SUBCOMMITTEE RECESS

Senator KASTEN. The hearing is adjourned.

[Whereupon, at 11:15 a.m., Tuesday, March 8, the subcommittee was recessed, to reconvene at the call of the Chair.]

FOREIGN ASSISTANCE AND RELATED PROGRAMS APPROPRIATIONS FOR FISCAL YEAR 1984

WEDNESDAY, MARCH 9, 1983

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, D.C.

The subcommittee met at 10 a.m., in room SD-192, Dirksen Senate Office Building, Hon. Robert W. Kasten, Jr. (chairman), presiding.

Present: Senators Kasten and Rudman.

DEPARTMENT OF THE TREASURY

SECRETARY OF THE TREASURY

STATEMENT OF HON. DONALD T. REGAN, SECRETARY OF THE TREASURY

OPENING STATEMENT OF SENATOR KASTEN

Senator KASTEN. The subcommittee will come to order.

Mr. Secretary, we are pleased to have you today to give us an overview of the U.S. contributions to the Multilateral Development Banks [MDB's].

On Monday we received a supplemental request from the administration for the International Monetary Fund (IMF]. As you know, our subcommittee will be holding special hearings on this particular request.

I will ask at that time for you or one of your colleagues to come back and speak to us in detail on the IMF. There is still a question as to what the authorizing committees are going to do, and what, if any, changes they may want to make. We have decided to wait until the authorizers have put the framework together, and then we will look at the funding. We may need your help and assistance at that time.

I think it is only fair for me to include with this opening statement reference to the supplemental request for the International Development Association [IDA]. As you know, this subcommittee, in consideration of the fiscal year 1983 bill, provided $800 million. It was my motion that raised it to $800 million. An amendment was offered on the floor of the Senate to cut $100 million. That amendment passed which reduced the amount to $700 million with strong bipartisan support.

Inasmuch as we were unsuccessful in getting the larger amount, I do not think there is much of a chance of getting the supplemental request, especially at the level you are asking for. Frankly, given the importance of the IMF battle, I am hopeful that we are going to be able to concentrate on the IMF quota increase, and possibly put the IDA matter on hold or at least part of the IDA matter on hold until we are able to deal with the IMF increase.

I know you realize foreign assistance in general is difficult to get through Congress. Different people have been before this committee, and various Committee members have said things are changing in Pennsylvania or that it is more difficult in Louisiana or wherever it might be to get the support for foreign assistance dollars that we need.

I think that the multilateral assistance programs are even more difficult than the bilateral programs to get through where we in effect are working and helping our friends.

Mr. Secretary, we have your full statement which will be made a part of the record. I would ask that you consider summarizing your statement, which will leave us time for questions.

MDB FUNDING REQUEST

Secretary REGAN. I do have a summary, and then I will be pleased to answer your questions.

I am pleased to have this opportunity to appear before you today to explain the administration's funding request for the multilateral development banks and to ask for your prompt and favorable consideration of this request.

We are all well aware of the fact that the international financial and economic system is experiencing very serious strains. The difficulties we face are without precedent in the postwar era and pose a very serious threat to the efforts being made, both domestically and internationally, to restore growth and vitality to the world

economy.

I understand that the Appropriations Committee will be considering separately legislation providing for U.S. participation in an increase in IMF resources. The IMF is the centerpiece of a comprehensive strategy to deal with current strains in the international financial system in the orderly manner essential for U.S. and global economic recovery.

The IMF must have adequate resources to fulfill its vital responsibilities for providing sound economic adjustment, and I urge your prompt approval of this vital legislation.

U.S. COMMITMENT TO DEVELOPING COUNTRIES

Global conditions pose particularly severe problems for the countries of the developing world. The United States has a long tradition of cooperating with developing countries, through both bilateral and multilateral channels, to assist them in accelerating the development process.

We have done so both for altruistic reasons, and in pursuit of our own interests. If the developing countries, especially the poorest ones, are to continue to have an opportunity to participate fully in

international growth, it is clear that immense challenges will have to be met during the remainder of this decade.

The most important contribution the United States can make to world development is to pursue sound economic policies at home. A vigorous U.S. economy firmly set on a path of sustained and noninflationary economic growth will be of immeasurable help to the global economy.

We have set out a comprehensive course to domestic economic recovery and will continue to work closely with the Congress to assure it is followed.

At the same time, we must recognize that global economic conditions have a direct impact on the health of the U.S. economy, and that the international economic environment can be an important force for either enhancing or thwarting our domestic recovery efforts.

It is thus in our own economic self-interest to encourage sound and sustainable growth in the developing world. A prospering and economically stable developing world also serves important U.S. political, strategic, and humanitarian interests.

MDB CONTRIBUTIONS TO GROWTH AND DEVELOPMENT

It is the view of the administration that the multilateral development banks do contribute effectively to economic growth and development, and that active U.S. support for these institutions is critical to our security and economic interests. Those interests include:

NATIONAL SECURITY INTERESTS

At a time when global economic difficulties are exposing nearly all of the poorer developing countries to serious threats of political, economic, and social instability, the MDB's are capable of providing a valuable contribution to our national security and other foreign policy objectives in each of the major regions of the world and in countries of particular interest to us.

One need only scan the list of the largest MDB borrowersMexico, Brazil, Argentina, Indonesia, Korea, Pakistan, Thailand, the Philippines, Turkey, and Egypt-to recognize that the MDB's are lending to countries of great importance to us. The IDB is especially important for our relations with Latin America and the Caribbean.

The MDB's are not providing any assistance to such hostile nations as Vietnam, Cuba, Iran, Afghanistan, and Cambodia.

There is also the growing importance of our dependence on critical raw materials from the developing world. The United States, for example, depends upon the developing countries for all of its tin imports, 90 percent of its bauxite, and 76 percent of its cobalt. The MDB's have made loans to key producing countries such as Bolivia, Zambia, Zaire, and Indonesia. We and the rest of the world have a vital stake in insuring the stability of LDC economies which produce critical raw materials and in safeguarding access to these supplies.