Order Code RL31311
Report for Congress
Received through the CRS Web
Appropriations for FY2003:
Foreign Operations, Export Financing, and
Related Programs
Updated July 8, 2002
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions, and
budget reconciliation bills. The process begins with the President’s budget request and is
bound by the rules of the House and Senate, the Congressional Budget and Impoundment
Control Act of 1974 (as amended), the Budget Enforcement Act of 1990, and current
program authorizations.
This report is a guide to one of the 13 regular appropriations bills that Congress considers
each year. It is designed to supplement the information provided by the House and Senate
Foreign Operations Appropriations Subcommittees. It summarizes the current legislative
status of the bill, its scope, major issues, funding levels, and related legislative activity. The
report lists the key CRS staff relevant to the issues covered and related CRS products.
This report is updated as soon as possible after major legislative developments, especially
following legislative action in the committees and on the floor of the House and Senate.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.sht
ml].

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Appropriations for FY2003:
Foreign Operations, Export Financing, and
Related Programs
Summary
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews the U.S. foreign aid budget and influences
executive branch foreign policy making generally. It contains the largest share —
about two-thirds — of total U.S. international affairs spending.
President Bush has requested $16.12 billion for FY2003 Foreign Operations, an
amount 5% higher than regular FY2002 appropriations, but somewhat less than
enacted FY2002 foreign aid appropriations when amounts allocated from the
Emergency Terrorism Response (ETR) fund are included. The White House has
distributed nearly $1.3 billion in FY2002 from the $40 billion emergency terrorism
supplemental appropriation (P.L. 107-38) enacted in mid-September 2001 following
the September 11, 2001 terrorist attacks. Combined with amounts provided in the
regular appropriation (P.L. 107-115), enacted Foreign Operations spending for
FY2002 totals $16.8 billion, about 4% more than the FY2003 request. Moreover, the
President has proposed an additional $1.3 billion for foreign aid in a pending FY2002
supplemental aimed at bolstering homeland security and fighting terrorism abroad.
The FY2003 Foreign Operations proposal increases bilateral U.S. development
assistance by $248 million (+9%), including an additional $165 million, or one-third
more for global HIV/AIDS programs. Other major additions in the FY2003 budget
include 15% more for the Peace Corps, 17% more for the Andean Counternarcotics
Initiative, 22% more for contributions to multilateral development banks, and 11%
more for military assistance, primarily to support countries facing terrorist threats.
Overall, the FY2003 request includes $3.5 billion in aid for “front-line” states in the
war on terrorism. In a few areas, the President’s request cuts spending: Export-
Import Bank appropriations would fall by nearly one-quarter while assistance to
Eastern Europe would drop by 20%.
Key Foreign Operations issues that are likely to attract considerable debate this
year include: size and composition of aid to help combat terrorism, including
amounts proposed as an FY2002 supplemental; the President’s pledge to increase
U.S. economic assistance by $5 billion by FY2006 and whether the initiative should
begin immediately; development aid funding priorities, especially the adequacy of
U.S. support for international HIV/AIDS programs and proposed reductions for other
global health programs; funding for family planning programs and eligibility of the
U.N. Population Fund; and assistance to Colombia, especially proposals to expand
aid beyond counter-narcotics to a broader counter-terrorism focus.

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Key Policy Staff
Area of Expertise
Name
Tel.
General: Policy issues & budget
Larry Nowels, Specialist, Foreign Affairs
7-7645
General: Policy issues
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Afghanistan reconstruction aid
Rhodi Margesson, Analyst, Foreign Affairs
7-0425
Africa Aid
Raymond Copson, Specialist, Intl Relations
7-7661
Agency for Intl Development
Larry Nowels, Specialist, Foreign Affairs
7-7645
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Andean Regional Initiative
Larry Storrs, Specialist, Latin American Affairs
7-7672
Debt Relief
Larry Nowels, Specialist, Foreign Affairs
7-7645
Development Assistance
Larry Nowels, Specialist, Foreign Affairs
7-7645
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Disaster aid
Rhodi Margesson, Analyst, Foreign Affairs
7-0425
Drug/counternarcotics programs
Rensselaer Lee, Analyst, International Affairs
7-7748
Drug/counternarcotics, Colombia
Nina Serafino, Specialist, Intl Security Affairs
7-7667
Export-Import Bank
James Jackson, Specialist, Intl Trade & Finance
7-7751
Family planning programs
Larry Nowels, Specialist, Foreign Affairs
7-7645
Health programs
Rhodi Margesson, Analyst, Foreign Affairs
7-0425
Tiaji Salaam, Analyst, Foreign Affairs
7-7677
HIV/AIDS
Raymond Copson, Specialist, Intl Relations
7-7661
International affairs budget
Larry Nowels, Specialist, Foreign Affairs
7-7645
International Monetary Fund
Jonathan Sanford, Specialist, Intl Political Economy
7-7682
Jeff Hornbeck, Specialist, Intl Trade & Finance
7-7782
Kosovo/Yugoslavia aid
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Microenterprise
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Middle East assistance
Clyde Mark, Specialist, Mid-East Affairs
7-7681
Military aid/Arms sales
Richard Grimmett, Specialist, National Defense
7-7675
Multilateral Development Banks
Jonathan Sanford, Specialist, Intl Political Economy
7-7682
North Korea/KEDO
Larry Niksch, Specialist, Asian Affairs
7-7680
Overseas Private Investment Corp
James Jackson, Specialist, Intl Trade & Finance
7-7751
Peace Corps
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Peacekeeping
Marjorie Browne, Specialist, Intl Relations
7-7695
Refugee aid
Larry Nowels, Specialist, Foreign Affairs
7-7645
Russia/East Europe Aid
Curt Tarnoff, Specialist, Foreign Affairs
7-7656
Terrorism
Rensselaer Lee, Analyst, International Affairs
7-7748
Trafficking in Women/Children
Francis Miko, Specialist, International Relations
7-7670
U.N. Voluntary Contributions
Vita Bite, Analyst, International Relations
7-7662

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Contents
Key Policy Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Foreign Operations Funding Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Foreign Operations, the FY2003 Budget Resolution, and Sec.
302(b) Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Foreign Operations Appropriations Request for FY2003 and
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Request Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Fighting the war on terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other key elements of the FY2003 request . . . . . . . . . . . . . . . . . . . . . . 8
Leading Foreign Aid Recipients Proposed for FY2002/FY2003 . . . . . . . . . 10
Supplemental FY2002 Foreign Operations Funding . . . . . . . . . . . . . . . . . . . . . . 11
Funding Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DOD’s Role in Military Aid Allocations . . . . . . . . . . . . . . . . . . . . . . . 14
Colombia Aid Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Removal of Restrictions for Other Economic and Military
Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Congressional Action on the Administration’s Supplemental
Foreign Operations Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Major Policy and Spending Issues for FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Foreign aid as a tool in the war on terrorism . . . . . . . . . . . . . . . . . . . . . . . . 18
Anti-Terrorism Assistance (ATA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Terrorist Interdiction Program (TIP) . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Terrorist Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
USAID Physical Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Aid Restrictions for Terrorist States . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Development Aid Policy Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Family Planning, Abortion Restrictions, and UNFPA Funding . . . . . . . . . 24
UNFPA funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
“Mexico City” policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Andean Regional Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Millennium Challenge Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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List of Figures
Figure 1. Foreign Policy Budget, FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Figure 2. Foreign Operations Funding Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
List of Tables
Table 1. Status of Foreign Operations Appropriations, FY2003 . . . . . . . . . . . . . 3
Table 2. Foreign Operations Appropriations, FY1995 to FY2003 . . . . . . . . . . . . 5
Table 3. Summary of Foreign Operations Appropriations . . . . . . . . . . . . . . . . . . 9
Table 4. Leading Recipients of U.S. Foreign Aid . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 5. FY2002 Supplemental Compared with Enacted & Requested . . . . . . . 12
Table 6. Funding for USAID Global Health Programs . . . . . . . . . . . . . . . . . . . . 23
Table 7. Foreign Operations: Discretionary Budget Authority . . . . . . . . . . . . . 36

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Appropriations for FY2003:
Foreign Operations, Export Financing,
and Related Programs
Most Recent Developments
In early February 2002, President Bush submitted his FY2003 budget that
includes $16.12 billion for FY2003 Foreign Operations. The amount is 5% higher
than regular FY2002 appropriations, but 4% less than enacted FY2002 foreign aid
appropriations when amounts allocated from the Emergency Terrorism Response
(ETR) fund are included. In late June, House and Senate Appropriations Committees
released subcommittee funding allocations, including $16.35 billion for Foreign
Operations, or $230 million higher than the request. The Committees, however, have
not announced dates for marking-up the Foreign Operations bill.
On March 21, the President requested a supplemental FY2002 appropriation,
including $1.3 billion for foreign aid to “front-line” states in the global war on
terrorism. Legislation (H.R. 4775) passed by the House and Senate increases the
foreign aid supplemental total to around $1.8 billion, adding funds for Israel, the
Palestinians, and international HIV/AIDS programs.
In mid-January 2002, the White House announced that it had placed a hold on
the transfer of $34 million to the U.N. Population Fund (UNFPA) due to new
allegations that UNFPA was involved in managing coercive family planning
programs in China. The Administration sent a team in May to conduct its own
investigation as a basis for deciding whether and in what amount the U.S. will
release contributions to UNFPA this year.
Introduction
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews and votes on the U.S. foreign assistance
budget and influences executive branch foreign policy making generally.1 It contains
1 Although the Foreign Operations appropriations bill is often characterized as the “foreign
aid” spending measure, it does not include funding for all foreign aid programs. Food aid,
an international humanitarian aid program administered under the P.L. 480 program, is
appropriated in the Agriculture appropriations bill. Foreign Operations also include funds
for the Export-Import Bank, an activity that is not regarded as “foreign aid,” but as a trade
promotion program. In recent years, funding for food aid and the Eximbank have been
about the same, so that Foreign Operations and the official “foreign aid” budget are nearly
(continued...)

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CRS-2
the largest share — about two-thirds — of total international affairs spending by the
United States (see Figure 1). The legislation funds all U.S. bilateral development
assistance programs, managed mostly by the U.S. Agency for International
Development (USAID), together with several smaller independent foreign aid
agencies, such as the Peace Corps and the Inter-American and African Development
Foundations. Most humanitarian aid activities are funded within Foreign Operations,
including USAID’s disaster program and the State Department’s refugee relief
support. Foreign Operations includes separate accounts for aid programs in the
former Soviet Union (also referred to as the Independent States account) and
Central/Eastern Europe, activities that are jointly managed by USAID and the State
Department. Security assistance (economic and military aid) for Israel and Egypt is
also part of the Foreign Operations spending measure, as are smaller security aid
programs administered largely by the State Department, in conjunction with USAID
and the Pentagon. U.S. contributions to the World Bank and other regional
multilateral development banks, managed by the Treasury Department, and voluntary
payments to international organizations, handled by the State Department, are also
funded in the Foreign Operations bill. Finally, the legislation includes appropriations
for three export promotion agencies: the Overseas Private Investment Corporation
(OPIC), the Export-Import Bank, and the Trade and Development Agency.
Figure 1. Foreign Policy Budget, FY2003
1 (...continued)
identical. Throughout this report, the terms Foreign Operations and foreign aid are used
interchangeably.

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CRS-3
For nearly two decades, the Foreign Operations bill has been the principal
legislative vehicle for congressional oversight of foreign affairs and for congressional
involvement in foreign policy making. Congress has not enacted a comprehensive
foreign aid authorization bill since 1985, leaving most foreign assistance programs
without regular authorizations originating from the legislative oversight committees.
As a result, Foreign Operations spending measures developed by the appropriations
committees increasingly have expanded their scope beyond spending issues and
played a major role in shaping, authorizing, and guiding both executive and
congressional foreign aid and broader foreign policy initiatives. It has been largely
through Foreign Operations appropriations that the United States has modified aid
policy and resource allocation priorities since the end of the Cold War. The
legislation has also been a key tool used by Congress to apply restrictions and
conditions on Administration management of foreign assistance, actions that have
frequently resulted in executive-legislative clashes over presidential prerogatives in
foreign policy making.
Status
Table 1. Status of Foreign Operations Appropriations, FY2003
Subcomm.
Conf. Report
Markup
House
House
Senate Senate
Conf.
Approval
Public
Report Passage Report Passage Report
Law
House Senate
House Senate










President Bush submitted his FY2003 federal budget request to Congress on
February 4, including funding proposals for Foreign Operations Appropriations
programs. Subsequently, on March 21, the White House requested FY2002
emergency supplemental funds for homeland security and combating terrorism
overseas, a proposal that includes assistance to “front-line” states. House and Senate
Appropriations Committees have held a series of hearings on both the FY2003 and
FY2002 supplemental requests, and are engaged in conference discussions for the
supplemental (H.R. 4775). The Committees are not expected to begin work on the
FY2003 legislation until at least mid-June.
Foreign Operations Funding Trends
As shown in Figure 2 below, Foreign Operations funding levels, expressed in
real terms taking into account the effects of inflation, have fluctuated widely over the
past 25 years.2 After peaking at over $33 billion in FY1985 (constant FY2003
2 Some of these swings, however, are not the result of policy decisions, but due to technical
budget accounting changes involving how Congress “scores” various programs. For
example, the large increase in FY1981 did not represent higher funding levels, but rather the
fact that export credit programs began to be counted as appropriations rather than as “off-
budget” items. Part of the substantial rise in spending in FY1985 came as a result of the
(continued...)

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CRS-4
dollars), Foreign Operations appropriations began a period of decline to $13.8 billion
in FY1997, with only a brief period of higher amounts in the early 1990s due to
special supplementals for Panama and Nicaragua (1990), countries affected by the
Gulf War (1991), and the former Soviet states (1993).
Figure 2. Foreign Operations Funding Trends
Arguing that declining international affairs resources seriously undermined U.S.
foreign policy interests and limited the ability of American officials to influence
overseas events, Clinton Administration officials and other outside groups vigorously
campaigned to reverse the decade-long decline in the foreign policy budget. Foreign
aid spending increased slightly in FY1998, but beginning the following year and
continuing to the present, Foreign Operations appropriations have trended upward
due in large part to the approval of resources for special, and in some cases
unanticipated foreign policy contingencies and new initiatives. While funding for
regular, continuing foreign aid programs also rose modestly during this period,
supplemental spending for special activities, such as Central American hurricane
relief (FY1999), Kosovo emergency assistance (FY1999), Wye River/Middle East
peace accord support (FY2000), and a counternarcotics initiative in Colombia and
the Andean region (FY2000 and FY2002), was chiefly responsible for the growth in
2 (...continued)
requirement to appropriate the full amount of military aid loans rather than only the partial
appropriation required in the past. Beginning in FY1992, Congress changed how all Federal
credit programs are “scored” in appropriation bills which further altered the scoring of
foreign aid loans funded in Foreign Operations. All of these factors make it very difficult
to present a precise and consistent data trend line in Foreign Operations funding levels.
Nevertheless, the data shown in Figure 2 can be regarded as illustrative of general trends in
Congressional decisions regarding Foreign Operations appropriations over the past 25 years.

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CRS-5
foreign aid appropriations.3 The average annual funding level during the FY1999-
FY2002 period of $16.8 billion represents a level 22% higher than the low point in
Foreign Operations appropriation in FY1997.
Table 2. Foreign Operations Appropriations, FY1995 to FY2003
(discretionary budget authority in billions of current dollars)
FY95
FY96
FY97
FY98
FY99*
FY00
FY01
FY02 FY03
nominal $s
13.61
12.46
12.27
13.15
15.44
16.36
14.99
16.78
16.12
constant FY03 $s
15.91
14.27
13.77
14.57
16.86
17.42
15.61
17.15
16.12
* FY1999 excludes $17.861 billion for the IMF.
Funding for Foreign Operations programs grew significantly in FY2002
following the terrorist attacks of September 11. As part of a $40 billion emergency
supplemental to fight terrorism enacted in September 2001 (P.L. 107-38), President
Bush and Congress allocated over $1.4 billion for foreign aid activities, pushing
FY2002 totals to $16.78 billion.4 This amount is the largest in nominal terms since
FY1985 and the highest in constant terms in 10 years. With Congress considering
an additional $1.3 billion Foreign Operations supplemental request (H.R. 4775 and
S. 2551), amounts for FY2002 are likely to climb higher.
Despite the recent trend of increased spending on foreign aid, however, by
historical standards current FY2002 and proposed FY2003 budgets, in real terms, are
relatively low. Except for the lowest point in foreign aid appropriations that occurred
in the mid-1990s, FY2002 and FY2003 are lower, in real terms than for any year
prior to FY1994.
As a share of the entire $2.1 trillion U.S. budget for FY2002, Foreign
Operations currently represents a 0.8% share. As a portion of discretionary budget
authority — that part of the budget provided in annual appropriation acts (other than
appropriated entitlements) — Foreign Operations consumes 2.3%. By comparison,
at the high point of Foreign Operations spending in FY1985, foreign aid funds
represented 2% of the total U.S. budget and 4.6% of discretionary budget authority.
3 Foreign Operations appropriations dipped in FY2001, a year in which there was only one,
relatively small ($100 million) supplemental for a global health trust fund, later named the
Global Health Fund to Fight AIDS, Tuberculosis, and Malaria.
4 Although the entire $40 billion was appropriated in FY2001, nearly all Foreign Operations
funds were not allocated to specific foreign aid programs until after the beginning of
FY2002 on October 1. Amounts are assigned to a specific fiscal year according to the time
at which the money was transferred from the Emergency Response Fund to a program
account.

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CRS-6
Data Notes
Unless otherwise indicated, this report expresses dollar amounts in terms of
discretionary budget authority. The Foreign Operations Appropriations bill
includes one mandatory program that is not included in figures and tables —
USAID’s Foreign Service retirement fund. The retirement fund is scheduled to
receive $45.2 million for FY2003.
In addition, funding levels and trends discussed in this report exclude U.S.
contributions to the International Monetary Fund (IMF), proposals that are enacted
periodically (about every five years) in Foreign Operations bills. Congress
approved $17.9 billion for the IMF in FY1999, the first appropriation since
FY1993. Including these large, infrequent, and uniquely “scored” IMF
appropriations tends to distort a general analysis of Foreign Operations funding
trends. Although Congress provides new budget authority through appropriations
for the full amount of U.S. participation, the transaction is considered an exchange
of assets between the United States and the IMF, and results in no outlays from the
U.S. treasury. In short, the appropriations are off-set by the creation of a U.S.
counterpart claim on the IMF that is liquid and interest bearing. For more, see
CRS Report 96-279, U.S. Budgetary Treatment of the IMF.
Foreign Operations, the FY2003 Budget Resolution, and
Sec. 302(b) Allocations
Usually, Appropriations Committees begin markups of their spending bills only
after Congress has adopted a budget resolution and funds have been distributed to the
Appropriations panels under what is referred to as the Section 302(a) allocation
process, a reference to the pertinent authority in the Congressional Budget Act.
Following this, House and Senate Appropriations Committees separately decide how
to allot the total amount available among their 13 subcommittees, staying within the
functional guidelines set in the budget resolution. This second step is referred to as
the Section 302(b) allocation. Foreign Operations funds fall within the International
Affairs budget function (Function 150), representing in most years about 65% of the
function total. Smaller amounts of Function 150 are included in three other
appropriation bills. (See Figure 1, above.)
How much International Affairs money to allocate to each of the four
subcommittees, and how to distribute the funds among the numerous programs are
decisions exclusively reserved for the Appropriations Committees. Nevertheless,
overall ceilings set in the budget resolution can have significant implications for the
budget limitations within which the House and Senate Foreign Operations
subcommittees will operate when they meet to mark up their annual appropriation
bills.
Complicating the Committees’ ability to set Section 302(b) allocations and
proceed with markups of the FY2003 appropriations has been the absence of
enactment of a budget resolution. The House approved H.Con.Res. 353 on March
20, 2002, recommending $759 billion in total discretionary budget authority,

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CRS-7
including a $10 billion reserve for defense, the level requested by the President. The
House-passed budget resolution further assumes full funding – $25.3 billion – for
the President’s proposal for International Affairs. On April 11, the Senate Budget
Committee reported its version of an FY2003 budget resolution (S.Con.Res. 100)
increasing total discretionary budget authority to $768 billion, including $25.8 billion
for International Affairs. Under either of the budget blueprints, House and Senate
Appropriations Committees would have sufficient foreign policy funds to allocate the
full amount requested to the Foreign Operations Subcommittees, if they so chose.
In the case of the Senate measure, the allocation for Foreign Operations might be
higher than levels proposed by the President.
Congress, however, has not concluded debate on a budget resolution and agreed
on a common framework. Some suggested that Congress include in the pending
FY2002 supplemental appropriation (H.R. 4775) a so-called “deeming resolution”
that would effectively enact one of the two pending budget resolutions and establish
a ceiling for FY2003 discretionary budget authority and outlays. Members remain
divided, however, over which budget resolution level to use.
Nevertheless, in the meantime House and Senate Appropriation Committees
issued section 302(b) allocations on June 21 and June 27, respectively, in order to
allow the Committees to begin marking up some of the spending bills. Overall, the
allocations differ significantly with the House approving $749 billion (excluding the
$10 billion defense reserve) while the Senate distributed a total of $768 billion.
Foreign Operations received a $16.35 billion allocation from each Committee, about
$230 million higher than the President’s request.
Foreign Operations Appropriations Request for
FY2003 and Congressional Consideration
Request Overview
In February 2002, President Bush asked Congress to appropriate $16.12 billion
for FY2003 Foreign Operations, an amount $774 million, or 5% higher than regular
Foreign Operations appropriations for FY2002. However, when the $1.44 billion
levels provided for foreign assistance in the Emergency Terrorism Response
supplemental measure (P.L. 107-38) are added to enacted amounts for FY2002, the
proposal for FY2003 is $662 million or 4% below current total appropriations.
Moreover, the President has requested $27.1 billion in additional homeland security
and other activities to combat terrorism, including $1.28 billion supplemental
funding for Foreign Operations programs. Enactment of the pending supplemental
would increase FY2002 Foreign Operations appropriations to $18.1 billion, making
the FY2003 recommendation $1.94 billion, or 10.8% less than the current year.
Fighting the war on terrorism. Although the request for FY2003 includes
a significant emphasis on aid activities associated with fighting the war on terrorism,
in several ways some have regarded it as an incomplete budget plan for addressing
U.S. interests overseas in a post-September 11 environment. Since the terrorist
attacks last year, the focus of American foreign aid programs has shifted to focus

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CRS-8
more directly on supporting key coalition countries and global counter-terrorism
efforts. The Administration says that the FY2003 proposal includes $3.5 billion to
assist the so-called “front-line” states in the war on terrorism.5 But FY2003 increases
proposed for many of these “front-line” states are uneven. For some – notably
Jordan, India, Oman, and Yemen – the FY2003 recommendations include
considerably more assistance than current allocations, while for others – the
Philippines, Uzbekistan, Tajikistan, Turkey, and Indonesia, for example – proposed
additional assistance is modest compared to FY2002 amounts. The FY2003 budget
submitted in February also does not include specific levels for Afghanistan.
Executive officials said that the request assumes about $138 million for Afghanistan
in several refugee and humanitarian aid accounts that are not allocated by recipient
countries, but that other bilateral reconstruction support for Kabul would be
determined later.
The absence of a comprehensive plan for Afghanistan and far less assistance
than anticipated for key nations cooperating in the war on terrorism led several
Members of Congress to characterize the FY2003 Foreign Operations plan as a
“business as usual” budget and one that did not adequately address the most urgent
requirements of the war on terrorism.6
To a large extent, the $1.28 billion FY2002 supplemental Foreign Operations
proposal, submitted to Congress on March 21, addresses the concerns of those who
doubt that the FY2003 plan is adequate. As outlined below in more detail, the
supplemental includes additional aid to 27 nations around the world, many of which
would receive no increase or only a modest rise in U.S. aid under the FY2003
request. The supplemental further seeks $250 million more assistance for
Afghanistan.
Other key elements of the FY2003 request. Beyond the issue of aid to
combat terrorism, the Foreign Operations proposal for next year would substantially
increase aid activities in several areas while cutting resources for a few programs.
Significant appropriation increases include:
! Development assistance would rise by about $250 million, or over
9%, but increases among the many development programs are
mixed. Funding for HIV/AIDS, agriculture, environment, and
trade/investment programs would grow sharply, while resources for
5 “Front-line” states are defined by the State Department as a group of countries not only
bordering Afghanistan or located in the region, but nations that have committed to helping
the United States in the war on terrorism globally. Although the complete list of “front-line”
states remains classified, the Administration has identified several (such as Jordan, Pakistan,
India, and Oman) of the countries in statements and budget justifications issued in the past
several months.
6 See statement of Congressman Kolbe, Chairman of the House Foreign Operations
Subcommittee, during a February 13, 2002 hearing. See also a February 26 press release
by Senator Leahy, Chairman of the Senate Foreign Operations panel, released prior to a
subcommittee hearing on USAID’s FY2003 request.

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CRS-9
several health activities would fall. (See below for more details in
section on development aid priorities.)
Table 3. Summary of Foreign Operations Appropriations
(Discretionary funds – in millions of dollars)
FY2001
FY2002 FY2003 FY2003 FY2003 FY2003
Bill Title & Program
Enacted Enacted Request
House
Senate
Enacted
Title I - Export Assistance
738.9
577.9
399.1
Title II - Bilateral Economic Aid
9,121.8
10,700.7
9,775.7
Development aid
2,325.0
2,611.5
2,859.5
Israel/Egypt economic aid
1,532.6
1,375.0
1,215.0
Former Soviet Union
808.2
830.5
755.0
Anti-terrorism programs
41.9
122.0
69.2
Narcotics control/Andean Init
275.0
792.7
878.2
Title III - Military Assistance
3,752.5
4,120.0
4,295.5
Israel/Egypt
3,273.6
3,340.0
3,400.0
Title IV - Multilateral Aid
1,330.0
1,383.3
1,627.0
OMB Retirement Accruals
–
–
23.0
Total Foreign Operations
14,943.2
16,781.9
16,120.3
Source: House and Senate Appropriations Committee and CRS calculations.
* FY2002 levels include regular Foreign Operations appropriations enacted in P.L. 107-115, plus $1.436 billion
emergency terrorism funding allocated from amounts provided in P.L. 107-38. In addition, there is a pending
$1.28 billion Foreign Operations supplemental for FY2002 that is not included.
! Andean Regional Initiative would grow by $106 million, or 13%,
continuing a program of several years to enhance Colombia’s and
other regional states’ capabilities to interdict illegal drug production
and to support alternative development programs. (See below for
more details.)
! Peace Corps would increase by $42 million, or 15%, in an effort to
open eight new country programs and place 8,000 volunteers by the
end of FY2003.
! Contributions to the World Bank and other international financial
institutions would grow by $262 million, or 22%, covering all
scheduled U.S. payments to the multilateral development banks, plus
one-third ($177 million) of U.S. arrears owed to these institutions.
Funding reductions are sought in three primary areas:

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CRS-10
! Export-Import Bank funds would drop by $182 million, or 23%,
although the Administration says that Bank lending will increase by
over 10% because of what it calls “more focused” estimates of
default risk that will reduce the level of appropriations.
! East European assistance would fall by $126 million, or 20% from
enacted levels. The executive proposes reductions for nearly every
regional country, including Bosnia, Montenegro, and Kosovo.

! Debt reduction would receive no funding in FY2003, although this
does not represent a policy change. The United States fulfilled
current commitments to the Heavily Indebted Poor Country (HIPC)
initiative with the FY2002 appropriation of $229 million.
Leading Foreign Aid Recipients Proposed for FY2002/FY2003
While Israel and Egypt remain the largest U.S. aid recipients, as they have been
for many years, in the aftermath of the September 11 terrorist attacks, foreign aid
allocations have changed in several significant ways. The Administration has used
economic and military assistance as an additional tool in efforts to maintain a
cohesive international coalition to conduct the war on terrorism and to assist nations
which have both supported U.S. forces and face serious terrorism threats themselves.
Pakistan, for example, a key coalition partner on the border with Afghanistan, had
been ineligible for U.S. aid, other than humanitarian assistance, due to sanctions
imposed after India and Pakistan conducted nuclear tests in May 1998 and Pakistan
experienced a military coup in 1999. Since lifting aid sanctions in October, the
United States has transferred over $900 million to Pakistan, and another $450 million
remains pending in the FY2002 supplemental and FY2003 requests. India, the
Philippines, Turkey, and Uzbekistan also are among the top aid recipients planned
for this year and next as part of the network of “front-line” states in the war on
terrorism.
The other major cluster of top recipients are those in the Andean region where
the Administration maintains a large counternarcotics initiative that combines
assistance to interdict and disrupt drug production, together with alternative
development programs for areas that rely economically on the narcotics trade.
Several countries in the Balkans and former Soviet Union — Federal Republic of
Yugoslavia, Kosovo, Russia, Ukraine, and Georgia — would continue to be among
the top recipients, although at somewhat lower funding levels.

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CRS-11
Table 4. Leading Recipients of U.S. Foreign Aid
(Appropriation Allocations; $s in millions)
FY2001
FY2002
FY2002
FY2003
Actual
Enacteda
Supp. Request
Request
Israel
2,814
2,788
0
2,700
Egypt
1,992
1,956
0
1,916
Pakistan
4
921
145
305
Colombia
49
382
35
538
Jordan
229
230
125
453
Afghanistanb
184
420
270
138
Peru
90
198
0
189
Ukraine
183
163
0
166
Russia
169
165
0
158
FRYugoslavia
186
165
0
136
Indonesia
121
125
16
132
Bolivia
89
126
0
137
Turkey
2
4
228
21
India
60
80
0
153
Philippines
49
94
40
95
Georgia
100
103
20
97
Uzbekistan
31
115
46
44
Kosovo
150
118
0
85
Source: U.S. Department of State.
Note: Because of the unusual way in which the United States has allocated FY2002 country aid levels
(largely in support of the war on terrorism), this table lists countries in order of the combined FY2002
enacted and FY2002/2003 requested appropriations. This better reflects the ranking of current major
U.S. aid recipients, avoiding distortions that would result if the list ranked countries by one of the
years only.
a FY2002 includes funds allocated from the regular Foreign Operations appropriation, plus funds
drawn from the Emergency Response Fund appropriated in P.L. 107-38.
b Amounts for Afghanistan are estimates that include funds allocated from refugee, food, and other
humanitarian aid accounts.
Supplemental FY2002 Foreign Operations Funding
The Administration seeks $1.28 billion in additional FY2002 Foreign
Operations funding, primarily to increase economic, military, and counter-terrorism
assistance to so-called “front-line” states in the war on terrorism. If enacted, the
supplemental would nearly double the level of assistance allocated in FY2002 for
emergency foreign assistance to combat terrorism. Beginning in October 2001, the

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CRS-12
President distributed $1.5 billion for Foreign Operations programs, drawn from the
$40 billion emergency terrorism supplemental approved by Congress shortly after
September 11 (P.L. 107-38). The proposed supplemental also includes several policy
changes related to foreign aid activities that may raise controversy during
congressional debate.
Table 5. FY2002 Supplemental Compared with Enacted & Requested
($s – millions)
FY2002
FY2002
FY2002
FY2001
FY2002
FY2003
Country/Program
Supplement
Supplement
Supplement
Enacted
Enacted
Request
Request
Housea
Senatea
South Asia:
Afghanistan
– $297.0
$250.0
$370.0
TBD
Nepal
$21.3
$30.0
$20.0
$41.2
Pakistan
$3.5
$921.0
$145.0
$305.0
Middle East
Bahrain
$0.2
$0.4
$28.5
$0.5
Jordan
$226.2
$227.0
$125.0
$450.4
Oman
$0.0
$0.3
$25.0
$20.3
Yemen
$4.2
$5.5
$25.0
$12.7
Economic Initiative
–
–
$50.0
$25.0
$50.0
–
Israel
$2,813.8
$2,788.0
$0.0
$200.0
$200.0
$2,700.0
Palestinians
$71.0
$72.0
$0.0
$50.0
$50.0
$75.0
East Asia
Indonesia
$121.0
$124.7
$16.0
$8.0
$16.0
$71.9
Philippines
$50.4
$92.1
$40.0
$93.1
Africa
Cote d’Ivoire
$2.0
$0.0
Djibouti
$0.2
$0.2
$6.0
$0.2
Ethiopia
$40.6
$46.8
$12.0
$51.1
Kenya
$34.6
$40.7
$22.0
$48.8
Mauritania
$1.0
Nigeria
$2.0
Southern Sudan
$4.5
$11.4
$10.0
$22.3
Europe/Eurasia
Georgia
$97.8
$100.9
$20.0
$95.2
Kazakstan
$48.4
$48.6
$3.5
$47.0
Kyrgyz Republic
$35.2
$37.6
$42.0
$41.1
Tajikistan
$16.7
$19.9
$40.0
$22.5
Turkey
$1.7
$22.7
$228.0
$20.3
Turkmenistan
$7.3
$7.6
$4.0
$8.2
Uzbekistan
$28.4
$95.6
$45.5
$41.5
Latin America

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CRS-13
FY2002
FY2002
FY2002
FY2001
FY2002
FY2003
Country/Program
Supplement
Supplement
Supplement
Enacted
Enacted
Request
Request
Housea
Senatea
Colombia
$49.0
$381.7
$35.0
$538.2
Mexico
$31.1
$35.6
$25.0
$25.0
$43.6
Ecuador
$16.4
$47.5
$3.0
$65.8
Regional Border
– – $5.0
–
Control
Global
Antiterrorism Training
$38.0
$83.5
$20.0
$64.2
Terrorist Financing
–
–
$10.0
–
Terrorist Interdiction
$4.0
$8.0
$10.0
$5.0
USAID admin/security
–
–
$7.0
$7.0
$5.0
–
Defense admin costs
–
–
$2.0
$2.0
–
HIV/AIDS, TB, Mala-
$573.0
$653.0
$0.0
$200.0
$200.0
$762.0
ria, & Global Fund
Demining
$40.0
$40.0
$0.0
$0.0
$10.0
$45.0
Migration/Refugee aid
$698.0
$705.0
$0.0
$0.0
$50.0
$705.6
TOTAL
$3,765.5
$5,546.3
$1,279.5
$1,816.5
$1,779.5
$4,885.1
Sources: Department of State and House Appropriations Committee.
a The House and Senate bills direct or recommend allocations for specific countries/programs in only selected
cases. These directives and recommendations are noted in this column. The table does not include rescissions.
Funding Issues
The supplemental sets new directions in the distribution of assistance to meet
the new terrorist threat. Much of the $1.5 billion emergency aid already distributed
focused on two areas: 1) economic support to Afghanistan and neighboring countries
in anticipation of food shortages, displacement and other humanitarian disruptions
that would occur during the military campaign; and 2) efforts to achieve security and
stabilize the economic situation in Pakistan and demonstrate support for President
Musharraf. By contrast, the proposed $1.28 billion supplemental would distribute
additional economic and military assistance among 23 countries in all regions of the
world.
In several respects the $1.28 billion supplemental proposal reflects what many
said should have been incorporated in the FY2003 plan. Although like the FY2003
budget, the request includes significant amounts for Pakistan ($145 million) and
Jordan ($125 million), it distributes, as shown in Table 5, considerable amounts of
aid to Central Asian states that would not receive substantial increases in FY2003
and to nations globally.

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CRS-14
Policy Issues
The supplemental request includes several general provisions that would change
current policy regarding the distribution of military aid, assistance to Colombia, and
conditions under which regular foreign aid is transferred. Each is expected to be
closely examined during congressional debate.
DOD’s Role in Military Aid Allocations. Currently, the State Department
receives funding through the Foreign Military Financing (FMF) account of the
Foreign Operations Appropriations and provides broad policy direction for U.S.
military assistance programs. DOD frequently administers FMF activities, but under
the policy guidance of the State Department. The Administration proposes in the
FY2002 supplemental to grant DOD authority to use up to $30 million to support
indigenous forces engaged in activities combating terrorism and up to $100 million
to support foreign government efforts to fight global terrorism. The $130 million
total would come from defense funds – not Foreign Operations – and be directed by
the Secretary of Defense and be available “not withstanding any other provision of
law.” A third provision proposes $420 million in DOD Operation and Maintenance
funding for payments to Pakistan, Jordan, and “other key cooperating states for
logistical and military support provided” to U.S. military operations in the war on
terrorism that would also be under DOD’s policy purview.
DOD officials say that these provisions are essential to help reimburse countries
for costs they incur in assisting U.S. forces engaged in the war on terrorism. The
United States had to delay payments to Pakistan for support provided in Operation
Enduring Freedom because of competing demands on regular military aid funds and
the absence of agreements between DOD and the Pakistan military that would allow
such transfers out of the defense budget. Nevertheless, critics charge that such a
change would infringe on congressional oversight and the State Department’s
traditional role in directing foreign aid policy and resource allocations. By including
a “notwithstanding” proviso, the request further would remove human rights and
other conditions that must be observed by countries in order to qualify for U.S.
security assistance.
At a House hearing on April 18, Deputy Secretary of State Armitage told the
Foreign Operations Appropriations Subcommittee that although the State Department
supports the “intent” of the provisions, the Administration drafted the legislation in
a “rather poor way” and that the authority “is a little broader in scope than we really
intended.” Secretary Armitage pledged that both State and DOD officials would
work with Congress to adjust the provisions in a way that would protect the
prerogatives of the Secretary of State as the “overseer of foreign policy and foreign
aid.”7
Colombia Aid Restrictions. An additional provision in the supplemental
seeks to broaden DOD and State Department authorities to utilize unexpended Plan
Colombia, FY2002 and FY2003 appropriations to support Colombia’s “unified
7 Testimony by Secretary of State Armitage before the Foreign Operations Subcommittee,
Senate Appropriations Committee, April 18, 2002.

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CRS-15
campaign against narcotics trafficking, terrorist activities, and other threats to its
national security.”8 The provision would allow funds to be used not only for counter
narcotics operations, but also for military actions against Colombian insurgents and
any other circumstances that threatened Colombian national security.
Although the most immediate effect of the change would be to permit the
United States to expand intelligence sharing with Colombian security forces, the
provision would also allow helicopters and other military equipment provided over
the past two years to fight drug production to be used against any threat to
Colombia’s security.
The Administration, however, is not asking Congress to soften two other
Colombia aid restrictions: a 400-person limit on U.S. personnel inside Colombia and
the prohibition of aid to Colombian military and police units that are engaged in
human rights violations (Leahy amendment). Despite the inclusion of a clause that
past and future aid be available “notwithstanding any provision of law” (see below)
– except for the two restrictions noted above – Administration officials say they are
not seeking to remove other enacted conditions on Colombian aid, such as those
related to human rights and aerial coca fumigation. Coupled with a pending FY2003
$98 million military aid request to help protect Colombia’s oil pipeline and other
infrastructure against guerilla activity, critics argue that the U.S. objective in
Colombia is shifting from one of combating narcotics production and trafficking to
a counter-terrorism and insurgency strategy.
Removal of Restrictions for Other Economic and Military
Assistance. The Administration’s supplemental submission asks Congress to
provide most of the economic and military aid funds “notwithstanding any other
provision of law.” Such language is usually reserved only for situations where
humanitarian assistance or aid in support of the highest U.S. foreign policy interests
would be prohibited due to existing legislative restrictions on assistance to
governments that violate human rights, engage in weapons proliferation, came to
power through a military coups, do not cooperate in counter-narcotics activities, or
a series of other similar aid conditions.
Because of the sweeping and broad nature of “notwithstanding” provisions,
Congress has often been reluctant to enact such a waiver without fully understanding
the implications of excluding foreign aid restrictions. More often, Congress prefers
to waive specific legislative constraints rather than approving across-the-board
waivers. Administration officials have said that such a waiver is needed in the
supplemental because of impediments that apply to Afghanistan, Yemen, Ethiopia,
and Cote d’Ivoire. These first three countries are overdue in making debt payments
to the U.S. in violation of the “Brooke amendment” (section 512 of the Foreign
Operations Appropriations, FY2002). Cote d’Ivoire is ineligible for aid because of
the military coup against a democratically elected government in 1999, in violation
of section 508 of the Foreign Operations Appropriations, FY2002.
8 Department of Defense, FY2002 Supplemental request to Continue the Global War on
Terrorism, March 2002, page 28. For web version, see
[http://www.dtic.mil/comptroller/fy2003budget/fy2002_supp.pdf].

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CRS-16
Congressional Action on the Administration’s Supplemental
Foreign Operations Request
House and Senate actions have increased foreign aid funding proposed by the
President, but have limited to some extent policy provisions and waivers sought by
the White House. Both chambers also introduced two new issues into the
supplemental debate – additional funding to fight global HIV/AIDS and the status of
U.S. contributions to the U.N. Population Fund (UNFPA).
The House passed bill includes $1.82 billion for foreign aid, $537 million more
than requested. The Senate measure provides $1.78 billion, or $500 million higher
than proposed. New items added by both the House and Senate include $200 million
in assistance to Israel, $50 million for the Palestinians, and $200 million to combat
HIV/AIDS, malaria, and tuberculosis. Both versions increase aid to Afghanistan for
reconstruction and security support above the President’s $250 million request: the
House by $120 million and the Senate by roughly $110 million. The House measure
reduces funding for a Middle East Economic initiative, while the Senate provides full
funding. The Senate bill further adds $15 million to create an international exchange
program for students from countries with large Muslim populations, $7 million to
support media training activities, especially in Pakistan, Egypt, and elsewhere in the
Middle East, and $10 million for humanitarian demining. In most other areas, the
bills recommend amounts close to those proposed (see Table 5, above).
On policy issues, both bills remove the requested “notwithstanding any
provision of law” provisos, but the House legislation still grants specific waivers that
will permit the State Department to program most of the funds as proposed. The
Senate-passed measure waives the debt arrears provision for Afghanistan, but not for
other recipients that might fall under this restriction. On Colombia, both bills include
language similar but less sweeping than the Administration’s request. Each would
allow Colombia to use American foreign aid (money managed by the State
Department) for a unified campaign against narcotics trafficking, against
organizations designated as terrorist groups, and for humanitarian rescue operations.
All current restrictions on Colombian aid, however, would remain in effect. The
Senate bill further adds a new requirement, opposed by the Administration, regarding
the newly elected Colombian President and policies regarding human rights, military
reforms, and financial commitments to implement other reforms. The House and
Senate differ, however, on broadening the use of DOD funds for programs in
Colombia. The House measure allows the money to finance operations against
terrorist groups while the Senate bill rejects the Administration’s request.
Both bills further deny DOD’s request for authority to use $30 million to
support indigenous forces engaged in activities combating terrorism, but approve
$420 million for payments to Pakistan, Jordan, and other cooperating states for
logistical and military support provided. The Senate bill, however, transfers the $420
million to the Foreign Military Financing (FMF) program where it would fall under
control of the State Department. The bill calls for the State Department to consult
with DOD and OMB before dispensing funds and also allocates $50 million to the
Phillippines. The White House opposes the Senate language, arguing that the State

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CRS-17
Department “should not be held accountable for managing or disbursing funds
directly related to military operations.”9
H.R. 4775, as passed by the House, approves DOD’s request for $100 million
to support foreign government efforts to fight global terrorism, but with significant
changes. Transfers would be limited only to reimbursements for the costs of goods,
services, or use of facilities by U.S. military forces and any proposed commitment
of funds must be submitted jointly to the Committees by the Secretaries of State and
Defense 15 days in advance for Committee approval. The Senate measure does not
include a provision related to this issue.
During House Committee markup, another contentious foreign aid policy issue
was introduced. Since mid-January, the White House has maintained a hold on U.S.
contributions to the U.N. Population Fund (UNFPA) because of allegations that
UNFPA is participating in the management of coercive family planning practices in
China. If the White House determines that this is the case, UNFPA would become
ineligible for American contributions. For FY2002, Congress provided “not to
exceed” $34 million for UNFPA, and some Members have criticized the White
House for delaying a decision regarding UNFPA’s eligibility. A State Department
investigation team spent two weeks in China during May.
After initially adopting an amendment by Representatives Lowey and Kolbe
(32-31) that would require the President to transfer the full $34 million to UNFPA
by July 10 if the State Department team concludes that UNFPA is not involved in
coercive family planning practices in China, the Committee approved a further
amendment by Representative Tiahrt that over-rode the Lowey/Kolbe provision. The
Tiahrt amendment required the President to determine whether UNFPA participates
in the management of coercive family planning practices by July 31, 2002, but said
nothing about how much the President must contribute. Prior to final passage of
H.R. 4775, however, the second rule (H.Res. 431) under which the bill was debated
deleted both amendments from the legislation. As such, the House-passed measure
does not include any language regarding UNFPA. Nevertheless, the Senate bill
includes language nearly identical to Lowey/Kolbe text.
Under any of these amendments, a determination that UNFPA is involved in
coercive practices would result in the termination of U.S. support. Without such a
determination, however, the Senate and Lowey/Kolbe amendments would require the
President to transfer the full $34 million. Under the Tiahrt provision, however, the
President could reduce the U.S. contribution to something less than $34 million to
express displeasure over alleged coercive family practices in China and UNFPA’s
involvement. The White House strongly opposes the Senate language, but says it
plans to issue a determination regarding the UNFPA contribution by the July 10 date
referenced in the Senate bill.
9 Letter from OMB Director Daniels to Senate Appropriations Committee Chairman Robert
Byrd, June 17, 2002.

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CRS-18
Major Policy and Spending Issues for FY2003
While the Foreign Operations appropriations bill may include virtually any
foreign policy issue of interest to Congress, the annual debate usually focuses on
several major policy and spending issues. Possible issues for FY2003 are as follows.
Foreign aid as a tool in the war on terrorism
As discussed above, since the September 11 terrorist attacks and the initiation
of military operations in Afghanistan, combating global terrorism has become one
of the top priorities of American foreign assistance. While there is disagreement
regarding the extent to which foreign aid can directly contribute to reducing the threat
of terrorism, most agree that economic and security assistance aimed at reducing
poverty, promoting jobs and educational opportunities, and helping stabilize conflict-
prone nations can indirectly attack some of the factors that terrorists use in recruiting
disenfranchised individuals for their cause. More than $2.7 billion has been extended
to or recommended for “front-line” states in FY2002, while the FY2003 budget
proposes $3.5 billion.
Foreign aid can be programmed in a number of ways that contribute to the war
on terrorism. Assistance can be transferred, as it has in Pakistan and Afghanistan,
to bolster coalition-partner government efforts to counter domestic dissent and
attacks by extremist groups, and to promote better health care, education, and
employment opportunities to its people. Security assistance can finance the provision
of military equipment and training to nations facing threats from their own internally-
based terrorist movements.
While there has been substantial congressional support for additional foreign aid
resources aimed at countering terrorism, some warn that the United States needs to
be cautious about the risks of creating a close aid relationship with governments that
may have questionable human rights records, are not accountable to their people, and
are possibly corrupt. As noted above, Members have been especially critical of
Administration efforts to include in aid proposals for “front-line” states legislative
language that would waive all existing restrictions and prohibitions on the transfers.
Instead, these critics argue, the Administration should specifically identify any
obstacles to proceeding with a country aid program and seek a congressional waiver
for those particular problems. For example, last year when the Administration
wanted to provide Pakistan with $600 million in fast-disbursing economic aid,
Congress approved P.L. 107-57 which waived restrictions concerning aid to countries
that engaged in missile proliferation, whose leaders came to power through a military
coup, and were behind in debt payments to the United States.
Beyond substantial amounts of bilateral aid for “front-line” states, the Foreign
Operations appropriation bill funds several global programs specifically aimed at
anti-terrorism efforts overseas and the provision of security for USAID employees
living abroad.
Anti-Terrorism Assistance (ATA). Since FY1984, the State Department
has maintained the ATA program designed to maximize international cooperation in

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CRS-19
the battle against global terrorism. Through training, equipment transfers, and
advice, the ATA program is intended to strengthen anti-terrorism capabilities of
foreign law enforcement and security officials. Between 1984 and 1999 (the most
recent year for which ATA data are available), over 23,000 officials from 112
countries participated in ATA programs. ATA funding is included within the
Foreign Operations account of Non-proliferation, Anti-terrorism, Demining, and
Related Programs (NADR).
Resources for the $38 million annual ATA program (FY2001) rose sharply
following September 11, with an additional $45.5 million allocated out of the
Terrorism Emergency Response Fund in FY2002. A further $20 million is requested
in the pending emergency supplemental appropriation (H.R. 4775) and the President
requests $64.2 million for FY2003. Increased funding for FY2002 and FY2003 will
finance three post-September 11 changes in the ATA program:
! conducting training sessions more frequently overseas, on-site where
participants can be withdrawn quickly to respond to an emerging
crisis;
! adding new courses on kidnap intervention and advanced crisis
response; and
! expanding training to counter the use of weapons of mass
destruction by terrorists.
Terrorist Interdiction Program (TIP). As one response to the 1998
bombings of American embassies in East Africa, the State Department launched the
TIP, an activity intended to restrict the ability of terrorists to cross international
borders, launch attacks, and escape. TIP strengthens border security systems in
particularly vulnerable countries by installing border monitoring technology, training
border security and immigration officials in its use, and expanding access to
international criminal information to participating nations. Like ATA, funds for TIP
are part of the NADR account in the Foreign Operations spending bill.
Since September 11, the State Department has expanded from 34 to 57 the
number of countries where it believes TIP would immediately contribute to the
global counterterrorism campaign. The $4 million TIP budget doubled in FY2002
and the Administration seeks an additional $10 million in FY2002 supplemental
appropriations as well as $5 million for FY2003.
Terrorist Financing. In December 2001, an interagency review group
identified 19 countries where a significant terrorist financing threat existed, and with
$3 million allocated from the Emergency Response Fund, launched a training and
technical assistance program. The State Department requests $10 million in the
FY2002 supplemental appropriation to expand the program, while the Treasury
Department proposes funding for this activity out of its $10 million FY2003
“Technical Assistance” program. Anti-terrorist financing training is managed by the
Treasury Department.
USAID Physical Security. USAID maintains about 97 overseas facilities
where much of its workforce – both Americans and foreign nationals – is located.

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CRS-20
Many missions are based in places where there is a high threat of terrorist activity,
and especially since the 1998 embassy bombings in Kenya and Tanzania, agency
officials have been concerned about the lack of adequate security. In countries where
USAID is or is scheduled to be co-located with the U.S. embassy, the State
Department’s Foreign Buildings Operations office had been responsible for financing
USAID secure facilities. These funds are appropriated in the Departments of
Commerce, Justice, and State appropriations. Nevertheless, there have been serious
construction delays for USAID co-located facilities – especially in Uganda – due to
competing State Department building priorities and conflicting congressional
directives.
In an effort to overcome these problems, USAID is requesting for FY2003 a
new Foreign Operations account – the Capital Investment Fund – that will support
enhanced information technology ($13 million) and facility construction ($82
million) specifically at co-located sites where security enhancements are needed.
USAID plans to use the money in FY2003 for construction projects in Kenya,
Guinea, Cambodia, and Georgia. With the facility in Uganda still not built, USAID
says it may have to divert some resources from other intended projects to Uganda if
an appropriate lease arrangement cannot be worked out in Kampala.
Security upgrades for the 64 overseas missions situated some distance from
American embassies have been provided out of USAID operating expenses, a
Foreign Operations account that has been under funding stress in recent years due to
agency relocation costs in Washington, replacement of failed financial management
systems, and dwindling non-appropriated trust funds used to finance some in-country
costs. As a result, security up-grades for some USAID missions have been deferred
due to funding shortfalls. For FY2003, USAID requests $7 million for security needs
out of its operations account, a slight increase over the $6.9 million level in FY2002.
The agency has further proposed $2 million in the pending FY2002 emergency
supplemental (H.R. 4775) for establishing secure USAID operating facilities in
Afghanistan and Pakistan.
Aid Restrictions for Terrorist States. Annual Foreign Operations
spending bills routinely include general provisions prohibiting U.S. assistance to
countries engaged in terrorist activities or providing certain types of support to
terrorist groups. Included in the FY2002 funding measure are two:
! Sec. 527 prohibits bilateral U.S. assistance to any country that the
President determines grants sanctuary from prosecution to any
individual or group which has committed an act of international
terrorism, or otherwise supports international terrorism. The
President may waive the restrictions for national security or
humanitarian reasons.
! Sec. 544 prohibits any U.S. aid to a government which provides
lethal military equipment to a country that the Secretary of State has
determined is headed by a terrorist government. The President may
waive the requirement if it is important to U.S. national interests.

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CRS-21
Despite these restrictions, however, certain types of humanitarian foreign assistance
may be provided “notwithstanding” other provisions of law, which would override
the terrorism restrictions. Disaster and refugee relief, child survival and HIV/AIDS
programs, emergency food and medicine, and demining operations are among the
categories of U.S. assistance that could potentially be provided to a country that
would otherwise be ineligible.
Development Aid Policy Priorities
A continuing source of disagreement between the executive branch and
Congress is how to allocate the roughly $2.7 billion “core” budget for USAID
development assistance programs. Among the top congressional development aid
funding priorities in recent years have been programs supporting child survival, basic
education, and efforts to combat HIV/AIDS and other infectious diseases. The
Administration also backed these programs, but officials object to congressional
efforts to increase funding for children and health activities at the expense of other
development sectors. When Congress has increased appropriations for its priorities,
but not included a corresponding boost in the overall development aid budget,
resources for other priorities, such as economic growth and the environment, have
been substantially reduced.
In 2001, the Bush Administration set out revised USAID core goals for
sustainable development programs focused around three “spheres of emphasis” or
“strategic pillars” that include Global Health, Economic Growth and Agriculture, and
Conflict Prevention and Developmental Relief. The Administration further
introduced a new initiative – the Global Development Alliance (GDA) – in an effort
to expand public/private partnerships in development program implementation.
Under the initiative, USAID would identify good development opportunities being
conducted by private foundations, non-governmental organizations, universities, and
for-profit organizations, and provide parallel financing to leverage resources already
committed to these activities. USAID officials envision that the agency will become
much more of a coordinating and integrating institution to expand and enhance
development efforts of these non-governmental development partners. Although
USAID requested $160 million in FY2002 to finance GDA projects, only $20 million
has been set aside. A budget of $30 million is proposed for FY2003.
For FY2003, USAID seeks $2.86 billion for development aid, an increase of
about $250 million, or nearly 10% above FY2002 levels.10 However, about $100
million of the increase represents a decision to transfer the funding source for a few
countries from the Economic Support Fund account in FY2002 to the Development
Assistance account in FY2003. After adjusting for this, the USAID proposal is
roughly 6% more than FY2002.
10 The $2.86 billion figure includes USAID’s development aid request of $2.74 billion plus
the State Department’s proposed $120 million contribution to UNICEF. In recent years,
Congress has incorporated UNICEF funds within development assistance. For consistency,
USAID’s request has been adjusted to include UNICEF.

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CRS-22
USAID proposes increases for each of its three “strategic pillars,” with specific
emphasis in several areas:
! agriculture programs would increase by 30% to $261 million.
! environmental activities would grow by 11% to $308 million. A
year ago USAID proposed $225 million for the environment.
! business, trade, and investment funding would rise by 25% to $317
million.
! basic education, a high congressional priority, would increase by
10% to $165 million.
! HIV/AIDS funding would rise by one-quarter to $640 million,
including $100 million for the Global Fund to Combat HIV/AIDS,
Malaria, and Tuberculosis.11
! democracy aid would rise by 68% to $200 million, although much
of this increase comes from shifting recipients that had previously
received similar types of aid from the Economic Support Fund (ESF)
account to the development aid account.
USAID is also asking Congress to appropriate all development aid in a single
Development Assistance account. Congress created a second account – the Child
Survival and Health Programs Fund – in FY1997 in order to highlight the importance
of aid activities aimed at promoting the health and well being of children, mothers,
and other vulnerable elements of society and to specifically appropriate funds for
these purposes. The Administration argues that a successful development strategy
requires an integrative approach for which resources can be flexibly drawn upon to
meet the changing, complex and interwoven nature of development goals.
Congressional proponents of a separate Child Survival/Health account, however,
continue to argue that special attention needs to be drawn to child and maternal
health programs, and say they will challenge the elimination of this second
development aid account.
The proposed budgets for various global health activities are likely to encounter
close congressional scrutiny. USAID requests $1.49 billion for child survival and
health programs (including $120 million for UNICEF) within the Development
Assistance account, about $55 million higher than current amounts. After adding
smaller health-related funds from other Foreign Operations accounts, the total
amount for child survival and health projects is $1.67 billion, an increase of $15
million, or 1%. As noted above, with a large increase proposed for HIV/AIDS
programs, funding for nearly all other global health activities would decline in
FY2003 under the agency’s budget plan. As illustrated in Table 6, resources for
Child Survival and Maternal Health would fall from $383 million in FY2002 to $344
million in FY2003; amounts for Vulnerable Children would drop from $32 million
to $20 million; levels for malaria would decline from $60 million to $42.5 million
and for tuberculosis, from $70 million to $52.5 million.
11 The Global Fund would also receive a $100 million appropriation under the Department
of Health and Human Services budget, making the total U.S. pledge $200 million for
FY2003, the same as for FY2002.

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CRS-23
USAID maintains that resource limitations require the United States to
concentrate resources on the most severe health needs in the developing world, which
it views as fighting the HIV/AIDS epidemic. Some congressional critics of the
Administration’s decision to increase HIV/AIDS and de-emphasize other health
programs have said they will work to fully fund or exceed the HIV/AIDS proposal
while also restoring funds for areas set for reductions in FY2003. (For more
information on this issue, see CRS Report RL31433, U.S. Global Health Priorities:
USAID FY2003 Budget Request.)
Table 6. Funding for USAID Global Health Programs
(estimates across all Foreign Operations accounts – in millions of dollars)
FY2003 FY2003
FY2003
Program
FY2001a FY2002
est
Request
House
Senate
Child Survival/Maternal Health
$361.0
$383.0
$344.0
Of which:
Morbidity & mortality
[269.8]
[243.5]
Polio
[27.6]
[25.5]
Micronutrients
[30.6]
[25.7]
Iodine Deficiency Disorder
[2.0]
[0.0]
Vaccine Fund (former GAVI)
[53.0]
[50.0]
Vulnerable Children
$22.0
$32.0
$20.0
HIV/AIDS
$433.0
$510.0
$640.0
Of which:
HIV/AIDS bilateral programs
[367.0]
[467.0]
Microbicides
[15.0]
[15.0]
Global Fundb
[75.0]b
[100.0]b
UNAIDS
[18.0]
[18.0]
Intl AIDS Vaccine Initiative
[10.0]
[10.0]
Commodity Promotion Fund
[25.0]
[30.0]
Other Infectious Diseases
$140.0
$165.0
$122.0
Of which:
Malaria
[60.0]
[42.5]
Tuberculosis
[70.0]
[52.5]
Other
[35.0]
[25.0]
UNICEF
$110.0
$120.0
$120.0
Reproductive Health
$424.0
$446.5
$425.0
TOTAL, GLOBAL HEALTH
$1,490.0
$1,656.5 $1,671.0
a USAID has not yet finalized health budget figures for sub-account activities for FY2001.
b Contributions to the Global Fund benefits HIV/AIDS, malaria, and tuberculosis. In total, the United
States contributed $200 million to the Global Fund in FY2002 and plans for a $200 million transfer
in FY2003. Additional resources are derived from National Institutes of Health funds.

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CRS-24
Family Planning, Abortion Restrictions, and UNFPA Funding
U.S. population assistance and family planning programs overseas have sparked
perhaps the most consistent controversy during Foreign Operations debates for nearly
two decades. The primary issues addressed in nearly every annual congressional
consideration of Foreign Operations bills focus on two matters: whether abortion-
related restrictions should be applied to bilateral USAID population aid grants and
whether the United States should contribute to the U.N. Population Fund (UNFPA)
if the organization maintains a program in China where allegations of coercive family
planning have been widespread for many years.
UNFPA funding. The most contentious issue usually concerns the abortion
restriction question, but current attention is focused on UNFPA and a White House
decision in January 2002 to freeze the $34 million U.S. contribution to the
organization. During the Reagan and Bush Administrations, the United States did
not contribute to UNFPA because of concerns over practices of forced abortions and
involuntary sterilizations in China where UNFPA maintains programs. In 1985,
Congress passed the so-called Kemp-Kasten amendment which has been made part
of every Foreign Operations appropriation since, barring U.S. funds to any
organization that supported or participated “in the management” of a program of
coercive abortion or involuntary sterilization. In 1993, President Clinton determined
that UNFPA, despite its presence in China, was not involved in the management of
a coercive program. In most years since 1993, Congress has appropriated about $25
million for UNFPA, but added a directive that required that amount reduced by
however much UNFPA spent in China. Consequently, the U.S. contribution has
fluctuated between $21.5 million and $25 million.
For FY2002, President Bush requested $25 million for UNFPA. As part of a
larger package concerning various international family planning issues, Congress
provided in the FY2002 Foreign Operations bill “not more than” $34 million for
UNFPA. While members of the Appropriations Committees say it was their intent
to provide the full $34 million, the language would allow the President to allocate
however much he chooses, up to a $34 million ceiling. According to February 27
testimony by Arthur Dewey, Assistant Secretary of State for Population, Refugees,
and Migration before the Senate Foreign Relations Committee, the White House
initiated the hold on UNFPA funds because of new evidence that coercive practices
continue in counties where UNFPA concentrates its programs. A September 2001
investigation team, sponsored by the Population Research Institute, concluded that
a consistent pattern of coercion continues in “model” UNFPA counties, including
forced abortions and involuntary sterilizations. Refuting these findings, a UNFPA-
commissioned review team found in October 2001 “absolutely no evidence that the
UN Population Fund supports coercive family planning practices in China or violates
the human rights of Chinese people in any way.”12
12 See House International Relations Committee hearing, Coercive Population Control in
China: New Evidence of Forced Abortion and Forced Sterilization, October 17, 2001. See
also testimony of Josephine Guy and Nicholaas Biegman before the Senate Foreign
Relations Committee, February 27, 2002.)

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CRS-25
While most observers agree that coercive family planning practices continue in
China, differences remain over the extent to which, if any, UNFPA is involved in
involuntary activities and whether UNFPA should operate at all in a country where
such conditions exist. Given the conflicting reports, the State Department sent its
own investigative team to China for a two-week review of UNFPA programs on May
13, 2002. The team was led by former Ambassador William Brown, and included
Bonnie Glick, a former State Department official, and Dr. Theodore Tong, a public
health professor at the University of Arizona. A final report on its findings is
expected by late June. The team’s objective was to determine whether UNFPA
“supports or participates in the management of a program of coercive abortion or
involuntary sterilization.” If Administration officials conclude that this is the case,
UNFPA would be in violation of the Kemp-Kasten amendment and be ineligible for
U.S. grants. Alternatively, the President could find that the UNFPA did not violate
Kemp-Kasten, but reduce the U.S. contribution to something less than $34 million
to express displeasure over alleged coercive family practices in China and UNFPA’s
involvement.
This issue has already been the subject of sharp debate during House
consideration of the FY2002 emergency supplemental (H.R. 4775). On May 9, 2002,
the House Appropriations Committee approved (32-31) an amendment by
Representatives Lowey and Kolbe that would have required the President to transfer
$34 million to UNFPA by July 10 if the State Department commission concludes
that UNFPA is not involved in coercive family planning practices in China. Meeting
on May 15, however, the Committee added an additional provision offered by
Representative Tiahrt, supported by the White House, requiring the President to
determine by July 31, 2002, whether UNFPA participates in the management of
coercive family planning practices. Before final passage, however, pursuant to
H.Res. 431, the second rule for consideration of H.R. 4775, both the Lowey/Kolbe
and the Tiahrt amendments were deleted from the bill.
The Senate-passed Supplemental Appropriation includes a provision nearly
identical to the Lowey/Kolbe text. Under any of these amendments a finding that
UNFPA was in violation of Kemp-Kasten would result in the termination of U.S.
support. Without such a conclusion, however, the Senate and Lowey/Kolbe
amendments would require the full $34 million contribution to go forward. The
Tiahrt amendment would have left open the possibility for the President to allocate
something less than $34 million for UNFPA.
For FY2003, the President proposes no funding for UNFPA, although $25
million is requested in “reserve” for the account from which UNFPA receives its
funding. Presumably, this could be made available to UNFPA if it is found not to be
in violation of Kemp-Kasten.
“Mexico City” policy. The debate over international family planning policy
and abortion began nearly three decades ago when Congress added a provision to the
Foreign Assistance Act of 1961 prohibiting the use of U.S. appropriated funds for
abortion-related activities and coercive family planning programs. During the mid-
1980s, in what has become known as the “Mexico City” policy (because it was first
announced at the 1984 Mexico City Population Conference), the Reagan
Administration, and later the George H. W. Bush Administration restricted funds for

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CRS-26
foreign non-governmental organizations (NGOs) that were involved in performing
or promoting abortions in countries where they worked, even if such activities were
undertaken with non-U.S. funds. Several groups, including International Planned
Parenthood Federation-London (IPPF-London), became ineligible for U.S. financial
support. In some years, Congress narrowly approved measures to overturn this
prohibition, but White House vetoes kept the policy in place. President Clinton in
1993 reversed the position of his two predecessors, allowing the United States to
resume funding for all family planning organizations so long as no U.S. money was
used by those involved in abortion-related work.
During the past six years, the House and Senate have taken opposing positions
on the Mexico City issue, and thus have repeatedly held up enactment of the final
Foreign Operations spending measure. The House position, articulated by
Representative Chris Smith (N.J.) and others, supported reinstatement of the Mexico
City policy restricting U.S. aid funds to foreign organizations involved in performing
abortions or in lobbying to change abortion laws or policies in foreign countries. The
Senate, on the other hand, has rejected in most cases House provisions dealing with
Mexico City policy, favoring a position that leaves these decisions in the hands of the
Administration.
Unable to reach an agreement satisfactory to both sides, Congress adopted
interim arrangements for FY1996-FY1999 that did not resolve the broad population
program controversy, but permitted the stalled Foreign Operations measure to move
forward. The annual “compromise” removed House-added Mexico City restrictions,
but reduced population assistance to $385 million, and in several years, “metered”
the availability of the funds at a rate of one-twelfth of the $385 million per month.
In FY2000, when the issue became linked with the un-related foreign policy
matter of paying U.S. arrears owed to the United Nations, a reluctant President
Clinton agreed to a modified version of abortion restrictions, marking the first time
that Mexico City conditions had been included in legislation signed by the President
(enacted in the Foreign Operations Act for FY2000, H.R. 3422, incorporated into
H.R. 3194, the Consolidated Appropriations Act for FY2000, P.L. 106-113).
Because the President could waive the restrictions for $15 million in grants to
organizations that refused to certify, there was no major impact on USAID family
planning programs in FY2000, other than the reduction of $12.5 million in
population assistance that the legislation required if the White House exercised the
waiver authority.
When Congress again came to an impasse in FY2001, lawmakers agreed to
allow the new President to set policy. Under the FY2001 Foreign Operations
measure, none of the $425 million appropriation could be obligated until after
February 15, 2001. Subsequently, on January 22, 2001, two days after taking office,
President Bush issued a Memorandum to the USAID Administrator rescinding the
1993 memorandum from President Clinton and directing the Administrator to
“reinstate in full all of the requirements of the Mexico City Policy in effect on
January 19, 1993.” The President further said that it was his “conviction that
taxpayer funds should not be used to pay for abortions or to advocate or actively

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CRS-27
promote abortion, either here or abroad.”13 A separate statement from the President’s
press secretary stated that President Bush was “committed to maintaining the $425
million funding level” for population assistance “because he knows that one of the
best ways to prevent abortion is by providing quality voluntary family planning
services.” The press secretary further emphasized that it was the intent that any
restrictions “do not limit organizations from treating injuries or illnesses caused by
legal or illegal abortions, for example, post abortion care.”14 On February 15, 2001,
the day on which FY2001 population aid funds became available for obligation,
USAID issued specific policy language and contract clauses to implement the
President’s directive. The guidelines are nearly identical to those used in the 1980s
and early 1990s when the Mexico City policy applied.15 For FY2003, President Bush
seeks $425 million for USAID population assistance, the same as requested for
FY2002, but less than the $446.5 million appropriated.
Critics of the certification requirement oppose it on several grounds. From an
administrative standpoint, they say it increases USAID costs to manage family
planning programs because of the additional paperwork and delays in implementation
of projects. They further believe that family planning organizations may cut back
on services because they are unsure of the full implications of the restrictions and do
not want to risk losing eligibility for USAID funding. This, they contend, will lead
to higher numbers of unwanted pregnancies and possibly more abortions. Opponents
also believe the new conditions undermine relations between the U.S. Government
and foreign NGOs and multilateral groups, creating a situation in which the United
States challenges their decisions on how to spend their own money. They argue that
U.S. policy imposes a so-called “gag” order on the ability of the organization to
promote changes to abortion laws and regulations in developing nations. This would
be unconstitutional if applied to American groups working in the United States,
critics note.
Supporters of the certification requirement argue that even though permanent
law bans USAID funds from being used to perform or promote abortions, money is
fungible; organizations receiving American-taxpayer funding can simply use USAID
resources for permitted activities while diverting money raised from other sources to
perform abortions or lobby to change abortion laws and regulations. The certification
process, they contend, stops the fungibility “loophole.”
13 White House. Memorandum for the Administrator of the United States Agency for
I n t e r n a t i o n a l D e v e l o p m e n t . J a n u a r y 2 2 , 2 0 0 1 . F o u n d a t
[http://www.whitehouse.gov/press/releases/20010123-5.html].
14 White House. Restoration of the Mexico City Policy. January 22, 2001. Found at
[http://www.whitehouse.gov/press/releases/20010123.html].
15 For more background on the Mexico City policy, see CRS Report RL30830, International
Family Planning: the Mexico City Policy.

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Andean Regional Initiative16
The Andean Regional Initiative (ARI) was launched in April 2001, when the
Bush Administration requested $882.29 million in FY2002 economic and
counternarcotics assistance, as well as an extension of trade preferences and other
measures, for Colombia and six regional neighbors (Peru, Bolivia, Ecuador, Brazil,
Panama, and Venezuela). Of this amount, $731 million was designated as
International Narcotics Control (INC) assistance in a line item in the budget request
known as the Andean Counterdrug Initiative (ACI). A central element of the program
has been the training and equipping of counternarcotics battalions in Colombia.
According to the Administration, the distinctive features of the program,
compared to Plan Colombia assistance approved in 2000,17 are that a larger portion
of the assistance is directed at economic and social programs, and that more than half
of the assistance is directed at regional countries experiencing the spill-over effects
of illicit drug and insurgency activities. Another aspect of the initiative was
President Bush’s request for the extension and broadening of the Andean Trade
Preferences Act (ATPA) expiring in December 2001, that would give duty free or
reduced-rate treatment to the products of Bolivia, Peru, Ecuador and Colombia. This
was a central topic when President Bush met with Andean leaders at the Summit of
the Americas meeting in Canada in April 2001.
In a mid-May 2001 briefing on the Andean Regional Initiative, Administration
spokesmen set out three overarching goals for the region that could be called the
three D’s - democracy, development, and drugs. The first goal was to promote
democracy and democratic institutions by supporting judicial reform, anti-corruption
measures, human rights improvement, and the peace process in Colombia. The
second was to foster sustainable economic development and trade liberalization
through alternative economic development, environmental protection, and renewal
of the Andean Trade Preference Act (ATPA). The third was to significantly reduce
the supply of illegal drugs to the United States from the source through eradication,
interdiction and other efforts.18 Under consideration by the Congress in 2001, critics
of the initiative argued that it overemphasized military and counter-drug assistance,
16 This section was prepared by Nina M. Serafino and K. Larry Storrs, and drawn from CRS
Report RL31383, Andean Regional Initiative (ARI): FY2002 Supplemental and FY2003
Assistance for Colombia and Neighbors.
17 “Plan Colombia” refers to the $1.3 billion in FY2000 emergency supplemental
appropriations approved by the 106th Congress in the FY2001 Military Construction
Appropriations bill (H.R. 4425, P.L. 106-246) for counternarcotics and related efforts in
Colombia and neighboring countries. For more detail, see CRS Report RL30541, Colombia:
Plan Colombia Legislation and Assistance (FY2000-FY2001). For the latest figures on aid
to Colombia, as well as past assistance, see CRS Report RS21213 , Colombia: Summary and
Tables on U.S. Assistance, FY1989-FY2003.
18 See U.S. Department of State International Information Programs Washington File, Fact
Sheet: U.S. Policy Toward the Andean Region, and Transcript: State Department Briefing
on Andean Regional Initiative, May 17, 2001, also available at the following web site
[http://usinfo.state.gov/regional/ar/colombia/]

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CRS-29
and provided inadequate support for human rights and the peace process in
Colombia. Supporters argued that it continued needed assistance to Colombia, while
providing more support for regional neighbors and social and economic programs.
By the end of 2001, Congress approved, in the Foreign Operations
Appropriations Act (H.R. 2506/P.L. 107-115), $625 million for the ACI, $106
million less than the President’s ACI request. Also included were a series of
conditions and certification requirements relating to human rights and to the
controversial aerial eradication spraying (also known as aerial fumigation) program
to destroy illicit coca crops, and an alteration of the cap on military and civilian
contractors serving in Colombia.
For FY2003, President Bush requests about $980 million for the Andean
Regional (ARI) Initiative, including $731 million in counternarcotics assistance
under the Andean Counterdrug Initiative (ACI), with some ACI funds being used for
social and economic programs. The FY2003 request is similar to the FY2002 request,
except that the Administration is requesting $98 million in Foreign Military
Financing (FMF) for Colombia to train and equip a Colombian army brigade to
protect the Cano-Limon oil pipeline in northeastern Colombia. The request marks a
sharp break with previous policy towards Colombia, as it is the first request for
military assistance provided specifically for a purpose other than counternarcotics
operations. The Administration is also requesting $1 million each for Bolivia,
Ecuador, Panama, and Peru in FY2003 FMF funding.
Requested FY2003 foreign operations funding of $979.8 million for the ARI,
including $731 million for ACI, is to be distributed as follows in descending order:
! Colombia: $537 million in ARI funding, including $439 million in
ACI funding and $98 million in FMF funding.
! Peru: $186.6 million in ARI funding, including $135 million in ACI
funding and $1 million in FMF funding.
! Bolivia: $132.6 million in ARI funding, including $91 million in
ACI funding and $1 million in FMF funding.
! Ecuador: $65.1 million in ARI funding, including $37 million in
ACI funding and $1 million in FMF funding.
! Brazil: $29.5 million in ARI funding, including $12 million in ACI
funding.
! Panama: $20.5 million in ARI funding, including $9 million in ACI
funding and $1 million in FMF funding.
! Venezuela: $8.5 million in ARI funding, including $8 million in ACI
funding.
Proponents of the Administration’s request argue in the context of the post-
September 2001 war on terrorism that Colombia and the region should be supported,

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CRS-30
and they have urged the Administration to seek expanded authority to provide
support for an expansion of activities.19 On March 6, 2002, the House passed H.Res.
358 expressing the sense of the House of Representatives that “the President, without
undue delay, should transmit to Congress for its consideration proposed legislation,
consistent with United States law regarding the protection of human rights, to assist
the Government of Colombia protect its democracy from United States-designated
foreign terrorist organizations and the scourge of illicit narcotics.”
Critics argue that the new request would expand the U.S. military role in
Colombia, now strictly limited to counternarcotics, into a problematic
counterinsurgency one. Critics who emphasize human rights considerations argue
that such a role would inevitably involve tolerance of the linkages between the
Colombian military and paramilitary groups which are responsible for gross
violations of human rights. (A particular concern is the lifting of human rights
conditions concerning paramilitary groups in the FY2002 supplemental request, see
below.) Others, who believe U.S. military power should not be committed unless it
can be effective, warn that the proposed assistance falls far short of that required to
have any significant effect on the situation in Colombia. Many also worry that the
United States is slowly being drawn into a Vietnam-like morass, providing assistance
to a government that does not have the credibility and political will to pay for and
successfully wage its own war, and conclude a just peace.
In addition to the request for FY2003, on March 21, 2002, the Bush
Administration requested $27.1 billion in Emergency FY2002 Supplemental
Assistance, which was mostly to support Department of Defense and Homeland
Security counter-terrorism efforts, but would also provide $38 million in additional
funding and authorities relating to Colombia and the Andean Region. Included in
this submission was a request for $4 million of International Narcotics Control (INC)
funding for Colombia police post support, $6 million of FMF funding for Colombia
for infrastructure security and $3 million for Ecuador for counter-terrorism
equipment and training, and $25 million of Nonproliferation, Anti-Terrorism and
Demining funding for a counter-kidnaping program for members of Colombia’s
police and armed forces. The supplemental submission proposes to broaden the
authorities of the Defense and State Departments to utilize FY2002 and FY2003
assistance and unexpended Plan Colombia assistance to support the Colombian
government’s “unified campaign against narcotics trafficking, terrorist activities, and
other threats to its national security.” According to the Administration’s explanation,
these provisions “would allow broader authority to provide assistance to Colombia
to counter the unified ‘cross-cutting’ threat posed by groups that use narcotics
trafficking to fund their terrorist and other activities that threaten the national security
of Colombia.”
19 For critical comments, see statements on the Center for International Policy’s Colombia
Project web site [http://www.ciponline.org/colombia/] under CIP Analyses, under U.S.
Military and Police Aid (especially Other Groups’ Analyses) and under U.S. Government
Information (especially Legislators). For supportive comments, see statements on the same
web site under U.S. Military and Police Aid (especially Other Groups’ Analyses), and U.S.
Government Information (especially statements from Officials and Legislators).

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CRS-31
Such a change would allow the Administration to expand the scope of U.S.
assistance, particularly military assistance, to Colombia, allowing State and Defense
department funds to assist the Colombian government to counter any threat to its
national security. The immediate, and widely discussed, effect of this change would
be to allow the U.S. government to broaden the circumstances under which it
currently shares intelligence with Colombian security forces, providing intelligence
not only for counterdrug operations, but also for military operations against the
Colombian guerrillas and paramilitaries. The change would also permit the Plan
Colombia helicopters and other equipment that the United States has provided to be
used for such purposes.
The Administration’s proposal would continue, the “Leahy Amendment” – a
provision in the foreign operations and defense appropriations legislation forbidding
assistance to military and police units credibly alleged to engage in gross violations
of human rights – as well as the current caps of 400 each on the number of U.S.
civilian contractors and U.S. military personnel supporting “Plan Colombia”
activities in Colombia. (The new proposed military activities, i.e., infrastructure
protection and anti-kidnaping assistance, are not, however, “Plan Colombia”
activities.) Except for those two specifically mentioned conditions, however, the
Administration’s proposal states that funding would be provided “notwithstanding
any provision of law.” That statement would lift conditions like those of Section 567
of P.L. 107-115, the FY2002 Foreign Operations Appropriations Act, which has
stiffer provisions regarding human rights violations by security forces, and also
requires the armed forces to address the continuing links of some of its members with
illegal rightist paramilitary groups. It would also lift P.L. 107-115 conditions
regarding aerial fumigation spraying and alternative development.
Millennium Challenge Account
In a speech on March 14, 2002, at the Inter-American Development Bank,
President Bush outlined a proposal for the United States to increase foreign economic
assistance beginning in FY2004 so that by FY2006 American aid would be $5 billion
higher than three years earlier. If the aid budget rises in three equal installments of
$1.67 billion each year, the initiative could provide as much as a cumulative $10
billion in additional economic assistance above what might be assumed for the three
year period without the President’s initiative. The funds would be placed in a new
Millennium Challenge Account (MCA) and be available to developing nations that
are pursing political and economic reforms in three areas:
! Ruling justly – promoting good governance, fighting corruption,
respecting human rights, and adhering to the rule of law.
! Investing in people – providing adequate health care, education, and
other opportunities promoting an educated and healthy population.
! Fostering enterprise and entrepreneurship – promoting open markets
and sustainable budgets.
If fully implemented, the initiative would represent one of the largest increases in
foreign aid spending in half a century, outpaced only by the Marshall Plan following

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CRS-32
World War II and the Latin America-focused Alliance for Progress in the early
1960s.
The concept is based on the premise that economic development succeeds best
where it is linked to sound economic and good governance policies. Conditioning
assistance on policy performance and accountability by recipient nations is not new
to U.S. aid programs. Since the late 1980s at least, portions of American
development assistance have been allocated to some degree on a performance-based
system. What is different about the MCA is the size of the commitment and the
pledge to segregate the funds for use only to support development efforts by the
“good performers,” evidently without regard to other U.S. foreign policy objectives
that often strongly influence where U.S. aid is spent.
Assuming that Congress fully funds the President’s aid request for next year and
that FY2003 will be the baseline from which to compare growth in foreign aid
spending during implementation of the MCA, a $5 billion dollar increase by FY2006
would result in a $17.2 billion foreign aid budget. In real terms (constant FY2003
dollars), taking into the account the estimated effects of inflation, U.S. economic
assistance in FY2006 would be $16.14 billion, the highest amount since FY1979 and
the signing of the Camp David Middle East peace accords and FY1985, an unusual
year in which the United States responded to special Middle East economic
stabilization and African famine requirements. But using FY2003 as a baseline
rather than FY2000, the percentage of increase, especially in real terms (counting
inflation), between FY2003 and FY2006 will be less than the 50% figure used by
some Administration officials. The nominal increase would be about 41% while in
real terms, FY2006 funding would be nearly 32% more. Because of the size of the
U.S. economy and continued growth projected over the next several years, the MCA
increases will have little impact on the amount of U.S. aid as a percent of GDP.
According to current projections, assistance would rise from the current 0.11% of
GDP to 0.13%.
There has also been some discussion about launching an MCA “pilot” project
in FY2003. While executive officials caution that delays in reaching agreement on
an overall MCA framework may prevent any early start to the initiative, some
Members of Congress have expressed support for immediately funding the MCA,
possible in the FY2003 regular Foreign Operations appropriations bill. The Senate-
reported FY2003 budget resolution (S.Con.Res. 100) appears to endorse an early start
for the MCA by increasing international affairs funding by $500 million above the
President’s request and using the money, among other things, to initiate a pilot
program targeting “foreign assistance on debt relief, development, global health, and
trade in top performing countries in Africa and other developing regions of the
world.”20 (For more information about this issue, see CRS Report RS 21209, The
Millennium Challenge Account: Bush Administration Foreign Aid Initiative.)
20 Senate Committee on the Budget. Concurrent Resolution on the Budget, FY2003. Report
107-141, April 11, 2002, p. 21.

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CRS-33
For Additional Reading
General/Overview
CRS Report 98-916. Foreign Aid: An Introductory Overview of U.S. Programs and
Policy.
CRS Report 97-62. The Marshall Plan: Design, Accomplishments, and Relevance
to the Present.
CRS Report RS21209. The Millennium Challenge Account: Bush Administration
Foreign Aid Initiative.
Foreign Operations Programs
CRS Report RS20329. African Development Bank and Fund.
CRS Issue Brief IB10050. AIDS in Africa.
CRS Issue Brief IB88093. Drug Control: International Policy.
CRS Report 98-568. Export-Import Bank: Background and Legislative Issues.
CRS Report RS21181. HIV/AIDS international programs: FY2003 request and
FY2002 spending.
CRS Report RS20622. International Disasters: How the United States Responds.
CRS Report RL30830. International Family Planning: The “Mexico City” Policy.
CRS Report RL30932. Microenterprise and U.S. Foreign Assistance.
CRS Issue Brief IB96008. Multilateral Development Banks: Issues for the 107th
Congress.
CRS Report RS21168. The Peace Corps: USA Freedom Corps Initiative.
CRS Issue Brief IB89150. Refugee Assistance in the Foreign Aid Bill: Problems and
Prospects.
CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for
Congress.
CRS Report RL 31433. U.S. global health priorities: USAID FY2003 budget.

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CRS-34
Foreign Operations Country/Regional Issues
CRS Report RL31355. Afghanistan’s Path to Reconstruction: Obstacles,
Challenges, and Issues for Congress.
CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues.
CRS Report RL31383. Andean Regional Initiative (ARI): FY2002 Supplemental and
FY2003 Assistance for Colombia and Neighbors.
CRS Report RL30831. Balkan Conflicts: U.S. Humanitarian Assistance and Issues
for Congress.
CRS Report RS21213. Colombia: Summary and Tables on U.S. Assistance,
FY1989-FY2003.
CRS Issue Brief IB95077. The Former Soviet Union and U.S. Foreign Assistance.
CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance.
CRS Report RL31342. Middle East: U.S. Foreign Assistance, FY2001, FY2002, and
FY2003 request.
CRS Report RS20895. Palestinians: U.S. Assistance.
CRS Report RL31362. U.S. Foreign Aid to East and South Asia: Selected
Recipients.
Selected World Wide Web Sites
African Development Bank
[http://www.afdb.org/]
African Development Foundation
[http://www.adf.gov/]
Asian Development Bank
[http://www.asiandevbank.org/]
CRS Current Legislative Issues: Foreign Affairs
[http://www.crs.gov/products/browse/is-foreignaffairs.shtml]
Export-Import Bank
[http://www.exim.gov/]

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CRS-35
Inter-American Development Bank
[http://www.iadb.org/]
Inter-American Foundation
[http://www.iaf.gov/]
International Monetary Fund
[http://www.imf.org/]
Overseas Private Investment Corporation
[http://www.opic.gov/]
Peace Corps
[http://www.peacecorps.gov/]
Trade and Development Agency
[http://www.tda.gov/]
United Nations Children’s Fund (UNICEF)
[http://www.unicef.org/]
United Nations Development Program (UNDP)
[http://www.undp.org/]
United National Population Fund (UNFPA)
[http://www.unfpa.org/]
U.S. Agency for International Development
[http://www.info.usaid.gov/]
U.S. Department of State
[http://www.state.gov/]
World Bank
[http://www.worldbank.org/]
World Bank HIPC website
[http://www.worldbank.org/hipc/]

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CRS-36
Table 7. Foreign Operations: Discretionary Budget Authority
(millions of dollars)
FY2002
FY2002
FY2003
House
Senate
Program
Supp.
Enacted
Request
FY2003 FY2003
Request
Title I - Export and Investment Assistance:
Export-Import Bank
779.3
–
596.7

Overseas Private Invest Corp
(251.4)
–
(242.1)
Trade/Development Agency
50.0
–
44.5
Total, Title I - Export Aid
577.9
–
399.1
Title II - Bilateral Economic:
Development Assistance:
b
Child Survival & Health
1,433.5a
–
Development Asst Fund
1,178.0
–
2,859.5a
Subtotal
2,611.5
–
2,859.5
Of which:
UNICEF
[120.0]
–
[120.0]
Population aidc
[447.5]
–
[425.0]
HIV/AIDSc
[510.0]
–
[640.0]
Intl Disaster Aid
235.5
40.0
235.5
Intl Disaster Aid–ETRd
146.0
–
–
Transition Initiatives
50.0
–
55.0
Development Credit Programs
7.5
–
7.6
Subtotal, Development Aid
3,050.5
40.0
3,157.6
USAID Operating Expenses (OE)
549.0
7.0
572.1
USAID OE–ETRd
15.0
–
–
USAID Inspector General
31.5
–
33.0
USAID Capital Invst Fund
–
–
95.0
Economic Support Fund (ESF)e
2,199.0
525.0
2,290.0
Economic Support Fund–ETRd
600.0
–
–
International Fund for Ireland
25.0
–
[25.0]e
East Europe
621.0
–
495.0
Former Soviet Union
784.0
110.0
755.0
Former Soviet Union–ETRd
46.5
–
–
Inter-American Foundation
13.1
–
14.0
African Development Foundation
16.5
–
16.6
Treasury Dept. technical asst
6.5
–
10.0
Treasury technical asst–ETRd
3.0
– –
Debt reduction
229.0
–
0.0
Peace Corps
275.0
–
317.0

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CRS-37
FY2002
FY2002
FY2003
House
Senate
Program
Supp.
Enacted
Request
FY2003 FY2003
Request
Peace Corps–ETRd
3.9
– –
Intl Narcotics/Law
217.0
114.0
197.0
Intl Narcotics/Law–ETRd
73.0
– –
Intl Narcotics–Andean Initiative
625.0
–
731.0
Migration & refugee asst
705.0
–
705.0
Migration & Refugee asst–ETRd
100.0
–
–
Emerg. Refugee Fund (ERMA)
15.0
–
15.0
Non-Proliferation/anti-terrorism
313.5
83.0
372.4
Non-Prolif./anti-terrorism– ETRd
183.7
–
–
Total Title II-Bilat Economic
10,700.7
879.0
9,775.7
Title III - Military Assistance:
Intl Military Ed. & Training
70.0
–
80.0
Foreign Mil Financing (FMF)
3,650.0
372.5
4,107.2
Foreign Mil Financing–ETRd
45.0
–
–
Peacekeeping Operations
135.0
28.0
108.3
Peacekeeping Operations–ETRd
220.0
–
–
Total, Title III-Military Aid
4,120.0
400.5
4,295.5
Title IV - Multilateral Economic Aid:
World Bank - Intl Develop. Assn
792.4
–
874.3
World Bank-EnvironmentFacility
100.5
–
177.8
World Bank-Mult Invst Guaranty
5.0
–
3.6
Inter-Amer. Development Bank
18.0
–
59.9
Asian Development Bank
98.0
–
147.4
African Development Fund
100.0
–
118.1
African Development Bank
5.1
–
5.1
European Bank for R & D
35.8
–
35.8
Intl Fund for Ag Development
20.0
–
15.0
Intl Organizations & Programs
208.5f
–
190.0f
Total, Title IV - Multilateral
1,383.3
–
1,627.0
OMB Retirement Accruals
–
–
23.0
Foreign Operations– Regular
15,345.8
1,279.5
16,120.3
Emergency Terrorism
1,436.1
–
–
Response
Foreign Operations–with ETR 16,781.9
1,279.5
16,120.3
Source: House and Senate Appropriations Committee and CRS calculations.

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CRS-38
a. Includes the UNICEF contribution.
b. For FY2003, the Administration is proposing to consolidate Child Survival/Health and
Development Assistance accounts into a single account. For comparative purposes with
FY2002, the FY2003 request breaks down as follows: $1.374 billion for Child Survival/Health
and $1.365 billion for Development Assistance.
c. Population and HIV/AIDS aid funding include small amounts from other Foreign Operations
accounts. The figures here represent totals “across all accounts,” not just those within the
Development Aid subtotal.
d. Funds allocated from the $40 billion Emergency Terrorism Response (ETR) fund, appropriated in
P.L. 107-38. These amounts are in addition to amounts appropriated in P.L. 107-115, the
regular Foreign Operations Appropriations for FY2002.
e. The Administration request includes the Ireland Fund as part of the Economic Support Fund.
f. Excludes UNICEF contribution which is part of Development Assistance under Title II above.

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