface and control large untapped resources.
As a nation. seeking to expand its trade, the United States is finding
the developing nations increasingly important markets for U.S. goods
and investment.
As a nation whose interests ire linked with the maintenance of world
peace, the United States has a clear stake in preventing the tumult and
unrest from social disintegration in poor countries.
As a nation which seeks international solutions of problems of nar-
cotics control, terrorism, and environmental pollution, the United
States needs the cooperation of the developing countries.
To these practical interests must, of course, be added the moral
dimension. We give foreign assistance, as the President has said,
because it is right.
We Americans annually spend six times what we allot for foreign
assistance on cigarettes and other tobacco products.
We spend three times as m ac]h for toys and sports supplies; three
times as much for toilet articles and perfumes.
We spend twice as much for jewelry and watches.
Surely, our consumption-oriented society can spare something for
fellow human beings who have virtually nothing.
At the same time, experience and America's limited resources as
compared to the gargantuan word needs, dictate new approaches:
Our assistance must be concert gated on the most urgent problems
of the poorest majority in the developing countries.
We must share our expertise: ar.d problem-solving know-how rather
than making large-scale capital transfers to the countries.
We must move away from government bureaucracies, both in our
own and the developing countries, and toward greater involvement of
the private sector.
That is the purpose of this reform legislation, H.R. 9360.
Today, while it is fashionabl to say that foreign assistance "has no
constituency," evidence is that the American people will support a
program based on these new a-op:roaches.
In a recent nationwide poll conducted by Peter D. Hart Research
Associates for the Overseas I)evelopment Council, fully two-thirds
of those responding basically favored the idea of responsible, mutually
beneficial foreign assistance.
The polls showed that Americans are most approving of tangible
forms of U.S. assistance-such as food and health aid-rather than
nebulous transfers of funds in the form of grants or loans.
The public, at the same time, iir; suspicious of programs which per-
nrit bureaucratic waste and diversions by graft.
The committee shared these concerns as it drafted this new legisla-
tion. We believe that the bill now before the House meets the objections
about foreign aid which Americans, including Members of Congress,
have harbored heretofore.
The changes are not simply cosmetic, but real.
We intend change-drastic change-in the planning and operation
of our U.S. bilateral economic assistance programs.
Moreover, the committee is prepared to exercise its oversight func,
tion to the fullest to insure that rhanges intended by Congress will
be accomplished by the executive branch.
We urge the wholehearted support of our colleagues in the Congress
for this legislation and the programs it ro oses--programs which
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COST ESTIMATES
Pursuant to clause 7, rule XIII of the House Rules, the committee
has examined the requests submitted by the President to carry out the
various programs authorized by this bill. It has made adjustments in
the requests and recommends $2,833,868,000 for fiscal year 1974 and
$889,068,000 for fiscal year 1975 as shown in the table in the section on
"Purposes of the Bill".
Any projection for the next 5 years is difficult to make. The pro-
gram has been restructured by this bill and a period of experience
will be necessary to determine if the new emphasis meets congressional
expectations. Changing foreign policy interests of the United States
and defense requirements of its friends and allies add uncertainties.
Consequently, a straight-line projection of the costs described above
with respect to fiscal year 1974 can provide, at best, a tentative and
uncertain estimate.
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THE PIPELINE
Unexpended balances, often referred to as the pipeline, are funds
that have been obligated for goods and services on order but not yet
delivered. When delivery is made, payments are met from funds
previously appropriated and set aside for that purpose.
In recent years, Congress and the Executive have placed greater
emphasis upon loans rather than grants. This has resulted in a buildup
of the pipeline. A loan is authorized when a decision is made to make
the loan to the borrowing country. Expenditures, on the other hand,
are made only against deliveries or the fulfillment of conditions. In
either case, the outlay of funds usually stretches over a number of
years. Hence, there is a lag between loan authorizations and expendi-
tures. The following table shows the annual unexpended balances for
the foreign ;assistance program- military and nonmilitary but exclud-
ing investment, guaranty programs-at the end of each fiscal year
since 1950.
Unexpended balances, foreign assistance program, military and nonmilitary, including
Alliance for Progress, but excluding investment guaranty program and acquisition
of excess property revolving fund
(!rr.
Fis cal year: bildior,8)
Fiscal year-Continued billions)
1950--------------------- $3.5
1962--------------------- $6.6
1951--------------------- 7.1
19113--------------------- 6.8
1952---------------------- 9.9
19134--------------------- 6.3
1953--------------------- 10.1
1965---------------------- 6.3
1954---------------------- 9.6
1966---.-------------------- 6.4
1955 ---------------------- 7.9
1967--------------------- 6.6
1956--------------------- 6.4
1968--------------------- 6.2
1957--------------------- 6. 1
1969--------------------- 5.3
1958----------------------- 5.3
1970--------------------- 4.7
1959--------------------- 4.8
1971--------------------- 4.8
1960---------------------- 4.8
1972--------------------- 4.7
1961---------------------- 6.0
1973 (estimated) ---------- 4.4
An examination of the annual budget of the President indicates that
unexpended balances are not peculiar to the foreign assistance pro-
gram. The following table comptret the unexpended balances of the
military assistance portion of the program with those of the Depart-
ment of Defense.
UNEXPENDED BALANCES-MILITARY ASSISTANCE PROGRAM COMPARED WITH DEPARTMENT OF DEFENSE
[in billion:; of dallars[
Military
assistance
Department
of Defen:;e
(military)
function
Military
assistance
Department
of Defense
(military)
function
1950 - - - ----------------
1.3
9.8
1962-------------------- 2.8
21.1
1951--------------------
5.5
3B.1
1963-------------------- 2.4
18.6
1952-------------------
8.4
59.5
1964-------------------- 2.0
17.5
1953- -----------??----
8.5
62.1
1965- ------------------ 2.0
19.5
1954--------------------
7.8
55.0
1966-------------------- 1.8
26.9
1955--------------------
6.2
45.3
1967-------------------- 2.1
32.1
1956--------------------
4.6
24.8
1968-------------------- 1.8
30.9
1957- ------------------
4.2
23.6
1969-------------------- 1.6
29.5
1958__-------------------
3.4
23.8
1970-------------------- 1.2
25.5
1959 - ------------- -----
2.5
23.5
1971-------------------- 1.6
23.0
1960--------------------
2.3
21.1
1972-------------------- 1.6
24.0
1961--------------------
2.6
1&8
1973 (estimated) --------- 1.6
29.8
ILO)
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Opponents of the foreign assistance program are critical not only
of the unexpended balances but of unobligated balances which are
often described as sizable. They argue that the Executive has asked
for, and the Congress has voted, more money than can be used. This
complaint rests on the theory that money appropriated must be spent
regardless of the changing circumstances. The committee does not en-
dorse an imprudent approach in dispensing public funds. If a particular
program does not materialize as planned, it is a mark of sound manage-
ment to withhold the obligation of funds. The dimensions of the un-
obligated and unexpended balances of the foreign assistance program
can be better appreciated by comparison with similar balances of other
agencies of the Government. The following figures, taken from the
budget of the President, cover the Department of Defense, the Depart-
ment of Agriculture, the foreign assistance program, and all other
Government agencies.
UNEXPENDED AND UNOBLIGATED BALANCES'
[In billions of dollars]
Depart-
ment of
Depart-
Defense
(military
functions)
Foreign
assist-
once
ment of
Agri-
culture
All others
Tote
Unexpended, June 30,1956___5b-
-1-9-5-6 ________
Unab igated/unreserved
June
24.8
6.2
1.8
7.1
39
9
,
,
__
Unexpended
June 30
1957
12.7
.4
.2
19.6
.
32
9
,
,
_______________________
Unobligated/unreserved
June 30
1951
23.6
5.4
1.4
7.0
.
37
4
,
,
Unexpended/June 30
1958
11.0
.9
1.6
17.7
.
31
2
,
_______________________
Unobligated/unreserved
June 30
1958
23.8
5.3
1.4
8.9
.
39
4
,
,
_____
Unexpended
June 30
1959
8.3
.2
3.4
20.6
.
32
5
,
,
_______________________
Unobligated/unreserved
June 30
1959
23.5
4.8
1.4
9.2
.
38
9
,
,
_____________
Unexpended
June 30
1960
8.2
.2
2.2
22.1
.
32
7
,
,
______________________
Unobligated/unreserved
1960_
June 30
21.1
4.8
1.3
9.5
.
36
7
,
,
___
Unexpended
June 30
1961
9.6
.2
2.4
23.5
.
35
7
,
,
_______________________
Unobligated/unreserved Ju
e 30
1961
18.8
5.4
2.2
10.8
.
37
2
n
,
_
Unexpended
June 30
1962
9.9
.8
1.1
27.4
.
39
2
,
,
__ ___________________
Unobligated/unreserved
1962_
June 30
21.1
6.7
3.4
11.9
.
43
1
,
,
_____________
Unexpended
June 30
1963
8.1
.2
1.2
27.3
.
36
8
,
,
_________
Unobligated/unreserved
June 30
1963
18.6
6.5
3.8
13.4
.
42
3
,
,
-------------
Unexpended
June 30
1964_
11.7
.5
1.0
32.1
.
45
3
,
,
______________________
Unobligated/unreserved
June 30
1964
17.5
6.2
4.0
15.7
.
42
6
,
,
_____________
Unexpended, June 30, 1965
12.7
19
5
.3
5
8
.8
32.9
.
46.7
Unobligated/unreserved, June 30, 1965
Unexpended
June 30
1966
_________
.
13.6
.
.5
4.1
.8
20.6
32.1
50.0
47
0
,
,
Unobligated/unreserved
J
30
19
26.9
6.0
5.4
24.8
.
63
1
,
une
,
66
Unexpended
June 30
1967
15.8
.4
.9
34.1
.
51
2
,
,
Unobligated/unreserved
J
30
19
7
32.1
6.2
5.5
35.2
.
79
0
,
une
,
6
Unexpended
June 30
1968
15.1
.4
2.6
116.4
.
134
5
,
,
Unobligated/unreserved, June 30, 1968 _
__
30.9
14
8
6.0
2
5.6
38.8
.
81.3
Unexpended, June 30, 1969
____
.
14
9
.
5
3
2.7
124.4
142.1
Unobligated/unreserved , June 30, 1969
-
Unexpended
June 30
.
25.5
.
.7
1.9
5.9
24.5
145.6
41.6
181
7
,
------------------
, 25.5 4.7
Unobligated/unreserved June 30
,
1970
14
8
2
.9
4 5
.
.
56.4
,
'
(
)
------
Unexpended, June 30
1971
23
0
1
1.6
1400.0
.
0
156.4
_ ___
,
.
4.1
Unobligated/unreserved
June 30
1971
5.7
52.5
86.0
,
,
4.0 .1
Unexpended, June 30
11972
_
.9
160.6
192.
1
____________
,
_
----- 2 21.9 4.1
Unobligated/unreserved
June 30
1972
6 6.9
63.7
3
92.3
,
,
-----------
3 11.9 (2)
Unexpended, June 30,197 s 29.8 4.4
Unobligated/unreserv
J
d
3
1.6
6.0
163.6
74.3
177.1
114
5
e
,
une 30, 1973
___________ 9.4 (1)
3.5
171.1
.
184.0
1 Data in "Total" and "All others" columns for June 30, 1968, and subsequent years are not comparable with prior
years. Reporting in Treasury Combined Statement was changed in fiscal year 1968 to conform to a unified budget concept.
E Less than $100,000,000.
a Estimated.
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FOREIGN A 5SISTANCE AND THE U.S. BALANCE OF
PAYMENTS
The committee gave conside'-ation to the impact of the foreign
assistance program on the U.S. balance of payments.
The most recent complete figuress available are for fiscal year 1972.
In that year 80 percent of AID expenditures for development assist-
ance-about $1,073 million-was for goods and services procured
from. U.S. sources. The remaining 20 percent-$266 million-was spent
offshore. Of this latter sum, $22 million was spent overseas in the
form of excess foreign currencies u.ed in lieu of dollars. This reduced
the dollar expenditures to $244 million. This outlay of dollars spent
abroad was offset; by $276 million in net receipts of dollar repayments
and interest on prior year loans and credits. In summary, the develop-
ment assistance program in fiscal i ear 1972 resulted in a net flow to
the United States of $32 million.
In the case o supporting a;;sistance, expenditures in fiscal year
1972 were $684 million. Of this total, $174 million represented. off-
shore expenditures--$96 million in cash grants and $78 million for
personnel costs and procurement abroad.
The total level of offshore expenditures for the economic part of the
foreign assistance program thus came to $142 million in net terms
during fiscal year 1972.
Looking ahead a few years, :.f offshore expenditures remain at the
1972 level, they will be more than. offset by the projected increased
dollar repayments and interest on outstanding loans which, by 19,
are estimated to return $456 million to the United States.
The military part of the p:-ogam in fiscal year 1972 is heavily
weighted on the plus side of the ledger. While grant military assist-
net eturndlofnslighyles credit
than $3.4
ance in resulted bill onfl for of
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ESTABLISHMENT OF REVIEW MECHANISM FOR
REFUSAL OF EXTRADITION REQUEST
The committee is concerned that in a number of instances in recent
years certain foreign countries have refused U.S. requests for extradi-
tion of individuals charged in the United States with offenses ap-
parently covered under valid extradition treaties. Whenever a U.S.
extradition request is refused by another country, the committee be-
lieves that such refusal should be subject to a review mechanism es-
tablished by the executive branch to determine, to the extent feasible
tablished by the Executive branch to determine, to the extent feasible,
whether the refusal of extradition was based on valid legal grounds.
Conclusions based on such a review should, in each instance, be
promptly reported to the appropriate committees of Congress.
In any case where it is found that there were no valid legal reasons
for not honoring a U.S. extradition request, it is the committee's
opinion that the President should consider an appropriate response,
including possible reduction or termination of assistance to the coun-
try refusing extradition, and that the President should promptly
report his findings and recommendations in this regard to the
Congress.
(13)
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PROVISIONS OF THE BILL
SECTION 2-CHANGE OF TITLE' OF ACT AND NAME OF AGENCY
I n order to emphasize the chc,ng,~, in foreign assistance policy and
structure incorporated in this legisl -ion, this section makes two signifi-
cant name changes:
Subsection (a) alters the title of the basic legislation authorizing
U.S. bilateral foreign economic and military assistance from "The
Foreign Assistance Act of 1961" to "The Mutual Development and
Cooperation Act of 1973."
Subsection (b) changes the name of the agency responsible for ad-
ministering the programs under the act from the "Agency for Inter-
national Development" (AID) to "The Mutual Development and Co-
operation Agency" (MDCA).
The change is not merely cosaie:;ic. It reflects the conviction that
foreign. assistance programs must be a mutually beneficial process both
for the low-income countries in need of outside resources and for the
United States when it helps supply some of those resources.
i'or example, increases in domestic employment and improvements
in the American trade and payments balances are goals that depend on
reforms of the international finaucis,l and trading systems. The ability
and willingness of the developing ';ountries to cooperate with us in
these areas are likely to be enhanced if they are making progress eco-
nomically and the United States :i:, aiding the process.
Similarly, our Nation's future access to needed raw material
resources of less developed nations may well depend on the con-
tribution we make now to their economic and social viability.
-Unfortur ately, "aid" and "A_D" had come to connote a "one-way
street" donor-recipient relationship
By emphasizing mutuality ani cooperation in the law and adminis-
tering agency, a clearer focus o^ benefits which can accrue to the
United States from a foreign assistance program should be possible.
SECTION 3--POLICY; DEVELOPMENT ASSISTANCE AUTHORIZATIONS
"Phis section contains a major redirection of U.S. bilateral foreign
economic, assistance. Through he addition of a clear congressional.
mandate in the statement of policy and a sectoral approach in the;
authorization of funds, U.S. programs are restructured toward a,
people-oriented, problem-solving form of foreign assistance.
Statement of policy
Subsection (b) amends section t02 of the Foreign Assistance Act
by adding new language whic:i calls for the restructuring of U.S,
relationships with the developing countries, in the light of progress
already made and changing conditions. Emphasis should be given to
several criteria:
(1) Bilateral development aid should concentrate increasingly on
sharing American technical expertise, farm commodities, and in..
(1'1)
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dustrial goods to meet critical development problems, and less on
large-scale capital transfers, which when made should be in associa-
tion with contributions from other industrialized countries working
in a multilateral framework.
Past foreign aid programs have had a heavy emphasis on large-scale
capital transfers to the "third world." While the industrial sectors of
recipient countries have thereby progressed, the benefits often have
not "trickled down" to the poorest majority of people.
In some countries, the capital-intensive approach has not prevented
the gap between the few rich and the many poor from growing; neither
has it kept the absolute numbers of hungry, illiterate, and diseased
people from increasing.
Growth in the gross national product is not enough. Governments of
the developing nations must actively attempt to distribute income
more equitably and to attack directly the most pressing problems of
their peoples.
(2) Future U.S. bilateral support for development should focus on
critical problems in those functional sectors which affect the lives of
the majority of the people in the developing countries: food produc-
tion, rural development, and nutrition; population planning and health;
education, public administration, and human resource development.
Hunger, malnutrition, disease, ignorance and poverty continue to
plague the majority of the human race.
The needs of low-income peoples are staggering. The ability of
the United States to meet those needs is limited. For that reason,
attacks on the problems of the developing countries must be based on
clear priorities.
Those priorities should be directly related to meeting the basic
human needs of the poorest people in the developing countries, in
order to enhance their opportunities for employment, to improve the
distribution of wealth, and to increase social justice.
Projects which aim at development through a "trickle down"
approach should be left to multilateral international financial institu-
tions and private investment.
U.S. bilateral assistance henceforth should be problem-solving,
people-oriented and targeted on the basics: food, nutrition, health,
population control, education, and development of human resources.
(3) U.S. cooperation in development should be carried out to the
maximum extent possible through the private sector, particularly those
institutions which already have ties in the developing areas, such as
educational institutions, cooperatives, credit unions, and voluntary
agencies.
In line with the reduction in the number of U.S. officials aborad
and the collaborative style of relationships with the developing coun-
tries mandated in this act, it is expected that the overseas missions of
the Mutual Development and Cooperation Agency (MDCA) will be
small.
Similarly the Washington headquarters of the Agency should be
significantly reduced in size. Congressionally approved measures pro-
viding for early retirement of AID personnel should be used to the
utmost in achieving the personnel cutback.
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16
Under this restructured program, there should be much less project
implementation directly by the MDCA.
Rather, where Americans are needed to help implement projects, the
MDCA should turn to voluntary organizations, nonprofit contractors,
other U.S. Government agencies, private contractors and consultants,
private international organizations and organizations within the devel-
oping countries themselves.
So far as American private organizations are concerned, the Agency
would be expected to work closely with those U.S. institutions and
groups which already have ties established in the recipient countries,
such as educational organizations, cooperatives, credit unions and
voluntary organizations. The committee believes that the Agency
should simplify its administrative requirements in working with these
private organizations in order to facilitate their activities.
(4) Development planning must. be the responsibility of each
sovereign country. U.S. assistance should be administered in a col-
laborative style to support the development goals chosen by each
country receiving assistance.
Development planning must be the responsibility of each sovereign
country-a responsibility which many developing nations are increas-
ingly capable of discharging themselves.
U.S. foreign aid personnel should no longer attempt to promote
"made in America" developmen; strategies. The planning and execu-
tion of development policies for recipient countries by large U.S.
bureaucracies are neither necessary nor feasible for the future.
This in no way should reflect on the dedication and talent of the
many Federal employees who have been involved in past foreign aid
operations. Frequently, they have played a key part in those initial
development undertakings whose services make further progress
possible today. Nevertheless, if foreign aid is to be restructured,
the machinery which has administered it must be tailored to reflect
the new and changed conditions.
In the absence of a demonstrated capacity of a nation to do its
own planning, an appropriate international organization or group
should assist in that country's development planning effort.
(5) U.S. bilateral development assistance should give the highest
priority to undertakings submitted by host governments which
directly improve the lives of the poorest majority of people and their
capacity to participate in the development of their countries.
Although the restructured program would abandon attempts to do
"made in America" country planning for recipient nations, it does
express a clear ureference for a particular type of development-one
that aids the poor majority of the people and enables them to partici-
pate more effectively in the development process-and concentrates
future U.S. aid on efforts which aim at that objective.
We are learning that if the poorest majority can participate in
development by having producti-ie work and access to basic education,
health care and adequate diets, thou increased economic growth and
social justice can go hand in hard.
Through the restructured program the United States would be
telling the developing countries: Use technology suited to your
needs. Keep investments labor-intensive. Do not forget the immediate
needs of your poorest people.
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Moreover, the United States would be saying that in the future, the
bulk of our development assistance will be associated with programs
in three basic fields: (1) rural development, nutrition and food;
(2) education and manpower development; and (3) population and
health.
Our view that these fields need the greatest attention may not be
shared by the governments of the developing countries. The setting
of domestic goals is their own business. But it is our business to
decide what form our bilateral aid will take, and what kind of activities
we will henceforth support. This the bill does very clearly.
There may be cases where it is apparent that the greatest needs
and opportunities lie outside those three fields and where progress in
them is being impeded for lack of investment in another, supporting
field.
In such instances, the bill makes provision for an exception and
permits funds to be used where common sense would dictate.
(6) U.S. development assistance should continue to be available
through bilateral channels until it is clear that multilateral channels
exist which can do the job with no loss of development momentum.
In recent years an increasing portion of U.S. development assistance
has been contributed to several multilateral institutions to be loaned
or granted by them to the developing nations.
While the multilateral organizations have a definite place in the
development picture, it is clear from their performance to date that
they cannot be expected to substitute entirely for bilateral assistance.
They tend to concentrate their efforts on massive industrial projects
rather than on the problem-solving, people-oriented efforts which this
bill emphasizes.
The United States has repeatedly demonstrated in the past its
ability to exert leadership in the solution of problems which afflict
the lives of millions. From the development of the "miracle" seed
grains to the achievement of a sensitivity among nations to the threat
of excess population growth, our Nation has played an essential role.
To abandon that role without assurance of adequate replacement
would be to turn our backs on the struggles of other peoples against
man's ancient enemies of poverty, disease, ignorance, and hunger.
(7) Under the policy guidance of the Secretary of State, the Mutual
Development and Cooperation Agency should have the responsibility
for coordinating all U.S. development-related activities.
At the present time no single entity within the Government co-
ordinates the range of U.S. activities which relate to the developing
nations.
The need for more effective coordination and review of U.S. develop-
ment-related undertakings is clear.
These programs are conducted under several statutes by several
departments and agencies. At times, each of them has seemed to be
going its own way without reference to the others.
The MDCA would be the only U.S. Agency which is primarily
concerned with development. It ought to play a more important role
than AID presently does in coordinating these U.S. programs.
Thus, this bill provides, in subsection 640B, a mechanism for effec-
tive coordination.
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t8
Functional categories
Subsection 3 (c) adds seven new sections-sections 103-109-to
chapter 1 of the act, which toge ,he:i- constitute a completely new system
of authorizing the appropriation. of funds for bilateral development
assistance.
Whereas previous authorizations have provided funds for develop-
ment loans, technical cooperation and development grants, Alliance
for Progress, and programs relating to population growth, the amend-
ments authorize funds in five categories divided primarily according to
sector or field of activity: Food and nutrition, population planning and
health, education and human resource development, selected develop-
ment problems, and selected countries and organizations.
As the following table demonstrates, the authorizations for the five
categories for the fiscal years 1574 and 1975 are essentially the same as
that proposed by the executive branch, but with somewhat different
distribution among the categories.
Activities falling into more than one category may be funded from
one or more categories, as appropriate.
Funds are to be used in accordance with existing provisions of law,
but the amendments provide for Somewhat greater transferability of
funds among the five categories; than is now permitted among present
funding categories in the act.
COMPARISON OF DEVELOPMENT ASSISTANCE FUNDS REQUESTED BY THE ADMINISTRATION AND H.R. 9360
[In millionsf
Administration
request
Development loans -----_---------------------------------------------------- $201.4 ---------------
Technical assistance and development grants ------------------------------ _------ 165.65 -----------------
Alliance for progress---_ ------------------------------------------------------ 236.1 ----------------
Population programs-------------------------------------------------------- r 116.0 ----------------
Food and nutrition------------------------------------------------------------------------- $3110
Population planning and health_______________________________________________________________ 1!i0
Education and human----------------------------------------------------------------------- L'5
Selected development problems _------------------------------------------------------------- !l3
Selected countries and organizations ----------------------------------------------------------- 60
I The administration failed to request an authorization W. appropriations for population programs. In fiscal year 1973,
funds were appropriated for potation programs on the basis of an earmarking provision-not an authorization-in
the law. In marking up the bill, the committee mcludad this amount in the authorizations. An authorization would have
been necessary in any case and thus is included as part of the administration's request in this table.
The seven new sections are the following:
Section 103-Agricultu re, rural development, and nutrition
This section authorizes the appropriation of $300 million for each
of the fiscal years 1974 and 1075 for agriculture, rural development
and nutrition.
Agriculture is given a particular priority because in most developing
countries it provides not only food and fiber, but also jobs for the
unemployed, increased incomes for the poor and additional foreign
exchange earnings.
An estimated 300 to 500 million people in developing countries
do not get enough food of any type. Further, some 1.5 billion people
have inadequately balanced diets and suffer particularly from protein
deficiencies.
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Over the past decade as a result of the "Green Revolution," food
production in the developing countries has increased an impressive 35
percent. This effort has been retarded, however, by depletion of soils,
increased plant diseases and depredations by insect pests.
If present population growth rates continue in the developing
countries, world food production must double by the year 2000 merely
to maintain current inadequate diets. In order to provide adequate
nutrition the output will have to increase by two and one-half times.
(See the following chart:)
14
TR
Indexes, 1961 - 1965 = 100
dl IS P' IN THF,SEc3C
Total Food
Output
10
125
Trend
Per
Capita
%MEMNO
N
Food
Output
'
100
---
I I I
9
19611 1462 -
19 8 19
70
19
72
('CQAAt35 Cf~ N RI 8?
SES
Since there is little arable land not now in use, this great increase
must be achieved by major advances in agricultural productivity and
techniques-fields in which the United States is justly regarded as
the leader.
A particularly important target must be those lands which have
less than adequate water supplies.
The poorest majority of rural people live on just such lands. Their
livelihood depends on crops which, unlike irrigated wheat and rice,
have not been the subject of extensive research.
The success of the "miracle" seeds for well-irrigated lands provides
ground for hope. That example indicates the kind of accomplishments
which are attainable when research and technological development
efforts are thoroughly organized and clearly targeted on the basic
needs of the people in the low-income countries.
Increasing production of food grains is not, by itself, sufficient.
Better distribution of foodstuffs and better nutrition are essential to
increased well-being for the poor.
New ways must be found to create low-cost foods and to increase
the nutritive content of the foods traditionally consumed in the recipi-
ent countries.
_
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XJ
Rural development aims at increasing the productivity and improv-
ing the quality of life in rural areas. Projects are needed to aid small
farmers and help reduce existing income disparities.
Most of the people of the developing countries---SO percent in
Asia-live in rural areas. But they are abandoning them at alarming
rates and crowding the cities in search of a better life.
As a result, cities have expanded beyond any nation's ability to
cope with the influx. In Latin America, cities are growing at the rate
of 10 percent a year, and more than 50 percent of the population on
that continent now is urbanized.
Instead of finding a better life, these migrants are discovering
unemployment, congestion, inadequate shelter, and disease. Their
presence as a potentially volatile, rootless mass in the major cities
of the developing countries is a major threat to stability and progress.
To slow the rural-urhan migration will require renewed efforts at
rural development, including increased agricultural production, land
reform, and the encouragement of local. institutions which can foster
participation by the general pepulace.
To meet those objectives, rural development funds authorized under
this section should be concentrated in the following areas:
1. Local and regional institutions in which people participate in
development; local government; fanners organizations, business,
trade, labor, professional, and other groups and also specialized
authorities such ;as irrigation districts.
2. Local, essentially agricultural, market areas and market towns,
and small. cities located in them. (The U.S. rural county, with its
county seat market town is ar. American equivalent of this concept.)
3. Local and regional financial institutions such as private banks,
cooperatives, land banks, and small business banks.
4. Local infrastructure and utilities; farm-to-market roads, small-
scale land. improvement, rural electrification, storage facilities, water
supply, and sanitation.
5. Small-scale agriculturally related industries, consumer goods, and
service and construction industries oriented to meeting the needs and
demands of people whose incomes are low but rising.
Turkey is an example of hove foreign. assistance can help a country
meet its special agricultural neecls
To provide for a rapidly growing, wheat-eating population, tae
Turkish Government sought to increase acreage yields. A U.S. short-
term advisory group worked with Turkish experts to plan a successful
wheat production effort.
In the first year more than 50,000 farmers planted 425,000 acres of
high-yielding wheat along ccastal areas. Yields increased from 22
bushels to 52 bushels per acre.
By 1972 Turkey was one of the few developing nations with a
domestic surplus of wheat.
Research plays an important part in increasing agricultural pro-
ductivity, both of grains and livestock.
Today, funded by foreign assistance money, Texas A. & M. is doing
very promising work on contro,ling blood parasite diseases-which
are a common problem of anima's and man in the tropics.
In fish production, a projec~ at Auburn University has achieved the
marvel of getting almost a pcund of fish per pound of feed. This fish-
growing process is being introduced into the Philippines, Brazil,
Thailand, and other countries.
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With a modest research project, AID has helped eliminate the dev-
astating livestock rabies problem-a disease being spread by vampire
bats throughout Latin America and even to our own borders.
Animal losses to rabies once amounted to $250 million annually.
Now at a cost of about 9 cents per cow a control program is being
introduced in Mexico, Brazil, and other Latin American countries
which should see the end of the problem in a few years.
In the area of nutrition, research is essential. At the University
of Nebraska a team of AID-funded scientists is concentrating on
finding high-protein genetic strains of grain.
Some 15,000 different strains of wheat have been assessed and several
with double or more the average protein levels have been discovered.
These are being tested around the world and could be an important
answer to the problem of providing a balanced protein food for
children.
In rural development the activities of credit unions and cooperatives
can make important contributions to the improvement of rural life..
Small farmers in the developing countries rarely have access to
needed credit on terms they can afford.
Foreign assistance has been and must continue to be aimed at
providing credit to small farmers to assist them in increasing their
own productivity.
For example, a loan authorized for Guatemala in fiscal year 1973
provides financing for cooperative credit in the poorest agricultural
areas of that country.
Elsewhere in Latin America, credit unions which started with
deposits of 25 cents per family are now part of a hundred million
dollar cooperative savings system in that hemisphere.
In a single African country, the creation and development of a
central service cooperative has increased the access of 600,000 small
farmers to farm supplies and credit.
Those types of projects would be carried forward and given new
emphasis under the revisions provided in this legislation.
Section 104-Population planning and health
This section authorizes the appropriation of $150 million for each
of the fiscal years 1974 and 1975 for population planning and health.
Since the early stages of development assistance, the United States
has been involved in helping other countries solve their health prob-
lems. In more recent years, it has assisted recipients with programs of
family planning.
Great progress has been made against epidemic killers such as small-
pox and malaria, and there is a growing acceptance by governments
of the need for population programs.
However, the great majority of people still do not have access to
even rudimentary health services, and birth rates are dropping only
slowly in most countries. For example, despite government programs
to reduce population growth, India must feed, clothe, house, and
educate an additional 1 million people each month.
The poor countries now account for about 85 percent of the annual
world population growth, with family size in developing areas averag-
ing six children per family.
At that fertility level, world population will grow from the present
3.6 billion to about 6.6 billion by the year 2000 and will reach mare
than 10 billion in the next 50 years. (See chart below.)
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POPULATION EXPLOSION
In Th* Les Developed 1ounjiies
12
8--
LD POPLtATION: LESS DEVELOP O C.)UNTR I!cS' GROWTH PROJECTED
AT THE CURRENT PNNUAL RATE QP 2.5%, DEYE LOP
ED COUNTRIES.A?7. E9%.
Clearly, such growth would be catastrophic.
From the standpoint of population control, there are four groups of
people in the developing countries:
I. City-dwellers who have easy access to a variety of health and
family planning services, which they can afford. The group is relatively
small.
Rural people who have s.mi=.ar availabilities as group No. 1.
This is a larger but still relatively small segment.
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3. The urban poor who have only limited or difficult access to
family planning services and cannot afford them. This is a large
number.
4. The rural poor who have little or no inkling of reliable family
planning methods, no access to antifertility services, no money to pay
for them anyway, and little motivation to limit their families. This is
the majority in the developing nations.
In the past, U.S.-aided population programs have for logistics and
other reasons concentrated on groups Nos. 1 and 2, and have found
many in them to be "early acceptors" of family planning.
Now efforts must be launched to reach and motivate the much larger
numbers in groups Nos. 3 and 4.
Only by changing the fertility patterns of those groups can the de-
veloping countries prevent gains in productivity from being eroded by
population growth. (See the following chart.)
'GPULATION GROWTH ' .IMITS ADVANCES
IN PER CAPITA GNP
200 In The Less Developed Countries 200
' I Developed Countries 200
195
100
90
180 180
Indexes, 100
1960 =
TOTAL
GNP
1
0
P
ER CAPIT
GNP
A
0_00 _0_
0
1960 :67 '62 '63 '64 '65 '66 '67
'69 '70 '71 '72
(Prelim:)
120
100
90
1W 1A
i ifv"os~fir~Y~fc s .4
Efforts to reach groups Nos. 3 and 4 will be difficult because of
logistics problems, meagerness of resources, and lack of motivation
among poor peoples.
New approaches-going beyond traditional family planning pro-
grams-are needed. The United States should be prepared to aid the
developing countries in establishing low-cost systems of extending
services to the urban and rural poor.
For both humanitarian and logistics reasons such delivery systems
should be devised in an integrated strategy to combat the related
problems of inadequate health care, insufficient nutritious food, poor
sanitation, and excessive population growth.
In a larger context, the entire new direction for foreign assistance
represented in this legislation should have an impact on the population
crisis in the developing countries.
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By concentrating on remed,ring the basic "disease" of poverty as it
would, this restructured U.S. bilateral assistance program can help
create the needed motivation :`or smaller families.
Policies and programs whic'i target on bringing food, jobs, health,
and education to poor peol:le, when combined with substantial,
effective family planning programs, should make it possible to stabilize
"third world"' population much more rapidly than reliance on either
approach alone..
In the field of health, rather than focus on curative programs which
would reach relatively few people, foreign assistance funds must
continue to try to reach the great mass of people with programs ro
prevent serious epidemic diseases such as malaria, smallpox, measles,
and cholera.
The malaria control program sponsored by AID has been a notable
success. When U.S. support for the program began 1.7 billion persons
were exposed to malaria.
Today, over three-fourths of them live in regions where the disea,te
has been eradicated or greatly reduced.
Success in those areas should make possible bringing a fuller range
of health services to the poor majority through systems which are
appropriate to existing conditions. including the use of paramedical
personnel.
In Guatemala, for example training of paramedical personnel--
midwives, practical nurses aid laboratory technicians--has been
made part of the national health nroram. With the help of an A1131-
supported American medical s necralist in preventive medicine,
hundreds of individuals are being trained to,bring improved health
care into the rural areas.
At the same time. foreign assistance loans have made possible the
construction of simple, yet utilitarian, rural health centers in Guate-
mala, Nicaragua, and Panama, focusing on mobile dispensary units.
The success of population a:id health programs in the developing
countries depend to a large extent upon existence of trained manpower,
appropriate service systems, an] local institutions to lead and conduct
the effort.
Foreign assistance funds have, for example, aided a public ad-
ministration education and research center to design and recommend
management and marketing systems for Venezuelan agencies engaged
in family planning.
At the University of Ghana, foreign assistance funds are assisting
the development, of a population center to expand local research and
teaching on population problem s.
In Thailand, AID has supported family planning activities aimed a -D
r?e,a.ching the rural poor Thai population by expanding existing health
services in the countrvside to include family planning.
In many Thai locales, each eligible couple has been pinpointed
through village mapping and receives home visits by a trained mid.-
wife who provides family planning information and advice.
In rural areas of Korea and the Philippines, amopg others, popula?.
tion funds are used to support "mother-craft" classes in which women.
are taught adequately to care for and feed their children, while being
given the essentials of family planning.
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Section 105-Education and human resource development
This section authorizes the appropriation of $115 million for each
of the fiscal years 1974 and 1975 for education, public administration,
and human resource development.
Due to population increases, there are today 100 million more
illiterate people than there were 20 years ago.
Further, although the low-income countries have doubled the
size of their school systems in the past 10 years, it is believed that
there are more children for whom even elementary education is
unavailable than there were a decade ago. (See the following chart.)
POPULATION GROWTH OVERBURDENS SCHOOLS
In The Less Developed Countries
(Millions of Children Ages 5 - 14)
It has become clear that these countries cannot afford universal
education as known in the West and that the academic patterns of
the developed countries are inappropriate in the developing countries.
Those nations must develop low-cost, innovative systems of educa-
tion to roll back illiteracy and provide their people with the requisite
skills to participate in the process of development.
The United States can assist the developing nations with designing
and testing new educational systems and concepts aimed at reaching
larger numbers of people at lower costs.
To that end, funds appropriated under this section should be
targeted at:
1. Expanding nonformal education, much of it through local insti-
tutions, with special emphasis on literacy and low- and medium-level
skills training.
2. Increasing the relevance of formal educational systems to develop-
ment problems through curriculum reform, better teaching materials,
and improved teacher training.
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3. Aiding higher education (but in smaller quantity and in lower
priority than nonformal education) ,o the extent that the professional
skills imparted contribute mos1s directly to development and the
welfare of the poorest majority.
4. Improving the administrai,ive capacity of government at all
levels, local and provincial as well as higher levels.
Among the kinds of new concepts and. systems which the United
States has helped devise and test before they have been adopted on a
wide scale are the following:
In Guatemala children in four rural pilot schools are planting
vegetable gardens while learning to read and write at the same time.
Since the AID-supported program went into effect, the dropout
rate-usually about 80 percent in rural schools-decreased dramati-
cally and attendance rates are significantly increased.
I n Korea an elementary middle school program, supported by a
U.S. loan, started with an analysis organized and conducted by the
Korean Ministry of Educatior. with the help of Florida State
Uri iversity.
Using advanced systems techniques, the analysis called for an
overhaul of the Korean education system, including development of
radio-television instructional systems. Currently AID is helping the
Koreans design a 5-year pilot project based on the proposals in the
study.
In Ethiopia and Kenya, a labor union-organized training program
has met with success. Through the African-American Labor Center,
Ethiopian construction workers are receiving part-time, evening train-
ing in modern building skills.
Icy Kenya, 200 printers are being trained in modern printing meth-
ods, through cooperation of local labor unions and employers.
Work in the general field of public administration can also help
pro vide skills which are in . ve:~y short supply in the developing
countries.
In the past the United States has helped impart techniques to
build public management capabilities in taxation, statistics, and civil
service.
AID-supported programs have strengthened business schools in
Nicaragua, Korea, Nigeria, Peru, Colombia, Brazil, and the
Philippines.
luring the past 10 years some .10,000 persons from developing
countries have come to the United States or gone to other countries
for training in business and public administration.
Section 106-Selected development programs
'['his section authorizes the appropriation of $93 million for each of
the fiscal years 1974 and 1975 to help solve economic and social devel-
opment problems in fields such as transportation and power, industry,
and urban development.
Although the intent of this act is to put the emphasis on the fields
described in sections 104-106, many countries still need substantial
external resources to provide adequate roads, power supplies, and other
basic elements of development.
The World Bank and other international institutions are providing a
large part of assistance for those purposes. For that reason, it should
be possible for the United States drastically to cut back on its infra-
structure aid. In accomplishing this objective, however, the commit-
p i c rt ri 's yl / 8i ? ljk- 6 R000600170008-4
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At the same time, however, in certain countries where infrastructure
is critical to the development goals described in the new policy guide-
lines of this act, it may be necessary for the time being to continue to
finance related projects.
Such projects should, however, be kept to a minimum and should
pertain directly to development objectives which will benefit the
poorest majority of people in the developing countries.
Section 107-Selected countries and organizations
This section authorizes the appropriation of $60 million for each of
the fiscal years 1974 and 1975 for three purposes:
First, to support the general economy of certain key countries, pri-
marily through program lending;
Second, to contribute to development programs conducted by pri-
vate organizations such as the International Executive Service Corps
(IESC), the Asia Foundation, cooperatives, credit unions, and volun-
tary agencies; and
Third, to help support development programs of certain interna-
tional organizations such as the Organization of American States
(OAS) and the Central Treaty Organization (CENTO).
Although this act sets a new direction for foreign assistance away
from program lending, certain key countries-such as Ghana and Indo-
nesia-lack foreign exchange to buy imports of materials, equipment,
and commodities necessary for development.
Thus, this act provides for an amount, greatly reduced from prior
years, for program lending to those countries. This lending, it should be
noted, normally is worked out in concert with a consultative group of
other donors and involves self-help steps by the recipients.
The committee, however, anticipates that to the fullest extent pos-
sible export credits under the new Export Development Credit Fund
will be substituted for direct program lending as a means of meeting
the import gaps of those selected countries and introducing American
goods to their private sectors.
As for the development programs of private international organiza-
tions, the committee continues to believe that such organizations can
and do play an important role in bringing American talents to the aid
of developing countries.
As emphasized in the new policy statement, we believe in the maxi-
mum use of the private sector to carry out development programs.
The people-to-people, institution-to-institution relationship between
Americans working in development and their equivalent organized
groups in the developing countries is a valuable concept.
Such an approach can increase the flexibility and quality of American
assistance; help institutionalize professional, technical, and organi-
zational skills in low-income countries; and reduce or avoid some
difficulties involved in government-to-government relationships.
Section 108-Applicability of existing provisions
This section requires assistance authorized under this chapter to be
furnished in accordance with the provisions of law applicable to
categories of assistance now in the law: development loans, technical
cooperation and development grants, and Alliance for Progress.
This language assures that the restrictions, criteria, authorities and
other provisions of existing law are not rendered inapplicable as a
result of the restructuring of foreign assistance proposed in this bill.
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Section 109-Transferability
This section provides for limited transferability of funds among
the five new categories of assistance.
It permits up to 15 percent o"' the funds made available in any of
the five categories to be transferred to any of the other four, provided
that the category to which the funds are transferred is not thereby
increased by more than 25 percent.
Transfers between any of the five new categories and any other
funds appropriated under the act would continue to be governed by
the existing provisions of section 610.
SECTION 4-DEVE1OPIVIENT LOAN FUNDS
Subsection (a) amends the existing loan receipt reuse authority of
section 203 of the act to include dollar receipts from loans made prior
to 1954.
Subsection (b) extends the loan receipt reuse authority to fiscal years
1974 and 1975 and authorizes reuse for the restructured categories of
development assistance as well as fo:r specified purposes of the new U.S.
Export Development Credit Fund established by the bill.
SECTION 5--TECHNICAL COOPERATION AND DEVELOPMENT GRANTS
Section 5(a)-Authorization limitation
Section 5 (a) amends section 211(a) of the Foreign Assistance Act
of 1961, relating to general authority, by adding the word "directly"
to the sentence which limits to 40 the number of countries to which
technical assistance may be furn:shed under title H.
The purpose of this amendment is to make clear that the 40-country
limitation applies only to bilateral assistance furnished directly by the
Government of the United States to the governments of less developed
countries and is not applicable to assistance to private organizations,
such as the International Executive Service Corps, which conduct
programs in countries to which the U.S. Government does not furnish
bilateral assistance.
The amendment is also intended to make clear that programs of
research and experimentation authorized under section 241 of the
act are not considered assistance to countries within the meaning
of section 211 or any other section of the act.
Section 5(b)-American schools and hospitals abroad
This section amends section 214 of the act in three respects:
Authorization
Section 214(c) of the act is amended to provide authorization in the
amount of $20 million for fiscal year 1974 and $20 million for fiscal
year 1975 for assistance to American schools and hospitals abroad. It
also eliminates unnecessary lan,;uage pertaining to expenditure of
funds appropriated for fiscal year 1970.
Excess local currencies
Section 214(d) of the act is amended to provide an authorization for
appropriation of excess foreign c irrencies of $7 million for fiscal year
1974 and $7 million for fiscal year 1975.
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Limitation
A new subsection (e) is added to section 214 of the act to limit as-
sistance under this section to not more than four institutions in any
one country in any fiscal year. This amendment also provides that not
more than one university and one hospital in any one country may
receive section 214 aid in any fiscal year. By "university" is meant
any institution of higher learning.
The purpose of these provisions is to help insure wider geographic
distribution of the funds available and to carry out the stated intent
of the law: namely, to provide such support as may be necessary to a
limited number of institutions, sponsored by American citizens, which
serve as demonstration centers for American ideals and practices in
the fields of education and health.
At present, approximately 80 percent of the funds authorized and
appropriated under this section go to institutions in the Near East.
The committee believes this represents too heavy a concentration in a
single region.
Moreover, during recent years, requests for section 214 assistance
have proliferated to the point that they have greatly exceeded the
funds provided by Congress for this program. Many of these requests
have come from institutions which perform valuable social and educa-
tional services in the countries in which they are located, but which
seem to be outside the purview of section 214. The committee believes
that the limited funds provided under section 214 should be reserved
for centers of excellence which in fact serve as demonstration centers
for American achievements in education and health. As the committee
suggested in its report on the Foreign Assistance Act Amendments
of 1971, other worthy institutions should be considered for assistance
under the appropriate sectoral authorizations.
The further limitation to support only one university and only one
hospital center in a country at the same time was deemed necessary
because such institutions require more funds and this program, with
limited funds, cannot be expected to support several large institutions
in the same country.
SECTION 6-HOUSING GUARANTIES
Section 6(a)-Worldwide housing guaranties
This subsection amends section 221 of the act by increasing by $100
million the amount of worldwide housing guaranty authority. With
the provision of this $100 million, the total amount of guaranties that
may be outstanding at any one time under section 221 will be $305
million, exclusive of the $25.1 million authorized and issued under
predecessor programs.
As of March 31, 1973, AID had authorized $147.5 million in world-
wide housing guaranties covering 14 projects in 11 countries. When
completed the projects will provide a total of 33,733 new housing units.
With the unused authority of $82.6 million and the $100 million being
provided in this bill, the committee believes this amount is sufficient
to carry on the program for the next 2 fiscal years.
Section 6(b)-General provision
This subsection amends subsection 223(i) of the act to make housing
guaranty authority available through June 30, 1976.
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Section 7(a)-issuing authority
This subsection would amend section 235 (a) (4) of the act to extend
OPIC's investment insurance and guaranty authority from June
30, 1974, to June 30, 1975, which is 1 year beyond the current fiscal
year.
The Foreign Assistance Act of 1969, which was enacted December
30, 1969, authorized extension of the 25-year-old political risk in-
surance program and the extended risk guaranty program for 5 years
from June :30, 1969, and provided for the establishment of the Over-
seas Private Investment Corpo?ation to operate these programs. A
5-year extension of the insurance and guaranty programs was granted
to provide a reasonable period for testing of the management of the
programs by a public corporation and to determine the feasibility of
further steps toward private management and financing of some or
all of OPIC's services. This test period is due to expire at the end of
the current fiscal year, June 30, 1974.
The committee extended the expiration date for 1 year but did
not approve any of the numerous expanded authorities requested
by the executive branch. This a-.tion was taken without prejudice to
ODIC'"s requested expanded authorities. The committee does not be-
lieve that substantial changes in OPIC's legislative authorities should
be made until the in-depth legislative oversight hearings by the Sub-
committee on Foreign Economic Policy currently underway, as well as
a General Accounting Office investigation. and a study by the Library
of Congress ordered by the committee, are completed. Without the
results of these current studies it is difficult for the committee to arrive
at any sound judgment regardir.:g OPIC's future role in the develop-
ment assistance field.
it is anticipated that the studies, when completed, will serve as a
basis for amending OPIC's legislative authorities.
Section 7(b)-Agriculture credit and self-help community devel-
opment projects
This section would extend the pilot agriculture credit guarantee
program which expired on June 30, 1973, for an additional 2 years,
to June 30, 1975.
This program was authorized by the Foreign Assistance Act of 1969
as an experiment to see whether U.S. Government guarantees of for-
eign private capital would help to make credit available, on reasonable
terms, for small-scale community development projects in the develop-
ing countries. The pilot program was limited to five Latin American
countries. Because extended initial planning was necessary, the pro-
gram did not get started until 1971.
Two years' experience has shown that well-to-do individuals and
banks in the selected countries of Latin America are not making funds
available for such guaranteed lenlinz because the cost of making small
loans to new borrowers is high and results in lower profits than those
associated with commercial loans to traditional customers. Because
of this, OPIC has been focusing cn a new approach to overcome these
commercial limitations.
The new approach needs to be tested under controlled lending
levels prior to implementation. I, is estimated that at least 24 months
will be required to complete this test period.
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The committee believes that the developing countries should be as-
sisted in their efforts to make credit available to communities and
people who are now outside of normal credit channels. Therefore, this
experimental program is being extended for 2 years to test OPIC's
new approach.
Authorization
Although there is no specific authorization in this legislation for the
Alliance for Progress, the executive branch's proposed level of assist-
ance under the Alliance is not affected. The committee's action in
deleting direct reference to the Alliance in the bill was designed to
conform with the previous committee decision to adopt an important
reform in the administration of foreign economic assistance. Under
that reform, funds are authorized in section 2 by "sector" rather than
according to a specific country or area.
Partners of the Alliance
This section authorizes appropriations of $968,000 in each of the
fiscal years 1974 and 1975 for grants to the National Association of
the Partners of the Alliance, Inc. (NAPA) for administrative ex-
penses and to supplement volunteer travel costs. NAPA is the ad-
ministrative arm of a volunteer organization known as the Partners
of the Americas. This people-to-people organization has carried out
many impressive projects of mutual assistance and development which
are funded through private contributions. The committee approves
of these efforts and feels that continued governmental support of
NAPA's administrative expenses is worthwhile.
SECTION 9-PROGRAMS RELATING TO POPULATION GROWTH
Authorization
This section. amends section 292 of the act, relating to the authori-
zation for population programs, by extending the earmarking provision
for each of the fiscal years 1974 and 1975.
The authorization of funds for population planning and health has
been provided in section 104 of chapter 1 of part I of the act. Because
of the importance of population programs, the committee has again
extended the earmarking provisions to assure the continued financial
support at a level not less than the $125 million specified in section 292.
SECTION 10-INTERNATIONAL ORGANIZATIONS AND PROGRAMS
Section 10(a)-Independent review groups for international as-
sistance institutions
This section requires the President to actively seek the establish-
ment of independent groups within the United Nations and its affili-
ated organizations, the World Bank and the Asian Development Bank,
to review and evaluate the programs of these organizations. The
President is further required to transmit to the Congress and the
Comptroller General reports prepared by such groups.
The committee believes that the Congress should have more
adequate assurance that the various programs of the United Nations,
the World Bank, and the Asian Development Bank are given critical
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review and that such review is reported to high enough levels to
achieve the required attention. This provision will make it possible
for the Congress and the Comptroller General to have access to audit
reports on which a judgment can be made of the effectiveness and
quality of the operations of these institutions.
Section 10(b)-Authorization
This section authorizes an appropriation of $127,800,000 for fiscal
year 1974 and the same amour..t for fiscal year 1975, for voluntary
contributions to various international organizations and programs.
This figure represents a $3 million increase in the executive branch
request in order to allow for a corresponding increase in the U.S.
contributions to the United Nation; Children's Fund.
The major portion of these fund::, is for the United Nations Devel-
opment Program (UNDP) which serves as the focal point for all U.N.
technical assistance activities.
These voluntary contributions. are distinct from the assessed contri-
butions which the United State; makes to the regular budget of the
United Nations. While the committee favors the proposed reduction
to 25 percent in the U.S. rate of assessment for the regular U.N.
budget, it also supports assura;ace~ given to other members of the
United Nations by the United States at the United Nations General
Assembly last year that this redaction would not be followed by U.S.
efforts to cut back on voluntary contributions to special U.N. programs.
An arbitrary and permanent percentage ceiling on voluntary contri-
butions would be a contradiction in terms. If these contributions are
indeed to be voluntary, then the United States should maintain the
present procedure of determining such amounts by having the admin-
istration and Congress review programs annually on a case-by-case
basis according to the benefits that can be expected to flow to the
United States.
In the case of the UNDP, contributions from other governments
have increased by more than 46 percent since 1970. This has enabled
UNDP to meet its annual goal of a 9.6 percent increase in total
contributions in spite of percentE.,ge decreases in the U.S. contribution.
In order that the UNDP may continue to improve its capacity in
multilateral technical assistance, the committee considers it important
for the United States to continue to provide adequate support for this
worthwhile program.
Section 10(c)-Indus Basin project
'['his section authorizes an appropriation of $15 million for fiscal
year 1974 and the same amount :"or fiscal year 1975, for U.S. contribu-
tions to the World Bank-administered consortium which is financing
the development of the Indus B:rsir, project.
The committee approved the full executive branch request for this
project because the U.S. grant to the Indus Basin Development Fund
under the fiscal year 1973 continuing resolution has fallen. short of
requirements by 88 million. The $15 million authorized in this legisla-
tion will enable the U.S. Government to pay these overdue amounts
as well as the World Bank's October 197:; call which is expected to be
$5.9 million. The $1.1 million balance remaining will be used to meet a
portion of the spring 1974 call.
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Section 10(d)-United Nations Children's Fund-(UNICEF)
This section stipulates that, of the funds provided for international
organizations and programs for fiscal years 1974 and 1975, $18
million shall be available in each of the fiscal years only for contribu-
tions to the UNICEF.
The $18 million earmarked for UNICEF in this subsection repre-
sents a $3 million increase in the amount requested by the executive
branch. In view of the fact that emergency demands on UNICEF
resources have increased markedly over the past year, the com-
mittee feels this increase is justified.
Section 10(e)-Technical and vocational training of Arab refugees
This section authorizes an appropriation of $2 million for fiscal
year 1974 and the same amount for fiscal year 1975, for an additional
contribution to the United Nations Relief and Works Agency
(UNRWA) for expansion of technical and vocational training of
Palestinian refugees.
At present, UNRWA operates 8 training centers which provide
4,258 places in courses of vocational and teacher training. This hardly
accommodates the approximate 30,000 refugees who become available
for such training each year. Additional contributions will be used to
expand vocational training facilities to include more advanced
courses and to modernize existing facilities.
The committee approves this additional contribution because such
an expansion of the UNRWA program will help make available the
skilled manpower needed throughout the Middle East, especially in
the Israeli occupied territories, and in Jordan and the Persian Gulf.
The committee also believes that this program contributes to building
peace in the area by allowing refugees to become productive partici-
pants in the development process in the Middle East.
SECTION 11-CONTINGENCY FUND
Section 11(a)-General authorization
This subsection amends section 451 of the act, relating to contin-
gency funds, by authorizing $30 million for fiscal year 1974 and $30
million for fiscal year 1975.
The amounts authorized are in line with AID's use of the contin-
gency fund over the past several years and are considered sufficient
by the committee to meet unforeseen developments or situations
during this period.
Authorized (in
millions)
Used
1970---------------------------------------------------------------------------
$30
$28.0
1971---------------------------------------------------------------------------
30
29.0
1972 -------------------------------------------------------------
30
30.1
1973 (estimated to June 15,1973)-------------------------------------------------
30
24.7
The use of the contingency fund is reported quarterly to the Con-
gress during the fiscal year. Thus, Congress has an opportunity to
evaluate these uses and determine that the fund has not been used
to finance programs for which funds were previously denied or for
requirements that were not bona fide contingencies.
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Section 11(b)-'Authorization for disaster relief assistance
As in the past, disaster relief ar.d reconstruction assistance furnished
under the contingency fund has peen. limited to short-term assistance
designed to alleviate and repai ^ the consequences of a, natural or
manmade catastrophe rather thin providing for long-term develop-
ment assistance.
Subsection (b) provides a permanent authorization for appropria-
tions for disaster relief assistance in the case of extraordinary disasters
of large magnitude. This authority would permit prompt appropria-
tions of funds to meet emergency requirements in those cases where
the assistance required is in excess of the amounts made available by
the contingency fund or by other accounts.
In the past, in the case of extraordinary disaster, such as the hostili-
ties in Bangladesh, the Congress `ias authorized and appropriated
special amounts to meet the humanitarian needs arising from the
disaster. A permanent authorization for appropriations to meet dis-
asters of extraordinary magnitude would permit the United States to
assist in emergency situations which require financial support beyond
the limited amounts normally available for immediate response to such
situations. Although the authorization is open ended, it could only be
used in the case of extraordinary disaster situations, and, of course,
would be subject to congressional action on a specific appropriation
request for such disasters. The Committee on Foreign Affairs expects
to be consulted in. advance of tha ue of this special authority. More-
over, the committee will review any significant use of this authoriza-
tion in the course of its normal oversight hearings.
Definition of "related assistance"
The amendment authorizes the appropriation of funds for "relief,
rehabilitation, and related assistance in the case of extraordinary
disaster situations." This language does not expand the present author-
ity for All) to provide disaster relief and reconstruction assistance
through the use of the contingency fund. The term "related assistance"
refers to activities which are des, .gzied to alleviate and repair the con-
sequences of a natural or manmade catastrophe, although in some
extraordinary situations such issistance may result in long-term.
benefits to the recipient nation.
While this title provides a specific disaster relief authority, it is not
intended to preclude the use of limos made available under other pro-
visions of the Foreign Assistance Act in emergency situations.
SECTION 12-INTERNATIONAL NARCOTICS CONTROL
Section 12(a)-Reports to Congress
This section amends section 481 of chapter 8 of part I of the Foreign
Assistance Act, relating to international narcotics control, by adding a
new subsection (b).
The new subsection (b) requires the President to transmit quarterly
and semiannual reports to the Congress on all aspects of U.S. inter-
national narcotics control programs and activities.
Subsection (b) (1) requires a report on the programing and obliga-
tions of funds not later than 45 days after the end of each calendar
quarter.
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Subsection (b) (2) requires semiannual reports not later than 45 days
after the end of the second and fourth calendar quarter, giving com-
plete and detailed data on all activities and operations carried out by
the U.S. Government and relating to international narcotics control.
The semiannual reports shall include, but shall not be limited to:
(1) The status of each agreement reached with any foreign country
or international organization pertaining to narcotics matters;
(2) The aggregate of obligations and expenditures made, and the
types and quantities of equipment delivered, to any foreign country
or international organization receiving assistance from the United
States for narcotics control purposes by country and by program. The
reports shall include all of the costs, including all salaries and allow-
ances of all indigenous and U.S. personnel engaged in international
narcotics control programs being carried out by the United States.
The purpose of this amendment is to insure that the Congress will
receive timely reports on all aspects of U.S. international narcotics
control programs including the type and quantity of equipment
provided, and to provide the executive branch with a valuable man-
agement tool for the administration of international narcotics control
activities.
International narcotics control programs are of the highest priority
in the United States. There is increasing cooperation from other
countries. Expenditures for narcotics control assistance, and other
programs relating to international narcotics control will be substantial
over the next several years. If the Congress is to approve such pro-
grams, it is essential that it have the information required by this
section.
Section 12(b)-Authorization
This subsection amends section 482 of the Foreign Assistance Act
to authorize the appropriation of $50 million for international narcotics
control in each of the fiscal years 1974 and 1975. This is $7.5 million
more than the $42.5 million requested for fiscal year 1974.
The program presented to the committee detailed the proposed
international narcotics assistance program for only fiscal year 1974
and requested an open-ended authorization for fiscal year 1975. The
committee was reluctant to approve an open-ended authorization and
authorized a sum equal to the 1974 authorization in order to provide
the executive branch with a 2-year authorization.
In increasing the authorization from $42,500,000 to $50 million in
1974, it is the intention of the committee that most, if not all, of the
increase be expended on programs for Southeast Asia.
It is estimated that each year over half of the world's 900-1,210
tons of illicit opium. is produced in the "Golden Triangle" area of
Southeast Asia. An increasing amount of heroin is being smuggled
into the United States from this area. In spite of the important role
that the countries of Southeast Asia play in the illegal production of,
and trafficking in narcotics, the executive branch has programed an
inadequate sum of slightly over $3 million for five countries as follows:
Laos-------------------------------------------------------- $1,500,000
Indonesia---------------------------------------------------- 18,000
Philippines-------------------------------------------------- 265,000
Thailand---------------------------------------------------- 1,114,000
Vietnam----------------------------------------------------- 182,000
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The committee is also concerned that international narcotics control.
programs may be underfunded elsewhere. Although 27 countries arc
programed to receive narcotics control assistance in fiscal year 1974,
approximately 80 percent of the funds are scheduled to be used as
follows :
Turkey------------------------------------------------------
$15,000,000
U.N.fund ---------------------------------------------------
5,000,000
Training-------- - --------------------------------------------
6,700,000
Unprogramed-----------------------------------------------
9,700,000
Total------_--- --------------------------------------
36,400,000
With the exception of Laos, Thailand, and Turkey, no other country
is programed to receive more than $375,000 for narcotics control
assistance in 1974.
Following is the proposed 197^4 program:
INTERNATIONAL NARCDrICS CONTROL PROGRAM
[In th msan ds of dollars]
Fiscally9ea Fiscal y973
Fiscal y9e74r
20,637 20,500
42, 50D
---------------------------------- -------------------------- 18,576 9,971
18,504
Lebanon ---------------------------------------
Pakistan------------------------------------------------------------------- 5
50
Syria -------------------------------------------------------------------- 8
--------------
Turkey----------------------------------------------------- 15,700 5,000
15,000
Cambodia----------- - --------------------------------------------------- 24
------------
Indonesia ------------------------------------------------------------------ 19
18
Laos -------------------------------------------------------- 1,100 2,079
1,500
Philippines --------------------------------------------------- 230 300
265
Singapore------------------------------------------------------------------ 40
--------------
Thailand ----------------------------------------------- -----
1,046 1,871
1,114
Vietnam -----------------------------------------------------
500 500
182
Latin America-----------------------------------------------------
36 2,596
1,927
Argentina ------------------------------------------------------ 234
310
13ahamas--------------- ----------------------------- ----
---------------------------- - - -
15
Barbados---------------------------------------------------------------___ 5
12
Bolivia---------------------------------------- -------- ----- 17 147
4
Brazil-------- ------------------------------------------------------------- - 4
100
Chile ------------------------------------------ --------------------------- 106
75
Colombia-------------------------------------- ---------------------------- 51
238
Ecuador-------------------------------------------------------------------- 308
300
Guyana ------------------------------------------------------------------ ----------------
2
Jamaica-------------------------------------------------------------------- 33
26
Mexico---------------------------------- -----------------------1,305
Netherlands Antilles
375
--------
Panama--------------------------------------- ---- ---------------------- 48
3
20
Paraguay--------------------------------------- ----?----------------------- 50
22
Peru ---------------------------------------------------------------------_ 143
250
tlruguay ---------------------------- . --------------------------- 140
135
Venezuela ------------------------------------------- ?---------------------- 22
40
Regional ---------------------------------------------------- 19 --------------
--------------
Africa ---------------------------------------------------------------------------------------
50
Tunisia -------------------------
50
International organizations___________ ______________-___-
_-_____ _
2,000
5,100
5,100
U.N. Special Fund---------------------------------------- _----
2,000
5,000
5,000
Colombo plan--._----------------------------------- ---------------------
100
100
Worldwide program costs -------------------------------------------
25
2,833
7,181
Training ------- --------------------------- ------------------__
25
2,383
6,731
loterregional casts ----_------------------------------ --------------_-_------
450
450
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Foreign assistance programs for international narcotics control pur-
poses are unique. Undertaking such programs, the United States is
asking other countries to join in a mutual attack upon the illegal
production of, and trafficking in, narcotics. If such assistance is
effectively utilized, it will lessen the quantity of narcotics and other
dangerous drugs entering the United States, thus benefiting the
United States.
It is not the intention of the committee that the United States
dispense narcotics control assistance unnecessarily. It should be noted
that there is a limit to the amount of financial and material assistance
that many of the countries of Southeast Asia, Latin America, and the
Middle East can usefully absorb. U.S. narcotics assistance control
programs should be based upon a realistic assessment of what can be
effectively utilized. What can be utilized, however, should be made
available immediately.
It is the judgement of the committee that the additional $7.5 million
authorized pursuant to this section, when combined with the
$9,700,000 which is unprogramed, will enable the Cabinet Committee
for International Narcotics Control to formulate a realistic, adequate
international narcotics control assistance program in fiscal year 1974.
In the event that the $50 million authorized for fiscal year 1975
proves to be inadequate, the committee would be receptive to a
request for additional funds contingent upon adequate justification
for such any increase.
SECTION 13-COOPERATIVE ECONOMIC EXPANSION
This section amends the Foreign Assistance Act of 1961 by adding
a new chapter 10-Cooperative Economic Expansion-which author-
izes the President to use up to $2 million of the funds available under
part I of the act, to assist friendly countries, particularly those in
which development aid has ceased or those not receiving prior assist-
ance, in obtaining technical assistance from U.S. sources.
The assistance would be for experimental programs of (1) encourag-
ing development of natural resources of interest to the United States,
(2) encouragement of a favorable climate for trade and investment,
and (3) stimulation of markets for U.S. exports.
The area of emphasis in the use of the funds would be certain
countries in the Near East and the Persian Gulf, Venezuela, Iran, and
others which are "aid graduates" or have never received U.S.
assistance.
By encouraging the furnishing of technical services from U.S.
public or private agencies and individuals to countries which suffer
from a shortage of technical capabilities, the United States will be
serving its own interests as well as development purposes.
The programs would differ from traditional technical assistance
because they would:
(1) Place a greater emphasis upon activities which have the
potential for building opportunities for U.S. exports, stimulating
the local private sector, and developing needed natural resources;
(2) Be conducted in countries which in other respects may be
considered developed ; and
(3) Be designed to make American technical know-how avail-
able to recipients at costs competitive with those charged by
other developed countries for such services.
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The amendment is also intended to make clear that programs of
experimentation which it conte_nplates would not be considered as-
sistance to countries within the meaning of section 211 or any other
section of the act.
Further, the section would allow the subsidizing or "topping off"
of salaries of personnel, either private citizens or public officials,
serving with international organizations or foreign governments.
Section 11(a)--Authorization
This subsection amends section 504(a) of the Foreign Assistance
Act to authorize $550 million for, rant military assistance-a reduction
of $102 million below the executive request of $652 million.
There was no military assistance authorization for fiscal year 1973.
The appropriation for military > ssistance, including training costs, in
fiscal year 1973, was $553.9 million pursuant to continuing resolution
authority.
The fiscal year 1974 authorization does not include funds for military
assistance for Laos or South Vietnam which are funded in the Depart-
ment of Defense budget, nor does it include any funds for military
education and training. For the first time, education and training
funds are authorized in a separate section of the bill.
Although the number of countries which may receive military assist-
ance (other than training in the United States) is limited by law to 40,
the executive branch has proposed grant military assistance to only
20 countries in fiscal year 1974.
The primary role of the grant military assistance program is to
supply arms and equipment to friendly foreign countries to fill the gap
between what they need to provide for their own security and what
they are able to finance with their own resources.
The fiscal year 1974 grog rairn
The Executive requested an authorization for the appropriation
of $652 million in new obligational authority to fund items that can
only be obtained from. new procurement, or for replacement of equip-
ment supplied from normal DOD stocks.. This $652 million, together
with real) propriation, recoupnlents, reimbursements, and other
transfers totaling $119.5 million, was expected to finance an overall
grant military assistance program of $771.5 million in fiscal year
1974. The proposed fiscal year 1974 program is compared with the
fiscal year 1972 and fiscal year ] 973 programs in the following chart:
MILITARY ASSISTANCE PIIOGRAM, FISCAL YEARS 1972-73
[In wliions]
1973 as
equested of 1973 as of
972 Congress Jan. 23,1973 Proposed 1974
New obligational authority-------------------
Other availabddies------- ____________________
Unobligated-------------------------------
$580.6 $780.0 $553.1 $652.0
6 39.7 35.7 119.5
-2.3 --------------------------------------------
5q9.9 819.7 588.8 771.5
The projected country-by-country rant military assistance program
including supply operations costs (packing, crating, handling and
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GRANT MILITARY ASSISTANCE (MATERIEL)
[In thousands of dollars]
Supply Supply Supply
opera- opera- opera-
Materiel lions Total Materiel lions Total Materiel tions Total
East Asia and Pacific:
Cambodia-------------- 168,397 9,719 178,116 128,560 13,400 141,960 167,194 13,500 180,694
Indonesia-------------- 14,670 1,092 15,762 14,700 1,000 15,700 20,826 2,200 23,026
Korea------------------ 131,472 16,445 147,917 117,211 16,700 133,911 238,789 22,500 261,289
Philippines------------- 11,755 1,211 12,966 14,683 1,100 15,783 19,269 2,100 21,369
Thailand------------------------------------------ 34,063 2,100 36,163 55,762 2,700 58,462
Regional costs---------------------------------------------------------------- 28,300 --------- 28,300
Subtotal------------- 326,294 28,467 354,761 309,217 34,300 343,517 530,140 43,000 573,140
Prior year program cost:
Republic of China--- 3,634 6,306 9,940 2,099 7,000 9,099 --------- r 5,700 5,700
Total---------------- 329,928 34,773 364,701 311,316 41,300 352,616 530,140 48,700 578,840
Near East and South Asia:
Jordan----------------- 35,694 1,757 37,451 32,132 2,000 34,132 35,632 3,900 39,532
Turkey---------------- 45,662 12,955 58,617 56,717 10,560 67,277 85,501 12,500 98,001
Total---------------- 81,356 14,712 96,068 88,849 12, 560 101,409 121, 133 16,400 137,533
Prior year program cost:
Greece------------- 1,443 7,564 9,007 791 5,100 5,891 --------------------------
Europe:
Portugal--------------- 618 69 687 442 80 522 323 100 423
Spain------------------ 8,621 1, 452 10, 073 8, 227 700 8,927 3,026 2,000 5,026
Region----------------- 80 --------- 80 100 --------- 100 --------------------------
Africa:
Ethiopia---------------- 9,019 659 9,678 7,736 600 8,336 10,454 1,200 11,654
Tunisia---------------- 925 527 1,452 1,451 300 1,751 2,476 100 2,576
Total---------------- 9,944 - 1,186 11,130 9,187 900 10,087 12,930 1,300 14,230
Prior year program cost:
Liberia------------- 62 25 87 83 20 103 -------------------------
Total---------------- 10,006 1,211 11,217 9,270 920 10,190 12,930 1,300 14,230
Latin America:
Bolivia----------------- 2,800 270 3,070 3,036 30D 3,336 3,996 250 4,246
Dominican Republic----- 319 25 344 33 70 103 796 70 866
El Salvador------------------------------------------------- 15 15 400 40 440
Guatemala------------- 1,201 115 1,316 298 150 448 1,080 100 1,180
Honduras-------------------------------------------------- 20 20 400 30 430
Nicaragua-------------- 307 10 317 64 40 104 1,023 40 1,063
Panama---------------- 223 25 248 239 25 264 230 20 250
Paraguay--------------- 316 25 341 203 50 253 550 50 600
Uruguay--------------- 414 30 444 268 130 398 1,000 100 1,100
Regional--------------------------------------------------------------------- 525 --------- 525
I Cost of supply operations for materiel ordered in previous years. No MAP materiel is programed for the Republic of
China in fiscal year 1974.
The bulk of the program, $682,373,000, has been allocated to seven
countries: Cambodia, Korea, Thailand, Indonesia, the Philippines,
Jordan, and Turkey.
The committee reduced the authorization for grant military assist-
ance by approximately 15 percent.
The committee recognizes that if U.S. foreign policy objectives are
to be achieved and U.S. troop levels abroad reduced, it is essential that
sufficient funds be provided to friendly foreign countries and allies to
enable them to obtain defense articles and services necessary to provide
for their internal and external security.
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At the same time, it must be recognized that the United States faces
serious economic and financial problems domestically and inter-
nationally. The U.S. balance of payments is in deficit and the dollar
is under persistent pressures abroad. Under the circumstances, it
would not be consistent with the -)verall national interest to authorize
funding of grant military assistant programs at the requested level.
The committee believes that an authorization of $550 million,
together with recoupments, reiml')ursements, and reappropriations of
$50 million and $185 million of excess defense articles (at legal value)
should be sufficient to continue an effective military assistance pro-
grain in fiscal year 1974.
Section 14(b)-Special authori y
This section amends section 506(a) of the act by renewing for
another year the authority of the President, when he determines it to
be vital to the security of the United States, to order defense articles
from Department of Defense stocks, and defense services, to carry out
the purposes of part 11 of the act, subject to subsequent reimbursement
from military assistance funds. As ,in prior years, this authority is
limited to $300 million in fiscal year 1974 and prompt notice of action
taken under this section is required to be given to the Congress.
The Executive requested that this authority be extended without
a fiscal year limitation.
The committee is convinced that this authority should be subject
to annual review axed approval by the Congress and has authorized the
extension of this authority for the fiscal year 1974 only.
Section 14(c)-Military assistance to Laos and South Vietnam
This subsection amends section .1513 of the act and requires that
after June 30, 1974, all military assistance to Laos and South Vietnam
shall be funded out of the regular military assistance program as
authorized under the Mutual Development and Cooperation Act or
the Foreign Military Sales Act.
Military assistance for South Vietnam has been funded from the
Department of Defense budget since 1966 and for Laos since 1967.
For fiscal year 1974 the Department of Defense initially requested
$1.87 billion for these two countries. Due to the reduction in hostilities,
the committee is informed that the currently projected program is
$1,085,300,000 for South Vietnam and $101) million for Laos.
When funding for these two countries was transferred to the Depart-
ment of Defense budget, the Indochina war was in progress and the
exigencies of the situation justifie,i the transfer of military assistance
funding to the Department of Defense. That situation has changed.
Cease-fire agreements have been reached in South Vietnam and Laos,
and the provisions of those agreements place a limit on the amount of
defense articles that can be provided. For example, article 7 of the
Vietnam cease-fire agreement states that parties shall be permitted
to make--
periodic replacement of armaments, munitions and new materials which have
been destroyed, damaged, worn out or used up after the ceasefire, on the basis of
piece by piece, of the same characteristics and properties, under supervision of the
Joint Military Commission of the two South Vietnamese parties and of the Inter-
national Commission of Control and Supervision.
In the case of Laos, article 3(d) of the cease-fire agreement states:
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It is forbidden to bring into Laos all types of military personnel, regular troops
and irregular troops of all kinds and all kinds of foreign made weapons or war
material, except for those specified in the Geneva Agreements of 1954 and 1962.
In case it is necessary to replace damaged or worn out weapons or war materials,
both sides will consult and arrive at an agreement.
Thus, the basic justification for carrying military assistance for these
two countries in the Defense Department budget no longer exists.
The furnishing of military assistance in any form is an important
tool of foreign policy. Legislative responsibility for approving such
programs must rest with the committees of the Congress which have
jurisdiction over foreign policy matters.
In the event that the cease-fire agreements break down and it
becomes necessary to provide substantial quantities of defense articles
to either South Vietnam or Laos, the President can exercise the draw-
down authority continued in section 506(a) of the act. This was done
in 1965, when the President provided $75 million to South Vietnam,
and again in 1966 when the full amount of $300 million in defense
articles was drawn from Department of Defense stocks subject to
subsequent reimbursement from military assistance funds. The draw-
down authority enables the President to meet any contingency that
may develop in either South Vietnam or Laos.
Section 14(d)-Local currency deposits
This subsection repeals section 514 of the act which requires
recipients of grant military assistance, including excess defense
articles, to deposit in local currency an amount equal to 10 percent
of the value of such assistance for use by the United States to pay its
official local currency costs in that country.
Section 514 was included in the Foreign Assistance Act of 1971
which became effective February 7, 1972. The committee has been
informed that its implementation has created substantial difficulties
with a number of countries with whom the United States has had
long-standing and mutually beneficial security arrangements. For
example, Korea is required to set aside $20 million out of its total
defense budget of $360 million. The impact of this requirement limits
severely Korea's efforts to modernize its armed forces-a program
that the United States has committed itself to support. The committee
was also advised that, as a practical matter, the value of local currency
contributions, office space, military housing and installations contrib-
uted by countries receiving military assistance, in the aggregate
exceeds what we would expect to receive under the deposit require-
ments. Accordingly, the committee recommends repeal of this
requirement.
SECTION 15-SECURITY SUPPORTING ASSISTANCE
This section amends section 532 of the Foreign Assistance Act to
provide an authorization of $125 million for security supporting
assistance in fiscal year 1974. Of this amount, $50 million is specifically
earmarked for Israel.
The Executive request was for new obligational authority of
$100 million to finance a security supporting assistance program of
$124,055,000 in fiscal year 1974.
In fiscal year 1973, the Congress appropriated $600 million for such
programs pursuant to continuing resolution authority. The sharp
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reduction in supporting assistance funds requested for fiscal year 1974:
results from the fact that programs for South Vietnam, Cambodia,
and Laos ($632 million) are being treated separately in another
section of this bill.
Security supporting assistance is the third major component o:f
international security assistance and is administered by the Agency
for International Development Such programs further economic or
political stability in nations threatened by significant security prob..
lems. Since they involve economic assistance, they normally also
contribute to economic growth and development of the recipeint
countries. Their major objective, however, is to stabilize the economic
or political situation in a special security framework.
The Executive programed $25 million in security supporting assist??
ance for Israel in. fiscal year 1974. In each of the fiscal years 1972 and,
1973, the United States furnished $50 million to Israel. These funds
were used to provide general budget and balance-of-payments support.
The committee increased the authorization for supporting assistance
from $100 million to $125 million and earmarked $50 million for
Israel to insure that Israel's ecoaolnic situation will not deteriorate as
a result of exceptionally heavy defense expenditures.
The fiscal year 1974 security supporting assistance programs as
revised by the committee follow:
SECURITY SUPPORTING ASSISTANCE
(In thoisands of dollars(
Fiscal year-
- ---- 1972 -- -~ 1973
Thailand ------------------------------------------------ 14,840
Philippines-----------------------------------------------------------------
Israel------------------------------------------------------ 50,000
Jordan----------------------------------------------------- 40,000
Malta---------------------------------------------------------------------
13, 000 15, 0011
50,000 ---------------..
50, 000 25, 0011
50, 000 650011
1
14, 400 9:50
Spain ----------------------------------??__..
Africa region---------------------------------------------- 3,700 ---------------------------------
U.N. Forces Cyprus (UNFICYP) ------------------------------- 2,400 2,400 4, 2011
Interregional support costs--.--------------------------------- 1,506 1,958 2,355
Subtotal -__------------------------------------ --------- 112,446 184,758 149,055
Indo-China program--------.-----------------------.--------- 480,779 443,133 (r)
Total------------------------------------------------ 593,225 627,891 149, 055
Less other availabilities for obligation------ ---------------- 43, 225 27,891 24, 05!1
New obligational authority------------------- 550,000 600, 000 125, 0011
r $632,000,000 in fiscal year 1974 requested separately under Indochina Relief and Reconstruction.
SECTION 16--INTERNATIONAL MILITARY EDUCATION AND TRAINING
Section 16(a)-Authorization and purpose
This section adds to part II of the act a new chapter which estab-
lishes it program of international military education and training,
separate and distinct from the military assistance program, and
authorizes the appropriation of $30 million for this program for fiscal
year 1974. In fiscal year 1973, the Department of Defense programed
$34,639,00( out of the regular grant military assistance appropriation
for such programs.
Section 541 contains a statement of the chapter's purpose, which
emphasizes the differences between the objectives of this new program
and those of the military assistance program.
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Section 542 authorizes the President to provide military education
and training by grant, contract, or otherwise and describes the kind
of activities that can be engaged in under this chapter. These activi-
ties include attendance by foreign military personnel and related
civilians at United States and foreign military facilities for education
or training purposes. International military educational facilities, such
as those under NATO auspices, are included. Also permitted is at-
tendance by foreign personnel at pertinent courses of instruction at
nonmilitary public and private educational and research institutions.
In addition, observation and orientation visits by foreign military
and related civilian personnel would be authorized under this chapter.
Finally, section 542 provides for other activities to further the purposes
of the chapter, such as the furnishing of noncombat military training
instructors, media aids, and publications.
Section 543 authorizes the appropriation of funds for military edu-
cation and training programs in fiscal year 1974. The executive branch
requested an open-ended authorization and budgeted $33 million for
such programs. The committee reduced this amount by $3 million
and authorized a line item appropriation of $30 million. These funds
will be used to provide training to 43,282 foreign military students. Of
this number, 3,464 will be trained in the United States and 39,818 will
receive overseas training. Of the total number, 37,445 are expected to
be Cambodians. Consequently, if the situation in Cambodia should
change in such a way as to limit the need and the opportunity for U.S.
training of Cambodian military personnel, the committee expects that
a significant part of this authorization will not be used.
Section 544 requires the President to submit annual reports to the
Congress concerning activities carried on and obligations incurred for
international military education and training on a country by country
basis.
Section 16(b)-Conforming amendments to the Foreign Assist-
ance Act
This subsection amends the act to eliminate all references to train-
ing from chapter 2 of part II, which deals with military assistance,
because military education and training programs will no longer be
conducted as military assistance. Thus, for example, statutory require-
ments and restrictions applicable to "military assistance" (e.g. section
514, section 653, etc.) would not be applicable to military education
and training programs under this chapter. The subsection also amends
part III of the act, containing general, administrative, and miscel-
laneous provisions, to clarify the application of those provisions to the
new chapter on international military education and training. The
specific amdndments made by this subsection are as?follows:
(1) This provision deletes the references to training or advice from
section 503(d) of the act, which authorizes the assignment of members
of the U.S. Armed Forces to noncombatant duties.
(2) This provision deletes the exclusion of "training only" coun-
tries from the 40-country limitation on the number of countries that
may receive military assistance, contained in section 504(a) of the act.
(3) This provision repeals the restriction on the number of foreign
military students that may be trained in the United States. According
to section 510 of the act, this number cannot exceed in any fiscal year
the number of civilians brought to the United States in the previous
fiscal year under the Mutual Educational and Cultural Exchange Act
of 1961.
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(4) This provision makes clear that the roles of the chief of the
U.S. diplomatic mission and of the Secretary of State with respect
to international military education and training will be the same as
they are for military materiel assistance programs. This is achieved
by inserting a reference to military education and training after the
reference to military assistance in subsections (b) and (c) of section
(22 of the act.
(5) This provision extends the supervisory responsibilities of the
Secretary of Defense under section 623(a) (4) of the act to military-
elated civilian personnel, consistent with the scope of the new chapter
a)n internationals military education and training. It also makes the
.upervisory responsibility of the Secretary of Defense over Deparr-
nient of Defense functions relating to military assistance expressly
applicable to military education. and training as well.
(6) This provision makes the provisions of section 632 of the acts,
i,oncerning reimbursement among agencies, expressly applicable to
Military education and training in the same manner as that section
applies to military materiel assistance.
(7) This provision amends section 636(g) of the act to insure that
part 11 funds are available for administrative, extraordinary, and
operating expenses incurred in furnishing military education and train-
ing. It also makes part II :'unds available for reimbursement of
expenses of military-related civilian personnel in connection with orien-
tation visits, consistent with th.e scope of the new chapter on interna-
tional military education and training.
(8) This provision modifies the definition of defense service in sec-
tion 644(f) of the act so as to exclude references to training. By this
t?.hange, the authority to furnish training as military assistance under
chapter 2 of part 11 of the act will be terminated. In addition, the
definition of training formerly included within the definition of defense
service is made a separate subsection, subsection 644(n), which will
apply to the new chapter on international military education and train-
ing. The changes made by this provision are not intended to affect the
sale of training as a defense serv:i,,e under the Foreign Military Sales
Act.
.Section 16(c)--Preservation of existing actions
This subsection makes clear than, the amendments to the act affected
by this section will not call into question the continuing validity of
actions taken prior to the enactment of this bill under authority of
any provision amended or repealed by this section, such as regulations
and contracts.
Section 16(d)--Interim funding
This subsection authorizes funds heretofore made available for
activities which will be fundec. in the future under the new interna-
tional military education and training chapter to be obligated and
expended either in accordance 'vit r the originally applicable authority
or under the new authority.
SECT ION 17-GEIN ERAL PROVISIONS
Section 17(a)--Expropriation
This subsection repeals paragraph 1 of section 620(e) of the Foreign
Assistance Acts of 1961, relating to expropriation, the so-called Hicken-
looper amendment.
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It is the considered judgment of those who are primarily charged
with the conduct of U.S. foreign policy in those areas where expropria-
tions are taking place that the language of this act has proven to be so
restrictive that it has denied the President the needed flexibility to
effectively assist U.S. companies in defending their interests when they
have been expropriated.
The problem posed by this provision of the law is that it has at-
tempted to deal in a blanket fashion with diverse situations. Since its
enactment in 1962 this provision has proved unworkable and in-
effective. In fact, it has been invoked on only one occasion. Despite its
existence, there have been numerous expropriations, especially in
Latin America. Rather than discouraging expropriations, this provi-
sion of law is regarded as having produced contrary results.
The committee believes that the striking of the Hickenlooper amend-
ment would in no way result in denying the United States the oppor-
tunity and the flexibility to invoke retaliatory action with regard to
our assistance programs if the President and the State Department
felt that such an approach would bring about just compensation to
expropriated companies by way of negotiations.
The committee further believes that the existing provision forces
the United States to take action in a commercial dispute without a
full assessment of the evidence and the possibility that a foreign
government may be responding to a serious provocation. If, indeed, a
foreign government has acted in response to an illegal act of a U.S.
company, the American people should not be required to forfeit
mutually valuable foreign policy relationships with that country.
Finally, the committee is advised that those most directly involved
with the issue of expropriations-the U.S. business community-have
spoken out strongly in opposition to the continuation of this provision.
For example, the board of trustees of the Council of the Americas,
which is composed of the 200 major U.S. companies which represent
90 percent of U.S. direct investment in Latin America, has urged
that this provision be eliminated.
Therefore, the committee recommends the deletion of this provision.
Section 17(b)-Prohibitions against furnishing assistance
This section amends section 620(n) of the act relating' to prohibitions
against furnishing assistance to countries trading with North Vietnam.
The amendment authorizes the President to waive the prohibitions of
section 620(n) when he finds that such waiver is in the national
interest and reports such finding to the Congress within 30 days.
Section 17(c)-Seizure of U.S. fishing vessels
This section repeals section 620(o) of the Foreign AssistanceAct
which requires that:
In determining whether or not to furnish assistance under this Act, considera-
tion shall be given to excluding from such assistance any country which hereafter
seizes, or imposes any penalty or sanction against any United States fishing
vessel on account of its fishing activities in international waters.
The committee also repealed the restrictive provisions relating to
the seizure of U.S. fishing vessels in the Foreign Military Sales Act
and in the Fishermen's Protective Act of 1967.
To date, 10 Latin American countries claim. sovereignty or ex-
clusive jurisdiction over the waters or resources off their coast to a
distance of 200 miles. These claims are representative of the threat
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to freedom of navigation and the -potential conflict over rights to
ocean resources which led the President, in May 1970, to conclude that
existing law of the sea is inadequate and to call for all nations'
ations to
resolve the disputed issues.
A new Law of the Sea (.LOS) Conference has been scheduled by
the U.N. General Assembly for 1973-74. Intensive negotiations are
underway on treaty articles covering such major subjects as fisheries,
a regime for the seabed, territorial seas, straits used for international
navigation, mti,rine pollution, and oceanographic research.
Pending an LOS Conference settlement, the committee believes
fisheries disputes can and should be resolved through interim ar-
rangements which do not prejudice LOS positions of either sides.
This approach! has resulted in a bilateral conservation agreement with
Brazil on shrimp.
In the case of the tuna fi;;hing conflict with Ecuador and Peru,
section 620(o) and other such restrictive legislation have not pre-
vented 1T.S. fishing vessel seizures by those two countries. To date,
the total cost of fines and license fees assessed against U.S. fishing
vessel owners has reached close ;o $7 million. Experience has shown
that these countries do not wish to appear to be bowing to U.S.
pressure implied by a cutoff of assistance. As a result, when the
U.S. Government has applied sanctions, the governments concerned
have often reacted against other U.S. interests. For example, when
military sales to Ecuador were suspended, the effects were an expulsion
of the U.S. military mission., a refusal to negotiate the fishing issue
any further, and continuation of the seizures.
In sum, the committee believes that the prospects for it negotiated
interim settlement of fishing disputes as well as for a satisfactory LOS
Conference would he consideraMly brighter in the absence of legislative
-unctions. In addition, the threat of it negative reaction against other
1T.S. economic and political irter?ests would be lessened by the re-
moval of such legislation.
SECTION 18--EMPLOYMENT OF PERSONNEL
This section amends section (3325 of the Foreign Assistance Act,
relating to employment of personnel, by adding a new subsection (k).
The new subsection authorizes she participation in the Foreign Service
Retirement and Disability System of certain categories of All)
l+'oreign Service personnel.
Under existing law all AID ,employees, both domestic and Foreign
Service, are participants in. the Civil Service Retirement and Disability
li'und. On the other hand, Foreign Service personnel of the Department
of State and of the U.S. Information Agency are participants in the
Foreign Service retirement system. That system provides more
aworable conditions for retirement to compensate for some of the
personal difficulties arising fr~nrn overseas service. It has several
au van tapes over the Civil Service provisions :
i i.) Foreign Service personne.'. maa.y retire at age 50 with 20 years of
service without penalty while !'civil Service personnel may retire at
age 55 with 30 years of service without penalty.
(2) Foreign Service annuities are calculated at 2 percent of the
highest 3-year base. Civil Service annuities are also calculated on the
highest 3-year base but on a graduated scale of 1)2 percent for the first
5 years, 1%~ percent for the next 5 years, and 2 percent for all year
of service over 10.
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Paragraph (k) (1) designates the categories of personnel serving in
AID who would participate in the Foreign Service Retirement Sys-
tem. The major categories are Foreign Service Reserve officers and
Foreign Service staff officers and employees serving under unlimited
appointments. Based upon current personnel strength, about 2,500
individuals would be transferred from the Civil Service Retirement
System to the Foreign Service Retirement System. Although existing
law limits participation by Foreign Service Staff personnel to those
with 10 years prior service, the Department of State is seeking an
amendment that would bring all such personnel in the Department
and in USIA into the Foreign Service System without regard to a 10-
year period. Thus the amendment proposed in this paragraph is con-
sistent with the proposed legislation.
Paragraph (k) (2) provides that persons who become participants
in the Foreign Service Retirement System shall make a special con-
tribution to the Foreign Service Retirement and Disability Fund in
accordance with section 852 of the Foreign Service Act of 1946. This
means that, upon transfer from the Civil Service Retirement System
to the Foreign Service Retirement System, the previous contributions
made by the individual into the former fund will be transferred to his
account in the Foreign Service fund. At present, employee contribu-
tions to both retirement systems are 7 percent of their salary. In each
case, this is matched by the employing agency.
Paragraph (k) (3) provides for the application of section 636 and
of title VIII of the Foreign Service Act of 1946. Section 636 permits
voluntary retirement of a participant who is at least 50 years of age
and has 20 years of service. Title VIII details the computation and the
conditions of retirement.
Paragraph (k) (4) continues a participant's coverage under the
Foreign Service Retirement System whenever such participant might
be assigned to a position not covered by the system. This authority
is similar to that contained in section 571(b) of the Foreign Service
Act of 1946.
Paragraph (k) (5) is a transitional provision that will permit older
employees to make the necessary preparations for retirement. It
provides for the gradual retirement over a 7-year period of participants
in the system who are above the Foreign Service mandatory retire-
ment age at the time they became participants in the system. It is
similar to the formula used when staff personnel of the Department of
State and USIA Foreign Service personnel were transferred to the
Foreign Service Retirement System. A proviso exempts Presidential
appointees confirmed by the Senate, while so serving, from the other-
wise applicable mandatory retirement age. It is estimated that of the
2,500 AID Foreign Service personnel who would come under the
Foreign Service Retirement System about 625 would qualify for
immediate retirement.
Paragraph (k) (6) provides that the President may , whenever he
deems it to be in the public interest, extend any participant's service
for a period not to exceed 5 years after the mandatory retirement date
for such participant. It is anticipated that this authority will be
delegated to the Administrator, AID. A comparable provision in the
Foreign Service Act permits the Secretary of State to extend the
services of a Foreign Service officer for a period not to exceed 5 years
after compulsory retirement.
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Paragraph (k) (7) provides that the subsection will become effective
on the first day of the first month which begins more than 1 year
.after the date of enactment but an eligible participant may elect to
become it participant before that date. It also provides that a par-
ticipant who on the effective date of this subsection is age 57 or over
may retire voluntarily at any time before the mandatory retirement
elate set forth in paragraph (5) above.
Paragraph (k)(8) provides that an AID participant in the Foreign
Service Retirement System who is separated for cause shall be entitled
to the benefits set forth in subsections 637 (b) and (d) of the Foreign
Service Act of 1946, as amende(i. These provide either a lump-sun
refund of the participant's contributions or a deferred annuity. This
,aragraph also provides that the selection-out authority contained hn
,;ubsection 625(e) of the Foreign Assistance Act shall apply to AI.D
participants in the Foreign Service Retirement System rather than
the selection-out authority contained in the Foreign Service Act of
1946, as amended.
All) operates only in the less, developed-countries. Hence its Foreign
llervice personnel spend almost their entire working years in posts that
.age designated hardship posts. 'the transfer of its personnel to the
Foreign Service Retirement System should encourage those who meet
the age and service requirements to seek earlier retirement. The
inclusion of such personnel in the Foreign Service Retirement System
does not, create a permanent fereigm assistance career service and does
,got prejudice any future action that the Congress or the Executive
Branch may wish to take with :respect totheforeign assistance program.
ss1:CCiON 19-REFORPS AND INFORMATION
Debt status and relief reports
This section amends section 6c 4 of the act relating to reports and
information, by adding two new subsections calling for additional
reporting.
Subsection (f) provides fcr comprehensive semi-annual reports
showing as of June 30 and De,encber 31 of each year the status of all
outstanding obligations owing is the United States and potential
liabilities under insurance and contracts of guarantees and loa:as
and other credits resulting from transactions under this act; the
Foreign Military Sales Act, the Agriculture Trade Development and
Assistance Act of 1954; and the Export-Import Bank Act of 1945.
The status report is limited to those outstanding balances on individ-
ual items which exceed $1 millior_.
Subsection (g) provides for comprehensive annual reports not later
than January 31 of each year detailing the worldwide dimensions
and impact of the debt servicing problems among the developing aid
receiving countries along with specific debt relief measures granted by
the United States to these counties. It also provides for summary and
detailed reports dealing with the impact of debt relief measures upon
the availability of U.S. aid resources for such countries and detailed
analysis as to the net aid flow where debt relief has been granted during
the reporting period.
In an ever-increasing number of developing countries, external
public debt has become it heavy burden on further economic growth.
The GAO has reported that;, by December 1970, 80 developing
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countries had accumulated over $66 billion of external debt. At the
same time, debt service payments increased by about 18 percent,
reaching nearly $6 billion annually.
The committee believes that due to this growing importance of the
developing countries' debt service burden and the increase of debt
relief measures, Congress' must be well informed with respect to the
relationship of debt-servicing problems, debt relief and economic
assistance. It should also be noted that Congress may well be required
to authorize future debt-relief arrangements to the developing coun-
tries. The report required by this provision would be a useful aid to
Congress for these purposes.
SECTION 20-ADMINISTRATIVE EXPENSES
This section amends section 637 (a) of the act relating to admini-
strative expenses by deleting the authorization of $50 million for
each of fiscal years 1972 and 1973 and inserting an authorization of
$53,100,000 for each of fiscal years 1974 and 1975.
The authorization of $53,100,000 together with unobligated funds
carried over, reimbursements, and transfers from other AID appro-
priations will provide an estimated availability of $57,875,000 for
fiscal year 1974 for administrative expenses. This sum represents
about one-third of the operating expenses of the Agency. The balance
is funded from the major program appropriations and from non-
appropriated funds available to the Agency, such as the housing
guaranty, excess property programs, and foreign currency trust funds
contributed by host countries.
SECTION 21-FAMINE AND DISASTER RELIEF AND AFRICAN
SAHEL DEVELOPMENT PROGRAM
This section amends chapter 2 of part III of the act, relating to
miscellaneous provisions, by rewriting section 639 and adding two
new sections providing assistance to African Sahel.
General authorization
Section 639 of the act was rewritten to permit the furnishing of
famine or disaster relief notwithstanding the provisions of the act
or any other law.
Section 639 of the act provides that "no provision of this act shall be
construed to prohibit assistance to any country for famine or disaster
relief". The proposed amendment would change this section slightly
to permit the furnishing of such assistance notwithstanding provisions
of the act or any other law. The change is proposed to give the Presi-
dent greater flexibility in carrying out programs of famine and disaster
relief
In its present form, section 639 permits famine and disaster relief
assistance in cases in which it would otherwise be prohibited. The
section recognizes that humanitarian concerns in such cases override
the political considerations which, in some circumstances, would pre-
vent the conduct of ordinary assistance programs.
The purpose of this provision is to facilitate humanitarian activities
where normal operating procedures would unduly curtail them. Thus,
for example, the provisions of the Merchant Marine Act of 1936
requiring transportation by American-flag carriers would not apply in
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disaster situations when their use would result in delay in alleviating
the consequences of the disaster. Similarly, the new authority would
eliminate delays encountered (for instance, in Biafra and Bangladesh)
in responding swiftly and effectively to disaster situations because of
the necessity of complying with such sections of the act as 636(i.),
relating to vehicle procurement and section 604, establishing rules
applicable to ordinary procurement activities.
Statutory requirements and regulations would, of course, continue
to apply to ordinary economic -assistance furnished under the act,
and the new authority would be. utilized only when assistance was
hieing provided in famine or disaster situations and compliance would
interfere with prompt and adequate administrative response.
African Sahel famine and disaster relief
Section 639A(a). would aflirrn Congress' support for the U.B.
Government response in providing, famine and disaster relief assistance
to the Sahelian nations of Africa.
Section. 639A(b) authorizes the appropriation of $30 million to
remain available until expended, for emergency and recovery needs
of the drought--stricken Sahelian nations.
The $30 million authorized by this amendment is the initial esti-
mate of needs for relief, rehabilitation, and related assistance. Any
additional appropriated funds subsequently needed for these purposes
would be requested under the disaster relief authorization provided
by section 11(b) of this bill as an amendment to section 451 (a) of the
act.
During the past 5 years, the drought in the Sahel region has become
increasingly severe. The sub-Sahara African countries most affected
are Chad, Mali, Mauritania, Niger, Upper Volta, and Senegal. About
25 million people, mostly nomads and migrants, live in these six
countries,. An estimated one-tjird of them are suffering from hunger
and malnutrition, and millions of cattle, goats, and sheep have already
died of thirst and starvation.
The United States and other international donors have been focusing
on the immediate short-term assistance to the affected areas over
the past year. Assistance by the United States up to the end of
July 1973 totals about $24 million, $21 million of which was in the
form of delivered food grains.
The committee believes, however, that this is an appropriate time
for the United States and other donors to join in with the affected
countries to begin planning for the medium- and long-term recon-
struction and development of the area. This authorization will allow
the initiation of such a progr mmt
African Sahel development program
Section 639B reflects the Con ressional endorsement of the long-
term planning for the preservation and development of the Sahel
region in cooperation with the Ur.ited Nations and other international
and regional organizations.
SECTION 22---COORDINATION
This section. directs the Pre..ident to establish a Development
Coordination Committee to advise him with respect, to U.S. policies
and programs, bilateral as well ai multilateral, affecting the develop-
ment of the low income countries.
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This would be a statutory body, chaired by the Administrator of
the Mutual Development and Cooperation Agency (MDCA). Its
membership would include officials of the Departments of State,
Treasury, Commerce, and Agriculture, the Executive Office of the
President, and others as designated by the President.
The committee would operate under the foreign policy guidance of
the Secretary of State.
The President would be required to report annually to the Congress
on U.S. actions affecting the development of the low-income countries,
through one of the already existing annual reports.
At the present time, U.S. policies and programs having international
economic implications are coordinated by two different bodies. One
is the National Advisory Committee on International Monetary and
Financial Policies (NAC) which was established by Executive order
and is chaired by Treasury. Its preoccupations center on international
monetary and financial issues. AID is not a member of NAC.
The other is the Council on International Economic Policy (CIEP),
in the Executive Office of the President. This Council operates under
a statute which expires June 30. AID is not a member.
Neither of these two bodies is development-oriented. While both of
them submit written annual reports, neither of those reports deal now
in a comprehensive manner with the whole range of U.S. development-
oriented activities.
The need for more effective review and coordination of U.S. develop-
ment-related undertakings is clear. These programs are conducted
under several statutes, by several departments. At times, each of them
has seemed to be going in a different direction.
AID is the only U.S. agency which is primarily concerned with
development. It (and the successor agency, MDCA) ought to play a
more important role than it does now in coordinating these U.S. pro-
grams.
As a result of discussions with the executive branch, the committee
wishes to emphasize several points about the Development Coordina-
tion Committee :
(1) It is left to the President to determine which officials in the
executive branch should serve on the committee, in addition to the
MDCA administrator, who would chair it.
(2) The report from the President need not be a separate report but
may be included in the NAC, CIEP, or State Department annual
report, as the President shall determine.
(3) To the extent that information necessary for the report pre-
scribed in this section overlaps with material heretofore provided under
title XI or section 621A, it may be omitted from reports required by
the latter two provisions.
Section 640C-Shipping differential
This section authorizes the use of funds made available in chapter 1
and part VI of the act to make grants to defray the freight differential
between U.S.- and foreign-flag vessels on cargoes financed under the
Mutual Development and Cooperation Act.
The purpose of the section is to encourage the use of U.S.-flag
vessels, in compliance with the 50-percent requirement of section
901(b) of the Merchant Marine Act of 1936.
The grants authorized here would cover this difference between
U.S.- and foreign-flag freight costs and would relieve the importing
cou t a d end user of bearing this added cost.
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This provision also covers he Export Development Credit Fund
tinder part VI.
It also serves to identify that payments under the 50-50 shipping
requirement of the differential between U.S.-flag and foreign-flag
vessels do not constitute assistance to a country but are in the nature
of support for the U.S. maritime industry.
MISCELLANEOUS PROVISIONS
SECTION 23--ANNUAL NORTH ATLANTIC TREATY ORGANIZATION
REPORT
This section amends chapter 3 of part III of this act, relating to
Miscellaneous provisions by adding a new section 659 to the act,
requiring specified reports before January 15 of each year from the
Secretaries of State and Defense on expenditures by the United States
on behalf of its participation in NATO.
Subsection (a) requires a report on the direct, indirect and unal-
located costs to the United State; of participation in NATO for the
past, the current and the immediately following fiscal year along with
an estimate of the impact o' the expenditures on United States
balance of payments after conmaderation for any offset arrangements.
Mach such cost is required to be identified by reference to the act of
t'ongress that authorized and appropriated the funds.
Subsection (b) defines the meaning of the terms direct, indirect, and
unallocated costs.
Subsection (c) provides that all information included in the report
be public information unless it is required to be kept secret in the
interest of national defense.
'hhe provision. requiring an annual report from the Secretaries of
Defense and State on the cos Ss of U.S. participation in the North
Atlantic Treaty Organization was suggested by a recent report of the
General Accounting Office whch noted that NATO costs for the
United States were distributed in many different appropriations bills.
'['his circumstance makes it diff cult, the GAO noted, for the Congress
and its committees to determine the total costs of U.S. participation
in NATO.
The committee believes that this provision will correct the deficiency
in information available to the Congress.
SECTION 24-INDOCHINA POSTWAR RECONSTRUCTION
This section adds a new part to the act to provide for reconstruction
of the war torn countries of Indochina. The new part contains 5
sections.
Section 801-Statement of policy
This section states that the purpose of this part of the act is to
(1) authorize immediate humarrtarian relief assistance to the people or
South Vietnam, Cambodia, and Laos and (2) to assist the people or
those countries to return to a normal peacetime existence. In this
effort, U.S. bilateral assistance should focus on the sectors of food,
nutrition, health, population planning, education, and human resource
development. Such assistance should be channeled to the maximum
extent possible through the private agencies, particularly those
voluntary organizations which already have ties in the area.
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The committee rewrote the policy statement suggested by the execu-
tive branch because it was felt that future U.S. assistance in Indo-
china should emphasize humanitarian programs administered on a
people-to-people basis. The inclusion of the sectoral approach conforms
this part of the act to the precepts of the reforms in bilateral assistance
made elsewhere in the act.
Section 821-General authority
This section authorizes the President to furnish assistance for the
relief and reconstruction of South Vietnam, Cambodia, and Laos with
special emphasis on humanitarian assistance to refugees, civilian war
casualties, and other persons disadvantaged by the war. This assist-
ance may be furnished on a loan, grant, or other basis. Section 821
further stipulates that no assistance shall be furnished to South
Vietnam under this general authority unless the President receives
? satisfactory assurances that such assistance or local currency generated
by such assistance will not be used for support to police or for prison
construction and administration within South Vietnam.
The committee feels that the first tasks are those of dealing with
the direct and immediate consequences of the war. The most urgent of
these is to provide temporary sustenance, food, shelter, and medical
care for. refugees and other victims of the war until they can resume
normal and productive lives. Such emergency relief programs have
been going on for some years amidst the fighting. They must continue
for some time to come but now the emphasis can shift to resettlement.
There are other problems on the human side as well. Those wounded
in war, both military and civilian, need further help, as do orphans
and other children of families torn apart. Although much attention has
been given to emergency medical care during the years of war, major
medical rehabilitation, education, and training of these direct victims
of the war still require significant efforts.
In authorizing assistance for humanitarian relief and reconstruction,
the committee contemplates that a full range of assistance mechan-
isms, including project, program, and technical assistance, may be
utilized, and that such assistance may be furnished directly by the
United States, or, to the maximum extent possible, through private,
regional, multilateral, or international organizations. The committee
recognizes that regional projects funded under this general authority
may have benefits for other eligible countries in Southeast Asia, as
well as for South Vietnam, Laos, and Cambodia.
By prohibiting the use of U.S. assistance for support to police and
for prison construction within South Vietnam, the committee did not
intend to forbid the continuation of training of South Vietnamese
police officials in the United States. Because the U.S.-based training
programs for foreign police officials are designed to impart modern,
humanitarian police methods, the committee feels that such training
efforts are consistent with the purposes of this act.
With regard to Cambodia, it is the committee's intention that, for
the purpose of fulfilling the requirements of section 655(c) of the
Foreign Assistance Act, the fiscal year 1974 program figures submitted
heretofore to Congress by the executive branch for Cambodia shall
constitute a specific authorization.
Report requested on public safety program
In recent years, there has been steadily rising public concern, at
home and abroad, over the purposes and operations of the programs
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conducted by the Office of Public Safety of the Agency for Interna-
tional Development. Since the establishment of the Office of Public
Safety, there has been no high level review of the effectiveness of the
program. The committee is concerned that rising criticism, whether
based on fact or misunderstanding, and failure to properly evaluate
the public safety program at a high enough level may adversely affect
U.S. relations with other nations. It, is, therefore, the committee's
request that the President direct that, a thorough review be made of
the programs of the Office of Public Safety and that, not later than six
months after the date of enactment of the Mutual Development and
Cooperation Act of 1973, the President submit to the committee a
report containing (1) recommendations concerning termination of the
public safety program administered b;y the Agency for International
Development and (2) suggested alternative means of achieving such
program's objectives through other than direct bilateral U.S. Govern-
rnent assistance.
Section 822--Authorization
Section 822 provides an authorization for appropriation of $632
million for fiscal year 1974. This figure does not include any amount
for assistance `to North Vietnam The section would also make clear
that while this part will be the principal source of funds for economic
assistance for Indochina, funds otherwise available for these purposes
may also be used. One source of such funds could be the authorities of
the Overseas Private Investment Corporation (OPIC) if and when
the existing congressional prohibition against OPIC carrying on opera-
tions in Southeast Asia is lifte1.
Fiscal year 1974 program summary
The following is a comparison of the fiscal year 1974 reconstruction
program to assistance programs for fiscal year 1972 and fiscal year
1973. In the nears preceding fiscal year 1974 economic assistance for
this area was provided largely from security supporting assistance.
South Vietnam -________385.0
------------------ -
Lamhodia-
Laos..-----de-vel ---opmentpragram ----------
Regional pragra--------------------- ----`------------ 47.3
.________-_.. 3
Interregional support costs______________________-_-_ __- 12.3
Total ------------ 482.0
Fiscal year Fiscal year Fiscal year
1972 193 1974
actual estimated proposed
313.0 475.0
68.0 75.0
45.0 55.0
2.4 9.0
16.3 16.9
444.7 630,9
The committee hopes that an effective cease-fire can be achieved
throughout Indochina which will bring a long and bitter chapter
to it close. The peoples of Indochina can then turn toward reconstruc-
tion and peaceful development of their countries. While the cease-fire
is not yet fully effective and peace is not fully in hand, economic
assistance from the United States is an essential component in the
successful transition from wai to peace. Therefore the committee
has approved the full request of the administration for funds to
begin humanitarian rehabilitation programs and related development
activities.
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Vietnam
Within the context of the statement of policy and the general
authority set forth in this part of the Act, the committee envisions
the goals of U.S. assistance to South Vietnam as follows:
To assist the Government of Vietnam in caring for refugees
and other war victims, including help in resettling these people
in their former villages or in other areas where they can make
a living;
To assist the Vietnamese in reconstructing vital public and
private facilities destroyed in the course of the war;
To help Vietnam develop its economy in a manner which will
lead to eventual economic self-sufficiency; and
To help provide sufficient imported resources to sustain the
people and the economy cf Vietnam at a reasonable level during
the transition from war to peace.
In pursuit of those goals, the executive branch has programed the
following sums for fiscal year 1974 as compared to the sums provided
in fiscal years 1972 and 1973.
PROGRAM SUMMARY
On millions of dollars]
Fiscal y8e7 r Fiscal 1973
a
Fiscal 4r
Humanitarian assistance------------------------------------------- 15.0 40.0
85.0
Reconstruction-rehabilitation..------------------------------------------------------------------
50.0
Development-----------------------------------------------------
31.0
30.0
48.0
Commercial import program----------------------------------------
313.0
223.0
275.0
Technical support -------------------------- -----------------------
26.0
20.0
17.0
Cambodia
Seventy-five million dollars of assistance is programed to enable
Cambodia to cope with the serious economic and, social dislocations
caused by the war while continuing its resistance against the Khmer
communist insurgents supported by North Vietnamese troops.
Commodity import program.-The principal part of the pro-
gramed funds ($46.7 million) will be required for financing essential
private sector imports. This import level, including such goods as
fertilizer, machinery spare parts, chemical and steel raw material, and
foodstuffs, is the minimum necessary to maintain the Cambodian
people's already low standard of living. After a cease-fire and a return
to relative security, the import composition will shift more toward
capital equipment to help restore prewar industrial capacity. Esti-
mated obligations for the commodity import program in fiscal year
1973 are $45 million.
Multilateral stabilization program.-Another important pro-
gram needed to finance imports of commodities and services not avail-
able from U.S. sources is the multilateral stabilization fund for which
$18.3 million is programed.
Under the auspices of the IMF, a multilateral Exchange Support
Fund is in its second year of operation. The fund provides support to
stabilize the Khmer economy. The fund finances (a) commodities for
which Cambodian reserves and earnings are insufficient, and (b) serv-
ices and commodities required in connection with capital projects or
technical assistance. The fund's resources are used in accordance with
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rules and procedures established by representatives of the multilateral
membership.
At a November 1972 review with other donors and Cambodia for
the calendar year 1073, the Urited States repeated its previous year's
intention (subject to authorhation and appropriation of funds by
Congress) to match the contributions of others. The U.S. contribution
for calendar year 1.973 is planned to be $17.5 million, or half of the
estimated total of about $35 million. Other contributions are estimated
as follows: Japan. $7 million; Australia, $1 million; United Kingdom,
"490,000; Thailand, $250,000; New Zealand, $10,000; and Malaysia,
$10,000. The Cambodians will put $8.7 million into the fund, includ-
ing proceeds of a special IMF drawing.
I,cr+~s
The cease-fire agreement of February 21, 1973, has provided the
1 asis for the establishment of an economic program directed toward
rehabilitation, reconstruction, and development in Laos.
Although the terms of the Lao accord have not yet been fu".y
realized, the level of fighting there is the lowest in Indochina.
Given a modicum of political stability in Laos, the U.S. economic
a.id program can be redirected groin support for a war effort to support
01 - the peace. The permanent resettlement of refugees is an urgent
requirement. Reconstruction of facilities damaged by the war must be
undertaken. Greater emphasis can be placed on long term develop-
meat leading to eventual economic self-sufficieilcy. It will also be
Necessary Co continue the economic stabilization progrizn, but the
..ventual demobilization of Lao troops should lead to thegradual
reduction of the amount of outside aid necessary for this purpose.
With these encouraging developments in mind, the executive
branch has proposed the following level of funding for programs in
Laos for liscal year 1974 as compared to the sums provided in the two
previous fiscal. years.
fiscal year Fiscal year Fiscal year
1972 19/3 1974
actual estimated proposed
Humanitarian assistance----------------------- --------_---------------------- 18.4
Reconstruction--------------------------------- ----------- ------ 29.1 28.9 12 5.9
5
Development ------------------------------------ ------------------------ -------
fltahili7atinn. --- -.----------------------------..---..------18.2 16.1 18 2
Section 823-Center for Plastic and Reconstructive Surgery in
Saigon
A new section 823 is added to the act which earmarks $712,000 of
, unds authorized for Indochina postwar reconstruction for assistance
to the Center for Plastic a:nd Reconstructive Surgery in Saigon,
Republic, of Vietnam.
This is a well-known and highly competent plastic surgery facility
with the dual purpose of treating and rehabilitating disfigured Viet-
iarnese children while training; Vietnamese doctors in plastic surgery.
It is the only facility of its kind in that country.
Founded by Americans and staffed by doctors and nurses of several
nations, the Center has received assistance in the past through the
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Agency for International Development, but the AID contribution has
been reduced in recent years.
During committee hearings on the bill, Dr. Arthur J. Barsky, pro-
fessor of plastic surgery at the Albert Einstein School of Medicine,
New York, and a cofounder of the Center, testified in detail on the
work of this medical facility.
The committee believes that the work of the Center deserves suffi-
cient support to permit its continuation and expansion. The $712,000
will assist in the financing of a third floor addition to the facility which
will provide expanded care for general patients and which will be
turned into a speciali?ed unit for the treatment of burn cases as
Vietnamese staffing becomes available. Both the Center and the
proposed burns unit have the active support of the South Vietnamese
Ministry of Health.
A similar earmarking provision was approved by both the House and
Senate in amending the Foreign Assistance Act in the 92d Congress,
but it failed to become law because a House-Senate conference could
not settle differences in the foreign aid legislation.
Section 824-Assistance to South Vietnamese children
A new section 824 is added to the act which earmarks the use of
$5 million for the specific purpose of providing assistance to children
in South Vietnam, who clearly are among the most unfortunate
victims of the war.
The funds can be used for two purposes:
First, they can provide for the establishment, expansion and
improvement of day care centers, orphanages, hostels, school feeding
programs, health and welfare programs, and training programs related
to such programs.
Second, the funds may be used to facilitate the adoption by Ameri-
can citizens.of orphaned and abandoned children in South Vietnam,
especially those fathered by Americans. Of the funds available under
the provision, however, not more than 10 percent may be used for
adoption assistance.
The committee believes that this form of assistance is a particularly
appropriate expression of our Nation's compassion and concern for
the thousands of war-disadvantaged Vietnamese children.
SECTION 25-EXPORT DEVELOPMENT CREDIT FUND
Section 25(a)-Establishment of Export Development Credit
Fund
Section 25(a) adds a new part to the act (sections 901-909), creating
a facility for the purpose of increasing U.S. exports which can advance
the development of 1 billion people who live in the lowest income
countries of Asia, Africa, and Latin America.
The proposed fund would utilize repayments from outstanding de-
velopment loans to subsidize the interest rates on export credits to
the poorer of the developing countries, thereby aiding U.S. exports
and enabling low-income countries to purchase American goods and
services needed for their development.
If an average of $1 billion per year in U.S. exports were facilitated
by the Fund, recent experience with the job-creating effects of the
Export-Import Bank's regular operations suggests that an estimated
additional 80,000 jobs would be created for U.S. workers. The Export-
Import Bank calculates that each additional $12,500 of exports creates
one U.S. job.
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The committee anticipates that to the fullest extent possible sup-
plier credits under the Export Development Credit Fund will be sub-
stituted for development lending as a means of providing needed
products to developing countries and introducing American goods to
their markets.
Background
U.S. exports to developing countries as a whole have been rising
rapidly in recent years. These exports have increased by some 48
percent in the past 5 years, and their volume of $16.3 billion in 1972
nearly equaled the total of U.S. exports to the recently enlarged
European Community (including the United Kingdom) and Japan.
However, U.S. exports have been declining to the 60 percent of the
people living in the category of the lowest income countries (those
with per capita GNP below $20') per year), both in absolute volume
of sales and as a share of that market.
U.S. sales to the latter market depend upon U.S. Government
financial support for about three-quarters of their financing, as
contrasted with the two-fifths support provided to sales to the develop-
ing countries with per capita incomes above $200. Government financ-
ing for sales to the lowest income countries with their limited near
term repayment capacity consisti largely of development loans, other
aid and Public Law 480. Only 9 percent comes from the Export-Import
Bank.
By contrast, Government financing of sales to the rapidly growing
market in countries above the '20O annual per capita income level
consists chiefly of Export-Import Bank support.
As noted in the following chart, the Bank during fiscal year 1972
authorized credits to the poorest countries which amounted to only
10 cents per capita. By contrast its per capita credits to the "emer-
gent" countries was $12.27, while to poor countries ($200-$375 annual
per capita income) it was only $:..5f1.
Rich above
Emergent
Poor
Poorest
$1, 000 $1,
000 to 500
$500 to 200
below $200
Total population(million)r___________________________ 813.5
182.6
536.4
1,941.2
Of which Communist) ------------------------------- (317.7)
(31.0)
(1.3)
(871.1)
1970 GNP(billions)r------ _------------------------- $1,706.7
$134.5
$156.5
$239.3
(Ofwhich Communist) _______________________________ (572.7)
(
(26.7)
((6
128.7)
1972U.S.exports (billions)2.._________________________ $3;?.2
$29.4)
$6.1($5.2)
$7.0($6.2)
$1.6($1.8)
As percent of importerGNP3--------------------- 3.0
5.6
4.6
1.4
As percent of importer trade3 4_____________ 16.2
25.2
25.6
14.8
U.S. Government, fiscal year 1972 commitments (billions)- $1.9
$0.9
$3.2
$1.3
As percent of calendar year 1972U.S.exportsb------------ 5.5
14.2
46.0
81.8
Sources of commitments:
Eximbank loans and medium term guarantees______ 1,840
776
1,840
116
AID(including technicalassistance) --------------- 50
50
905
695
Public Law 480_________________________________ 55
46
490
524
Eximbank authorizations (per capita), fiscal year
1972--------------------------------------------------------
$12.27
$1.55
$0.10
I IORD Atlas.
31971 U.S. exports in brackets.
3 Excluding Communist countries.
4 Excluding areas not covered by IMF statistics.
3 U.S. Government commitments in fiscal year 1972 were only partially disbursed during calendar year 1972, but this
table serves as a crude indicator of the degree of relationxhip t?etween U.S. Government financing commitments and U.S.
exports. The percentage figure is somewhat overstated since actual disbursements for exports will be less because these
commitment figures include technical services, and actual disbursements frequently fall some degree below the commit-
ment amounts.
Note: U.S. exports to the lowest income countries depend heavily on U.S. Government financing. Most of that financing
is through Public Law 480 and AID; very little is by the :xpc-rt-impart Bank. However the latter is the largest financer
of exports to countries in each of the 3 income groups abr.ve the lowest.
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U.S. exporters are at a growing disadvantage in the market of
lowest-income countries since U.S. commodity-tied development loans
are declining, and these countries do not have the servicing capacity
for a substantial volume of loans on standard Export-Import Bank
terms. In many cases, lack of financing on competitive terms, rather
than price or quality, explains U.S. inability to compete for this
market.
This market of about 1 billion people (excluding Communist areas),
whose GNP has been increasing at approximately 5 percent annually,
is important at present and promises to grow more important in the
future. Europe and Japan apparently believe this and offer vigorous
and steadily increasing government financing programs which help
develop their markets in these countries.
If the United States wants to avoid further losses and increase its
share in this market, there will have to be increased Government
? financing on terms that compete. Such financing also can advance the
development of low-income countries and thereby lead to their further
expansion as markets for U.S. exports. The committee intends that
most export credits would be on somewhat harder terms than those
provided for in section 201 of the act but still appropriate to the
developing country's repayment capacity.
The rapid expansion of U.S. exports in the past 10 years to such
countries as Mexico, Brazil, Korea, and Taiwan illustrates the poten-
tial for increased U.S. exports on commercial terms as those countries
progress.
S. exports to Taiwan have increased from approximately $100
million in 1960, 90 percent of which were U.S. aid-financed, to a
level of over $800 million in 1972, very little of which was financed
by U.S. credits on concessional terms.
U.S. EXPORTS TO TAIWAN, 1968-71
[In millions of dollars[
Food and live animals_______________________________
30.6
36.5
24.8
29.6
Beverages and tobacco__________ __ _________________
10.1
9.0
9.0
6.2
Crude materials, inedible, except fuel__1
141.6
101.1
82.5
89.1
Mineral fuels, lubricants, and related materials---------
2.2
2.4
2.2
2. 1
Animal and vegetable oils and fats____________________
4.5
5.8
3.2
3.3
Chemicals___________________ _---------------------
25.2
29.1
19.7
19.6
Manufactured goods classified chiefly by material-------
25.3
25.8
15.8
17.4
Machinery and transport equipment___________________
59.0
122.0
151.3
113.2
Miscellaneous manufactured articles______________ ____
13.1
12.0
10.6
.91
Commodities and transactions, not classified, according
to kind------------------------------------------
1.8
2.5
2.5
2.7
1 $60,800,000 soya beans; $53,200,000 raw cotton.
Source: OECD "Foreign Trade Statistics."
Section-by-section explanation:
Section 901 (General Authority) establishes a fund, to be known
as the "United States Export Development Credit Fund". It author-
izes the President to extend credit on terms not easier than the mini-
mum terms specified by law for development lending under part I of
the act to facilitate the sale of U.S. goods and services of a.develop-
mental character to the lowest income countries. It provides that the
fund shall be treated in the same fashion as the Export-Import Bank
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for purposes of exclusion from budget totals and exemption from
expenditure and. outlay limitations, including requirements for trans-
mission of an annual budget and an annual report to the Congress.
Section 902 (Financing). In this respect, the fund would follow the
Export-Import Bank pattern. Ex-Im is financed outside the budget,
primarily through use of borrowing authority, and covers the modest
interest differential between the rate at which it borrows and the lower
(currently 6 percent) rate at whch it lends through income from its
capital, currently approximately $2.5 billion. The fund's operations,
to the extent that they would involve use of borrowing authority,
would also be financed outside the -ash budget of the United States.
Both the borrowing of the fund and the availability of repayments on
past aid loans would be subject to the annual appropriation process.
The proposed bill provides tha': the fund may only be used to finance
goods that advance development objectives of the assisted countries.
Care would be required to prevent low-utility exports from being
financed. The fund should have a flexible commodity eligibility test,
designed to make certain that it,; exports support development in the
importing country. Beyond tha there may be good reason for the
fund to verify that the import an: investment policies of the importing
country are such that fund-financed exports to that country have a
reasonable prospect of being constructively used. Such tests should not
lessen the fund's usefulness as a promoter of U.S. exports, since the
range of U.S. goods and services helpful to development is very broad
and can range from capital goods to individual raw materials and
fertilizer.
In order to take these develop anent considerations into account, the
fund should have some expertise in the development business. In that
connection, the Advisory Committee established by this bill should
prove valuable, for wherever the President might locate the fund
administratively, the committee would insure that the extensive de-
velopment experience accumulated by the U.S. Government was
brought to bear on its decisions.
Further, development in thie context does not mean industrial
development through exporting to the United States or competing
with U.S. exports. The provision3 of sections 201 and 211 dealing with
possible adverse effects on the U S. economy, with special reference to
areas of substantial labor surplus, and on the U.S. balance-of-payments
position, would apply to the fund. The fund shall not be used to dis-
place production of, or use of, modern equipment and facilities in the
United States.
The bill provides that countries; with less than $375 per capita annual
GNP are to be the main recipients of the fund. Particular emphasis,
the committee believes, should be given to the poorest countries, those
with a per capita national product less than $200 annually.
Although per capita GNP is the best measure we have of poverty,
it is not a perfect measure. For that reason, the fund should be admin-
istered with some flexibility to take account of all relevant factors,
including ability to pay, poverty, and the need for a subsidy to support
U.S. exports. It seems clear, however, that the need and the opportun-
ity for the fund is greatest, though not exclusively, in the category of
countries with the lowest incomes.
This section authorizes the President, as may be provided in appro-
priation acts, to borrow up to one-fourth (currently $5 billion) of
Export-Import Bank loan, guaranty, and insurance authority, during
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the period from the enactment of this legislation through December 31,
1977, to be used (except for $500 million of reserves) for the purposes of
the fund.
Any difference between the interest the borrowers are to pay to the
Fund on export credits extended (at low rates of interest) and the
interest the Fund pays on the funds it borrows (at higher rates of
interest) ; which constitutes an "interest subsidy," would be paid from
dollar receipts from loans made under foreign assistance legislation.
These repayments on past aid loans are rising (and will peak at
$613 million in 1981 if AID were to make no further development
loans) and will average almost $400 million per year over the next
4 years.
Of these amounts, an annual average of about $63 million will be
available over the next few years from receipts which now go into
general receipts of the Treasury, and about $260 million is, under
present law, available for AID loans.
Thus receipts would be sufficient to pay the interest subsidy for 4
years of operations at the rate of $1 billion of new credits per year
while still leaving nearly $300 million per year for development assist-
ance under the proposed new Mutual Development and Cooperation
Act.
Four years would provide ample experience to judge whether the
Fund should continue to make new loans.
Receipts from loans made by the Fund, if not needed to pay interest
or repay the principal on the Fund's obligations, may be reused for
the purposes of the Fund, and all deobligated funds may be reobligated
for the purposes of the Fund.
Section 903 (Lending Ceiling and Termination) places a lending
ceiling on the principal amount of loans by the Fund outstanding at
any one time amounting to one-fourth (currently $5 billion) of the
Export-Import Bank loan, guaranty, and insurance ceiling, and
authorizes the Fund to operate until December 31, 1977.
Section 904 (Reports to the Congress) requires a detailed report on
the operations of the Fund to be transmitted to the Congress semi-
annually.
Section 905 (Administration of Fund) requires the President to
establish an advisory committee including the Secretaries of Com-
merce, Treasury, and State; the President of the Export-Import Bank;
and the Administrator of the Mutual Development and Cooperation
Agency.
This Fund could be administered in a variety of ways; e.g., by the
Export-Import Bank, the Department of Commerce, as an inde-
pendent fund, or by MDCA. The final decision is left to the President.
As has been done with reasonable success for Public Law 480, it would
be closely coordinated with interested Government agencies through
the Advisory Committee provided for in the bill.
Section 906 (Provision for Losses) reserves 10 percent ($500 million)
of the Fund's borrowing authority to cover losses and provides that
receipts from loans made under foreign assistance legislation may also
be used for that purpose. Any amounts borrowed from the reserve
would eventually have to be repaid, and foreign assistance receipts
could be used for that purpose. Losses may include loans written off or
payments suspended or deferred, or the interest payments required
to service funds borrowed in the amount of the loans written off or
payments suspended or deferred.
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62
The experience with loans to he poorest countries over the past 20
years suggests that they can and will repay their debts but occasionally
need to reschedule repayments when the terms of their debt are too
hard. In fact, so-called "bad debts" do not normally result from
inability to repay but from an internal political change. For example,
two defaults on the books of tho Ex ort-Import Bank have resulted
from the change of government,,; in China and Cuba.
Since the Fund will extend terms more commensurate with their
ability to pay, and for goods and services of a developmental character
which strengthen. the borrower,;' economies, there should be fewer
problems of need for debt relief than if these credits were not available
or if they were available only on harder terms.
However, there may be cases where rescheduling is necessary.
Rescheduling means the Fund wi'l lose income in the year when
rescheduling gives debt relief. Therefore, provision must be made for
the Fund to hand Le such losses. I t is proposed that in the event of such
income loss, the repayments on previous aid loans be used to cover
the losses. In addition it is proposed that a reserve for bad debts be
established which would consist of 10 percent of the Fund's au-
thorization to borrow.
Section 907 (Export-Import BanL Powers) provides that this part
does not limit the powers of the Export-Import Bank.
Section 908 (Prohibition on Loans for Defense Articles or Services)
prohibits use of the Fund in connection with the sale of defense articles
or services and provides that this prohibition may not be waived.
Section 909 (Definitions) defines "lowest income countries" as the
poorer developing countries with. special reference to countries where
national product per capita is under $375 a year.
Section 25(b)(1)-Exclusions from prohibitions on assistance
This section amends section 638, of the act, relating to assistance
under other legislation, by adding part VI of the act which establishes
the Export Development Credit .Fund to legislation now excluded
from certain restrictions of the act.
Other acts presently excluded from the prohibition against_ giving
assistance are: the Peace Corps Act. as amended; the Mutual Educa-
tional and Cultural Exchange Act of 1961, as amended (Hays-Ful-
bright) ; and the Export-Import Bank Act of 1945, as amended.
Section 25(b)(2).-Inspector General, Foreign Assistance
Section 624(d)(5) currently holds the Inspector General responsible
for reviewing and inspecting all activities being conducted by AID,
assistance under the Latin Amencan Development Act, Peace Corps,
military assistance program, 0-11-11C, and Public Law 480.
This section would add the Export Development Credit Fund
established in this bill to the Inspector General's responsibility.
SECTION 26-MEANING OF REFERENCES
't'his section assures that the charge of the title of the act to "Mu-
tual Development and Cooperation. Act of 1973" and of the name of
the administering aaggency to "Mutual Development and Cooperation
Agency" will not affect existing :)r future references to either.
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Section 27 amends the Foreign Military Sales Act.
The major objectives of the fiscal year 1974 amendments are as
follows :
(1) To repeal provision of the law relating to the seizure of fishiag
vessels;
(2) To extend the repayment period for credit purchases from 10 to
20 years;
(3) To eliminate the requirement that guarantees be issued only to
financial institutions doing business in the United States when banks
in the United States are unable to provide fully for such financing;
(4) To permit the sale of promissory notes generated by previous
direct credits extended by the Department of Defense without charge
to current appropriations or current aggregate ceiling;
(5) To permit part of the funds generated by the sale of such prom-
issory notes to be used to satisfy the requirements of section 24(c)
that 25 percent of the face value of the credit transaction be set aside
in a guarantee reserve with respect to the sale and guarantee of such
promissory notes;
(6) To authorize the appropriation of $450 million to finance the
foreign military credit program;
(7) To establish an aggregate ceiling of $760 million on the total
amount of foreign military sales credits and guaranties that can be
made in fiscal year 1974. Of this amount $300 million is earmarked for
Israel;
(8) To increase the regional ceiling on credits and guaranties for
sales of defense articles and services to Latin American countries from
$100 million to $150 million in any year and to exclude cash sales from
counting against the regional ceiling for Latin America and African
countries. The ceiling for military assistance, including credits and
guaranties for sales to African countries, would remain at $40 million
per year;
(9) To remove the reporting requirement of the provisions of
section 36(a) of the Foreign Military Sales Act which require semi-
annual reports on the export of defense articles on the U.S. Munitions
List;
(10) To bring the terms of the Foreign Military Sales Act into
conformity with the amendments made by this bill; and
(11) To prohibit the sale or grant of sophisticated weapons, in-
cluding sophisticated aircraft, to any foreign country that has trans-
ferred U.S.-furnished defense articles to a third country without
prior approval of the President.
Subsection (a)(I)-Seizure of U.S. fishing vessels
This section deletes subsection (b) in section 3 of chapter 1 of the
Foreign Military Sales Act which stipulates that "no sales, credits, or
guaranties shall be made or extended under this Act to any country
during a period of one year after such country seizes, or takes into
custody, or fines an American fishing vessel for engaging in fishing
more than twelve miles from the coast of that country."
The committee's decision to repeal this provision of the Foreign
Military Sales Act is based on the reasons and evidence set forth in
section 17(c) of the report relating to the repeal of section 620(o) of
the Foreign Assistance Act.
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Subsection (a)(2)-Elilribility for sophisticated weapons
This subsection amends section 505(a) of the Mutual Development
and Cooperation Act of 1973 and any other provisions of law, relating
to eligibility to receive defense articles from the United States.
Specifically, the amendment provides that no sophisticated weapons,
including sophisticated jet aircraft or spare parts and associated
ground equipment for such aircraft, shall be furnished under this or
any other act to any foreign country on or after the date that the
President determines that such country has violated any agreement
it has made in accordance with paragraph (2) of subsection (a) of
this section or section 505(a) of the Mutual Development and Co-
operation Act of 1973 or any other provision of law requiring similar
agreements. The prohibition contained in the preceding sentence shall
not apply on or after the date that the President determines that
such violation has been corrected and such agreement complied with.
The purpose of this amendment is to strengthen the transfer
restrictions in existing law and to help assure that sophisticated
weapons, including jet aircraft that might be sold to any Persian
Gulf country will not be transferred to any other country. At the first
evidence of such a transfer, the flow of sophisticated weapons and
spare parts from the United States would be immediately terminated
until the country involved has given assurances to the President that
such violations will not reoccur and that the weapons have been
returned to the country violating the agreement.
Subsection (b)-Credit terms
This subsection amends section 23 of the Foreign Military Sales
Act, which deals with credit financing of sales of defense articles and
services, by extending from 10 to 20 years the length of time for which
credit may be extended. The extension of the credit repayment period
will permit the U.S. Government added flexibility when justified by
the national interest to help facil_tate the transitioning of economically
less developed countries from grant assistance to credit financing. By
increasing the repayment terms to 20 years, countries will be able to
finance more of their own security .)rograms and to depend less upon
the United States.
Subsection (c)-Guaranties
This subsection amends section. 24(a) of the Foreign Military Sales
Act by eliminating the requirements that guaranties be issued only
to financial institutions doing business in the United States. The
change will permit the utilization of overseas sources of financing
military exports at times when tanks in the United States are unable
to provide fully for such financing.
Subsection (d)-Charges against the ceiling
Subsection d(l) amends section 24(c) of the Foreign Military Sales
Act in two respects. The purpose of these amendments is to permit
the sale of promissory notes generated by credit extended under section
23 of the Foreign Military Sales Act without additional charge against
current appropriations or the current program ceiling as is now
required.
The Foreign Military Sales At as presently written requires that
the face value of any sales made in any one fiscal year shall count
against both the appropriation and the aggregate ceiling for that year.
If that promissory note is sold in a succeeding fiscal year to a private
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financial institution with a Department of Defense guaranty, the
transaction also counts against the appropriation and aggregate ceiling
for that year as well. Thus, if a promissory note were accepted in 1972,
it would count against the aggregate ceiling and the appropriation for
that year. If this note were sold to a private financial institution in
1973 with a DOD guaranty, it would also count against the aggregate
ceiling and the appropriation for credit sales for 1973 as well. Because
of this situation the U.S. Government has not sold any promissory
notes with a guaranty since the Foreign Military Sales Act became
law in 1968. The Department of Defense currently holds $1,126
million in promissory notes from previous credit transactions.
These changes are intended to facilitate the Treasury Department's
debt management functions and would not increase the amount of the
foreign military sales credit program.
Subsection (d) (2) is related to amendments contained in subsections
(f), (g) (2), (h) (2), and (i) (3) of this section of the bill. These amend-
ments clarify the computation of the 25 percent guaranty reserve
established by section 24(c) of the Foreign Military Sales Act in
conformity with the practice of the Export-Import Bank.
Heretofore, in contrast with the practice of the Export-Import
Bank, the Department of Defense has counted both the principal
amount of the guaranteed loan and the interest against the aggregate
program ceiling. The provisions of this subsection will enable the
Department of Defense to exclude guaranties for interest repayment
from counting against the aggregate ceiling. The amendments specify
that the principal amount of the loan guaranteed will be charged
against the program ceiling and that 25 percent of that principal
amount will be charged against the current appropriation for the
guaranty reserve.
Subsection (e)-Authorization
This subsection amends section 31(a) of the Foreign Military Sales
Act by authorizing the appropriation of $450 million for fiscal year
1974 to carry out the purposes of the act. This amount compares
with an appropriation of $400 million in 1973 pursuant to continuing
resolution authority.
FOREIGN MILITARY CREDIT SALES-SUMMARY
[In thousands of dollars]
-------------------------------
Africa ------------------ ------- ---------------------------- 21,700 16,100 18,000
Latin America---------------------------------------------------- 61,750 59,000 150,000
Near 500 465, 000
r East and South Asia------------------------------------------ 395,000 395,
Europe -------------------------------------------------------------------
Totalobligational authority----------------------------------- 550,000 550,000 760,000
Private financing-------------------------------------------------- -220,500 -200,000 -313,300
Fiscal 1972 Fiscal 1973 F1sca11974
DOD financed-----------------------------------------------
Guaranty of private financing---------------------------------------
Lapsed----------------------------------------------------------
329500 350,000 446,700
55,100 50,000 78,300
15,400 ----------------------------
The executive branch requested an authorization of $525 million
for fiscal year 1974. The committee reduced this amount by $75 million.
With the amendments dealing with the guaranty of private financing
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and the authority to draw uppo:1 the funds that are available in over-
seas branch of domestically ba;;ed U.S. banks contained elsewhere i rn
this section, the Department of Defense should be able to obtain
additional private financing t''ius reducing the requirement for the
larger appropriation.
Subsection (f)-Aggrelirate ceiling
This subsection amends section 31(b) of the Foreign Military Sales
Act by raising the foreign m:litary sales credit ceiling from $551)
million for fiscal year 1972 to $760 million for fiscal year 1974, of which
$300 million is earmarked for Israel. The purpose of this ceiling is to
place a limitation on the total amount of sales of defense articles
and services that can be financed during the fiscal year from U.S.
Government credits either directly or with a guaranty. Details of the
fiscal year 1974 credit and guaranty program are as follows:
FOREIGN MILITARY CREDIT SALES
(In th(usands of dollars
Fiscal year-
1972 1973
1974
East Asia and Pacific:
Republic of China--------------------------------------------- 46,000 45,200
65,000
Korea---------------------------------------- --------------- 17,000 24,200
25,000
Malaysia------------------------------------- -------------- 8,550 10,000
19,00(
Philippines ----------------------- --------?-------'----------------------------------'-
3,000
Thailand ---------------------------------------------------------------------------------
15,00(
Total-------------------------------------------------------- 71,550 79,400
127,000
Near East and South Asia:
Greece-------------------------------------------------------- 60,000 58,000
65,000
Israel ---------------------------------------- 300,000 307.500
300,000
Jordan----------------..-------------------------------------- 10,000 -------------------
Lebanon
10
000 10
000
--------
5
000
,
,
--------
Saudi Arabia ----------------------------------------------------------------------------.-
,
20,000
Turkey---- ------------------------------------------------ 15,000
20,000
75,000
Total -------------------------------------------------------395,000
395,500
465,000
Africa:
Liberia ---------------------------------------_----------- 2,000 ----------------------------
Mali
500
-----------------------
Morocco----------------._ __.----------------__-------.-_ 15,000 9,800
12,000
Tunisia ---------------------------- ----------- ----------- 2,200 --------------
2,500
Zaire ----------------------------------------------- 2,000 6,300
3,500
Argentina ------ - ---------------------------- 15,000 11,500
22,500
3olivia-------------------------------------------- ---------------------------------------
4,000
3razil-------------------- ----------------------------- ------- 20, 000 15,000
56,000
Chile _- ___________________-_ 10,000 12,400
10,000
Colombia --------------------------------------------_----- 7,250 10,000
El Salvador
15,000
------ - - ------------------ --- ------
Guatemala-- ----------------------------------------------------
-----
-------
---- --------
2.600
500
2
000
I(anduras
Mexico----------------- -------------------- ------------------
--------
------------
,
2,500
Peru- ------ --------- ----- --------------
--------
- ---
20,000
tlruguay---------------------------------------------------
2,000
--------------
2,000
Venezuela----------------------------------------------------
7,500
7,500
15,000
Total_ ------------------------__-------------
61,750
- 59,000 -
150,000
Worldwide total ------------------------------ _-__-_---_---
550,000
550,000
760,000
The committee did not reduce the aggregate ceiling. The Congress
desires and the executive branch is trying to move military assistance
programs from grant aid to sales. To reduce the ceiling would not be
consistent with those objectives.
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This section also makes technical amendments to section 31(b)
which are explained above in the analysis of subsection (d).
Subsection (g)-Latin American ceiling
Subsection (g)(1) amends section 33(a) of the Foreign Military
Sales Act by removing cash sales from the ceiling on aggregate
military assistance and sales to Latin America. The committee believes
that limitations on the furnishing of military assistance and credit
should not be applied to cash transactions.
Subsection (g)(2) makes technical amendments to section 33(a)
of the Foreign Military Sales Act to bring it into conformity with
the amendments explained above in the analysis of subsection (d)
relating to the disposition and accounting for the sale of and guarantee
of promissory notes.
Subsection (g) (3) amends section 33(a) of the Foreign Military
Sales Act by raising the ceiling of the total amount of military assist-
ance and sales to Latin America from $100 million to $150 million
annually.
This change is designed to enable the United States to be more
responsive to legitimate requests, originating in Latin America, for
conventional military hardware and spare parts.
Latin America spends less than 3 percent of its gross national
product for military purposes. A significant portion of the military
equipment owned by the Latin American countries is either worn or
obsolete and in need of replacement. In recent years the United
States has provided only a small share of replacement military equip-
ment required and purchased abroad by the Latin American govern-
ments. In the opinion of the executive branch, the proposed change is
consistent with the maintenance of friendly relations with the other
nations of this hemisphere. The committee finds the $150 million
ceiling reasonable.
Subsection (h)-African ceiling
Subsection (h)(1) amends section 33(b) of the Foreign Military
Sales Act by removing cash sales from the ceiling on aggregate military
assistance and sales to African countries. There is no increase in the
aggregate ceiling.
Subsection (h) (2) makes technical amendments in section 33(b)
to bring it into conformity with amendments pertaining to guaranties
explained above in the analysis of subsection (c).
Subsection (i)-Waiver of regional ceilings
This subsection amends section 33(c) of the Foreign Military Sales
Act relating to waiver of the regional ceilings to bring it into conformity
with subsections (d), (g) (1) and (2) (relating to guaranties), and (h)
(relating to the exclusion of cash sales from the regional ceilings for
Latin America and Africa) of this section of the bill.
Subsection (j)-Annual reports
This subsection repeals section 36(a) of the Foreign Military Sales
Act, which requires the Secretary of State to submit semiannual
reports to the Congress of exports of significant defense articles on the
U.S. munitions list. Section 657 of the act, which was enacted in
1972 in Public Law 92-226, now requires the submission of annual
reports containing all of the information included in the reports pre-
viously submitted under section 36(a) of the Foreign Military Sales
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Act. The committee fully expects that future reports submitted in
compliance with section 657 of the act will include, but not be limited
to, full information as to the pia-ticular defense article exported, the
particular recipient or purchaser, the terms of the export, including its
selling price, if any, and such other information as may be appropriate
to enable the Congress to evaluate the distribution of U.S. defense
articles abroad.
Subsection (k)-Deposit in guaranty reserve
'T'his subsection amends section 37(b) of the Foreign Military Sales
Act to permit part of the funds generated by the sale of promissory
notes to be used to satisfy the requirements of section 24(c) that 25
percent of the face value of all credit transactions be set aside as a
guaranty of repayment. Therefore, instead of taking the 25 percent
reserve from current appropriations, the reserve guaranty for the
promissory notes being sold world be taken from the proceeds of the
sale of those notes.
This change is related to the amendments made by subsection (d)(1)
and its purpose and effect are explained in the analysis of that sub-
section.
SECTION 28--FISHERMEN'S PROTECTIVE ACT OF 1967
'['his section repeals section 5 of the Fishermen's Protective Act of
1967 which requires the Secretary of State to make and collect claims
against a foreign, country as a rostilt of such country's seizure of any
U.S. fishing vessel in internation it waters. Section 5 of that act further
requires that in the event that such country should refuse to pay in
full any such claim, the Secretary of State shall transfer an amount
equal to the unpaid portion of such claim from funds appropriated
for assistance to such country to the Fishermen's Protective Fund.
The committee's action in repealing this provision of the Fisher-
men's Protective Act is based en the reasons and evidence set forth
in section 17(c) of the report relating to the repeal of section 620(o)
of the Foreign Assistance Act.
SECTION 29--REVISION OF SOCIAL PROGRESS TRUST FUND
AGREEMENT
The aim of this section is to insure the continuing use of funds
authorized for the purposes of the Latin American Development Act
of 1960 for social development ir. the Western Hemisphere.
Following congressional passage and funding of the Latin American
Development Act, the United States in 1961 entered into an agreement
with the Inter-American Development Bank (IDB) to administer for
the United States a Social Progrrss,crust Fund (SPTF). In subsequent
years the IDB loaned virtually all of the funds provided by Congress
for the purposes of the Latin American Development Act. Subse-
quently, the IDB decided to discontinue substantial use of SPTF
and,, with U.S. approval, has diverted loan repayments to the IDB's
Fund for Special Operations. While this use has permitted main-
tenance of value of the local currencies repaid under SPTF loan
agreements, the volume of locf,l currencies flowing into the IDB is
expected to substantially exceed the Bank's needs in the years ahead.
It is estimated that in the ye rrs 1973--82 the availability of local
currency funds from the SPTF alone will total $440 million.
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ESTIMATE OF ANNUAL FUND AVAILABILITY FOR PERIOD 1973-82
lin millions of dollars
SPTF
principal
repayments
Participation
principal
repayment
Estimated
income
Total
1973
23.3
2.9
13
2
39
4
1974------
24.0
3.4
.
13
2
.
40
6
1975
24.8
3.7
.
13
2
.
41
7
1976
25.3
3.9
.
13
2
.
42
4
1977---------------------
25.8
5.1
.
13.2
.
44
1
1978----------------------
25.3
6.6
13
2
.
45
1
1979
26.1
7.3
.
13.2
.
46
6
1980 -----------------------------------
26.8
7.8
13
2
.
47
8
1981
27.1
8.0
.
13.2
.
48
3
1982---------------------
23.8
7.6
13.2
.
44.6
Total
Assets of Social Progress Trust Fund, as of December 31, 1971
Millions
Loans outstanding----------------------------------------------- $398.3
Dollar funds not disbursed by U.S. Government-- ------------------ 18. 1
Social Progress Trust Fund holdings of U.S. Government obligations
and dollars in cash__________________________________
1.4
Social Progress Trust Fund holdings of dollar participations in the Fund
for Special Operations ------------------------------------------ 35. 0
Social Progress Trust Fund holdings of Latin American currencies- - _ - - 19. 8
Social Progress Trust Fund holdings of Latin American currency
participations in FSO------------------------------------------ 71.2
Other assets and accrued charges on loans-------------------------- 3. 4
Total---------------------------------------------------- 547.2
The committee finds that these funds should be utilized more
directly for the social development purposes for which they were
originally intended, that they are substantially excess to the needs
of the IDB, and that use of the funds directly by the United States,
particularly through the Inter-American Foundation, can more
effectively accomplish the goal of promoting social development in
Latin America and the Caribbean.
Section 29 seeks to insure that uncommitted funds remaining
in the SPTF as well as all reflows into the SPTF be used, to the
extent feasible, to foster hemisphere social development by directing
the President to seek an amendment of the original U.S. agreement
with the IDB to provide that SPTF funds be made available periodi-
cally to :
(1) The Inter-American Foundation, established by Congress
in 1969 specifically to promote social development in Latin
America and the Caribbean and, or
(2) The Department of State for the social development
purposes of the Latin American Development Act and, or
(3) To the United States Treasury for general uses of the
Government, with the consent of the Department of State.
The section also specifically permits continuing use of some SPTF
funds by the IDB subject only to the provision that to the extent
possible the monies be used to benefit the least developed countries
belonging to the IDB.
In seeking revision of the Social Progress Trust Fund Agreement,
the committee recognizes the need for an orderly and gradual change
in the uses of SPTF funds. This section specifies that the transfer and
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use of funds should be in proportions agreed to by the United States
and. the IDB. In addition, the committee recognizes the advisability
of continuing to have the IDB act as recipient for all SPTF loan
repayments.
The committee, through this section; does not seek to exempt any
agency from the normal budgEt process. It is expected that the Office
of Management and Budget will coordinate the use of funds to be
transferred by the IDB. The committee intends, however, that funds
continue to be used primarily for social development. In 1969, the
committee supported establishment of the Inter-American Social
Development Institute, now kr..own as the Inter-American Foundation,
for just such a purpose. It is the committee's view that, to the extent
feasible, the purpose of this section can best be accomplished by
transfer of a substantial and gradually increasing proportion of SPTF
funds to the Inter-American foundation to be used for the purposes
for which it was established.
While stressing the use of SPIT monies for social development pur-
poses, the committee recognizes that there may be instances in which
some of these funds might be appropriately used for the general uses
of the Government and thus has provided for the transfer of funds to
the Treasury. It is the committee's view, however, that funds should
be used for such purposes only when they are excess to the needs of
the Inter-American Foundation, the IDB, or the Department of State.
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CHANGES IN EXISTING LAW MADE BY THE BILL,
AS REPORTED
In compliance with clause 3 of Rule XIII of the Rules of the House
of Representatives, changes in existing law made by the bill, as re-
ported, are shown as follows (existing law proposed to be omitted is
enclosed in black brackets, new matter is printed in italics, existing
law in which no change is proposed is shown in roman) :
THE FOREIGN ASSISTANCE ACT OF 1961
AN ACT To promote the foreign policy security, and general welfare of the
United States by assisting peoples of the world in their efforts toward eco-
nomic development and internal and external security and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled, That this Act may be cited as
["The Foreign Assistance Act of 1961"] the "Mutual Development and
Cooperation Act".
PART 1
CHAPTER 1-POLICY; DEVELOPMENT ASSISTANCE AUTHORIZATIONS
SEC. 101. SHORT TITLE.-* * * [Repealed-19631
SEC. 102. STATEMENT OF POLICY.--(a) * * *
(b) The Congress further finds and declares that, with the help of
United States economic assistance, progress has been made in creating
a base for the peaceful advance of the less developed countries. At the
same time, the conditions which shaped the United States foreign as-
sistance program in the past have changed. While the United States
must continue to seek increased cooperation and mutually beneficial
relations with other nations, our relations with the less developed coun-
tries must be revised to reflect the new realities. In restructuring our
relationships with those countries, the President should place appro-
priate emphasis on the following criteria:
(1) Bilateral development aid should concentrate increasingly on
sharing American technical expertise, farm commodities, and indus-
trial goods to meet critical development problems, and less on large-
scale capital transfers, which when made should be in association with
contributions from other industrialized countries working together in
a multilateral framework.
(2) Future United States bilateral support for development should
focus on critical problems in those functional sectors which affect the
lives of the majority of the people in the developing countries : food
production, rural development, and nutrition; population planning
and health; education, public administration, and human resource
development.
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(3) United States cooperat,"on in development should be carried cut
to the maximum extent possible through the private sector, partiou-
larl.,y those institutions which .already have ties in the developing areas,
such as educational institutions, cooperatives, credit unions, and volun-
tary agencies.
(4) Development planning must be the responsibility of each sover-
eign country. United States assistance should be administered in a
collaborative style to support the development goals chosen by each
country receiving assistance.
(5) United States bilateral de-eelopment assistance should give the
highest priority to undertakings iubrnitted by host governments which
directly improve the lives of the poorest majority of people and their
capa?crity to participate in the development of their countries.
(6) United States developme.-zt assistance should continue to be
available through bilateral channels until it is clear that multilateral
channels exist which can do the job with no loss of development
momentum.
(7) Under the policy guidance .)/ the Secretary of State, the Mutual
Development and Cooperation. agency should have the responsibility
for coordinating all United States development-related activities.
SEC. 103. 1"OOD AND NurRrTION.-In order to prevent starvation,
hunger, and malnutrition, anaI to provide basic services to the people
living in rural areas and enluance their capacity for self-help, the
President is authorized to furnish assistance, on such terms and condi-
tions as he may determine, for agriculture, rural development, and
nutrition. There are authorized to be appropriated to the President
for the purposes of this sectioai, in addition to funds otherwise avail-
able for such purposes, $300,070,000 for each of the fiscal years 1974
and 1975. which amounts are authorized to remain available until
expended.
SEC. 10.x. POPULATION PLAN17IN17 AND HEALTFL-In order to increase
the opportunities and motivation for family planning, to reduce the
rate of population growth, to prevent and combat disease, and to help
provide health services for the great majority, the President is au-
thorized to furnish assistance en such. terms and conditions as he may
determine, for population planni?r