The Trade and Development Agency: Background and Funding

The Trade and Development Agency: Background and Funding

98-924 F
CRS Report for Congress
Received through the CRS Web
The Trade and Development Agency:
Background and Funding
November 9, 1998
(name redacted)
Specialist in Foreign Policy and Trade
Foreign Affairs and National Defense Division
(name redacted)
Foreign Affairs and National Defense Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
The Trade and Development Agency (TDA) is one of several government agencies involved
in “aid for trade” programs, combining development assistance and export promotion. For
TDA’s FY1999 funding, the Administration had requested $50 million, up 20% from the
FY1998 level of $41.5 million, but down 23% from its peak funding level of $65 million in
FY1994. Congress enacted $44 million for FY1999 in the omnibus appropriations bill (H.R.
4238, P.L. 105-277). This report provides TDA’s background, budget history and ranks
sector and state-by-state gains from TDA. This report will be updated as events affecting
TDA occur.

The Trade and Development Agency
Summary
Congressional interest in linking foreign aid more directly with commercial
interests has waxed and waned throughout the 1990s as increasing demands have
been placed on the U.S. budget, constituent support for more traditional foreign aid
has dwindled, and U.S. industries have increasingly sought federal assistance in
garnering foreign sales. The Trade and Development Agency (TDA), operating
since 1982, is one of several government agencies involved in "aid for trade"--
programs that combine development assistance and export promotion. The agency
provides grants directly to foreign countries enabling them to hire U.S. companies
to conduct feasibility studies for in-country capital projects. Since several other
countries provide this type of assistance, many believe the United States should also,
in order for U.S. businesses to remain competitive with foreign businesses in host
countries.
The Trade and Development Agency has been viewed quite favorably by many
policymakers as a relatively inexpensive tool to promote U.S. exports and
employment while keeping the United States relevant to the economic development
of middle-income developing countries. However, the program has also encountered
criticism from Members who view it as a form of “corporate welfare,” and by those
who oppose foreign aid generally.
TDA’s primary activities include funding feasibility studies overseas and
definitional missions (to assess the merits of funding a feasibility study project).
Other activities include technical assistance grants, orientation visits, technical
symposia, training, grants to multilateral development banks to hire U.S. consultants,
as well as grants to state and local entities like the National Association of State
Development Agencies (NASDA).
Although funding increased nearly ten-fold from FY1982 to its peak in FY1994,
when Congress appropriated $65 million, TDA's budget remained modest when
compared to most other agencies. Even at the time of its peak funding, many TDA
proponents believed the request was still inadequate to fully utilize the agency and
support its many potential projects. Others, concerned with budget reduction,
overlap and duplication among government agencies, believed that “aid for trade”
agencies and offices could be consolidated or better coordinated. Additionally, there
were other matters associated with TDA, such as whether there was large company
bias in the agency’s activities and whether U.S. tax dollars should assist corporations
with ample resources of their own for export development. Despite the controversy,
Congress appropriated $65 million for TDA in FY1994.
For comparison, on October 20, 1999 Congress passed the omnibus
appropriations bill (H.R. 4238, P.L. 105-277) which included $44 million for TDA’s
FY1999 funding level, 6% above the previous year’s appropriation. (The
Administration’s request for FY1999 had been $50 million.) The FY1999
appropriation is 32% below the peak FY1994 level at the same time that TDA is
expanding activities in new countries. Along with a reduction in funding since
FY1994, congressional debate over the appropriateness of providing federal funds
to TDA and other agencies involved with the aid for trade concept has also declined.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Origin and Evolution of the Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Funding History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Staffing/Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Current Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TDA Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
What U.S. Companies Participate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
How Can U.S. Companies Participate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Where Have TDA Projects Concentrated? . . . . . . . . . . . . . . . . . . . . . . . . . 10
Similar Programs in Other Industrialized Countries . . . . . . . . . . . . . . . . . . 10
Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Should the U.S. Government Intervene in the Markets? . . . . . . . . . . . . . . . 12
Is There Bias Involving Company Size? . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Should U.S. Tax Dollars Assist Large Corporations? . . . . . . . . . . . . . . . . . 13
Appendix 1
Trade and Development Agency Program Activities
Number of Participating Companies (State by State) . . . . . . . . . . . . . . . . . 15
Appendix 2
Trade and Development Agency Program Activities
Funds Obligated (State by State) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table
1. The Trade and Development Agency Budget Authority, FY82-99 . . . . . . . . . . 5
Figures
1. Trade and Development Agency Organizational Chart . . . . . . . . . . . . . . . . . . . 6
2. FY1997 TDA Activities by Economic Sector . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. TDA's Budget Compared with Competitors', 1997 . . . . . . . . . . . . . . . . . . . . . 11

The Trade and Development Agency
Introduction
The Trade and Development Agency (TDA), created as the Trade and
Development Program (TDP) in 1982, has been viewed quite favorably by many
policymakers as a relatively inexpensive tool to promote U.S. exports and
employment while offering aid to middle-income developing countries. Others
opposed the concept as a form of “cooperate welfare” and raised specific issues
about TDA’s cost and effectiveness as Members addressed appropriations for foreign
aid and export promotion agencies and programs. In the late 1990s, however,
arguments against the aid for trade concept, TDA, and its mission have tended to
decline. TDA acquired increased attention after the end of the Cold War as security
and political arguments for supporting U.S. foreign assistance weakened. A debate
over setting a new foreign aid agenda emerged which included the argument that
American foreign assistance, in addition to promoting development overseas, could
also be used as a tool that would benefit U.S. businesses. Interest in TDA intensified
in the early 1990s as the U.S. budget became increasingly strained, constituent
support for foreign aid dwindled, and U.S. industries sought help to sustain their
international competitiveness. Some in Congress and in the export community
advocated a strengthening of TDA and other "aid for trade" activities of the U.S.
government.
TDA provides grants directly to foreign countries that hire U.S. companies to
conduct feasibility studies1 for in-country projects such as dam construction, energy
production, and telecommunications development. Middle-income developing
countries are among the world's fastest-growing markets for U.S. exports, and many
foreign competitor governments fund "aid for trade" programs.
Some believe that the United States, in order to help its industry be more
competitive in those markets, should continue current-level or modestly increased
support for TDA activities. Others argue that too many agencies are conducting
export promotion activities. Critics of TDA contend that the Office of Capital
Projects at the Agency for International Development (USAID),2 the Overseas
Private Investment Corporation (OPIC), the Export-Import Bank (Eximbank), and
TDA carry out similar, if not duplicative functions. They assert that elimination of
1 A feasibility study is an assessment of a potential project to determine whether the
project is economically, financially and technically possible.
2 The Office of Capital Projects was first established by USAID in 1991 under the Bush
Administration's Partnership for Business and Development Program. It was authorized by
Congress in the Jobs through Exports Act of 1992, but has been minimally funded by
USAID. It is currently operating primarily through funding from USAID field mission
offices.

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some of these functions or consolidation into one agency would improve
effectiveness while reducing budgetary costs.
In the past, particularly in the early 1990s, some Members supported merging
other “aid for trade” agencies into TDA and greatly expanding its funding levels.
Proponents argued that eliminating “aid for trade” activities in less active offices,
such as USAID's Office of Capital Projects, would result in greater budgetary
savings without loss in policy effectiveness. Others contended that TDA was
efficient, effective, and flexible. They feared that consolidating these agencies into
a single entity would create inefficiencies that did not exist in TDA.
Political support for TDA peaked about 1994. Since then, Congress generally
has been less enthusiastic about “aid for trade” programs. TDA’s FY1998 core
budget is similar to that prevailing in the early 1990s, despite TDA’s expanding
activities in new countries. TDA has increased the number of its programs from 307
in 1993 to 390 in 1997. TDA also conducted more activities in Latin America, Asia
and Africa in 1997 than in previous years. The FY1999 Administration request for
$50 million took into account TDA’s crucial involvement in a number of middle-
income developing country infrastructure projects. Congress enacted $44 million
rather than the requested $50 million because of limited budgetary resources.3
This report provides background information on the Trade and Development
Agency, including how it evolved, its budget, staff size and activities. It also
compares TDA with similar programs in other countries and discusses current
congressional issues and views.
Background
TDA provides grants to foreign governments enabling them to hire U.S.
companies to conduct feasibility studies and other planning services for major
industrial and infrastructure projects viewed as development priorities by the host
country. Through these planning services, TDA activities subsequently assist U.S.
businesses in exporting goods and services for major capital projects in developing
and middle-income countries. TDA's stated mission is to:
! help position U.S. companies to compete successfully as suppliers of goods
and services for major capital projects in developing countries;
! assist economic growth in the developing and middle-income world by
increasing access to U.S. private sector expertise;
! serve as a front line agency for implementing U.S. trade and foreign
assistance objectives by rapidly and effectively mobilizing U.S. technical
expertise;
3 Foreign Operations Appropriations, House of Representatives Report 105-719, pp.6-
7.

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! maximize the reciprocal benefits of U.S. foreign assistance.4
TDA’ specific mission for FY1999 is to assist in the creation of jobs for
Americans by helping U.S. companies pursue overseas business opportunities.5
According to the Director of TDA in 1998, J. Joseph Grandmaison, the total
volume of U.S. exports associated with TDA activities since its inception in 1982 has
grown to about $10 billion to $11.5 billion. In March 1998 congressional testimony,
he claimed that every dollar TDA invests in 1998 on behalf of American exporters
results in $33 in U.S. exports — up from $30 in exports per dollar invested in 1997.6
He also pointed out that during 1997 TDA funded 390 activities in 65 countries,
which helped American companies establish themselves in a variety of projects in
emerging markets.7 Similar capital project activities conducted by USAID, on the
other hand, may generate less than one dollar for every dollar invested, since USAID
selects capital projects to meet the host country's development needs rather than
projects with the greatest potential return for U.S. businesses.8
Origin and Evolution of the Program
The idea of reimbursable government services to foreign countries,9 linking the
U.S. private sector with development activities, dates back to the Mutual Security
Act of 1954. Later the policy was reauthorized in section 607(a) of the Foreign
Assistance Act of 1961. In 1974 Congress added section 661 to the Foreign
Assistance Act of 1961, as amended. It provided authority to promote the use of
U.S. government reimbursable services that would be paid for by foreign countries.
The Foreign Assistance Act designated USAID as the agency responsible for
implementing both section 607(a)--putting foreign governments in touch with U.S.
government agencies for reimbursable services--and section 661--funding planning
studies which would lead to the use of such services. The two activities were housed
in USAID's Office of Reimbursable Development Programs, directly under the
Administrator. According to USAID, because of a congressional initiative in the
early 1970s that shifted aid program emphasis to basic human needs and small scale
poverty projects and away from promotion of the private sector, USAID's
4 United States Trade and Development Program, Congressional Presentation, Fiscal
Year 1993, U.S. International Development Cooperation Agency, and telephone
conversation with Ned Cabot, Congressional Relations, Trade and Development Agency,
July 28, 1998.
5 Trade and Development Agency, Congressional Presentation, Fiscal Year 1999.
6 Statement of J. Joseph Grandmaison, Director of U.S. Trade and Development
Agency, Hearings, House Appropriations Subcommittee on Foreign Operations, Export
Financing and Related Programs, March 11, 1998.
7 U.S. Trade and Development Agency, 1997 Annual Report.
8 Office of Special Projects, Agency for International Development, March 3, 1993, and
telephone conversation with Agency for International Development, July 27, 1998.
9 Reimbursable government services refers to services that are paid for, but not
necessarily provided by, the U.S. government.

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expenditures for activities linking U.S. businesses to development in 1976 and 1977
fell to only about $1 million annually.
By the end of the 1970s, however, there was a growing sense in Congress that
the U.S. private sector should be more active in development programs. In 1978,
Congress directed USAID to increase emphasis on U.S. private sector involvement
in development assistance. By March 1979, USAID issued new guidelines
facilitating the involvement of the U.S. private sector in development from the
earliest planning stages of the projects through implementation.
In July 1980, to further underscore the link between private sector and U.S.
development activities, USAID's Office of Reimbursable Development Programs
was made a part of the International Development Cooperation Agency (IDCA), a
newly created umbrella agency tasked with coordinating U.S. development
assistance programs, and was renamed the Trade and Development Program (TDP).
Independent from USAID by delegation of authority, TDP received a separate line
item authorization and appropriation in 1982, pursuant to Section 661 of the Foreign
Assistance Act.
Congress further strengthened TDP's autonomy with passage of the Omnibus
Trade and Competitiveness Act of 1988 (P.L.100-418) which made TDP an
independent agency and required the TDP Director to be appointed by the President.
It established TDP as the primary federal agency providing information to the private
sector regarding trade and development and export promotion. The 1988 Act further
transferred to TDP the USAID tied aid10 responsibilities directed by the Trade
Expansion Act of 1983. It also expanded TDP activities to include education and
training programs, and required that TDP be represented (and vote) at meetings of
the National Advisory Council on International Monetary and Financial Policies
whenever tied aid issues were discussed. Additionally, the Omnibus Trade Act
required the Director of TDP to establish an advisory board which must include
representatives from the private sector to make recommendations to the Director
regarding TDP activities.
In December 1992 Congress enacted the Jobs through Export Act that renamed
TDP the Trade and Development Agency (TDA). Lawmakers supported the name
change to clarify and emphasize that TDA is an independent agency, and increase
its visibility as the primary federal agency promoting private sector trade
development in middle-income developing countries. In addition, the Act required
annual independent audits of TDA's financial statements and increased TDA’s
spending authority to $65 million annually beginning in FY1994.
Funding History
Although TDA funding has increased dramatically since 1982, it remains one
of the smaller foreign aid programs. Despite growing foreign aid budget constraints
beginning in 1985, however, TDA appropriations have grown steadily. The
Administration requested $60 million for FY1994--a 50 percent increase over the
10 Tied aid is foreign assistance that is linked with a requirement that the recipient
country purchase U.S. goods and services with the assistance.

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FY1993 level and the largest increase since 1983--and Congress appropriated $65
million. While this seemed like a sizeable percentage increase, TDA stated that it
would not be able to fund all project requests received even with the additional
resources.11 For FY1999 TDA requested an increase to $50 million, but received $44
million, $2.5 million above the previous year’s level of $41.5 million, and well
below the FY1994 peak of $65 million. The agency points out that since 1993 the
number of projects has expanded by 27%, while the agency’s core budget has
declined by 32%. Table 1 provides a history of TDA’s budget authority since 1982.

Table 1. The Trade and Development Agency
Budget Authority, FY 1982 - FY 1999
Fiscal Year
Budget Authority
($1,000)
1982
6,907
1983
12,624
1984
16,565
1985
21,000
1986
18,087
1987
20,000
1988
25,000
1989
25,000
1990
29,916
1991
35,000
1992
34,575
1993
40,000
1994
65,000
1995
57,000
1996
48,994
1997
53,500
1998
41,500
1999
44,000
Source: Trade and Development Agency, February 16, 1993.
U.S. Agency for International Development, Congressional Presentation,
1996, 1997, 1998, 1999.

Staffing/Structure
The structure of TDA is shown in Figure 1. While staff size has been increasing
somewhat over the years, TDA is a small agency when compared to most others.
The Office of Management and Budget (OMB) sets a staff ceiling for TDA each
year. (TDA staff numbers usually are maintained at the ceiling.) As recently as
11 Meeting with Jonathan Raymond, Director of Congressional Affairs, TDA, February
8, 1993.

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1987, the Trade and Development Program ceiling was 15 full time employees. In
1988 the staff ceiling increased to 17; in 1992 it was 32; and by 1998 it was 41 full
time employees. By comparison, other aid and export promotion agencies have
much larger staffs and also manage much larger programs: in FY1998 OPIC's full
time staff, which extended $4 billion in insurance to U.S. firms, was 198; Eximbank's
full time staff, managing programs worth more than $12.2 billion, was 371.
Figure 1. Trade and Development Agency Organizational Chart
Source: TDA, 1997.
Current TDA Activities and Frequently Asked Questions
TDA Program
TDA funds a wide range of activities, the largest category being feasibility
studies. A feasibility study is an assessment made by a U.S. firm (hired by the host
country with a TDA grant) to determine whether a potential project is economically,
financially and technically possible. In FY 1997, 69 percent of the TDA budget was
devoted to financing 105 feasibility studies.
Another important TDA activity is definitional missions/desk studies. TDA
uses technical consultants to develop reports, which are used to assist in the agency’s

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decisions on funding requests for feasibility studies and other assistance. These
reports are categorized into two types: definitional missions (DM) and desk studies
(DS). Definitional missions involve a short-term visit to a host country to gather
additional information and evaluate the project. Desk studies involve information
gathering, but do not require overseas travel. Based on the recommendations
contained in the DM or DS analysis report, the advice of the U.S. embassy, and
TDA’s internal analysis and budget capabilities, the agency makes investment
decisions on funding requests for feasibility studies. All definitional missions and
desk studies at TDA are contracted exclusively with small and minority-owned
businesses. TDA contracted for 168 definitional missions and desk studies during
1997.12
Other TDA activities include technical assistance grants, orientation visits,
technical symposia, training, grants to multilateral development banks to hire U.S.
consultants, as well as grants to state and local entities like the National Association
of State Development Agencies (NASDA).
TDA conducts projects involving agriculture, energy and natural resources,
human resources, manufacturing, multi-sector services, telecommunications,
transportation, and water/environment. In recent years the largest number of projects
(85 in FY1997) and the largest amount of funds ($9.6 million in FY1997) have been
in the transportation category. The smallest have been in the agribusiness and human
resources categories (14 and 12 projects and about $1.1 million and $1.4 in FY1997,
respectively). (See Figure 2.)
TDA's project selection criteria are as follows:13
! Development Priority: TDA projects must be development priorities of the
host country and likely to be implemented. TDA must receive a formal
request from the host country government, and the U.S. Embassy must
endorse TDA's involvement in the proposed project.
! U.S. Export Potential: Projects must present an opportunity for substantial
sales of U.S. goods or services relative to the cost of the requested assistance.
! Financing Availability: There must be a likelihood that project
implementation financing which is not tied to award to a particular foreign
country will be available and that procurement will be open to U.S. firms.
! Competition: There must be a likelihood that U.S. companies will face strong
competition from foreign companies that receive various kinds of subsidies
and support from their governments.
12 U.S. Trade and Development Agency, 1997 Annual Report, p. 6.
13 U.S. Trade and Development Agency, 1997 Annual Report, p. 4.

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FIGURE 2.
FY1997 TDA ACTIVITIES BY ECONOMIC SECTOR

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By Type and Number of Activities
Source: TDA 1997 Annual Report, pp. 17 and 19.

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What U.S. Companies Participate?
A wide variety of U.S. companies have exported goods and services overseas
as a result of TDA activities. Through FY1997 more than 1,000 companies have
been actively involved in TDA-financed activities around the world. Companies
range in size and include very small firms, minority-owned businesses, and large
corporations (such as AT&T, General Electric, COMSAT, and Westinghouse).14
Businesses in a majority of states benefit from TDA projects, according to data
compiled by TDA. In FY1997 District of Columbia-based companies (83) were the
most from any one “state” to benefit from TDA projects, followed by Virginia (69),
California (39), Maryland (29), New Jersey (19), Illinois (16), Colorado (13), New
York (13), Texas (10), and Massachusetts (10). (For a complete ranking of states,
see the appendixes on pages 15 and 16.)
How Can U.S. Companies Participate?
One concern among policymakers, as well as TDA administrators, has been
how to inform U.S. businesses about TDA and explain how they can participate in
its programs. For that, TDA began to interact with the National Association of State
Development Agencies (NASDA) to inform businesses of export opportunities at the
local level. Generally, what TDA has shared with NASDA is the following activity
path:
1--Host government contacts TDA with a prospective project, or a U.S.
company operating in a region becomes aware of a potential project in a foreign
country and notifies TDA;
2--Regional TDA officer evaluates worth of project, puts together an
assessment of the scope of work, completes a definitional mission--the
consultant that does this can not be one that could benefit from the project. At
this stage, TDA coordinates with the Trade Policy Coordination Committee
(TPCC), AID, OPIC, Eximbank;
3--If the project assessment is favorable in meeting TDA's criteria, a regional
TDA director presents the project to the Project Review Board, consisting of
TDA's Director, Deputy, and General Counsel; if the review committee does
not approve, the process ends here;
4--If the review committee approves the project, the host country signs an
agreement for TDA to provide a grant which requires the host country to hire
a U.S. company to do a feasibility study;
14 The number of companies involved in TDA activities at any given time can not be
accurately counted, according to TDA. Many times, after a company wins one contract, the
country may continue to employ that company years after the initial project because of
familiarity with the company name, staff, and quality of work. Also, often large companies
win the contracts, but then subcontract the work to a number of smaller ones, making an
accurate count difficult.

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5--The feasibility study project is announced in the Commerce Business Daily
(CBD) and U.S. firms are invited to bid. To learn of the announcements,
companies must subscribe to the newsletter;
6--U.S. companies can offer a bid within a specified time period;
7--The bids are reviewed by the host country;
9--The host country selects a U.S. company to do the study.
Where Have TDA Projects Concentrated?
In 1997, 65 countries received TDA grants. African, Latin American, Eastern
European, and Asian countries were heavily represented among the list of countries.
Specific countries with the largest number of TDA projects in 1997 were Russia
(38), Brazil (23), South Africa (19), Indonesia (19), Thailand (16) and Bosnia &
Herzegovina (15). Additionally, five TDA projects which were regional or
worldwide in scope, were categorized as: Latin America Regional, Asia Regional,
Africa Regional, Europe Regional and Worldwide. The number of TDA activities
in Latin America, Asia and Africa has increased from 46% of the total activities in
FY1993 to 63.6% in FY1997. The funding level has also increased from 52.2% of
the totals in FY1993 to 57.3% in FY1997.15
Prior to China's Tianamen Square incident, TDA provided about one-third of
its grants to Beijing. TDA officials defend this heavy concentration on one country
by saying that all these grants were based on specific criteria, as well as potential for
U.S. benefit and export potential. After Tianamen Square, TDA voluntarily
suspended activities in China, and later was prohibited from conducting projects
there by legislation. Currently China, along with Vietnam, North Korea, and Burma,
is ineligible for TDA assistance.16
Similar Programs in Other Industrialized Countries
According to the Coalition for Employment through Exports, the United
Kingdom annually spends over $35 million for various agencies that fund feasibility
studies, bid on major overseas projects, and fund privatization studies and technical
advisors. The Canadian International Development Agency annually provides an
industrial cooperation program of approximately $46 million for feasibility studies
and technical assistance. The Japan International Cooperation Agency annually
spends $229 million in support for feasibility studies. Germany’s Kreditanstalt fuer
Wiederaufbau annually provides $98 million in support for feasibility studies. Other
agencies provide additional funding for technical assistance, training and equipment
procurement. France’s total program amounts to $45 million annually which is
distributed throughout several government agencies.17
15 U.S. Trade and Development Agency, 1997 Annual Report, p. 32.
16 U.S. Trade and Development Agency, web site (http://www.tda.gov/)
17 Source: telephone conversation with Monique Roske, Legislative Representative,
Coalition for Employment through Exports, July 1, 1998.

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Figure 3, according to TDA, compares the size of aid programs of several donor
countries.
Figure 3. TDA's Budget Compared with Competitors', 1997
Source: TDA.
Issues for Congress
Over the years, policymakers' attitudes on U.S. foreign aid have changed. In the
1960s and 1970s, many supported U.S. foreign assistance for security and foreign
policy reasons with the continuation of the Cold War. Throughout the 1980s, the
Reagan Administration shifted the focus of foreign assistance away from
government-to-government assistance and toward fostering growth of the private
sector in developing countries. In the 1990s, foreign aid advocates have been
looking for a new rationale and purpose of U.S. foreign assistance in the absence of
the threat of communism. Foreign aid activity that promotes U.S. businesses in
development programs is one of several new purposes that has received support and
is under consideration. TDA's role in an expanded U.S. government export
promotion initiative is also under review by the Clinton Administration.
In recent years, some Members of Congress supported the aid for trade concept
as conducted by TDA and other agencies. Congressional debate has focused not on
whether to conduct aid for trade projects, but rather, how much should be
appropriated and under what agencies. Congress has focused on two overriding
issues concerning the Trade and Development Agency: 1) the optimal funding level,
and 2) the designated responsibilities of the agency (and the related issue of possible
overlap of responsibilities with other agencies). Additionally, policymakers have
examined other matters associated with TDA and its activities, such as whether TDA
was an aid or export promotion agency, whether there was company-size bias in
TDA activities, and whether U.S. tax dollars should assist large corporations.

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Should the U.S. Government Intervene in the Markets?
Currently some Members question whether the U.S. government should even
intervene in the markets at all. They feel that the U.S. government should abstain
from assisting the business community in meeting the demands of the global
marketplace on grounds that such intervention skews the marketplace. If the
overseas activity were worth doing, they say, the businesses should take it upon
themselves to do it. If it is not worth doing, the U.S. government should not be
involved in it.

The U.S. business community, on the other hand, points out that it faces highly
competitive markets where foreign competitors such as European and Japanese
companies enjoy the full backing and support of their respective governments. Many
Members of Congress maintain that the competitiveness of a great number of
international businesses (and thus the U.S. economy) depends on the quality of
project financing, and therefore that the role played by TDA is essential.18
Is There Bias Involving Company Size?
Some have claimed that TDA has a large-company bias. Since TDA provides
grants directly to foreign governments, it is the host country that selects U.S.
companies to conduct feasibility studies. As a result, U.S. companies do not receive
any taxpayer dollars directly from TDA. Thus, there is no direct U.S. government
action showing bias toward larger companies involved in TDA activities. However,
there may be some bias in favor of larger, better-known companies on the part of the
host country because they may be more comfortable with a large or well-known
company. Also, the larger companies can afford the money, staff, and paper work
involved in marketing themselves to the host country and are more able to have staff
in Washington, D.C., who are familiar with procedures and potential projects.
Large firms also are better equipped with staff and resources to be more competitive
in bidding, especially on engineering and large construction projects.
Small businesses can benefit whenever they have a particular expertise, specialty
skill, knowledge of a region or culture in the world, or have developed a particular
niche in the market. In many cases, large businesses that win contracts subcontract
some of the work to smaller businesses. Furthermore, small and minority-owned
businesses do all definitional missions, according to TDA officials.
A large number of feasibility studies have been conducted by small firms as
well. According to agency data, one-third of TDA’s program budget has gone to
small firms. TDA has also sponsored conferences and orientation visits, which have
been beneficial to small business.19
18 Source: telephone conversation with Monique Roske, Legislative Representative,
Coalition for Employment through Exports, July 31, 1998.
19 Source: telephone conversation with Ned Cabot, Congressional Relations, U.S. Trade
and Development Agency, September 2, 1998, and U.S. Trade and Development Agency,
1997 Annual Report, p. 8.

CRS-14
Should U.S. Tax Dollars Assist Large Corporations?
Some have questioned whether it is really necessary to provide American tax
dollars to multi-billion dollar corporations to develop foreign markets. They
maintain that if the foreign market were profitable, the companies would be
conducting these activities on their own. American companies should be just as
competitive as their foreign counterparts, they argue, without government assistance.
On the other hand, supporters argue that, at least until recently, many U.S.
companies have not had as much experience and history in bidding on foreign capital
projects, since they traditionally have concentrated their business in the U.S. market.
Other competitor country governments, moreover, have funded feasibility studies as
a normal way of obtaining foreign contracts for their national firms. Supporters of
TDA argue that U.S. companies would be at a disadvantage if the United States were
to withdraw from this activity. Some trade experts believe that if the United States
wants to remain competitive in the world and in these fast-growing middle-income
markets, it must offer similar grants to host countries. Moreover, they say, U.S.
taxpayers would benefit with a subsequent increase in domestic employment and
economic activity as TDA projects would promote U.S. exports.
However, critics of U.S. government activities linking U.S. businesses to
development assistance programs assert that large and small companies alike seem
to want to be "spoon fed"; it has been observed that often, once government funds
dry up, the companies seem to drop their promotional activities in a particular
country. This suggests to critics that TDA funds are supporting projects that are not
really commercially viable.
Furthermore, critics of TDA contend that the agency lacks technical,
development, and engineering expertise, saying that often projects are approved
without adequate technical review. As a result, businesses might be able to overprice
estimates for feasibility studies, or might recommend a project when it may not be
sound technically, developmentally, or economically. TDA needs to have the
technical expertise to know if/when overpricing occurs, or unsound projects are
considered, critics claim, if taxpayer dollars are to be spent to promote U.S. business
activity overseas.
Another idea raised by some is that private enterprises benefitting from
government-funded TDA activities should return some of the TDA grant if the
company wins follow-on contracts. According to those who espouse this concept,
such rebates to TDA could be placed in a revolving fund to reduce the size of future
TDA appropriations and to deflect criticism that large businesses are receiving a
subsidy from American taxpayers.

CRS-15
Appendix 1
Trade and Development Agency Program Activities
Number of Participating Companies (State by State)
(FY 1997)
(FY 1996)
(FY 1995)
(FY 1994)
(FY 1993)
STATE (NUMBER)
STATE (NUMBER) STATE (NUMBER)
STATE (NUMBER)
STATE (NUMBER)
District of Columbia (83)
District of Columbia (70)
Virginia (90)
District of Columbia (81)
District of Columbia (62)
Virginia(69)
Virginia(59)
District of Columbia(88)
Virginia (62)
Virginia (43)
California (38)
California (31)
California (30)
California (28)
California (25)
Maryland (28)
Massachusetts (16)
Pennsylvania (22)
Massachusetts (25)
New Jersey (21)
New Jersey (19)
Texas (14)
Maryland (20)
Maryland (24)
Texas (20)
Illinois (15)
New Jersey (13)
New Jersey (20)
New Jersey (15)
Colorado (14)
Colorado (13)
Pennsylvania (12)
Texas (19)
Texas (12)
Maryland (14)
New York (13)
Colorado (11)
Illinois (14)
Colorado (9)
Georgia (12)
Texas (12)
Georgia (10)
Colorado (13)
Georgia (9)
Pennsylvania (12)
Pennsylvania (11)
Illinois (9)
Massachusetts (9)
Ohio (9)
Massachusetts (11)
Massachusetts (10)
Florida (8)
Georgia (8)
Pennsylvania (8)
Illinois (11)
Ohio (8)
Maryland (7)
New York (8)
New York (7)
Ohio (6)
Florida (6)
New York (7)
Ohio (7)
Connecticut (6)
Missouri (5)
Maine (6)
Montana (6)
Michigan (6)
South Carolina (6)
New York (5)
Montana (6)
Connecticut (4)
Florida (5)
Illinois (5)
Washington (4)
Georgia (4)
Oregon (4)
Washington (5)
New Hampshire (4)
Connecticut (3)
Minnesota (3)
Louisiana (3)
Connecticut (4)
Florida (3)
Louisiana (3)
Washington (3)
Michigan (2)
Tennessee (4)
Michigan (3)
Michigan (3)
Louisiana (2)
New Hampshire (2)
Missouri (3)
North Carolina (3)
Tennessee (3)
New Hampshire (2)
South Carolina (2)
Oklahoma (3)
Washington (3)
Alabama (2)
North Carolina (2)
West Virginia (2)
New Mexico (2)
Wisconsin (3)
Florida (2)
Tennessee (2)
Arizona (1)
North Dakota (2)
Louisiana (2)
Idaho (2)
Wisconsin (2)
Idaho (1)
Arizona (1)
Minnesota (2)
Hawaii (1)
Alabama (1)
Iowa (1)
Indiana (1)
South Dakota (2)
Indiana (1)
Alaska (1)
Kansas (1)
Kentucky (1)
Alaska (1)
Iowa (1)
Arizona (1)
Maine (1)
Michigan (1)
Alabama (1)
Minnesota (1)
Connecticut (1)
New Mexico (1)
Nebraska (1)
Indiana (1)
Nebraska (1)
Hawaii (1)
Ohio (1)
Nevada (1)
Nebraska (1)
Oklahoma (1)
Idaho (1)
Washington (1)
New Hampshire (1)
North Carolina (1)
South Carolina (1)
Michigan (1)
Wisconsin (1)
North Carolina (1)
Oklahoma (1)
West Virginia (1)
Nevada (1)
Oregon (1)
Utah (1)
Tennessee (1)
Vermont (1)
Utah (1)
West Virginia (1)

CRS-16
Appendix 2. Trade and Development Agency Program Activities
Funds Obligated (State by State)
(FY 1997)
(FY 1996)
(FY 1995)
(FY 1994)
(FY 1993)
STATE (FUNDS)
STATE (FUNDS)
STATE (FUNDS)
STATE (FUNDS)
STATE (FUNDS)

D.C. ($8,068,752)
D.C. ($6,209,944)
D.C. ($8,593,119)
D.C. ($5,509,556)
D.C. ($4,656,486)
California ($4,006,063)
California ($4,322,337)
California ($5,039,526)
Virginia ($4,479,323)
California ($4,141,969)
Maryland ($2,771,119)
Virginia ($3,022,434)
Pennsylvania ($4,466,723 +
Massachusetts ($4,067,585 +
Texas ($4,037,530)
Texas ($2,578,493)
Texas ($2,725,200)
$408,900 with New York)
$104,000 with Pennsylvania)
Virginia ($3,890,667)
Virginia ($2,564,867)
Georgia ($2,137,750)
Virginia ($3,851,688)
California ($3,883,626 +
Illinois ($2,116,318)
New Jersey ($2,123,420)
Pennsylvania ($2,000,200)
Illinois ($2,818,023)
$400,000 with South Carolina)
Colorado ($2,019,086)
Pennsylvania ($1,805,834)
New York ($1,651,414)
Washington ($1,988,235)
Texas ($3,020,165)
New Jersey ($1,833,335)
Colorado ($1,610,148)
New Jersey ($976,935)
Colorado ($1,576,763)
Maryland ($2,377,741)
Missouri ($1,772,500)
New York ($1,490,460)
Illinois ($874,976)
New Jersey ($1,458,779)
Pennsylvania ($2,209,500 + Pennsylvania
($1,718,212)
Illinois ($1,087,768)
Massachusetts ($816,875)
Nebraska ($1,000,000)
$104,000 with Massachusetts)
Georgia ($1,457,857)
Wisconsin ($960,000)
Louisiana ($705,496)
New Mexico ($1,000,000)
New Jersey ($2,205,976)
New York ($1,421,972)
Ohio ($882,846)
South Carolina ($574,906)
New York ($920,697 +
South Carolina ($2,180,000 +
Massachusetts ($1,023,684)
Massachusetts ($854,334)
Maryland ($524,280)
$408,900 with Pennsylvania)
$400,000 with California)
Louisiana ($658,900)
Minnesota ($697,490)
Kansas ($510,000)
Florida ($848,425)
New York ($1,602,500)
Idaho ($650,000)
Alabama ($600,000)
Florida ($504,281)
North Dakota ($800,000)
Ohio ($942,364)
Nebraska ($500,000)
Missouri ($577,399)
Missouri ($461,950)
Ohio ($702,500)
Illinois ($877,000)
Washington ($447,500)
North Carolina ($487,867)
Colorado ($332,178)
Michigan ($658,500)
Louisiana ($641,250)
Maryland ($435,688)
Michigan ($482,000)
Arizona ($350,000)
Georgia ($643,765)
South Carolina ($600,000 +
Ohio ($277,450)
Florida ($443,144)
Oregon ($211,518)
North Carolina ($625,000)
$400,000 with California)
Florida ($201,000)
Maine ($384,189)
Idaho ($299,045)
Oklahoma ($612,638)
Washington ($573,441 +
Indiana ($200,000)
Georgia ($378,029)
Connecticut ($187,065)
Maryland ($602,990)
$150,000 with Alaska)
West Virginia ($173,000)
Tennessee ($352,500)
New Mexico ($160,000)
Missouri ($425,277)
Connecticut ($558,224)
Alabama ($151,500)
Louisiana ($350,000)
Michigan ($146,300)
Arizona ($399,000)
Indiana ($550,000)
Connecticut ($93,705)
Connecticut ($305,000)
Washington ($113,093)
Tennessee ($355,000)
New Hampshire ($460,000)
Iowa ($80,000)
Utah ($200,000)
Wisconsin ($40,000)
Connecticut ($315,104)
West Virginia ($437,000)
Hawaii ($40,000)
Vermont ($184,952)
Maine ($29,000)
Indiana ($300,000)
Colorado ($425,425)
South Carolina ($24,300)
Hawaii ($175,000)
Iowa ($27,489)
Nebraska ($300,000)
Wisconsin ($415,000)
Michigan ($7,500)
Alaska ($150,000)
New Hampshire ($27,315)
Texas ($250,000)
Florida ($321,500)
Tennessee ($6,500)
Nevada ($150,000)
West Virginia ($5,000)
Kentucky ($215,000)
Michigan ($306,500)
Oklahoma ($5,736)
Washington ($100,308)
Massachusetts ($183,787)
Nebraska ($215,000)
Minnesota ($2,500)
New Hampshire ($25,242)
Michigan ($148,000)
Utah ($200,000)
Idaho ($23,973)
New Hampshire ($24,054)
Alaska ($150,000 with Washington)
Arizona ($16,863)
Georgia ($130,595)
West Virginia ($2,500)
North Carolina ($106,580)

Vermont ($72,582)

Oklahoma ($49,000)

Oregon ($23,361)

Minnesota ($5,000)
South Dakota ($4,000)

Alabama ($2,500)
Tennessee ($2,500)
Source: TDA

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