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Full text of "Department of State bulletin"

BOSTON 
PUBLIC 
LIBRARY 




NDEX 



larch 1987 
olume87, No. 2120 



fghanistan. State of the Union Address 

(Reagan) 5 

Frica. Secretary Visits Bermuda and 

Africa 23 

■ms Control 

•ms Control: The East Asian and Pacific 

Focus (Rowny) 37 

;velopments in NST Issues After Reykjavik 

(Nitze) 33 

eeting of NATO's Special Consultative 

Group (chairman's statement) 46 

arth Atlantic Council Meets in Brussels 
(Shultz, final communique, declaration) . 42 
jclear and Space Arms Talks Resume 

Round Seven (Reagan) 36 

le Nuclear and Space Negotiations: 
Translating Promise to Progress (Nitze) 29 
'Cretary's Interview on "Meet the 

Press" 20 

ate of the Union Address (Reagan) .... 5 

mgress 

?velopments in NST Issues After Reykjavik 

(Nitze) 33 

le Foreign Affairs Budget Crisis: A Threat 

to Our Vital Interests (Shultz) 7 

ate of the Union Address (Reagan) .... 5 
imeroon. Secretary Visits Bermuda and 

Africa 23 

>sta Rica 

>sta Rica-A Profile 57 

sit of Costa Rican President (Arias, 

Reagan) 56 

)te d'lvoire. Secretary Visits Bermuda and 

Africa 23 

spartment & Foreign Service 

le Foreign Affairs Budget Crisis: A Threat 

to Our Vital Interests (Shultz) 7 

structions to Ambassadors on Chain of 

Command (Reagan, Shultz) 40 

ist Asia. Arms Control: The East Asian 

and Pacific Focus (Rowny) 37 

:onomics. Secretary Visits Bermuda and 

Africa 23 

>reign Assistance. The Foreign Affairs 
Budget Crisis: A Threat to Our Vital In- 
terests (Shultz) 7 

uman Rights 

srth Atlantic Council Meets in Brussels 
(Shultz, final communique, declaration) . 42 
iviet Repression of the Ukrainian Catholic 

Church 47 

N General Assembly Review for 1986 . . 52 

itelligence Operations 

le Foreign Affairs Budget Crisis: A Threat 

to Our Vital Interests (Shultz) 7 

an 

dependent Counsel to Investigate Arms 

Sales to Iran (Reagan) 6 

orth Atlantic Council Meets in Brussels 
(Shultz, final communique, declaration) . 42 
;cretary's Interview on "Meet the 

Press" 20 

:ate of the Union Address (Reagan) .... 5 
.S. Interests in the Persian Gulf (Shultz) 19 



Iraq. U.S. Interests in the Persian Gulf 

(Shultz) 19 

Israel. Secretary's Interview on "Meet the 

Press" 20 

Kenya. Secretary Visits Bermuda and 

Africa 23 

Lebanon. U.S. Passports Invalid for Travel 

to Lebanon (Department statement) ... 51 
Liberia. Secretary Visits Bermuda and 

Africa 23 

Libya. Practical Measures for Dealing With 

Terrorism (Bremer) 1 

Middle East. U.S. Interests in the Persian 

Gulf (Shultz) 19 

Mongolia. U.S. and Mongolia Establish 

Diplomatic Relations (Shultz, final 

communique) 41 

Narcotics. The Foreign Affairs Budget 

Crisis: A Threat to Our Vital Interests 

(Shultz) 7 

Nicaragua 

Independent Counsel to Investigate Arms 

Sales to Iran (Reagan) 6 

Nicaragua: The Moral and Strategic Stakes 

(Shultz) 14 

North Atlantic Council Meets in Brussels 

(Shultz, final communique, declaration) . 42 
Secretary's Interview on "Meet the 

Press" 20 

State of the Union Address (Reagan) .... 5 
Nigeria. Secretary Visits Bermuda and 

Africa 23 

North Atlantic Treaty Organization 
Meeting of NATO's Special Consultative 

Group (chairman's statement) 46 

North Atlantic Council Meets in Brussels 

(Shultz, final communique, declaration) . 42 
Pacific. Arms Control: The East Asian and 

Pacific Focus (Rowny) 37 

Passports. U.S. Passports Invalid for Travel 

to Lebanon (Department statement) ... 51 
Philippines. Secretary's Interview on "Meet 

the Press" 20 

Presidential Documents 

Independent Counsel to Investigate Arms 

Sales to Iran 6 

Instructions to Ambassadors on Chain of 

Command (Reagan, Shultz) 40 

Nuclear and Space Arms Talks Resume 

Round Seven 36 

State of the Union Address 5 

Visit of Costa Rican President (Arias, 

Reagan) 56 

Publications 

CSCE Semiannual Report 92 

Department of State 93 

GPO Sales 92 

Refugees. The Foreign Affairs Budget Crisis: 

A Threat to Our Vital Interests (Shultz) 7 
Security Assistance. The Foreign Affairs 

Budget Crisis: A Threat to Our Vital Inter- 
ests (Shultz) 7 

Senegal. Secretary Visits Bermuda and 

Africa 23 

South Africa. Secretary Meets With ANC 

Leader Tambo (Department statement). 28 
Syria. Practical Measures for Dealing With 

Terrorism (Bremer) 1 



Terrorism 

The Foreign Affairs Budget Crisis: A Threat 

to Our Vital Interests (Shultz) 7 

Practical Measures for Dealing With 

Terrorism (Bremer) 1 

Secretary's Interview on "Meet the 

Press" 20 

U.S. Passports Invalid for Travel to Lebanon 

(Department statement) 51 

Trade. State of the Union Address 

(Reagan) 5 

Travel. U.S. Passports Invalid for Travel to 

Lebanon (Department statement) 51 

Treaties. Current Actions 90 

U.S.S.R. 

Arms Control: The East Asian and Pacific 

Focus (Rowny) 37 

Developments in NST Issues After Reykjavik 

(Nitze) 33 

Meeting of NATO's Special Consultative 

Group (chairman's statement) 46 

Nicaragua: The Moral and Strategic Stakes 

(Shultz) 14 

North Atlantic Council Meets in Brussels 

(Shultz, final communique, declaration) . 42 
Nuclear and Space Arms Talks Resume 

Round Seven (Reagan) 36 

The Nuclear and Space Negotiations: 

Translating Promise to Progress (Nitze) 29 
Secretary's Interview on "Meet the 

Press" 20 

Soviet Repression of the Ukrainian Catholic 

Church 47 

State of the Union Address (Reagan) .... 5 
United Nations. UN General Assembly 

Review for 1986 52 

Western Hemisphere. Democracy in Latin 

America and the Caribbean: The Promise 

and the Challenge 58 

Name Index 

Arias Sanchez, Oscar 56 

Bremer, L. Paul, III 1 

Nitze, Paul H 29, 33 

Reagan, President 5, 6, 36, 40, 56 

Rowny, Edward L 37 

Shultz, Secretary 7, 14, 19, 20, 23, 40, 41, 42 



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Department 



IW of State jm l| j ^ 

bulletin 



The Official Monthly Record of United States Foreign Policy / Volume 87 / Number 2121 






April 1987 




Middle East/49 



Economics/22 
Human Rights/37 

Western Hemisphere/54 



Department of State 

bulletin 



Volume 87 / Number 2121 / April 1987 



Cover: President Reagan with Israeli 
Prime Minister Shamir. 

(White House photo by Pete Souza) 



The Department of State Bulletin, 
published by the Office of Public Com- 
munication in the Bureau of Public 
Affairs, is the official record of U.S. 
foreign policy. Its purpose is to provide 
the public, the Congress, and govern- 
ment agencies with information on 
developments in U.S. foreign relations 
and the work of the Department of 
State and the Foreign Service. 
The Bulletin's contents include major 
addresses and news conferences of the 
President and the Secretary of State; 
statements made before congressional 
committees by the Secretary and other 
senior State Department officials; se- 
lected press releases issued by the 
White House, the Department, and the 
U.S. Mission to the United Nations; and 
treaties and other agreements to which 
the United States is or may become a 
party. Special features, articles, and 
other supportive material (such as maps, 
charts, photographs, and graphs) are 
published frequently to provide addi- 
tional information on current issues but 
should not necessarily be interpreted as 
official U.S. policy statements. 



GEORGE P. SHULTZ 

Secretary of State 

GEORGE B. HIGH 

Acting Assistant Secretary 
for Public Affairs 

PAUL E. AUERSWALD 

Director, 

Office of Public Communication 

NORMAN HOWARD 

Chief, Editorial Division 

PHYLLIS A. YOUNG 

Editor 

SHARON R. LOTZ 

Assistant Editor 



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Management and Budget through March 31, 
1987. 



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' 



CONTENTS 







The President 

1 A Quest for Excellence 
(Excerpts) 

The Vice President 

3 Uniting Against Terrorism 

The Secretary 

5 Meeting America's Foreign 

Policy Challenges 
8 Interview on "This Week 
With David Brinkley" 
1 1 Pursuing an Effective Foreign 
Policy 

Africa 

15 Visit of Zaire's President (Sese 

Seko Mobutu, President 
Reagan) 

Arms Control 

16 U.S. Arms Control Initiatives 

East Asia 



19 



21 



Korean Politics in Transition 
(Gaston J. Sigur, Jr.) 

Philippine Constitutional 
Plebiscite (White House 
Statement) 



Economics 

22 U.S. Trade Policy and the Trade 
Deficit (Clayton Yeutter) 

30 Imports from the EEC 

(Proclamation) 

31 Finance Ministers Meet on 

Exchange Rates (Statement) 

32 U.S. International Trade 

(White House Statement) 

Europe 

33 Poland (President Reagan) 

34 30th Report on Cyprus (Message 

to the Congress) 

34 Vienna CSCE Followup Meeting 

Resumes (President Reagan) 

General 

35 Maintaining the Momentum in 

U.S. Foreign Policy 
(John C. Whitehead) 



Human Rights 

37 1986 Human Rights Report 

Released (Richard Schifter) 

38 The Reality About Human 

Rights in the U.S.S.R. 
(Richard Schifter) 

39 Release of Soviet Political 

Prisoners (Department 

Statement) 
42 Human Rights, the Soviet 

Union, and the Helsinki 

Process (Richard Schifter) 
45 Czechoslovak Human Rights 

Initiative (President Reagan) 

Middle East 

49 Visit of Israeli Prime Minister 
Shamir (President Reagan, 
Yitzhak Shamir, Secretary 
Shultz) 

51 Kidnappings in Lebanon 

(President Reagan) 

52 Iran-Iraq War 

(President Reagan) 

Narcotics 

52 International Narcotics Control 

Strategy Report Released 

Pacific 

53 South Pacific Nuclear Free Zone 

Treaty (Department 
Statement) 



Western Hemisphere 

U.S. -Mexico Binational 
Commission Meets (Bernardo 
Sepulveda, Secretary Shultz) 

Collective Security and the 
Inter- American System 
(Historical Study) 

A Plan for Fully Funding 
NBCCA Recommendations 



54 



56 



59 



Treaties 

86 Current Actions 

Press Releases 

88 Department of State 

89 USUN 

Publications 

89 Department of State 

90 Current Documents Volume 

Released 
90 Background Notes 



Index 



HE PRESIDENT 



i Quest for Excellence (Excerpts) 



5SSAGE TO THE CONGRESS, 
N. 27. 1987' 



• • • • 



aping the International 
onomic Environment 

litmus test of whether we will be truly 
petitive in the 21st century will be our 
ity to meet the competition head-on— and 
—in the international marketplace. The 
leral government can play a key role here 
lelping to shape an international environ- 
it in which American knowledge, talent, 
entrepreneurship can flourish. 
In an increasingly interdependent world, 
rency flows, foreign government policies 
i respect to spending, saving and taxes, 
trends in foreign investment all have a 
or impact on the competitiveness of 
erican firms. We must shape these factors 
'ays that enhance, not inhibit, our com- 
tiveness. This will require improved 
lomic and monetary cooperation on a 
>al scale. We will build on progress over 
past year, including the new institutional 
ingements we have developed both 
tilaterally and bilaterally, to guarantee a 
e stable and realistic value for the dollar, 
roved growth abroad, and an accompany- 
growth in markets for American firms. 
: The developing countries, particularly 
1 e in Latin America, represent new, 

• vth markets of the next century. We will 
Ik to ensure that these markets meet their 
l potential by pressing our initiative on the 
I problem, with a view toward increasing 

* ate investment and encouraging the 

h issary policy reforms within the develop- 
a world. 

My Administration has aggressively used 
k funding provided in last year's "war 
i t" legislation to combat aggressively 

ign predatory financing practices. We will 
8 s our efforts on achieving an interna- 

i il agreement limiting these practices. But 
lie same time, our trading partners and 

1 petitors should be on notice that we will 

I Dur full authorities to counter foreign sub- 
I ed credit offers. To this end, we will be 
I ing the additional $200 million in "war 
1 1" monies promised last year. 

We will not tolerate closed markets, trade 
I iers, and unfair foreign subsidies that 
I dvantage American firms in the world 
pketplace. We will aggressively seek to 

fi foreign markets through multilateral 
bilateral negotiations and eliminate 
o ign unfair trade practices whenever and 
Irever they occur through the active use of 
x trade laws. 

We must ensure that the laws of the 
If ing system recognize the commercial 
Kities of the 21st century. We made major 
p^ess this past year in securing the launch 
M new round of multilateral trade negotia- 
is in GATT [General Agreement on Tariffs 



and Trade], We will push hard for quick 
results from the Uruguay round in areas 
critical to our competitive future, including 
agriculture, services, intellectual property, 
and investment. 

We will also seek to achieve a major 
market opening close to home. More trade 
passes between the United States and Canada 
than between any other two countries in the 
world. We are now engaged in historic 
negotiations with Prime Minister Mulroney's 
government on a free trade agreement that 
will improve commercial opportunities on 
both sides of the border and serve as a model 
for trade liberalization on a global scale. We 
will work with the Canadians and the Con- 
gress to conclude an ageement in our mutual 
interests. 

We will continue to assure that bribery to 
gain markets is deterred with criminal sanc- 
tions. However, uncertainty and ambiguity 
arising from portions of the Foreign Corrupt 
Practices Act serve as a needless disincentive 
to American business. My Administration will 
again propose amendments that eliminate 
these uncertainties by clarifying the act's 
"reason to know" and other provisions and 
reduce its costly and duplicative accounting 
requirements. 

Our trade laws have proven to be effec- 
tive instruments for opening foreign markets 
and defending American industries against 
unfair practices on the part of our com- 
petitors. I will propose improvements to these 
laws that will enhance our ability to meet the 
challenges from abroad without erecting pro- 
tectionist barriers at home. Our proposals will 
emphasize opening markets through 
multilateral and bilateral negotiation, not 
closing them; encouraging adjustment while 
providing improved relief to industries 
injured by import competition; and tightening 
our laws to make them more effective in deal- 
ing with unfair foreign competition. 



IV. International Peace 
and Freedom 

In the past 6 years my Administration has 
pursued a foreign policy based on realism— 
about the world we live in, about the nature 
of our adversaries, about the need for 
American leadership. To close gaps that had 
opened in the past, we were obliged to under- 
take a significant rebuilding of our defense 
capabilities. As a result, our allies have 
greater confidence in America, and the Soviet 
Union is more willing to work seriously for 
arms reduction. 

Peace and progress, of course, depend on 
much more than a sound military balance. 
That is why, in the same spirit of realism, we 
encourage democracy, freedom, and respect 
for human rights by all nations. In this decade 
democracy has been on the march. Country 



after country has joined those nations where 
the people rule. We have supported those 
freedom fighters who bravely make sacrifices 
so their nations will enjoy freedom and inde- 
pendence. 

The successful conduct of foreign policy 
rests upon a strong bipartisan spirit in the 
Congress, and close cooperation between the 
legislative and executive branches. I am 
pledged to continue this long-held tradition, 
and hope the Congress will see the impor- 
tance of doing the same. Toward that end, in 
the near future, I will send the Congress a 
full and comprehensive report on American 
foreign policy. 

East- West Relations 

Last October, my Iceland meeting with 
General Secretary Gorbachev brought great 
progress in the area of arms reduction. There 
is much work to do, and we continue to work 
in this area. It is, however, only one of 
several items on our agenda with the Soviets. 
No fundamental and lasting progress is pos- 
sible in one area of our relations without 
improvement elsewhere. 

My Administration is engaged in a broad 
range of bilateral and multilateral arms con- 
trol negotiations. Our objectives include: 
deep, equitable, and verifiable reductions of 
nuclear arsenals; a cooperative transition by 
the United States and the U.S.S.R. to a 
strategic regime based increasingly upon 
defenses; verifiable limits on nuclear testing; 
a global ban on chemical weapons; and con- 
ventional force reductions to redress 
imbalances in Europe. In each of these 
negotiations, we are guided by principles of 
equity, increased stability, effective verifica- 
tion and strict compliance with both past and 
future agreements. I look forward to meeting 
again with Mr. Gorbachev to advance this 
important work. 

Responsible Soviet conduct abroad is 
essential to a peaceful international environ- 
ment. I have urged Mr. Gorbachev to 
withdraw all Soviet forces from Afghanistan 
and to allow genuine Afghan self- 
determination, to cease support for Cuban 
expeditionary forces in Africa, and to pro- 
mote a withdrawal of Vietnamese forces from 
Cambodia. In the absence of such actions, the 
Soviet Union can hardly expect to be treated 
as a respectable member of the international 
community. 

In the Soviet Union today there is much 
talk of change. We must hope for a true 
break with the past, but we see both hopeful 
and discouraging signs, especially in the 
critical area of human rights. Certain better- 
known dissidents have been released while 
others continue to receive very harsh treat- 
ment; tragically, emigration remains at a 
historic low, and religious persecution con- 
tinues unabated. My Administration will 
welcome, and respond to, positive steps 
toward greater respect for human rights, 



Ml 1987 



THE PRESIDENT 



while expressing our views on the enduring 
nature of the Soviet system. 

Since I met General Secretary Gorbachev 
in Geneva, exchanges between our two 
societies have gained momentum. I hope for 
futher expansion of people-to-people contacts 
in 1987. 

One of the most important obstacles to 
improved East-West relations, which touches 
on all elements of our agenda, is the continu- 
ing unnatural division of the European conti- 
nent. Toward the states of Eastern Europe, 
our policy of differentiation remains intact; in 
particular our trade relations with them will 
continue to reflect the extent of internal 
freedom and foreign policy independence 
from Moscow. 



America in the World 

The extraordinary surge of democracy that 
we have seen in the past 6 years, particularly 
in the developing world, benefits us polit- 
ically, economically, and strategically. 
Democratic transitions are nonetheless 
fragile; they require constant nurturing and 
careful support. This Administration will con- 
tinue to work with and support those nations 
that share our interests and values. By 
diplomatic and other means we can help 
create the peaceful environment in which free 
institutions flourish. 

To help create such an environment, the 
Congress should support adequate funding 
levels for economic and security assistance. 
The year 1987 is the 40th anniversary of the 
Marshall Plan, a reminder that American 
commitment and generosity serve our own in- 
terests while changing the course of history 
for the better. Our goal is to foster peace and 
stability by helping friendly nations to defend 
themselves and by encouraging market- 
oriented economic growth abroad. We con- 
tinue to work toward the elimination of 
hunger and extreme poverty for both 
humanitarian and security reasons. Thus, 
American interests are harmed if our pro- 
grams in this area are cut by the Congress 
below adequate levels, as they have been. 

The advance of democracy and the 
strengthening of peace are closely related. 
Nowhere is this clearer than in our own 
hemisphere. We must continue to provide 
support and assistance to freedom fighters in 
Central America. To that end I will ask the 
Congress for renewed assistance for the 
Nicaraguan democratic resistance, which 
faces a Leninist dictatorship that has received 
over a billion dollars of Soviet-bloc arms. I 
also strongly support a supplemental appro- 
priation for the economic development of the 
Central American democracies. 

State-sponsored terrorism has increased 
dramatically in the last few years. When such 
incidents go unpenalized, further terrorist 
efforts are encouraged. We will continue to 
build our capability to deter and, when 
necessary, to combat swiftly and effectively 
state-sponsored terrorism worldwide. In this 
regard, I am requesting necessary funding to 
continue the multi-year program to improve 
the protection and security of our personnel 
and facilities overseas. 



The people of the Philippines, whose 
history is closely linked with ours, acted last 
year to reconfirm their democratic traditions. 
We encouraged them, and applauded their 
success. This year, my Administration will 
seek addditional support to assist the Aquino 
government, as it confronts serious economic 
and security problems. The rebuilding of 
political institutions and restoration of 
investor confidence are Filipino goals that 
America must support. 

My Administration will continue to 
enforce the Comprehensive Anti-Apartheid 
Act of 1986. We seek an end to apartheid and 
will use our influence to foster a peaceful 
transition to a truly free, democratic, and 
multi-racial society. We will offer a special 
economic assistance program for southern 
Africa. We will also seek to restructure 
economic assistance to Africa so as to rein- 
force positive policy reforms in a growing 
number of African nations. This approach, 
whose goal is to promote investment and 
economic growth in Sub-Saharan Africa, is 
reflected in the Administration's FY 1988 
budget request. 

The United States must be able to com- 
municate information and ideas on a world- 
wide basis. Ongoing expansion of America's 
international broadcasting capability— the 
Voice of America, Radio Free Europe/Radio 
Liberty, and Radio Marti— must, therefore, 
continue. Increased resources for the United 
States Information Agency are also needed to 
reach this goal. In addition, the National 
Endowment for Democracy and its subsidiary 
elements— including free labor, free enter- 
prise, and the political parties— permit the 
United States to help strengthen the infra- 
structure of democracy, particularly in the 
less developed countries. Funding for this 
program is very small; the potential return on 
our investment, very high. 

In the past, the ideals of the UN Charter 
have often been trampled under foot. The 
United States remains committed to restoring 
efficiency and impartiality to the United 
Nations and effectiveness to its peacekeeping 
activities. We will use our influence to restore 
respect in the UN for the principles on which 
it was founded. 

My Administration will continue efforts to 
achieve the fullest possible accounting of our 
servicemen missing from the Vietnam war. 
Recent progress can continue with the strong 
bipartisan support in the Congress for this 
humanitarian issue. Also, my Administration 
is committed to aiding refugees and those 
countries providing first asylum to them. 
International organization support, 
multilateral and bilateral programs, and 
resettlement opportunities in the interna- 
tional community are all required to ensure 
humanitarian treatment of these homeless 
and shattered peoples. 

The Administration is proud of a path- 
breaking agreement reached this year with 
the Pacific island states over the long- 
contentious tuna fishing issue, one that our 
adversaries have tried to exploit. Modest but 
indispensable funds are needed to meet our 
obligations under the agreement. 



Maintaining A Strong 
National Defense 

The increased resources we have devoted! 
national defense in the past 6 years have n 
brought many benefits— above all, a lastnl 
peace. Our forces have been modernized, ft 
quality and spirit of those in uniform hav<B 
risen to the highest levels, and we have bran 
work on new technologies that can pro tec W 
America in the future and free us from tlL 
nuclear balance of terror. 

All these efforts must continue. We n ft 
realistic and sustained growth in defense n 
funding to consolidate the real gains we 1 B 
made. The alternative is unacceptable: sp I 
ing less will unavoidably mean less securiH 
We cannot keep America strong without k 
mitting the resources that this effort 
requires. 

In keeping with the recommendation 
the Packard Commission, and as requirec 
the 1986 Defense Authorization Act, I ha 
submitted a 2-year national defense budg 
for 1988-1989. The Packard Commission 
stressed no point more than the need for 
greater stability in defense funding. Rolle 
coaster, surge-and-starve budgeting leads 
higher costs and dangerous risks to natio 
security. Furthermore, I want us to get o 
money's worth from every defense dollar 
spent. Under the leadership of the Secret 
of Defense, with the expert help of the n« 
Under Secretary of Defense for Acquisiti' 
this Administration will continue to take 
important strides toward improving the 
acquisition system. Other major changes 
DOD organization and the procurement 
system have been underway, some since I 
beginning of this Administration. So I ho] 
the Congress will withhold further efforts 
legislate defense procurement reform unt 
the effect of these changes can be fully 
evaluated. 

Our strategic modernization program 
essential to assuring our national safety i 
the years ahead. The strength it provides 
also the indispensable foundation for 
negotiating the deep cuts we seek in nucl 
arsenals. The Soviets are willing to barga 
and make concessions only if they unders 
that— in the absence of agreements— Ame 
will provide for her own security. 

Strategic Defense Initative research 
explores the way to move toward a world 
which effective defenses, rather than thrt 
of retaliation, keep the peace. This vital p 
gram reinforces our policy for arms 
reductions— as an incentive for the Soviet 
agree to real arms reductions and as an 
insurance against cheating on arms reduc 
tions agreements. The pace of research tc 
date has been impressive, and I will ask tl 
Congress to increase funding so that we c 
continue moving forward. 

My Administration will continue to m; 
tain an effective nuclear deterrent, but at 
same time it is essential that we and our s 
modernize and strengthen conventional la 
air, and naval forces so they can carry out 
their missions in the face of a steadily 
increasing Soviet threat. That will cost mi 
money than the Congress has been willing 
vote the last 2 years, but it is essential. 



Department of State Bulli 



THE VICE PRESIDENT 



America will continue to deploy military 
fees throughout the free world as proof of 
Kdarity with our Allies and other friendly 
rf;ions, and as a deterrent to those who 

xht threaten our peace and freedom. For- 
ird deployments not only underscore our 
yonal policies, but also provide valuable 

ercises and training for Active, Guard, and 
ifeerve Component Forces. 

' The Soviet Union has the world's only 
.■■■rational ASAT [antisatellite] system. The 
1 5. miniature homing vehicle ASAT system 
It can deter the Soviets from using their 
item in times of crisis is in development. Its 
it program, however, has been blocked by a 
jgressional unilateral ban that prohibits 
ij:s against targets in space. The Soviets are 
ller no such prohibition. I will continue to 
1 e the Congress to lift this moratorium as 
|n as possible. I will strongly oppose its 
gension beyond October 1, 1987. Such 
lateral restrictions on the United States 
we the Soviets with capabilities that 
I anger America's security. 

: Keeping America strong means more 
li acquiring ships, tanks, and planes. Those 
1) wear the uniforms of our armed forces 
r;t receive appropriate recognition for the 
1-ifices and hardships that they are called 
In to endure on our behalf. My Admin- 
s itimi will take the necessary steps to con- 
I e to improve the quality of life for those 
iiniform. In this way we can retain the 
I i-quality trained people serving now, all as 
I nteers, and provide sufficient incentives 
k ecruit the qualified people that we need in 
i future. 

I As we revitalize our naval forces, we face 
1 need to build home port facilities that can 
■•mmodate our growing fleet and to pro- 
I our vital merchant ports in the least 
I erable but affordable way. We must con- 
me to implement and expand our strategic 
I e-porting program. 
I Last fall I sent to the Congress a classi- 
I report on the threat to our security from 
I activities of hostile intelligence services. 
I report set out a blueprint of legislative 
1 administrative measures to enhance our 
I ty to meet this threat. I hope the Con- 
1 s will act on our recommendations. 
1 We must maintain the viability of our 
I nology base and pursue new 
Itlopments in conventional weapons 
1 nology. The armaments cooperation 
lative with our allies helps us to improve 
I isition management, share technological 
I .nces within the alliance, and enhance col- 
1 ve defense. The Soviet Union should 
I rd the industrial unity of the West as an 
I ratable force. We must not squander our 
I s through careless or felonious transfers 
I chnology to potential adversaries. My 
■dnistration will continue our successful 
I 't to curb the theft of strategic 
l°gy by the Soviet bloc. 



Conclusion 

year of the 200th anniversary of our 
stitution affords us the opportunity to 
e momentous strides in our quest for 



national excellence. It will require the efforts 
of all of us— not just the government, but all 
the people. To achieve this greatness really 
comes down to just being our best. No 
government plan or program is capable of 
enacting such sweeping change and reform. 
All the Federal spending in the land cannot 
buy excellence. It must occur as part of the 
natural instinct of free people to compete for 
the highest standard. The proposals and 
actions outlined in this message will form the 



foundation to meet the challenge of the third 
American century. 

I look forward to working with the Con- 
gress in a bipartisan fashion in order to 
achieve this worthy goal. For when it comes 
to the future of America, there must be no 
Republicans or Democrats— only Americans. 

Ronald Reagan 



•Text from Weekly Compilation of 
Presidential Documents of Feb. 2, 1987. 



Uniting Against Terrorism 



Vice President Bush's address before 
an international conference on terrorism 
sponsored by Discover magazine on 
January 20, 1987. l 

I appreciate the opportunity to address 
this important conference on terrorism. 
In light of recent events and the specula- 
tion surrounding the U.S. counterter- 
rorism policy, you could not have 
scheduled your conference at a more 
appropriate time. 

A few weeks ago I spoke about our 
initiative toward certain factions in Iran. 
And I mentioned then that a widespread 
perception exists that this Administra- 
tion traded arms for hostages, thereby 
violating our own strong policy of mak- 
ing no concessions to terrorists. When 
all the facts are out, the American peo- 
ple can make up their own minds on that 
key question. But the American people 
should also know that the President is 
certain to this very day that he did not 
authorize "arms for hostages." 

At the same time you should know 
the concern that the President feels, that 
we all feel, when an American in ter- 
rorist hands is tortured and, in the case 
of William Buckley, killed. We will 
explore every channel, run down every 
lead. We will go the extra mile to free 
those American hostages. 

I am here tonight to reaffirm our 
policy— a policy that we have built 
through arduous work and courageous 
example. 

When we intercepted the hijackers 
of the Achille Lauro and helped bring 
them to justice, we took tremendous 
risks on behalf of a terrorism policy that 
was born of great conviction. When we 
flew our bombers for hours through the 
night to attack Libya's training camps, 
we again put our policy on the line. It is, 
therefore, with a profound sense of loss 
that I view this existing perception that 
we have abandoned our policy of not 
negotiating with terrorists. 



I believe we must reaffirm our policy 
with a better understanding that there is 
a very thin and delicate line between 
talking with terrorists and negotiating 
with terrorists. As Terry Waite [per- 
sonal envoy of the Archbishop of Canter- 
bury] can surely attest, searching for 
ways to communicate with hostage- 
takers can be a ghostly business. Out of 
adversity comes opportunity. And we 
now have the opportunity to restore the 
credibility of our policy, give it new 
meaning, and move forward with a 
renewed commitment in our battle 
against the terrorist threat. 

Having said that, let me read three 
sentences from the report on my task 
force on combatting terrorism. "Ter- 
rorism is a phenomenon that is easier to 
describe than to define. It is the 
unlawful use or threat of violence 
against persons or property to further 
political or social objectives. It is 
generally intended to intimidate or 
coerce a government, individual or 
groups to modify behavior or policies." 

Now let me reaffirm the policy this 
Administration will follow in combatting 
terrorism. Let me restate the strong, 
straightforward language that continues 
to guide our policy. 

We do not make concessions to ter- 
rorists. We do not pay ransoms. We do 
not release prisoners. We do not 
encourage other countries to give in to 
terrorists. And we do not agree to other 
acts that might encourage future 
terrorism. 

It was back in July of 1985 that the 
President asked me to chair a cabinet- 
level task force on counterterrorism, and 
it was almost exactly 1 year ago this 
month that we issued our report. In all, 
the task force made 44 recommendations 
that constituted a unified strategy for 
fighting terrorism and that significantly 
improved our nation's capacity for 
addressing this threat. 



il 1987 



THE VICE PRESIDENT 



The most important achievement of 
the task force was to bring together the 
various parts of the government to agree 
to broad rules for action. We settled 
festering problems of jurisdiction. We 
resolved policy issues regarding the 
seriousness of the terrorist threat and 
the range of actions appropriate to deal- 
ing with it. And we set these issues in 
the context of a broader strategy— a 
strategy that has brought home some big 
victories. 

Recent Incidents 

As a result, we have made great pro- 
gress in thwarting potential terrorist 
attacks. While only successful terrorist 
acts receive front-page coverage, I'd like 
to draw your attention to some of the 
attempted attacks that we've helped 
prevent. 

For example, in Turkey last April, 
security officers arrested Libyan- 
supported terrorists who were planning 
to attack the U.S. Officers' Club in 
Ankara during a wedding celebration. 
Those arrests were possible, in large 
part, because of our joint intelligence 
efforts. In Paris, at about the same time, 
officials thwarted a similar attack 
planned against citizens in a visa line at 
the U.S. Consulate. Again, we helped. 

Of course, our ultimate objective is 
to join with other nations devoted to 
peace and freedom so that we can wipe 
this planet clean of terrorism. Interna- 
tional terrorism demands an interna- 
tional response. And we have a long, 
long way to go. Believe me, I know this 
all too well. 

In June of 1985 I stood on the hard 
earth at Andrews Air Force Base, and I 
received in the name of this country the 
body of a young man named Robert 
Dean Stethem. You remember that 
name. He was the Navy enlisted man 
who was shot to death by terrorists on 
TWA Flight 847. They tortured him and 
then they shot him in the head. They kill- 
ed him because he was an American 
serviceman. 

A few months later, another gang of 
terrorists hijacked the Achille Lauro. 
Leon Klinghoffer was on board taking a 
last holiday cruise with his dying wife. 
The terrorists singled him out, a sick old 
man in a wheelchair, and they executed 
him. They killed him because he was an 
American. 

Last March, four American terrorist 
victims included a mother and the baby 
she held in her arms. Not long after- 
ward, two American soldiers and a 
Turkish woman were killed and another 
150 people injured in the bombing of a 
West Berlin nightclub; a nightclub, I 



might add, that was targeted because it 
entertained Americans. 

As an American official, it's natural 
for me to highlight incidents where 
Americans have been killed. But I refer 
to these specific attacks to make a more 
general point. And that is that ter- 
rorism, wherever it takes place, is 
primarily directed against democratic 
governments and their citizens. The 
moral values on which democracy is 
based— individual rights, equality under 
the law, freedom of thought, freedom of 
religion, and the peaceful resolution of 
disputes— are all threatened by those 
who attempt to impose their will through 
terrorist violence. 

Terrorism ranks as one of the 
greatest modern day threats to 
democracy in our own hemisphere. Con- 
sider for a moment Latin America, 
where in recent years Argentina, El 
Salvador, Peru, Colombia, Guatemala, 
Honduras, Brazil, and Bolivia have all 
taken impressive strides toward 
democratic rule. These countries, led by 
strong and sometimes heroic statesman- 
ship, are building new, more open 
societies for their people in the face of 
murderous outfits such as the FMLN 
[Farabundo Marti National Liberation 
Movement] in El Salvador, the AVC 
[Alfaro Lives] in Ecuador, the M-19 in 
Colombia, and the Nicaraguan and 
Cuban Governments— both of which have 
been exporting subversion and terrorism 
throughout our hemisphere for years. 

Terrorist Claims and Goals 

Terrorists and their apologists fre- 
quently claim that they are merely 
"soldiers" or "guerrillas" or "freedom 
fighters" in a struggle for national 
liberation. I reject this premise. And the 
American people reject it. 

Terrorists are criminals. They use 
murder, torture, hijacking, and the kid- 
napping of innocent people to further 
their own evil ends. In some cases the 
terrorist may even intend that his 
actions escalate into general warfare. 
But that does not convert a terrorist into 
a soldier any more than his political 
aspirations turn him into a statesman. 

When terrorists aim their machine 
guns at a peaceful sidewalk cafe as they 
did in El Salvador in 1985, or when they 
slaughter worshipers as they did in an 
Istanbul synagogue just 4 months ago, 
they forfeit all right to call themselves 
soldiers or freedom fighters. 

Terrorism attempts to erode the 
legitimacy of democratic institutions. Its 
real and lasting effects cannot be 
measured in body counts or property 



damage but rather by its long-term 
psychological impact and the subsequ t 
political results. 

The terrorists' cry is: Don't trust j 
your government, your democratic in 
stitutions, your principles of law. Nor 
of these pillars of an open society can^ 
protect you. Give in to our demands. 1 
terrorists' goal is to attract attention I 
themselves and to their causes in 
defiance of democratic and legal proc 
esses. In that sense, terrorism is a kii 
of violent graffiti, and simply by capti 
ing headlines and television time the 1 
rorist partially succeeds. 

Our Response 

But the greater danger lies in our 
response. If democratic governments 
appear indifferent or impotent in the 
face of terrorists, they imply that the 
is something to what the terrorists ha 
to say. As a stable and prosperous coi 
try, a society Abraham Lincoln called 
"the last, best hope on earth," the 
United States has a duty to help 
freedom-loving and democratic counti 
throughout the world, especially those 
our own hemisphere, combat terrorisi 
It is neither bravado nor alarmist sen 
ment, but simple historical fact, that ; 
lack of national will, an attitude of "i{ 
nore terrorism and it will go away," v 
result in more, not fewer, terrorist 
assaults. The British military historiai 
Sir Robert Thompson once defined a 
country's military power as its appliei 
resources plus its applied manpower 
multiplied by its national will. In the 
West's war against international ter- 
rorism, it is critical that would-be ter- 
rorists know that their actions will re, 
in retribution. 

At the same time, we do not take 
pleasure in confrontation or bloodshei 
We do not look for fights. Military sol 
tions can never be our first choice. E\ 
in the case of our air strike against 
Libya, we tried every peaceful and 
diplomatic means of convincing Col. 
Qadhafi that his support of terrorism 
was unacceptable; when we acted and 
acted boldly the initial gasp turned int 
broad support for a message the Coloi 
heard loud and clear. So let there be n 
confusion, least of all among would-be 
terrorists. If a terrorist act is commit- 
ted, we will come after you. And if we 
find you, we are going to bring you to 
justice. 

Not only is the United States com- 
mitted to bringing terrorists to justice 
but we have encouraged all civilized 
nations to join us in hunting down 
suspected terrorists. 



Department of State Bull< 



THE SECRETARY 



As you know, last week the long arm 
cthe law caught up with two Lebanese 
lyn, both of whom are believed to have 
is to Shi'ite Moslem terrorist groups 
: it have attacked American targets in 
, t past. In fact, one of those men, 
; ihammed Ali Hamadei, may have been 
Solved in the murder of Robert Dean 
f 'them, the young serviceman I talked 
rout earlier. 

i I want to share with you what I told 
A parents on that day when his body 
Ene home to its final resting place. I 
1 1 them that we understood the lesson 
) heir son's tragic death. I told them 
It we would not forget him. Three 
is ago, Robert Stethem's dad called 
ir up. He told me that he and his wife 
;pd half the night when they heard that 
>1 of the men who might well have 
ordered Robert had been captured. 
Bi see, the Stethems, their marvelous 
ftng son murdered in cold blood, don't 
»it revenge. They simply want justice. 
[ Id him again that America hasn't 
batten his brave son. Well, we 
len't. And our friends in Germany, 
tie who deserve the credit for appre- 
nding Mr. Hamadei, haven't forgotten 
1 er. And none of us are going to rest 
n 1 Hamadei is brought to justice. 

One of the key points in our task 
y e report related to more interna- 
:i al cooperation on extradition. I want 
x ike this opportunity to thank the 
J mans for their fine cooperation on 
i extradition process of Hamadei. 

We have to stand up to terrorism, 
u we have to keep standing up until 
v ;top it. That's why our policy has 
X i, and continues to be, no conces- 
i s to terrorists. 

Our counterterrorist policy has 
■e ized many successes these past few 
re 's. But as a great nation that sees 
ti f as a powerful force for good in a 
i >nt world, we recognize that we will 
K always succeed. Nevertheless, we 
I ! to try. 

This Administration has tried hard 
» ake the world a safer place in which 
»i /e. And we have tried hard to give 
le ocracy and freedom a better chance. 
N 1 1 our allies' help, and with the sup- 
w and trust of the American people, 
« vill move forward united in our com- 
ni lent to stopping terrorism, united in 
iu :ommitment to democracy and 
t« iom, and dedicated to carrying out 
>u obligations as the leader of the free 
»« d. Our fight against terrorism rages 
M t's a fight that together we must 



Text from the Office of the Vice Presi- 
te! s Press Secretary. ■ 



Meeting America's 
Foreign Policy Challenges 



Secretary Shultz s address before the 
Institute of International Education and 
the World Affairs Council in Denver on 
February 20, 1987. 1 

Today, I want to talk with you about the 
role the United States seeks to play in 
the world. Overall, our foreign affairs 
situation is good and our prospects 
bright. We have a strong hand with 
which to influence world affairs to our 
benefit— but only if we are persistent, 
use our advantages wisely, and apply the 
necessary resources to the conduct of 
our foreign relations. 

To do so, we need to have clearly in 
mind just where we are and where we're 
going; the problems we face and the 
strengths we have for dealing with 
them; and, finally, the challenges that 
we should be focusing on right now. And 
that's the purpose of my remarks to you 
today. 

America's Foreign Policy Goals 

We begin with the question of our 
foreign policy goals. What are we, as a 
people and a nation, seeking to 
accomplish? 

There is a strong consensus on our 
basic objectives. They are widely 
understood and supported by the 
American people. I think all of us can 
agree that we serve the interests of the 
United States best when we seek to: 

• Protect the safety of our nation 
against aggression and subversion; 

• Promote our domestic prosperity; 

• Foster the values of freedom and 
democracy both at home and abroad; 

• Act in a manner consistent with 
our humanitarian instincts; and 

• Combat those activities which 
undermine the rule of law and our 
domestic stability— particularly, right 
now, terrorism and narcotics trafficking. 

Over the past four decades, both 
Republican and Democratic administra- 
tions have come to agree on these goals. 
They're not the source of divisive par- 
tisan debate. But for that very reason, 
we sometimes take them for granted. 
We shouldn't. We should keep reminding 
ourselves of them, for they represent, in 
effect, the compass of our dealings with 
other nations. 



Foreign Policy Problems 

Now, how are we doing in accomplishing 
these broad objectives? 

Clearly, we face a number of serious 
and immediate challenges in the world 
today— ones that directly affect our 
national interests. In the Middle East, in 
Africa, and elsewhere, persistent ten- 
sions threaten regional peace and stabil- 
ity. The continuation of conflict in the 
Persian Gulf raises the possibility of 
wider escalation of a war that threatens 
our energy security and that of our 
allies. In Central America, democracies 
are struggling to eliminate externally 
supported aggression and subversion. In 
Afghanistan, Angola, and Indochina, the 
Soviet Union and its proxies are using 
military force in the most brutal manner 
to maintain and expand their influence 
and control. 

Elsewhere in the developing world, 
the efforts of local governments to 
address the root causes of their 
economic and social malaise have been 
hampered by large foreign debt and 
disappointing growth rates. The transi- 
tion to greater political freedom in many 
of these countries continues to be a 
fragile process. 

Current events in Beirut have yet 
again illustrated that no single country 
or its citizens are exempt from the 
scourge of terrorism. Combating that 
threat will continue to demand steadfast 
courage and expanded cooperation on 
the part of all civilized nations. 

And among the major industrialized 
democracies of the world, we confront 
persistent pressures for thinly disguised 
protectionist measures. These short- 
sighted actions would only stimulate 
political confrontations among trading 
partners. They would have the effect of 
dismantling the open world trading 
system which has helped to generate so 
much of the West's prosperity and 
technological advantage of the past four 
decades. 

Positive Trends in Our Favor 

Now, that's the catalogue of problems. 
But more than balancing those problems 
is increasingly clear evidence that we are 
making significant progress in the world. 
Trends are in our favor. The movement 
toward expanded political and economic 
freedom is real and growing. 



II 1987 



THE SECRETARY 



Our world is already in the midst of 
a scientific and technological 
revolution— one whose social, economic, 
political, and strategic consequences are 
only beginning to be felt. Time and space 
are contracting as instantaneous com- 
munications make business, politics, and 
culture truly global for the first time. 
Familiar measures of economic 
development— and, by extension, 
military and political strength— are 
becoming outdated. This new informa- 
tion age is bound to have, and already 
has had, a profound impact on world 
politics and economics. 

My own belief is that, having long 
since passed from the agricultural age— 
although we still produce more than 
enough food to feed ourselves— we in 
this country have left the industrial age, 
and we're in a new era. No longer, if 
somebody asks you, "What is the symbol 
of America's economy?"— well, maybe 
once you would have said the blast fur- 
nace and the assembly line. You 
wouldn't say that today, would you? It's 
different. 

This new information age has the 
potential to be our age— a period which 
plays to the great strengths of the West. 
The productivity and competitiveness of 
a nation will be far more dependent on 
how freely knowledge can be used and 
shared. And unlike oil or mineral wealth, 
knowledge is a resource that does not 
diminish but, rather, increases with its 
use. In this sort of environment, open 
societies such as our own will thrive; 
closed societies will fall behind. What is 
more, this lesson— that freedom and 
openness are the wellspring of 
technological creativity and economic 
dynamism— is increasingly well 
understood throughout the world. 

Recent events in the Philippines 
have once again demonstrated the 
power of the democratic idea. Through- 
out Latin America, we have seen a 
remarkable resurgence of democratic 
governments. Contrary to predictions of 
just a few years ago, the percentage of 
Latin America's population living under 
freely elected governments has grown 
from 30% in 1979 to more than 90% 
today. In witnessing these events, we 
cannot be indifferent to just how positive 
and important a role the United States 
can play in supporting such develop- 
ments. 

At the same time, there is an equally 
encouraging trend on the part of many 
nations away from central planning 
toward greater economic freedom for 
the individual and increased reliance on 
free market-oriented solutions to the 



problems of economic growth. Few coun- 
tries would now dispute that entre- 
preneurial initiative in a market 
environment is the engine of develop- 
ment and growth. These truths are being 
acknowledged even in the communist 
world, as demonstrated by economic 
reforms in China and Hungary. 

All this reflects that the great 
ideological struggle that has marked this 
century ever since the Bolshevik revolu- 
tion of 1917 has essentially been decided. 
In the contest between the Western 
values of democracy and individual 
freedoms and Soviet-style, party- 
dominated centralized collectivism, the 
trend is in our favor, and it's clear. In 
contrast with earlier decades, no one 
speaks today of communism as the wave 
of the future. The battle of ideas will 
doubtless continue, but we have the 
winning hand. 

As a consequence, it is the Soviet 
Union's massive military might alone— 
and not any inherent economic advan- 
tage or political appeal— that underlies 
its status as a global competitor. The 
Soviet Union possesses a clear and 
sobering strategic threat to the United 
States and its allies. It has the capability 
to intervene with conventional military 
force, directly or through proxies, in 
many regions of the world and to 
threaten and to try to intimidate our 
allies and friends in these areas. It com- 
mands a massive nuclear arsenal and, in 
particular, an offensive ballistic missile 
force able to inflict great destruction on 
the United States and our allies. 

We must be prepared to counter 
these threats. We must be prepared to 
deter Soviet aggression against the 
United States or its allies, by whatever 
means. We must have the defensive 
strength necessary to demonstrate that 
we and our allies would be able to 
respond instantly, and with enormous 
effectiveness, should we be attacked. 
That's the way to keep the peace, to 
have the capacity to deter. 

Why Our Approach Works 

As a nation, we have the ability to meet 
these challenges. We can capitalize on 
the foreign affairs opportunities before 
us. To do so, we have to show patience 
and determination— but we have power- 
ful advantages in our favor. 

The first of these advantages is 
our democratic vision. The effec- 
tiveness of our foreign policy reflects our 
confidence in our beliefs and values and 
in our purposes and priorities as a 
society. People throughout the world 



look to us for a vision of the future, 
precisely because so many individual 
Americans— such as Martin Luther Ki 
Jr., whose birthday we celebrated 
recently— have worked to extend the 
promise of our beliefs to everyone, 
regardless of race, creed, or class. Am 
by so doing, they have made America 
stronger in the world: stronger in our 
own sense of solidarity as one people ; 
stronger as a precious source of hope- 
realistic hope— for oppressed people 
everywhere. 

And we gain strength from our 
tremendous economic capabilities. 

America's economic capacity— its abili 
to support ambitious national objective 
to advance the edge of technological 
creativity, and to support increased 
domestic prosperity— can only be 
described as awesome. Of course, we 
have our problems— and not the least 
Federal budget deficit that we must 
address promptly and effectively, and 
I'm confident we can. And by doing s( 
we will be better able to draw upon th 
powerful economic advantages that w 
possess in the pursuit of our foreign 
policy objectives. 

We are also benefiting from a 
renewed sense of hard-headed realis 
about the importance of our own 
military strength. Healthy American 
defenses are the indispensable underp 
ning for any American foreign policy 
seeking a safer world and a more 
durable peace. Our weakness invites 
challenges and intransigence; our 
strength deters aggression and 
encourages restraint and negotiation 
the part of our adversaries. But we fa 
entirely new security challenges in 
today's world, including protracted 
armed subversion, state-sponsored tei 
rorism, or the political disruption and 
violence associated with large-scale n; 
cotics trafficking. If we are to be effei 
tive in meeting these threats— as well 
in deterring more traditional forms of 
aggression— we have to be steady in s 
porting our commitments and ready t 
act decisively when necessary. We ha' 
to show the political will to use our 
military strength intelligently and effi 
tively in defense of our most vital 
interests. And we have to be clearly 
perceived by both friends and adver- 
saries as having that will. 

Now let me turn to our diplomai 
efforts. Power and diplomacy are not 
contradictory alternatives in our deal- 
ings with the world. They are com- 
plementary and reinforcing componen 
of our foreign policy. Military pre- 
paredness alone is not enough. 



Department of State Bullw 






THE SECRETARY 



9>lomacy is an essential and cost- 
fcctive means of accomplishing our 
Isctives. But diplomacy that is not 

■ ked up by military strength is usually 
Kfective. And so, as a first resort, we 
Ik to meet our objectives with 
llomacy. It can encourage like-minded 
i ions to join with us in common effort 
|l bring a greater sense of predictabil- 
land stability to our relations with 
lential adversaries. If we attempted to 
ill with the diverse threats to our 

! Tests on a unilateral basis, this would 
liand great effort and enormous 
lense on our part. But there is a more 
Icient strategic alternative. Our 
lomacy— along with its various tools 
ii as security assistance and economic 
flport funding— seeks to maximize our 
ictiveness in the world through 
alteration with those nations with 
Ich we share basic values and common 

■ rests. 



f! Foreign Affairs 
it ource Crisis 

lis far, I have spoken about America's 
H ning hand in world affairs because I 
il personally confident about our 
lonal strengths and the wisdom of our 
j?ral approach. But I also have to 

■ id a warning note as well. Just as we 
laid be consolidating our recent gains, 

■ ire in danger of undercutting our 
^ tion in the world by denying 

■ .elves the necessary resources. Any 
ft tegy is only as good as the tools pro- 
I d to work toward its objectives. And 
(I ire fast approaching a situation in 
Ith the United States will simply not 
I ! the foreign policy tools needed to 

[t the job done. 

Last month, the President submitted 
» le Congress his fiscal year (FY) 1988 
■ FY 1987 supplemental requests for 
h 'oreign affairs budget— some $19.6 
)i >n. I can assure you, the budget 
•e est was no pie-in-the-sky wish list. It 
B 'Cted a number of tough choices that 
I lad to make as part of our contribu- 
I to reducing the overall Federal 
1 :it. As a result, our request for FY 
I ! is $1.6 billion lower than for the 
I ious year. Our total request amounts 
» ss than two cents on every dollar 
* iosed to be spent by the Federal 
;c >rnment. 

This year, as the Congress begins to 
M ;w our foreign affairs budget 
Best, there is no fat to be cut— we've 
ftidy gotten to the bone and well 
X ind. Over the past 2 years, Congress 

■ made devastating cuts in our foreign 
Hirs budget proposals. We have lost 



over $3.3 billion from the resources we 
were operating with in FY 1985, and 
we've had mild inflation since then, but 
some inflation, so the real value is even 
less. And, remember, a portion— roughly 
40% or so— of that budget is fixed. It 
doesn't get cut. So the cuts get borne 
heavily by the remainder. And if you are 
trying to operate an embassy in Japan or 
in Western Europe where the currency 
cross-rates have changed drastically, 
you're in tough shape. 

But these drastic reductions were 
not generated through any careful deter- 
mination of national priorities. They 
didn't reflect any lessening in the 
importance or number of foreign policy 
challenges that this nation faces in the 
world. These cuts were more severe, in 
percentage terms, than the reductions in 
any other function in the President's 
budget requests. And, as I was saying, 
for our key posts in Europe and Japan, 
they have been even more damaging as a 
result of the recent decline in the dollar. 

But what do these figures really 
mean? These draconian budget reduc- 
tions are forcing us to play Russian 
roulette as we shortchange our various 
foreign policy interests. If massive cuts 
are continued this year, they will directly 
undermine our ability to exercise effec- 
tive leadership in the world. 

This budget crisis is perhaps the 
most urgent— and the least recognized- 
foreign policy problem facing our nation 
today. These cuts have seriously 
impaired our ability to provide necessary 
economic and military support for our 
allies and friends in need. By doing so, 
they risk our continued access to vital 
military bases and facilities overseas 
that would require tremendous expense 
and effort for us to try to replace or 
compensate for. They signal— correctly 
or not— a declining U.S. interest in sup- 
porting our friends and allies in 
strategically important regions. 

And the effects of these cuts go fur- 
ther. They hamper our war on drug traf- 
fickers and on terrorists. They restrict 
our attempts both to promote 
democratic values and reforms overseas 
and to expand trade and develop jobs. 
And, by forcing us to close overseas 
posts and to curtail necessary training, 
such as language training, they are 
weakening not only our career Foreign 
Service but the government's very 
ability to follow, analyze, and understand 
developments in a fast-changing interna- 
tional environment. 

Let there be no mistake: the expend- 
iture of resources in support of our 
foreign policy objectives is not any sort 



of a "giveaway." Our foreign affairs pro- 
grams are designed to advance U.S. 
national security interests. They're a 
cost-effective way of doing so, and they 
make less likely the possibility that we 
will have to fall back on military means 
to counter threats against us. They are 
an investment in a better future for 
ourselves and our children. Attempting 
to save some dollars in the short run 
through deep cuts in these programs 
may turn out to be a very expensive 
illusion. Over the longer term, these cuts 
may cost us much more— in money, in 
jobs, and even in lives. 

Challenges Before Us 

And that should be an important lesson 
for all Americans. The pursuit of an 
effective foreign policy— one that seeks 
meaningful progress toward our basic 
goals— doesn't lend itself to quick fixes. 
Americans have to be prepared to con- 
duct foreign relations on a coherent, 
long-term basis. But that requires a 
special steadiness and persistence on our 
part. A world of peace and security will 
not come without considerable exertion 
or without our facing up to some tough 
choices. 

In particular, we cannot allow 
ourselves to lose our sense of focus on 
what we are seeking to achieve in the 
world and what is required to reach 
those ends. It would be all too easy for us 
as a society to become distracted from 
what is truly at stake in the most urgent 
foreign policy challenges now facing us. 

The first such challenge lies with our 
firmness and reliability in promoting the 
cause of democracy, national self- 
determination, and individual freedom in 
various parts of the world. In some 
cases— as in the Philippines today— this 
will involve our continued support and 
assistance for the efforts of the Filipino 
people to strengthen democratic institu- 
tions in the face of a bitter communist 
insurgency and economic problems. It is 
in our strategic interest to do so and to 
do all we can to support President 
Aquino's government in promoting 
democracy, stability, and prosperity in 
the Philippines. 

Where necessary— as in Central 
America— we must be prepared to assist 
friendly governments in dealing with 
externally generated threats to their 
political stability. We desire a peaceful 
and negotiated resolution to such 
regional tensions and will work, and do 
work, actively to those ends. But we 
should never forget that the firmness of 
our support for threatened democratic 
governments is a necessary incentive for 



■il 1987 



THE SECRETARY 



potential aggressors to refrain from 
threats and attempts at subversion. 

Today, we also see the power of the 
idea of freedom calling into question the 
old assumption of the inevitable perma- 
nence of dictatorships of the left in 
various countries. Soviet-sponsored 
aggression in Afghanistan, Angola, and 
Cambodia, and the oppression of a 
Marxist-Leninist regime in Nicaragua, 
have given rise to resistance movements. 
These men and women are struggling 
for the rights denied them by communist 
rule. And, as such, they deserve our 
support. 

We should be under no illusions. 
Over the longer term, our reliability in 
supporting those who believe in freedom 
in the face of communist totalitarianism 
is an important element in securing and 
ensuring our own security. It encourages 
our friends and gives our adversaries a 
reason for restraint. And conversely, if 
we fail to support those struggling for 
freedom in their own countries, we will 
only face more daunting challenges to 
our security over the longer term. 

The second pressing challenge is that 
of our response to terrorism. In recent 
years, we have seen new and ever more 
virulent forms of this modern-day bar- 
barism. These include the emergence of 
narcoterrorism, where the narcotics traf- 
fickers provide the money and the ter- 
rorists provide the muscle— the use of 
such violence in association with nar- 
cotics trafficking to undermine local 
governments. Quite simply, terrorism is 
war. It's a shadow war involving direct 
and brutal assaults on the lives of our 
citizens, on our national interests 
overseas, and on our basic values. 

It's vital that we win this war. But 
to do so, we have to be prepared for a 
long, tough effort. It's inevitable that, as 
a people, our hearts go out to the 
individuals directly affected by terrorism 
and to their families and friends here at 
home. But we cannot allow our sympa- 
thies to overshadow the pressing need 
for us to stand firm behind our prin- 
ciples and to deny international ter- 
rorism further leverage against us. Our 
foremost priority must continue to be to 
demonstrate, through word and action, 
that there are no rewards for terrorist 
violence. We have to see to it that the 
terrorists not only don't get rewards, 
they pay a price. We have to redouble 
our cooperative efforts with other 
nations in dealing with this scourge. 

The third pressing challenge we face 
lies with the management of our rela- 
tions with the Soviet Union. The Soviet 
Union poses the primary threat to our 



security, yet our two countries share a 
basic interest in ensuring that— as the 
President and General Secretary Gor- 
bachev agreed at their Geneva summit 
in 1985— they said, "A nuclear war can- 
not be won and must never be fought." 

In our dealings with the Soviet 
Union, we have pursued a four-part 
agenda of issues that are important to 
us, including arms control, regional con- 
flicts, bilateral matters, and human 
rights. In the field of arms control, the 
President's discussions with General 
Secretary Gorbachev at Reykjavik last 
October revealed potential areas of 
agreement on substantial and verifiable 
mutual reductions in offensive nuclear 
weapons that would enhance strategic 
stability. We are committed to pursuing 
these opportunities at the negotiating 
table, even as we will also continue our 
efforts— consistent with the ABM [Anti- 
Ballistic Missile] Treaty— to research 
ways of strengthening that stability 
through greater reliance on defenses. 
Both efforts are complementary and 
necessary. 

But this places special demands on 
us. We need a sustained effort that is 
firm, realistic, and patient. We can't 
afford to become either disheartened or 
euphoric with each week's news out of 
Moscow. Agreements for their own sake 
are of no interest. It is the content that 
counts. Nailing down the details of any 
meaningful agreement with the Soviets 
will take time and tough negotiating. 



And for that sort of negotiating to be 
successful, we have to be prepared to 
take the necessary steps to keep 
America strong. 

Conclusion 

And so, as Americans, we have our wfe 
cut out for us. We have to use our pcto 
and our diplomacy with exceptional si 1 
in a highly competitive international i 
environment. But if the problems bef'k'j 
us are great, so, too, are our strength 
and our opportunities. Our political ai 
economic freedoms are those which h m 
the greatest promise for the future. C'r 
diplomacy is active in seeking practic 
negotiated solutions that might 
strengthen the peace, and we have 
rebuilt our military strength so that \ 1 1 
can better defend our interests and 
discourage others from violence. And'e 
have allies with whom we share comr n 
purposes and ever more effective 
cooperation. 

The test for us will be whether- 
the conduct of our foreign policy— we 
continue to make the best use of our 
energy and creativity as a people in t 
service of peace and our democratic 
ideals. I, for one, am confident that v 
will meet that challenge. 

'Press release 46 of Feb. 24, 1987. 
Question-and-answer session following 
address not printed here. ■ 



Secretary's Interview 

on "This Week With David Brinkley 



> ? 



Secretary Shultz was interviewed on 
ABC-TV's "This Week With David 
Brinkley" on February 8, 1987, by David 
Brinkley and Sam Donaldson, ABC 
News, and George F. Will, ABC News 
analyst. 1 

Q. You've heard Senator [Sam] Nunn; 
you've heard a great many others, in 
fact, on this topic — the push to reinter- 
pret the ABM [Antiballistic Missile] 
Treaty so as to allow an early deploy- 
ment of Star Wars, SDI [Strategic 
Defense Initiative]. Where is this 
coming from and why? 

A. Let me tell you, if I can take a 
minute, exactly what the President's 
position is on this. First of all, as far as 
early deployment is concerned, as 



Secretary [of Defense Caspar] 
Weinberger is saying today in a tape 
interview on a BBC [British Broad- 
casting Corporation] program, it is n 
possible to make any such decision tl 
year or next year, and he declines to 
when that might be possible. It depe 
upon the progress in the work. 

Second, there has been, apparent 
very considerable progress. It's 
encouraging. The push that the Pres 
dent has put behind this, and Secrete ' 
Weinberger and others, seems to be y- 
ing off, and we're getting somewhen 
Maybe we're going to learn how to 
defend ourselves against ballistic 
missiles, and we all ought to be thanl ll 
of that. 






Department of State Bui tin 



THE SECRETARY 



Third, the President's criteria for 
■hat has to be met in order to make a 
eployment decision remain in effect. A 
/stem, obviously, would have to be 
jchnically feasible, would have to be 
irvivable, and would have to be cost- 
ffective at the margin. 

Now, the progress in the program is 
Jach, again as Secretary Weinberger 
iiys today, that it is now prudent to 
link to yourself, if these developments 
ime along continuing as they are, we 
lould begin to factor into our research 
jrogram how you would go about 
.eployment if you were to make such a 
ecision. And as soon as you pose that 
lestion, there are certain obvious 
lings that come forward which, by and 
rge, everyone agrees on, namely, 
jviously, you have to do it in phases, 
hen you have to ask yourself, what is to 
B the characteristic of each phase? And 
le of them should be that each phase, 
its stage, adds to stability. You don't 
ant to do something in a phase that 
akes the situation less stable; you want 
to be more stable. Second, since you're 
Iking about an overall system, you 
m't want to start with phase one until 
)ur are clear and confident about where 
>u're going. So that's where we stand, 
id so there isn't any early deployment 
;cision in the offing, but the program 
is gone along very well. 

Q. But the issue is not the deploy- 
ent, is it? It's testing, that you can't 
iswer any of the questions you've 
st posed without a certain test, and 
lere's a scientific judgment at odds 
ith the legal judgment. The scientific 
dgment is, you need the tests that 
•e permitted only by a broad inter- 
etation of the ABM Teaty of 1972. 
nd there is a legal argument in town 
tat that reading is incorrect. 

Now, the Administration is asking 
llions more dollars after the billions 
ready spent. Is the Administration 
>sition that that spending makes 
;nse if, but only if, the broad inter- 
■etation allows testing to answer 
lese questions? 

A. No, that's not the Administration 
usition. The program itself has been 
^signed given the restrictions in what's 
died the "narrow" interpretation, and 
le program's made a lot of progress, 
ut it is clear enough now, given the 
rogress that's been made, that you'd be 
ole to pursue the program much more 
ffectively— and perhaps only— if a dif- 
srent pattern of testing is permitted. 

So that raises this question which 
'as, in a sense, the second half of your 



position and/or question, so let me tell 
you where we stand on that: nothing 
incompatible with what Senator Nunn 
said here; namely, that there are three 
bodies of evidence which you have to 
examine, insofar as the meaning of the 
treaty is concerned. First and most 
important is the negotiating record. 
We've done that and we believe that it 
shows that a broad interpretation is 
entirely within the meaning of that 
treaty, although, of course, there are 
ambiguities; but we think that will come 
forward. 

All of the material in that 
negotiating record has been made 
available to the Congress, that is, the 
authoritative figures, including Senator 
Nunn; and we will have a collaborative 
process of discussing that. Second, as he 
said, the ratification process, and what 
was said in the ratification process, is 
part of the body of evidence. That will be 
examined, again collaboratively, you 
might say. 

And third, there is the question of 
what have been the practices in the 
statements to each other, in a sense the 
common law, under this treaty that's 
developed, and that, too, will be 
examined. 

Now, let me reemphasize a point 
that I think you made in one of your 
questions that I think is extremely 
important. Obviously, we're interested in 
what was said during the ratification 
process here, but remember, that has 
absolutely no standing insofar as the 
Soviets are concerned. They look at the 
negotiating record and are entitled to. 

Q. Further, it said, if I may inter- 
rupt you at this point, it said that 
Ambassador [Yuriy] Dubinin of the 
Soviet Union told you last week that if 
the Administration moves to imple- 
ment the strict interpretation, or 
rather, the broad interpretation, arms 
control is through. 

A. I read that that's what is said, 
but that is not, in fact, the case. 

Q. What did he say to you? 

A. But I'm not— let me return to the 
point that we were discussing, because I 
think it is very important to get this 
straight. 

Q. But you raised the question of 
the Soviet attitude. 

A. I didn't. I said that the Soviet 
Union is entitled to look at the 
negotiating record and draw conclusions 
from that about what the treaty says. 
They are not bound by what is said in 
our ratification process. 



I want to add a point, because we 
have to remember we're talking about 
our national security and figuring out 
how to defend ourselves, and our allies, 
with whom we will consult on all these 
things, just as we will consult the 
Senate. 

Q. Before a decision is made, sir, 
or after? 

A. Before a decision is made. 

Now, the reason why the examina- 
tion of the negotiating record shows a 
possibility of a broad interpretation is 
that the Soviet Union has always been 
more defense-minded than we have; and 
they, in the negotiations, did not want to 
foreclose what we apparently did want 
to foreclose, namely, the possibility of 
new and different defensive things based 
on other physical principles. And we also 
know that they have been working much 
harder than we for a long period of time 
on strategic defense. 

Q. I understand the argument 
you're making, which is that the 
record, as the State Department inter- 
prets it, allows the broad interpreta- 
tion. But you also seem to be saying 
that the broad interpretation, although 
helpful to the testing, may not be 
critical to the testing to answer all the 
questions you posed at the beginning. 
If it's not critical, and if, as usual, the 
diplomatic imperative is not to rock 
the boat, including the critics, Con- 
gress, and the allies overseas, aren't 
you saying in effect that there is no 
particular urgency attached to your ad- 
mittedly legally defensible position, 
and therefore, won't the broad inter- 
pretation be set aside? 

A. No, I don't think it should be. At 
least, there is the legal question, and 
from the practical standpoint of what 
you can do, first, you can do it much 
more effectively if you don't have to test 
things all around the barn and then 
make gross inferences from it. You're 
much surer of your ground if you test 
something directly. 

And then, no doubt, there are things 
that you probably couldn't test ade- 
quately under the narrow definition, 
which are very desirable to test. There 
are probably some things in addition, as 
Senator Nunn suggested, that may be 
impossible to test under either 
definition. 

Q. There's another threat to SDI, 
and it's budgetary, and it can go like 
this. The President, in his State of the 
Union address, said he will veto any 
attempt by Congress to enact the 
Soviet agenda, in effect, on arms 



Vpril 1987 



THE SECRETARY 



control— banning nuclear testing, forc- 
ing the narrow compliance of ABM, 
banning antisatellite tests— I'm miss- 
ing one, but it's in there somewhere. 
Anyway, what if those are attached to 
the defense authorization and appro- 
priation bills? The President vetoes 
them: Congress doesn't have to send 
up another one; you get a continuing 
resolution, which means level funding 
of SDI, which is, what? 70% below 
what the Administration is asking? 
Don't the critics of SDI achieve the 
same thing? 

A. What we have to do, represent- 
ing the Administration, is present con- 
vincing arguments— and I believe there 
are convincing arguments— for what 
must be done to safeguard the national 
security of the United States and our 
allies, and work collaboratively, care- 
fully, and thoroughly with the Congress, 
as we fully intend to do, for instance on 
this question we were discussing a few 
minutes ago. We do that in the expecta- 
tion that the national interests of the 
United States will emerge and be 
reflected in the policies that come out of 
that kind of discussion and debate. 

Q. I'd like to change the subject. 
Alann Steen, one of the U.S. hostages 
being held in Lebanon, has shown up 
on a videotape saying he and two other 
Americans will be killed by his captors 
within 24 hours unless Israel releases 
some 400 Shi'ite prisoners that it 
holds. I understand that Israel has 
said it will not do that. 

A. We'll respond as the situation 
merits. I'm not going to try to forecast 
it, but we do have a clear and basically 
good set of policies on terrorism, and the 
tactical implementation of them has been 
broadly succeeding— 

Q. Do you think this threat is a 
realistic one? 

A. —and I think that we're getting 
somewhere. 

Q. Do you believe this threat, or 
do you think it's some gambit that the 
kidnappers are taking? 

A. I don't have any way of knowing. 
They always issue threats like that. But 
one thing I think you just can't do is 
start jumping whenever threats are 
made. 

Q. If they killed three 
Americans — if they killed one 
American — we're still in that same 
quandary, are we not? We have to 
know, if it's military action, who to 
hit, and we have to know whether 
we're going to kill a bunch of innocent 
people. 



You once said, in a famous speech, 
that it might have to be that some 
civilians would die in a military 
operation — if there were a broader 
objective that was more important. Do 
you still feel that way? 

A. I don't know that I put it quite 
that way, but I do think that the people 
of Beirut have to recognize that what 
they're doing is ruining themselves. 
They, in effect, have a plague there; and 
they're isolating themselves from the 
world; and the world should isolate 
them; and they should take control of 
the situation. It is absolutely not in their 
interest. 

Q. It's not the people of Beirut, 
it's a few. 

A. Yes, the people of Beirut have a 
responsibility for their own community, 
and they're not exercising it. 

Q. There was an attempt to 
organize this past week, in Rome, a 
conference, an international con- 
ference on this problem, and how the 
developed countries might deal with 
it. Our European allies decided this is 
a bad time to have it, and it wasn't 
held. 

A. It was to be a meeting of 
experts, and they, two of them didn't 
want to have it for different reasons. 
But we have a vast amount of contact. 

Let me just call your attention to 
some positive things in this field. First of 
all, it's been a pretty good week or so for 
the rule of law involving terrorism. 
Hamadei and his brother have been 
detained by the Germans. 

Q. But not extradited. 

A. We have found and gotten 
extradited from Colombia one of the 
leading drug traffickers. The Philippines, 
a year after Mrs. Aquino came into 
office, had a huge turnout and voted a 
new constitution. Gerry Seib was 
released through a successful, quiet 
effort. There are other things I could 
tick off. 

One of the interesting things about 
1986 is that international terrorism in 
Europe was down by 40%. That doesn't 
mean it's satisfactory, but it's down. So 
the efforts are proceeding, and they pro- 
ceed on an international and consultative 
basis. 

And there's a question you're not 
asking me— 

Q. What is that? 

A. —which is, which presents me, in 
all seriousness, with the biggest foreign 
policy problem that I have, and the 



$ 
Hi 
I 
il 



President has, and that is the inadequa 
of the resources that the Congress is 
making available to us to conduct our 
international affairs. It's been cut 
drastically. 

Q. Foreign aid, are you talking 
about? 

A. It involves our security and 
assistance to countries where we have 
bases. It's for the security of the Unite 
States. It involves things that will help 
make the world economy more healthy 
so it involves the prosperity of the 
United States. It involves support for * 
very gratifying trend toward freedom 
and democracy, so it involves our 
deepest values; it involves the fight 
against terrorism, the fight against dn 
trafficking— all these things in the 
interest of the United States— and we' 
being cut, cut, cut— and it's not in the i 
terest of the United States, and I hope 
the Congress appropriates what the 
President has requested. 

Q. Please consider that question 
was asked. 

Q. But isn't that applied 
Reaganism? I mean, the Reagan 
Administration wanted tax cuts. Nov 
it says, cut these horrendous deficits 
but do it by cutting the budget witho 
raising taxes, and you force Congres 
to choose between domestic spendinj 
and foreign aid, and you're surprisec 
at the choice thay make? 

A. The President has presented a 
budget that, as any budget, states 
priorities. This budget is over one trilli 
dollars. We're talking about two cents 
on the dollar, to serve the interests of 
the United States in our security, our 
prosperity, and our values around the 
world. 

Q. Are you talking about improv 
ing embassies for the safety of the 
staff against bombs and so on? 

A. That's one thing. 

Q. That's one item. 

A. That's an item. It's one among 
many. I'm talking about the war of 
ideas. There has been a big effort to 
improve our effectiveness there. 

Q. Can I ask you about Seib? Yoi ' 
said he was released through our 
efforts, or through efforts. 

A. He was released, and I'm not 
going to talk about it. 

Q. Can you guarantee us that we 
didn't make a deal with Iran to relea: 
him? 

A. Yes. 



10 



Department of State Bulle 



THE SECRETARY 



Q. And you know that you speak 
|r the Adminstration? 
.• A. Absolutely. 

J! Q. Can you tell us if Terry Waite 
ersonal envoy of the Archbishop of 
1 interbury] is, as he's described, a 
gotiator? For whom and with what 
res he negotiate? And does he have 
xy connection with any American 
|in, purpose, or institution? 



A. He doesn't have a connection 
with an American institution or govern- 
ment. Of course, we're interested in any 
efforts that somebody can make to free 
the hostages. 

Q. What's he negotiating with? 

A. I don't know. He's a represen- 
tative of the Church of England. 



■Press release 33 of Feb 9, 1987. 



lursuing an Effective Foreign Policy 



1 Secretary Shultz 's statement before 
i Senate Armed Services Committee on 
¥rruary3, 1987. 1 

J/elcome this opportunity to meet with 
lu to discuss the role the United States 
s >ks to play in the world and our 
sategy for achieving the nation's basic 
feign policy objectives. Overall, our 
f eign affairs situation is good and our 
i )spects bright. We have a strong hand 

I ;h which to influence world affairs to 
{ - benefit— if only we are persistent, 

I ! our advantages wisely, and apply the 
i ?essary resources to the conduct of 
i - foreign relations. 

Today, I want to review with you 
j t where we are and where we're 
f ng, the problems we face and the 
s engths we have for dealing with 
t m, and finally, the challenges that we 
s >uld be focusing on right now. 

Much of what I will have to say may 
I ; sound very new to you, and for good 
i .son. This Administration did not sud- 
( lly discover national security strategy 
i Dreparing for these hearings. We have 
i trong and broadly based bipartisan 
i ndation on which to build— and much 
( which we inherited— and for the past 
f ears we have been following a steady 
A I consistent approach in our efforts to 
i ranee U.S. interests, to support the 

ise of freedom, and to make the world 
i afer place. 

In the field of foreign affairs, I have 
li 1 out the rationale and the specifics of 
C • policies on many occasions— in 
t timony here before the Congress, 
r st particularly in the Senate, before 

I I Senate Foreign Relations Commit- 

t , and in a series of speeches over the 

1 st few years at Rand, at Harvard, in 
i n Francisco, at the University of 

( icago, in Atlanta, and elsewhere. So 
t s afternoon should not be seen as an 



occasion for breaking dramatic new 
ground but rather for reviewing and 
reaffirming the essentials of our national 
strategy. 

America's Foreign Policy Goals 

We begin with the question of the goals 
of our foreign policy. What are we, as 
a people and a nation, seeking to 
accomplish? 

There is a strong national consensus 
on our basic objectives. They are widely 
understood and supported by the 
American people. I think all of us can 
agree that we serve the interests of the 
United States when we seek to: 

• Protect the safety of our nation 
against aggression or subversion; 

• Promote our domestic prosperity; 

• Foster the values of freedom and 
democracy both at home and abroad; 

• Act in a manner consistent with 
our humanitarian instincts; and 

• Combat those activities which 
would undermine the rule of law and our 
domestic stability— and, particularly right 
now, terrorism and narcotics trafficking. 

Over the past four decades, both 
Republican and Democratic administra- 
tions have come to agree on these goals, 
but they're not the source of divisive 
partisan debate. But for that very 
reason, we sometimes take them for 
granted. We shouldn't. We should keep 
reminding ourselves of them, for they 
represent, in effect, the compass of our 
dealings with other nations. 

Foreign Policy Problems 

How are we doing in accomplishing 
these broad objectives? Clearly, we face 
a number of serious and immediate 
challenges in the world today— ones that 
directly affect our national interests. In 



the Middle East, in Africa, and 
elsewhere, persistent tensions threaten 
regional peace and stability. The con- 
tinuation of conflict in the Persian Gulf 
raises the possibility of wider escalation 
of a war that threatens our energy 
security and that of our allies. In Central 
America, democracies are struggling to 
eliminate externally supported aggres- 
sion and subversion. In Afghanistan, 
Angola, and Indochina, the Soviet Union 
and its proxies are using military force 
in the most brutal manner to maintain 
and expand their influence and control. 

Elsewhere in the developing world, 
the efforts of local governments to 
address the root causes of their 
economic and social malaise have been 
hampered by large foreign debt and 
disappointing growth rates. The transi- 
tion to greater political freedom in many 
of these countries continues to be a 
fragile process. In the current tragedy of 
Sri Lanka, for example, movement 
toward stability and growth on a basis of 
economic freedom has been undermined 
by violence arising out of longstanding 
communal grievances. 

Current events in Beirut yet again 
illustrate that no single country or its 
citizens are exempt from the scourge of 
terrorism. Combatting that threat will 
continue to demand steadfast courage 
and expanded cooperation on the part of 
all civilized nations. 

And among the major industrialized 
democracies of the world, we confront 
persistent pressures for thinly disguised 
protectionist measures. These short- 
sighted actions would only stimulate 
political confrontations among trading 
partners and have the effect of disman- 
tling the open world trading system 
which has helped to generate so much of 
the West's prosperity and technological 
advantage of the past four decades. 

Positive Trends in Our Favor 

More than balancing those various prob- 
lems, however, is the increasingly clear 
evidence that we are making significant 
progress in the world and that trends 
are in our favor. For all its fragility, the 
movement toward expanded political and 
economic freedom is real and growing. 

The world is already in the midst of 
a new scientific and technological 
revolution— one whose social, economic, 
political, and strategic consequences are 
only beginning to be felt. Time and space 
are contracting as instantaneous com- 
munications make business, politics, and 
culture truly global for the first time. 



>ril 1987 



11 



THE SECRETARY 



Familiar measures of economic 
development— and, by extension, military 
and political strength— are becoming out- 
dated. This new Information Age is 
bound to have, and already has had, a 
profound impact on world politics and 
economics. 

All of which seems to confirm that 
this new Information Age has the poten- 
tial to be our age— a period which plays 
to the greatest strengths of the West. 
The productivity and competitiveness of 
a nation will be far more dependent on 
how freely knowledge can be used and 
shared. And unlike oil or mineral wealth, 
knowledge is a resource which does not 
diminish but rather increases with its 
use. In this sort of environment, open 
societies such as our own will thrive; 
closed societies will fall behind. What is 
more, this lesson— that freedom and 
openness are the wellspring of such 
technological creativity and economic 
dynamism— is increasingly well 
understood throughout the world. 

Recent events in the Philippines 
have once again demonstrated the per- 
sistent power of the democratic idea. 
Throughout Latin America, we have 
seen a remarkable resurgence of 
democratic governments. Contrary to 
the expectations and predictions of so 
many just a few years ago, the percent- 
age of Latin America's population living 
under freely elected governments has 
grown from 30% in 1976 to more than 
90% today. And in witnessing these 
events, we cannot be indifferent to just 
how positive and important a role the 
United States can play in supporting 
such hopeful developments. 

At the same time, there is an equally 
encouraging trend on the part of many 
nations away from central planning 
toward greater economic freedom for 
the individual and increased reliance on 
free market-oriented solutions to the 
problems of economic growth. Few coun- 
tries around the world now dispute that 
entrepreneurial initiative in a market 
environment is the engine of develop- 
ment and growth. These truths are now 
being acknowledged even in the com- 
munist world, as demonstrated by 
economic reforms in China and Hungary. 

All of this reflects the reality that 
the great ideological struggle that has 
marked this century ever since the 
Bolshevik revolution of 1917 has essen- 
tially been decided. In the contest 
between the Western values of 
democracy and individual freedoms and 
Soviet-style, party-dominated centralized 
collectivism, the trend in our favor is 



clear. In contrast with earlier decades, 
no one speaks today of communism as 
the wave of the future. The battle of 
ideas will doubtless continue, but we 
have the winning hand. 

As a consequence, it is the Soviet 
Union's massive military establishment 
alone— and not any inherent economic 
advantage or political appeal— that 
underlies its status as a global com- 
petitor. The Soviet Union poses a clear 
and sobering strategic threat to the 
United States and its allies. It has the 
capability to intervene with conventional 
military force, directly or through prox- 
ies, in many regions of the world and to 
threaten and try to intimidate our allies 
and friends in these areas. It commands 
a nuclear arsenal— and, in particular, an 
offensive ballistic missile force— able to 
inflict massive destruction on the United 
States and our allies. 

We must be prepared to counter 
these threats. We must be prepared to 
deter Soviet aggression against the 
United States or its allies by whatever 
means. We must have the defensive 
strength necessary to deter the Soviet 
threat by clearly demonstrating that we 
and our allies would be able to respond 
instantly, and with enormous effec- 
tiveness, should we be attacked. 

Why Our Approach Has Worked 

As a nation, we have the ability to meet 
these challenges and to capitalize on the 
foreign affairs opportunities before us. 
To do so, we must have patience and 
determination, but we also have power- 
ful strengths and advantages in our 
favor. 

The first is our democratic vision 
and our commitment to give reality to 
our ideals. The effectiveness of our 
foreign policy will reflect our confidence 
in our beliefs and values and in our pur- 
poses and priorities as a society. Our 
tradition of pluralism and openness 
shapes the content of much of our 
foreign policy. We support democratic 
institutions in the world, for free peoples 
can join together in resisting threats and 
intimidation from nondemocratic forces. 

Traditionally, people throughout the 
world have regarded America as a land 
of opportunity and looked to us for a 
vision of the future. They know that 
American society has its faults, in part 
because we ourselves are always ready 
to proclaim them. We are never afraid of 
criticism, and we tend to measure our 
performance through our proclamations. 
Throughout our history, so many 
individual Americans have worked 



tirelessly to extend the promise of oi 
beliefs to everyone, regardless of rao 
creed, or class. Recently, our nation 
tribute to one such American, Dr. Ma 
tin Luther King, Jr. Dr. King's legac 
and the epic poem of the black civil 
rights movement have made America i 
much stronger in the world: stronger 
our own sense of solidarity as one pec 
and stronger as a precious source of 
hope— realistic hope— for oppressed p< 
pie everywhere. 

And we gain strength from our 
tremendous economic capabilities. He 
again, we are perhaps too familiar wi1 
our own economic success story or 
preoccupied with problems of the 
moment to sense our true power and 
potential. But America's economic 
capacity— its ability to support ambiti 
national objectives, to advance the ed 
of technological creativity, and to sup 
port increased domestic prosperity— c 
only be described as awesome. And ri 
now, interestingly enough, the so-call 
misery index— you remember that Ar 
Okun created that some years ago— is 
its lowest point in 18 years. 

There is, of course, an irony here. 
Our national economy is enormous an 
sound— over twice the size of any oth< 
But the government is broke. The 
Federal budget deficit is a major prot 
lem for us; it affects our ability to grc 
and to compete. It is a drag on all of < 
efforts, and we must address it prom] y 
and effectively. I'm confident that we : 
can. And by doing so, we will be bettt 
able to draw upon the powerful econc 18 
advantages that we possess in the pn |J 
suit of our foreign policy objectives. 

And now, we are benefiting from 
renewed sense of hard-headed realisn 
about the importance of our own 
military strength. A healthy America 
defense establishment serves as the 
indispensable underpinning for any 
foreign policy seeking a safer world a 
a more durable peace. Our weakness 
invites challenges; our strength deter 
aggression and encourages restraint ; 
negotiation on the part of our 
adversaries. 

We are already seeing the positiv 
results of that renewed realism. The 
rebuilding of America's defenses in tr I 
early 1980s has given the Soviets the 
necessary incentive to begin serious 
negotiations, not just on limits to the 
future growth of our nuclear arsenals 
but on their substantial reduction froi 
current levels. Improvements in our 
ability to project power abroad have 
helped us protect our vital interests a 



12 



Department of State BulM 



THE SECRETARY 



?fend our friends against subversion 
,id aggression. And our willingness to 
j;e that power when necessary— as 
gainst Libya, as a last resort after 
*ars of Qadhafi's terrorism— has sent a 
wwerful signal to friends and enemies 
ike. 

: But we face entirely new challenges 
il American interests as well, and in 
jday's world these are often less clear 
It than the traditional examples of 
agression we associate with World 
liars I and II. And so we require not 
<dy the military capabilities but also the 
j.tience and the flexibility necessary to 
tal with protracted armed subversion, 
ute-sponsored terrorism, or the 
] litical disruption and violence 
jsociated with large-scale narcotics 
lifficking. These new threats are 
■Jmetimes referred to as "low-intensity 
inflict." I don't particularly like that 
■*m. There is nothing "low intensity" 
iiout them for those who must join the 
Ittle, and the stakes of these challenges 
i our security are high. 
I If the United States is to be effective 
i addressing these threats— as well as in 
t terring military aggression— we have 
1 be steady in supporting our com- 
l tments and ready to act decisively 
I ien necessary. Our military must have 
i > capabilities to perform a variety of 
i ssions across the spectrum of security 
rfillenges. But just as importantly, we 
1 re to show the political will needed to 
1 ; our military strength intelligently 
i i effectively in defense of our most 
1 al interests. And we have to be clearly 
] "ceived by both friends and adver- 
! - ies as having that will. 

Now let me turn to our diplomatic 
i orts. Americans have sometimes 
1 ided to think that power and 

< ilomacy are two distinct and conflict- 
i ; alternatives in our dealings abroad. 
] t power and diplomacy are not con- 

1 dictory. They are complementary; 
I ;h are necessary and reinforcing com- 
] lents of our foreign policy. Military 
] ?paredness alone is not enough. Power 
i ist always be guided by purpose; and, 
( te often, diplomacy is an essential and 
t it-effective means of accomplishing 
( " objectives. But diplomacy that is not 
I :ked up by strength is usually 
i effective. 

As a nation, we learned from bitter 

< perience during the first half of this 
t itury that we can retreat from the 

l ;t of the world only at our peril. 
' day, we can see with even greater 
( rity that what happens in distant 
*ions of the globe has an important 
taring on our safety and well-being. 



And so, as a first resort, we seek to 
meet our objectives with diplomacy 
without having to use military force. 
Successful diplomacy encourages like- 
minded nations to join with us in com- 
mon effort, and it brings a greater sense 
of predictability and stability to our rela- 
tions with potential adversaries. 

The United States could attempt to 
deal with the diverse threats to our 
interests on a unilateral basis, but that 
would demand great effort and enor- 
mous expense on our part. There is a 
more efficient strategic alternative, as 
we have agreed upon as a nation for 
more than four decades. Our diplo- 
macy—along with its various tools, such 
as security assistance and economic sup- 
port funding— seeks to maximize our 
effectiveness in the world through 
cooperation with those nations with 
whom we share basic values and com- 
mon interests. But to conduct an effec- 
tive diplomacy and to make best use of 
all of our advantages require that we 
sustain our efforts. 

The Foreign Affairs 
Resource Crisis 

This afternoon, I have spoken about 
America's winning hand in world affairs 
because I am personally confident about 
our national strengths and the wisdom of 
our general approach. But I also have to 
sound a warning note as well. Just as we 
should be consolidating our recent gains 
and building on important opportunities, 
we are in danger of undercutting our 
position in the world by denying 
ourselves the necessary resources. Any 
strategy is only as good as the tools 
provided to work toward its objectives. 
And we are fast approaching a situation 
in which the United States will simply 
not have the foreign policy tools needed 
to get the job done. 

Earlier this month, the President 
submitted the Administration's FY 1988 
and FY 1987 supplemental requests to 
the Congress for the foreign affairs 
budget. Responding to congressional 
concerns, our FY 1988 budget request 
was lower than that requested for FY 
1987— and, I might say, lower than that 
appropriated for fiscal 1985 or 1986. Our 
total request amounted to less than two 
cents of every dollar proposed to be 
spent by the Federal government. 

I am dismayed that over the past 
2 years, Congress has made devastating 
cuts in our foreign affairs budget pro- 
posals. Last January, our international 
affairs budget for FY 1987 was cut by 



Congress by over 20%, reducing our 
operating base by $1.8 billion. After 
accommodating earmarked items which 
had to be funded, the effective reduction 
for the bulk of our operations was more 
on the order of 50%. And that was on 
top of the $1.5 billion cut from prior year 
levels that we suffered in the FY 1986 
congressional appropriations process. 

Over the last 2 years, we lost over 
$3.3 billion from the resources we were 
operating with in FY 1985. These cuts 
were more severe, in percentage terms, 
than the reductions in any other function 
in the President's budget requests. And 
for our posts in Europe and Japan, these 
cuts have been even more damaging as a 
result of the recent huge changes in cur- 
rency cross rates. Just call up your 
friend Mike Mansfield [U.S. Ambassador 
to Japan] and ask him how he's doing 
taking those dollars you appropriate, 
changing them into yen, and trying to 
run his embassy. 

Let me be blunt: these draconian 
budget reductions are forcing us to play 
Russian roulette as we shortchange our 
various foreign policy interests. If these 
massive cuts are continued this year, 
they will directly threaten our ability to 
exercise effective leadership in the 
world. This budget crisis is perhaps the 
most urgent— and least recognized- 
foreign policy challenge facing our 
nation today. 

Challenges Before Us 

The pursuit of an effective foreign 
policy— one that seeks meaningful prog- 
ress toward our basic goals— doesn't 
lend itself to quick fixes. Americans have 
to be prepared to conduct foreign rela- 
tions on a coherent, long-term basis. 
That requires a special steadiness and 
persistence on our part. A world of 
peace and security will not come without 
considerable exertion or without our fac- 
ing up to some tough choices. 

In particular, we cannot allow 
ourselves to lose our sense of focus on 
what we are seeking to achieve in the 
world and what is required to reach 
those ends. It would be all too easy for 
us as a society to become distracted 
from what is truly important and at 
stake in the most urgent foreign policy 
challenges now facing us. 

The first such challenge lies in how 
we continue to support the cause of 
democracy and freedom in Central 
America. As a nation, we have long 
sought to advance national self- 
determination and individual freedom in 
the world. And today, we see the power 



>ril 1987 



13 



THE SECRETARY 



of the idea of freedom calling into ques- 
tion the old assumption of the inevitable 
permanence of dictatorships of the left 
or right in various countries. Not just in 
Nicaragua but in Afghanistan, Angola, 
and Cambodia as well, Marxist-Leninist 
oppression and aggression have given 
rise to resistance movements. These men 
and women are struggling for the rights 
denied them by communist rule. And as 
such, they deserve our support. 

We should be under no illusions in 
this regard. Over the longer term our 
reliability in supporting those who 
believe in freedom in the face of com- 
munist totalitarianism is an important 
element in ensuring our own security. It 
encourages our friends and gives our 
adversaries a reason for restraint. And 
conversely, if we fail to support those 
struggling for freedom in their own 
country, we will only face more daunting 
challenges to our own security. 

The second pressing challenge is that 
of our response to terrorism. In recent 
years, we have seen new and ever more 
virulent forms of this modern-day bar- 
barism. These include the emergence of 
narcoterrorism— the use of such violence 
in association with narcotics trafficking 
to undermine local governments. The 
narcotic traffickers provide the money, 
and the terrorists provide the muscle, 
and they work together; and they are an 
extremely subversive element, and that's 
particularly so right in our own 
neighborhood, in the Andean countries, 
for example. Quite simply, terrorism is 
war. It's a shadow war involving direct 
and brutal assaults on the lives of our 
citizens, on our national interests 
overseas, and on our basic values. 

It's vital that we win this war. But 
to do so, we have to be prepared for a 
long, tough effort. It's inevitable that, as 
a people, our hearts go out to the 
individuals directly affected by terrorism 
and to their families and friends here at 
home. But we cannot allow our sym- 
pathies to overshadow the pressing need 
for us to stand firm behind our principles 
and to deny international terrorism fur- 
ther leverage against us. Our foremost 
priority must continue to be to 
demonstrate through word and action 
that there are no rewards for terrorist 
violence. We have to redouble our 
cooperative efforts with other nations in 
dealing with this scourge. 

The third pressing challenge we face 
lies with the management of our rela- 
tions with the Soviet Union. The Soviet 
Union poses the primary threat to our 
security, yet our two countries share a 



basic interest in ensuring that— as the 
President and General Secretary Gor- 
bachev agreed at their Geneva summit in 
1985, quoting from their statement: "A 
nuclear war can never be won and must 
never be fought." 

In our dealings with the Soviet 
Union, we have pursued a four-part 
agenda of issues that are important to 
us, including arms control, regional con- 
flicts, bilateral matters, and human 
rights. In the field of arms control, the 
President's discussions with General 
Secretary Gorbachev at Reykjavik last 
October revealed potential areas of 
agreement on substantial and verifiable 
mutual reductions in offensive nuclear 
weapons that would enhance strategic 
stability. We are committed to pursuing 
these opportunities at the negotiating 
table, even as we will also continue our 
efforts— consistent with the ABM [Anti- 
Ballistic Missile] Treaty— to research 
ways of strengthening that stability 
through greater reliance on defense. 

But this places special demands on 
us. We need a sustained effort that is 
firm, realistic, and patient. We can't 
afford to become either disheartened or 
euphoric with each week's propaganda 
effort out of Moscow. Agreements for 
their own sake are of no interest. It is 
the content that counts. Our negotiating 
objective of strengthening strategic 
stability at substantially reduced levels 
of nuclear arms is a sound one, and we 



must stick to it. Our guiding objective 
continues to be to persuade the Soviet 
leadership— through the evidence of 01. 
own determination— that excessive 
military buildups on their part will off 
no easy rewards and that negotiated I 
restraint and reciprocity will be to oui 
mutual advantage. 

Conclusion 

We have our work cut out for us. We I 
have to use our power and our diplom 
wiili exceptional skill and determinati I 
in the service of peace and our 
democratic ideals. But if the problemsB 
before us are great, so, too, are our 
strengths and opportunities. Our 
political and economic freedoms are 
those which hold the greatest promisel 
for the future. We have a diplomacy 1 1 
has moved toward peace through 
negotiation. We have rebuilt our militi 
strength so that we can defend our 
interests and discourage others from I 
violence. And we have allies with whcl 
we share common purposes and ever I 
more effective cooperation. Our 
challenge is to use our strengths wise 
on behalf of the interests of the 
American people. 



'Press release 25. The complete 
transcript of the hearings will be publishe 
the committee and will be available from i 
Superintendent of Documents, U.S. Gove: 
ment Printing Office, Washington, D.C. 
20402. ■ 



14 



Department of State Bull 



" 



AFRICA 



/isit of Zaire's President 



— ■ 







Pirsidi-nt Mohutii Scse Seko of the 
i public of Zaire made an official work- 
1/ visit to Washington, D.C., December 
1 12, 1986, to meet with President 
, a gun and other government officials. 

Following are remarks made by 
} esident Reagan and President Mobutu 
i er their meeting on December 9. 1 

1 esident Reagan 

] ;sident Mobutu and I have had the 
( Dortunity to review and renew one of 
li| " oldest and most solid friendships in 
I rica, that between the United States 
>)| I the Republic of Zaire. Cooperation 
I ween the United States and Zaire 
l ier President Mobutu's leadership 
s etches back through 20 years and five 
.1 3. Administrations. In that time, 
i lerican leaders have learned to place a 
[ 'ticularly high value on President 
Iibutu's insights and counsel. 



photo by Pete Souza) 



President Mobutu has brought a con- 
sistent voice of good sense and good will 
to the international councils where 
African issues are considered, from the 
United Nations to the Organization of 
African Unity to the Nonaligned Move- 
ment. He has stood uniformly for the 
peaceful settlement of disputes but has 
not shrunk from his responsibilities 
when action was appropriate. In 1983, 
for example, he dispatched troops to 
assist Chad in defending itself against 
Libya's criminal aggression. This year he 
came to the assistance of the Govern- 
ment of Togo as it faced an externally 
mounted coup attempt. 

Much of our discussion today focused 
on Zaire's heroic effort to complete its 
program of economic policy reform. As 
you know, Zaire has been engaged for 
nearly 4 years in a series of painful 
sacrifices and adjustments designed to 
rationalize and revive its private sector. 
We have tried to help by supplementing 
our regular development assistance with 
special funds earmarked for African 



states which are undertaking serious 
steps toward reform. We've also encour- 
aged our business community to look at 
the growing investment opportunities in 
Zaire and will continue to do so. 

Unfortunately, Zaire's determined 
economic efforts have been greatly com- 
plicated by the severe drop in world 
market prices for its exports. President 
Mobutu and his people face a heavy 
foreign debt burden. We have encour- 
aged Zaire to hold firm to the respon- 
sible, economic reforms it is attempting, 
while promising to do our best to ease 
the way. 

Naturally, President Mobutu and I 
also examined the regional situation, 
especially in southern Africa, where we 
share the goals of a rapid, peaceful end 
to apartheid; the independence of 
Namibia; and national reconciliation and 
removal of all foreign forces stationed in 
Angola. President Mobutu brings great 
prestige and influence to bear on the 
range of southern African problems, and 
I welcome his recent efforts in seeking 
solutions to these issues. 

After today's meeting, we can be 
more confident that the future of U.S.- 
Zairian relations will remain close, pros- 
perous, and productive. President 
Mobutu and his country's friendship with 
the United States is most appreciated. 
And we're proud and pleased to have 
him with us here today. 

President Mobutu 2 

On behalf of my wife and of my entire 
delegation, I should like to thank you 
most sincerely for your warm and 
friendly welcome as extended to us by 
you, personally, and by members of your 
Cabinet ever since we arrived here in 
Washington. Together we have surveyed 
all issues that relate to the bilateral rela- 
tionship of our two countries, and I go 
home in full awareness that I have the 
full support of your government and can 
assure the people of Zaire that they can 
count on you and on your government. 

Again, Mr. President, thank you 
very much for all that has been done to 
facilitate our stay. 



'Made in the Rose Garden at the White 
House (text from Weekly Compilation of 
Presidential Documents of Dec. 15, 1986). 

2 President Mobutu spoke in French, and 
his remarks were translated by an 
interpreter. ■ 



Ml 1987 



15 



ARMS CONTROL 



U.S. Arms Control Initiatives 



In conjunction with the ongoing nuclear 
and space talks in Geneva between the 
United States and the Soviet Union, the 
White House and the Department of 
State released on January 13, 1987, the 
following summary of U.S. initiatives on 
various arms control issues and a 
chronology of U.S. -Soviet arms control 
negotiations and expert-level meetings 
(1986). 

Strategic Offensive Forces 

During their October meetings at 
Reykjavik, President Reagan and 
General Secretary Gorbachev agreed in 
principle on 50% reductions of strategic 
offensive arms over 5 years to 1,600 
strategic nuclear delivery vehicles and 
6,000 warheads on those delivery 
vehicles. The two sides made important 
advances in rules for counting bombers 
and reached agreement in principle on 
the requirement for "significant cuts" in 
Soviet heavy ICBMs, the most destabiliz- 
ing missiles of all. 

Our negotiators in Geneva promptly 
tabled a new U.S. START proposal 
reflecting the areas of agreement 
reached at Reykjavik. On November 7, 
the Soviet Union took some new steps as 
well by tabling proposals that partially 
reflect the headway made at Reykjavik. 
It is our hope that these areas of agree- 
ment can serve as the starting point 
from which U.S. and Soviet negotiators 
can hammer out significant arms reduc- 
tion treaties. 



Acronyms 

ABM Treaty— Antiballistic Missile Treaty 
ASAT — antisatellite system 
CBMs— confidence-building measures 
CD — Conference on Disarmament 
CDE— Conference on Confidence- and 
Security-Building Measures and Disarma- 
ment in Europe 
CW — chemical weapons 
ICBM— intercontinental ballistic missile 
INF — intermediate-range nuclear forces 
LRINF— longer range INF 
MBFR — mutual and balanced force 

reductions 
NST— nuclear and space talks 
PNET— Peaceful Nuclear Explosions Treaty 
SDI— Strategic Defense Initiative 
START— strategic arms reduction talks 
TTBT— Threshold Test Ban Treaty 



Unfortunately, the Soviets continue 
to link agreement in START to U.S. 
agreement to the Soviet defense and 
space proposal, which would effectively 
kill the U.S. Strategic Defense Initiative. 
This is unacceptable and is contrary to 
the commitment made by Mr. Gorbachev 
in November 1985 in Geneva to move 
forward in areas of common ground, 
including the idea of 50% reductions in 
strategic offensive arms. The Soviets 
also precondition their agreement on 
50% reductions in strategic arms to U.S. 
agreement in principle to total elimina- 
tion of all strategic offensive weapons by 
1996. This, too, is unacceptable; for the 
present, given the massive Soviet invest- 
ment in conventional forces, nuclear 
weapons are indispensable to the 
security of the United States and our 
allies. 

In early December, negotiators from 
both sides met for between-round discus- 
sions in Geneva. While there was no nar- 
rowing of differences, we believe that 
these talks did contribute to our prepara- 
tions for the next round in that they 
made limited but useful progress in 
terms of clarifying points of agreement 
and disagreement. For the current 
round of NST, which begins on Jan- 
uary 15, our task is to build upon the 
accomplishments achieved in Reykjavik 
and the proposals tabled in Geneva dur- 
ing the last round of NST. 

Intermediate-Range Nuclear Forces 

At Reykjavik there was significant prog- 
ress in narrowing differences on 
intermediate-range nuclear forces. The 
United States and the Soviet Union 
agreed in principle at Reykjavik to a 
global limit of 100 LRINF missile 
warheads for each side, with none in 
Europe. Remaining missiles would be 
deployed in Soviet Asia and on U.S. ter- 
ritory. The Soviets dropped their 
longstanding insistence that British and 
French nuclear weapons be included in 
such an agreement. Both sides also 
agreed in principle to constrain shorter 
range INF systems and to hold follow-on 
negotiations at Geneva for their reduc- 
tion. Following the Reykjavik meeting, 
our negotiators in Geneva promptly 
tabled a new U.S. proposal incorporating 
the areas of agreement in principle and 
other elements which would be 
necessary to achieve an acceptable INF 



agreement. While the Soviets subse- 
quently tabled a new proposal based oi 
their version of the events of Reykjavi 
they have stepped backward from mu< 
of the progress made at that meeting. 
Additionally, the Soviets have backed 
away from their Geneva summit comn - 
ment to conclude a separate interim 
agreement on INF. They are now tryi 
to link INF to other arms control area 
insisting that their arms control pro- 
posals are a "package" and cannot be 
separated. 

Defense and Space Issues 

At Reykjavik, in response to the Sovk ' 
proposal that we provide a 10-year coi 1 
mitment not to withdraw from the AI i 
Treaty, the United States offered to 
accept such a commitment for the 
10-year period through 1996, during 
which research, development, and 
testing, which are permitted by the 
ABM Treaty, would continue. U.S. 
acceptance was coupled with: 

• A 50% reduction in strategic 
offensive forces of the United States : m 
the Soviet Union by 1991; 

• Elimination by 1996 of all U.S. I 
and Soviet offensive ballistic missiles; 
and 

• Agreement that either side cou 
deploy advanced strategic defenses : 
1996, unless the sides agree otherwis 

The Soviets, however, in effect 
sought to amend the ABM Treaty by 
banning testing of space-based 
"elements" of a missile defense systi 
outside of laboratories. This, in effec 
would have killed the U.S. SDI 
program— something the President c< 
not accept. 

Previously, the United States als 
proposed an open laboratories 
initiative— a confidence-building prog 
of reciprocal briefings and site visits 
strategic defense facilities. 

In regard to ASAT, the United 
States has not identified any limitatk 
proposals which are effectively verifi; 
and in the security interests of the 
United States. We have offered to co 
sider proposals for specific ASAT an 
control measures, should those measi 
be compatible with U.S. national 
security. 

Chemical Weapons 

In April 1984, the United States pro- 
posed to the 40-nation Conference on 
Disarmament in Geneva a compre- 
hensive treaty banning development, 



16 



Department of State Bui 



. 



ARMS CONTROL 



-oduction, use, transfer, and stockpiling 
' chemical weapons, to be verified by 
•irious means, including mandatory 
isite challenge inspection. At the 
ovember 1985 summit, President 
eagan and General Secretary 
orbachev agreed to intensify bilateral 
scussions on all aspects of the com- 
-ehensive chemical weapons ban being 
jgotiated at the CD. In 1986, we had 
;>ur rounds of bilateral CW treaty talks, 
id a fifth round is planned for 
ebruary 1987. 

The bilateral treaty discussions have 
irrowed differences on the elimination 
' CW production facilities and on 
!iemicals to be covered by an eventual 
,W treaty. However, important dif- 
'rences remain on these and a number 
' other key issues, especially those 
yarding verification of treaty com- 
'iance. To ensure compliance, the 
nited States calls for systematic onsite 
■ spection to verify compliance at 
:clared sites and mandatory "challenge 
; spections" to investigate suspected 
olations. The Soviets have traditionally 
i sisted that acceptance of challenge 
spection be voluntary. Although they 
cently indicated that stricter pro- 
cures could apply to certain 
lallenges, they have yet to explain fully 
mw these would work. 

In addition, we have opened a 
alogue with the Soviets on preventing 
e proliferation of chemical weapons. In 
ese meetings, we reviewed export con- 
ols and political steps to limit the 
iread of chemical weapons. 

uclear Testing 

^ he U.S. priority in the nuclear testing 
•ea is improvement of the verification 
•ovisions of the existing Threshold Test 
an Treaty and Peaceful Nuclear Explo- 
ons Treaty. At the Reykjavik meetings 
;tween President Reagan and General 
ecretary Gorbachev, we proposed that 
le United States and the Soviet Union 
jgin negotiations on nuclear testing. 

' he agenda for these negotiations would 
rst be to resolve remaining verification 
sues associated with the TTBT and 

( NET. Once these verification concerns 
ave been satisfied and the treaties 
itified, the United States and U.S.S.R. 
ould immediately engage in negotia- 
ons on ways to implement a step-by- 
;ep parallel program— in association 
•ith a program to reduce and ultimately 
liminate all nuclear weapons— of 
miting and ultimately ending nuclear 

listing. 



Chronology 


U.S.-SOVIET ARMS CONTROL 


Mutual and Balanced Force 


NEGOTIATIONS, 1986 


Reductions Talks 




August 6-7 in Moscow 


Nuclear and Space Talks 


September 10-11 in Washington 


Round IV: January 16-March 4 




Round V: May 8-June 26 


Conference on Confidence- and 


Round VI: September 18-November 13 


Security-Building Measures and 




Disarmament in Europe 


Conference on Confidence- and 


August 14-15 in Stockholm 


Security-Building Measures and Dis- 




armament in Europe (Multilateral) 


Chemical Weapons Treaty Talks 


Round IX: January 28-March 15 


January 28-February 3 in Geneva 


Round X: April 15-May 23 


April 15-25 in Geneva 


Round XI: June 10-July 18 


July 1-18 in Geneva 


Round XII: August 19-September 19 


October 28-November 18 in New York 




City 


Conference on Disarmament 




(Multilateral) 


Chemical Weapons Nonproliferation 


Chemical Weapons Committee Rump 


Discussions 


Session: January 13-31 


March 5-6 in Bern 


Spring Session: February 4-April 25 


September 4-5 in Bern 


Summer Session: June 10-August 29 




Chemical Weapons Committee Chair- 


Nuclear Testing 


man's Consultations: November 24- 




December 17 


July 25-August 1 in Geneva 




September 4-18 in Geneva 


Mutual and Balanced Force 


November 13-25 in Geneva 


Reductions (Multilateral) 




Round 38: January 30-March 20 


Nuclear Risk Reduction Centers 


Round 39: May 15- July 3 


May 5-6 in Geneva 


Round 40: September 25-December 4 


August 25 in Geneva 


U.S.-SOVIET ARMS CONTROL 


Nonproliferation Talks 


EXPERT-LEVEL MEETINGS, 1986 


December 15-18 in Washington 


Nuclear and Space Talks 




August 11-12 in Moscow 




September 5-6 in Washington 




December 2-5 in Geneva at the 




negotiator level 





While there are indications that the 
Soviets might agree to address our con- 
cerns, there has yet been no agreement 
on priorities in these negotiations. At 
subsequent sessions of expert-level 
discussions on nuclear testing, the Soviet 
delegation backed away from an orderly 



step-by-step approach to negotiations. 
We hope to resume these sessions this 
spring. 

The President also indicated to Mr. 
Gorbachev in Iceland that when the 
100th Congress convened, he would 
request the advice and consent of the 



\pril 1987 



17 



ARMS CONTROL 



Senate to ratification of the TTBT and 
PNET, but with an appropriate reserva- 
tion to the treaties that would ensure 
that they not take effect until he cer- 
tifies they are effectively verifiable. As 
promised, the President forwarded that 
request to the Senate on January 13. 

Conference on Confidence- 
and Security-Building Measures 
and Disarmament in Europe 

The 35-nation Stockholm CDE con- 
ference adjourned September 22 with 
the adoption of a set of concrete 
measures designed to increase openness 
and predictability of military activities in 
Europe. These measures, which are built 
around NATO proposals, provide for 
prior notification of all military activities 
above a threshold of 13,000 troops or 
300 tanks, observation of military activ- 
ities above a threshold of 17,000 troops, 
and annual forecasts of upcoming 
military activities. The accord also con- 
tains provisions for onsite air and 
ground inspections for verification. 
Although modest in scope, these provi- 
sions are the first time the Soviet Union 
has agreed to inspection on its own ter- 
ritory for verification of an international 
security accord. 



Bilateral Confidence-Building 
Measures 

The U.S. proposal for measures to 
upgrade Hot Line communications was 
agreed to by the Soviet Union and is 
now being implemented. A U.S. proposal 
to establish nuclear risk reduction 
centers is now being considered by the 
Soviet Union. CBM initiatives on 
military-to-military exchanges and on 
notifications of ballistic missile launches 
and strategic military exercises have 
also been proposed by the United States. 

Mutual and Balanced Force 
Reductions 

On December 5, 1985, NATO proposed a 
new initiative designed to meet Eastern 
concerns. The proposal deferred the 
Western demand for prior data agree- 
ment on Eastern forces. The Soviets had 
claimed that this Western demand was 
the primary roadblock to agreement. 
The proposal also called for a time- 
limited, first phase withdrawal of 5,000 
U.S. and 11,500 Soviet troops, followed 
by a 3-year, no-increase commitment by 
all parties with forces in the zone, during 
which residual force levels would be 
verified. Residual force levels would be 
verified through national technical 
means, agreed entry/exit points, and by 
30 annual onsite inspections. Thus far, 
the Soviets have not responded con- 
structively to the Western initiative. 

NATO High-Level Task Force on 
Conventional Arms Control 

The task force presented its report on 
the direction of NATO's arms control 



policy for the future to the North Atla 
tic Council on December 11. At that 
meeting, NATO ministers announced 
their acceptance of the "Brussels 
declaration," which states NATO's 
readiness to enter into new negotiatio 
with the Warsaw Pact aimed at estab 
lishing a "verifiable, comprehensive a 
stable balance of conventional forces ; 
lower levels" in the whole of Europe 
from the Atlantic to the Urals. NATO 
hopes to begin discussions early in 1 9i 
to develop a mandate for new negotia 
tions. The Brussels declaration also ce 
for separate negotiations to build up a 
expand the results of the CDE 

J 



Nuclear Nonproliferation Treaty 

On December 15-18, the United State 
and the Soviet Union met in Washing 
for the eighth round in an ongoing ser 
of consultations, which began in 
December 1982, on nuclear nonprolife 
tion. These consultations covered a wi 
range of issues, including prospects fc 
strengthening the international nonpr 
liferation regime, support for the 
Nuclear Nonproliferation Treaty, and 
the mutual desire of the United States 
and the U.S.S.R. to strengthen the 
International Atomic Energy Agency. 
These consultations are not negotiatic 
but, rather, discussions to review vari 
issues of common concern. The Unite< 
States and the Soviet Union share a 
strong interest in preventing the 
dangerous spread of nuclear weapons 
and have agreed to use these consulta 
tions as a forum for discussion and 
exchange of views. ■ 



18 



Department of State Bulle 



AST ASIA 



Corean Politics in Transition 



y Gaston J. Sigur, Jr. 

Address before the U.S. -Korea 
teiety in New York City on February 6. 
bgr. Mr. Sigur is Assistant Secretary 
\r East Asian and Pacific Affairs. 

'm delighted to be here with you today. 
jve been looking forward to meeting 
ith the U.S. -Korea Society for several 
jonths. With scheduling the way it is in 
lir bureau, it often is easier to get to 
i;oul than to New York. I've had the 
oportunity to visit the Republic of 
|orea frequently over the past several 
tars, most recently last November, 
Jhen I talked with President Chun, 
l-ime Minister Lho, Foreign Minister 
hoi, and DJP [Democratic Justice 
iirty] leader Rho, as well as NKDP 

few Korea Democratic Party] leader 
\ie and other opposition party leaders, 
iiese visits have provided useful insight 
;to the complex political process evolv- 
b there, a process which will influence 
\e security and general well-being of 

e Korean people for generations to 

me. 

Next month, I expect to return to 
( oul with the Secretary of State for a 
1 ief visit following our mission to 
' lina. It will be a good opportunity to 

in, first hand, an update on political 

d security conditions. In the mean- 
|ne, I want to take this opportunity 

day to share with you our govern- 
Nnt's observations on the domestic 

litical process underway in Seoul. 

icing the Challenges 

the past few decades, the Republic of 
>rea has created a dynamic economic 
stem and is now in the process of 
sating an equally dynamic political 
stem to carry the nation into the next 
ntury. This task is being undertaken 
lid unique circumstances. The 
(public of Korea faces a determined 
d well-armed foe, committed to 
unification of the peninsula on its own 
rms by whatever means are necessary. 
iuth Korea also faces the stresses and 
rains of industrialization, which 
veloped over a period of generations 
> the West but which is taking place 
nost overnight in Korea. In these cir- 
mstances, the new political system 
>w debated in Seoul must provide 



security and dynamism for the continued 
parallel development of economic, social, 
and political institutions. 

Few countries face as direct and sus- 
tained a threat to their very existence as 
does the Republic of Korea. Over the past 
40 years, North Korea's Kim II Sung 
has tried virtually every tool available— 
from all-out war to assassination to 
"peace offensives"— to destroy or eclipse 
the Republic. As everyone in this room is 
well aware, the cost of these misbegot- 
ten policies has been tremendous for 
Koreans, both north and south. 

The Korean war exacted a terrible 
toll in human suffering, and its repercus- 
sions are still evident. Today, a band of 
steel still stretches across Korea's 
beautiful mountains and rivers from one 
sea to the other. In the past few 
decades, the North has doubled the size 
of its armed forces and increased its 
weaponry with vast assistance from the 
Soviet Union. The threat to South Korea 
is still very real. 

During the same period the South, 
with U.S. support, has made steady 
progress toward modernization of its 
defensive capabilities. The improvements 
have been largely in equipment and 
training, neither of which come cheap. 
South Korea has been devoting some 6% 
of its gross national product to this 
effort. Furthermore, this significant 
investment is being made at the same 
time that the Republic of Korea has been 
undertaking one of the world's most 
impressive programs of economic 
development and industrialization. 

Strong Economic Base 

Korea is one of the nations to which the 
term "newly industrializing country" is 
aptly applied. Over the past 5 years, the 
Republic of Korea has maintained an 
average annual economic growth rate 
of over 8%, following an earlier decade 
of equally impressive economic 
development. 

During this time South Korea moved 
from being a recipient of U.S. aid to 
America's seventh largest trading part- 
ner. Today, the United States has more 
trade with South Korea than with many 
of our traditional European trading part- 
ners. In 1986, total bilateral trade was 
some $19 billion. The United States is 
South Korea's single biggest market, 
buying $13-billion worth of Korean prod- 
ucts. Footwear and apparel top U.S. 



imports from Korea, but Americans have 
also become very fond of Korean-made 
electronic products, from TVs to 
microwave ovens and small computers. 
Furthermore, Korean firms have been 
moving into new areas as well— witness 
the increasing number of sharp Hyundai 
automobiles on American roads. 

It bears emphasizing that the 
Republic of Korea is also a major market 
for U.S. goods and services. The South 
purchased about $6-billion worth of 
American goods, services, and 
agricultural products in 1986. 

Economic success has changed South 
Korean society in fundamental ways. In 
1960, the average per capita gross 
national product was $100. Today, it is 
over $2,000. In 1975, almost one-third of 
all South Koreans were engaged in 
agriculture. Today, that proportion is 
down to one-fifth. Koreans have moved 
rapidly to their cities; over half now live 
in urban areas. Seoul alone accounts for 
one-quarter of the population. 

South Koreans, whose drive for 
learning is an enviable national 
characteristic, are better educated than 
ever before. Today, 98%— one of the 
world's highest percentages— are 
literate. Korean colleges and universities 
enroll more than 1 million students. 
Korean mothers tell their high school 
student children that they must study 
long and hard: "Five hours sleep a night 
means success; six hours means failure." 

New Stresses 

The Republic of Korea faces new 
stresses in many sectors of its society, 
which will require a political system 
capable of building consensus through 
discussion and compromise. On the 
economic side, South Korea faces many 
new challenges as it moves into indus- 
tries based on more sophisticated 
technologies. Firms like Gold Star, Sam- 
sung, and Daewoo are, for example, 
already producing integrated circuits 
and computers. At the same time, 
Koreans realize they must accept certain 
responsibilities, such as more open 
markets, commensurate with their new 
role as an international trader of some 
consequence. South Korea has earned 
full membership on the team. With that 
full membership comes the obligation to 
help maintain the free trading system 
from which it has benefited so greatly. 
Naturally, such profound changes in 
economic behavior in such a short 
time are difficult, but they must be 
accomplished. 



oril 1987 



19 



EAST ASIA 



Korean society faces a wide range of 
other challenges deriving from industri- 
alization. Success in meeting these 
challenges will require a creative, 
responsive political system. Seoul needs 
to decide, for example, on the appro- 
priate amounts of national resources to 
invest in social capital— schools, medical 
facilities, and so forth— and how to con- 
tinue to assure equitable distribution of 
the benefits of economic success. As the 
work force becomes more sophisticated, 
Korea has also to deal with the difficult 
problems of workers' rights, including 
safety and labor organizations and the 
role of unions. Koreans are beginning to 
address such complex issues. Last year, 
the National Assembly passed new 
legislation that permits national labor 
organizations to participate in individual 
labor actions. Another effort has begun 
to establish minimum wages. These 
issues will not be solved overnight. A 
more open political system will be a 
critical part of the solution. 

The Move Toward 
Political Maturity 

Everyone understands the fundamental 
linkage between a nation's domestic 
political maturity and its general secu- 
rity. The two elements are mutually 
dependent. The Republic of Korea's 
security relies as much upon responsive 
political institutions that promote the 
aspirations of its people as upon the 
mighty military capability it possesses. 
By the same token, of course, political 
transition must proceed at a pace con- 
sistent with harmony and stability. 
Secretary of State Shultz has pointed 
out that transitions toward greater 
democracy are "often complex and 
delicate, and. . .can only come about in a 
way consistent with a country's history, 
culture, and political realities." We 
recognize that. 

At present, there appears to be a 
general consensus among South Koreans 
of various political persuasions that 
domestic political practices up to now— 
however well suited they may have been 
for a simpler, slower moving past— 
simply are inadequate to meet Korea's 
complex present and future needs. 

First, there is the problem of the 
peaceful transfer of power from one 
leader to the next. President Chun Doo 
Hwan himself has pointed out that the 
country cannot afford long periods of 
one-man rule ending in violence and con- 
frontation. Koreans also face the 
challenge of permanently "civilianizing" 
their politics— of calling upon the full 



20 



range of their talent resources to lead an 
increasingly complex economy and 
society. 

The Korean military has played an 
important role in various aspects of the 
Republic's recent development. But 
Seoul is now moving into a new era. 
After the destruction of much of the 
civilian sector by the Korean war, 
Korea's military men were a significant 
group among the relatively small 
number with experience in administering 
large, modern organizations. Today, 
however, many South Koreans have a 
wealth of experience and have operated 
successfully in a wide variety of fields to 
ensure progress in a modern society. 
Korea's industry and business compete 
aggressively and impressively on the 
world stage. Its universities produce 
world-class scholars. 

In addition, new technologies have 
thrust greater complexities into modern 
defense efforts. Today's soldier lives in a 
new era in which Korea's national 
security demands his full-time concentra- 
tion and energy to accomplish his vital 
primary mission: mastering the skills 
needed for the defense of his country. 

Laudable Initiative 

President Chun has recognized these 
trends and moved to implement the 
changes in the Republic of Korea's 
political institutions necessary to meet 
the demands of the next century. He has 
pledged to break the historical cycle of 
succession, instability, and uncertainty 
by peacefully transferring power at the 
end of his term in February 1988. The 
President has made a historic commit- 
ment toward greater democratization in 
South Korea: he has said that he will be 
the first major Korean president to 
retire from office peacefully, in order to 
set the pattern for future Korean 
leaders. He will join a pool of retired 
statesmen, no longer active in politics, 
whose counsel and advice will be a 
valuable national resource. It is now the 
task of the Korean people to establish a 
system which will ensure that such 
peaceful transfers of power continue into 
the future. 

President Chun deserves credit for 
his promise, and history will praise his 
service to the nation by making good on 
it. In keeping this pledge, he also thrusts 
obligations on all his compatriots: to sup- 
port a peaceful process while eschewing 
violence and to deal responsibly with the 
new phenomenon of a once-powerful 
president who has retired. 



President Chun, the Democratic 
Justice Party, and the New Korea 
Democratic Party all deserve credit as 
well for recognizing the need for and 
starting the process of constitutional 
revision. Although political differences 
must be played out, most outside 
observers are concerned that, to date, 
there seems to have been more argu- 
ment than real discussion and— as a 
consequence— more rhetoric than 
results. It is essential for the future of 
the Republic of Korea, and for the futu 
of our bilateral relations, that any new 
constitution, and the laws which suppoi 
representative government, create a 
more open and legitimate political 
system. 

A Consensus Process 

History demonstrates that to be durabl 
constitutions must be carefully con- 
structed. They emerge from compromi 
and consensus among the major politic 
players, not from violence, abuse of 
physical force, or obstinate confronta- 
tion. Lasting constitutions encompass 
broad principles, such as free and fair 
elections in an open atmosphere. Agre< 
ing on such principles requires that pec 
pie work together for the future, putti: 
aside personal ambitions and past accu 
sations and grievances. Put another 
way, any new system must enlist the 
constructive energies of all South 
Koreans, emulating the way that 
economic development has brought 
together people of divergent back- 
grounds and used the talents of every 
man and woman. 

Only if it is created through a con- 
sensus process can South Korea's evol 
ing political system have the dynamisn 
and the durability to prosper into the 
next century. Only in this way will it 
have the firm support of Korea's peopl< 
support which is vital if Korea is to 
break the tragic cycle of unexpected an 
violent changes of government. Only 
popular support can give the stability 
which the Republic of Korea needs to 
meet the challenges to its national and 
its economic security in the future. 

The task is not an easy one, but 
Koreans know the time is ripe for 
beginning. 



First, the combined South Korean 
and UN Command forces present a for- 
midable shield behind which the process 
of political change can take place. 

Second, the Korean economy did 
well last year. The Republic of Korea 
had a surplus in its current accounts foi 
the first time, and this year also prom- 
ises to be a good one. 



Department of State Bulle 



EAST ASIA 



Third, and perhaps most impor- 
intly, Koreans want change. They are 
etter educated than ever before and 
•ave a new self-confidence— a "can-do" 
ttitude— after their success in develop- 
lg their country's economic strength. 

The Republic of Korea's political 
.aders have committed themselves to a 
■?w course. President Chun has pledged 
•i transfer power peacefully and has 
arted the process of constitutional revi- 
,on. The other major political actors on 
Dth sides are men who know from their 
wn experience the consequences if this 
lance is missed. They lived through the 
Drrors of the Korean war and past 
jlitical traumas amidst uncertainty and 
olence. They know that an orderly 
'stem for changing governments is a 
jcessity for their country's security and 
•osperity. In the hurly-burly of day-to- 
vy political activity, it is easy to lose 
ght of the big picture; but these men 
ive the breadth of mind to pause and 
fleet and act constructively, not for 
irrow partisan interest but for their 
untry. 

Regardless of what specific govern- 
ental system emerges from the current 
bate, it surely must reflect elements of 
ienness, fairness, and legitimacy. We 
juld hope for further innovative pro- 
sals from participants in this process, 
oposals which statesmen in both the 
ijority and minority parties will con- 
fer with open minds and an eye toward 
cessary compromise. Innovative ideas 
n serve as an agenda to move the revi- 
>n process out of the morass into which 
has fallen. 

The 1988 Olympics will give South 
>reans a chance to show off the results 
their hard work to the world. Their 
untry has certainly become a model of 
onomic development, and many 
tions will be justly impressed. The 
ne remaining before the games also 
/es South Koreans the opportunity to 
nstruct the kind of political institu- 
ms, the kind of political model, that 
ey would like the world to see. 

r fer Our Support 

iuth Koreans developed their economic 
stem step by step and by their own 
rd work. They will build a new 
litical system in the same way. The 
lited States can and will support this 
fort as it did economic development, 
thout interfering in domestic affairs, 
e shall do so in a number of ways. 



Philippine Constitutional Plebiscite 



WHITE HOUSE STATEMENT, 
FEB. 3, 1987' 

On February 2 an estimated 20 million 
Filipinos went to the polls to vote on a 
new constitution. This plebiscite is a 
significant milestone on the path of 
democratic renewal which President 
Aquino has charted for the Philippines. 
Representative civilian government 
is the very essence of the democratic 
process. In view of our own history and 
values, it is an institution the United 
States encourages vigorously and sup- 
ports totally. We congratulate the people 
of the Philippines on their latest, suc- 
cessful exercise in democracy and wish 



them equally well in the political con- 
tests ahead. 

The United States pledges continu- 
ing support for President Aquino's 
courageous efforts to maintain her 
fellow Filipinos' freedom and participa- 
tion in the political process. These are 
the surest guarantees that the Philip- 
pines will achieve the internal harmony, 
political stability, and economic pros- 
perity it needs and has earned. 

The President has sent President 
Aquino a message conveying his per- 
sonal congratulations on the successful 
conclusion of the plebiscite. 



'Text from Weekly Compilation of 
Presidential Documents of Feb. 9, 1987. I 



First, the United States will con- 
tinue to work with the Republic of 
Korea's Armed Forces to maintain and 
strengthen the military shield which pro- 
tects the country. The American commit- 
ment is firm and will remain so, regard- 
less of changes in the Congress or even 
in administrations. At the same time, we 
will support the Republic of Korea in its 
efforts to reduce tension with the North. 

Second, we shall continue to support 
an open international trade system. This 
system is the bedrock upon which 
Korea's present and future prosperity 
depends. Korea is rich in human 
resources but lacks many raw materials. 
The continuation of free trade between 
nations is clearly vital to the Republic. 
One need only observe the stagnation of 
the North Korean economy to get a good 
idea of how unproductive that society's 
go-it-alone approach to development has 
been. The Reagan Administration will 
continue to fight for the preservation of 
this beneficial system. But we will need 
help from our friends. From this per- 
spective, the present trade negotiations 
between Seoul and Washington repre- 
sent not an agenda of so-called American 
demands but rather our "request for 
assistance" in maintaining a dynamic 
and healthy international commercial 
system. We must pursue this effort in 
the face of rather strong protectionist 
forces in the United States and 
elsewhere that threaten our mutually 
beneficial trade. 



Finally, the United States will con- 
tinue to encourage all sides in Korea to 
work together to create a new political 
framework. The United States 
wholeheartedly supports the important 
process of constitutional and legislative 
reform as the means to this end. In that 
process, we will provide positive sup- 
port, not interference. We do not and 
shall not support any particular proposal 
by any Korean political party; but we 
shall continue to urge accommodation, 
compromise, and consensus. Both sides 
have made eloquent arguments concern- 
ing the virtues of their respective ideas. 
It is for Koreans, not outsiders, to decide 
what institutions and mechanisms best 
fit their country's needs. We urge all 
sides to sit down and work together 
toward constructive proposals. 

Conclusion 

Citizens of the Republic of Korea have a 
historic opportunity to create with their 
own hands new political forms to match 
the vitality of their economy and society. 
Clearly, old patterns no longer suffice. 
Equally clearly, creating new ones will 
require courage and self-sacrifice on the 
part of the statesmen who undertake the 
task. We Americans are fully behind the 
Korean people in this tremendously 
important effort to create a new political 
system with the vitality and solid 
popular support to carry their country 
successfully into the next century. ■ 



pril 1987 



21 



ECONOMICS 



U.S. Trade Policy 
and the Trade Deficit 



by Clayton Yeutter 

Statement before the House Ways and 
Means Committee on February 10, 1987. 
Ambassador Yeutter is U.S. Trade- 
Representative. 1 

I am pleased to appear before you today 
to discuss U.S. trade policy and the 
trade deficit. This hearing takes place 1 
month after the introduction of H.R. 3, 
the trade provisions of which are iden- 
tical to those in H.R. 4800 passed by the 
House last year. I know you are all 
aware of the views of the Administration 
on those provisions, and I do not intend 
to belabor them here this morning. 

I am very pleased with the bipar- 
tisan cooperation members of this com- 
mittee have shown in their desire to 
craft responsible, effective trade legisla- 
tion in 1987. The administration looks 
forward to working with you throughout 
that process. Our bill will be before you 
shortly. In developing that bill, we were 
guided by several overarching considera- 
tions. For example, we considered 
whether each proposal would: 

• Facilitate the competitiveness of 
U.S. industry; 

• Conform to our international 
obligations; 

• Enhance our leverage in the 
Uruguay round and in other interna- 
tional trade negotiations; 

• Provoke costly retaliation against 
U.S. exports; or 

• Invite our trading partners to 
enact mirror legislation, to the detriment 
of U.S. exports. 

These are the same tests we will 
apply in considering proposals 
emanating from the Congress. 

Let us turn now to one of our most 
challenging national problems— the trade 
deficit. 

U.S. Trade Deficit 

In 1986, the United States had a mer- 
chandise trade deficit of $169.8 billion. 
The deficit has grown as a consequence 
of rising imports in recent years while 
exports have been essentially unchanged 
[Table 1]. In 1986, imports were 7% 
higher than in 1985 and up over 50% 
from 1980. Rising imports were to be 
expected following 1982, when 



America's economy began expanding 
again. Of greater concern is that during 
this same period, exports have remained 
flat, rising only about 2% this past year, 
and they still remain slightly below their 
1980 level. 

The 1986 merchandise trade deficit 
grew vis-a-vis virtually every major U.S. 
trading partner [Table2]. In dollar terms, 
the biggest shifts occurred in trade with 
the European Community [EC] and 
Japan, but countries such as Korea and 
Taiwan now also have major surpluses 
with us. In terms of product com- 
ponents, changes in our manufactures 
trade dwarf any other shift. In manufac- 
tures, there has been a net swing of 
-$158 billion since 1980. 

As the U.S. merchandise trade 
deficit has worsened, so has the current 
account deficit, which for 1986 (on the 
basis of three quarters' data) is 
estimated to be about $140 billion. The 
1986 current account deficit was 19% 
larger than in 1985. As recently as 1981, 
we had a current account surplus of $6.3 
billion. The current account is the 
broadest measure of our international 
trade, including not only the merchan- 
dise trade balance but also the balance 
on trade in services, investment earn- 
ings, and transfers. 

The deterioration in America's trade 
and current account balances should con- 
cern all of us. However, before we try to 
"do something," we ought to understand 
just what the problem is. We will see a 
permanent turnaround in our trade and 
current account balances only if we take 
actions which address their real causes, 
rather than their perceived causes. 

The growth in the current account 
deficit is, by definition, the mirror image 
of the growth in net foreign capital 
imports [Table 3]. In recent years, we 
have gone from being a large net capital 
lender to a substantial net capital bor- 
rower. Between 1982 and 1986, we bor- 
rowed almost $420 billion more than we 
loaned overseas. In other words, our 
problems are as much capital related as 
they are trade related. 

Let me briefly explain how the cur- 
rent account deficit mirrors our net 
foreign capital imports. Over the last 
few years, foreign lenders and investors 
have found the United States a par- 
ticularly attractive haven for their funds. 
Sustained noninflationary growth, 



l« 



i 

i 



relatively low taxes, business deregula 
tion, and relatively high real interest 
rates have all helped to attract foreign 
funds. 

In order to invest or lend here, 
however, foreigners have to purchase 
dollars in foreign exchange markets. 
That strong external demand caused a 
substantial appreciation in the dollar's 
value during the first half of the 1980s. 
That appreciation, in turn, was a majoi 
factor in our large trade and current 
account deficits. After all, not many 
Americans give dollars to foreigners sc 
that the latter can invest here. 
Foreigners earn those dollars by selling 
us goods and services. 

Our trade and current account 
deficits supply the dollars purchased bj 
foreigners in foreign exchange markets 
to invest here. Under the flexible 
exchange rate system, the value of the 
dollar moves whenever necessary to 
equate the value of capital inflows with 
the current account deficit. Conversely 
there is no way for our current account 
deficit to decline without a correspond- 
ing reduction in our net capital inflows 
(our net foreign borrowing). 

The fundamental question then is: 
Why are we borrowing so much from 
overseas? The answer is that our 
national pool of savings— the positive 
savings of private households, corpora- 
tions, and state and local governments- 
is insufficient to meet the combined 
expenditure demands of private invest- 
ment plus the large Federal budget 
deficit. The gap-3.3% of GDP in 
1986— between domestic savings, on th 
one hand, and private investment plus 
Federal budget deficits must be made i 
by borrowing substantial amounts of 
capital from abroad. This borrowed 
capital allows us to keep our investmen 
spending at current levels rather than 
reduce them to the level of domestic sa 
ings as would otherwise be necessary. 
We are saddling future generations of 
Americans with a growing domestic an> 
foreign debt burden so that we can enjc 
greater comforts today. Would that our 
grandchildren were to understand what 
we are doing to them. 

One reason low net U.S. saving is 
not sufficient to meet domestic expendi 
ture is that there has been substantial 
dissaving, in the form of large budget 
deficits, by the Federal government. Th 
most important action we as a nation 
can take to improve the trade deficit an 
enhance U.S. competitiveness is to boos 
domestic saving by cutting the Federal 
budget deficit through reductions in 
government spending. An attempt to cu 
the budget deficit by raising taxes woul< 
be counterproductive. 



22 



Department of State Bulled 



ECONOMICS 



A second important factor con- 
tributing to the worsening of our trade 
and current account deficits has been 
slow economic growth in many of our 
industrialized trading partners. This, of 
icourse, impedes growth in our exports. 
Were our overseas trading partners to 
(grow faster, the net effect on U.S. 
:exports would be positive. In addition, 
those countries would become more 
attractive to global investors, thereby 
reducing the demand for dollars to 
(invest in the United States. (The latter is 
•a two-edged sword, of course. A 
slowdown in foreign investment here 
will drive up interest rates, unless we 
also take steps to boost domestic 
savings.) 

Finally, our trade and current 
account deficits are related to the debt 
:risis in the developing countries. 
Secretary [of the Treasury] Baker has 
Covered this point, so I will only say that 
heavy debt burdens have caused many of 
)ur Latin American trading partners to 
■ -educe their imports from us while 
lj xtosting exports to the United States in 
>rder to service their debts. That may 
; lave been a prudent and necessary 
, strategy in the short run. It is not 
lj lecessarily a sound strategy, either for 
Ithem or for us, in the long run. 

The Positive Side 

t is important to keep all this in 
terspective. Notwithstanding our pres- 
:nt trade woes, the United States is still 

- me of the world's most competitive and 
iroductive economies. We can and must 
lo better, but our competitive posture 
oday is far superior to what it was 2 or 

1 1 years ago. The restoration of sus- 
ained, noninflationary growth is an 
.ccomplishment of which the Admin- 
stration, the Federal Reserve, the Con- 
gress, and the American people can be 
iroud. 

Beginning in 1981, President 
leagan and the Congress worked 
ogether to unleash the inherent power 

ki our economy by dramatically reducing 
he tax burden borne by Americans. As 
i consequence, our economy is far 
stronger and more vibrant than it was 
vhen the Administration first took 
>ffice. 

In 1981 America was in the grip of 
he highest inflation rate ever seen in 
.his country. Inflation was silently steal - 
ng money from the pockets of all of us. 
I Since 1980, however, inflation has been 

|:ut from over 12% to 1.1% in 1986, the 
■owest level in 25 years. 



Accompanying this fall in the rate of 
inflation has been a significant drop in 
interest rates. The prime rate has been 
cut by almost two-thirds, from a crippl- 
ing high of 21.5% in January 1981 to 
7.5% in December 1986. Housing has 
once again become affordable to 
Americans, sparking a boom in the 
domestic housing market. 

Our ability to create jobs for 
Americans is the envy of the rest of the 
world. Nearly 13 million new jobs have 
been filled since 1980, and more than 
61% of our people over the age of 16 are 
employed, the highest level ever. While 
civilian unemployment remains too high 
at 6.7%, it is now the lowest it has been 
since the end of 1979. 

The Administration and the Con- 
gress together have completed a major 
overhaul of the tax system. The new 
system, which starts to take effect this 
year, will make our Federal income tax 
simpler and fairer for millions of 
Americans. 



Thanks to the efforts of Treasury 
Secretary Baker, [Federal Reserve] 
Chairman Volcker, and their counter- 
parts in other major industrial countries, 
we have seen a growing degree of 
macroeconomic coordination. 

The totality of these and other 
economic policies has helped create over 
49 months of sustained economic expan- 
sion, one of the longest periods of con- 
tinuous growth since the Second World 
War. This growth has boosted national 
wealth, given Americans higher real 
incomes than ever before, and raised our 
standard of living. 

Trade Policy and 
the Trade Deficit 

Hand-in-hand with these general 
economic accomplishments have been 
numerous victories in the trade policy 
area. The Administration remains com- 
mitted to its policy of free and fair trade. 



Table 1 



Trade and Current Account Balances 
(US$ billions) 



Merchandise Trade (Census basis, imports valued c.i.f.) 

U.S. Exports U.S. Imports 



1980 
1981 
1982 
1983 
1984 
1985 
1986 



220.6 
233.6 
212.2 
200.5 
217.9 
213.1 
217.3 



257.0 
273.4 
254.9 
269.9 
341.2 
361.6 
387.1 



Balance 

- 36.4 

- 39.8 

- 42.7 

- 69.4 
- 123.3 
-148.5 
-169.8 



Current Account Balances 









Direct 


Other 








Merchan- 


Business 


Invest. 


Invest. 




Current 




dise** 


Services 


Earnings 


Earnings 


Other*** 


Account 


1980 


- 25.4 


7.6 


28.5 


1.9 


-10.7 


1.9 


1981 


- 28.0 


9.6 


25.7 


8.4 


- 9.9 


6.3 


1982 


- 36.4 


9.1 


18.2 


10.4 


-10.4 


- 9.1 


1983 


- 67.1 


6.4 


14.9 


9.9 


-10.7 


- 46.6 


1984 


-112.5 


2.3 


12.3 


6.5 


-15.1 


-106.5 


1985 


- 124.4 


0.4 


26.3 


-1.1 


-18.9 


-117.7 


1986* 


-146.4 


4.6 


31.2 


-8.4 


-20.6 


-139.6 



•Annualized from the first three quarters of 1986. 
"The merchandise trade deficit as reported in the current account is smaller than on the 
more widely reported Census basis. The exclusion of insurance and freight charges from mer- 
chandise import valuations in the balance of payments, together with other technical adjust- 
ments, cause this difference in the valuation of the trade balance. 

** 'Includes military transactions, government services, and unilateral transfers. 

Sources: Survey of Current Business, U.S. Department of Commerce and UN Trade Statistics. 



<\pril 1987 



23 



ECONOMICS 



Table 2 



Selected Bilateral U.S. 



Merchandise Trade Balances— 1980-86 
(USS billions) 



1980 



1981 



1982 



1983 



1984 



1985 



1986 



Japan 


-12.0 


-18.0 


-19.0 


-21.7 


-36.8 


-49.7 


-58. 


Canada 


-6.6 


-7.3 


-13.1 


-14.3 


-20.4 


-22.2 


-23. 


EC 


16.3 


8.7 


3.5 


-1.6 


-13.3 


-22.5 


-26. 


Germany 


-1.9 


-2.1 


-3.8 


-5.0 


-9.4 


-12.2 


-15. 


Mexico 


2.4 


3.8 


-4.0 


-7.9 


-6.3 


-5.8 


-5.2 


Korea 


0.0 


-0.5 


-0.7 


-2.0 


-4.2 


-4.8 


-7. 


Taiwan 






-5.4 


-7.7 


-11.3 


-13.1 


-15. 


Brazil 


0.3 


-1.0 


-1.2 


-2.9 


-2.9 


-5.0 


-3. 



Sources: U.S. Department of Commerce and the Office of the U.S. Trade Representative. 



However, if trade is to be truly free for 
all countries, it must be conducted by 
essentially the same rules everywhere. 
We have challenged and will continue to 
attack foreign unfair trade practices and 
trade barriers whenever and wherever 
they exist. They undermine the basic 
concepts on which the postwar trading 
system was built— equal access to open 
markets. And to individual industries 
and firms, foreign trade barriers and un- 
fair trade practices can and do cost large 
amounts in lost sales opportunities. 

The Administration has made major 
progress in removing foreign impedi- 
ments to U.S. trade. I will submit an 
overview of this as an appendix to my 
testimony today. Let me summarize 
some of those actions. 

Through the judicious use of Section 
301, we have reached agreements with 
many of our trading partners to 
eliminate or substantially reduce bar- 
riers to U.S. exports. More than 60% of 
all Section 301 trade actions have been 
launched under this Administration. Fur- 
ther, President Reagan was the first 
President to self-initiate Section 301 
cases. We have initiated eight such cases 
since September 1985 and have brought 
seven of them to a satisfactory 
resolution. 

In response to a Section 301 case, 
Japan will open its cigarette market. 
This could raise U.S. exports substan- 
tially. On semiconductors, we reached a 
broad settlement of a Section 301 case 
and two antidumping actions. In settle- 
ment of a Japanese leather and leather 
footwear case, the Japanese have agreed 
to reduce or eliminate tariffs on 137 
nonleather items, including five impor- 
tant aluminum products, and they will 
make permanent 242 earlier tariff 
reductions. 



24 



In other Section 301 actions, we 
negotiated settlements with Korea over 
two separate cases involving insurance 
and intellectual property. And the 
United States and Taiwan have settled a 
dispute over Taiwanese restrictions on 
its beer, wine, and cigarette markets, 
creating a probable $150 million in addi- 
tional U.S. exports. 

With the European Community, we 
have just concluded a major dispute over 
the enlargement of the EC to include 
Spain and Portugal. Under the agree- 
ment, the United States will receive full 
and fair compensation worth $400 
million for losses we would otherwise 
have suffered in our corn and sorghum 
exports to Spain. More than three- 
quarters of the compensation came in 
assured access for corn and sorghum; 
the remainder in additional access on 26 
other agricultural and industrial prod- 
ucts. In other cases against the EC, we 
have reached settlements on citrus, 
pasta, almonds, and canned peaches and 
pears, giving U.S. exporters an 
improved chance to compete in the EC 
market. 

Section 301 is not the only tool the 
Administration has used to ensure that 
trade is conducted on an open and 
equitable basis. At the end of December, 
we settled a protracted subsidy/counter- 
vailing duty dispute with Canada over its 
lumber pricing practices. In the first use 
of Section 307 authority by the United 
States, Taiwan has agreed to eliminate 
its export performance requirements in 
the automotive sector. 

We recently completed a 2-year 
review of the generalized system of 
preferences (GSP) program, during 
which GSP beneficiaries were encour- 
aged to improve intellectual property 
rights protection and worker rights prac- 
tices as well as eliminate barriers to U.S. 



exports of goods, services, and invest- 
ment. As a result of the review, the lev 
of duty-free GSP benefits granted to 
advanced developing countries will be 
reduced by about $2 billion, or 23%. In 
addition, three countries were denied 
GSP benefits for failure to improve 
workers' rights practices. 

The United States and Japan have 
made important progress in the market 
oriented, sector-selective (MOSS) talks 
to open markets to U.S. products. In 
telecommunications, pharmaceuticals, 
forest products, and electronics, 
agreements were reached that should 
increase market access for U.S. firms. 
August 1986, another MOSS negotiatio 
was launched on transportation 
equipment. 

In what may be our single most 
important international endeavor for 
1987, we are in the midst of negotiatior 
on a comprehensive trade agreement 
with Canada, our largest trading part- 
ner. Merchandise trade flows between 
our two countries totaled $114 billion in 
1986. We believe those numbers will 
grow dramatically if we are able to opei 
up the border between our two nations, 
and we also see a vast expansion of ac- 
tivity in the services sector, in invest- 
ment flows, and in capital movements 
generally. These negotiations are com- 
plex and very sensitive, but they are als 
clearly in the economic interest of both 
countries. We hope to bring them to 
completion later this year. 

The United States and more than 5( 
of its major trading partners have suc- 
cessfully renegotiated a renewal of the 
multifiber arrangement (MFA) in tex- 
tiles and apparel to 1991. The new MFA 
expands coverage to previously uncon- 
trolled fibers such as ramie, linen, and 
silk blends. It also includes a mechanism 



Department of State Bulleti 



ECONOMICS 



<;o prevent destructive import surges and 
provisions to prevent fraud. During the 
jiiscussions, we made it clear to our 
trading partners that we would continue 
,;o pursue measures in our bilateral 
agreements negotiated under the MFA 
■ o open markets to our textile exports. 

Following a determination that a 
substantial increase in imports of 
nachine tools could threaten U.S. 
national security, President Reagan 
■ecently announced a program to 
•evitalize the domestic machine tool 
ndustry. As part of this program, the 
'resident instructed Secretary [of Com- 
nerce] Baldrige and me to discuss volun- 
ary restraint agreements with Japan, 
Taiwan, Germany, and Switzerland. We 
lave now concluded agreements with 
apan and Taiwan. Given recent 
xchange rate movements, it is unlikely 
hat machine tool imports from Germany 
nd Switzerland will increase. If, 
owever, there is a surge from those 
ountries and if it threatens to under- 
line our voluntary restraint agree- 
lents, the President has reserved the 
ight to take unilateral action. President 
leagan has also approved a domestic 
ction plan to boost the machine tool 
ldustry. 

laintaining and Enhancing 
fj F.S. Competitiveness 

'he growth in America's trade deficit 
as caused some observers to question 
'hether or not we can meet the 
hallenge of the international 
larketplace. President Reagan's answer 
; an emphatic "yes, we can!" provided 
usiness, labor, and government put 
leir heads together and work 
imperatively toward that goal. 

While the world has changed con- 
derably in the last 40 years, one con- 
;ant remains. Other nations look to 
.merica for economic leadership. We 
an lose that leadership role only 
irough our own inadequacies. It is 
r e— no one else— who will determine 
'hether we are internationally com- 
etitive a decade from now. If we are 
ot, we will have only ourselves to 
lame. 

In his January 27 State of the Union 
ddress, President Reagan outlined a 
road initiative to enhance U.S. com- 
etitiveness. As the President noted, all 
imericans must work together in a 
ational "quest for excellence." This 
administration is committed to doing its 
art in fostering and promoting 
imerica's ability to compete, as others 
lust also do their part. 



For its part, the Federal government 
should create an environment in which 
American business and workers can 
achieve their full potential. As part of 
the Administration's initiative to 
enhance U.S. competitiveness, the Presi- 
dent has proposed a wide-ranging set of 
initiatives designed to do just that. The 
multipronged program is aimed at: 

• Increasing our investment in 
human and intellectual capital; 

• Boosting scientific and 
technological development; 

• Improving protection for intellec- 
tual property rights; 

• Refining our legal and regulatory 
systems; 

• Creating a favorable international 
economic environment; and 

• Eliminating the budget deficit. 

Essential to enhanced U.S. com- 
petitiveness is increased investment in 
our most valuable national resources— 
our human and intellectual capital. This 
investment must start at the earliest 
possible stage, when our children are in 
school. One Administration goal is to 
broaden and deepen our children's com- 
mand of basic skills. In today's world, 
knowing the three "R's" is not enough. 
We live in a technological society in 
which a knowledge of computer 
languages is becoming as important as a 



mastery of English. Americans must be 
well-versed in every area, not only in 
English but in the new language of 
science and technology. The slide rule 
has been replaced by the personal com- 
puter, and our children had better know 
how to use it! 

Preserving human capital also means 
helping those workers who become 
displaced from their jobs. The President 
will propose a new $1 billion worker 
adjustment assistance program to help 
experienced industrial and service 
workers and farmers find new employ- 
ment when they lose their jobs. It will 
include job counseling and job search 
assistance and training for workers long 
before they exhaust their unemployment 
benefits. There will also be an $800 
million program for training needy youth 
in welfare families. Under the leadership 
of Secretary of Labor Brock, the Admin- 
istration will also seek ways to improve 
labor mobility, so that workers can move 
more freely to areas where jobs are 
being created. 

America's competitiveness increas- 
ingly depends on our ability to take 
quick advantage of our knowledge and 
technological breakthroughs. The 
Federal government has at least two 
roles in this area. First, it can promote 
the generation of new knowledge and 
technology. Toward this end, the Presi- 



Table 3 



Selected Data on U.S. Capital Flows— 1981-86 
(US$ billions) 



Item 


1981 


1982 


1983 


1984 


1985 


1986* 


Capital Outflows ( - ) 


-111.0 


-121.3 


-50.0 


-23.6 


-32.4 


-90.0 


of which 














Debt 


-96.2 


-117.2 


-44.6 


-15.9 


-5.9 


na 


Equity 


-9.6 


0.9 


-4.3 


-5.0 


-22.7 


na 


Capital Inflows ( + ) 


83.3 


94.1 


85.5 


102.8 


127.1 


204.4 


of which 














Debt 


53.1 


76.7 


67.2 


78.3 


104.4 


na 


Equity 


30.2 


17.4 


18.3 


24.5 


22.7 


na 


Net Capital Flows 


-27.7 


-27.2 


35.5 


79.2 


94.7 


114.4 


of which 














Debt 


-43.1 


-40.5 


22.6 


62.4 


98.5 


na 


Equity 


20.6 


16.5 


14.0 


19.5 


0.0 


na 


Current Account 














Deficit 


6.3 


-9.1 


-46.6 


-106.5 


-117.7 


-139.6 


Errors and Omissions 


21.4** 


36.3 


11.1 


27.3 


23.0 


25.2 



* Annualized on the basis of 9 months' data. 
** Includes allocation of special drawing rights. 

Note: In the categories "Capital Outflows" and "Net Capital Flows," debt plus equity do not 
equal the total capital flow because of changes in U.S. official reserve assets. 

Source: Survey of Current Business, U.S. Department of Commerce. 



April 1987 



25 



ECONOMICS 



dent will put forward several initiatives 
designed to foster U.S. research and 
development. Among these are science 
and technology centers that will focus on 
basic science that directly affects our 
competitiveness; increased incentives to 
research and development; the encour- 
agement of technology sharing among 
the government, universities, and 
business; and accelerated spinoffs from 
defense technologies. 

Promoting increased knowledge and 
technological development is only half 
the battle. It will do us little good if we 
develop new technologies, only to have 
them immediately pirated by other coun- 
tries as has so often occurred this past 
decade. The Administration is firmly 
committed to improving protection for 
U.S. intellectual property rights at home 
and abroad. We will seek improvements 
in domestic law to give greater protec- 
tion to holders of such rights, and abroad 
we will take into account the degree to 
which a country protects intellectual 
property rights when we negotiate 
treaties or provide assistance. We also 
plan to join the Bern Convention for the 
Protection of Literary and Artistic 
Works. 

We must examine our laws and 
regulations for unnecessary burdens on 
American business. Oftentimes, the 
greatest hurdle for an American 
exporter is our own rules. Instead of 
promoting exports, we discourage them! 
Among the areas that we will have pro- 
posals on are changes in product liability 
laws to reduce spiraling insurance costs; 
reform of our antitrust laws so that they 
reflect the reality of global markets; 
improved export controls; additional 
reforms to eliminate unnecessary 
regulatory burdens; deregulated surface 
transportation and natural gas; and a 
strengthened private pension system. 

Trade Legislation 

and the Uruguay Round 

The United States is the world's most 
important trading nation. Through 
trade, we have stimulated economic 
growth, taken advantage of economies 
of scale, encouraged innovation, and 
ensured a higher U.S. standard of living. 
Some 5 million American jobs depend on 
exports— more than in any other nation. 
The days when we could wall ourselves 
off from the rest of the world are gone, 
never to return. 

That is why the Administration, as 
part of its program to enhance U.S. com- 
petitiveness, will be submitting a 
substantial package of trade legislation 



to the Congress. It is our hope that we 
can work together to give this legislation 
the serious and thorough consideration it 
deserves. 

One of our legislative goals is to 
improve the scope and functioning of 
U.S. trade law. In so doing, we will sub- 
mit amendments to Section 201 of the 
Trade Act of 1974 to expand the range 
of relief remedies available to the Presi- 
dent and to help ensure that industries 
receiving Section 201 relief will be truly 
competitive following the period of 
relief. We will propose including 
reciprocity as a factor to be considered 
under Section 301— our most powerful 
trade weapon— in deciding whether a 
government's practices are 
"unreasonable." We will also propose a 
firm time limit for settling all Section 
301 disputes and regular reports on the 
commercial effects of Section 301 
actions. Our antidumping and counter- 
vailing duty laws should be tightened to 
prevent circumvention. In addition, the 
antidumping law should be amended to 
improve its application to nonmarket 
economies. Our legislative proposal will 
also contain a request for authority to 
implement the harmonized system of 
tariffs. 

The other goal of our proposed 
legislation will be to give us the tools to 
improve the international trade 
environment. 

The tool we need most is fast-track 
negotiating authority for the Uruguay 
round, and our legislative proposal will 
request this authority. Past experience 
has shown that we must offer reasonable 
assurance to our negotiating partners 
that the results of a multilateral round 
will be considered— and implemented— 
by the Congress on an expedited basis. 

Experience has also shown that it is 
critical for us to consult frequently and 
work closely with the Congress and the 
American public throughout such a 
negotiating exercise. The procedures 
used in the Tokyo Round were highly 
successful. They involved consultation 
with the Congress and the public 
through each step of the negotiation. As 
part of our request for trade negotiating 
authority, we will include provisions for 
even more extensive consultation during 
the Uruguay round. 

We want a successful conclusion to 
the Uruguay round for several reasons. 
As they try to do business overseas, 
Americans face numerous trade barriers 
and other trade distortions. Frequently, 
these barriers are legal under interna- 
tional trade rules, such as tariffs or, like 
services, are not covered at all by the 
rules. Just as frequently, they do not 



lend themselves to remedy through 
unfair trade actions. The authority to 
retaliate under Section 301, for exampk 
can be effective in specific, well-chosen 
cases but is impractical where problems 
are widespread or there is not interna- 
tional consensus over the fairness of a 
practice. 

Therefore, the most effective way t< 
attack many of these barriers and prac- 
tices is through international negotia- 
tions. That is why the United States 
pressed so vigorously for the start of a 
new round of multilateral trade negotia 
tions. Thanks to our efforts, and those c 
many like-minded nations, the latest 
round of multilateral trade talks was 
launched on September 20, 1986, by the 
92 nations of the General Agreement or 
Tariffs and Trade (GATT). 

If successfully concluded, the 
Uruguay round will assist America's 
trade performance by strengthening am 
improving existing trade rules and 
expanding the coverage of the rules to 
new areas. Where the GATT rules are 
weak, such as in agriculture and dispute : 
settlement, we will work to strengthen 
and improve them. Where the rules are 
nonexistent— as in intellectual property 
services, and trade-related investment- 
we seek new regimes for ensuring that 
trade in these areas is conducted on a 
free and fair basis. Our goal for the 
negotiations is to substantially increase 
the share of total world trade under 
some form of international discipline an 
to make certain the discipline is 
effective. 

The participating nations have now 
agreed on a negotiating program and 
organization for the Uruguay round. Th 
first phase of negotiations begins this 
week in Geneva. During 1987, the par- 
ticipants are committed to putting fort! 
detailed negotiating plans and proposal! 
in different areas of trade activity. It 
will be the most comprehensive trade 
negotiation ever undertaken. Intense 
bargaining should begin next year, and 
our goal is to complete all negotiations 
by 1990. Hopefully, some facets of the 
negotiation can be completed and 
brought back for congressional approval 
at an earlier date. 

Conclusion 

Numerous alternative policy solutions 
for the U.S. trade deficit have been 
discussed in the Congress, the public, 
and the press— an import surcharge, oil 
import fees, export promotion and sub- 
sidy programs, forced reductions of 
bilateral trade surpluses by major U.S. 



26 



Department of State Bulletir 



ECONOMICS 



rading partners, and the tightening of 
7.S. trade laws and programs. 

Many of these proposals are of 
dubious merit; some would be very 
armful to U.S. interests. In general, 
hey blatantly ignore our international 
ommitments and responsibilities. This 
./ould invite retaliation, shrink trade, 
low everyone's economic growth, and 
oost our inflation rate. Aside from their 
■pecific shortcomings, these proposals all 
hare one basic flaw— they fail to 
ddress the fundamental causes of the 
*ade deficit. 

They fail because they attempt to 
orce "traditional" trade policy instru- 
lents, such as our trade laws, to solve 
roblems they were never designed to 
i lolve. The proposals focus mainly on 

lechanisms which directly affect trade 
|ji goods— tariffs, quotas, retaliatory 
uthority, export promotion activities, 
tc. Even where such proposals move 
jtside of the traded-goods sector and 
ito the areas of services, intellectual 
roperty rights, and investment, they 
Bsume that the only tools we need to 
;e to bring down our trade deficit are 
ade policy and trade laws. 

Such matters are a legitimate sub- 
ct for public debate. Traditional trade 
)licy is still important, and we are 
orking very hard at it. But let us 
■cognize that it is not responsible for 
hiuch of the recent expansion in our 
ade deficit. At most, foreign trade bar- 
ers and unfair trade practices account 
■r a very small portion of our trade 
>ficit. Indeed, given the Administra- 
on's record in attacking unfair foreign 
•actices, if trade policy were a major 
ctor in the trade deficit, we would 
ready have eliminated a large chunk 
it of it. 

Actions in the trade area should be 
ken because they are needed to main- 
in and restore a sense of equity and 
>enness in the international trading 
stem. But they cannot be viewed as 
1 e fundamental solution to our trade 
•oblems. 

In looking for such solutions, we 
ust expand our horizons beyond those 
' traditional trade policy. The Admin- 
tration's competitiveness and trade 
itiatives are positive, forward-looking, 
id aggressive. They reflect President 
eagan's confidence in America and its 
;ople. We want to work with the Con- 
•ess in a determined effort to enhance 
ir competitiveness and expand our 
> ternational trading opportunities so 
llat we can guarantee a better future 
)t only for all Americans but for all 
utions. 



APPENDIX 



THE PRESIDENTS TRADE 
POLICY: AN UPDATE 

On September 23, 1985, President 
Reagan outlined a trade policy consisting 
of three parts: tough action against 
other nations' unfair trade practices, 
negotiations to liberalize world trade, 
and international economic policy 
reforms that would help both U.S. 
exporters and import-sensitive 
industries. 

The President's policy has achieved 
major progress on all fronts. Here is a 
summary of its achievements. 

Fighting Unfair Trade 

Since September 7, 1985, President 
Reagan has instructed U.S. Trade 
Representative Clayton Yeutter to 
initiate or take action on 11 unfair trade 
practice cases under Section 301 of the 
Trade Act of 1974. Ten of these cases 
have been resolved and President 
Reagan has issued an unfairness finding 
in the other. 

The aggressive use of Section 301 
and other statutes is achieving results. 

EC Enlargement. The European 
Community (EC) agreed on January 30, 
1987, to provide full compensation to the 
United States for higher corn and 
sorghum tariffs imposed in Spain follow- 
ing that country's accession to the EC. 
The $400 million compensation package 
includes guaranteed imports of 2 million 
metric tons of corn and 300,000 metric 
tons of sorghum by Spain. Another 
400,000 metric tons of grain may be sold 
in Portugal as a result of elimination of a 
requirement reserving 15% of the Por- 
tuguese grain market for sales from 
other EC member countries. The EC will 
also lower tariffs on 26 other products to 
provide additional market access and 
extend all current EC tariff bindings to 
Spain and Portugal. These actions were 
taken after President Reagan had 
announced retaliatory measures under 
Section 301. 

Japan Tobacco. Japan agreed on 
October 6, 1986, to open its cigarette 
market to U.S. cigarette exporters by 
suspending its 28% tariff on cigarette 
imports, by ending the discriminatory 
practice of allowing deferred payment of 
excise taxes by Japanese manufacturers, 
and by eliminating distribution and price 
approval problems. U.S. cigarette 
exporters believe their exports to Japan 



could quintuple, reaching $1 billion 
annually. This settled a self-initiated 
Section 301 case. 

Taiwan Beer, Wine, and Tobacco. 

Taiwan agreed to open its beer, wine, 
and cigarette markets to American 
exports, creating the possibility of an 
additional $150 million in sales in these 
commodities. This action was taken on 
December 8, 1986, after President 
Reagan instructed Ambassador Yeutter 
to propose retaliatory action under 
Section 301. 

Japan Semiconductors. Japan 
agreed on July 31, 1986, to open its 
market to sales of U.S. semiconductors, 
which should increase semiconductor 
exports by $2 billion in 5 years. Japan 
also agreed to help ensure that Japanese 
companies will quit dumping computer 
chips below cost in the United States 
and third country markets. This settled 
an industry -initiated Section 301 case 
and two antidumping cases. 

The Administration is monitoring 
this agreement carefully in light of 
apparent noncompliance by Japan. In 
emergency consultations in Tokyo the 
week of January 26, U.S. negotiators set 
deadlines for Japanese actions to bring 
them into full compliance with the 
provisions of the agreement. 

Brazil Informatics. In another self- 
initiated Section 301 case, President 
Reagan determined on October 6, 1986, 
that Brazil unreasonably restricts 
imports of computer technology, pro- 
vides inadequate protection of intellec- 
tual property rights for computer soft- 
ware, and restricts investment in the 
computer sector. Based upon progress 
made to date and upon expectations of 
future progress, President Reagan 
decided on December 30, 1986, to pro- 
vide an additional period until July 1, 
1987, for Brazil to make improvements 
in its informatics regime. 

EC Citrus, Pasta, and Almonds. 

The EC agreed on August 10, 1986, to 
give U.S. citrus producers additional 
access to the European market, ending a 
16-year dispute on the EC's special 
treatment for Mediterranean citrus 
imports. The EC also agreed promptly to 
solve the longstanding problem of sub- 
sidies for EC pasta exports. And the 
United States and EC agreed to tariff 
reductions on other products that will 
give U.S. almond producers additional 
access to the European market. These 
agreements were reached after Presi- 
dent Reagan retaliated against the EC's 
citrus preferences under Section 301, 
raising pasta duties on November 1, 



pril 1987 



27 



ECONOMICS 



1985. (As part of the settlement, both 
sides rescinded their retaliatory 
measures.) 

Japan Leather. Japan agreed on 
December 21, 1985, to compensate the 
United States for GATT-illegal leather 
and leather footwear quotas by 
eliminating tariffs on 137 items, includ- 
ing five important aluminum products, 
and making permanent 242 earlier tariff 
reductions. In addition, the United 
States imposed higher duties on 
Japanese leather imports to the United 
States. This settled a longstanding Sec- 
tion 301 case on which the President set 
a deadline for retaliation. 

Japan Aluminum. Following con- 
sultations required as part of the leather 
agreement, Japan agreed on October 31, 

1986, to accelerate tariff reductions on 
aluminum imports. 

Korea Insurance. Korea agreed on 
July 21, 1986, to eliminate prohibitions 
against underwriting by foreign firms of 
life and non-life insurance, ensuring fair 
access for U.S. firms to Korea's $5 
billion insurance market. 

Korea Intellectual Property. Korea 
agreed on July 21, 1986, to offer 
significantly greater protection to U.S. 
intellectual property rights, including 
patents, copyrights, and trademarks, 
settling a self-initiated Section 301 case. 

Korea Motion Pictures. A potential 
Section 301 case was avoided when 
Korea agreed on December 23, 1985, to 
reduce its barriers on importing and 
distributing of U.S. motion pictures, 
television programs, and video 
materials. 

Taiwan Customs Valuation. Taiwan 
agreed on August 11, 1986, to fulfill its 
commitment to use the transaction 
value, instead of an artificial duty paying 
schedule, to calculate customs duties. 
This action came after the President 
directed Ambassador Yeutter to propose 
retaliation under Section 301. 

EC Canned Fruit. The EC agreed 
on December 1, 1985, to phase out the 
processing element of subsidies for can- 
ned peaches and pears, giving U.S. can- 
ned fruit exporters a chance to compete 
in the EC market. This settled a long- 
standing Section 301 case on which the 
President set a deadline for retaliation. 

In addition to Section 301, President 
Reagan has used other statutes to fight 
unfair trade. 



Canada Lumber. On December 30, 
1986, the United States and Canada 
settled a longstanding dispute over 
Canada's lumber pricing practices. 
Canada agreed to implement a 15% ex- 
port tax on lumber, thereby neutralizing 
the effect of its lumber subsidies. 

Generalized System of Preferences 
(GSP). On January 2, 1987, Ambassador 
Yeutter announced that President 
Reagan will reduce the level of duty-free 
GSP benefits available to advanced 
developing countries by an estimated $2 
billion, or 23%. This decision concluded a 
2-year general review of the GSP pro- 
gram which encouraged improved pro- 
tection of intellectual property rights 
and the elimination of foreign trade bar- 
riers to U.S. goods, services, and invest- 
ment. The President also decided to ter- 
minate or suspend from the program 
three countries for their failure to 
improve their worker rights practices. 

Taiwan Investment Restrictions. 

Taiwan agreed on September 12, 1986, 
to eliminate export performance require- 
ments in the automotive sector. This 
occurred after the President instructed 
Ambassador Yeutter to initiate a case 
under Section 307 against trade related 
investment restrictions by Taiwan, 
which had imposed export requirements 
on a Japanese auto plant investment 
there. 

Brazil General Aviation Aircraft. 

Following several years of consultations, 
Brazil agreed in late 1985 to reduce 
import restrictions on general aviation 
aircraft by lowering tariffs from 50% to 
20%, by granting import licenses for air- 
craft under 7,000 kilograms within 30 
days, and by making licensing pro- 
cedures more transparent. 

Japan Supercomputers. The United 
States initiated a Section 305 investiga- 
tion of Japan's supercomputer trade 
practices on December 10, 1986, thereby 
launching an interagency fact-finding 
review of trade in one of America's most 
advanced industries. The United States 
and Japan will also discuss the issue of 
Japanese procurement of supercom- 
puters under the auspices of the market- 
oriented, sector-selective (MOSS) 
electronic talks. 

Japan Rice. Ambassador Yeutter 
announced a strategy for dealing with 
Japanese restrictions on rice imports on 
October 23, 1986. Under this strategy, 
the United States will ask Japan to 
honor commitments made in Punta del 
Este, Uruguay, to roll back GATT-illegal 
trade measures and to negotiate on all 



agricultural issues during the Uruguay 
round negotiations. 

Japan Airport Construction. Japa 
has assured the United States that 
foreign companies will be able to com- 
pete on a fair and equal basis in the 
second and third construction stages a1 
the $8.5 billion Kansai airport in Osaka 
Bay. Consultations continue on 
American participation in the airport 
construction. 

War Chest. On September 23, 198 
the President proposed a $300 million, 
3-year fund to counter predatory expoi 
credit financing by U.S. competitors fo 
projects in developing countries. Con- 
gress appropriated $100 million last ye 
for this purpose. The Administration is 
seeking the additional $200 million for 
the next 2 years. 

Sweaters from China and Macau. 

The United States used new authority 
under the multifiber arrangement (MF 
to establish quotas on such products as 
ramie, linen, and silk-blends for the fir: 
time on September 3, 1986, when, 
following import surges in these prod- 
ucts, it notified China and Macau that 
intended to limit "new MFA fiber" 
sweaters from those countries. 

Japan Fish Quotas. GATT consult 
tions requested by the United States 
regarding Japan's quotas on fish— par- 
ticularly herring and pollock— began oi 
October 22, 1986. 

Japan Agricultural Quotas. On Ji 

15, 1986, the United States asked for i 
GATT investigation of illegal Japanese 
import quotas in 12 agricultural 
categories, including fruit juices and 
processed beef. A GATT panel has bee 
established to investigate the U.S. claii 

EC Airbus. On December 19, 1986 
Ambassador Yeutter requested politica 
level round of consultations with three 
European governments on the Admin- 
istration's complaint that they improp- 
erly subsidize Airbus Industrie. Those 
talks were held during the week of 
February 2, 1987. 

EC Meat Inspection. On March 31 
1986, President Reagan instructed 
Ambassador Yeutter to initiate an 
inquiry under Section 305 into unnec- 
essary inspection standards the EC 
intends to enforce against meat import 

Preshipment Inspection. Ambas- 
sador Yeutter announced actions on 
October 20, 1986, that will address 
impediments to American exports 



28 



Department of State Bullet 



ECONOMICS 



caused by requirements by some coun- 
ties that shipments be inspected by 
jrivate companies in the United States 
before export. 

GSP Ethanol. On April 1, 1986, the 
Resident determined that certain 
?thanol mixtures were being imported in 
lircumvention of U.S. law and would no 
onger be eligible for duty-free treatment 
.inder the generalized system of 
references. 

Shakes and Shingles. On May 22, 

986, the President granted import 
elief to the red cedar shakes and 
.hingles industry under Section 201 in 
he form of a declining tariff program. 

Negotiating Trade Agreements 

'resident Reagan is seeking a worldwide 
legotiation to improve international 
rading rules as well as a wide array of 
ilateral agreements to open overseas 
larkets for U.S. exporters and to shield 
nport-sensitive industries from unfair 
nports. 

Uruguay Round. On September 20, 
986, in Punta del Este, Uruguay, trade 
linisters from the 92 nations in the 
leneral Agreement on Tariffs and Trade 
lunched comprehensive multilateral 
*ade negotiations under the GATT. The 
ilks will strengthen the international 
-ading system so that U.S. manufactur- 
lg, services, and agricultural industries 
an better compete in international 
larkets. The United States will seek 
ew rules covering trade in services and 
griculture, trade-related investment, 
itellectual property protection, and 
ispute settlement. 

Canada FTA. A historic negotiation 
'ith Canada designed to liberalize trade 
etween the two nations began on June 
7, 1986. If successful, the talks could 
■ad to the virtual elimination of the 
order for commercial purposes, 
trengthening both countries' ability to 
Dmpete in international trade. 

Multifiber Arrangement (MFA). 

extile exporting and importing nations 
greed to a stronger and more com- 
rehensive extension of the multifiber 
rrangement on August 1, 1986. The 
ew MFA extends product coverage to 
ssentially all fibers and makes it easier 
o prevent import surges. 

Machine Tools. On December 16, 
986, President Reagan announced that 
apan and Taiwan had voluntarily 
greed to restrain machine tool exports 






to the United States for 5 years. He also 
approved a domestic action plan that will 
facilitate the industry's revitalization. 
This program, which will last 5 years, 
was undertaken for national security 
purposes. 

Japan MOSS. Important progress 
was achieved in 1985 in the market- 
oriented, sector-selective (MOSS) talks 
with Japan to open markets for U.S. 
products. A number of market-opening 
measures are to be implemented while 
talks will continue to open markets even 
further. 

In the telecommunications area, the 
Japanese market was opened substan- 
tially to American radio equipment and 
services, terminal equipment, and net- 
work services. 

Barriers to imports of American 
medical equipment and pharmaceuticals 
were reduced by simplifying regulatory 
procedures, eliminating administrative 
delays, and making the rules and regula- 
tions more understandable. 

In electronics, several important 
measures were approved that should 
improve access by U.S. companies to the 
Japanese market, including tariff reduc- 
tions, improvements in the patent proc- 
ess, participation by U.S. companies in 
Japanese research and development 
projects, and legal protection for 
semiconductor chips and computer 
software. 

In forest products, the Japanese 
Government has committed to tariff 
reductions on wood and paper products. 
The talks will now focus on nontariff 
barriers. 

On August 20, 1986, the United 
States and Japan began negotiations on 
the next MOSS negotiation area— auto 
parts. 

Japan NTT Agreement. On 

December 23, 1986, Japan agreed to a 
3-year renewal of the bilateral agree- 
ment on procurement of telecommunica- 
tions equipment by the Nippon 
Telegraph and Telephone [NTT] Com- 
pany. Under this agreement, the 
Government of Japan must provide non- 
discriminatory treatment for U.S. 
products in procurement, ensuring the 
ability of U.S. suppliers to compete in a 
market that formerly was closed to 
foreign suppliers. 

EC Steel. On November 1, 1985, the 
EC agreed to hold steel exports to 5.5% 
of the U.S. market through September 
30, 1989. The United States has now 
negotiated 18 such agreements with 
steel-producing countries. These 
agreements are designed to correct 



\pril 1987 



market distortion caused by foreign 
practices such as subsidies, dumping, 
and quotas. 

On August 10, 1986, the EC agreed 
to limit semifinished steel exports to the 
United States to approximately 600,000 
tons annually. This agreement brings 
semifinished steel under the discipline of 
the U.S. -EC steel arrangement for the 
first time. 

Steel Surges. On September 4, 
1986, Ambassador Yeutter requested 
immediate consultations with Canada, 
Sweden, and Taiwan to remedy the 
problem of steel import surges from 
those nations. This followed large 
monthly increases from these nations 
(which are not covered by the Presi- 
dent's steel program) during July. Steel 
imports from Sweden and Taiwan have 
subsequently declined. 

Mexico GATT. On August 24, 1986, 
Mexico acceded to the GATT following 
the negotiation with the United States of 
terms of accession that will guarantee 
greater access to the Mexican market 
for U.S. exporters. 

Hong Kong Textiles. The United 
States and Hong Kong reached a com- 
prehensive agreement on textile and 
apparel imports on June 30, 1986, 
limiting growth of Hong Kong textile 
and apparel imports to an average of 1% 
per year through 1991. This agreement 
also extended coverage to virtually all 
fibers, including ramie, silk blends, and 
linen. 

Taiwan Textiles. On July 14, 1986, 
the United States and Taiwan reached a 
comprehensive agreement on textiles 
and apparel similar to the agreement 
reached with Hong Kong. Under this 
agreement, Taiwan's exports will grow 
by about one-half of 1% from 1985 
through 1988. In addition, Taiwan 
agreed to reduce tariffs on more than 
300 textile and apparel items by as much 
as 50%, providing additional market 
access for U.S. manufacturers. 

Korea Textiles. On August 4, 1986, 
the United States and Korea reached a 
comprehensive agreement on textiles 
and apparel that will limit import growth 
to 0.8% annually through 1989. In addi- 
tion, Korea has agreed to phase out its 
import licensing system over 3 years, 
providing additional market access for 
U.S. manufacturers. 

Japan Textiles. Japan agreed to a 
comprehensive agreement on textiles 
and apparel on November 13, 1986, that 
will limit import growth to 0.8% 



29 



ECONOMICS 



annually through 1989. In addition, 
Japan agreed to establish a mechanism 
to prevent transshipments of textiles 
from third countries through Japan. 

Japan Computer Parts. The United 
States and Japan agreed on November 
22, 1985, to eliminate all tariffs on trade 
in computer parts, and Japan agreed to 
eliminate tariffs on computer peripherals 
and central processing units. 

Japan Lawyers. On April 11, 1986, 
the United States and Japan announced 
an agreement permitting American 
lawyers to enter the legal services 
market in Japan for the first time. Con- 
sultations continue on implementation of 
the agreement. 

Taiwan Pears. Taiwan agreed to 
liberalize restrictions on imports of pears 
as of September 15, 1986. 

Colombia Wine. Following 
representations by Ambassador Yeutter 
to the President of Colombia, that nation 
removed U.S. wines from its list of pro- 
hibited imports. 

Bilateral Investment Treaties. 

Since March 25, 1986, President Reagan 
has sent to the Senate for ratification 10 
bilateral investment treaties liberalizing 
investment policies between the United 
States and developing nations. 

Harmonized System. On July 25, 
1986, the United States presented the 
GATT with a new U.S. tariff schedule 
bearing common nomenclature 
negotiated in the GATT over a 12-year 
period. U.S. exporters will benefit from 
the efficiency that results when the new 
system is phased in by all countries. 

Government Procurement Code. 

GATT's Committee on Government Pro- 
curement completed the first phase of 
renegotiating the Government Procure- 
ment Code on November 21, 1986, 
strengthening the code to bring the pro- 
curement practices of other signatories 
more into line with U.S. practices. 

Improving the International Economy 

President Reagan has sought an unprec- 
edented level of coordination of interna- 
tional economic policies among the 
leading developed countries to provide a 
more reasonable relationship between 
the dollar and other currencies to assist 
U.S. exporters and import-sensitive 
industries. 

Plaza Agreement. Secretary Baker 
and representatives of four other indus- 
trialized nations agreed on September 
22, 1985, to embark on a major effort to 



coordinate economic policies. The result 
has been a major realignment of cur- 
rency exchange rates, which will begin 
to alter our trade imbalance soon and 
which has already made U.S. products 
and services far more competitive. 

Tokyo Summit. The President 
achieved agreement at the Tokyo 
economic summit on May 6, 1986, on a 



Imports from the EEC 



PROCLAMATION 5601, 
JAN. 21, 1987 1 

1. On March 31, 1986, I announced my deci- 
sion, pursuant to section 301(a) of the Trade 
Act of 1974, as amended (the Act) (19 U.S.C. 
2411(a)), to take action in response to restric- 
tions imposed by the European Economic 
Community (EEC) affecting imports of 
United States grain and oilseeds into Spain 
and Portugal. I determined that these restric- 
tions deny benefits to the United States aris- 
ing under the General Agreement on Tariffs 
and Trade (GATT) (61 Stat. (pts. 5 and 6)), 
are unreasonable, and constitute a burden 
and restriction on United States commerce 
(51 F.R. 18294). Accordingly, in Proclamation 
5478 of May 15, 1986 (51 F.R. 1829), pur- 
suant to section 301 (a), (b), and (d)(1) of the 
Act (19 U.S.C. 2411 (a), (b), and (d)(1)), I 
imposed quantitative restrictions on imports 
of certain articles from the EEC in response 
to the EEC restrictions in Portugal. 

2. In Proclamation 5478, I also announced 
my decision, in response to the withdrawal of 
tariff concessions and the application of the 
EEC variable levy on Spanish imports of corn 
and sorghum, to suspend temporarily, pur- 
suant to section 301 (a), (b), and (d)(1) of the 
Act, the tariff concessions made by the 
United States under the GATT on articles 
described in Annex II to that proclamation. I 
made no immediate change in the U.S. duty 
rates for these articles in order to afford the 
EEC an opportunity to provide, by July 1, 
1986. adequate compensation for the imposi- 
tion of variable levies on imports of corn and 
sorghum into Spain. I further stated that, in 
the event such compensation were not pro- 
vided by July 1, 1986, I would proclaim 
increased duties for these articles as appro- 
priate. Having due regard for the interna- 
tional obligations of the United States. I 
decided that any such increased duties on 
these articles would be applied on a most- 
favored-nation basis. 

3. On July 2, 1986, the United States and 
the EEC reached an interim agreement 
whereby the EEC agreed to take measures to 
avoid harm to U.S. sales of corn and sorghum 
to the EEC for the 6-month period ending 
December 31. 1986. In return, the United 
States agreed to defer action on the imposi- 
tion of increased duties on imports of certain 
articles into the United States during this 
period so as to allow time for negotiation of a 
definitive settlement. 



package of reforms that will improve th 
international monetary system and pro- 
vide a more stable international 
economic environment. 



'The completed transcript of the hearing 
will be published by the committee and will h 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. ■ 



; 

of 
lis 



: 



4. Despite extensive negotiating efforts 
throughout 1986, the EEC has not yet agree 
to provide satisfactory compensation. Accore 
ingly, I have determined, pursuant to sectior 
301 (a), (b), and (d)(1) of the Act, that 
increased duties should be imposed on a mos 
favored-nation basis on the articles provided 
for in the Annex to this proclamation. Pur- 
suant to general headnote 4 to the Tariff 
Schedules of the United States (19 U.S.C. 
1202), the U.S. rates of duty for countries n< 
receiving most-favored-nation treatment wil 
be modified accordingly. 

5. In the event that the EEC provides 
adequate compensation for the imposition o: 
variable levies on corn and sorghum impon 
or if other circumstances so warrant, I am 
authorizing the United States Trade 
Representative to suspend, modify, or ter- 
minate the increased duties imposed by this 
proclamation upon publication in the Federa 
Register of notice of his determination that 
such action is in the interest of the United 
States. Such suspension, modification, or tei< 
mination shall be on a most-favored-nation 
basis. 

Now, Therefore. I, Ronald Reaga 

President of the United States of America, 
acting under the authority vested in me by 
the Constitution and the statutes of the 
United States, including but not limited to 
section 301 (a), (b), and (d)(1) and section 60< 
of the Act (19 U.S.C. 2483), do proclaim tha' 

1. Subpart B of part 2 of the Appendix t 
the Tariff Schedules of the Annex to this 
proclamation. 

2. The United States Trade Represen- 
tative is authorized to suspend, modify, or 
terminate the increased duties imposed by 
this proclamation upon publication in the 
Federal Register of his determination that 
such action is in the interest of the United 
States. 

3. This proclamation shall be effective 
with respect to articles entered, or withdraw 
from warehouse for consumption, on or ai'tei 
January 30, 1987. 

IN WITNESS WHEREOF, I have hereuntt 
set my hand this 21st day of January, in the 
year of our Lord nineteen hundred and 
eighty-seven, and of the Independence of the 
United States of America the two hundred 
and eleventh. 

Ronald Reaga 



■Text from Weekly Compilation of 
Presidential Documents of Jan. 26, 1987. 



30 



Department of State Bulleti 



ECONOMICS 



: inance Ministers 

i/leet on Exchange Rates 



The finance ministers and central 
lank governors of Canada, France, West 
tiermany. Japan, the United Kingdom, 
nd the United States (represented by 
meretary of the Treasury James A. 
taker III and chairman of the Board of 
Jovernors of the Federal Reserve System 
faul A. Volcker) issued the following 
\tatement in Paris on February 22, 1987. 

. Ministers of finance and central bank 
jovernors of six major industrialized 

ountries met today in Paris to conduct 

lultilateral surveillance of their 
iconomies in the framework of the 

'okyo economic declaration of May 6, 

986, pursuant to which the group of 
'even finance ministers was formed. The 

rinisters and governors, using a range 
jf economic indicators, reviewed current 

economic developments and prospects. 
i he managing director of the IMF 
1 nternational Monetary Fund] par- 

cipated in the discussions. 

2. The ministers and governors 
vere of the view that further progress 

ad been made since the Tokyo summit 
i their efforts to achieve a sustainable, 
oninflationary expansion, and the pros- 
ects are for continued growth this year, 
though the level of unemployment 
jmains unacceptably high in some coun- 

i -ies. A high degree of price stability has 
een attained, and there have been 
ibstantial reductions in interest rates, 
xchange rate adjustments have 
?curred which will contribute impor- 
mtly in the period ahead to the restora- 
on of a more sustainable pattern of 

I irrent accounts. 

3. Progress is being made in reduc- 
ig budget deficits in deficit countries, 
nd fundamental tax reforms are being 
itroduced to improve incentives, 
icrease the efficiency of economies, and 
nhance the prospects of higher growth, 
ther important structural reforms are 
Iso being carried forward, including 
eregulation of business to increase effi- 
■ency and privatization of government 
nterprises to strengthen reliance on 
rivate entrepreneurs and market 

orces. 

4. These positive developments not- 
withstanding, the ministers and gover- 

' ors recognize that the large trade and 
Current account imbalances of some 
lountries pose serious economic and 
olitical risks. They agree that the 
'eduction of the large unsustainable 
Irade imbalances is a matter of high 



priority and that the achievement of 
more balanced global growth should play 
a central role in bringing about such a 
reduction. 

5. The ministers and governors reaf- 
firmed their concern over continuing 
pressures for protectionism. They 
agreed that efforts to deal with 
economic problems by erecting trade 
barriers were self-defeating and pledged 
to intensify their efforts to resist protec- 
tionism and reaffirmed their strong sup- 
port for the next round of trade negotia- 
tions. They welcomed the progress made 
in the preparatory work for the new 
GATT [General Agreement on Tariffs 
and Trade] round and the recent positive 
conclusions of discussions between the 
United States and the European Com- 
munity on bilateral trade issues. 

6. The ministers and governors 
recognized that the major industrial 
countries have a special responsibility to 
follow policies which foster an open, 
growing world economy in order to sup- 
port the efforts of developing countries, 
especially debtor countries, to restore 
steady growth and viable balance-of- 
payments positions. They noted that the 
progress achieved by many debtor coun- 
tries toward these have not solved all the 
problems and stressed the importance of 
all participants in the strengthened debt 
strategy reinforcing their cooperative 
efforts. 

7. The ministers and governors 
agreed to intensify their economic policy 
coordination efforts in order to promote 
more balanced global growth and to 
reduce existing imbalances. Surplus 
countries committed themselves to 
follow policies designed to strengthen 
domestic demand and to reduce their 
external surpluses while maintaining 
price stability. Deficit countries commit- 
ted themselves to follow policies des- 
tined to encourage steady, low-inflation 
growth while reducing their domestic 
imbalances and external deficits. To this 
end, each country has agreed to the 
following undertakings. 

The Government of Canada's policy 
is designed to sustain the current 
economic expansion through its fifth 
year and beyond. In the budget for 
1987-88, the government has cut the 
fiscal deficit for the third consecutive 
year and remains committed to further 
progressive reduction. Canada will pro- 
pose shortly an extensive reform of its 
tax system. It will continue with its 



policies of regulatory reform, privatiza- 
tion, and liberalization of domestic 
markets. It will vigorously pursue trade 
liberalization bilaterally with the United 
States and multilaterally within the 
Uruguay round [of multilateral trade 
negotiations]. Monetary policies will con- 
tinue to aim at the reduction of inflation 
and be consistent with orderly exchange 
markets. 

The Government of France will 
reduce the central government budget 
deficit by 1% of GNP [gross national 
product] from 1986 to 1988 and in the 
same period will implement a tax cut 
program of the same order of magnitude 
(1% of GNP) with substantial tax rate 
cuts for corporations and individuals. It 
will pursue in 1987 its privatization pro- 
gram (with a projected $6,000-7,000 
million sale of assets) and reinforce the 
liberalization of the French economy 
especially of labor and financial markets. 

The Government of the Federal 
Republic of Germany will pursue 
policies to diminish further the share of 
the public expenditures in the economy 
and to reduce the tax burden for 
individuals and corporations with a com- 
prehensive tax reform aimed at reinforc- 
ing the incentives for private-sector 
activity and investment. In addition, the 
government will propose to increase the 
size of the tax reductions already 
enacted for 1988. The federal govern- 
ment will emphasize policies that 
enhance market forces in order to foster 
structural adjustment and innovation. 
Short-term interest rates, although 
already at a very low level in interna- 
tional comparison, have further dropped 
substantially during the last few weeks. 
Monetary policy will be directed at 
improving the conditions for sustained 
economic growth while maintaining price 
stability. 

The Government of Japan will follow 
monetary and fiscal policies which will 
help to expand domestic demand and 
thereby contribute to reducing the 
external surplus. The comprehensive tax 
reform, now before the Diet, will give 
additional stimulus to the vitality of the 
Japanese economy. Every effort will be 
made to get the 1987 budget approved 
by the Diet so that its early implementa- 
tion be ensured. A comprehensive 
economic program will be prepared after 
the approval of the 1987 budget by the 
Diet, so as to stimulate domestic 
demand, with the prevailing economic 
situation duly taken into account. The 
Bank of Japan announced that it will 
reduce its discount rate by l k% on 
February 23. 



kpril 1987 



31 



ECONOMICS 



The United Kingdom Government 
will maintain conditions for continuing 
the steady growth of GNP of the past 5 
years and will continue to work to 
reduce inflation by following a prudent 
monetary policy. On external account, 
the aim will be broad balance over the 
medium term. The share of public 
expenditure in the economy will continue 
to fall, and the burden of taxation will be 
reduced, while public sector borrowing is 
maintained at low level. These and other 
measures to strengthen the supply per- 
formance of the economy, such as the 
privatization program, will reinforce 
improvement over recent years in the 
growth of productivity. 

The United States Government will 
pursue policies with a view to reducing 
the fiscal 1988 deficit to 2.3% of GNP 
from its estimated level of 3.9% in fiscal 
1987. For this purpose, the growth in 
government expenditures will be held to 
less than 1% in fiscal 1988 as part of the 
continuing program to reduce the share 
of government in GNP from its current 
level of 23%. The United States will 
introduce a wide range of policies to 
improve its competitiveness and to 
enhance the strength and flexibility of 
its economy. Monetary policy will be con- 
sistent with economic expansion at a sus- 
tainable non-inflationary pace. 

8. The ministers and governors 
noted that a number of newly indus- 
trialized economies were playing an 
increasingly important role in world 
trade. These economies have achieved 
strong growth based significantly on 
their access to open, growing export 
markets. Recently some have accu- 
mulated trade surpluses which have con- 
tributed importantly to the present 
unsustainable pattern of global 
imbalances, thus increasing protectionist 
pressures. The ministers and governors 
considered that it is important that the 
newly industrialized developing 
economies should assume greater 
responsibility for preserving an open 
world trading system by reducing trade 
barriers and pursuing policies that allow 
their currencies to reflect more fully 
underlying economic fundamentals. 

9. The ministers and governors also 
agreed to additional refinements in the 
use of economic indicators for the 
multilateral surveillance arrangements 
approved in the Tokyo economic declara- 
tion. As part of these refinements, they 
will: 

• Periodically review medium-term 
economic objectives and projections 
involving domestic and external 
variables. The medium-term objectives 



32 



and projects are to be mutually consist- 
ent and will serve as a basis for assess- 
ing national policies and performance 
and 

• Regularly examine, using perform- 
ance indicators, whether current 
economic developments and trends are 
consistent with the medium-term objec- 
tives and projections and consider the 
need for remedial action. 

Initially, the objectives and projec- 
tions will involve the following key 
variables: growth, inflation, current 
accounts-trade balances, budget 
performance, monetary conditions, and 
exchange rates. 



10. The ministers and governors 
agreed that the substantial exchange 
rate change since the Plaza agreement 
will increasingly contribute to reducing 
external imbalances and have now 
brought their currencies within ranges 
broadly consistent with underlying 
economic fundamentals, given the policy 
commitments summarized in this state- 
ment. Further substantial exchange ratt 
shifts among their currencies could 
damage growth and adjustment pros- 
pects in their countries. In current cir- I 
cumstances, therefore, they agreed to 
cooperate closely to foster stability to 
exchange rates around current levels. I 



U.S. International Trade 



WHITE HOUSE STATEMENT, 
DEC. 30, 1986 1 

The President today is taking trade 
policy actions on two cases involving the 
unfair practices of our trading partners. 
The first case involves agricultural trade 
with the European Communities (EC). 
The President announced today that he 
is increasing import duties on U.S 
imports of certain European agricultural 
products in direct response to the failure 
of the European Communities to offer 
adequate compensation for lost U.S. 
feedgrain exports to Spain. He has 
directed U.S. Trade Representative 
Clayton Yeutter to prepare a proclama- 
tion imposing 200 duties on some $400 
million of EC exports by no later than 
January 30, 1987. 

The President's action follows the 
expiration of an interim agreement con- 
cluded last July with the EC, intended to 
allow time until the end of 1986 to reach 
a permanent compensation arrangement 
for U.S. exports of feedgrains to Spain. 
However, the EC failed to offer accept- 
able compensation in the negotiations. 

The President expressed regret that 
the European negotiators had not shown 
sufficient flexibility to reach a satisfac- 
tory settlement, despite the additional 6 
months the United States had allowed 
for the negotiations. He indicated that 
the time had come to respond in kind to 



the European measures, in accordance 
with U.S. rights under international 
rules of the General Agreement on 
Tariffs and Trade (GATT). Therefore, 
U.S. duties on certain agricultural prod 
ucts will be set at 200%. The U.S. Trad 
Representative has been directed to 
monitor the effects of the U.S. action t< 
ensure that they match the damage 
caused by the EC restrictions. 

The President reaffirmed that the 
United States would prefer a negotiate' 
solution rather than having to resort to 
trade restrictive actions to resolve 
disputes and hopes that a settlement cs 
be reached prior to the imposition of 
duties. He further indicated that the 
United States is prepared to restore th 
pre-existing tariff rates at any time tha 
there is agreement with the European 
Communities to provide adequate com- 
pensation for U.S. feedgrain losses. 

The second case involves the pend- 
ing Section 301 case against the Goven 
ment of Brazil for acts, policies, and 
practices involving restrictions on infor 
matics trade and investment and denial 
of adequate and effective intellectual 
property protection. Brazil has recentlj 
announced measures to improve the 
administration of its informatics law an 
narrow the scope of its market reserve 
Specifically, Brazil has agreed to 
establish an ad hoc group to review 
specific U.S. company complaints, has 
promulgated some administrative 



Department of State Bullei 



EUROPE 



forms, and has liberalized the importa- 
tion of some previously restricted infor- 
inatics products, subject to periodic 
prevision. As a result of these positive 
^undertakings, the President has decided 
jto suspend the procedural and admin- 
I strative reforms parts of the Section 
j?01 case and to monitor Brazil's imple- 
mentation of those reforms. 

The President has also determined 
Ithat while Brazil's investment environ- 
Iment is improved, it is not yet fully open 
Ito U.S. investment opportunities. In 
iddition, the Government of Brazil has 
i recently submitted legislation which pro- 
' rides some intellectual property protec- 
tion for computer software, but the 
legislation has numerous features incon- 
sistent with international standards. 

The President has, therefore, 
decided to delay further U.S. remedial 
liction for 6 months to monitor Brazilian 
Drogress in making necessary improve- 
ments in the investment climate and to 
secure passage of intellectual property 
j egislation consistent with international 
1 ;tandards. Thus, action on both the 
■ nvestment and intellectual property por- 
tions of the Section 301 case will be 
postponed until July 1, 1987. 

In addition, the President has 
nstructed U.S. Trade Representative 
Clayton Yeutter to conduct a series of 
public hearings on Brazil's informatics 
'\ jolicy and to solicit private sector recom- 
■nendations as to what further action 
lould or should be taken to foster the 
>pening of the Brazilian informatics 
narket. The scheduled dates of the hear- 
ngs will be published in the Federal 
Register 30 days prior to event. 



Poland 



■Text from Weekly Compilation of 
^residential Documents of Jan. 5, 1987. 



PRESIDENTS STATEMENT, 
DEC. 12, 1986 1 

Five years ago, on December 13, 1981, 
the people of Poland were subjected to 
martial law. Once again, as so often in 
their proud history, Polish patriots faced 
a cruel setback in their quest for human 
rights. That day will be remembered as a 
dark day in the heroic but tragic history 
of Poland. It is a day of painful 
memories for the families of Solidarity 
members who suffered much these past 
5 years— many lost lives, were jailed, or 
had to live in hiding, separated from 
their wives, husbands, and children. My 
heartfelt thoughts remain with them. 

America will never be indifferent to 
the future of Poland. Special ties of kin- 
ship, worship, and love of liberty, and 
the contribution of Poles to American 
independence and progress, remind us 
forever that our peoples share a faith in 
freedom, spiritual strength, and human 
dignity. 

After the imposition of martial law 
in 1981, the United States sought ways 
to express our solidarity with the Polish 
people. We welcome the recent amnesty 
of most political prisoners. This impor- 
tant step, however, does not solve all 
problems facing Poland today. They can 
be overcome only with the participation 
and support of the Polish people. We 
hope, therefore, that the amnesty will be 
an important first step toward a mean- 
ingful dialogue between the Polish peo- 
ple and their government. To encourage 
this process, we decided to enter into 
dialogue with the Polish Government. 
We truly hope that future developments 
will allow improvement in the relation- 
ship between both governments. 

On this anniversary, we commemo- 
rate the sacrifices and the great spiritual 
strength of the courageous Polish peo- 
ple, and we look to a future in which 
their heritage can breathe freely for the 
good of Poland. 

PRESIDENT'S STATEMENT, 
FEB. 19, 1987 2 

Five years ago I asked all Americans to 
light a candle in support of freedom in 
Poland. During that Christmas season of 
1981 candles were lit in millions of 
American homes. We had confidence 
that the spirit of freedom would continue 
to shine in the darkness that martial law 



had brought to that brave country. As 
Americans, we were showing solidarity 
with Solidarity. 

Symbolic gestures were not enough. 
Economic and other sanctions were 
imposed on Poland in response to the 
repression that descended on the Polish 
people as a result of martial law. Our 
message was that America would not 
passively stand by while a grand experi- 
ment in freedom was brutally smashed 
in Poland. If the Polish Government 
wanted a decent relationship with the 
United States, we made it clear they 
would have to lift martial law, release 
the political prisoners, and enter into a 
real political dialogue with Polish 
society. 

Today, more than 5 years later, the 
light of freedom continues to shine in 
Poland. The commitment and sacrifice of 
hundreds of thousands of Polish men and 
women have kept the flame alive, even 
amid the gloom. 

In 1983 martial law was lifted and 
thousands of political prisoners have 
been freed in a series of amnesties. Since 
the final amnesty last September, no one 
has been arrested on political charges in 
Poland. Yet there is still far to go. The 
threat of arrest still hangs over those 
who seek their freedom. 

The right to genuinely independent 
trade unions is still stifled. Independent 
political activity continues to be 
repressed by various governmental 
measures. National reconciliation 
remains a dream, a goal for the future, 
rather than a reality of today. 

I continue to believe, as do the 
Polish people, that it is a possible dream. 
The church in Poland has greeted the 
major amnesty of political prisoners last 
September as a significant step by the 
Polish Government. In response to that 
amnesty, we initiated a step-by-step proc- 
ess of expanding our dialogue with the 
Government of Poland. In our dealings 
with Polish authorities, we have made 
one point clear: the continuation of 
better relations between our countries, 
and their further improvement, will be 
possible only if we see maintained the 
spirit and principle of the amnesty and a 
reliance on dialogue and respect for 
human rights. Only through genuine and 
meaningful reconciliation can the plight 
of the Polish people be alleviated. We 
will be watching to see that further steps 
are taken toward national reconciliation 



April 1987 



33 



EUROPE 



in Poland and that the progress made is 
not reversed. 

Significantly, the leaders of Solidar- 
ity and of the Catholic church in Poland 
agree that this is the right course for us 
to take. They have now urged us to lift 
our remaining economic sanctions in 
order to encourage further movement in 
the right direction. In considering this 
question, I have drawn on a broad cross- 
section of view. We have been in touch 
at the highest levels with the Polish 
Government, with the church, and with 
Solidarity. We have also consulted with 
our allies. 

After careful review, I have decided 
that the economic sanctions imposed in 
December 1981 and October 1982 should 
be rescinded, and I am accordingly 
restoring most-favored-nation tariff 
treatment for Poland and lifting the ban 
on Poland's eligibility for official U.S. 
credits and credit guarantees. We have 
always worked closely with our allies on 
issues concerning Poland, and they have 
sent messages of support for this step 
forward. 

I am honored by the expression of 
concern from distinguished Members of 
Congress, leaders of the Polish- 
American community in this country, 
and Solidarity. Together we underscore 
the heartfelt concern of our citizens 
about Poland. Let no one doubt our 
brothers and sisters who struggle to 
build a freer and more humane Poland, 
or our resolve to stand by them. 

As it was in 1981, freedom is 
precious to us. The slogan of the Polish 
independence struggle of the last cen- 
tury was: "For Your Freedom And 
Ours." That is our slogan, too. And it is 
more than a slogan; it is a program of 
action. 

Today is the first step, a big step. 
Our relations with Poland can only 
develop in ways that encourage genuine 
progress toward national reconciliation 
in that country. We will be steady. We 
will be committed. The flame that burns 
in the hearts of the Polish people, a 
flame represented by the candles we lit 
in 1981, that flame of justice and liberty 
will never be extinguished. 



'Text from Weekly Compilation of 
Presidential Documents of Dec. 15, 1986. 

2 Text from Weekly Compilation of 
Presidential Documents of Feb. 23. 1987. 



30th Report on Cyprus 



MESSAGE TO THE CONGRESS, 
JAN. 29, 1987' 

In accordance with Public Law 95-384, I am 
submitting to you a bimonthly report on prog- 
ress toward a negotiated settlement of the 
Cyprus question. 

During this period U.N. Secretary 
General Perez de Cuellar continued his mis- 
sion of good offices to achieve a negotiated 
Cyprus settlement. U.N. Under Secretary 
General Goulding visited Cyprus from 
November 6 to 12 to follow up on the 
Secretary General's discussions with Greek 
and Turkish Cypriot leaders in September 
and to explore with them how best to move 
forward. 

According to the Secretary General's 
December 2 report to the Security Council on 
the U.N. operation in Cyprus (enclosed), Mr. 
Goulding discussed with the two Cypriot sides 
the Secretary General's approach to his mis- 
sion of good offices and his effort to help the 
two parties achieve a negotiated settlement. 
He told the parties that the Secretary General 
was determined to pursue his efforts, preserv- 
ing all that had been achieved so far and 
building on it for future progress. 



The two Cypriot sides reiterated to Mr. 
Goulding their positions on the draft 
framework agreement submitted by the 
Secretary General last March. They also 
expressed their support for the Secretary 
General's good offices mission. 

Mr. Goulding also visited Ankara and 
Athens and informed the Turkish and Greek 
governments of his discussions in Cyprus. 

Mr. M. James Wilkinson, the U.S. Speci; 
Cyprus Coordinator, visited Cyprus January 
19 to 22 and met with President Kyprianou 
and Mr. Denktash. Mr. Wilkinson reiterated 
during his discussion our sincere interest in 
progress toward a just and lasting Cyprus 
settlement and our support for the efforts of 
the U.N. Secretary General to reach that 
goal. We are continuing our consultations 
with the Secretary General and with the par 
ties to help them find ways to move forward 

Sincerely, 

Ronald Reaga 



'Identical letters addressed to Jim 
Wright, Speaker of the House of Represen- 
tatives, and Claiborne Pell, chairman of the 
Senate Foreign Relations Committee (text 
from Weekly Compilation of Presidential 
Documents of Feb. 2. 1987). ■ 



I 



Vienna CSCE Followup Meeting Resumes 



PRESIDENTS STATEMENT, 
JAN. 26, 1987' 

The followup meeting of the Conference 
on Security and Cooperation in Europe 
(CSCE) resumes its important work 
tomorrow in Vienna. It is charged with 
taking stock of developments in the 
"Helsinki process" and with charting the 
path ahead. 

The United States has worked 
energetically and in concert with our 
NATO allies to support full implementa- 
tion of the Helsinki Final Act. All CSCE 
states must fulfill their commitments if 
we are to realize the promise of a more 
secure peace with respect for human 
rights and with greater cooperation 
among all the peoples of Europe and 
North America. 

Progress has been achieved in some 
areas, but the human rights situation 
within the Soviet Union and other 
nations of Eastern Europe remains 
tragic. The resolution of some prominent 
individual cases is welcome, and we hope 
it will continue. However, sporadic 
gestures must be expanded into uni- 
versal practice. Our attention must not 
be diverted from the severe abuses of 
human rights that persist. During the 



last round of the Vienna meeting, the 
United States and other allied delega- 
tions documented in detail failures by 
the Soviet Union and its Warsaw Pact 
allies to keep their Helsinki promises, 
particularly on human rights. 

Looking ahead, the United States 
continues to believe that the credibility 
of the CSCE process depends on fulfill- 
ment of commitments already under- 
taken. We seek signs that the East is 
prepared to take actions— and not just 
offer words— to solve such problems as 
the treatment of Helsinki monitors and 
other political prisoners, divided familie; 
and spouses, persecution of religious 
believers, denial of the right of emigra- 
tion, and radio jamming. Significant 
progress on these issues would establish 
the basis for a constructive and balance( 
outcome at Vienna. Such an outcome 
would not only give renewed impetus to 
the Helsinki process but also mark a 
welcomed step forward in overall East- 
West relations. I have instructed Ambas 
sador Warren Zimmerman, chairman of 
the U.S. delegation, to work toward 
these important goals. 



Text from Weekly Compilation of 
Presidential Documents of Feb. 2. 1987. 



34 



Department of State Bulletir 



3ENERAL 

Maintaining the Momentum 
in U.S. Foreign Policy 



iy John C. Whitehead 

Address before the Mid-America 
lorn mittee on February 25, 1987. Mr. 
Vh Hi head is Deputy Secretary of State. 

Poday, I'm going to talk about some of 
|iur toughest foreign policy problems, 
vhich aren't on the front pages of the 
Newspapers. That rules out Iranian con- 
nections and contra funding— not 
■ because they aren't important topics in 
Iheir own right but because we shouldn't 
Lllow ourselves as a nation to become so 
jireoccupied with the details of this prob- 
em that we lose sight of even more basic 
oreign policy challenges facing us. 

I'd like to remind you of the most 
Important of these challenges— how we 
; eal with our adversaries, how we 
j ooperate with our friends, and how we 
'trengthen the stability of peace. 

My message is simple; right now the 
I Jnited States has much going for it in 
11 of these areas. In recent years, we 
Lave made important progress in halting 
estabilizing trends and in laying the 
roundwork for a safer and more secure 
I /orld. 

Our immediate task is to keep this 
p and to build upon our progress. But 
hat isn't always as easy as it sounds, 
ndeed, we may be on the verge of 
hrowing away these gains by suc- 
umbing to the temptations of a 
eo-isolationism. 

)pportunities for the U.S. 

'hroughout our history, Americans have 
ad recurrent difficulty in holding to a 
teady course in foreign affairs. As a 
eople, we have tended to extremes— 
ither rushing into broad, ambitious 

i verseas commitments or retreating into 

i . defensive isolationism. 

These pendulum swings in our 

|.pproach to the world do not serve U.S. 
nterests. We can no longer afford the 
uxury of inconsistently picking and 

, hoosing among our involvements 
ibroad. We need to demonstrate 

reliability in our commitments. 

For that reason, this Administration 

has sought to move our diplomacy away 
rom a pattern of periodic cycles of 



involvement and withdrawal. Our goal 
has been to affirm and reinforce a basic 
steadiness and consistency in the con- 
duct of our foreign policy. 

That effort is working. We are 
beginning to see important results. This 
is not a question of dramatic break- 
throughs; it is the result of sustained 
effort. 

Through firmness and realism, we 
have been able to embark on a new high- 
level dialogue with the Soviet Union— 
not just on arms control but on the full 
agenda of issues between us. And for the 
first time in our history, we now have a 
realistic prospect of negotiating substan- 
tial reductions in the nuclear arsenals of 
both sides. 

Similarly, we have sought to rein- 
vigorate our dialogue with the nations of 
Eastern Europe. The Secretary has 
asked me to take a special interest in our 
relations with these countries. I recently 
visited Romania, Hungary, Yugoslavia, 
Poland, Czechoslovakia, and Bulgaria. 
Despite the obvious differences between 
the internal and foreign policies of these 
countries and our own, I'm convinced of 
the special importance of broadening our 
political exchanges with them on issues 
of mutual concern— and, in the process, 
making clear U.S. views on such basic 
issues as arms control and human rights. 

In the developing world, we are 
working to support a remarkable 
resurgence of democratic govern- 
ments—most notably in Latin America, 
where the percentage of the population 
living under democratic rule has grown 
from 30% in 1979 to 90% today. We are 
extremely pleased that the Philippines 
has recently joined the lengthening list 
of democracies. We are actively seeking 
to promote negotiated peaceful solutions 
to regional conflicts— in the Middle East, 
southern Africa, and Central America— 
as well as to help countries around the 
globe resist the threat of aggression. 

On the economic front, there is now 
a greater appreciation of the need for 
the major industrialized nations to work 
together and with the less developed 
countries in support of broadly based 
economic growth, more open trade and 
investment, and greater exchange rate 
stability. 

We are also seeing an encouraging 
trend toward greater confidence in free 



market-oriented solutions to the prob- 
lems of economic growth. We now find, 
almost everywhere in the world, 
movements to decentralize, deregulate, 
and denationalize. At the economic 
summits, for example, all the leading 
industrial nations have acknowledged 
that structural rigidities imposed by 
governments are the main obstacles to 
renewed growth. Even in the communist 
world, reforms in China and Hungary 
demonstrate a growing recognition that 
entrepreneurial initiative in a market 
environment is the engine of develop- 
ment and growth. 

All of this represents important 
progress, but these are problems that 
transcend any single administration. Our 
ability to respond effectively to these 
and other challenges to our security and 
well-being over the next 2 years and 
beyond will depend on much more than 
the political fortunes of the White House 
this week or next. 

Rather, they are going to require a 
sustained bipartisan commitment to 
devote sufficient resources to the 
diplomacy supporting our foreign policy 
objectives. And it is in this area that I 
am especially concerned. 

The Foreign Affairs 
Resource Crisis 

There are, of course, efficiencies and 
savings that we can and should pursue in 
the conduct of our foreign policy. I can 
assure you that we are energetically 
doing so. This will continue as a basic 
priority of the Department of State. 

But the hard question for us, today, 
is whether we should succumb to the 
temptation of letting politically expe- 
dient, immediate budget cuts in the 
foreign affairs field drive our larger, 
longer term policy interests. 

This problem appears most starkly in 
the unrelenting assault on our foreign 
affairs budget. Last January, President 
Reagan submitted to Congress an inter- 
national affairs budget for fiscal year 
1987 that we had stripped to the bone. It 
amounted to less than 2% of the total 
Federal budget. 

That minimal request was cut by the 
Congress by 20%, a reduction with far 
more threatening effects than even that 



April 1987 



35 



GENERAL 



substantial percentage implies. After 
congressional earmarkings and other 
constraints on our spending are taken 
into account, the bulk of our foreign 
affairs operations is now being cut by a 
third and security assistance by about 
50%. 

Let me be clear about the dangers of 
this penny-wise, pound-foolish policy. 
The deep cuts in our foreign affairs 
resources are now dangerously widening 
the gap between our interests and our 
capabilities for pursuing them. Here are 
just a few examples. 

Combating Narcotics Trafficking. 

In recent months, we've seen extraor- 
dinary concern in this country about the 
dangers of illegal drugs. That concern is 
legitimate and long overdue. But even 
this concern is falling victim to false 
economizing. It is not simply a question 
of funds to enforce the law, to eradicate 
crops, and to educate people to the 
dangers of narcotics. There is a second 
side to the world drug problem— one that 
involves the political and economic 
realities of crop-producing countries. 
You can't just force peasants— many of 
them impoverished— to stop growing 
their best cash crop without offering 
them some sort of economic alternatives. 

Similarly, you can't expect the 
governments of these nations— many of 
them desperately poor and politically 
weakened from within by the 
gangsterism endemic in the narcotics 
trade— to launch major programs 
without the economic resources 
necessary to sustain them. Yet, to take 
an important example, aid for the 
Andean countries— Bolivia, Colombia, 
Ecuador, and Peru— will be practically 
eliminated by the draconian budget cuts 
recently enacted by Congress. 



Supporting Democratic Transi- 
tions. Over the past few years, we have 
seen our influence constructively at 
work in the Philippines, in Haiti, and 
across the continent of Latin America. 
But democratic transitions in these 
regions are fragile. They require our 
political and economic support. Help 
means money, and money is not in this 
foreign affairs budget. 

We are sometimes told that such 
foreign assistance is vulnerable on the 
Hill because "it doesn't have a constit- 
uency." To my mind, that sort of think- 
ing is dead wrong. This assistance helps 
these countries develop more healthy 
economies and helps us maintain close 
relations with them. These are often 
countries where we have bases vital to 
our defense and to the security of our 
allies. That should be important to all 
sectors of the American body politic. 
With a little support, they can also grow 
into major trading partners, which helps 
all of us. 

Third World Debt. Recently, we 
have seen increased attention to the 
growing problem of Third World debt. 
Right now we have a plan— the Baker 
plan— that is a constructive approach to 
encouraging growth in the developing 
countries so that they can do more to 
help themselves, provide a better market 
for our products, and get over their 
welfare dependency on the West. 

Obviously we need money to get the 
plan into action. But we're supposed to 
cut a third of our funding for the 
multilateral banks on which the plan 
depends. That's exceptionally 
shortsighted— we can all imagine the 
costs of a Third World debt collapse. 

And I could cite many more 
examples. 



What Is To Be Done 

As you can see, arms sales to Iran aren 
our only foreign policy problem. The 
really tough foreign policy problems are 
longer term in nature. If Americans are 
becoming unwilling or uninterested in 
devoting adequate resources for our 
foreign policy, much of the current 
debate over specific Administration 
policies may become academic. 

The serious mismatch between our 
policies and our resources creates 
vacuums that others can— and will- 
exploit to their own advantage. And it 
encourages confusion among friends an 
adversaries alike about the scope and 
aims of American policy. 

The particularly disturbing fact for 
me is that we've seen all this before; ye 
apparently we have forgotten the lessoi 
of the 1930s. But today's pressures for 
withdrawal from the world add up to 
isolationism with a dangerous differenc 
As America's power in the postwar 
world has grown at an exponential rate 
so, too, have the risks of indifference. 

For nearly half a century, the Unite 
States has shouldered its responsibilitie 
as leader of the free world and the char 
pion of those struggling to join us. 
Through our efforts, we have made eno 
mous gains in advancing our own 
interests and our ideals. Our prosperity 
our technological dynamism, the vitality 
of our alliances are all making us a fore 
for progress as never before. 

America holds a winning hand— if 
only we persevere. We must not permil 
our capacity for constructive leader- 
ship to atrophy for lack of adequate 
funding. ■ 



36 



Department of State Bullet 






lUMAN RIGHTS 



986 Human Rights Report Released 



Following is a statement by Assist- 
h,t Secretary for Human Rights and 
' it m unitarian Affairs Richard Schifter 
n February 19, 1987. 

/hen I appeared here a year ago on the 
■ccasion of the release of the human 
jghts reports for 1985, many of the 
juestions posed focused on the Philip- 
lines. The election had just taken place, 
he votes were being counted, and Presi- 
ent Marcos was still in power. I sug- 
gested at that time that we place our 
mfidence in the people of the Philip- 
jjnes. The events of the last year have 
; jmonstrated that the people of the 
Ihilippines have, in fact, come through, 
here are a great many problems still 
lead, but democracy and respect for 
iman rights have once again estab- 
;hed firm roots in the Philippines. 

The year 1986 also brought an end 
i dictatorship in Haiti. An elected 
Dvernment is not as yet in place there, 
at the National Governing Council has 
'fectively guaranteed freedom of 
cpression and association in Haiti. 
iteps are being taken to build 
imocratic institutions in a country 
hich has not known them before, 
ccording to the present timetable, an 
ected government is expected to be in 
ace by February 1988. That is not to 
,y that problems of governmental 
ructure are the only problems facing 
aiti. There is, above all, the difficulty 
>sed by the country's poverty and weak 
onomy. A great deal will still have to 
! done to place Haitian democracy on a 
und footing. 

Another country in which significant 
iman rights progress was noted in 
•86 was Guatemala. In an orderly 
ansition from a military regime to the 
■st democratically elected civilian 
rvernment in 20 years, President 
jrezo, a national legislature, and 330 
ayors— all chosen in the 1985 
lections— took office on January 14, 
•86. Although Guatemala, too, is beset 
ith problems arising out of economic 
fficulties, random acts of violence, and 
e aftermath of past human rights 
>uses, its new democracy has earned it 
•spect and recognition. 

Elsewhere in the Western Hem- 
phere, we continue to be concerned 
>out human rights problems in Chile, 
uba, Nicaragua, Paraguay, and 
iriname, all of which is spelled out in 
e report. 



The most troubling development on 
the human rights scene in 1986 was, of 
course, the sharp deterioration of human 
rights conditions in South Africa over 
the last half of the year. To the 
longstanding problem created by apart- 
heid, there was added last year the new 
state of emergency imposed on June 12, 
1986, which has been steadily tightened 
since then. It has been estimated that 
20,000 persons were detained under the 
state of emergency and that 10,000 
remained in detention by the end of the 
year. A great many of the detained per- 
sons are under the age of 18, some even 
under the age of 15. 

We continue to be deeply concerned 
by South Africa's denial of basic human 
rights to a majority of its citizens. We 
continue to see dialogue among all South 
Africans as the only way to effect 
positive change. The experience of the 
last year has, we believe, demonstrated 
that violence results in counterviolence 
and repression, which causes more 
violence and more repression— all at a 
terrifying human cost. We deeply hope 
that South Africans can turn from the 
self-destructive course on which they 
seem to have embarked and rededicate 
themselves to the search for a peaceful 
solution. 

In Europe we noted with satisfac- 
tion the release of Poland's political 
prisoners. 

Although our comprehensive report 
covers the year 1986, we cannot, at this 
time, totally ignore developments in the 
area of human rights since the beginning 
of this year. Let me, therefore, touch 
briefly on recent events in the People's 
Republic of China and in the Soviet 
Union. 

The Government of the People's 
Republic of China, some years ago, made 
certain basic decisions to improve the 
efficiency and productivity of its 
economy. It came to the clearly correct 
decision that a more decentralized and 
open system— a system based on 
incentives— was needed to improve pro- 
duction. Political openness was not 
joined into this new economic openness. 
It has, however, gradually developed as 
an inevitable consequence of the relaxa- 
tion of controls. It has also, understand- 
ably, whetted the appetite of a good 
many, particularly of young people who 
have shown a new zest for freedom of 
expression. This new zest was clearly in 
evidence in the recent demonstrations. 



We regret the steps that have been 
taken constitute steps back, but we 
sincerely hope that in due time the trend 
toward greater openness and greater 
freedom will be in evidence again. 

We have the same hopes for the 
Soviet Union. We do not believe that 
history has condemned any people to 
eternal autocratic rule. The natural 
human desire for freedom must inevita- 
bly come to the fore, whatever the 
governmental creed or cultural inhibi- 
tions might be. Having said that, let me 
emphasize that it is critically important 
that we assess the recent initiatives by 
General Secretary Gorbachev correctly. 
We should neither underestimate what 
has happened nor should we overesti- 
mate it. In a speech which I gave in 
Chicago a few days ago, I dwelled on 
this subject at some length [see p. 38]. 
The point I sought to make there, to 
summarize it briefly, was that the 
release of persons from prison prior to 
the end of the term for which they had 
been sentenced is to be welcomed on 
purely humanitarian grounds. It ends 
the suffering of the persons directly 
affected, their families, and their 
friends. Similarly, the policy of glasnost 
has expanded the scope for cultural 
expression somewhat, provided a 
somewhat greater range of information 
about events inside the Soviet Union, 
and allowed somewhat more breathing 
space for a great many average Soviet 
citizens. But it is not freedom yet, not by 
a long shot. 

We note, moreover, that the 
prisoners who were released were 
pressured to sign admissions of guilt and 
promises that they would not engage in 
antigovernment activities. Many political 
and religious prisoners remain 
incarcerated. 



Copies of the Report 



Country Reports on Human Rights Prac- 
tices for 1986 was submitted to the 
Senate Foreign Relations Committee 
and the House Foreign Affairs Commit- 
tee by the Department of State in 
February 1987. Copies of this 1,356-page 
document may be purchased from the 
Superintendent of Documents, U.S. 
Government Printing Office, 
Washington, D.C. 20402, for $31.00. 
When ordering, please use exact title 
and Stock No. 052-070-06253-3. ■ 






pril 1987 



37 



HUMAN RIGHTS 



Moreover, as the Soviet Union has 
not as yet embarked on a program of 
economic reform of the kind which is 
now in evidence in China, we cannot in 
the Soviet case speak as yet of political 
changes which will inevitably accompany 
a relaxation of economic controls. There 
is, to be sure, some talk of a new 
approach to economic enterprise, of 
another look at the Hungarian model. 
But so far it is only talk. 

There has been expectation— and 
occasionally vague hints have been 
dropped— that improvements in emigra- 
tion figures are in the offing. Yet, for 
the last 15 months, month after month, 
the emigration figures remained at 
extraordinarily low levels, rarely 
exceeding 100. The January 1987 figure, 
for example, was 98. We need to add 
that a new Soviet law promulgated in 
1986 restricts the pool of persons that 
might qualify for emigration, in violation 
of the Helsinki Final Act, to persons who 
have spouses, children, parents, or sib- 
lings abroad. But even within this nar- 
row group, only a very small number 
have so far been allowed to leave. ■ 



The Reality About Human Rights 
in the U.S.S.R. 



by Richard Schifter 

Address before the National Strategy 
Forum in Chicago on February 16, 1987. 
Ambassador Schifter is Assistant 
Secretary for Human Rights and 
Humanitarian Affairs. 

Of all the questions that can be posed 
about human rights conditions 
throughout the world, none has, in 
recent days, been asked more often or is 
more intriguing than the question: 
"What's going on in the Soviet Union?" 

There is no doubt that interesting 
events relating to the state of human 
rights in the U.S.S.R. have been happen- 
ing recently. The release and deporta- 
tion of Shcharanskiy and Orlov can be 
written off as parts of arrangements 
under which our side released spies. But 
there was no clear quid pro quo from the 
West for the return of Andrey Sakharov 
to Moscow, the release of the poet Irina 
Ratushinskaya, the decision not to 
impose a prison term on the Crimean 
Tatar leader Mustafa Dzhemilev, and, 
most recently, the release of a signifi- 
cant number of political prisoners. In 
Moscow, plays and films that are critical 
of certain aspects of past or present con- 
ditions in the Soviet Union are shown to 
limited audiences. Rumors abound that 
previously published books will now 
appear in print. There are serious 
students of Soviet affairs who believe 
that the events that I have just recited 
are harbingers of the far-reaching and 
most significant changes that Mikhail 
Gorbachev will institute in the Soviet 
system. There are others who hold to a 
more jaundiced view. 

Trying to determine what motivates 
the leadership of the Soviet Union in 
effecting changes in policy is by no 
means an easy task. The decisions are 
clearly made at the highest level, in the 
Politburo. These meetings are not open 
to the general public, nor are transcripts 
or summaries of its deliberations ever 
made available to the outside world. And 
in Soviet society, we don't even have 
leaks. Therefore, we can try to fathom 
the thinking of the Soviet leaders only 
by reading their speeches, statements, 
and the reports of foreigners who have 
had conversations with them. For the 
rest of it, we must fall back on educated 
guesses. It is with that caveat clearly 
underlined that I would like to offer you 



my interpretation of recent develop- 
ments in the Soviet Union as they rela \ 
to respect for human rights. 

Democracy and the 
Russian Revolution 

Let me begin by asking what is it that 
makes us, both as a political entity anc 
as individual citizens, respect the right 
of our fellow men— the right to life, to 
liberty, and to personal dignity. It is, il 
submit to you, above all, our religious 
tradition— principles such as the Ten | 
Commandments and the Golden Rule- i 
that provide the framework within wh j 
most of us act most of the time, both i 
our private and, in the case of govern- 
ment officials, in our official capacities , 
as well. 

To this religious tradition we musi 
add the fundamentals of our secular 
approach to government, an approach 
stemming from the philosophers of the 
Enlightenment, so magnificently sum- 
marized by Thomas Jefferson in the 
initial passage of our Declaration of 
Independence. What Jefferson stated 
there with the utmost clarity are our 
ideas of the inalienable rights of the 
individual, of limited government, anc 
government only with the consent of 1 
governed. 

Now let us examine where the So i 
Union stands on these propositions. T 
ideas of the Enlightenment did, indee 
penetrate into that country. The 
Empress Catherine II expressed an 
interest in them. And, in the 200 year | 
since her reign, the ideals of Western 
civilization have, by no means, been 
unknown in Russia. Admittedly, thou; 
the penetration has been shallow. 
Beyond that and, most importantly, a 
far as the outlook of the Soviet leader 
ship is concerned, Lenin, the founder 
the Soviet state, totally rejected the i 
cepts of the rights of the individual. '. 
Russian Social Democratic Party, it 
should be recalled, was united in its 
espousal of Marxism. But Lenin dividt 
it precisely on the issue of the method 
of seizing and maintaining power, 
repudiating any notion of the rights o: 
the individual and of government by c 
sent of the governed. The very reason 
for the existence of the Bolshevik Par 
and, ultimately, the communist intern 
tional movement united in the Third 
International was its complete rejectu 



38 



Department of State Bull! 



HUMAN RIGHTS 



of the concepts of democracy as they had 
developed in Western civilization in the 
ake of the Enlightenment. 

The fact that Western notions of 
■democracy were neither foreign to 
Russia nor lacked popular support in 
ithat country was borne out by the 
results of the first relatively free elec- 
tions to a Russian parliament. Both the 
(first and second Dumas, elected in 1906 
and 1907 respectively, contained over- 
whelming majorities pledged to 
democracy. It is most significant, 
furthermore, that the election in 
November 1917 of a Constituent 
Assembly, held after the Bolshevik 
seizure of power, produced only a 24% 
ivote for the Bolsheviks. Once again, the 
great majority voted for parties support- 
ing the democratic form of government. 
|[n fact, the largest vote total in the 
November 1917 election was garnered 
jy the party whose leader, Aleksandr 
Kerensky, had been deposed by Lenin 
ust weeks earlier. 

By the time the Constituent 
Assembly met in January 1918, quite a 
lumber of the elected delegates had 
)een arrested by the Bolsheviks. Even 
io, when the assembly met— in spite of 
j.hese arrests and in spite of the fact that 
3olshevik-led troops surrounded 
-"etrograd's Tauride Palace in which the 
neeting took place and were, in fact, 
^resent in the meeting hall— the 
Bolsheviks lost every key vote. They 
,hen withdrew from the session. Eight- 
een hours after the meeting had been 
opened, the Bolshevik soldiers forced its 
idjournment by simply turning off the 
ights. As the delegates stumbled in the 
lark to the doors and out into the street, 
.hey may not have known that the light 
lad also been turned out on Russia's 
>rief exposure to democracy. They found 
>ut a few days later when the Bolsheviks 
lissolved the assembly and moved on 
vith their program to establish 
.hroughout the country a one-party dic- 
.atorship. As the words "democracy" 
md "democratization" are so often in 
ise in the Soviet Union today, let us 
iote that just a few days before he 
lissolved the Constituent Assembly, 
Lenin had delivered a speech in which he 
lad pledged himself to fight for "our 
:ruly democratic regime" against the 
:apitalists of the world. 

The Growth of 
Soviet Repression 

;3o much for Lenin's approach to the 
• notion of government by consent of the 
governed. But what about the older. 



religious tradition of respect for the 
integrity of the individual, a tradition 
which had reached Russia more than 900 
years earlier with the arrival of Chris- 
tianity. It was a tradition which many 
rulers had honored in the breach, but it 
had, nevertheless, from time to time, 
served as a brake on Russia's autocrats. 
Lenin had swept it all aside, not only by 
committing the state he created to 
virulent atheism but by insisting that the 
leadership of his movement banish all no- 
tions of "bourgeois morality" from its 
conduct of public affairs. No holds were 
to be barred. Every vile trick in the book 
could be used, all forms of brutality were 
in order, if it advanced the cause. 

On the foundation laid by Lenin, 
Stalin then built the despotism uniquely 
associated with his name. The basic 
approach which justified repressive and 
amoral government had been well estab- 
lished by Lenin, and the mechanisms of 
repression had been put in place. But 
whereas Lenin was prepared to destroy 
and to kill for the cause, Stalin was 
prepared to use the existing apparatus 
to serve his personal ends, to destroy 
and kill out of vindictiveness, paranoia, 
and sometimes even on a whim. 

Stalin died in March 1953. The reign 
of terror continued a few months longer 
under the leadership of Stalin's Minister 
of State Security, Lavrenti Beria. But 
Beria was arrested in July 1953 and exe- 
cuted in December. That, indeed, put an 
end to Stalinism per se. Yet Stalinoid 
tendencies— for that matter tendencies 
that date back to the Romanovs, per- 
sisted. By that I mean governmental 



action which constituted brutality for 
brutality's sake, meanness, vindic- 
tiveness, and paranoia. In analyzing 
developments concerning human rights 
in the Soviet Union in the period since 
1953, we can identify both Leninist and 
Stalinoid tendencies. By the former, I 
mean repression for a clearly recognized 
purpose of state. By the latter, I mean 
random repression designed to instill 
fear in the populace without relevance to 
a clearly defined objective. 

The arrest and execution of Beria in 
1953, together with the arrest and 
execution of other leaders of Stalin's 
secret police, resulted in the transfer of 
the secret police apparatus from the 
center of the Soviet bureaucracy to its 
margin. The secret police was still there 
and operating, but its fangs had been 
pulled. It was operating under the 
authority of the country's political 
leadership rather than as a law unto 
itself. It was to crack down when it was 
in the interest of the state to do so, not 
at random, not on the basis of its own 
whim, not as a result of an anonymous 
denunciation. And what we might call 
the rules of engagement were changed. 
When dealing with the general public, 
the secret police would use brutality 
more sparingly, only when clearly 
necessary. 

Remission and Revival 

As we look back, we can identify a 
period of remission of the Stalinoid 
tendency, which lasted from July 1953 to 
February 1977, for 23V2 years. It began 



Release of Soviet Political Prisoners 



DEPARTMENT STATEMENT, 
FEB. 9, 1987' 

The United States welcomes the 
reported release of as many as 50 Soviet 
political prisoners. We have long urged 
the Soviet Government to live up to its 
obligations under the Helsinki Final Act 
and other international agreements on 
human rights, and we hope that the 
Soviet Government will follow up these 
recent moves by releasing all political 
prisoners and prisoners of conscience 
who unjustly remain in confinement or 
exile, without imposing any requirement 
that they recant their past activities, or 
limit future activities in support of 
human rights. As we have consistently 



made clear to the Soviet Government, 
we attach the greatest importance to 
improvements in the field of human 
rights, including the right to emigrate. 
We hope that recent statements by 
Soviet officials that larger numbers of 
Soviet Jews are being granted exit per- 
mission will be followed by steps to allow 
the departure of all those who wish to 
exercise their right to leave. The United 
States will be observing future develop- 
ments closely and continued positive 
moves by the Soviet Government in this 
area will have a positive impact on the 
climate of U.S. -Soviet relations. 



'Read to news correspondents by Depart- 
ment spokesman Charles Redman. ■ 



April 1987 



39 



HUMAN RIGHTS 



with the release of the hundreds of 
thousands of Stalin's prisoners. And it 
ended with the arrest of Yuriy Orlov, a 
well-known physicist, who had taken on 
the leadership of a group which had 
taken on the task of monitoring Soviet 
compliance with the human rights provi- 
sions of the Helsinki accords. 

The period of 1953-77 was by no 
means a period in which Soviet action in 
the field of human rights was totally 
benign. To be sure, Nikita Khrushchev 
released Stalin's prisoners, made his 
famous de-Stalinization speech in 
February 1956, allowed the publication 
of Solzhenitsyn's One Day in the Life of 
Ivan Denisovich, and permitted "the 
thaw" to develop. But in November 
1956, following Lenin's precepts, 
Khrushchev brutally suppressed 
Hungary's freedom fighters. And it was 
Khrushchev who ordered the execution 
in 1957 of Imre Nagy, a life-long com- 
munist, whom the Hungarian revolt had 
propelled into a leadership position. The 
man charged with carrying out the 
Kremlin's Hungary policy on the spot, 
incidentally, was the Soviet Ambassador 
in Budapest. He played a clever game of 
deception and, later, of ruthless suppres- 
sion. He thus earned his spurs to rise to 
much higher office. His name was Yuriy 
Andropov. 

It is interesting, at this time, to look 
back at the Khrushchev years. This was 
not an era in which the supreme leader 
had ordered glasnost [openness]. The 
thaw came about because repression 
from above had been relaxed and, as the 
years went by, particularly after the 
de-Stalinization speech, Soviet citizens 
became more courageous in speaking 
out. The thaw came from the bottom up, 
not from the top down. There were a 
good many of us who thought at the time 
that the thaw had become irreversible. 

It appeared that way even when 
Khrushchev fell in 1964 and was 
replaced by Brezhnev. The democratic 
ferment in intellectual circles was 
increasingly in evidence and, in time, 
ripened into the dissident movement. 
The leadership was uncertain about this 
new phenomenon. There were clearly 
some who thought that no harm could 
come to a Soviet state if a few dissent- 
ers spoke up, as long as they were 
not well organized. Others were, 
however, increasingly uncomfortable 
with the mere idea that dissenting views 
could not also be expressed in writing, 
even though such writings would be 
published abroad and under pseudonyms. 
The government response was, as a 
result, hesitant and unclear. The first 



indication that the Brezhnev regime 
would place limits on any further 
liberalization came in 1966, with the trial 
of the writers Yuliy Daniel and Andrey 
Sinyavsky. Both of them were sentenced 
for writings that had been published 
abroad. In the years immediately follow- 
ing, other activists were picked up and 
sentenced to relatively short terms of 
imprisonment. Some were also commit- 
ted to institutions for the mentally ill. 
But these governmental counter- 
measures were only sporadic. The dissi- 
dent movement— from 1970 on, led by 
Andrey Sakharov— was gaining further 
momentum. Samizdat or underground 
literature was distributed with increas- 
ing boldness. 

As the dissident movement became 
increasingly outspoken, an event 
occurred which received little notice at 
the time. In 1974, Yuriy Andropov, of 
Budapest fame, by then head of the 
KGB, was elevated to a seat on the Polit- 
buro. His views and those of persons 
close to him did not seem to have an 
immediate impact on the course of 
events. However, beginning in 1976, 
criticism of ideological laxness appeared 
in Pravda. There were now calls for a 
crackdown on the dissident movement. 

The crackdown came, as I noted 
earlier, in February 1977. It started with 
the arrest of Yuriy Orlov. Shcharan- 
skiy— arrested, tried, and convicted on a 
trumped-up charge of treason— followed, 
and then came the various other persons 
identified with the dissident movement 
as well as those who advocated 
unauthorized positions on religion, 
minority nationalities, and Jewish 
emigration and culture. By January 1980 
when Andrey Sakharov was banished to 
Gorkiy, the movement he had led had 
been totally crushed. 

The destruction of the dissident 
movement and the end to samizdat did 
not cause the secret police to relent. 
Wherever and whenever a Soviet citizen 
tried to raise his head to publicize 
unauthorized views, the heavy hand of 
the police state clamped down on him 
quickly. More persons were arrested and 
stood trial for anti-Soviet agitation and 
propaganda, which usually resulted in 7 
years of imprisonment plus 5 years in 
internal exile, a total of 12 years, a large 
chunk out of a person's life. Other 
dissidents were committed to mental 
institutions. 

This, then, was the state of affairs in 
the Soviet Union from 1977 on, during 
the last years of Brezhnev, during 
Andropov's tenure, during Chernenko's 
tenure, and during the first 20 months 
or so of the tenure of Mikhail Gorbachev. 



The New Openness 

And now let me get back to the question 
to which I referred at the outset: 
"What's going on in the Soviet Union?" 
Andrey Sakharov has been allowed to 
return to Moscow. And in recent weeks, 
dozens of emaciated men, with close- 
cropped hair and wearing work-camp 
clothes, have arrived at Moscow train 
stations: political prisoners released 
from incarceration without having to 
serve their full term. Gorbachev, the 
newspapers tell us, has released more 
political prisoners than anyone since 
1953-54, when Khrushchev freed the 
residents of Stalin's gulag. As I have 
just shown to you, the reason why Gor- 
bachev was able to release a greater 
number of prisoners than his 
predecessors was that by 1987, a greatei 
number of political prisoners had been 
collected in the gulag than at any time 
since 1954. Nevertheless, we have to ask 
ourselves why, after close to 2 years as 
General Secretary preceded by a year as 
heir apparent, Gorbachev has decided 
now on such steps as the release of 
significant numbers of political 
prisoners, the return of Sakharov, the 
policy of glasnost, and greater cultural 
freedom. 

I recall attending, many years ago, a 
talk by Judge Skelly Wright of the U.S. 
Court of Appeals for the District of 
Columbia Circuit. Judge Wright had 
once been a segregationist. He was 
asked what changed his mind. He 
pointed to his head and said: "One day 
something just clicked." Did something 
"just click" in Mikhail Gorbachev's head 

Perhaps it did, but whatever clicked 
has not turned Mikhail Gorbachev into a 
fervent adherent of all of the provisions 
of the Universal Declaration of Human 
Rights. As it has been for close to 70 
years, the Soviet Union remains a 
repressive police state. There has been 
no general amnesty of political 
prisoners. Article 70 of the Criminal 
Code of the Russian Socialist Federated 
Soviet Republic, making anti-Soviet 
agitation and propaganda a felony, is 
still on the books. So is article 190-1, 
which calls for 3-year sentences for per- 
sons guilty of defaming the Soviet state. 
What has been officially explained is that 
all cases of political prisoners were 
reviewed individually. Only some of 
them were released, after they had 
signed statements in which they promised 
not to engage any longer in the activities 
which caused their conviction in the first 
instance. 



40 



Department of State Bulletin 



HUMAN RIGHTS 



Please consider, in this context, my 
arlier remarks about the differences 
etween Leninism and Stalinism. If it is 
ear that the dissident movement has 
oeen destroyed, if it is clear that the 
long-term prison sentences imposed on 
.dissidents have frightened the popula- 
tion sufficiently to extinguish practically 
ill forms of dissidence, if a prisoner is 
prepared to promise not to offend 
against the system again, why engage in 
he Stalinist practice of retribution? It 
learly doesn't serve the cause. On the 
:ontrary, given the favorable publicity 
vhich the release of some prisoners 
vould generate abroad, the cause is bet- 
.er served by effecting such releases. It 
•ould help burnish the Soviet Union's 
mage and, thus, enhance its role in 
vorld affairs. 

But what about the various other 
neasures that are associated with the 
lew Gorbachev leadership? What 
•xplains the policy of openness, what 
xplains the showing to restricted 
udiences of hitherto forbidden plays 
nd films? 

Let me offer a theory as to the 
easons for recent developments in the 
ioviet Union. 

In 1919, after his visit to the Soviet 
Inion, American journalist Lincoln 
iteffens made this statement which was 
uoted for many years thereafter: "I 
ave seen the future and it works." 
'hree-quarters of a century later, it is 
vident to all that Steffens saw a 
lirage, that the future promised by the 
•oviet state has not arrived, that the 
'Oviet economic model is a failure. The 
ict that it is a failure, that the Soviet 
conomy is not only not gaining on the 
Vest but is falling further and further 
ehind, is evident even to the Soviet 
;adership. What that leadership seems 
d believe, however, is that this failure of 
erformance is not due to deficiencies in 
le model prescribed by Marxist- 
ieninist theory but is the result of 
uman frailty, of the inadequacies of 
*eonid Brezhnev and the people who 
rere placed in office during his period of 
jadership. Brezhnev and the 
irezhnevites are also faulted for their 
ailure to inspire the Soviet people, to 
lotivate them to work harder, to be 
lore efficient and productive. 

Starting with this assessment of the 
resent difficulties, Gorbachev has 
ledged himself to turn matters around, 
o get the Soviet Union moving again, 
ilere are some of the steps which he has 
i ecided to take. 



• Throughout the entire Soviet 
system, officeholders who are corrupt, 
drunkards, inefficient, or inept, must be 
removed and replaced. At the highest 
level of government, the identification of 
the people who need to be removed can 
be made by Gorbachev and his associates 
personally. But how can one flush out 
the persons at the lower levels of the 
hierarchy, particularly those far 
removed from Moscow? For that one has 
to resort to glasnost. No longer will the 
Soviet officialdom be sacrosanct, 
shielded from any popular criticism, able 
to order the arrest or the commitment to 
a mental institution of any citizen who 
tries to blow the whistle on a bureaucrat. 
From now on, on orders from the 
General Secretary, Soviet citizens are to 
speak up to denounce the evildoers so 
that they can be clearly identified and 
replaced. Glasnost is to be employed to 
upgrade the quality of the Soviet 
bureaucracy. 

• Though the Marxist-Leninist 
model must not be challenged, it is 
recognized that fallible men have, from 
time to time, instituted policies and prac- 
tices which served the country ill. These, 
too, have to be identified. Glasnost 
covers them as well. 

• Local officials have often exer- 
cised their power arbitrarily, thereby 
unnecessarily antagonizing Soviet 
citizens. The exercise of administrative 
discretion, therefore, must be reduced. 
There must be clear guidelines from the 
highest level of government which spell 
out the policies to be followed through- 
out the country. The rule of law must be 
understood and recognized. It may be 
repressive law, but if it is, it must come 
from the top, from people who have the 
knowledge to decide what is in the 
system's interest. 

• The country's future in an age 
characterized by technological advance 
lies with the group which the Soviet 
state identifies as the "intelligentsia." 
That group, Gorbachev recognized, in 
recent times had been affected by a 
serious malaise, despondent about the 
present and the future. Something had 
to be done to inspire that group, get it 
excited about life, and, consequently, 
make it more productive. Applying good 
principles of industrial psychology, Gor- 
bachev, perhaps on his wife's advice, 
appears to have focused on the area of 
culture as one that could, indeed, pro- 
vide stimulation. We thus have news 
that select audiences in Moscow and 
Leningrad may see plays and films that 



offer negative comment on current prob- 
lems in the Soviet Union. Books that for 
years have not been allowed to be 
published will soon appear, such as those 
of Nabokov and, perhaps, even Paster- 
nak. All of this may be enough to turn 
on a group which for quite some time 
has lived on a cultural diet of "socialist 
realism." But it is a far cry from cultural 
freedom. 

All that I have described takes place 
in a one-party state, led by a self- 
perpetuating elite, an elite fully sup- 
ported by a large, all-pervasive police 
force, which knows where the line is 
drawn between the permissible and the 
impermissible and makes sure— if 
necessary, with brute force— to see that 
everyone knows where that line is. A 
few days ago, the brutal treatment of 
persons engaged in a peaceful 
demonstration in Moscow at the hands 
of plainclothesmen reminded us all just 
where the line was drawn. 



Conclusion 

To sum up: changes have taken place in 
recent months in the Soviet Union, 
changes significant and meaningful to 
every single person released from 
prison, to his family, and to his friends. 
They are meaningful to Andrey 
Sakharov and Yelena Bonner, to their 
family and their many friends. They are 
meaningful also to those Moscow scien- 
tists, writers, and artists who can see 
plays that they have not been able to see 
before. And they are meaningful to the 
average citizen of, let us say, Tashkent, 
who can denounce some local official 
whose arbitrary use of power he has 
resented for so long. 

But it isn't freedom. It is not 
adherence to the provisions of the 
Helsinki Final Act, which Leonid 
Brezhnev signed on August 1, 1975. Not 
by a long shot. Are we, nevertheless, 
getting there? Can we count on further 
movement toward an open society? I 
would say that we surely will not get 
there if we break out in hosannas about 
the events in the Soviet Union of recent 
months. We should note them, we should 
welcome them as modest steps forward, 
but we need to point out that compliance 
with the international agreements 
signed by the Soviet Union concerning 
respect for human rights requires much, 
much more. Only then will there be at 
least a chance of continuing, and far 
more significant, progress. ■ 



\pril 1987 



41 



HUMAN RIGHTS 



Human Rights, the Soviet Union, 
and the Helsinki Process 



by Richard Schifter 

Address before the "club pro wien" 
in Vienna on January 28, 1987. Ambas- 
sador Schifter is Assistant Secretary for 
Human Rights and Humanitarian 
Affairs. 

On July 4, 1776, in Philadelphia, Penn- 
sylvania, 56 representatives of Britain's 
United Colonies of North America 
adopted a Declaration of Independence. 
The Declaration had started as a draft 
prepared by Thomas Jefferson, a leading 
member of those we call our "Founding 
Fathers," deeply committed not only to 
the cause of American independence but 
also imbued with the thinking of the 
Enlightenment. Reflecting the ideals of 
that new age, whose appeal was increas- 
ingly falling on fertile ground in Europe, 
as it was in North America, Thomas Jef- 
ferson penned these immortal words: 

We hold these Truths to be self-evident, 
that all men are created equal, that they are 
endowed by their Creator with certain 
unalienable Rights, that among these are 
Life, Liberty, and the Pursuit of Happiness— 
That to secure these Rights, Governments are 
instituted among Men, deriving their just 
Powers from the Consent of the 
Governed. . . . 

As the 56 men in Philadelphia took 
the decisive step to found a new nation, 
the city in which we meet today wit- 
nessed the 36th year of the reign of the 
Empress Maria Theresa. My research 
has not revealed whether Maria Theresa 
paid a great deal of attention to the 
activities of those revolutionaries in the 
relative wilderness of North America. 
Her concerns focused on matters far 
closer to home, namely the political 
outlook of her own son, a man of about 
the same age as Jefferson and clearly 
inspired by the same thinkers who had 
inspired Jefferson. To her son and 
co-regent, whom we know as the 
Emperor Joseph II, she addressed the 
following warning: 

Among your fundamental principles the 
most important are: (1) the free exercise of 
religion, which no Catholic prince can permit 
without heavy responsibility; (2) the destruc- 
tion of the nobility; and (3) the so frequently 
repeated liberty in everything. . . . Toleration, 
indifferentism, are precisely the means to 
undermine everything .... I only wish that 
when I die I can join my ancestors with the 



42 



consolation that my son will be as great, as 
religious, as his forefathers, and that he will 
give up his false arguments, the evil books, 
and the contact with those who have seduced 
his spirit at the expense of everything that is 
precious and sacred, only to establish an 
imaginary freedom which could . . . only lead 
to universal destruction. 

Maria Theresa's efforts to redirect 
her son's thinking failed. In his years as 
sole ruler, he did, indeed, attempt to 
instill the ideals of the Enlightenment in 
the governmental institutions of his 
empire. But he failed and died a deeply 
disappointed man. 

Not only at the time of the death of 
Joseph II but even as recently as 50 
years ago, a great many observers of 
public affairs would have said that the 
ideals of the Enlightenment might be 
appropriate and suitable in other parts 
of the world but surely not here. As a 
matter of fact, in the 1930s, as the 
world increasingly looked with either 
fear or admiration to Nazi Germany to 
set the tone in international affairs, 
there were many who viewed the totali- 
tarian systems then in vogue as the 
wave of the future. 

The Nazi wave ebbed in just a 
matter of years, albeit at enormous 
human cost. And this country, once Nazi 
rule had ended, for more than a genera- 
tion has enjoyed a government chosen by 
the people and respectful of their human 
rights. After all of the triumphs and 
defeats which the principles of freedom 
have experienced in this land since the 
founding of Austria's Aufklaerungs- 
partei in the year 1767, a system of 
government which cherishes the rights 
of the individual is now firmly anchored 
here. The governmental system which 
Austria adopted in the post- World 
War II period has, indeed, provided the 
greatest good for the greatest number 
for a period unprecedentedly long in this 
country's history. 

Systems of Government 
and Human Rights 

I have made this brief excursion into the 
past to underline the simple proposition 
that the ideals of the Enlightenment con- 
tinue to have universal applicability. I 
am making this point because there are 
some who genuinely believe in 
democracy and human rights, who will 
contend that political principles and 



structures appropriate for the people of 
Western, Northern, and Southern 
Europe, and for what we might now call 
West-Central Europe, are somehow 
inappropriate for Eastern and 
East-Central Europe. Advocates of this 
view might, if pressed, concede that 
most of the countries of Eastern and 
East-Central Europe, if left to their owr 
devices, could eventually adapt to 
democracy and, thus, naturally adhere to 
human rights. But they will argue that 
the country which dominates that 
region— the Soviet Union— still does not 
provide a fertile soil for the ideals which 
developed on this continent a quarter of 
a millennium ago. I submit that this viev 
of Russian cultural inferiority is unfair 
and unjust. 

Admittedly, cultural differences and 
separate historical influences do play a 
role in the development of varying form 
of government. Admittedly, there is a 
longer history of repressive autocracy ir 
Russia than there has been in other 
parts of Europe. And yet, who is 
prepared to say that history condemns a 
particular people to perpetual repres- 
sion? What might someone speaking in 
the year 1788 have said about France's 
governmental tradition? Who would, as 
recently as 15 years ago, have predicted 
the vibrant Spanish democracy that we 
see existing today? And who would, on 
March 13, 1938, have predicted Austria 
democratic rebirth only little more than 
7 years later? 

And let me add at this point that foi 
me it has been a particular pleasure to 
work closely with representatives of 
Austria in international human rights 
meetings, both under UN auspices and 
in the CSCE [Conference on Security 
and Cooperation in Europe] process. 
Everyone concerned with the human 
rights issue deeply admires the magnifi- 
cent contributions made over the years 
by [UN Special Rapporteur for Religiou; 
Intolerance] Professor Felix Ermacora. 
And let me say that I can also sing the 
highest praise of Ambassador Rudolf 
Torovsky of your Foreign Ministry, the 
head of your delegation to the Vienna 
CSCE conference. 

Let me acknowledge at the outset 
that Jefferson's ringing words of 1776 
did not usher in a system of government 
which fully lived up to all the principles 
set forth in the Declaration of Independ- 
ence. Our Founding Fathers were well 
aware that when the Declaration spoke 
of all men being created equal, some of 
its signers did not construe the term to 
include slaves. The emancipation of the 
slaves came 87 years later, in the midst 



Department of State Bulletii 






HUMAN RIGHTS 



mi a bloody civil war. It came, inciden- 
tally, 2 years after the proclaimed end of 
serfdom in the Russian Empire. 

And let me add that while I sat in a 
segregated classroom in Vienna in the 
spring of 1938, hundreds of thousands of 
)lack students in the southern states of 
;he United States were attending 
similarly segregated schools. As a 
-natter of fact, 25 years after I person- 
ally experienced that indignity, I had the 
Opportunity, as a member of the 
Maryland State Board of Education, to 
lelp end school segregation in Maryland. 

What I thus am suggesting is that no 
lountry has truly achieved perfection in 
:he quest for human rights, nor can we 
dentify a country which is condemned 
never to get started on the road to that 
roal. Those who write off the Soviet 
Jnion today as lacking in democratic 
error forget that in the 19th century, 
Russia not only produced supporters of 
■.he autocracy at one end of the political 
;pectrum and nihilists, anarchists, and 
■errorists at the other end, but also 
lemocrats genuinely committed to the 
irinciples that had been spelled out in 
he 1789 Declaration of the Rights of 
Man and of the Citizen. They forget the 
■vents that led to the revolt of 1905 and 
he democratic ferment that stirred 
lussia from then onward, the fact that 
•he relatively free elections to the first 
)uma and the second Duma produced 
iverwhelming majorities committed to 
lemocracy. Finally, they forget that in 
he only free election which the 
Solsheviks allowed, to the Constituent 
Assembly in November 1917, even overt 
Bolshevik pressure failed to win more 
han 24% of the vote for the Bolshevik 
'arty. An overwhelming majority of the 
>allots cast went to those who supported 
i democratic system of government. 

More recently, after the Stalinist 
lightmare, we saw signs of a resurgence 
if the spirit of freedom in the Soviet 
Jnion during Khrushchev's "thaw" and 
he rise of the dissident movement dur- 
ng the Brezhnev era. Certainly, as 
■ecently as 20 years ago one could have 
ooked east and north from Vienna with 
it least hope that a new day was dawn- 
ng. As a matter of fact, in the spring of 
L968 it seemed as if, at least in nearby 
Czechoslovakia, it was possible for a 
_,eninist system to evolve gradually into 
)ne in which freedom of expression, 
'reedom of religion, and all the other 
•jasic rights of the individual would, 
ndeed, be respected. 

That was not to be. Czechoslovakia's 
■noment in the sun came to an abrupt, 
externally imposed halt, as had 



Hungary's 12 years earlier and as 
Poland's would be 13 years later. And in 
the Soviet Union itself, where the 
government and the dissident movement 
had engaged in a cat-and-mouse game 
for some years, the heavy hand of severe 
oppression came down in 1977 and 
extinguished the dissident movement. 
The modern Okhrana [secret police] of 
the Soviets once again proved itself so 
greatly superior in efficiency to its 
czarist predecessor. 

Changes Under Gorbachev 

Now we are observing with deep interest 
developments in the Soviet Union under 
the leadership of Mikhail Sergeyevich 
Gorbachev. As so often before, we are 
hoping for the best, we are hoping that 
the Soviet Union will, at long last, take 
steps that will give its long-suffering 
people a chance to attain the same level 
of recognition of human dignity that is 
enjoyed by their fellow human beings in 
so many other parts of the world. 

What is important, though, is that 
we do not permit our hopes to influence 
our good judgment. Mikhail Gorbachev 
has now been in power for close to 2 
years and may have been the principal 
leadership figure for even longer. 
Enough time has passed, therefore, for 
us to shift from mere speculation as to 
what he might do in the future to an 
analysis of what he has already done— or 
not done. 

There is no doubt that a steady 
replacement of the officialdom of the 
Brezhnev era by a new group of younger 
and ostensibly more efficient people has 
brought in its wake significant changes 
in the day-to-day workings of the Soviet 
state. For the average citizen this has 
had important results. 

For example, a Soviet citizen who 
observes a drunken or corrupt official, 
inept management, inefficient operation 
of a government office, or any similar 
deficiency in governmental operations is 
now encouraged to speak up without 
fear and denounce the wrongdoers. 
There is also a new insistence on clearer 
instructions to the bureaucracy, less ease 
for bureaucrats to operate arbitrarily, a 
greater emphasis on promptness in 
responding to the public. Accidents or 
administrative problems will be admitted 
more freely and openly rather than 
being swept under the rug. Writers may 
criticize some governmental failings. If 
we add it all up, it means that a major 
effort has been undertaken to make the 
state function more smoothly and to 



enlist the average citizen in efforts to 
improve the efficiency of state opera- 
tions. 

There is also, under Gorbachev, 
greater freedom in the arts than there 
had been immediately prior to his acces- 
sion to the highest level of leadership. 
The works of some writers who were 
proscribed in the past have begun to 
appear in print, and a film reviewing the 
Stalinist past critically is now being 
shown in a few closed performances in 
Moscow. Whether these innovations are 
truly significant, how far they will 
ultimately reach, and how long they may 
last under what remains one-party state 
control of culture is simply not clear 
today, at least not to outsiders. 

For the rest, we have been bom- 
barded with imagery. A Department of 
Humanitarian Affairs has now been 
created in the Soviet Ministry of Foreign 
Affairs. Upon closer examination, it 
becomes clear that this department does 
not have responsibility for dealing in a 
substantive manner with genuine human 
rights concerns about the Soviet Union 
but, rather, to coordinate the Soviet 
counterattack against foreign criticism 
of its human rights behavior. 

Also, whereas in the past the policy 
of Soviet officials has been to refuse to 
listen to expressions of concern about 
human rights cases and to refuse to 
accept lists of names of persons present- 
ing human rights problems or petitions 
concerning them, there is now a will- 
ingness to hear interlocutors out on the 
subject of human rights and to accept 
lists and petitions. But there is no 
evidence that this change in approach 
has any substantive significance. On the 
contrary, our experience to date would 
suggest that the new approach may be 
only cosmetic, a recognition that one can 
make public relations points by being 
polite, without giving up anything of 
substantive concern. 

Even occasional humanitarian 
gestures are milked for maximum public 
relations benefit. All of us welcome the 
resolution of divided family and 
separated spouses cases. But let us keep 
in mind that these cases should never 
have arisen in the first instance. 
Moreover, they should be resolved not 
piecemeal over a stretch of time but 
systematically and promptly. In fact, if 
Mikhail Gorbachev were truly a 
reformer, I submit that the least he 
could have done would have been to 
resolve these divided-spouses cases over- 
night, by the stroke of a pen. Instead, 
we get an announcement of the future 
resolution of, let us say, 60 cases, and 
then the months pass as the cases are 



April 1987 



43 



HUMAN RIGHTS 



slowly, a few of them every month, 
actually resolved by the issuance of 
visas. 

In recent weeks, we have also heard 
hints that hundreds of political prisoners 
will be set free in the near future. We 
would welcome this result. But that does 
not change the fact that these people 
have done nothing which, in keeping 
with international law, should have led 
to a prison term. They were, nevertheless, 
convicted under paragraphs 70 and 190 
of the criminal code of the Russian 
Soviet Republic for anti-Soviet propa- 
ganda or for defamation of the Soviet 
system. As I said, if these prisoners are 
freed, we shall welcome it. We must, 
however, continue to emphasize that 
paragraphs 70 and 190 are in conflict 
with international law and should be 
stricken from the criminal codes of the 
Soviet republics. 

No, to date we have not seen any 
evidence of real human rights reform, 
only a heightened media consciousness. 
Shcharanskiy and Orlov have been 
released, but only in exchange for spies. 
Sakharov was allowed to return to 
Moscow, an important and welcome 
gesture, but one following within days 
the death of Anatoliy Marchenko in 
prison. Irina Ratushinskaya was allowed 
to leave prison early, after her health 
had been severely impaired through the 
brutalities she suffered in prison, most 
of them after Gorbachev's accession to 
power. A few prominent refuseniks 
leave the Soviet Union, but emigration 
numbers continue at the low level of the 
recent past. 

And abuse of psychiatry continues. 
Dr. Koryagin 1 , the courageous psychia- 
trist who revealed to the world the truth 
about the barbaric Soviet practice of 
committing sane persons to institutions 
for the mentally ill, is still serving 
sentences totaling 9 years for this 
revelation. Repression of independent 
religious groups is still the order of the 
day. During the past year, an additional 
90 persons were sent to prison for viola- 
tion of the Soviet Union's laws on the 
practice of religion. There is no indi- 
cation of a clear commitment to make 
significant changes with regard to 
respect for human rights, even changes 
that might do no more than return the 
country to the greater openness of the 
Khrushchev era. 

It is my personal opinion that the 
fundamental continuing problem of the 
Soviet Union is the centrality of the posi- 
tion of its secret police. That, I believe, 
is the great difference between Gor- 
bachev's openness and Khrushchev's 



thaw. Following the arrest and subse- 
quent execution of Lavrenti Beria in 
1953, the secret police had been moved to 
the margin of the Soviet Government 
apparatus. In the 1970s, with the rise of 
Yuriy Andropov, the KGB moved back 
into the center of power. It is there now. 
And the fact that Big Brother is always 
watching makes it, indeed, possible for 
the leadership to relax the reins just a 
little, in the full knowledge that they can 
always be pulled tight again. It is this set 
of circumstances that caused the former 
executive editor of The New York Times, 
A. M. Rosenthal, to write recently: 

Mr. Gorbachev is certainly a smoother 
chap than most of his predecessors but he has 
not touched the police nature of the Soviet 
state and has not even hinted he will. How 
could he? He is part of it and rules through it. 
But everytime he says he will let a suppressed 
book be published or a private citizen own a 
pushcart or releases one of his ample supply 
of prisoners the West goes into a mad fan- 
dango of appreciation. There are, blessedly, 
Shcharanskys and some journalists who cry 
"wait, wait" to the world but they are out- 
numbered by eager folk who clap hands and 
sing praise. Myself, I will wait until Mr. Gor- 
bachev arrests and tries the men who sent 
Mr. Shcharansky to jail and Dr. Sakharov 
into exile; time enough then to clap and sing. 

Role of the Democracies 

Indeed, let us examine what it is that we 
can do to bring us nearer to the day 
when we can clap and sing. And when I 
use the word "we," I am referring to the 
governments of the democratic world. 

The Soviet Union tells us that its 
treatment of its own citizens is none of 
our business, that they are willing to 
hear us out under the new policy but 
that that does not change the fact that in 
their eyes we are grossly interfering in 
their domestic affairs. 

There is a word in a language still 
spoken in the Soviet Union which aptly 
describes the nature of this response. It 
is chutzpah. In the Soviet Union, as we 
know, the Communist Party and the 
state are one. We need not go further 
than to remember that the person whom 
all of us accept as the leader of the 
Soviet Union is, in fact, none other than 
the General Secretary of the Central 
Committee of the Communist Party of 
the Soviet Union (CPSU). And this is the 
party which, upon establishing itself as 
the Government of Russia 69 years ago, 
did not miss a beat in pursuing its 
efforts at worldwide revolution, the 
grossest form of interference in the 
domestic affairs of other states. 



Putting that aspect of the world's 
experience with the Soviet Union and 
the world communist movement aside, 
let us move on to consider the relevance 
to the human-rights issue of the interna- 
tional agreements signed by the Soviet 
Union. As my good friend Max 
Kampelman once observed, there was a 
difference between U.S. work on anti- 
ballistic missile systems before the 1972 
ABM [Anti-Ballistic Missile] Treaty and 
thereafter. Work on such a system 
would take place totally on U.S. ter- 
ritory. It was not subject to internationa 
constraints before the ABM Treaty was 
signed. But it was, indeed, subject to 
such constraints after that event. 

By the same token, prior to 1975, th 
United States could say with regard to 
certain Soviet repressive measures that 
they were contrary to the provisions of 
the Universal Declaration of Human 
Rights, but the Soviet Union could 
respond that it had not voted for this 
nonbinding resolution of the UN Genera 
Assembly. However, by signing the 
Helsinki Final Act, the Soviet Union als> 
agreed to abide by the provisions of the 
Universal Declaration of Human Rights. 
From August 1, 1975, onward, therefore 
Soviet repressive measures can be and 
should be condemned as acts contrary t( 
the understandings incorporated in a 
document duly signed in behalf of the 
Soviet Union by its de facto head of 
government, the then-General Secretary 
of the Central Committee of the Com- 
munist Party of the Soviet Union. 

Role of the CSCE 

And that brings me to a discussion of th 
followup conference under the Helsinki 
accords, which is now meeting here in 
Vienna and whose second session starte* 
yesterday. 

This is the third such major con- 
ference since the Final Act of Helsinki 
was signed in 1975. In the interim, then 
have also been a number of minicon- 
ferences under the Helsinki accords, 
limited in duration and devoted to 
specific topics. 

The Helsinki accords, as we know, 
encompass a number of topics. The prin- 
cipal ones that have evolved in the last 
1 1 years have been security arrange- 
ments and human rights. As this presen- 
tation focuses on human rights, I shall 
limit my discussion of the Helsinki Final 
Act to its human rights dimension. 

I once posed the question to a rather 
high-ranking Soviet official as to what 
the Soviet Union really had in mind 



44 



Department of State Bulleti 






HUMAN RIGHTS 



vhen it agreed to the human rights pro- 
■isions of the Helsinki Final Act. I 
eceived a rather vague answer to the 
■ffect that the Soviet Union is a country 
vhich is in a state of evolution toward 
lemocracy. This would, of course, be a 
lerfectly reasonable answer if it were 
lot for the fact that human rights condi- 
ions in the Soviet Union at the time 
hat the statement was made to me in 
. 985 were so much worse than they had 
een 10 years earlier. It is more likely 
hat the correct answer to the question 
hat I posed is that the Soviet leaders, 
/ho do not worry a great deal about the 
bourgeois formalism" of keeping one's 
romises, decided that there were 
nough benefits for them in the Helsinki 
'inal Act to justify their signing the 
ocument even though it contained pro- 
isions on human rights by which they 
ad no intention to abide. What they 
bviously did not anticipate is that the 
^est would, in due course, try to hold 
aem to their commitments and pursue 
lem on compliance failures, meeting 
fter meeting. 

Today, it may appear strange that 
le Soviet Union did not anticipate that 
ther signatories of the Helsinki Final 
.ct would consistently raise the issue at 
jview conferences. But in 1975 it was 
ot at all clear that that would happen. 
t the time the Helsinki accords were 
gned, it was not considered proper in 
olite diplomatic company— that is, at 
iternational gatherings of the repre- 
mtatives of governments— to speak of 
uman rights violations of other 
wereign states. There were, to be sure, 
few isolated exceptions. It had, indeed, 
ecome acceptable at the United Nations 
) speak critically of the mistreatment of 
lacks in South Africa. More recently, 
-iticism had been voiced at the United 
[ations against the human rights viola- 
ons for which the Chilean military 
overnment had been responsible. Occa- 
onally, some adverse comment would 
Iso be offered about human rights viola- 
ons by other governments. However, 
y and large, as of 1975, only relatively 
'eak, isolated, and friendless countries 
'ould have their human rights violations 
illy exposed and discussed in detail at 
iternational meetings. We can assume, 
lerefore, that Soviet decisionmakers 
'ho agreed to the Helsinki accords did 
ot believe that signing the document 
rithout serious intention to abide by it 
arried any potential challenge to its 
ractices, either of commission or omis- 
ion. 

That there might be a down side, 
hat the Soviet Union's failure to abide 



by the provisions of the Helsinki Final 
Act might be subject to criticism at an 
international diplomatic gathering was 
not even clear in 1977, when the first 
Helsinki followup conference met in 
Belgrade. That meeting, it should be 
noted, was called to order within months 
following the first sharp Soviet 
crackdown on the Soviet Union's 
courageous Helsinki monitors. The 
prevailing sentiment among represent- 
atives of the democratic world in 
Belgrade was not to name names, not to 
be too pointed in one's criticism. It is my 
understanding that this note of caution 
was also sounded by quite a number of 
persons within the U.S. Government. It 
is to the great credit of the head of the 
U.S. delegation to the Belgrade con- 
ference, Justice Arthur Goldberg, that 
the final U.S. position was that names 
would be named; that the fact that, less 
than 2 years after the Helsinki Final Act 
had been signed, its human rights provi- 
sions were being grossly violated in the 
Soviet Union had to be spelled out. 



Justice Goldberg raised eyebrows at 
Belgrade, but as it turned out, he was 
the man who broke the ice. By the time 
the second followup meeting took place 
in Madrid, it was well understood that 
human rights violations in the countries 
which had signed the Helsinki accords 
would be fully discussed. The same was 
true of the CSCE miniconferences which 
took place after Madrid. And it is, of 
course, also true of the third followup 
conference which is now taking place in 
this city. 

To understand fully the setting in 
which the human rights debate at the 
CSCE conference is taking place, let us 
reflect on the most relevant texts. One 
of the basic human rights commitments 
in the Helsinki Final Act, contained in 
Principle VII, reads as follows: 

In the field of human rights and funda- 
mental freedoms, the participating States will 
act in conformity with the purposes and prin- 
ciples of the Charter of the United Nations 
and with the Universal Declaration of Human 
Rights. 



Czechoslovak Human Rights Initiative 



PRESIDENTS STATEMENT, 
DEC. 31, 1986' 

January marks the 10th anniversary of 
the founding of the Czechoslovak human 
rights initiative, Charter '77. The 
declaration of Charter '77 enumerated 
ways in which the government denied 
the people of Czechoslovakia the basic 
rights provided for in the country's legal 
code, in the Helsinki accords, and in 
international covenants. The charter, 
which also spelled out the responsibility 
of citizens in ensuring compliance with 
those principles, first appeared on 
January 1, 1977, carrying the signatures 
of 241 persons from a wide cross-section 
of Czechoslovak society. On January 6 
representatives of Charter '77 first tried 
to present the text of that document to 
the Czechoslovak authorities. Though, 
then and now, government officials have 
tried to characterize the signers of the 
charter as criminals, they could not 
diminish the moral authority of those 
who had the courage to hold them 
accountable to basic laws and principles. 

Charter '77, Eastern Europe's 
longest lasting human rights initiative, 
served for 10 years as a champion of 
civil and human rights, a repository for 
national values, and a cultural and 



publishing network at home and abroad 
that has kept unified and alive a rich 
national literature. Pluralistic in its 
membership and interests, the charter 
has avoided the role of a political opposi- 
tion. Despite imprisonment and intimida- 
tion, chartists have persisted in issuing 
numerous documents on many aspects of 
Czechoslovak life and on international 
affairs, witnessing steadfastly for the 
humanistic and democratic convictions of 
its reformist, Christian, and cultural 
memberships. The charter also gave rise 
to the Committee for the Defense of 
Unjustly Persecuted (VONS), which has 
documented and focused international 
attention on a vast number of injustices. 

The more than 1,000 signatures of 
the charter to date have had influence 
far beyond their numbers. They 
articulate the ideals of an uncountable 
number of their fellow Czechoslovaks 
and, indeed, of all who want to see 
human rights respected. By their 
activities, Charter '77 signers have in 
countless small and large ways pushed 
back the gloom over Czechoslovakia's 
barren political landscape. 



'Text from Weekly Compilation of 
Presidential Documents of Jan. 5, 1987. 



i\pril 1987 



45 



HUMAN RIGHTS 



Now let us examine some of the key 
provisions of this declaration, which 
were thus incorporated into the Helsinki 
Final Act. 

Article 18 provides: 

Everyone has the right to freedom of 
thought, conscience and religion; this right 
includes freedom to change his religion or 
belief, and freedom, either alone or in com- 
munity with others and in public or private, to 
manifest his religion or belief in teaching, 
practice, worship and observance. 

Article 19 provides: 

Everyone has the right to freedom of 
opinion and expression; this right includes 
freedom to hold opinions without interference 
and to seek, receive and impart information 
and ideas through any media and regardless 
of frontiers. 

Article 20 provides: 

1. Everyone has the right to freedom of 
peaceful assembly and association. 

2. No one may be compelled to belong to 
an association. 

Article 21 provides: 

1. Everyone has the right to take part in 
the government of his country, directly or 
through freely chosen representatives. 

2. Everyone has the right of equal access 
to public service in his country. 

3. The will of the people shall be the basis 
of the authority of government; this will shall 
be expressed in periodic and genuine elections 
which shall be by universal and equal suffrage 
and shall be held by secret vote or by 
equivalent free voting procedures. 

And to go back to Article 13, which reads: 

1. Everyone has the right to freedom of 
movement and residence within the borders 
of each State. 

2. Everyone has the right to leave any 
country, including his own, and to return to 
his country. 

As I have noted, the provisions 
which I have read to you were incorpo- 
rated by reference into a document duly 
signed by Leonid Brezhnev, Gustav 
Husak, Edward Gierek, and their col- 
leagues of the Soviet-bloc states. 

Yet, as representatives of the 35 
signatory countries of the Helsinki Final 
Act gather— representing, as they do, a 
total of close to 1.1 billion people— we 
know that close to 40% of the people 
whose official representatives are 
meeting here live in countries whose 
leaders do not, in fact, act in compliance 
with the provisions to which they have 
pledged themselves to be bound and who 
seem not to have the intention of chang- 
ing their behavior in the future. 



What are we to do under these cir- 
cumstances? There are some person- 
alities, in my country and elsewhere, who 
say that the members of the Soviet bloc 
have made a mockery of the Helsinki 
accords and that the democracies should, 
for that reason, abrogate them. 

The U.S. Government does not share 
that view. We believe that the Helsinki 
accords have given the world's democ- 
racies a unique platform on which we are 
able to expound universal ideas on the 
principles of democracy and human 
rights and point up the failures of the 
Soviet-bloc states to live up to the 
Helsinki commitments. (The accords 
obviously have other beneficial aspects 
as well, which are, however, beyond the 
scope of this talk.) 

The question which so often arises is 
whether our speeches do any good. Are 
we advancing our cause thereby? 

The issue which is thus put before us 
is whether there is any value in com- 
municating ideas. History has, indeed, 
demonstrated that ideas have conse- 
quences. There is value in communi- 
cating ideas. At meetings called under 
the terms of the Helsinki accords, all of 
the participants have the opportunity to 
put their thoughts on performance under 
these accords before the assembled 
group and, thus, before the world public. 
It is, indeed, significant that at meeting 
after meeting, the democracies have 
advocated open sessions and the Soviet 
bloc has insisted on closed meetings. 

Though most meetings are closed to 
outsiders, no one stands in the way of 
any one of us from the democratic world 
telling the public outside the meeting 
room what we have said inside it. It is, 
indeed, possible for the CSCE forum to 
serve the purpose of telling the world 
about violations of the most basic prin- 
ciples of human rights in the communist 
states of Eastern and East-Central 
Europe. 

The leaders of these states, I submit, 
are not impervious to such criticism. 
They are concerned about their standing 
in the world. They are also concerned 
about the operation of their system. To 
the extent to which the message comes 
through that their treatment of their 
citizens, their failure to respect human 
rights, is inexorably linked with their 
inability to reach the material goals 
which they have set for themselves, 
there is a chance that they might 
seriously consider changes in their 
approach. 

There is another important role 
which the CSCE meetings play. 



Throughout the Soviet-bloc states, as wl 
well know, there are millions of people 
who share our ideals of freedom, 
democracy, and human rights. Some of 
them do so quietly. Others have the 
courage to speak up. Some of them have 
even the courage to speak so clearly anc 
so loudly that their governments have 
attempted to silence them with severe 
punishment. We owe it to these people 
to send them a message of hope, a 
message that they and their ideals are 
not forgotten, that there are others, 
representing a majority of the people 
around the CSCE table, who share theii 
belief in the rights of the individual 
and in democratic government and 
who will not hesitate to criticize their 
persecutors. 

Let me say, just to return to my ow 
experience in this city in the year 1938, 
that I remember well how much it mear 
to me and to all those I knew whenever 
President Roosevelt made a comment o 
was merely reported to have made a 
comment which showed his awareness c 
our plight. 

Thus, I see the value of the human 
rights debate at CSCE meetings in the 
message it sends to the participating 
governments, to the general public, anc 
to believers in the human rights cause i 
countries which deny these rights. I see 
value in a message that the democratic; 
are united in their commitment and the 
concern. 

There are those who believe that it 
important when diplomats gather that 
they conclude their deliberations with 
new obligations, new commitments in a 
document which can be presented to tht 
world as the product of these latest 
deliberations. At diplomatic meetings 
dealing with more traditional topics, 
such an expectation makes a great deal 
of sense. If diplomats gather to deal wit 
such issues as border disputes, commer- 
cial arrangements, or disarmament, the 
success or failure of a meeting depends 
on whether such an agreement is 
reached. 

Consideration of New 
Human Rights Commitments 

Let us now examine the problems we 
face when we move from the discussion 
of performance at CSCE meetings to th 
consideration of proposed new com- 
mitments on human rights. 

We start out with the basic problem 
that, as I have already noted, a group o 
signatories of the Helsinki accords have 
never lived up to the human rights prov 
sions of these accords, do not live up to 



46 



Department of State Bulleti 



HUMAN RIGHTS 



■em now, and have, in the process of 
e discussions, not given any indication 
1 at they will live up to them in the 
ture. The United States believes that 
e existence of past commitments which 
We not been complied with presents us 
ith a serious problem as to the 
edibility of any new commitments, 
lould we ask for the express reaffirma- 
un of the existing texts? In the absence 
changed behavior, why should a new 
'omise offer us greater assurance that 
will be lived up to than the old one did? 
An alternative approach would be to 
cept the proposition that we simply 
nnot expect the Soviet-bloc states to 
Ihere to the human rights provisions of 
e Helsinki accords as now written. Let 
, therefore, someone may argue, try to 
ach new agreements which make 
wer demands on the Soviet-bloc 
ivernments to deviate from their 
i stomary methods of exercising 
ithority, agreements which they might 
willing to live by. 

What that would mean, of course, is 
at we are, for the time being and prob- 
>ly for quite some time to come, giving 
i on holding the Soviet-bloc states to 
e provisions of the Helsinki Final Act. 
for one, think that our interested 
iblic will not want us to relieve the 
iviet bloc of the existing human rights 
idertakings of Helsinki. 

A third approach would be to come 
i with a placebo, a string of nice- 
unding phrases which, on closer 
lalysis, turn out to have no practical 
eaning. 

There is also the possibility of 
aching agreement, not on any new 
bstantive commitments but on proc- 
s, on ways and means of monitoring 
■rformance under the existing 
:reements. At least such an agreement 
Duld point the way toward constructive 
iange. 

But what if no agreement is reached 
1 new substantive wording on human 
g'hts? Should that, by itself, be reason 
r great concern? Let me say that I was 
lzzled when, at the conclusion of the 
)85 Ottawa human rights experts' 
eeting held as part of the CSCE proc- 
;s, some media representatives called 
ie meeting a failure because no final 
■xt had been agreed to. What could 
ley reasonably have expected: that the 
?presentatives of the states which have 
:ted in contravention to the provisions 
.) the Helsinki Final Act would tell us 
lat they have carefully listened to the 
I Zest's expressions of concern and that 
re have persuaded them of the correct- 
iess of our position, that they will, 
nerefore, sin no more? Of course not. 



If we speak of failure, the failure lies 
in the actions of the Soviet-bloc states in 
not abiding by the commitments they 
entered into at Helsinki. It does not lie 
in the absence of an agreed-upon human 
rights text at the end of any CSCE 
meeting. Success or failure of the human 
rights portion of a CSCE meeting lies in 
the degree to which it encourages— or 
provokes— compliance with human rights 
commitments. This, in turn, depends on 
the clarity with which the participating 
democracies are willing to speak up for 
the principles agreed upon at Helsinki 
and are prepared to comment on the 
evidence of actions contrary to these 
principles. I submit to you that by this 
standard, the human rights portion of the 
Vienna CSCE meeting has already made 
a significant contribution. 

The Soviet Approach 

Up to this point, I have spoken princi- 
pally of the role of the democracies in 
the context of CSCE meetings. Let me 
now add a few words about the positions 
taken by the other side. 

I have heard it said that under the 
new Soviet leadership, the approach of 
Soviet representatives to human rights 
debates is significantly different from 
their past approach, that they are more 
willing to engage in human rights 
debates than they had been in the past. 
Having participated in international 
human rights discussions with the Soviet 
Union for the last 6 years, I must tell 
you that if there is a different approach, 
I have not noticed it. 

Now, as heretofore, the Soviet 
representatives will simply not engage in 
serious, substantive discussions of what 
we charge are actions contrary to the 
provisions of the Helsinki Final Act. 
They dismiss our statements about their 
abuse of psychiatry, about their 
incarceration of poets and writers, about 
their suppression of independent trade 
unions or even an independent peace 
movement as slander. What we need to 
remind them is that in the democratic 
world, a statement is deemed slanderous 
only if it is untruthful, not if it is merely 
an unpleasant truth. 

Rather than being willing to discuss 
the matters about which we express con- 
cern, the Soviets and their associates hit 
back by telling us what it is that is 
wrong in the democratic world. A good 
deal of what they say is factually inac- 
curate. But inaccurate or accurate, the 
Soviet presentations are a tiny fraction 
of the criticism, also inaccurate as well 
as accurate, which is leveled at our 



governments and our social systems day- 
in, day-out by domestic critics. One 
response to Soviet criticism is: let us 
debate. Let us engage in serious discus- 
sion of the questions that are being 
raised. 

They have, for example, criticized 
the United States for police wiretaps. 
Our response has been that we would be 
prepared to discuss the rules governing 
such taps by the FBI [Federal Bureau of 
Investigation] if the Soviets were 
prepared to tell us and discuss the stand- 
ards that govern wiretaps by the KGB. 
Soviet representatives often also talk 
about the Berufsverbot [security 
limitations on employment] in the 
Federal Republic of Germany. We 
assume that our German colleagues 
would be prepared to discuss their 
Berufsverbot, which applies to com- 
munists, if the Soviet Union, in turn, 
were prepared to discuss its own 
Berufsverbot, which is applicable to all 
upper-level positions in the Soviet Union 
and which disqualifies all nonmembers of 
the Communist Party. On all these 
matters, I am sure that the democracies 
would be interested in serious discussion 
with the communist states if these were 
only willing to enter these discussions 
rather than engage in sloganeering. 

And speaking of "sloganeering," let 
me note the Soviet Union's continuing 
emphasis in the context of human rights 
debates on economic and social rights, 
which it likes to juxtapose to political 
and civil rights. We are to be left with 
the notion that in the area of political 
and civil rights, the democracies may be 
ahead of the Soviet Union, but with 
regard to economic and social rights, 
they say, our side is far behind. This 
notion— namely, that a centrally plan- 
ned, collectivist system will be able to 
raise standards of living for the general 
population far higher than a private 
enterprise system based on incentives- 
was commonplace 20 or 30 years ago. 
What was then assumed was that 
Leninist states would, as time passes, be 
able to deliver on their promise of a 
more abundant society. The point that 
then was made by at least some 
democrats was that the price for such 
abundance in terms of enslavement of 
the average citizen was not worth 
paying. 

The evidence before us now has 
demonstrated that we are not even deal- 
ing with trade-offs between political 
rights on the one hand and economic 
rights on the other. What is clear now is 
that the states that guarantee political 
rights deliver the reality of a better 
standard of living. The states which 



April 1987 



47 



HUMAN RIGHTS 



deny political rights promise a better 
standard of living but fail to deliver it. 

We are frequently challenged by 
Soviet-bloc states to deal with economic 
and social issues at human rights 
meetings. Let me, therefore, emphasize 
that we have no problem discussing such 
matters with the Soviet Union or with 
anyone else. But in our view, such 
matters do not belong at a human rights 
meeting. At a human rights meeting, we 
can engage in useful discussion of the 
meaning of the right to freedom of 
speech or to freedom of religion. It is a 
right which a government can observe 
with ease by simply not interfering with 
the exercise of this freedom by the 
citizen. If the topic of discussion shifts, 
however, to housing or medical care, the 
truly meaningful issue is not what rights 
the government has guaranteed, what 
promises have been made, but what has 
been delivered. If the Soviet Union 
wants to engage us in a discussion of our 
system of delivering, for example, 
medical care, we are prepared to engage 
in that discussion, but we should under- 
stand that such a discussion would make 
sense only if we compared the realities, 
the quality and extent of care, the 



numbers of persons reached, and all 
related issues. We would staff our 
delegations to such a conference with 
persons able and qualified to engage in a 
useful, cooperative dialogue. The same 
can be said of housing or of any other 
aspect of our economic or social struc- 
ture. We unquestionably face serious 
problems in those fields. So does the 
Soviet Union. If, instead of merely 
denouncing us, it wants to engage us in 
thoughtful discussions of, for example, 
substance abuse, we would very defin- 
itely be interested. We do not believe we 
have all the answers. We are happy to 
compare notes with anyone interested in 
engaging in serious conversations. 

Conclusion 

But none of that— and that is our 
point— should serve as a distraction from 
discussions of human rights, of the 
principle of the dignity of the individual 
and of the respect which the state owes 
the individual. For we in the United 
States continue to rely on the fundamen- 
tal principle which I set forth in the 
beginning: that governments are insti- 
tuted among men to secure the rights of 



the individual and that these govern- 
ments must derive their just powers 
from the consent of the governed. Thef 
words reflect, I am sure, not only the 
point of view of the United States but c 
all the democratic participants in the 
CSCE process. They also reflect, I am 
certain, the point of view of great 
numbers, perhaps even great majoritiei 
of the citizens of countries whose 
governments have not lived up to these 
principles. It is to these people above 
all— to the Helsinki monitors, to the 
members of Charter '77, to the Solidar- 
ity movement, to all those who espouse 
the cause of freedom— that we must sei 
the message not to despair, to ask then 
to remember the last stanza of a song c 
the 1930s, the song of the Peatbog 
Soldiers: 

But for us there's no complaining. 
Winter will in time be past, 
One day we shall cry, rejoicing: 
"Homeland, dear, you're mine at last." 



■Dr. Koryagin was subsequently release 
on February 18. ■ 



48 



Department of State Bullet 



1IDDLE EAST 



isit of Israeli Prime Minister Shamir 




Prime Minister Yitzhak Shamir of 
', State of Israel made an official work- 
q visit to Washington, D.C., February 
-20, 1987, to meet with President 
agan. Secretary Shultz, and other 
vernment officials. 

Following are remarks made by 
cretary Shultz and Prime Minister 
amir on February 1 7 and remarks 
ide by President Reagan and Prime 
■nister Shamir following their meeting 
February 18. 



2MARKS, 

SB. 17, 1987 1 

tcretary Shultz 

'e been very happy to greet my friend, 
e Prime Minister of Israel, and already 
have had a considerable amount of 
scussion and look forward to our con- 
ming discussion. He's here to visit 
th us, to visit with the President 
morrow, and we have had very produc- 
'e meetings. 



(White House phnto by Pete Souza) 



We've paid special attention to 
several areas. First of all, the Prime 
Minister and I discussed our relationship 
which is strong and deep, and we 
reviewed practical ways our two govern- 
ments cooperate; our strategic coopera- 
tion to help discourage outside threats to 
the Middle East; our economic and 
security assistance, which support 
Israel's own efforts to stay strong— an 
essential element in the peace in the 
Middle East; our free trade agreement 
which we worked out when you were 
Prime Minister before; our cooperation 
on SDI [Strategic Defense Initiative] 
research and the VOA [Voice of 
America] transmitter to be located in 
Israel. 

Second, we talked about the Israeli 
economy and efforts Prime Minister 
Shamir and his government and the peo- 
ple of Israel are making to cut inflation 
further and to boost their economic 
growth. And we had all of our economic 



advisers gathered and had a good discus- 
sion on that subject. We agreed that a 
strong economy is no less important 
than a strong defense, and that Israel 
needs to redouble its efforts in this area 
to prosper and ultimately reduce 
dependence on foreign aid. And as we 
discussed problems with the Israel 
budget, I had to admit we have a few 
problems of our own, so we know it's not 
easy, but nevertheless it's important. 

And finally, and very important as 
we reviewed matters this afternoon, the 
Prime Minister and I talked about peace 
in the Middle East between Israel and 
its neighbors. And we noted that there 
has been considerable progress and that 
things are working along, but also we 
know that there are dangers to both 
Israeli and Arab interests and our own 
because of continued tension in the area. 
We discussed the importance of con- 
tinuing efforts at Israeli-Egyptian rela- 
tionships and also the importance of pro- 
moting a better quality of life for Pales- 
tinians on the West Bank and Gaza while 
we look more broadly at a possible 
political settlement. The immediate 
objective of a reactivated peace process 
is direct negotiations between Israel and 
a Jordanian-Palestinian delegation. 

I think I can fairly say, we agree 
completely on the importance of direct 
negotiations as the vehicle for bringing 
out peace. The United States believes it 
is important to explore all possible 
approaches to this objective to see 
whether any of these approaches, includ- 
ing an international conference, would 
lead immediately to direct negotiations. 
All possible approaches that we look at 
are designed to get us to direct 
negotiations. 

So we will stay in close contact and 
work closely together. And again, Mr. 
Prime Minister, I want to say, on behalf 
of my country— and perhaps I could be 
allowed, on behalf of myself as a 
person— to greet you here is a great 
pleasure. You were Foreign Minister 
when I became Secretary of State and 
we worked through a lot of problems 
together. We did some more when you 
were Prime Minister, again when you 
were Foreign Minister, and now you're 
Prime Minister again. You keep shifting 
jobs but I stay on the same old job. 
[Laughter] But I'll say this, when he 
moved from Foreign Minister to Prime 
Minister, he didn't discard his old friends 
who were still in the Foreign Ministry 
business. [Laughter] You stuck with us. 



pril 1987 



49 



MIDDLE EAST 



Prime Minister Shamir 

I am very grateful to Secretary of State 
Shultz for inviting me, and for giving me 
the opportunity to discuss in a very inti- 
mate and very serious manner all the 
problems we are facing in our area, and 
especially the problems of peace, the 
tower on the top, always on the top, of 
our agenda. I will say a bit about the 
various problems we have discussed. The 
bilateral relations between the United 
States and Israel under the guidance of 
President Reagan and the stewardship 
of the Secretary of State have acquired 
new and impressive dimensions. This 
includes our strategic cooperation, the 
decision to accord Israel the status of a 
major non-NATO ally, the close political 
cooperation and coordination, the free- 
trade area agreement, Israel's participa- 
tion in the SDI program, and the 
establishment of a VOA relay station in 
Israel. 

This strategic cooperation between 
the United States and Israel is a very 
strong foundation of stability and peace 
in our area. It is a driving deterrent 
against war, against terrorism, and we 
will do all in our possibilities to announce 
this cooperation. Secretary Shultz's 
wisdom has inspired and made possible 
the process to institute organization of 
these joint ventures, as well as the prog- 
ress relating to economic recovery. We 
are grateful for the great interest of the 
Secretary of State for our economy. This 
interest and the interest and the assist- 
ance of his advisers, we know very well 
as the Secretary said it, that a strong 
Israel means a strong Israeli economy, 
and we are very devoted to this task and 
it is a great encouragement that 
Secretary Shultz is with us with his 
thoughts in this important task. 

Today, we discussed the economic 
situation in Israel and the U.S. 
assistance program in relation to it. We 
then talked about a wide-range of 
bilateral issues and proposals for joint 
cooperation. We exchanged assessments 
on the political situation in the Middle 
East. The various tension points and the 
continuing menace of terrorism, a strug- 
gle against which both our countries are 
totally committed to; advancing the 
peace process is always prominent on 
our agenda. We both agree that peace 
can only be achieved through direct 
negotiations. As the Secretary said it, 
"the name of the game is direct negotia- 
tions." It is a historic imperative and we 
will keep it. The Israel-Egyptian peace 



which is recognized by all as the cor- 
nerstone for peace efforts in the Middle 
East could not have become a reality 
were it not for our determination to deal 
directly with each other. We should ex- 
plore every possible avenue to advance 
the peace process. On our part, we are 
prepared to meet our neighbors sitting 
at a negotiating table at any time and 
place. The Camp David framework 
agreements envisaging a conference 
attended by Israel, Egypt, and Jordan, 
as well as representatives of the 
Palestinian-Arabs living in areas, 
remains the most reasonable and prac- 
tical approach. I trust the United States 
will not agree to substitute this proven 
course by Soviet-inspired notions sup- 
ported by radical Arab nations such as 
an international conference. I will not 
deny, I am strongly opposed to this 
invention of an international conference 
for peace. It will not bring peace to our 
area; it will not serve the cause of peace. 
Walking together as we have so success- 
fully in the past will, I am confident, 
ensure that achievement of our common 
goal. 

The plight of our brethren in the 
Soviet Union was also central in our 
agenda. There is full agreement between 
us and agreement shared by all free peo- 
ple everywhere that the Soviet 
authorities should grant Soviet Jews the 
right to emigrate to their homeland. We 
also agreed that Soviet Jews should be 
entitled to practice their religion and 
give full and [inaudible] expression to 
their culture. I am very confident, after 
this very successful conversation and the 
talks we had today with Secretary Shultz 
and his assistants that the cooperation 
between our two countries will become 
stronger and will bring solutions to all 
the problems of our area and especially 
to the problem of peace. 



REMARKS. 
FEB. 18, 1987 2 

President Reagan 

It's been a pleasure to have an old 
friend, Prime Minister Yitzhak Shamir 
of Israel, back to the White House. His 
visit symbolizes the close and special 
relations between our countries. His visit 
has provided an opportunity for in-depth 
discussion, and I'm pleased to report our 
discussions went well. 



High on our agenda, of course, was 
Middle Eastern peace and our search fc 
a constructive approach to Arab-Israeli 
reconciliation. We talked about the 
dangers that threaten Israel and its 
neighbors and efforts being made to 
bring a degree of stability to that 
troubled region. Measurable progress, 
we both agree, is vital. Peace cannot be 
built in an environment where there is 
no hope. 

In our discussions we agreed, again 
that the road to peace lies through 
bilateral negotiations between Israel ar 
its neighbors, including representative 
Palestinians. We reviewed the 
diplomatic discussions over the last 2 
years which we've conducted with 
Jordan, Egypt, and Israel— all of whom 
share a strong desire to end the conflic 
that has plagued the Middle East. 

Our goal now is setting in motion a : 
process accepted by Israel and its 
neighbors which can lead to a com- 
prehensive peace settlement. We believ 
this requires direct bilateral negotiatioi 
Any reasonable means of including an 
international conference should be con- 
sidered. But the United States remains 
ready to be an active partner in any 
serious peace effort. 

Prime Minister Shamir and I dis- 
cussed Iran. I underscored our opposi- 
tion to Iran's use of force, terrorism, a 
expansionism. In discussing Iran and 
other regional issues, the Prime Minis' 
and I agreed on the importance of lool 
ing to the future, instead of dwelling o 
the past. 

We also went over our countries' 
strong and vital bilateral relationship 
and the broad scope of our cooperation 
Both our governments face tight 
budgets. I assured Prime Minister 
Shamir that we will continue our stead 
fast support for Israel's own efforts to 
ensure its security and economic well- 
being. In that regard we have desig- 
nated Israel, with other countries, a 
major non-NATO ally, for purposes of 
cooperation in certain aspects of milita 
research and development. 

Finally, in our discussions we reaf- 
firmed our concern about the plight of 
Soviet Jewry. We took note of recent 
releases, but are waiting to see the gat 
truly opened for Jewish emigration. 

The United States and Israel share 1. 
many common values and traditions. V 
have developed a warm friendship that 
encompasses close mutual strategic 
cooperation. This relationship, in whicl 
each gives special consideration to the 



s. 
»k 



50 



Department of State Bulle 



MIDDLE EAST 



other's interests, strengthens us both, 
jt's unshakable, and we're proud of it. 

^s we look to the future, the Prime 
ftinister and I are committed to the 
'lose cooperation long enjoyed by the 

'nited States and Israel. 

It is an honor to have Prime Minister 
(ihamir with us to reaffirm the solid 
ijiond of affection between our countries 
;.nd our peoples. 

'rime Minister Shamir 

it is with profound satisfaction that I 
tand here today, as we give expression 

I jo the abiding and deep friendship 

(■etween our two countries. 

America under your leadership 
tands tall and upright despite transient 
ifficulties. You continue to discharge 
our great responsibility as the leader of 

, he free world. Without strong United 

states leadership, mankind could be 
xposed to very grave peril in the hands 

I f the forces of evil and totalitarianism. 
Our two countries share values, 

perceptions, and goals that unite us in 
hought and in deed. Since my last visit 
s Prime Minister, we have given more 
ubstance to agreements we reached 

: hen in regard to strategic cooperation 
nd the free trade area. Now your 
administration has moved one more step 

, Drward by giving a new dimension to 
ur relations. I refer to your decision to 
ccord Israel the status of a major non- 
JATO ally. We have been among the 

> irst to join your Strategic Defense 
nitiative, and we hope to expand our 
ooperation in this program. We've also 
jst concluded an agreement enabling 
he establishment of a relay station for 
he Voice of America in Israel. Both 
irojects are a reflection of our contin- 
dng support of America's defense and 
dvancement of freedom. 

In our talks today we explored the 
irospects of advancing the peace process 

■ n the Middle East. While this is not an 
•asy task, it is a noble goal to which we 

. ire committed. On the foundations of 

I he Camp David accords— which remain 
he only agreement, therefore, only 
dable cornerstone for peace in the 

lirea— we renew the call to our neighbors 
o join us in direct negotiations for the 
)btainment of peace between us. Egypt, 
)ur partner to the Camp David agree- 
rient, could play a significant role by 
encouraging our other neighbors to 
"ollow its example and enter into face-to- 

I ? ace talks with us without preconditions. 



The struggle for the freedom and 
repatriation of Soviet Jewry is by no 
means over. We must press on with all 
vigor to persuade the Soviet authorities 
to let all our people return to their 
ancient homeland, the land of Israel. 

I take this opportunity of expressing 
our gratitude to you, Mr. President, for 
the great effort you made for the 
humanitarian cause of our brothers and 
sisters in the Soviet Union. Their hap- 
piness at coming home to Israel and 
experiencing freedom and democracy is 
their and our tribute to you. 

This year, 1987, records two events 
of great significance in the life of our 
two nations: you will celebrate the 
bicentennial of the U.S. Constitution, 



Kidnappings in Lebanon 



PRESIDENTS STATEMENT, 
JAN. 26. 1987 1 

All Americans, I know, share my 
outrage at the latest kidnappings of our 
citizens in Lebanon. Not only Americans 
but more than 20 citizens from nine 
countries are now being held by terrorist 
groups there. Today my sympathy goes 
out to the friends and relatives of all 
those hostages. 

The terrorists appear to believe that 
by trafficking in human lives they can 
force sovereign governments to give in 
to their demands. But our government 
will not make concessions to terrorist 
groups despite their threats. For to give 
in to terrorist blackmail would only 
encourage more terrorism; to yield to 
their demands now would only endanger 
the lives of many others later. 

I would like to add a special word to 
Americans in Lebanon. Where U.S. 
citizens are unjustly deprived of their 
God-given rights, the U.S. Government 
has an obligation to try to restore those 
rights. But there is a limit to what our 
government can do for Americans in a 
chaotic situation such as that in Lebanon 
today. In particular, the situation in west 
Beirut has deteriorated to total anarchy, 



which is regarded as the model for truth, 
civil liberties, and democratic govern- 
ment. We are marking the 90th anniver- 
sary of the birth of our national libera- 
tion movement, Zionism, which restored 
us to our ancient land and renewed our 
national independence. Both events have 
enriched the quality of our lives. And 
they are the root of our present relation- 
ship, joint efforts, our dreams, and our 
confidence in the future. 



■Made in the Diplomatic Lobby of the State 
Department. Question-and-answer session 
following remarks is not printed here (text 
made available to news correspondents by 
State Department Press Office). 

2 Made on the South Lawn of the White 
House (text from Weekly Compilation of 
Presidential Documents of Feb. 23, 1987). ■ 



with armed criminal groups taking the 
law into their own hands. For the past 
12 years our government has regularly 
warned American citizens against travel 
to Lebanon. As recently as last Tuesday 
we reiterated our assessment that the 
situation there is "extremely 
dangerous." The events of the past week 
provide striking confirmation of that 
assessment. Americans who ignored this 
warning clearly did so at their own risk 
and on their own responsibility. This 
weekend the U.S. Ambassador to 
Lebanon again was in contact with re- 
maining Americans and advised them to 
leave. 

Those who hold hostages, regardless 
of nationality, should release them im- 
mediately and unconditionally. Their 
acts of terror constitute a declaration of 
war on civilized society. I again join with 
civilized countries in condemnation of 
terrorist outrages. 

In conclusion, let me stress again 
that our government remains unrelent- 
ing and alert in its search for oppor- 
tunities to secure the release of our 
citizens no matter how long that may 
take. 



■Text from Weekly Compilation of 
Presidential Documents of Feb. 2, 1987. 



April 1987 



51 



NARCOTICS 



Iran-Iraq War 



PRESIDENT'S STATEMENT, 
JAN. 23, 1987 1 

The current Iranian assault on Iraqi 
forces near Basra is a reminder of the 
terrible suffering and loss which the 
Iran-Iraq war has brought to the peoples 
of the gulf region. The continuation of 
this bloody struggle remains a subject of 
deep concern to the United States and to 
the entire world. It is a war that 
threatens not only American strategic 
interests but also the stability and 
security of our friends in the region. 

As I have emphasized many times, 
we are determined to help bring the war 
to the promptest possible negotiated 
end, without victor or vanquished, leav- 
ing intact the sovereignty and territorial 
integrity of both Iran and Iraq. We can- 
not but condemn Iranian seizure and 
occupation of Iraqi territory, and we 
again call upon the Government of Iran 
to join the Government of Iraq in seek- 
ing a rapid, negotiated solution to the 
conflict. 

We share the concern of our friends 
in the gulf region that the war could spill 
over and threaten their security. We 
would regard any such expansion of the 
war as a major threat to our interests as 
well as to those of our friends in the 
region. We remain determined to ensure 
the free flow of oil through the Strait of 
Hormuz. We also remain strongly com- 
mitted to supporting the individual and 
collective self-defense of our friends in 
the gulf, with whom we have deep and 
longstanding ties. 



PRESIDENT'S STATEMENT, 
FEB. 25, 1987 2 

On January 23, while the Iranian assault 
against Iraqi forces was especially in- 
tense, I reiterated the deep concern of 
the United States at the suffering and 
instability which the Iran-Iraq war has 
brought to the gulf region. Since that 
time, although Iraq has stopped the 
Iranian attack east of Basra and pushed 
it back somewhat, the fighting in this 



tragic conflict has continued on ground, 
in the air, and at sea. 

Clearly, the peoples of the region 
cannot rest secure until there is a 
negotiated end to the conflict. We have 
frequently called on Iran's leaders to join 
in working toward a negotiated settle- 
ment, as the Iraqis have repeatedly 
offered to do. Regrettably, the Iranian 
Government has so far proved unrespon- 
sive in the face of all efforts to 
encourage reason and restraint in its 
war policy. It has also persisted in its 
efforts to subvert its neighbors through 
terrorism and intimidation. 

We continue to work for a settle- 
ment that will preserve the sovereignty 
and territorial integrity of both Iran and 
Iraq. Toward that end, I have asked 
Secretary of State George Shultz to take 
the lead in an international effort to 
bring Iran into negotiations. Secretary 
Shultz has recently named Under 
Secretary-designate Ed Derwinski to be 
responsible for our Operation Staunch. 
This effort has my full support. 

As I emphasized in January, this 
conflict threatens America's strategic 
interests, as well as the stability and 
security of all our friends in the region. 
We remain strongly committed to sup- 
porting the self-defense of our friends in 
the region and recently moved naval 
forces in the Persian Gulf to underpin 
that commitment. We also remain 
strongly committed to ensuring the free 
flow of oil through the Strait of Hormuz. 
Finally, we are determined to help bring 
the war to the earliest possible nego- 
tiated end. With that goal in mind, the 
United States calls for an immediate 
cessation of hostilities, negotiations, and 
withdrawal to borders. I urge the inter- 
national community, in the appropriate 
fora and through the appropriate 
mechanisms, to cooperate in the 
endeavor. The time to act on this 
dangerous and destructive war is now. 



■Text from Weekly Compilation of 
Presidential Documents of Jan. 26, 1987. 

z Text from Weekly Compilation of 
Presidential Documents of Mar. 2. ■ 



International 
Narcotics Control 
Strategy Report 
Released 



The Bureau of International Narcotics 
Matters (INM) has released its annual 
assessment of the worldwide narcotics 
situation. The 1987 International Nar- 
cotics Control Strategy Report (INCSR) 
is the basis on which the President will 
certify that countries have or have not 
cooperated fully with the United States 
in 1986 on a range of narcotics control 
functions including eradication, interdic- 
tion, and legal measures against nar- 
cotics production and trafficking. 

INM Assistant Secretary Ann 
Wrobleski said that "1986 gave us a 
clear indication that countries are on the 
right track. In many ways, this year was . 
a turning point— in attitudes, in commit- 
ment, in worldwide resources dedicated 
to narcotics control. The international 
community has stood up to narcotics pro 
ducers and traffickers, and there is 
simply no turning back." 

The report indicates that coca and 
opium production are up again, a 
development which comes as no surprise 
to Assistant Secretary Wrobleski. 
"What we are seeing is traffickers dig- 
ging in their heels as governments have 
begun to fight back. Traffickers have 
planted more coca and opium as an 
insurance policy against eradication and 
increased interdiction activities both in 
Latin America and Asia. But the heat is 
on. Trafficking organizations are in for 
the long haul— but so are we." 

Wrobleski says that 1986 was a year 
of mixed news. The year ended with the 
good news that both Pakistan and 
Jamaica had agreed to use herbicidal 
spraying methods of eradication against 
opium and marijuana. But opium produc 
tion in Burma and Pakistan was up due 
to good weather, increased regional 
demand, and the increased market price 
for opium. In Pakistan, the shift from 
martial to civilian law resulted in an 
increase in production from an estimated 
50 to 70 metric tons last year to a 1986 
estimate of between 140 and 160 metric 
tons. Burmese traffickers, under pres- 
sure from the government's wide-scale 



52 



Department of State Bulletin 



PACIFIC 



pium eradication program, which 
liminated 13,600 hectares, increased 
leir opium production. Lao opium totals 
lcreased as well. Yet Thailand's 
igorous opium eradication program 
;sulted in meaningful reductions in its 
pium crop, from an estimated 35 metric 
pns in 1985 to an estimated 20-25 
letric tons this year. The combination 
f strong political will, efficient enforce- 
ment, and a well-publicized eradication 
impaign contributed to Thailand's 
>:cellent performance. 

Coca continues to pose the major 
ireat to U.S. drug control efforts, 
olivia and Peru produced an estimated 
iaximum of 157,000 metric tons of coca 
af, and Colombian traffickers con- 
nued to manufacture and transport 
any tons of cocaine to the United 
tates. But some encouraging coca con- 
ol developments took place in 1986. 
tie Government of Bolivia requested 
ie U.S. assistance in shutting down 
icaine laboratories; as part of "Opera- 
)n Blast Furnace," six U.S. Blackhawk 
dicopters were deployed to Bolivia for 
;e against laboratories in the Beni area, 
ae result, though short-lived, of 
Operation Blast Furnace" was a signifi- 
nt drop in the price of coca cultivation, 
is hoped that this summer's enforce- 
ent operation has laid the foundation 
r a meaningful coca eradication pro- 
am under Bolivian Government 
ispices. 

During 1986, Colombia suffered at 
e hands of drug traffickers. Two major 
;sassinations— the former head of the 
ational Police, Col. Jaime Ramirez, and 
e well-respected journalist Guillermo 
ino— did not diminish the Colombian 
>mmitment to narcotics control. Presi- 
>nt Barco upheld the constitutionality 
' the extradition treaty with the United 
;ates, a move that resulted in Carlos 
ahder's extradition to the United 
;ates in February 1987. 

There were also historic cross-border 
illaborations among Latin American 
itions, working together to shut down 
e cocaine trade. At the OAS [Organiza- 
3n of American States] Conference on 
rugs in Rio de Janeiro last April, 
•oundwork was laid for a new Inter- 
merican Narcotics Commission, 
jproved at the OAS General Assembly 
Guatemala in November. At Quito in 
pril, a group of Andean nations signed 
me "Lara Bonilla Treaty," pledging 
"eater regional cooperation in the fight 
gainst narcotics. 



South Pacific Nuclear Free Zone Treaty 



DEPARTMENT STATEMENT, 
FEB. 5, 1987' 

The U.S. Government has been studying 
the question of whether to sign the three 
protocols to the South Pacific Nuclear 
Free Zone Treaty, the treaty of 
Rarotonga. The United States has now 
completed its study and has decided that 
in view of our global security interests 
and responsibilities, we are not, under 
current circumstances, in a position to 
sign the protocols. We have conveyed 
our position to the parties to the treaty. 



The United States is appreciative of 
the role of the Government of Australia 
and other parties to the treaty in this 
matter, including their efforts to keep 
our and allied interests in mind as they 
managed the composition of the treaty 
and protocols. The United States 
also appreciates the serious commit- 
ment of the Pacific island states to 
nonprolife ration. 



J Read to news correspondents by Depart- 
ment spokesman Charles Redman. ■ 



"While we are still engaged in an 
uphill battle against cocaine," Assistant 
Secretary Wrobleski stated, "we have 
realized real reductions in the availabil- 
ity of marijuana. Colombian marijuana 
cultivation has been significantly 
reduced in traditional areas. Belize's 
marijuana crop was virtually destroyed 
in 1986, and Panama's crop, eradicated 
last year, was not replanted. President 
Seaga's decision to use herbicides to 
eradicate ganja and the Jamaicans' 
destruction of 2,200 hectares of mari- 
juana is good news on the antimarijuana 
front. The Jamaican decision to use her- 
bicides in their eradication campaign 
should keep marijuana production on 
that island down next year." 

Rising levels of drug abuse in pro- 
ducing and trafficking countries has led 
to a new urgency in responding to the 
narcotics threat. "Heroin and cocaine 
threaten not only American youth, but 
Latin Americans, Europeans and Asians. 
Just as greedy drug traffickers 
marketed 'crack' in this country, they 
are finding new markets for their deadly 



products all around the world," 
Wrobleski said. "That is why interna- 
tional organizations such as the United 
Nations, the OAS and ASEAN [Associa- 
tion of South East Asian Nations] are 
infused with a new sense of commitment 
and dedication. We are seeing a single- 
minded determination by countries once 
indifferent to the drug issue." 

Assistant Secretary Wrobleski noted 
that 20 countries are involved in drug 
eradication efforts compared to two in 
1981. "We will continue to encourage 
nations to cooperate in narcotics control. 
Our aim is simple: to reduce the 
availability of narcotics worldwide; this 
cannot be accomplished without regional 
and global cooperation. The U.S. 
understands, however, that international 
cooperation is but one element of a nar- 
cotics control strategy. During the com- 
ing years, we intend to address all 
aspects of narcotics control, fulfilling our 
obligations at home and abroad," she 
said. 



Press release 50 of March 2, 1987. 



\pril 1987 



53 



WESTERN HEMISPHERE 



U.S. -Mexico Binational Commission Meets 



Secretary Shultz and Mexican 
Secretary of Foreign Relations Bernardo 
Sepulveda met on January 29, 1987, for 
the U.S. -Mexico Binational Commission 
meeting. Following are excerpts from the 
opening remarks made by Secretary 
Shultz and remarks made by the two 
Secretaries at the signing of Annex IV to 
the 1983 Border Environmental Coopera- 
tion Agreement. 



SECRETARY SHULTZS 
OPENING REMARKS, 
JAN. 29, 1987' 

We approach our meeting today with a 
sense of optimism and a positive spirit. 
Our challenge is to deal with the con- 
cerns and inevitable problems that 
accompany growth, development, and 
the interrelationships between us in 
ways which benefit both our peoples. We 
seek to demonstrate that two large and 
great nations can live border by border 
in harmony, with a relationship based on 
dialogue, cooperation, and mutual 
respect. 

Secretary Sepulveda and I, along 
with our colleagues, can look back on 
solid accomplishments from previous 
Binational Commission meetings. Last 
summer, for example, during President 
[Miguel] De la Madrid's visit to 
Washington, we resolved our differences 
over tuna fishing, and restored access 
for Mexican tuna to the U.S. market. 
And only 2 days ago, President De la 
Madrid inaugurated a new water sanita- 
tion plant south of Tijuana, the realiza- 
tion of our discussions on resolving the 
difficult problem of water pollution in 
the Tijuana-San Diego area. 

Today, we look ahead to the issues 
and problems that face us in 1987 and 
beyond. Some are extremely difficult 
and have no easy solutions. Let me men- 
tion a few of the subjects which will be 
discussed. 

A vicious drug traffic is a social 
cancer infecting our children, the 
integrity of our societies, and the lives of 
dedicated law enforcement officials on 
both sides of the border. President 
Reagan and Mrs. Reagan have launched 
a vigorous effort to reduce the use of 
dangerous drugs by Americans and to 
combat international narcotics traffick- 
ing. Largely as a result of close coopera- 
tion between Attorney General [Edwin] 
Meese and Attorney General [Ramirez] 
Garcia, Mexico and the United States 
have reinvigorated our cooperation 



against narcotics production and traf- 
ficking. We will discuss today further 
joint measures to put the drug traf- 
fickers out of business. 

Since 1982, Mexico has suffered 
severe shocks to its economy caused in 
large part by the instability of interna- 
tional oil markets. President De la 
Madrid and his administration have 
taken important steps toward the dif- 
ficult goal of adjustment and reform of 
the Mexican economy in response to new 
international circumstances. 

The United States has strongly 
encouraged Mexico's efforts, and we will 
continue to cooperate with the interna- 
tional financial community in support of 
Mexico's attempt to restore economic 
growth and prosperity. Mexico's 
economic health is clearly of major 
importance to the United States. Today 
we plan to discuss how we can 
strengthen our economic, financial, 
trade, and investment ties over the com- 
ing decade. The United States has 
strongly encouraged Mexico's efforts, 
and we will continue to cooperate with 



the international financial community II 
support of Mexico's attempt to reston 
economic growth and prosperity. 

Both our countries are challenged 
the ongoing conflict in Central Americ 
We share the objectives of peace, a 
stable and strong democracy, and 
economic and social development in th| 
nearby region. We each have our 
national views on how best to attain 
these goals. This will be an important 
subject in our discussions today. 

Last year, the Congress passed th 
first major revision to U.S. immigrate 
laws in over 30 years. Its primary pur 
pose is to bring immigration into this 
country under control. We are aware i 
Mexico's concerns about the potential 
effects of this legislation on its citizen; 
The law provides that Mexican and otl 
foreign citizens in the United States w 
be treated with dignity and respect. M 
government is committed to this objec 
tive and to discussing Mexico's concer 
about the new law. 




On January 29, 1987, Secretary Shultz and Secretary Sepulveda sign Annex IV to the U.S; 
Mexico Border Environment Cooperation Agreement. The annex will control air pollutio 
caused by copper smelters along the border and is part of the 1983 agreement signed by 
Presidents Reagan and De la Madrid. The two Secretaries also exchanged notes placing 
the annex into force along with Annex III, signed in November 1986, which controls tra 
boundary movement of hazardous waste. 



54 



Department of State Bulle 






WESTERN HEMISPHERE 



We look forward to a productive 
ly. We expect that, within a framework 
■ trust and respect, we can deal frankly 
|th the thorny issues, strengthen an 
;ready-strong relationship, and insure 
fat our children and grandchildren, 
Istined to inhabit this continent, will 
iofit by enhanced dialogue and 
iderstanding between our countries. 



1EMARKS, 
AN. 29, 1987 2 

I'cretary Shultz 

'ie Border Environmental Cooperation 
toeement was concluded in 1983 by 
resident De la Madrid and President 
j;agan. We have just signed Annex IV 
1 this agreement, which deals with the 
joblems of air pollution from copper 
jielters in Arizona and Sonora. We 
jive also exchanged notes placing that 
Snex into force along with Annex III, 
1 lieh deals with transboundary move- 
i >nt of hazardous wastes and sub- 
.« inces. I want to give special credit to 
i 'icials from the Mexican Secretariat of 
rban Development and Ecology and 
>m EPA [Environmental Protection 
I ;ency] for their important part in 
i gotiating these annexes. Several 

I ambers of the Arizona congressional 

i legation are here and deserve special 

• inks for their advice and support on 
. inex IV— and it isn't surprising that 

: Dple who live there take an interest— 
; d they take an interest, and we're 
' ry delighted to be able to work with 

II im on this. 

Let me quickly note a few other 
ll ?as of success. Yesterday, January 28, 
1 esident De la Madrid inaugurated the 
: st stage sewage treatment works at 
I uana. We are grateful for Mexico's 
li brts to address this problem. Water 
N ality problems, for instance of the 
I'W River at Mexicali, and sanitation 
■ Dblems are being worked out by the 
B ternational Boundary and Water 
I'mmission. 

Progress is being made on the con- 
ruction of the bridges between 
B:Allen, Texas, and Reynosa, and Del 
lo, Texas, and Ciudad Acuna. Bridge 
H ojects are also proposed for 
rownsville and El Paso. 

These are important achievements 
I our countries, exercising good will in 
ijaling with common problems. In our 
: inion they deserve more public note. 
Jie problems get a lot of notoriety; 
uen you do something about them, 
I'body notices, but we're calling it to 

• ■ur attention. 



I might say that we've just con- 
cluded another of our periodic Binational 
Commission meetings. These are occa- 
sions when the ministers of various 
ministries— and Mexico is represented by 
the whole group of heavy hitters who are 
here— and we've had one-on-one discus- 
sions between counterparts and small 
group meetings, and a couple of plenary 
sessions— and a pretty good lunch in the 
process. And we have agreed that it was 
a constructive and worthwhile meeting 
summarizing and looking at the overall 
situation and seeing that there is a lot of 
good in it and a lot of room for improve- 
ment, which we are dedicated to getting. 

Secretary Sepulveda 

What I would wish to say is very much 
what you have already mentioned— the 
pleasure of the Mexican Government in 
being able to make progress with this 
question of protecting the environment 
in the border area. I think that in a very 
short while, we have been able to make a 
tremendous step forward in terms of 
solving the different aspects of this 
environmental question. Only in 1983, 
President Reagan and President De la 
Madrid signed a convention, a bilateral 
treaty by which we took responsibility— 
the two of us— for paying far greater 
attention to this very important issue. 
Since we share a common border, we 
have a common responsibility for insur- 
ing that the environment is kept healthy. 

[These are] the third and the fourth 
protocols that we have signed, and they 
again show the capacity we have had to 
solve problems that we face. I join you in 
thanking very much indeed the Ministry 
of Urban Development in Mexico which 
was very much in charge of concluding 
this treaty. I also wish to point out the 
relevance of the plans you have men- 
tioned. This means solving an important 
problem in Tijuana and in San Diego. 

As to the meeting we have had, 
again it has been a very constructive 
meeting. I think that we have been able 
to erase from our agenda a number of 
issues that were there for quite a while. 
Now we can only hope that we shall not 
discuss them any longer. Some others 
were analyzed in a very positive fashion, 
and we can be certain that the good will 
shown throughout the series of meetings 
we have had will assure us of the 
possibility of having some of them also 
being erased from the agenda as solved 
problems. 

It has been a pleasure to work 
together with such a distinguished group 
of high officials in the U.S. Administra- 
tion. I'm sure that my colleagues in the 



Mexican delegation join me in thanking 
you very much for your hospitality. 

[State Department spokesman] 
Charles Redman. We have time for a 
few questions on the day's activities to 
be posed to either one of the ministers. 

Q. I'd like to ask which are the 
issues which have been erased from 
the common agenda? 

Secretary Sepulveda. Being an 
oldtimer, I'm sure you are aware that in 
previous times, in previous meetings of 
the Binational Commission, one of the 
topics included in the agenda was related 
to the tuna embargo— the fisheries ques- 
tion that fortunately was solved 4 
months ago. It was a good negotiation; 
we were very satisfied with it. Now, that 
issue will no longer be there in the 
agenda. 

The other question is that related to 
environmental issues, the Tijuana and 
San Diego question bothered us for a 
number of meetings. Now we can show 
clear progress and, again, we are very 
satisfied with the inauguration of the 
sewage plant that was made the day 
before yesterday by President De la 
Madrid. 

Q. Could you maybe just give us 
one or two off the top of the issues 
that were not erased? Would those be 
economic — just one or two of the 
major issues that you're still facing? 

Secretary Sepulveda. I just men- 
tioned at the end of our meeting that 
some of these topics will be with us for a 
long time. But what is important is to 
see that a good will decision is there, to 
see that they are attended and, in some 
cases, solved. 

As an example, the question of trade 
will be there for a long while, because 
we have a very close economic relation- 
ship. We can only hope to enhance our 
trade relationship. What we have to see 
is the different issues related to trade 
that have to be solved periodically. 

The other question, as an example, 
would be the one related to drug traf- 
ficking. It was very clear that the two 
governments are fully committed to the 
combat of this aspect of organized crime; 
but we have to review in each of our 
meetings of the Binational Commission 
the progress that is being made, the 
exchange of information, and the results 
we are obtaining. There could be other 
examples— the question of migration- 
other issues that are there and that we 
have agreed that we are to look at them 
very thoroughly and, as I said before, 
make as much progress as we can. 



pril 1987 



55 



WESTERN HEMISPHERE 



Secretary Shultz. It's a pleasure to 
come to the end of a question-and- 
answer period and a unique experience 
for me [laughter] not to have any of the 
questions. But that being the case, let 
me just interject, following up Secretary 
Sepulveda's comments with one fact that 
has emerged over the last year in the 
economic field, which was brought home 
to me during the course of the meetings. 

It turns out that for the first time in 
a long while, the flow of capital that has 
been— Mexican capital flowing out— has 
shifted. And this past year— you told me, 
and this [is] our information— that about 
$l l /2 billion have flowed in the other 
direction. Now this is a fact of immense 
significance, because when the flows are 
out, what it means is that any new 
capital that is raised and goes there, in a 
sense, is transformed and flows out 
again, so it doesn't add that much to the 
resources available. But when private 
capital is flowing back in voluntarily, 
that means that the reschedulings and 
new money and so forth that you've 
arranged for are adding resources and 
have all the potential of seeing your 
economy improve. So I've always felt 
that capital movements, if you watch 
them, tell you a big fraction of the total 
story. And one reason why I've been so 
worried is I've seen capital flow out, and 
why I feel so good about the fact that 
it's flowing in the other direction. 



Historical Study 



Collective Security and 
the Inter-American System 



•Press release 16 of Jan 29, 1987. 
2 Press release 17 of Jan. 30. ■ 



This paper, by David S. Painter of 
the Office of the Historian, is one of a 
series that provides background informa- 
tion on selected foreign policy issues. It 
was released by the Department of State 
in November 1986. 

The Western Hemisphere has a unique 
experience of international cooperation 
that goes back to the late 19th century. 
In the 1930s and 1940s, the American 
states developed procedures for collec- 
tive response to external aggression and 
conflicts among nations of the hemi- 
sphere. These procedures were formal- 
ized in the Rio treaty and the Charter of 
the Organization of American States 
(OAS). They have proved valuable in 
preventing or halting hostilities and have 
also been used to mobilize support 
against communism. 

Background, 1989-1945 

The inter-American system is the oldest 
regional society of nations in the world, 
dating back to the First International 
Conference of American States, held in 
Washington from November 1889 to 
April 1890. The concept of collective 
security emerged as a major element in 
the inter-American system during the 
1930s in response to attempts by the 
Axis Powers to increase their economic 
and political influence in Latin America. 
At inter- American conferences in 
Montevideo (1933), Buenos Aires (1936), 
and Lima (1938), the American states, in 
response to U.S. initiatives and U.S. 
pledges of non-intervention, agreed that 
whenever the peace of the hemisphere 
was threatened, the foreign ministers of 
the American republics would meet to 
consult on possible common action. A 
series of resolutions adopted at the first 
three meetings of foreign ministers 
(Panama, 1939; Havana, 1940; and Rio 
de Janeiro, 1942) further developed the 
inter- American system of collective 
security as the American states affirmed 
the principle of hemispheric solidarity 
against external aggression and estab- 
lished mechanisms to promote defense of 
the hemisphere. Meeting in Mexico City 
in March 1945, the American states 
adopted the Act of Chapultepec, which 
provided for collective action, including 
the possibility of the use of armed force, 



against aggression from either a non- 
American or hemispheric nation and 
pledged the signatories to negotiate a 
permanent inter- American collective 
security treaty once the war had end( 

The Rio Treaty 

The goals of solidarity, cooperation, i 
collective response to aggression and lei 
procedures for consultation develope< 
the late 1930s and early 1940s were f 
malized in the Rio treaty (the Inter- 
American Treaty of Reciprocal 
Assistance), adopted at the Inter- 
American Conference for the Mainte 
nance of Continental Peace and Secu 
rity, held near Rio de Janeiro betwee 
August 15 and September 2, 1947. T 
Rio treaty established a permanent 
inter- American regional security 
mechanism within the framework of 
UN Charter. 

Under the treaty's terms, the sig 
tory nations agreed to act collectively 
the event of aggression against any ( 
of them whether it was an armed att 
or some other type of threat to their 
ritory, sovereignty, or independence. 
Collective action could be taken not ( 
against non-American aggressors bu 
also against any member of the regie 
community which threatened the pea 1 
The treaty provided that any party t 5 
terms could initiate a meeting of fort n 
ministers by making a request to the 
Governing Board of the Pan Americ; 
Union (predecessor of the Permanen 
Council of the Organization of Ameri n 
States). The Governing Board could ; o 
act provisionally as the organ of cons 
tation until a meeting of foreign min; 
sters could assemble. Decisions on th 
application of sanctions against aggr 
sors had to be approved by a two-thii 
vote of a consultative meeting and w 
binding on all signatories, with the 
exception that no member could be 
required to use armed force without 
consent. The Rio treaty went into efi t 
on December 3, 1948. 

The OAS Charter and 
Collective Security 

At the Ninth International Conferem 
of American States, held at Bogota f m 
March 30 to May 2, 1948, the Amerin 



56 



Department of State Bui I 



WESTERN HEMISPHERE 



Dublics approved a Charter of the 

■ ganization of American States (OAS), 
lich placed the inter- American system 

i. a treaty basis and set forth its 
^iding principles, defined the rights and 
ities of its members, and described its 
i janizational structure. 

Among the essential purposes of the 
US, the charter included strengthening 
m peace and security of the hemi- 
spere; preventing disputes among mem- 
br states and ensuring the peaceful 
s;tlement of disputes that did arise; 
cnmon action by the American states 
i the event of aggression; seeking the 
s ution of inter- American political, 
j idical, and economic problems; and 
pmoting economic, social, and cultural 
(velopment. 

The OAS Charter provided for a 
i mber of collective security mecha- 
1 ;ms to deal with threats to the peace 
jd security of the Americas. Meetings 
( foreign ministers were to be held to 
( isider problems of an urgent nature 
t i to serve as the organ of consulta- 
1 n. The charter specified how and 
I ien such meetings should assemble and 
1 -ther provided that in cases of aggres- 
s n, the American states "shall apply 
} i measures and procedures established 
i the special treaties on the subject." 
'< e charter also declared that "no State 
i group of States has the right to inter- 

■ le, directly or indirectly, for any 
] ison whatever, in the internal or 

i ternal affairs of any other State." 
'. ;asures "adopted for the maintenance 
i peace and security in accordance with 
i isting treaties," however, did not con- 
: tute a violation of this principle. The 
i i.S Charter went into effect on 
: cember 13, 1951. 

The Bogota conference also 
; proved an American Treaty on Pacific 
ttlement, known as the pact of 
igota, which provided for good offices, 
;diation, investigation, conciliation, 
d arbitration of disputes. The treaty 
tered into force only for those states 
tifying it and, so far as their relations 
;re concerned, superseded a number of 
ior inter-American agreements on 
aceful settlement of disputes to which 
ey were party. To date, 14 states have 
trfied the treaty. The United States 
med the treaty but has not ratified it. 

Elective Security in Action 

Elective security procedures have been 
iplied under both the Rio treaty and 
1 e OAS Charter, most often under the 
rmer but with reference to the latter 
ji several occasions. The majority of 



Members of the Organization of American States 


and Signatories to the Rio Treaty 


States 


OAS Members - 


Rio Treaty - 


Antigua and Barbuda 


Dec. 3, 1981 




Argentina 


Apr. 10, 1956 


Aug. 21, 1950 


The Bahamas 


Mar. 3, 1982 


Nov. 24, 1982 


Barbados 


Nov. 15, 1967 




Bolivia 


Oct. 18, 1950 


Sept. 26, 1950 


Brazil 


Mar. 13, 1950 


Mar. 25, 1948 


Chile 


June 5, 1953 


Feb. 9, 1949 


Colombia 


Dec. 13, 1951 


Feb. 3, 1948 


Costa Rica 


Nov. 16, 1948 


Dec. 3, 1948 


Cuba 


July 16, 1952 


Dec. 9, 1948 


Dominica 


May 22, 1979 




Dominican Republic 


Apr. 22, 1949 




Ecuador 


Dec. 28, 1950 


Nov. 7, 1950 


El Salvador 


Sept. 11, 1950 


Sept. 11, 1950 


Grenada 


May 13, 1975 




Guatemala 


Apr. 6, 1955 2 


Apr. 6, 1955 2 


Haiti 


Mar. 28, 1951 


Mar. 25, 1948 


Honduras 


Feb. 7, 1950 


Feb. 5, 1948 2 


Jamaica 


Aug. 20, 1969 




Mexico 


Nov. 23, 1948 


Nov. 23, 1948 


Nicaragua 


July 26, 1950 


Nov. 12, 1948 2 


Panama 


Mar. 22, 1951 


Jan. 12, 1948 


Paraguay 


May 3, 1950 


July 28, 1948 


Peru 


Feb. 12, 1954 2 


Oct. 25, 1950 


St. Christopher-Nevis 


Mar. 13, 1984 




St. Lucia 


May 22, 1979 




St. Vincent and 






the Grenadines 


Dec. 3, 1981 




Suriname 


June 8, 1977 




Trinidad and Tobago 


Mar. 17, 1967 


June 12, 1967 


United States 


June 19, 1951 2 


Dec. 30, 1947 


Uruguay 


Sept. 1, 1955 


Sept. 28, 1948 


Venezuela 


Dec. 29, 1951 
strument of ratification. 


Oct. 4, 1948 


'Date of deposit of the in 


2 With reservation(s). ■ 







cases have involved longstanding inter- 
American tensions, rivalries, or territo- 
rial disputes, and the collective security 
mechanisms of the inter- American 
system have generally been able to halt 
hostilities among disputants, if not to 
resolve the underlying causes of conflict. 
In many instances Permanent Council 
action has been sufficient, and the 
foreign ministers have not had to meet. 
With a few exceptions, OAS action 
has consisted of investigating conditions 
and facilitating peaceful settlement of 
disputes. Sanctions were first imposed in 
1960 when the sixth meeting of foreign 
ministers called on member states to 
break diplomatic relations and suspend 
trade in arms with the Dominican 
Republic. 



Although the inter-American 
system's collective security arrange- 
ments provide for the use of armed force 
in certain instances, the American states 
have been reluctant to exercise this 
option. In the case where military per- 
sonnel have been utilized in conflict 
resolution, their role, with few excep- 
tions, has been limited to that of 
observers or expert members of fact- 
finding missions. 

Communism and 
the Cuban Threat 

Several applications of collective and 
security mechanisms have involved the 
issue of communism, and since 1959 the 
Castro regime in Cuba has been a source 



dn'I 1987 



57 



WESTERN HEMISPHERE 



of special concern. The 1948 Bogota con- 
ference and the fourth meeting of 
foreign ministers (1951) adopted U.S.- 
sponsored resolutions condemning com- 
munism and calling on the American 
states to adopt measures to eradicate 
and prevent communist activities. 

In response to U.S. initiatives, the 
Tenth Inter- American Conference, held 
in Caracas in March 1954, declared that 
control of the political institutions of any 
American state by the international com- 
munist movement would constitute a 
threat to the independence and peace of 
the Americas and would call for a con- 
sultative meeting in accordance with 
provisions of the Rio treaty. 

In June 1954, the United States and 
nine other member states requested a 
meeting of foreign ministers under the 
provisions of the Rio treaty due to "the 
demonstrated intervention of the inter- 
national communist movement in the 
Republic of Guatemala and the danger 
which this involves for the peace and 
security of the Continent." Although the 
OAS council voted to convoke a meeting 
of foreign ministers, the Guatemalan 
Government was overthrown before the 
ministers could assemble. 

In August 1960, the seventh meeting 
of foreign ministers adopted the Declara- 
tion of San Jose which, while not naming 
Cuba specifically, condemned "the inter- 
vention or the threat of intervention" by 
an extracontinental power in the affairs 
of the American republics, and rejected 
the efforts of the "Sino-Soviet powers" 
to destroy hemispheric unity. 

The eighth meeting of foreign 
ministers, held in Punta del Este from 
January 22 to 31, 1962, rejected com- 
munism as a means of achieving eco- 
nomic development and social justice and 
declared that adherence by any OAS 
member to Marxism-Leninism was 
incompatible with the inter- American 
system. This incompatibility, a majority 
of the foreign ministers decided, 
excluded the present Government of 
Cuba from participation in the inter- 
American system. The meeting of 
foreign ministers called on members to 
suspend trade in arms with Cuba, 
excluded Cuba from participation on the 
Inter-American Defense Board (IADB), 
and established a Special Consultative 
Committee on Security (SCCS) to make 
recommendations on countering inter- 
national communist subversion in the 
hemisphere. (The OAS terminated the 
SCCS in December 1975.) 

Following the discovery of arms 
originating in Cuba on the Venezuelan 
coast in late 1963, the ninth meeting of 
foreign ministers, held in Washington in 



July 1964, condemned Cuba for seeking 
to subvert and overthrow the Govern- 
ment of Venezuela and imposed sanc- 
tions which included the breaking of 
diplomatic and consular relations and the 
suspension of trade and sea transporta- 
tion, except for foodstuffs, medicine, and 
medical equipment. 

Three years later, the 12th meeting 
of foreign ministers condemned Cuba for 
its intervention in Venezuela, Bolivia, 
and other American states and appealed 
to other Western states to restrict their 
trade with Cuba. 

By the end of the 1960s, several 
states had begun to question continuing 
sanctions against Cuba. After the 15th 
meeting of foreign ministers in Novem- 
ber 1974 failed to adopt a resolution 
calling for an end to sanctions, the 16th 
meeting of foreign ministers, on July 29, 
1975, approved a resolution which left 
member states "free to normalize or 
conduct in accordance with the national 
policy and interests of each their rela- 
tions with the Republic of Cuba at the 
level and in the form that each State 
deems advisable." 

An Inter-American 
Peace Force 

The Rio treaty created the political 
framework for collective security, but it 
did not establish a combined military 
command (such as NATO) nor a military 
planning agency. Since its creation by 
the third meeting of foreign ministers in 
1942, the IADB has performed an advis- 
ory role outside the formal structure of 
the OAS. In 1962, with U.S. assistance, 
the IADB established an Inter-American 
Defense College to provide advanced 
training for selected personnel from the 
armed forces of the Americas. 

In these circumstances, inter- 
American peacekeeping forces have been 
ad hoc and temporary. In October 1962, 
at the urging of the OAS Council, 
Argentina and the Dominican Republic 
participated in the U.S. quarantine of 
Cuba. In 1965, the 10th meeting of 
foreign ministers sponsored the creation 
of an inter- American peace force to help 
restore peace in the Dominican Republic. 

Following the Dominican experience, 
some OAS members, led by the United 
States, called for the creation of a per- 
manent inter- American peace force to 
serve as the military arm of the 
organization in future collective actions. 
Although this idea was discussed at 
various inter- American conferences over 
the next 2 years, it failed to gain the 
support of a majority of American 
states. The OAS also rejected a June 



1979 U.S. proposal to establish an OAc 
peacekeeping force to help restore ordr 
in Nicaragua and provide conditions 
under which free elections could be hel 



OAS Charter and 
Rio Treaty Revisions 

Almost two decades after the Bogota 
conference of 1948, the Third Special 
Inter- American Conference met in 
Buenos Aires between February 15 am 
27, 1967, and approved a series of 
amendments to the OAS Charter (pro- 
tocol of Buenos Aires). The protocol 
created the General Assembly as the 
new supreme body of the OAS (replaci: 
the Inter-American Conference) and 
strengthened and broadened the 
organization's economic and social fun< 
tions. No structural or procedural 
changes were made in the organizatior 
security functions, nor was the Rio 
treaty affected by the charter amend 
ments. The amendments went into efft 
in February 1970. 

In July 1975, a conference of 
plenipotentiaries meeting in San Jose 
approved a protocol of amendment to 
the Rio treaty drafted by the Special 
Committee to Study the Inter-Americs 
System, created by the OAS General 
Assembly in 1973. Among its provisior 
the protocol narrowed the geographic 
area covered by the treaty, eliminating 
Greenland and some high seas areas; 
limited its applicability to member stat 
rather than to all American states; pre 
vided that nothing in the treaty was tc 
be interpreted as impairing "the princ 
pie of nonintervention and the right of 
all States to choose freely their politic; 
economic and social organization;" anc 
added a provision stating that "for the 
maintenance of peace and security in t 
Hemisphere, collective economic secur 
for the development of the Member 
States of the Organization of Americai 
States must also be guaranteed throug 
suitable mechanisms to be established 
a special treaty." 

The United States, in signing the 
protocol, included a reservation stating 
that it accepted "no obligation or com- 
mitment to negotiate, sign or ratify a 
treaty or convention on the subject of 
collective economic security." This rest 
vation was retained when the United 
States ratified the protocol on Septem- 
ber 20, 1979. To date, only 7 member 
states (of the 14 necessary for the 
amendments to enter into force) have 
ratified the protocol of amendment. ■ 



58 



Department of State Bullet 



WESTERN HEMISPHERE 



Plan for Fully Funding 
sIBCCA Recommendations 



"A Plan for Fully Funding the 
ecommendations of the National Bipar- 
san Commission on Central America 
a report to the President and the Con- 
fess prepared by the Department of 
tate, Agency for International Develop- 
ent, and the Office of Management and 
udget in March 1987. 

RESIDENT'S MESSAGE 
ll TO THE CONGRESS. 
:AR. 3, 1987 

lie one hundred million dollars in assistance 
jr the Nicaraguan democratic resistance 
liproved by Congress in October of last year 
las intended as only one aspect of an inte- 
rated, comprehensive approach for United 
Lates efforts to promote economic and 
ilitical development, peace, stability and 
hmoeracy in Central America and to encour- 
Ke a negotiated resolution of the conflict in 
e region. In that law (Title II of the Act 
laking appropriations for military construe- 
)n for the fiscal year ending September 30, 
H87, as contained in Public Laws 99-500 and 
1 ►— 591, hereinafter "the Act"), the Congress 
cognized, as does the Executive branch, 
at the Central American crisis has its roots 
| a long history of social injustice, extreme 
iverty, and political oppression. These condi- 
>ns create discontent, which is often 
iploited by communist guerrillas in their 
lar against democracy. The focus of United 
,ates policy in Central America goes beyond 
e military aspects of the problem. To help 
■•Idress the underlying social and economic 
i .uses of conflict in the region, the Congress 
rected that additional economic assistance 
i made available for four Central American 
'mocracies: Costa Rica, El Salvador, 
aatemala, and Honduras. 



I rogress Toward Democracy 

emocracy is making great strides in these 
■ur countries. Their progress in building 
icieties in which their citizens enjoy freedom 
' choice and equal justice under law stands 
marked contrast to the totalitarian sub- 
[ .gation suffered by the Nicaraguan people, 
his progress, however, cannot be sustained 
ithout concurrent economic growth, 
olitical freedom cannot prosper in an 
ivironment of hunger and despair. Nor, as 
mnd by the National Bipartisan Commission 
a Central America (NBCCA), can we expect 
ie Central American democracies to recover 
!'om a severe economic recession without 
gnificant outside assistance. The Central 
merican democracies cannot attract ade- 
uate private investment to achieve sus- 
linable economic growth in the current 



environment of violence and subversion. The 
four democratic nations of Central America 
will have little appeal for investors as long as 
there is an aggressive communist regime 
nearby— a militant regime bent on ideological 
expansion and already in command of the 
largest army in the history of Central 
America. 



Congressional Attempt 
To Aid the Democracies 

To help the Central American democracies 
preserve their hard-earned progress in mak- 
ing democracy work, the Congress in October 
1986 approved in section 205 of the Act the 
transfer of three hundred million dollars in 
unobligated funds for economic assistance to 
the Central American democracies. Title III 
of the Act also appropriated an additional 
three hundred million dollars for this purpose, 
to be available through fiscal year 1987. 
Unfortunately, despite the best intentions of 
those in the Congress who supported the 
additional assistance for Central America and 
despite this Administration's strong support 
for that assistance, the Foreign Assistance 
Appropriations Act mandated that the three 
hundred million dollars be regarded as part of 
the specified (and very limited) FY 1987 
worldwide total for economic support fund 
assistance, thus precluding us from consider- 
ing this sum as additional assistance. As a 
practical result there could be no increased 
aid for Central America. When this became 
apparent, we shared the great disappoint- 
ment of bipartisan supporters in the Con- 
gress, not to mention the Central Americans 
who were counting on this assistance after it 
had been approved in both the Senate and 
House of Representatives. 



Report to Congress 
on Assistance Needs 

Clearly, there is the desire in the Congress to 
make good on this commitment. Toward that 
end, there is a provision in the law that the 
Executive branch should develop a plan 
for fully funding the assistance to the Central 
American democracies proposed in the 
January 1984 report of the National Bipar- 
tisan Commission on Central America. I am 
transmitting that plan to the Congress with 
this message. 

The Bipartisan Commission determined 
that the Central American crisis was the 
result of a long history of interrelated 
political, security, and socio-economic condi- 
tions and recommended a greatly expanded 
financial assistance program for the years 
1984-89. The Central America Democracy, 



Peace and Development Initiative (CAI), 
transmitted to the Congress in February 
1984, was designed to accomplish most of the 
NBCCA's recommendations. This program 
concentrated on strengthening democratic 
institutions, arresting economic decline while 
promoting stabilization and recovery and 
increasing the benefits of growth. Results in 
the political sector have been more rapid than 
anticipated. In the economic and social areas 
much also has been achieved. Nevertheless, 
this progress remains fragile and much 
remains to be done. The plan herewith 
transmitted to the Congress proposes a 
3-year extension of the program's execution 
until 1992. The extension would increase the 
total amount of funds originally recom- 
mended in the CAI for the period FY 1984 to 
FY 1989 from $6.4 billion to $6.9 billion in 
appropriated funds for the period FY 1984 to 
FY 1992. As economic recovery in the region 
proceeds, the benefits of growth, economic 
and political stabilization will be enjoyed by 
an ever-increasing percentage of the region's 
population. 

After reviewing the findings of this study, 
I have concluded that additional assistance is 
required immediately in order to help meet 
the economic goals of the Bipartisan Commis- 
sion and to keep faith with the millions of 
men and women who through hard work and 
sacrifice are making democracy a living real- 
ity in Central America. 

This assistance is urgently required to 
help meet the great economic and social 
needs of the struggling democratic govern- 
ments of the region. By generating conditions 
of violence in Central America that under- 
mine prospects for economic growth, the com- 
munist government of Nicaragua works to 
discredit the democratic system as a viable 
alternative for development. To offset this 
effort, it is the responsibility of the friends of 
democracy to help Central America's 
democrats prove that even in adversity 
democracy offers their people a better way of 
life. The Soviet Union and its allies have pro- 
vided the Sandinista regime military hard- 
ware and sufficient economic aid to keep 
Nicaragua's failed economy afloat. The 
United States must help those small nations 
in Central America that have chosen freedom. 

Request for Additional Assistance 

To carry out the recommendations contained 
in the report being forwarded to the Con- 
gress, Section 215(2) of the Act further pro- 
vides expedited procedures for requests from 
the President for additional economic 
assistance for the Central American 
democracies. I hereby request that such 
expedited consideration be given to my 
request for an additional $300,000,000 for 
fiscal year 1987 as economic support fund 



l^pril 1987 



59 



WESTERN HEMISPHERE 



assistance for Costa Rica, El Salvador, 
Guatemala, and Honduras, notwithstanding 
section 10 of Public Law 91-672. 

In order to assure that this additional 
assistance is fully consistent with applicable 
requirements of law and sound budget prin- 
ciples, I further request that the amounts 
made available for this additional economic 
assistance for Central America be transferred 
from unobligated balances in such accounts as 
I may designate for which appropriations 
were" made by the Department of Defense 
Appropriations Act, 1985 (as contained in 



Public Law 98-473); the Department of 
Defense Appropriations Act, 1986 (as con- 
tained in Public Law 99-190); the Department 
of Defense Appropriations Act, 1987 (as con- 
tained in Public Laws 99-500 and 99-591); 
and the Department of State Appropriations 
Act, 1987 (as contained in Public Laws 
99-500 and 99-591). 

I urge the prompt enactment of a joint 
resolution expressing approval of this 
request. 

Ronald Reagan 



#% 



4 







An AID irrigation project helps small farmers produce nontraditional crops for 
export. 



LETTER TO THE PRESIDENT, 
FEB. 17. 1987 

The Congress has instructed the Secretary < 
State, the Administrator of the Agency for 
International Development, and the Directo 
of the Office of Management and Budget to 
develop a plan for fully funding assistance t< 
the Central American democracies proposed 
in the January 1984 report of the National 
Bipartisan Commission on Central America. 
The legislation required that a report descri 
ing the plan for full funding of the recomme 
dations be provided to the Congress no latei 
than March 1, 1987. We have completed our 
work, and we are very pleased to transmit t 
report to you. 

Our report indicates that, with our help, 
the Central American democracies have mat. 
great strides in improving democratic proc- 
esses and respect for human rights, the ess« 
tial underpinnings of all free societies. Signi 
cant progress also has been made toward 
economic stabilization in the region. In addi 
tion, more free market-oriented economic 
policies are beginning to develop. If these 
policies can be nurtured and there is furthei 
progress in this direction, a key objective of 
the plan described in our report, then the 
foundation will have been laid for sustained 
economic growth. The report also relates 
achievements and goals in spreading the 
benefits of economic and social progress. Tc 
help ensure that this progress is solidified, t 
report recommends that the timeframe of tl 
plan be extended to 1992 with a modest 
increase of $500 million in the originally 
recommended levels of financing to be pro- 
vided by the United States. 

The ongoing process of realizing inter- 
related political, social, economic, and secur 
ity objectives of our Central American 
neighbors remains fragile. While a great de 
has been accomplished, much remains to be 
done. If the recommendations set forth in t 
report are implemented by the Central 
American governments with the support an 
encouragement of the United States, there 
reason to expect further progress toward 
achieving stronger democracies, more solid! 
based economies, and greater social equity, 
a more stable and secure environment. The: 
goals are of fundamental importance to U.S 
national interests. 

Sincerely, 

George P. Shultz 
Secretary of State 



James C. Miller III 

Director, Office of 
Management and Budge' 

M. Peter McPherson 

Administrator, Agency f 
International Developme 



60 



Department of State Bullet 



WESTERN HEMISPHERE 



ummary 



i the Continuing Resolution of October 
)86', Congress requested that the 
■scretary of State, the Administrator of 
ID, and the Director of OMB develop a 
an for fully funding the assistance to 
ie Central American democracies pro- 
ved in the January 1984 report of the 
ational Bipartisan Commission on Cen- 
al America (NBCCA). Congress also 
■quested that the report include recom- 
endations on how more effective use 
.n be made of U.S. agricultural com- 
odities in alleviating hunger and con- 
futing to the economic development in 
1 e region. 

This paper outlines the Commission's 
commendations, assesses the status 
id prospects of achieving these in 
)sta Rica, El Salvador, Guatemala, and 
onduras, as required by law. Consist- 
it with the original NBCCA report, it 
so addresses Belize and Panama. It 
oposes a plan for fully funding the 
sistance proposed by the NBCCA. The 
.per also includes a section on agri- 
ltural commodity assistance and 
ricultural programs, prepared in con- 
ltation with the Secretary of 
n-iculture. 



isential Recommendations 
the Commission 

ie NBCCA determined that the crisis 
Central America had indigenous roots 
a long history of social injustice, 
ildistribution of national income, 
vernment oppression, and closed 
litical systems. It identified three 
separable elements of the crisis— 
litical, security, and social/economic 
■ues. 

In the economic and social areas, the 
immission recommended a greatly 
panded financial assistance program 
d estimated that $21 billion (excluding 
caragua) would be required (including 
0-$12 billion in U.S. assistance) for 
e period 1984-90. The NBCCA 
ressed its belief that economic 
ogress would depend on reductions in 
gional violence, improved economic 
ilicies, and performance by the Central 
merican economies, increased 
onomic assistance beginning in 1984, 
id an ever-improving world economic 
ivironment. Not all of these assump- 
)ns have been borne out since 1984. To 
Idress the political and security 
lements, the NBCCA recommended 
ultiyear funding of military aid to the 
•gion, without specifying funding 
'vels. 



In February 1984, the President 
transmitted to Congress proposed 
legislation— known as the Central 
America Democracy, Peace, and 
Development Initiative (Central America 
Initiative or CAI)— which encompassed 
many of the NBCCA's recommendations 
and requested $8.4 billion in U.S. 
Government assistance and guarantees 
for the region for the period FY 
1984-89. The Central America Initiative 
concentrated on the economic, social, 
and democratization areas and empha- 
sized four principal goals: 

• Strengthening democratic institu- 
tions and processes; 

• Arresting economic decline and 
promoting economic stabilization; 

• Laying the basis, through struc- 
tural transformation, for sustained 
economic growth; and 

• Increasing equity and spreading 
the benefits of economic growth. 

The CAI was launched in 1984, when 
Congress approved $370 million in sup- 
plemental funds, and its basic policy pro- 
visons were enacted in 1985 as a new 
Chapter 6, Part I, of the Foreign 
Assistance Act of 1961. 

Prospects for Achieving 
the Commission's Objectives 

In the political sphere, there has been 
rapid and substantial progress. 

Democratization and Human 
Rights. As proposed in the CAI, U.S. 
efforts and assistance now focus on 
facilitating the electoral process, 
strengthening national legislatures, 
improving the administration of justice, 
expanding citizen participation in 
democratic processes, and promoting 
freedom of the press. 

In the economic and social sphere, 
the CAI proposed an ambitious series of 
goals, and, despite difficulties, much has 
been achieved. 

Economic Stabilization. Sharply 
increased economic assistance has 
facilitated an upturn in the region's 
economic situation. Nevertheless, prog- 
ress toward recovery is fragile and the 
continued implementation of improved 
policies is vital. 

Structural Transformation. The 

CAI proposed a strategy for generating 
economic growth, based primarily on 
increased private investment and the 
rapid growth of nontraditional exports. 
Investment levels have increased 



modestly but steadily. The growth in 
nontraditional exports has been very 
encouraging. 

Spreading the Benefits of 
Economic Growth. The CAI emphasized 
rapid economic growth as the most 
important vehicle for achieving higher 
standards of living. In some countries, 
this is likely to be insufficient to ensure 
benefits for poorer groups. Therefore, a 
number of specific programs in the 
education, health, family planning, and 
housing fields are being implemented. 
Although significant progress has been 
achieved, not all of the original targets 
have been met. 

Regional Security. The defensive 
capability of the region's democracies 
has been strengthened. Central 
American militaries have used U.S. 
assistance to improve organization, 
training, and equipment. Fostering 
stability in the region is a long-term 
undertaking, however, and it is unlikely 
that broad U.S. security objectives for 
the region will be fully realized by the 
end of the decade. 

Problems Encountered. While 
substantial progress has been made 
toward achievement of the Commission's 
objectives, this progress has taken place 
under conditions substantially more 
adverse than those assumed by the Com- 
mission. External economic trends, 
notably world prices for Central 
America's main export commodities, 
have been substantially worse than 
anticipated. The Commission projected 
that the military/security climate would 
be largely resolved within 18 months 
from the time of the report. There have 
been improvements, but the military/ 
security climate remains unsettled and is 
a major impediment to capital invest- 
ment and economic recovery. 

The Need for Full Funding 
of NBCCA Recommendations 

Economic assistance levels for Central 
America have been substantial over the 
past 3 years, but they have been 
diminishing and falling short of the 
levels recommended by the NBCCA, par- 
ticularly with respect to appropriated 
funds. The shortfall in appropriated 
funds will be approximately $760 million 
by the end of FY 1987, assuming 
passage of the $300 million requested as 
supplemental economic assistance for 
the Central American democracies. This 
$300 million is needed immediately. Any 
reduction in the FY 1987 supplemental. 



Vprit 1987 



61 



WESTERN HEMISPHERE 



Key Facts on the Commission 



The National Bipartisan Commission on 
Central America (referred to in this study 
as "the Commission") was named in July 
1983 by President Reagan to advise on "a 
long-term U.S. policy that will best 
respond to the challenges of social, 
economic, and democratic development in 
the region and to internal and external 
threats to its security and stability." 

Henry A. Kissinger served as Com- 
mission Chairman. The Commissioners 
were: Nicholas F. Brady, Henry G. 
Cisneros, William P. Clements, Jr., the 
late Carlos F. Diaz-Alejandro, Wilson S. 
Johnson, Lane Kirkland, Richard M. 



Scammon, John Silber, the late Potter 
Stewart, Robert S. Strauss, and William B. 
Walsh. Senior Counselors were Jeane 
Kirkpatrick, Winston Lord, William D. 
Rogers, Daniel K. Inouye, Pete V. 
Domenici, Lloyd Bentsen, Charles McC. 
Mathias, William S. Broomfield, Jack F. 
Kemp, James C. Wright, and Michael D. 
Barnes. Harry W. Shlaudeman served as 
Executive Director. 

The Commission submitted its report 
to the President on January 10, 1984. The 
complete text was published commercially 
as The Report of the National Bipartisan 
Commission on Central America (N.Y.: 
MacMillan Publishing Co., 1984). 



of course, will increase the shortfall 
further. 

We propose to fund the Central 
America Initiative fully by extending the 
period of execution of the program by 3 
years to 1992. This would increase the 
originally recommended amount of 
appropriated funds by approximately 
$500 million to a total of $6.9 billion, 
while the level of $2 billion in guarantees 
remains unchanged. It is important to 
note that if the Central America Ini- 
tiative had ended in 1989, an ongoing 
assistance program would have been 
required to consolidate and sustain 
economic and social progress. The pro- 
posed extension is responsive to funding 
limitations under the budget deficit 
reduction act and reflects the difficulties 
inherent in the implementation by 
sovereign governments of essential 
reforms. It also reflects the political and 
security realities of the region, the exter- 
nal conditions of world markets, the 
limited availability of external capital 
from other public and private sources, 
and investment attitudes. The decision 
to extend the CAI is a practical response 
to a changed situation. 

The 3-year extension would ensure 
that: 

• There is a solid trend in all the 
countries toward democratization; 

• The region's economies are 
stabilized; 

• Essential structural reforms are 
institutionalized; and 

• Mechanisms are in place for a 
broader distribution of increasing 
economic benefits. 

The projected assistance levels also 
reflect a shift in focus, beginning in FY 
1989, away from stabilization and 



toward an increased emphasis on struc- 
tural transformation that leads to 
economic growth and a broadening of its 
benefits. The levels are predicated on 
the assumption that the Central 
American governments will implement 
economic measures to promote export- 
led growth and essential structural 
reforms. We hope that the major 
economic objective of the CAI— 
recovery— will be achieved by FY 1992 
and that the need for economic support 
assistance will be less. Central America's 
development is a long-term proposition, 
however, and a need for well-designed 
development assistance programs will 
continue beyond 1992. 

The extended program will not vary 
significantly from that currently under- 
way, although the pace of accomplish- 
ment will vary among countries and 
goals. U.S. assistance to democratization 
has grown in size and sophistication and 
will continue to focus on facilitating the 
election process, strengthening the 
capabilities of legislators, improving on 
the administration of justice, expanding 
citizen participation, promoting freedom 
of the press, and providing new training 
and educational opportunities for Cen- 
tral Americans in the United States 
under the Central American Peace 
Scholarship program. The term and level 
of continued balance-of-payments sup- 
port for economic stabilization will vary 
by country but should decline signif- 
icantly by 1992. The focus of our 
economic support assistance will shift 
toward macroeconomic and sector 
policies designed to institutionalize sus- 
tained growth, as the requirement for 
balance-of-payments support declines. 
As economic stabilization benefits are 
achieved, progress to ensure the 



spreading of the benefits of the region\ 
economic growth will increase. 

Agricultural Commodity Assistance 
and Agricultural Programs 

The United States has provided 
increasing amounts of food commoditie;. 
to Central America and continues the 
effort to use its programs more effec- 
tively to alleviate hunger and contribute 
to economic development in the region. 
The Administration uses its food aid 
authorities to support the CAI, primari 
through traditional PL 480 programs, | 
Section 416 of the Agriculture Act of 
1949, new benefits allowed under 
PL 480, and the new Food for Progress 
program. In addition, the Central 
American governments are undertakin; 
under PL 480 self-help activities 
designed to contribute to their general 
economic development. 

The CAI was not designed to solve 
all of Central America's problems in 5 < 
6 years but rather to assist these coun- 
tries to take the essential steps require 
to establish the basis for gradual, steac 
and sustainable political and economic 
progress over the longer term. These a 
still achievable goals and significant 
progress has been made toward them, 
is clear, however, that the timeframe ft 
laying a firm political and economic 
foundation must be extended. Also, out 
firm commitment to the NBCCA and tl 
CAI objectives must be sustained into 
the next decade, if we and the Central 
American democracies are to succeed i 
achieving the goals of the NBCCA. 



. Essential 
Recommendations 
of the Commission 



MAJOR GOALS 

The National Bipartisan Commission o: 
Central America found that the Centra 
American crisis had indigenous roots ii 
a long history of social injustice, 
maldistribution of national income, 
government oppression, and closed 
political systems. The crisis had been 
brought to a head by an ongoing intern 
tional economic recession and Soviet- 
Cuban intervention in the region. The 
Soviet- and Cuban-supported Nicaragu; 
military buildup, the Sandinista export 
of revolution, and the Marxist insur- 
gency in El Salvador were signs of a 
deteriorated security environment. 



62 



Department of State Bullet 



WESTERN HEMISPHERE 



orts to achieve peace, social progress, 

economic well-being were undercut 
extremist violence, subversion, and 
ernally supported insurgency. 

damentally, the crisis elements were 
itical, security, and economic/social 

es that were intertwined; none could 

eparated, and each had an impact on 

others. 

Therefore, the analyses and recom- 
ndations of the NBCCA report were 
anized around these three major 
egories. (See Appendix A for a list of 

report's major recommendations and 
ammary. 2 ) 



OERVIEWOF 
CNDITIONS, 1983-84 

1-ing the summer of 1983, when the 
I CCA began its deliberations, Central 
A erica probably was experiencing its 
list serious crisis. 

• The security of Guatemala and El 
S vador was seriously threatened by 

I ist insurgencies, widespread political 
v. ence from the extreme right, and 
a! lificant human rights abuses. 

• Nicaragua was providing sites for 
command, control, training, and 
stical support of Salvadoran insur- 
ts; the country was becoming 
■easingly militarized. 

• Soviet-bloc deliveries of military 
plies to Nicaragua had grown; Soviet, 
>an, and other Soviet-bloc military 
sonnel numbered in the thousands. 

• El Salvador already had suffered 
nuch as $1 billion in damage to infra- 
lcture and other economic losses 

ti the conflict. 

• Between 1980 and 1983, the 
ion's per capita income declined 12% 
nost 20% in El Salvador, following an 
;ady sharp decline between 1978 and 
0).' 

• Between 1980 and 1982 approx- 
.tely $1.5 billion in capital had left the 
ion. 

• Private investment had 
i mmeted. 

• The region's external debt was 
ii billion. 

• More than one-half million 

i dgees and displaced persons were in 
. region, and perhaps as many had 
'1. 

• Foreign exchange reserves were 
|)leted. 

'■ • Social services were deteriorating. 

• Judicial systems in some countries 
re virtually inoperative, suffering 

m decades of neglect and abuse by 
trenched interests. 



• Only two countries (Costa Rica 
and, since 1982, Honduras) had 
democratically elected presidents. 
(Newly independent Belize also had an 
elected prime minister, who had come to 
office during the British colonial 
administration.) 



NBCCA FUNDING PROPOSALS 

On the economic side, the NBCCA 
recommended an expanded financial 
assistance program sufficiently large and 
comprehensive to help Central 
Americans recreate conditions for "sus- 
tainable economic growth." A major 
objective was to recover, by the end of 
this decade, the per capita income levels 
of 1980 for five countries (i.e., Belize, 
Costa Rica, El Salvador, Guatemala, and 
Honduras) and that of 1982 for Panama. 
This would require an average annual 
real growth rate of about 6% by 1990— a 
difficult goal under the best of 
circumstances. 

The NBCCA estimated that an 
external financing requirement of $24 
billion for the region ($21 billion 
excluding Nicaragua), most of which 
would have to come from official 
creditors. Approximately $12 billion was 
expected to come from international 
institutions, other donor countries, and 
through loans nd investment from 
private sector sources. The estimate also 
included at least $10-$12 billion in U.S. 
financial assistance and guarantees over 
the period 1984-90. The NBCCA pro- 
posed a program of U.S. Government 
assistance of $8 billion over the next 5 
fiscal years (FY 1985-89). 

Achievement of the economic 
recovery target was predicated on four 
assumptions. 

• Without a considerable reduction 
in the levels of violence, efforts to revive 
the regional economy would fail. 

• Over time, the Central American 
countries would adopt a coherent set of 
economic policies. 

• External economic assistance 
would increase significantly beginning in 
1984. 

• The global economic environment 
would continue to improve. 

On the political/security side, the 
NBCCA recommended multiyear fund- 
ing of military aid to the region to 
ensure predictability of support over the 
long term. For El Salvador, the NBCCA 
recommended more military assistance 
based upon sufficient progress in human 
rights, free elections, and political 
reforms. The recommended approach 



Central America Defined 

There are seven sovereign nations on the 
isthmus between Colombia and Mexico- 
Panama, Costa Rica, Nicaragua, Hon- 
duras, El Salvador, Guatemala, and 
Belize— but not all are necessarily 
included when the term "Central 
America" is used. 

For purposes of addressing the Cen- 
tral American security and diplomatic 
crises, the Commission focused on five 
countries: El Salvador, Hondoras, 
Nicaragua, Guatemala, and Costa Rica. 
This is the same definition as that of the 
Contadora process. These states together 
made up the Captaincy-General of 
Guatemala during the Spanish colonial 
period and have shared traditions and 
cultural similarities. 

For purposes of addressing Central 
American economic and political develop- 
ment, however, the Commisssion included 
Belize and Panama. Unless otherwise 
noted, economic data cited in this report is 
for Belize, Costa Rica, El Salvador, 
Guatemala, Honduras, and Panama. 
Nicaragua does not publish up-to-date 
data on its economic performance and has 
excluded itself from U.S. development 
activities. 



required strengthening the profes- 
sionalization of each country's armed 
forces in order to combat insurgency and 
deter the Nicaraguan military threat. 
Without sufficient improvement in the 
regional security situation, meaningful 
political, economic, and social progress 
would be impossible. 



THE CENTRAL AMERICAN 
INITIATIVE 

The Commission formally submitted its 
report to the President on January 10, 
1984. On February 21, the President 
transmitted to the Congress proposed 
legislation for FY 1984-89, known as the 
Central America Democracy, Peace, 
and Development Initiative, which 
encompassed more than 40 of the 
NBCCA's recommendations. To imple- 
ment the program, $8.4 billion in U.S. 
assistance (including $2 billion in 
guarantees) was requested for the period 
(see Appendix B). 

Although the Congress did not agree 
to commit itself to fund a multiyear pro- 
gram until 1985, on August 10, 1984, it 
did appropriate $370 million to begin 
implementing the Commission's recom- 
mendations. The FY 1985 Continuing 
Resolution of October 12, 1984, con- 
tained 88% of the $1.11 billion in 
economic assistance funds requested by 



ril 1987 



63 



WESTERN HEMISPHERE 



the Administration for the coming fiscal 
year. The proposed strategy, funding, 
and supporting activities were organized 
around four fundamental elements or 
goals. 

Strengthening democratic institu- 
tions and processes to bring about 
greater participation in the political 
and development processes. This ele- 
ment, perhaps the most important to the 
long-term success of our effort, recog- 
nized that the basic purpose of economic 
development is increased human 
welfare, best achieved within a 
democratic environment. It initially 
focused on improving electoral and 
judicial institutions and processes and on 
a major new scholarship program. 

Arresting economic decline and 
stabilizing the region's economies. The 

principal means would be world 
economic recovery, balance-of-payments 
support from external sources, and 
implementation by the Central American 
countries of sound exchange rate, 
monetary, and fiscal policies. It was 
hoped that this phase would be com- 
pleted in 2-3 years, depending on the 
level of violence, the amount of external 
assistance, conditions in the world 
economy, and the will of the countries to 
initiate stabilization measures. 

Economic transformation and lay- 
ing the basis for sustained economic 
growth. Economic policy reforms were 
needed to decrease dependence on tradi- 
tional agricultural export crops and to 
create a sound foundation for diversified 
and export-led growth of nontraditional 
agricultural crops and manufactures, 
once political and economic stability was 
achieved. This is a much longer process 
than financial stabilization and involves a 
series of continuing reforms in such 
areas as exchange rate, interest rate, 
and tariff policies, as well as other 
measures to stimulate private savings 
and investment, diversify the region's 
production and export base, and develop 
markets for diversified production. 

Increased equity and spreading the 
benefits of economic growth. The CAI 

called for improvements in infant mor- 
tality rates, primary school enrollments, 
housing and infrastructure, and other 
areas affecting socioeconomic well-being. 



II. Prospects for Achieving 
NBCCA Objectives 



DEMOCRATIZATION AND 
DIPLOMATIC EFFORTS 

There has been substantial progress in 
Central America toward institutionaliz- 
ing democratic processes and improving 
respect for human rights. While 
democratic institutions in El Salvador, 
Honduras, and Guatemala are still 
fragile and need continued support, 
progress has been more rapid than many 
anticipated. Since May 1984, El 
Salvador, Guatemala, Honduras, and 
Costa Rica have held open and honest 
presidential elections, as was the 
parliamentary election in Belize. 

With the return to constitutional 
government in several countries, respect 
for human rights also has improved. In 
Guatemala and El Salvador, the number 
of politically motivated deaths and disap- 
pearances has been reduced 
dramatically. 

There also has been a fundamental 
change in military attitudes about the 
need to respect human rights in coun- 
tries where, in the past, military and 
security forces had been involved in 
gross violations of human rights. 
Nowhere is that change more apparent 
than in El Salvador, where both the 
military and civilian leadership are com- 
mitted to improved human rights per- 
formance. Military personnel now 
receive human rights training, and the 
National Police recently inaugurated a 
comprehensive course in human rights 
that is mandatory for all personnel. In 
the past 2 years, human rights violations 
have been reduced to a fraction of their 
previous levels. Similar improvements in 
human rights performance have 
occurred in Guatemala. 

The relationship of the military to 
the state also has been the subject of 
important legislative changes. In several 
countries basic laws governing the 
military have been changed to prohibit 
or limit its participation in politics. 

Nicaragua remains the major excep- 
tion to the democratic advances in Cen- 
tral America. The Sandinista govern- 
ment continues to work actively against 
the democratic trend within and outside 
that country's borders. Democracy also 
suffered a setback in Panama in 1985 
when the country's elected president 
resigned under pressure from opponents 
including the Panamanian Defense 
Force. 



Under the CAI, U.S. assistance to 
the process of democratic political 
development in Central America has 
increased in scope and sophistication 
We have a strategy for supporting 
democratic political developments, baa 
on the recognition that democracy is ai 
evolutionary process involving a range 
civic institutions, cultural attitudes, an 
sociopolitical resources. U.S. efforts to 
promote and strengthen democracy in 
the region focus on the following areas 
facilitating the electoral process, 
strengthening national legislatures 
improving the administration of justice 
expanding citizen participation in 
democratic processes, promoting 
freedom of the press and democratic 
labor organizations, and exposing 
thousands of Central American youths 
and future leaders to life in the United 
States. 

The United States has implemen 
new methods to reinforce its tradition 
support for democratic institutions, su 
as labor unions, private and voluntary 
organizations, and cooperatives. For 
example, the United States Informatic 
Agency (USIA) has increased its pro 
gramming of U.S. speakers traveling ( 
Central America and of Central 
Americans invited to the United State 
to discuss democratic processes. (For 
further details on USIA's programs, s 
Appendix D.) AID, with USIA's 
assistance, has initiated a scholarship 
program to bring to the United States 
Central Americans from nonelite 
backgrounds who otherwise would nol 
have an opportunity to study here. 

The U.S. Government also has 
encouraged the activities of nongover: 
mental organizations, particularly the 
National Endowment for Democracy ; 
affiliated institutes of the U.S. Chamb 
of Commerce, the AFL-CIO, and the 
Republican and Democratic Parties. 

A major U.S. effort involves supp 
for improving the administration of 
justice. In March 1985, AID provided 
funding for the UN-affiliated Latin 
American Institute for the Prevention 
Crime and Treatment of Offenders 
(ILANUD) to expand its assistance to 
the Governments of Costa Rica, El 
Salvador, Guatemala, Honduras, and 
Panama. The 5-year ILANUD prograi 
has three principal components: 

• Training courses for judges, pre I 
ecutors, and other judicial system per- 
sonnel; 

• Technical assistance to improve 
the collection of criminal statistics, to 
modernize information systems, to 



I 



64 



WESTERN HEMISPHERE 



i velop better law libraries, and to sup- 
1 1 basic commodities for courtrooms; 
i 

' • Assistance to develop programs 
s ted to each country's judicial system 
si problems. 

In addition, the United States has 
vrked to improve the administration of 
jvtice through assistance to the Inter- 
/•lerican Bar Foundation which is 
s engthening links among bar associa- 
tes in Central America. Also, the 
Epartment of Justice has developed a 
p>gram to enhance the skills of 
ii estigators who develop evidence for 
jiges and prosecutors, as well as the 
fewledge of judges who supervise 
il estigations. 

The Center for Electoral Assistance 
ad Promotion (CAPEL)— a private, 
r npartisan institute promoting free and 
f r elections established by the Inter- 

I lerican Institute for Human Rights 

\ ;h AID assistance— has sent observers 
t the national elections in the region 
i I cosponsored a series of training 
c irses on election laws and procedures. 
, The United States also has helped 

I I legislatures of El Salvador, 

( atemala, and Honduras to design and 

{ lduct training programs for their 

1 mbers and to begin developing perma- 

i it support systems that will 

s engthen their capacity to participate 

i democratic decisionmaking. 

Finally, the Central American Peace 
! lolarship program has brought more 
1 in 3,400 Central Americans to the 
1 dted States for professional and skills 
I .ining and to observe the practice of 
( nocracy in the United States. 

) plomatic Efforts 

' e United States has consistently pur- 
! 3d the NBCCA's recommendations 
lit U.S. policy test "Nicaragua's will- 
i mess to enter into a general agree- 
i :nt" and support a just and lasting 
! ution to the Central American crisis. 

The United States has supported the 
'. tin American initiative for a 
i gotiated solution to the crisis, known 
i the Contadora process, since its incep- 
|n in 1983. U.S. objectives in Central 
.nerica are consistent with the 21 
.]ints listed in the September 1983 
. icument of Objectives and which the 
'mtadora countries (Cclombia, Mexico, 
'tnama, and Venezusla) and the five 
•ntral American states agreed were 
sential for a lasting peace. Common 
jectives include the ending of military 
stilities, reductions in foreign military 



advisers and equipment, the end of sup- 
port for insurgencies, and dialogue 
between insurgents and the govern- 
ments they oppose— leading to open, 
competitive, democratic processes in 
which all citizens may participate. So 
long as it is fully implemented by all par- 
ties, the United States will support and 
respect a comprehensive, verifiable, and 
simultaneous implementation of an 
agreement fully embodying the Docu- 
ment of Objectives. 

To date, the Sandinistas' conviction 
that they are a revolutionary 
"vanguard" that must exercise national 
leadership has kept them from 
negotiating seriously to fulfill the Con- 
tadora goals. This claim to exclusive 
political power is fundamentally incom- 
patible with the other Central American 
nations' pluralistic vision of democracy. 

Through 1985 and 1986, the San- 
dinistas repeatedly hampered efforts to 
conclude an agreement. For example, in 
June 1985, Nicaragua's refusal to 
discuss an agreed-upon agenda 
torpedoed a Contadora meeting and tem- 
porarily interrupted Contadora negotia- 
tions. In November 1985, the San- 
dinistas went public with extensive, 
detailed objections to the September 
1985 Contadora draft agreement that 
was similar to a September 1984 draft 
they had said that they would accept. In 
December 1985, they called for a 
6-month suspension of the negotiations. 

With the Contadora negotiations 
deadlocked in 1985 because of Sandinista 
intransigence, four South American 
countries (Argentina, Brazil, Peru, and 
Uruguay) formed the Support Group in 
an effort to revitalize the negotiating 
process. In January 1986, the Contadora 
and Support Groups issued a "Message 
of Caraballeda" urging resumption of 
Contadora talks and other steps to 
resolve the crisis. In June, the Con- 
tadora and Support Groups presented 
the Central Americans an amended draft 
agreement. The Central American 
democracies noted that this draft con- 
tained major deficiencies; it essentially 
left open key provisions and asked them 
to "sign now and negotiate later." They 
called for further negotiations to 
strengthen the draft. The Sandinistas 
stated that they would accept the new 
draft agreement on the condition that 
future arms talks be held on their terms. 
In July, they filed suit against Costa 
Rica and Honduras at the International 
Court of Justice, effectively blocking 
further negotiations on the agreement. 

In September 1986, the Contadora 
countries met at the United Nations in 
New York to discuss ways of reviving 



the negotiating process. After a spirited 
debate, the OAS General Assembly in 
Guatemala in November accepted by 
acclamation a resolution urging Con- 
tadora to persevere in its efforts to find 
a negotiated settlement. The UN 
General Assembly adopted a similar 
resolution the following week. On 
November 18, the UN and OAS Secre- 
taries General presented a joint initiative 
listing services available from their 
organizations to assist Contadora. 

Contadora and Support Group 
foreign ministers met in mid-December 
and announced their intentions to insti- 
tutionalize the process by scheduling 
regular meetings and expanding its 
scope to include other regional political 
and economic issues. They also 
announced a January 1987 tour of Cen- 
tral America accompanied by the UN 
and OAS Secretaries General. The 
January 19-20 visit demonstrated their 
continuing interest in seeking an agree- 
ment, but no breakthroughs resulted. 

Costa Rica invited the presidents of 
the four Central American democracies 
to meet on February 15, 1987, in San 
Jose. At that time Costa Rica presented 
a new peace proposal focusing on the 
key issue of national reconciliation and 
democratization in Nicaragua. The San- 
dinistas have criticized the summit and 
Costa Rica's peace plan. In a parallel 
effort, on February 6, seven parties of 
the Nicaraguan civic opposition pre- 
sented a proposal to achieve national 
reconciliation. 

The United States has sought to 
cooperate with the Contadora process. 
From June to December 1984, the 
United States participated in bilateral 
talks with the Sandinistas at the request 
of Contadora. In January 1985, after 
nine rounds of talks, the United States 
decided not to schedule further meetings 
due to concern that the Sandinistas were 
using the talks to avoid a comprehensive 
agreement within Contadora's 
multilateral framework. 

On February 10, 1986, Secretary of 
State Shultz met in Washington with the 
foreign ministers of the Contadora and 
Support Groups. The Secretary reiter- 
ated that the United States was pre- 
pared to reopen bilateral discussions 
with Nicaragua if the Sandinistas talked 
to their democratic opposition, including 
the armed resistance. 

In March 1986, Ambassador Philip 
C. Habib became the new Special Envoy 
for Central America. Ambassador Habib 
has made 10 trips to the region to meet 
with Central American and Contadora/ 
Support Group leaders and reaffirm our 
support for the negotiating process. 



pril 1987 



65 



WESTERN HEMISPHERE 



TABLE 1 






Macroeconomic 
Central America, 


Indicators for 
1983 and 1986 1 


Indicator 

GDP Growth Rate 


1983 

- 0.8% 


1986 

(est.) 

+ 1.4% 


Private Investment 
(°/o of GDP) 


8.9% 


1 1 .4% 


Private Capital 
Flows 


-$101 
million 


+ $215 

million 


Government 
Fiscal Deficits 
(% of GDP) 


5.1% 


2.8% 


Total Nontraditional 
Exports 


$808 
million 


$1,221 
million 


Nontraditional 
Exports to U.S. 

Fruits and 
Vegetables 


$33 
million 


$66 
million 


Manufactures 


$290 
million 

ja. 


$440 
million 


'Excludes Nicarag 



(For further information on the 
political situation in Nicaragua and the 
other Central American countries, see 
Appendix C.) 



ECONOMIC AND SOCIAL ISSUES 

Economic Stabilization 

Central America underwent a severe 
economic contraction during the early 
1980s. Total production declined yearly 
between 1980 and 1983, causing per 
capita incomes to fall by 12% over the 
period. The decline in production was 
reflected in a sharp fall in private invest- 
ment, massive capital flight, and a 
general deterioration of the economic 
climate. 

Sharply increased economic 
assistance resulting from implementa- 
tion of the NBCCA's recommendations 
facilitated a turnaround in the region's 
economic situation. Table I summarizes 
the main macroeconomic conditions in 
1983 and 1986 and presents several key 
indicators of progress to date in stabiliz- 
ing the region's economies. The reversal 
of the downward spiral in overall produc- 
tion is the broadest indicator of this 
turnaround. After declines of -2.6% in 
1982 and -0.8% in 1983, regional gross 
domestic product rose in 1984 by 1.7%, 
in 1985 by 0.9%, and in 1986 by an 
estimated 1.4%. 



Overall economic conditions have 
substantially improved. Nevertheless, 
the recovery is still precarious. The 
economic growth rate of 1.4% in 1986 
falls short of the 2.5%-3.0% hoped for 
2 years ago. The two most significant 
shortfalls have been in Guatemala, 
where major U.S. funding did not begin 
until an economic stabilization program 
was implemented in 1986 after the tran- 
sition to an elected government, and in 
El Salvador, where continued guerrilla 
attacks and destruction make economic 
stabilization and recovery more difficult. 
In addition, El Salvador suffered a major 
earthquake in October 1986, causing a 
conservatively estimated $822 million in 
damage to infrastructure alone. 

The slowness of the recovery 
appears to be the result of both internal 
and external factors. The major factors 
are as follows. 

An adverse political/military 
climate still exists. The NBCCA pro- 
jected that the major problems— insur- 
gency in El Salvador and Nicaragua and 
the destabilizing political conflict be- 
tween Nicaragua and its neighbors- 
would largely be resolved within 18 
months of the report's issuance (i.e., by 
sometime in 1985). This has not proven 
to be the case. 

External economic trends have 
been worse than anticipated. Sluggish 
world economic growth and unfavorable 
commodity prices have limited Central 
American growth. The NBCCA had an- 
ticipated that prices of the major export 
commodities of Central America— coffee, 
sugar, bananas, beef, and cotton— would 
slowly recover from the very low levels 
existing during the 1981-83 period. 
However, prices of sugar, cotton, and 
beef remain significantly below their 
1980 levels. After rising in 1985-86, cof- 
fee prices have fallen below the 
depressed levels of 1982-84. 

Anticipated capital inflows have 
not materialized. The NBCCA report 
projected total inflows of capital during 
the 1984-90 period of $21 billion 
(excluding Nicaragua), including $10-$12 
billion to be provided by the U.S. 
Government. Actual U.S. assistance 
flows have been behind schedule; even if 
a $300 million FY 1987 supplemental is 
approved, the cumulative shortfall 
through the current fiscal year will be 
$760 million. An anticipated repatriation 
of capital sent abroad earlier and sharp 
upsurges in private domestic and foreign 
investment and in World Bank lending 
have not occurred. 



Governments have been slow to 
make economic policy changes. To 

varying degrees, governments have bei 
reluctant to take some of the steps 
necessary to resolve their economic 
problems. 

Progress in exchange rate realig 
ment has been substantial but remair 
incomplete. This is not an issue in Beli 
Costa Rica, or Panama. Guatemala 
adjusted its exchange rate for most 
transactions to a realistic level in earlv 
1986 and has pledged to complete the 
process. El Salvador also undertook a j 
major adjustment in 1986 but has not 
made needed followup adjustments. In 
Honduras, the exchange rate remains 
policy concern. 

Economic policy coherence has n 
been fully achieved. In addition to dif 
ficulties in maintaining an appropriate 
exchange rate system, El Salvador, 
despite the substantial gains of 1984 a 
1985, continues to suffer from a lack c 
public and private consensus on 
economic policy. Costa Rica's overall 
economic policy under the current 
administration has been the subject of 
protracted negotiations, while its rela- 
tionship with its commercial creditors 
deteriorates. 

Government deficits are still too 
large. Fiscal deficits have been cut 
sharply, but further reductions are 
needed in some countries. A relaxatioi 
of fiscal discipline in Costa Rica is 
threatening to undo some of its prog- 
ress, while the Salvadoran Governmer 
inability to control fiscal deficits 
threatens inflationary pressures. 

Implementing such structural 
economic reforms presents a dilemma 
for fragile democratic governments. It 
the short run, such actions impose 
economic hardship on some groups up< 
which the governments depend for suj 
port. Over the long term, failing to cot 
rect underlying structural problems wi 
only lead to worsening economic condi 
tions for the entire country. U.S. 
economic assistance, therefore, must b 
conditioned upon implementation of 
needed reforms, or ever-higher 
assistance levels will be required just t 
prevent further economic decline. 

Structural Transformation 

The CAI proposed a strategy for 
generating economic growth by the eni 
of the decade, based on increased privf 
investment, reduced government inter 



66 



Department of State Bulle 



WESTERN HEMISPHERE 



jntion, and accelerated growth of non- 
.aditional exports. Gross domestic 
roduct (GDP) growth in the region was 
irgeted to reach 6% per year by 1990, 
'ieled by new investment, particularly in 
■intraditional export products. Non- 
aditional exports were projected to rise 
lorn $400 million in 1983 to $1 billion by 
•90. The following reviews progress to 
ite. 

Investment. Domestic private 
vestment in the region declined 
iarply during 1980-83. For the region 
| a whole, the ratio of private invest- 
ment to GDP fell from 16% in 1980 to a 
Ijw of 9% in 1983. Since then, the ratio 
eadily rose to more than 11% in 1986, 
ith all of the countries (except Belize) 
alizing some recovery by 1985. 
| The most promising trend has been 
i Costa Rica, where the private invest- 
Hent/GDP ratio fell from 17% in 1980 to 
' % in 1982 but then regained its 1980 
l/el by 1985. This turnaround can be 
tributed primarily to the significant 
onomic policy reforms undertaken by 
je Costa Rican Government during that 
iriod. Sharp declines in private invest- 
snt occurred in Belize, Guatemala, and 
jnduras. In El Salvador, the ratio 
mained in the 6%-7% range during 
'80-83, then rose to 8.4% in 1985 and 
12% in 1986. This level, however, is still 
r below those of the 1970s. 

While improvement in overall 
onomic conditions is likely to stimulate 
vestment from larger firms, the 
nited States is actively engaged in 
ore direct efforts to promote small 
isiness. A series of specific projects is 
iderway, including technical assistance 
small business, training of managers, 
id increased credit. 

Another important aspect of improv- 
g the investment climate has been the 
duction in the role of government 
iterprises. The United States supports 
forts to sell or liquidate such enter- 
■ises in several countries, notably Costa 
ica and Honduras, eliminating a serious 
■ain on government finances, and 
lproving efficiency of operation. A 
imber of firms already have been sold 
• liquidated. In Costa Rica, the drain on 
wernment resources from the state 
tiding company has been reduced from 
55 million in 1983 to only $5 million in 
)86; the figure is expected to drop to 
■ro in 1987. 

Nontraditional Exports. Although 
bntral to long-run prospects for sus- 
iiined growth, nontraditional agricul- 
iral and industrial export products can- 
st play a significant economic role in 



CHART I 

Central America: Manufactured Exports to the U.S., 1984-86 

$ millions 

20 40 60 80 100 120 140 160 180 200 220 

H 1 1 1 1 1 1 1 1 1 1 



Belize 



Costa Rica 



El Salvdor 



Guatemala 



Honduras 




Panama 



V/////A 



the near term. For Costa Rica, the 
largest exporter of manufactures, 
manufactured exports to the United 
States (the primary extraregional 
market) were valued at only $100 million 
in 1983 or less than 10% of total 
exports. Even a doubling of this figure 
would have a smaller effect on export 
earnings than a significant rise in coffee 
prices. 

A sustained effort over a decade or 
more will be needed if nontraditional 



products are to play an important role in 
generating export earnings. An annual 
growth rate of 15%-20% per year in 
nontraditional exports would seem to be 
necessary both for arriving at substan- 
tial export levels in the medium term 
and for maintaining the attention of 
policymakers to the potential in this area 
for further rapid growth through appro- 
priate policy changes. 

The experience so far has been 
encouraging. Nontraditional exports 



Vpril 1987 



67 



WESTERN HEMISPHERE 



CHART II 

Central America: Commodity Exports, 1980-92 3 



$ billions 
7 T 



6 ■• 



5 ■■ 



4 ■■ 



3 ■■ 



2 ■ ■ 






Traditional 



Central American 
Common Market 



□ 



Nontraditional 










M 



u 



7?. 



& 



m 



w 



m 



1980 '81 



'82 '83 '84 '85 '86 '87 '88 '89 '90 '91 



'92 



a Data for 1980-86 are actual; those for 1987-92 are projected. 



have been growing since 1983 at an 
annual rate of 15%. As a result, their 
share of total exports has risen from 
21.6% in 1983 to 26.5% in 1986. We pro- 
ject (see Chart II) that they will rise to 
40% by 1992, providing a basis for 
dynamic growth by then. Nevertheless, 
the speed with which countries have 
been able to move to an export-led 
growth rate has varied. 

Costa Rica appears to be on a rapid 
growth path, with exports to the United 
States rising from $72 million in 1982, 
when policy reform began, to an 
estimated $211 million in 1986— an 
annual growth rate of about 30%. 
Panama, Guatemala, Honduras, and 
Belize also show favorable trends in non- 
traditional exports to the United States, 
although they began from much smaller 



68 



bases than in the case of Costa Rica. In 
El Salvador, a significant decline 
occurred in 1985 and 1986, suggesting 
that the policy framework and civil strife 
contributed to an inadequate environ- 
ment for stimulation of new exports. 

Spreading the Benefits of 
Economic Growth 

Rapid economic growth is probably the 
most important vehicle for achieving 
adequate standards of living for the peo- 
ple of Central America. Economic oppor- 
tunity for all groups in society is most 
likely to result from growth of employ- 
ment opportunities and from replace- 
ment of government controls and non- 
price rationing by market forces. 
However, disparities in income and 
opportunity in some countries are so 



wide that a direct attack on such prob 
lems is needed. 

To promote progress in these social 
and economic opportunity areas, the 
Central America Initiative considered i 
crucial to assure that the benefits of thi 
growth process are broadly distributed. 
Significant progress is being achieved. 
Table II summarizes our best estimates 
of social indicators for 1983 and 1986. 
Specific activities in these areas are 
described below. 

Education. Under the CAI, the 
United States and other donors have 
undertaken a series of projects aimed a 
increasing access to education, includin; 
the following. 

Access to primary education has 
significantly increased over the past 



WESTERN HEMISPHERE 



*veral years in the countries with the 
bst serious problems— Guatemala, El 
.lvador, and Honduras. In Guatemala, 
E gross enrollment ratio increased 
!wn 71% to 76% between 1980 and 
086, and in Honduras by 9%. For El 
[dvador, current data are not available 
teause of the October 1986 earthquake. 
S'ese increases reflect AID inputs, 
fcernal efforts, and large amounts of 
instance from the World Bank and the 
I<;er-American Development Bank. 

Efficiency of education also is 
■proving. In Guatemala, the average 
imber of student-years of schooling 
reded to produce a sixth-grade 
f aduate has dropped by 1 year since 
180, and in Honduras it has dropped by 
]i years. In Belize, Panama, and Costa 
l:a, where access to primary education 
i already close to complete, improve- 
(mts in efficiency also are taking place. 

Between 1984 and 1986, more than 
t> million textbooks were produced and 
< itributed in the region through AID 
id World Bank projects. Another 9 
i llion textbooks are planned for pro- 
cction and distribution between 1987 
id 1990. 

The United States has supported 
i lining of 16,000 teachers in Guatemala 
; d Honduras during the past 4 years, 
! d plans are underway for training 
j other 50,000 during the 1987-90 
] riod. 

I Current U.S. -financed projects have 
! oported construction or renovation of 
i 100 classrooms in Honduras and El 
il lvador, with smaller efforts in 
I .atemala and Costa Rica. Plans for 
i other 4,000 during 1987-90 are being 
i plemented. 

AID has important vocational, 
' ;hnical, and management training 
i tivities underway or in development in 
i ch country. In Honduras and Costa 
i| ca, 6,000 managers were trained 
■ I tween 1984 and 1986, and 20,000 per- 
I ns are expected to benefit from voca- 
liinal, technical, and/or management 
fj lining between 1987 and 1990. 

Health and Nutrition. Available 
i ta indicate that infant mortality is 
■ dining in the region. The goal of 
3 during infant mortality by 10% can be 
tpected to be attained by 1989. AID's 
i alth projects focus on developing a 
; stained capacity to provide oral 

hydration therapy (ORT), immuniza- 
•>ns, and other important child-survival 
.terventions and to reduce the inci- 

nce of malaria. 

'. Oral rehydration therapy reduces 
jfant mortality by treating the dehydra- 
>n resulting from diarrhea by the 



TABLE II 

Trends in Social Indicators, 1983 and 1986 

Social Indicator 

Health 

Infant Mortality Rate (per 1,000 births) 

Education 

Primary School Enrollments 1 

Percent of Population (Ages 7-1 2) 1 
Primary School Completion Rate 1 
Central American Peace Scholars 

Family Planning 

Couples using Family Planning 
Percent Coverage 

El Salvador Land Reform 

Titles Issued to Phase I Cooperatives 
Phase III Titles Issued 



1983 

(est) 


1986 


61.1 


56.9 

(1985) 


3,040,000 


3,300,000 


90% 


91% 


72% 


75% 


— 


3,497 


1,150,000 


1 ,400,000 


37.5% 


41 .7% 


41 


196 


5,456 


17,426 



'Education statistics exclude El Salvador, for which current data are not available. 



ingestion of a simple solution of water, 
sugar, and salts. This technology already 
has prevented thousands of deaths each 
year in Central America. AID-supported 
programs include local production of 
ORT solutions in Guatemala and mass 
media campaigns promoting its use in 
El Salvador. 

The rate of immunization coverage 
in Central America, except in Costa Rica 
and Panama, is low. AID helps to vac- 
cinate children and to institutionalize 
vaccination programs. In Guatemala, a 
new AID-funded project assists the 
Ministry of Health to make immuniza- 
tions routinely available in all health 
facilities. Each household in rural 
Guatemala is visited three times per 
year to identify children needing vac- 
cinations and to have them vaccinated. 
Similar projects are underway in El 
Salvador and Honduras. 

Nutrition-related activities focus 
on development of growth-monitoring 
programs that complement ORT and 
immunization activities. The PL 480 
Title II program provides about $10 
million per year in food assistance for 
maternal and child health, food for work, 
school feeding, emergency feeding, and 
aid to displaced persons. 

Population Growth. Access to fam- 
ily planning services is key to reducing 
the region's rapid population growth, 
which has exacerbated the drain on 



available resources. The extremely high 
regional annual population growth of 
about 2.8% means that annual produc- 
tion increases of that magnitude are 
needed just to prevent current living 
standards from declining. Although the 
rate has been brought down from more 
than 3% a decade ago, the present rate 
of 2.8% is so high that its impact will be 
felt for decades in terms of huge 
numbers of new entrants to the labor 
force, a continuing negative factor in per 
capita income growth, and large 
numbers of people for whom education 
and many other social services will have 
to be provided. In some areas of Central 
America, the huge investments being 
undertaken in such projects as the 
development of urban infrastructure will 
cover only the projected growth in 
population and will not reduce the high 
percentage of the urban population that 
does not have adequate access to water 
and sanitation. 

The Central American governments 
have recognized that population and 
development policies are mutually rein- 
forcing, and steps have been taken to 
address this serious problem. AID's 
main role has been technology transfer, 
with 80% of AID assistance going to 
nongovernmental organizations in sup- 
port of Central American efforts to 
implement their own plans. Major sup- 
port is being provided for contraceptive 



pril 1987 



69 



WESTERN HEMISPHERE 



commercial sales programs and for 
improving information available to the 
population. We expect a 50% increase in 
the use of family planning services by 
1990. 

Housing, Water, Sewerage, and 
Other Infrastructure. At present, AID 
is financing more than 50 separate 
activities related to housing; water and 
sewerage systems; and other infrastruc- 
ture, such as roads, bridges, irrigation 
projects, and energy. Other donors, 
including the Inter-American Develop- 
ment Bank and the World Bank, also 
have been active. 

Because of depressed economic con- 
ditions and tight government budgets, 
expansion of housing and infrastructure 
construction has been slow. Available 
data indicate that access to water and 
sewerage is expanding faster than 
overall population growth but only 
modestly so. As economic conditions 
improve, resources available for these 
activities will expand. 

Security Developments 

The NBCCA concluded that indigenous 
Central American problems "have been 
exploited by hostile outside forces. ..." 
The Commission recommended more 
security assistance for El Salvador, con- 
tingent on sufficient progress in human 
rights, free elections, and political 
reforms. It also urged greater predict- 
ability of U.S. support through multiyear 
funding of military aid to the Central 
American region. U.S. policy is to signal 
solid U.S. commitment to the Central 
American democracies— through security 
assistance, training, and exercises- 
while promoting the professionalization 
of each country's armed forces. Soviet, 
Cuban, and other Soviet-bloc assistance 
to the Sandinistas continues unabated. 
In the face of externally supported insur- 
gent movements and the increasing 
Nicaraguan military threat, the United 
States assists the Central American 
democracies to provide the protective 
security shield which makes development 
possible. 

Progress to Date. Remarkable prog- 
ress has been made toward the basic 
objective of improving the regional 
security environment through U.S. 
assistance in strengthening the defense 
capabilities of the region's democracies. 
This effort has promoted the profes- 
sionalization and effectiveness of each 
country's armed forces to enable them to 
better combat security threats, e.g., 



insurgency and the Nicaraguan military 
challenge. Central American militaries 
have used U.S. assistance to improve 
organization, training, and equipment. 
Increased battlefield success and 
reduced guerrilla strength, particularly 
in El Salvador, have marked these 
efforts. They have been accompanied by 
improved human rights performance 
(see Appendix E.) 

At the same time, however, the 
Nicaraguan military threat has increased 
due to an upgraded military hardware 
capability and the growing size of their 
armed forces, which reached 75,000 
active duty personnel in 1986. Soviet, 
Cuban, and other Soviet-bloc military 
assistance to the Sandinistas continues 
unabated, reaching a peak level of 
23,000 metric tons of equipment in 1986. 

Although the U.S. -supported 
Nicaraguan democratic resistance has 
increasingly forced the Sandinistas to 
pay more attention to internal condi- 
tions, the Sandinistas continue to sup- 
port subversion in the region and to 
offer training, logistical, and command 
and control facilities to the Marxist guer- 
rillas in neighboring countries. 

In the last 2 years, U.S. security 
assistance has been constrained by 
budgetary restrictions and the 
Adminstration's aid request levels to 
Congress have not been fully funded. 

Prospects for Meeting Objectives 
Through 1989. The crisis in the region is 
a long-term problem— in the absence of a 
comprehensive, simultaneous, and 
verifiable implementation of the 21 
objectives of the Contadora Document of 
Objectives of September 1983— will 
require a coordinated long-term 
response and commitment of resources. 
Soviet-bloc military assistance to 
Nicaragua alone exceeds U.S. military 
assistance to all the Central American 
democracies. Consolidation of the San- 
dinista regime and Nicaragua's ability to 
destabilize the region continue to 
frustrate peaceful negotiations. That 
country's military capability is improv- 
ing. Soviet, Cuban, and other Soviet-bloc 
military assistance to the Sandinistas 
and various insurgent groups in Central 
America is likely to increase. 

Meeting the security objectives will 
require that the United States 
simultaneously continue to: 

• Strengthen the security shield of 
each of the Central American 
democracies to ensure continued prog- 
ress in democratic development, 
economic growth, and national recon- 
ciliation; and 



• Support efforts to achieve a 
democratic outcome of the conflict in 
Nicaragua and a comprehensive, 
verifiable implementation of the 21-poi 
Contadora Document of Objectives. 

Although substantial progress has 
been made toward the realization of th 
security objectives in the region, there 
a grave risk of compromising the succe 
of the effort if there is a reduction in 
funding for the security shield to the 
region's democracies or for the 
democratic resistance. 



III. The Need for 

Full Funding of NBCCA 

Recommendations 



■ 



i 

! 



SUMMARY OF ACCOMPLISHMEN' 

The CAI was based on certain econom 
and social recommendations contained 
the NBCCA report. Much has been 
accomplished in the past 3 years. 

• Democratically elected govern- 
ments, dedicated to human rights 
improvements, are found in Belize, 
Costa Rica, El Salvador, Guatemala, a 
Honduras; Marxist-Leninist Nicaragua 
stands in stark contrast in this trend. 

• Politically motivated violence in 
Salvador and Guatemala has been 
reduced significantly. 

• A fundamental change has 
occurred in the attitudes of the militar 
toward human rights in El Salvador ai 
Guatemala. 

• The severe economic slide so evi 
dent in 1980-81 has been arrested and 
recovery is underway in every country 
the region. 

• Capital flight from the region hs 
been reduced, and private investment 
and private capital have begun to retui 

• Nontraditional exports (believed 
be the economic key to Central 
America's long-term future) are expan 
ing in every country and dramatically i 
Costa Rica. 

• Infant mortality rates are drop- 
ping more rapidly than targeted. 

• Primary school enrollments are 
increasing. 

• Programs for improvements in t 
administration of justice are underway 
throughout the region. 

• 3,497 "peace scholars" already 
have come to the United States under 
the Central American Peace Scholarsh 
program. 



70 



Department of State Bullei 



WESTERN HEMISPHERE 



Central Americans have begun to 
blish the proposed Central American 
velopment Organization. 

In its report, the NBCCA indicated 
at the United States should furnish 
0-$12 billion in resources and 
arantees to Central America from 
84 to 1990. The CAI proposed a more 
)dest beginning— a 5-year effort total- 
some $8.4 billion, of which $2 billion 
is to be in guarantees and the balance 
appropriated funds from Economic 
ipport Funds (ESF), development 
sistance, PL 480, Peace Corps, USIA, 
d the refugee program. 3 Excluding the 
[ 1984 supplemental request of $400 
lllion, this averages out to an annual 
IjTuirement of $1.2 billion in appro- 
bated funds and $400 million in 
jarantees for the 5-year period. 
I Actual funding against these targets 
I of the end of FY 1986 totaled $2,155 
llion in appropriated funds and $377 
■jllion in guarantees (see Table III, 
172). 

I Economic assistance levels for Cen- 
^il America have been substantial over 
\i past 3 years, but they have been 
Jninishing and falling short of the 
j-els recommended by the NBCCA and 
ithe CAI, particularly with respect to 
1 propriated funds. In terms of the 
• ginal assistance targets, the shortfall 
i appropriated funds will be approx- 
imately $760 million by the end of FY 
r87, assuming passage of the full FY 

4 87 supplemental. 4 Any reduction in 
I? FY 1987 supplemental level will, of 
lurse, further increase the shortfall. 

The NBCCA made no specific dollar- 
1 r el recommendation for military 

5 5istance. In general, it did recommend 
1 ire aid at a level that would ade- 

i ately promote the strengthening and 
j Dfessionalization of each democracy's 
s ned forces. An effective security 
I teld against violence and intimidation 
Id to be built for Central American 
( mocracies in order to create an envi- 
Inment in which political, economic, 
id social progress could succeed. The 
led for sustained, sufficient military aid 
I* regional armed forces and the 
i caraguan democratic resistance 
Jl mains. 

.) the Goals Need Modification? 

JDSt of the recommendations contained 
j the NBCCA report remain sound. It is 
' preasingly evident, however, that not 
I of the objectives originally set forth 
' the NBCCA's report can be fully 
ihieved within the 5-year timeframe of 
leCAI. 



CHART III 

U.S. Fruit and Vegetable Imports from Central America, 1980-86 3 

$ millions 
70 -r 



60 - ■ 



50 



40 



30 -- 



20 -• 



10 




1980 



1981 



1982 



1983 



1984 



1985 



1986 



Excludes bananas. 



We believe the basic goals of the 
CAI— strengthening democratic institu- 
tions, economic stabilization, economic 
transformation, and spreading the 
benefits of growth more broadly— are 
consistent with the NBCCA recommen- 
dations and remain a sound and appro- 
priate focus for U.S. assistance to Cen- 
tral America. 

It is clear that several of the major 
targets under these goals will require 
additional time and all of the resources 
recommended by the NBCCA. 

Targets under strengthening 
democratic institutions were never 
quantified, and efforts in this area will 
need to continue well into the 1990s. 
Specifically, over the next several years, 
we would hope to greatly expand activ- 
ities in such areas as the administration 



of justice, leadership training, improve- 
ment of electoral processes and support- 
ing systems, improvement of local 
governments, legislative processes, 
trade union development, and creating a 
role for women in development. 

While economic stabilization has 
been achieved in varying degrees 
throughout the region, it is quite fragile 
and could be easily reversed by any 
significant economic, political, or 
military setback. Another 3-5 years will 
be needed to solidify the economic 
stabilization process and to ensure that 
the Central American economies are 
securely on the road to recovery. 

The prolonged economic stabilization 
process, among other factors, has 
affected the speed at which the all- 
important economic transformation has 



pril 1987 



71 



WESTERN HEMISPHERE 



TABLE III 












Funding of the Central American Initiative, FY 1984/85-1987 






($ thousands) 














1984/85 


1986 TOTAL 


1987 
Supplemental 


1987 


TOTAL 


Appropriated Funds 












ESF 


826,993 


457,812 1,284,805 


415,000 


200,000 


1 ,899,805 


Development 












Assistance 


299,933 


254,952 554,885 


231,062 


100,000" 


885,947 


PL 480 












Title I 


130,100 


89,500 219,600 


89,000 





308,600 


Title ll" 


11,591 


19,671 31,262 


18,181 





49,443 


Subtotal 


1,268,617° 


821,935 2,090,552 


753,243 


300,000 3,143,795 


Peace Corps 


18,200 


10,600 28,800 


10,500 





39,300 


USIA 


7,800 


19,500 27,300 


15,900 





43,200 


Narcotics" 


548 


326 874 


1,255 





2,129 


OPIC 


4,544 


3,330 7,874 


3,300 





11,174 


Subtotal' 


31,092 


33,756 64,848 


30,955 





95,803 


Total appropriated 


1 ,299,709 


855,691 2,155,400 


784,198 


300,000 3,239,598 


Guarantees 












Trade Credit Insurance 












Program 





176,600 176,600 


200,000 





376,600 


Housing 


5,000 


40,469 45,469 


2,600 





48,069 


Commodity Credit 












Corporation 


59,700 


34,000 93,700 


48,000' 





141,700 


OPIC 


10,103 


33,050 43,153 


33,000* 





76,153 


Eximbank 


9,943 


7,957 17,900 


8,500' 





26,400 


Subtotal 


84,746 


292,076 376,822 


292,100 





668,922 


TOTAL 


1,384,455 1 


,147,767 2,532,222 


1,076,298 


300,000 3,908,520 


3 FY 1987 supplemental includes $100 mi 


lion for El Salvador earthquake reconstruction. 




" Includes Section 416 commodities $5 million in FY 1986 and $7.7 million in FY 1987. 




c For FY 1984, includes su 


pplemental plus 


> $25 million of PL 480 reallocations only. 






For further information on narcotics program see Appendix G. 








c Excludes non-CAl related program costs 










Projected based on FY 1986 allocations. 











been simultaneously taking place. 
Stabilization concerns have directed 
attention and resources away from the 
structural reforms and programs needed 
if Central America is to attain the type 
of self-sustaining economic growth 
essential to equity and the preservation 
of democracy and human dignity. It now 
is obvious that transformation of these 
economies— changing the base from 
traditional exports of bananas, coffee, 
sugar, cotton, and meat, to non- 
traditional agricultural products and 
manufactures— will require significantly 
more time than envisioned by the 
NBCCA. Under optimistic projections, it 
will be 1992 before Central America 
again achieves a 5% growth rate— one 
percentage point less than originally con- 
templated in the NBCCA report and 



only slightly more than two percentage 
points above the annual increase in 
population. 

In terms of spreading the benefits 
of growth more broadly, several specific 
targets may be largely met by 1989 or 
1990, e.g., reduction in infant mortality, 
increased use of family planning serv- 
ices, improved access to potable water, 
and meeting the objectives under the 
Central American scholarship program; 
others will not. For example, the crea- 
tion of 250,000 jobs per year must await 
a fairly high and sustainable economic 
growth rate. Other social benefit 
targets— for example, primary school 
enrollment growth and reduction in 
primary school repeaters— were probably 
overly optimistic within either the CAI's 



5-year or the NBCCA's 7-year time- 
frame. Accordingly, we have establishe I 
more realistic targets in education for j 
the region (including El Salvador) for 
1990: 90% gross enrollment ratios; 709| 
completion rates; and 9 years to produi j 
a sixth-grade graduate. Finally, it will 1 J 
a long and difficult effort to incorporat ' 
equitably the less advantaged into the l 
new productive base which we are help 1 j 
ing the Central Americans to build. 

Fully Funding the Objectives 

We intend to fund the CAI fully by 
extending the period of execution of th 
program by 3 years to 1992. The targe 
growth rate is being revised to slightly 
more than 5%. The extension will 
increase the original budget by approx 
imately $500 million to a total of $6.9 
billion in appropriated funds while 
retaining the original $2 billion in 
guarantees. This extension is response 
to funding limitations under the budge 
deficit reduction act and reflects the di 
ficulties inherent in the implementatioi 
by sovereign governments of essential 
reforms. It is attuned to the political a 
security realities of the region and the 
external conditions of world markets a 
investment attitudes. We consider this 
extension of the CAI a practical 
response to a changed situation. 

A 3-year extension of the original 
5-year timeframe will help to ensure 
that: 

• There is a solid trend in all coun 
tries toward increased democratizatioi 
and participation of the populace in th 
electoral and governing processes; 

• The Central American economie 
are stabilized and well on the road to 
recovery and are moving toward regai 
ing or exceeding their precrisis rates c 
growth; 

• Essential structural reforms are 
place or sufficiently initiated to permit 
Central America to achieve and sustai; 
positive per capita economic perform- 
ance based on export-led growth; and 

• Policies and other programs are 
place to ensure broader participation i: 
the benefits of these higher growth 
rates. 

Projected assistance levels also 
reflect a shift in emphasis, beginning i 
FY 1989, away from stabilization and 
toward structural transformation and 
equity concerns. Economic Support 
Funds will continue to play a major rol 
in this transition by helping to fund so 
of the larger projects that are aimed a 
increasing and diversifying both produ 
tion and exports through improved inf 
structure, technology, and/or equipmei 



72 



Department of State Bulle 



WESTERN HEMISPHERE 



3F-generated local currencies will be 
ired with U.S. and other donor 
sistance to support programs designed 
broaden access to basic social services 
id promote equity. U.S. aid will be tied 
sector-wide reforms designed to put 
licy, institutional, and financial 
ameworks in place, to ensure that 
owth is both quantitatively and 
lalitatively appropriate and 
stainable. 

We hope that the year 1992 
i presents a reasonable date by which 
ie CAI's major economic objective— 
icovery— will be achieved and the need 
:r economic supporting assistance will 
I significantly less. Central America's 
i'velopment is a long-term proposition, 
Iwever, and we intend to develop a 
llow-on program for the years beyond 
)92. This will be needed especially for 
lime of the newer initiatives under 
;mocratization, structural reform, and 
•ograms to ensure broader participa- 
m and human resource development. 

Table IV (p. 74) summarizes by 
ajor goal area and major funding 
: >urce: the levels of financial assistance 
ider the CAI already committed or pro- 
cammed through FY 1987; the planned 
Y 1988 request; and estimated funding 
quirements beyond FY 1988 and 
rough FY 1992 to fund fully and com- 
ete as many of the NBCCA recommen- 
itions as possible. The actual outlays in 
ich country may be less than author- 
ed if a country fails to implement 
gnificant economic reforms. 

rogram Summary 

he program we envision under the 
rtended timeframe will not vary 
gnificantly from that currently under- 
•ay. The pace of accomplishment over 
ie next 5 years, however, will vary. The 
blowing provides a general description 
f program content and focus. 

Democratization. The continuation 
nd strengthening of democratically 
lected governments, democratic proc- 
sses, and civilian institutions in the 
egion are critical to overall success in 
chieving the recommendations of the 
JBCCA report and the goals of the CAI. 
^he elected civilian governments of the 
egion must be able to govern effectively 
ind honestly, to protect and extend the 
luman and legal rights of their citizens, 
ind to organize alternative programs 
ind choose among them peacefully. 

U.S. aid to democratization must 
jrow in size and sophistication as we and 
the Central Americans confront the fact 



that democracy is an evolutionary proc- 
ess involving a range of civic institu- 
tions, cultural attitudes, and socio- 
political resources. AID programs will 
continue to focus on facilitating the elec- 
tion process itself, expanding citizen par- 
ticipation and leadership training, 
strengthening the professional 
capabilities of legislatures, and pro- 
moting the freedom and competency of 
the press. AID also is working to 
upgrade the competency and independ- 
ence of the judiciary and the investi- 
gative organs of government so that 
they may more effectively serve the 
populace and protect human rights. 

The Central American Peace 
Scholarship program, aimed at providing 
10,000 or more scholarships, will be con- 
tinued. This highly successful effort aims 
to not only acquaint trainees with the 
values and institutions of democracy, 
but— because it is targeted at the less 
advantaged— to increase their ability to 
compete in the employment market- 
place. We see the program as an invalu- 
able tool to facilitate our efforts to 
redirect Central American agricultural 
and manufacturing production toward 
the highly competitive world market. A 
highly trained workforce is essential if 
Central America is to succeed in such a 
competitive environment. 

In addition, AID and USIA should 
develop programs to improve the profes- 
sional capabilities of Central American 
civilian officials, for example, through 
courses that complement existing U.S. 
Government training programs by help- 
ing Central American civilian officials 
relate U.S. -oriented course matter to 
Central American requirements. 

Stabilization. We envision that 
balance-of-payments assistance to El 
Salvador and Honduras through ESF 
cash transfers will be required 
throughout the period at gradually 
declining levels. ESF funding for 
Panama and Belize should not be 
required after 1989 or for Costa Rica 
and Guatemala after 1991. This assumes 
that we will be successful in convincing 
the nations of the region that our com- 
mitment to economic and social reform 
equals that of our concern for 
democratization and our opposition to 
the spread of Marxism. Otherwise, there 
will be a danger of creating economic 
dependency by continuing high ESF 
levels without appropriate structural 
adjustment. 

Economic Transformation. As the 

requirement of ESF for balance-of- 
payments financing declines, we intend 



to shift the focus of ESF funding and its 
associated policy dialogue to the 
macroeconomic and sectoral policy and 
institutional impediments to rapid and 
sustained growth. A combination of 
ESF, development assistance, and Food 
for Peace resources will be used to build 
on programs currently underway to 
strengthen and stimulate the private sec- 
tor as the primary force behind economic 
recovery, employment, and wider partic- 
ipation in growth and development. 

Particular attention will be given to 
the question of economic equity, not 
through government largesse but 
through programs that permit the less 
advantaged to play a larger role in pro- 
duction and in the marketplace. We will 
continue to examine ways in which small 
farmers can be integrated into the effort 
to produce nontraditional agricultural 
exports as independent producers and 
small- and medium-sized industries can 
expand their sales beyond narrow 
domestic markets. 

The NBCCA report suggested that 
infrastructure needed for renewed 
growth would require external financing. 
We had hoped that the multilateral 
development banks and other donors 
would play the major role in meeting this 
need. Their response has been less than 
projected. We will reexamine the 
infrastructure needs of the region, par- 
ticularly in Belize and in the highlands of 
Guatemala and Honduras, to identify 
where farm-to-market roads, rural elec- 
trification, and other relatively small- 
scale activities could play a decisive role 
in bringing small farmers into a diversi- 
fying economy. We will also look at the 
irrigation requirements of nontraditional 
crops, regional processing and shipping 
facilities, and industrial parks. Efforts 
will have to be made to restore the 
essential economic infrastructure in El 
Salvador damaged by insurgents and by 
a major earthquake. 

Spreading the Benefits of 
Economic Growth. The NBCCA 
recognized that economic growth alone 
does not ensure greater equity for low- 
income groups. Disparities in income and 
economic opportunity— particularly in 
Guatemala, El Salvador, and 
Honduras— are wide and in some cases 
growing. They must be reduced if 
economic and political gains are to be 
preserved. A shift to higher value, non- 
traditional agricultural crops and 
increased industrial exports will mean 
little if workers lack basic education and 
if skills training is not available. 

Availability of agricultural credit has 
little impact on small farmers who do 



April 1987 



73 



WESTERN HEMISPHERE 



TABLE IV 

Central American Initiative Financial Plan, FY 1984/85-1992 

($ millions) 



1984/85° 1986" 



1987 1984/87 

Subtotal 



1989 1990 



1988/92 
Subtotal 



Economic Stabilization 



ESF 

DA 

USIA 

Subtotal 



TOTAL 



24 


5 


12 


41 


15 


20 


20 


20 


15 


90 


3 


6 


13 


22 


17 


18 


23 


28 


29 


115 


8 


20 


16 


43 


16 


16 


16 


16 


16 


80 



35 



31 



41 



106 



48 



54 



59 



64 



60 



285 



ESF 


707 


417 


538 


1,662 


415 


286 


230 


130 


70 


1,131 


2,793 


Development Assistance 


21 


8 


8 


37 
















37 


PL 480 c 


130 


95 


97 


321 


80 


50 


45 


30 


25 


230 


551 


Trade Credit Insurance Program 


(0) 


(177) 


(200) 


(377) 
















Commodity Credit Corporation 


(60) 


(34) 


(48) 


(142) 
















Subtotal 


858 


520 


643 


2,020 


495 


336 


275 


160 


95 


1,361 


3,381 


Structural Change 
























ESF 


71 


9 


14 


94 


47 


150 


160 


100 


80 


537 


631 


DA 


116 


113 


91 


320 


93 


94 


84 


65 


50 


386 


706 


PL 480 

















31 


35 


40 


45 


151 


151 


OPIC Financing 


5 


3 


3 


11 


3 


3 


3 


3 


3 


15 


26 


OPIC Guarantees 


(10) 


(33) 


(33) 


(76) 
















Eximbank Guarantees 


(10) 


(8) 


O) 


(27) 
















Subtotal 


192 


125 


108 


425 


143 


278 


282 


208 


178 


1,089 


1,514 


Spreading Benefits 
























ESF 


25 


27 


51 


103 


25 


40 


40 


40 


40 


185 


288 


DA 


160 


128 


219 


507 


120 


120 


140 


140 


120 


640 


1,147 


PL 480 


12 


15 


10 


37 


14 


9 


9 


5 


5 


42 


79 


Narcotics 


1 





1 


2 


1 


1 


2 


2 


2 


8 


10 


Peace Corps 


18 


11 


11 


39 


10 


10 


10 


10 


10 


50 


89 


Housing Guarantee 


(5) 


(40) 


(3) 


(48) 
















Subtotal 


215 


181 


292 


688 


170 


180 


201 


197 


177 


925 


1,613 


Democracy 

























391 



Appropriated 
Guarantees" 

Grand Total 



1,300 


856 


1,084 


3,240 


856 


848 


817 


629 


510 


3,660 


85 


292 


292 


669 


301 


300 


280 


225 


225 


1,331 



1,385 1,148 1,376 3,909 1,157 1,148 1,097 



854 



735 4,991 8,900 



Includes FY 1984 supplemental of $370 million plus $25 million of FY 1984 PL 480 reallocations. 
b Total includes $300 million requested in FY 1987 supplemental, $100 million of which is destined for El 
Salvador earthquake recovery. 

c Includes Section 416 commodities for FY 1986 and FY 1987. Outyear levels for Section 416 are depen- 
dent on regional allocations and future legislative actions. 

Out-year total estimates for guarantees are projected, based on experience to date. 



74 



Department of State Bulletin 



WESTERN HEMISPHERE 



t qualify for it because they do not 
m their farms or have secure and 
uitable tenure arrangements. Even in 
eas where the economic and social 
! ects are less direct and longer term— 
ch as child survival, nutrition, family 
inning, and better housing— early 
ogress is essential if the United States 
d the elected governments of the 
gion are to demonstrate convincingly 
at democracy is preferable to 
talitarian and Marxist regimes. 

As economic stabilization is 
hieved, we will expand our programs 
the equity area through a mixture of 
■velopment assistance, ESF, Food for 
ace, local currency generations, and 
using guarantees. These programs will 
i concentrated in Guatemala, El 
.lvador, and Honduras and will require 
adually diminishing U.S. support. 

inding Alternatives 

is section describes the broad 
acroeconomic implications of three 
nding alternatives that were 
nsidered. 

Option 1: Funding Stretched Out to 

Y 1992. (This is the chosen option.) We 
oject that stretching out the program 
rough FY 1992— with total appro- 
bated funding of $6.9 billion— would 
If ill its main economic, social, and 
litical objectives. Economic growth in 
'92, at 5.2%, would be lower than the 
•iginal target but would be sustainable 
; that level in subsequent years with 
wer levels of assistance. Equally 
iportant, the social and democratiza- 
>n goals of the program would be more 
■icurely in place. 

Achievement of these results 
jsumes continued economic policy 
?form by Central American govern- 
ents. Without such action, we would 
■oject a 1992 growth rate of only 3.2% 
ven with full funding. However, we 
ould continue to condition our aid to 
ch reforms, so actual funding levels 
'ould be adjusted downward if reforms 
/ere not forthcoming. 

Option 2: Full Funding by 1990. 

Vere full funding of the CAI to occur by 
990, we project, under favorable 
ssumptions, that growth by 1990 would 
early reach the original growth target 
Id.8% v. the targeted 6%). This would 
lequire about $1 billion more in appro- 
priations during FY 1988-90 than the 
iunding profile of Option 1. It was 
•ejected for two reasons. 



• While achieving the growth target 
for that year, the growth would be arti- 
ficially induced and would not be self- 
sustaining, so growth rates after 1990 
would fall sharply, causing backsliding 
on the progress made through 1990; and 

• It would increase the risk that 
Central American governments would 
fail to undertake assumed policy actions, 
thereby reducing the effectiveness of the 
assistance and the prospects for sus- 
tained growth. 

Without the policy actions, we pro- 
ject a 1990 growth rate of 3.1%— only 
slightly higher than population growth. 

Option 3: Achieving 6% Growth by 
1990. Under the most favorable assump- 
tions, slightly more than $7.2 billion 
would be required to achieve 6% growth 
by 1990. We rejected this option 
because, as indicated in the discussion of 
Option 2, this growth would not be self- 
sustaining after the end of large-scale 
aid. 

As in the previous scenarios, 
achievement of the goal would require 
continued policy action by Central 
American governments. If such policy 
actions were not forthcoming, the addi- 
tional cost of achieving the 6% growth 
by 1990 would rise dramatically to $11.2 



Status of Other NBCCA 
Recommendations 

The CAI, as proposed and carried out 
thus far, embraces most, but not all, of 
the NBCCA recommendations. As we 
have gained experience with implement- 
ing the program, it has become clear 
that some of the specific NBCCA recom- 
mendations are no longer appropriate. 
Examples are noted below. 

Organize a Meeting of Central 
American and U.S. Leaders. The 

United States did not initiate such a 
meeting for a variety of reasons. An 
annual private sector-sponsored con- 
ference in Miami, however, brings 
together the political and economic 
leaders of Central America, the Carib- 
bean, and the United States. In 1986, 
President Cerezo of Guatemala called a 
meeting of all Central American leaders 
in Esquipulas, Guatemala, at which 
regional political and economic issues 
were discussed. Former President 
Monge of Costa Rica began discussions 
on trade imbalances and ways to 
reinvigorate the Central American Com- 
mon Market. Similar meetings are likely 
to take place over the next few years, 



especially if a Central American 
Development Organization becomes a 
reality (for details on CADO, see 
Appendix F). 

Revitalization of the Central 
American Common Market (CACM). 

Subsequent to the NBCCA report, an 
AID-financed study of the CACM recom- 
mended against trying to revitalize the 
CACM through emergency financial 
credits, as suggested in the NBCCA 
report. Emergency credits would not 
have stimulated trade on a sustained 
basis in light of the disequilibrium of 
exchange rates in the region. We are 
focusing on the exchange rate problem 
through our bilateral policy dialogues. 
Because future economic growth in the 
region will come predominantly from 
exports to extraregional markets, our 
primary concern is to ensure that the 
region's currencies are in tune with the 
world currency regime. Although the 
U.S. Government has deferred taking 
action, there have been some potentially 
hopeful signs of interest by the Central 
Americans in reviving the CACM. The 
most noteworthy is agreement by the 
region's economic ministers to introduce 
a new instrument for the CACM that 
may help increase intraregional trade 
without requiring the use of hard 
currencies. 

Establish a Venture Capital Cor- 
poration. This recommendation is still 
being studied. In the meantime, at least 
three countries in the region are in 
various stages of establishing private 
investment corporations. One is already 
operating in Costa Rica, and similar 
institutions are under consideration in 
Honduras and El Salvador. A study of 
the feasibility of establishing a regional 
venture capital corporation has been 
initiated, along with a broader assess- 
ment of medium- and long-term credit, 
financial instruments, and policies 
needed to attract foreign investment. If 
the study results of the regional venture 
capital corporation study are favorable, 
the earliest date at which AID could ini- 
tiate a project of this kind is FY 1988. 

The U.S. Government Should Join 
the Central American Bank for 
Economic Integration (CABEI). The 

United States has a longstanding policy 
of not joining or taking equity positions 
in subregional banks. While the United 
States did not join CABEI, we are 
assisting it through a $50-million 
grant/loan and related technical 
assistance project. In the 18 months that 
this project has been in operation, the 



April 1987 



75 



WESTERN HEMISPHERE 



U.S. contribution has helped bring about 
the payment of $38 million in arrearages 
and $40 million in new capital from 
CABEI member countries. CABEI also 
has secured commercial refinancing in 
the amount of $170 million. The project 
also calls upon CABEI to raise an addi- 
tional $50 million in capital from extra- 
regional sources by August 31, 1987. 
CABEI's efforts toward meeting this 
condition are proceeding well, and as 
much as $100 million might be raised in 
paid-in capital and/or concessionary 
loans. AID expects to sign an agreement 
this fiscal year for $15 million in housing 
guarantees and $4 million in grant 
assistance to support a Housing and 
Urban Development program for the 
region. 

Appropriate Funds for Central 
America on a Multiyear Basis. 

Although this was initially judged to be 
politically infeasible, it remains most 
desirable. Congress has authorized 
appropriations for nonmilitary assistance 
to Central America through FY 1989 
(Section 416 of the Foreign Assistance 
Act) and has made funds appropriated in 
the FY 1987 Foreign Assistance Appro- 
priation Act available for obligation over 
a 2-year period. These measures demon- 
strate a willingness by Congress to 
address the issues considered by the 
NBCCA in the longer term. 



IV. Agricultural Commodity 
Assistance and Programs 

The Congress, in Section 205(2) of the 
Foreign Assistance Act, stated that: 

... the report requested by paragraph (1) 
shall include an analysis and recommenda- 
tions, prepared in consultation with the 
Secretary of Agriculture, on how more effec- 
tive use can be made of agricultural com- 
modities from the United States in alleviating 
hunger in Central America and contributing 
to the economic development of the Central 
American democracies. 

Over the past 3 years, the United 
States has provided increasing amounts 
of food commodities to Central America 
under various sections of PL 480 as well 
as under the authority of Section 416 of 
the 1949 Agriculture Act. The major 
commodities that we provide to Central 
America are wheat, corn, rice, vegetable 
oil, dairy products, tallow, and breeding 
livestock. Actual tonnages provided have 
increased, but because of declining world 
prices for many of these commodities, 



the total dollar equivalents may not 
show increases (see Table V). 

While the global funding levels for 
the PL 480 program were cut in FY 
1986 and FY 1987 due to budgetary con- 
straints, these reductions have not been 
as severe as in the case of ESF and 
development assistance. Therefore, food 
aid is assuming a relatively larger role in 
our total resource flows. 

The U.S. Government will continue 
to use its food aid authorities to support 
the CAI. Food aid provided under the 
concessional loan authority of Title I of 
the Agricultural Trade Development and 
Assistance Act of 1954 (PL 480) will con- 
tinue to be the primary means of 
assistance in this area. In addition to the 
ongoing use of this authority to help 
meet the agricultural commodity import 
needs of these countries with minimal 
foreign exchange use, recent actions by 
Congress offer a newer benefit of this 
program. 

A new Section 108 in Title I 
authorizes a program that will promote 
the local private sector as the means to 
economic growth. This new section 
allows the United States to sell 
agricultural commodities, up to the 
authorized levels, for local currencies. 
These U.S. -owned currencies are lent to 
financial intermediaries, which then 
make loans to the indigenous private sec- 
tor based on commercial practices. This 
new effort will allow more effective use 
of U.S. agricultural commodities to pro- 
mote private sector economic growth in 
the region. 

A second new program, Food for 
Progress, also may be effective in the 
region. This program, which is author- 
ized by Congress through either PL 480 
or a newer food aid authority (the Sec- 
tion 416 Overseas Donations Program), 
provides for multiyear donations of U.S. 
agricultural commodities to support 
countries "that have made commitments 
to introduce or expand free enterprise 
elements in their agricultural econ- 
omies. ..." The multiyear nature of this 
program will enhance its effectiveness. 

Section 416, which makes use of 
agricultural commodities owned by the 
Department of Agriculture's (USDA) 
Commodity Credit Corporation, also has 
recently helped countries in the region 
affected by the required changes in U.S. 
sugar quota arrangements. These pro- 
grams have allowed the recipient 
governments to sell the U.S. com- 
modities locally, thereby creating funds 
to support development activities. 

USDA's Office of International 
Cooperation and Development (OICD), in 
cooperation with AID, has successfully 



TABLE V 

PL 480 and Section 416 Assistance 
for Central America, FY 1984-87° 



1984 1985 1986 1987 1984-8? 

(supple- (actual) (actual) (est.) (est.) 
mental) 



Title l/lll 

Title II 

Section 
416 

TOTAL 



25.0 



25.0 



105.1 
11.6 



89.5 
14.6 



89.0 
10.5 



0.0 5.0 7.7 
116.7 109.1 107.2 



308.I 
36/ 

12. 
358. 



' Excludes World Food Program assistance. 



completed many programs to alleviate 
hunger and help Central Americans 
achieve economic development through 
scientific and technical exchanges, 
technical assistance, training activities, 
and agribusiness promotion to facilitate 
trade, investment, and employment 
generation. 

USDA's Animal and Plant Health 
Inspection Service currently administer 
several important long-term programs 
with Costa Rica and other Central 
American countries to suppress the 
Mediterranean fruit fly, to eradicate 
cattle screwworm, and to conduct 
phytosanitary preclearance programs f( 
fresh fruits and vegetables. 

OICD's Private Sector Relations 
Division has successfully channeled 
development efforts through agricultur; 
marketing workshops for the region, 
providing a forum not only for practical 
marketing information dissemination bi 
also for establishing and strengthening 
business contacts and trade with the 
U.S. private sector. 

OICD's Scientific and Technical 
Cooperation Division and International 
Research Division are involved in pro- 
grams that were designed for mutual 
benefit to the agricultural sectors of bot 
the United States and the cooperating 
country. Collaborative research efforts 
are underway with Costa Rica to identii 
and evaluate fruit flies, study the prev- 
alence of blue tongue virus in livestock, 
and determine the effectiveness of 
pheromone bait hives in attracting and 
capturing Africanized bees. 

These activities are providing better 
and more efficient use of agricultural 
assistance to support the CAI. 

In addition, under PL 480 Title I 
agreements, several Central American 
democracies are undertaking self-help 
activities designed to contribute to 
economic development. Costa Rica is 
pursuing measures intended to stabilize 



76 



Department of State Bullet 



WESTERN HEMISPHERE 



economy and reduce government 
[get deficits, including more rational 
{cultural pricing policies; expansion of 
in storage, handling, and marketing 
terns; reduction of postharvest losses; 
improvements in administrative and 
rational efficiency in supporting 
yernment agencies. 
The Government of El Salvador is 
cntinuing efforts to improve production 
fcentives offered to small farmers and 
Invide financial support for mainten- 
I:e of agricultural storage facilities and 
pier rural support activities, such as 
Isic community services, rural employ- 
nnt generation, rural potable water 
futilities, and supplementary feeding 
p>grams. In Guatemala, efforts empha- 
ae increased use of the private sector 
iidistribution of Title I commodities and 
siport of agricultural sector develop- 
l nts. In Honduras, the PL 480 Title I 
a-eements support activities in animal 
al plant health, and in agricultural 
eication. All the countries in the region 
a' either currently implementing or are 
fcthe process of concluding agreements 
per the Section 416 programs, several 
c which are designed to compensate for 
i ■ reduction in the sugar quota to the 
J don. 

In El Salvador, Guatemala, and Hon- 
c "as, PL 480 Title II commodities sup- 
| -t maternal and child health, school 
i ding, and food-for-work programs 
t it enhance nutritional levels among 
I ;gnant and lactating women and their 
l mg children. Based on a decade of 
« iluating findings concerning the 
( sign and implementation of Title II 
] )grams, AID has developed and sent 
1 private and voluntary organizations 
i i to AID missions revised guidance 
; d technical review procedures for PL 
< 3 Title II Operational Program Plans. 
' lese new procedures require the 

■ lowing: precise statements of program 
i jectives, detailed identification of 

' rget populations, detailed descriptions 

■ problems to be addressed, and iden- 
ication of complementary inputs 
jsides food) necessary for achieving 
oject objectives. The Institute of 
itrition for Central America and 
inama will be providing technical 
sistance to governments and private 
id voluntary agencies to strengthen 

• eir capacity to design, monitor, and 

'aluate Title II programs. 

The Administration is making major 
: forts to use these programs more 

fectively to alleviate hunger in Central 
imerica and contribute to economic 

!velopment. It is important to note 
(veral constraints to the overall amount 



of commodity assistance that can be pro- 
vided to these countries. One is the limit 
of their absorptive capacities; there is 
only so much that the countries can 
store, distribute, and use. Second, we 
have to be careful that our assistance 
does not result in disincentives for local 
farmers whose livelihoods depend on 
producing many of these items. Given 
these considerations, however, we 
believe that we are using commodity 
assistance creatively and effectively in 
Central America. 



'Section 205(c) of the act appropriating 
funds for military construction for the 
Department of Defense for the fiscal year 
(FY) ending September 30, 1987, and for 
other purposes (as contained in section 101(k) 



of the joint resolution on continuing appro- 
priations for the FY 1987, and for other pur- 
poses (House Joint Resolution 738; PL 99-500 
as supplemented by PL 99-591)). 

z Reports were made to the President by 
the Secretary of State in 1985 and 1986 on 
the status of implementing NBCCA recom- 
mendations. These reports were transmitted 
to the Congress (see "Sustaining a Consistent 
Policy in Central America: One Year After 
the National Bipartisan Commission Report," 
Special Report No. 124, April 1985, and "The 
U.S. and Central America: Implementing the 
National Bipartisan Commission Report," 
Special Report No. 148, August 1986). 

3 For further information on Peace Corps 
and refugee programs, see Appendix G. 

"The FY 1987 supplemental requests $300 
million in economic assistance for the four 
Central American democracies, $100 million 
of which is for earthquake recovery in El 
Salvador. 



APPENDIX A 



NBCCA Recommendations 



No. 

1 



Recommendation 



Organize summit of U.S. and 
Central American leaders. 

2 Increase private sector 

involvement. 

3 Establish U.S. Government role 

in renegotiation of official debt. 

4 Encourage renegotiation of 

private debt. 

5 Increase economic aid in FY 

1984. 

6 More emphasis on housing and 

infrastructure. 

7 Provide trade credit guarantees. 

8 Revitalize the Central American 

Common Market. 

9 The United States should join the 

Central American Bank for 
Economic Integration. 

10 Should be a major increase in 

other donor assistance to Cen- 
tral America. 

11 Authorize $8 billion in U.S. 

assistance funds and 
guarantees for 5 years, FY 
1985-FY 1989. 

12 Appropriate funds on a multi- 

year basis. 

13 Require host government 

economic policy reforms. 

14 Help create a Central American 

Development Organization. 

15 Use economic aid to promote 

democracy; 
15.1 Promote community organiza- 
tions and democratic 
institutions; 



No. Recommendation 

15.2 Expand USIA's binational 

centers; and, 

15.3 Increase USIA's exchange 

programs. 

16 Help Central Americans to 

receive duty-free trade with 
other countries. 

17 Review U.S. nontariff barriers. 

18 Promote exports from Central 

America and development of 
energy sources. 

19 Establish a venture capital 

corporation. 

20 Expand Overseas Private Invest- 

ment Corporation insurance 
coverage. 

21 Promote small businesses. 

22 Accelerate agricultural 

development; 

22.1 Provide long-term credit for land 

purchases by small farmers; 

22.2 Study the holding of idle, poten- 

tially productive land; 

22.3 Improve title registration and the 

defense of property rights of 
farmers; 

22.4 Provide short- and medium-term 

credit for working capital 
improvements and equipment; 

22.5 Encourage pricing policies which 

protect the interests of both 
producers and consumers; 

22.6 Encourage an equitable distribu- 

tion of agricultural wealth, 
including agrarian reform and 
land-to-the-landless type of 
program; 



Mil 1987 



77 



WESTERN HEMISPHERE 



No. Recommendation 



22.7 Improve and expand rural infra- 

structure, e.g., roads, storage 
facilities, and rural 
electrification; 

22.8 Increase rural research and exten- 

sion programs; 

22.9 Halt deforestation and environ- 

mental degradation; and 

22.10 Increase support for cooperatives. 

23 Increase emergency food aid. 

24 Increase funding for training and 

education programs; 

24.1 The Peace Corps should expand 

recruitment of teachers to serve 
in a new literacy corps; 

24.2 The Peace Corps should expand 

recruitment of primary, second- 
ary, and vocational teachers to 
serve in a new Central 
American teachers corps; 

24.3 Expand secondary-level technical 

and vocational education and 
apprenticeship programs; 

24.4 Increase support for education 

programs in business and public 
administration; 

24.5 Expand the International Execu- 

tive Service Corps; 

24.6 Develop a program for 10,000 

government-sponsored scholar- 
ships; 

24.7 Prepare and implement a plan to 

strengthen universities; and 

24.8 Subsidize translation, publication, 

and distribution of books and 
educational material. 

25 Expand health and nutrition 

programs; 

25.1 Increase technical assistance for 

health programs; 

25.2 Eradicate vector-borne diseases, 

e.g., malaria and dengue fever; 

25.3 Expand oral rehydration and 

immunization programs; 

25.4 Train primary health care 

workers; and 

25.5 Encourage adequate public invest- 

ment in primary health care and 
in preventive and environmental 
interventions. 

26 Continue AID population and 

family planning programs. 

27 Strengthen judicial systems; 

impose sanctions against death 
squad members. 

28 Support refugee programs. 

29 Give more military aid to El 

Salvador. 

30 Authorize multiyear funding of 

military aid to ensure 
predictability. 



No. Recommendation 

31 Military aid to El Salvador should 
be tied to periodic reports on 
human rights, progress toward 
free elections and elimination of 
death squad activities, and other 
political reforms. 



Summary of Commission Report 1 

OUTLINE 

The report, which was dedicated to 
Senator Henry Jackson and transmitted 
to the President on January 10, 1984, 
consisted of the following chapters: 

1. 

2. 



Introduction and basic themes. 
Placed crisis in larger hemispheric 
context. 

3. Provided historical perspective. 

4. Examined prospects for economic and 

political development; presented 
recommendations. 

5. Discussed social issues— health and 

education particularly— and made 
recommendations. 

6. Explored security issues and recom- 

mended U.S. action. 

7. Looked at diplomatic aspects and 

offered recommendations on pur- 
suing negotiated settlements. 

8. Conclusion. 

—On security and diplomatic issues, 
the report dealt with El Salvador, Hon- 
duras, Nicaragua, Guatemala, and Costa 
Rica. Panama and Belize were included 
for discussion of development programs. 



MAJOR THEMES SET FORTH 
IN THE COMMISSION REPORT 

—The crisis in Central America is 
acute. Its roots are indigenous— in 
poverty, injustice, and closed political 
systems. But world economic recession 
and Cuban-Soviet-Nicaraguan interven- 
tion brought it to a head. 

—The crisis will not wait. It must be 
addressed at once and simultaneously in 
all its aspects. Ultimate resolutions 
depend on economic progress, social and 
political reform. But insurgencies must 
be checked if lasting progress is to be 
made on these fronts. 

—Indigenous reform, even indige- 
nous revolution, is no threat to the 
United States. But the intrusion of out- 
side powers exploiting local grievances 
for political and strategic advantage is a 



serious threat. Objective of U.S. policy 
should be to reduce Central American 
conflicts to Central American 
dimensions. 

—United States has fundamental 
interests at stake: Soviet-Cuban succes 
and resulting collapse of Central 
America would compel substantial 
increase in our security burden or 
redeployment of forces to detriment of 
vital interests elsewhere. 

—As a nation we have deep and 
historic interest in the promotion and 
preservation of democracy. Report con 
eludes that pluralistic societies are wha 
Central Americans want and are essen 
tial to lasting solutions. In this case, ou 
strategic interests and our ideals 
coincide. 

—Central Americans desperately 
need our help, and we have a moral 
obligation to provide it. The United 
States and other nations can make a di 
ference. But, in the end, solutions will 
depend on the efforts of Central 
Americans themselves. 

—Although there is urgent need fo 
action, no quick solutions can be 
expected. The United States must mak 
a long-term commitment and stick to a 
coherent policy. 

—That policy can and should be 
bipartisan. Commission found wide con 
sensus on principles and objectives. 



POLITICAL AND ECONOMIC 
DEVELOPMENT 

—Central American economies gre 
substantially during the 1960s and earl 
1970s. But income distribution was 
highly inequitable, except in Costa Ric; 
and Panama. 

—Trend toward more pluralistic 
political systems in El Salvador, 
Guatemala, and Nicaragua reversed in 
early 1970s. 

—World recession and rising politic 
violence had catastrophic effect on 
region's economies in late 1970s, early 
1980s. All have declined dramatically. I 
Salvador's gross domestic product is off 
25% since 1978. 

—Even with successful stabilization 
programs and restored political stabilit; 
per capita wealth in 1990 would only b€ 
three-quarters of what it was in 1980. 

—There must be substantial increas 
in outside assistance. 

—Commission believes economic 
development cannot be separated from 
political and social reform. Objective 
must be parallel development of 



78 



Department of State Bullet 



WESTERN HEMISPHERE 



jhralistic societies and strong 
jpnomies with far more equitable 
«tribution of wealth. 
I —We propose a program of U.S. 
distance designed to promote economic 
fcwth, democratization, and greater 
jpial equity. 

I —We encourage the greatest pos- 
We involvement of the U.S. private sec- 
I- in the stabilization effort. Recom- 
jj'nd the formation of an emergency 
jpion committee of private sector per- 
sialities to provide advice on new 
■vate-public initiatives to spur growth 
■d employment. 

J'commendations: An Emergency 
tabilization Program 

—Leaders of the United States and 
Intra] America should meet to initiate 
Igomprehensive approach to economic 
llvelopment of the region and rein- 
itiation of the Central American Confi- 
rm Market. 

| —A $400-million supplemental in FY 
B4, over and above the $477 million 
Iw in the budget for the seven coun- 
ty es. There is urgent need to stabilize 
( momies now going downhill very fast. 
I —Focus this assistance on labor- 
a ensive infrastructure projects and 
\l ising. Unemployment is a critical 
j )blem— politically and economically. 
I —Establish a program to provide 
HS. Government guarantees for short- 
■m trade credits. External credit has 
( ed up. Without it economies cannot be 
ii ictivated. 

—Provide an emergency loan to the 
M ntral American Common Market to 
| 'mit the reactivation of this vital 
< ionization. Lack of resources in the 
■I irket to settle trade accounts among 
I j countries has stalled it. 

—U.S. Government should take an 
I ive role in the efforts to resolve the 
n ;ernal debt problems of Central 
Mnerica and should encourage the coun- 
t es that have not done so to seek 
lliltilateral rescheduling. 

—Also encourage commercial banks 
■ renegotiate at the lowest possible 
lerest rates. 



]?commendations: Medium 
id Long Term 

—Commission estimates $24 billion 
i net external exchange inflows needed 
I 1990 to foster a growth rate of 3% 
Br capita, returning these countries to 
lerecession levels of per capita wealth, 
pout half— $12 billion— is expected to 
me from international institutions, 



other donor countries and loans, and 
investments from private sector sources. 

—U.S. Government will have to pro- 
vide as much as $12 billion if these 
financing needs are to be met. 

—We propose, in this context, a pro- 
gram of $8 billion over next 5 fiscal 
years (FY 1985-89) in U.S. Government 
assistance. This would be divided very 
roughly into about $6 billion in appro- 
priated funds and about $2 billion in con- 
tingent liabilities covering guarantees, 
insurance, and the like. 

—Compared with current projections 
for FY 1985-89, these contributions 
would constitute an increase of about 
$2.8 billion in appropriated funds and 
$0.7 billion in contingent liabilities over 
the 5-year period. 

—Urge that Congress authorize 
multiyear funding of this program. Com- 
mission believes firm, long-term commit- 
ment is essential. 

—To give form and structure to the 
development effort, suggest establish- 
ment of the Central American Develop- 
ment Organization (CADO). Perhaps 
one-quarter of U.S. aid could be 
channeled through CADO. 

—CADO would consist of the United 
States and those countries of the seven 
willing to commit themselves to internal 
democracy and reform. Continued 
membership would depend on demon- 
strated progress toward those goals. 
Adherence to regional security pact also 
required. 

—Nicaragua could participate by 
meeting these conditions. 

— CADO's principal body would be a 
Development Council with tripartite, 
ILO [International Labor Organization]- 
style representation. Would assess pro- 
gram and progress toward economic 
growth, democratization, reform, and 
preservation of human rights. 

—Other democracies would be 
invited to join. 

Additional Recommendations 

—Expanded assistance from the U.S. 
Government for democratic institutions 
and leadership training-neighborhood 
groups, cooperatives, binational centers, 
and visitor programs for leaders of labor 
unions, local governments, and other 
organizations. 

—Require a firm commitment by the 
Central Americans to economic policies, 
including reforms in tax systems, to 
encourage private enterprise and indi- 
vidual initiative, to create favorable 
investment climates, to curb corruption 
where it exists, and to spur balanced 
trade. 



—Urge extension of duty-free trade 
to Central America by other major 
trading nations. 

—Review nontariff barriers to 
imports from Central America with a 
view toward using whatever flexibility 
that exists within the framework of 
multilateral agreements to favor Central 
American products. 

—Establishment of the Central 
American Development Corporation— a 
privately owned venture-capital company 
which could initially be financed by a 
loan from the U.S. Government. 

—Recommend that the United States 
join the Central American Bank for 
Economic Integration. 

—Technical and financial support for 
export promotion and a U.S. Govern- 
ment review of nontariff barriers to Cen- 
tral American imports. 

—Expanded availability of insurance 
guarantees for new investments from 
the U.S. Government's Overseas Private 
Investment Corporation. 

—Increased focus in assistance pro- 
grams on small business and accelerated 
agricultural development— particularly in 
production of food for domestic 
consumption. 



HEALTH AND EDUCATION 

—Democracy and prosperity in the 
region require accelerated human 
development. Hunger, disease, and illit- 
eracy sap a people's vitality and impede 
the growth of viable democratic 
institutions. 

—Literacy rates are unacceptably 
low in several countries (e.g., Guate- 
mala, 45%; El Salvador, 63%; Honduras, 
60%), handicapping education efforts 
seriously. 

—Widespread malnutrition also 
handicaps education by sending physi- 
cally and mentally underdeveloped 
children to school. 

—Goals should include a reduction of 
malnutrition, elimination of illiteracy, 
expanded education, health, and housing 
opportunities. 

—Initial efforts must be to increase 
food assistance to Central America 
through the PL 480 programs. 

—Commission calls for formation, 
under direction of the Peace Corps, of a 
Literacy Corps and a Central American 
Teachers Corps. 

—To meet needs in higher education, 
U.S. Government scholarships should be 
raised to approximately 10,000 over 4-6 
years, a level comparable to Cuban and 
Soviet Union efforts. 



oril 1987 



79 



WESTERN HEMISPHERE 



—Educational reform can also be 
encouraged in the areas of technical and 
vocational education through the expan- 
sion of the International Executive Serv- 
ice Corps and through closer cooperation 
with Central American universities to 
improve the quality of education. 

—Judicial systems in Central 
America can be strengthened by pro- 
viding resources for training judges, 
judicial staff, and public prosecutors. 

—Continuation and expansion of 
existing programs for disease control 
and eradication, as well as immunization 
and oral rehydration. 

—Training of primary health 
workers, especially nurses, should be 
expanded and the means developed to 
integrate private and public financing of 
health services. 

—Assistance programs should target 
the area's severe housing shortage. 

—Training of public administrators 
required to improve public service. 

—U.S. Government should provide 
more resources to meet critical problem 
of refugees and displaced persons— more 
than 1 million of them need help. 



SECURITY ISSUES 

—In El Salvador there are two 
separate conflicts: (1) between those 
seeking democratic reform and those 
seeking to retain their privileges; (2) 
between Marxist-Leninist guerrillas and 
those who oppose Marxism-Leninism. 

—In discussing the latter we identify 
three general propositions about such 
guerrilla movements: 

(1) They depend on external sup- 
port. Without it they are unlikely to 
succeed. 

(2) They develop their own momen- 
tum which reform alone cannot stop. 

(3) Victorious, they create 
totalitarian regimes, even though they 
have enlisted support of democratic 
elements in order to project democratic, 
reformist image. 

—External support comes from 
Soviet Union, Cuba, and now Nicaragua. 
Cuba has developed into a leading 
military power through Soviet 
assistance. Since Sandinista victory, 
Soviets have come around to support 
Cuban strategy of armed road to power 
in Central America. 

—There are serious strategic impli- 
cations for the United States in Soviet- 
Cuban support for armed insurgency in 
the region. 



—Triumph of hostile forces there 
could require us to devote large 
resources to defend our southern 
approaches. 

—This could mean either substan- 
tially increased defense burden for the 
United States or redeployment of forces 
to the detriment of our interests 
elsewhere. 

—Threat to our shipping lanes in the 
Caribbean. 

—Increased violence and dislocation 
in the area from which we could not 
isolate ourselves. 

—Erosion of our power to influence 
events worldwide as we are perceived as 
unable to influence events close to home. 

El Salvador 

—The war is stalemated, a condition 
to the ultimate advantage of the 
guerrillas. 

—U.S. military assistance is inade- 
quate to permit modern, humane, and 
successful counterinsurgency. 

—Commission recommends that the 
United States provide significantly 
increased levels of military assistance for 
greater mobility, more training, higher 
force levels, and more equipment. 

—Assistance is to be conditioned 
through legislation on terminating death 
squads, progress toward democracy, and 
establishment of the rule of law. 

—In Guatemala, such assistance 
should only be provided if the same 
terms are met. 

—Increased military assistance also 
needed for Honduras to build a credible 
deterrent and to meet renewed efforts at 
insurgency. 

—Commission concludes that U.S. 
security interests are importantly 
engaged in Central America. Larger pro- 
gram of military assistance needed, as 
well as expanded support for economic 
growth and social reform. 

—Success will depend on an end to 
massive violations of human rights and 
the neutralization of external support for 
the insurgencies. 



THE SEARCH FOR PEACE 

—A successful U.S. political strategy 
in Central America requires resources to 
promote economic growth; vigorous 
efforts to advance democracy and 
reform; other inducements and 
penalties. 



—General strategic objective of U.;. 
diplomacy in Central America should b 
to reduce the civil wars, national con- 
flicts, and military preparations to Cen 
tral American dimension. 

—Specifically, we should seek to st 
the war and killing in El Salvador. 
Create conditions under which 
Nicaragua becomes a peaceful and 
democratic member of the Central 
American community. And open the w 
for democratic development in all 
countries. 

—Commission calls for negotiation 
in El Salvador between guerrillas and 
the government to be elected in March ' 
to establish conditions for later 
legislative and municipal elections in 
which all could participate: electoral 
commission with FMLN/FDR [Fara- 
bundo Marti National Liberation Fron' 
Revolutionary Democratic Front] 
representation, cease-fire, and end to ; 
violence; international observation of 
elections. 

—Adequate economic and military 
assistance from the United States can 
help to achieve such a settlement. 

—Commission believes military 
stalemate works against rather than f( 
a political settlement based on the 
popular will. 

—In Nicaragua, consolidation of a 
Marxist-Leninst regime would create ; 
permanent security threat. Nicaragua' 
mainland location makes it a crucial 
stepping-stone to promote armed insu 
gency in Central America. Cuban per- 
sonnel (2,000 military advisers and 6,C 
civilian officials); several hundred Sov 
East European, Libyan, and PLO [Pal 
tine Liberation Organization] advisers 
extensive arms deliveries (13,000 tons 
1983) add an external dimension to tht 
threat posed by Nicaragua to its 
neighbors. 

—What gives the current situation 
its special urgency is the external thre 
posed by the Sandinista regime in 
Nicaragua; supported by Cuban militai 
strength; backed by Soviet weapons, 
guidance, and diplomacy; and integrati 
into the Cuban network of intelligence 
and subversion. 

—Central American leaders believt 
pluralistic political orders are essential 
to long-term security. 

—An alternative would be an 
attempt at containment. But that woul 
be threaten militarization of the 
isthmus— the creation of garrison state 
Democracy would wither. And the 
United States could find itself as sur- 
rogate policeman. 



80 



Department of State Bulls 



WESTERN HEMISPHERE 



—Commission proposes comprehen- 
. e regional settlement based on: 

'i (1) Respect for sovereignty and 
i nintervention. 

(2) Verifiable commitments to 
inaggression and an end to all 

i empts at subversion— covert or overt. 

(3) Limitations on arms and sizes of 
sned forces. Prohibition of foreign 

f ces, bases, and advisers. 
• (4) No military forces, bases, or 
a/isers of non-Central American coun- 
ts would be permitted. 

(5) Commitment to internal 
p ralism and free elections in all 
cintries. 

(6) Provision for verification of all 
a'eements. 

(7) Establishment of an intergovern- 
i) nt council to meet regularly to review 
c npliance. 

(8) Adherence to the overall agree- 
rtnt would be required for membership 
i the Central American Development 

< ganization. 

—The United States would support 
1 ; agreement and provide assistance 
i d would commit itself to respect 
] suits of elections within countries as 
1 ig as principles of pluralism at home 
; i restraint abroad are observed. 

—Commission's proposal based on 
i i amplifies 21 points of the Contadora 
<oup. 

—Commission fully endorses Con- 
1 lora efforts. 

—Finally, majority of Commission 
( poses dismantling existing incentives 
; i pressures for the regime in 
] inagua to negotiate seriously. 

—As for Cuba, Commission sees lit- 
1 possibility of separating it from 
! viet Union. But the United States 
i )uld be prepared to negotiate seriously 
i Huba were to show itself prepared for 
f nuine coexistence, dropping support 
i • insurgency in Central America and 
] /olutionary violence elsewhere in the 
'rid. 

—As for Soviet Union, establishment 
Soviet military base in Nicaragua is 
t the major concern. Before that could 
ve happened, the crisis would have 
iched proportions not containable in 
ntral American dimensions. 

—There is little promise in negotiat- 
r with the Soviet Union over Central 
nerica. Soviets would seek to cast such 
gotiations in terms of sphere of 
luence, an unacceptable concept for 
2 United States. 



APPENDIX B 



I 'From "The U.S. and Central America: 
plementing the National Bipartisan Com- 
ssion Report," Special Report No. 148, 
igust 1986. 



Economic Assistance to Central America, as Proposed in the CAM 

($ millions) 



Purpose 


Supple- 
mental 
FY 1984 


FY 1985 


FY 1986-89 


TOTAL 




Stabilization 












ESF 

PL 480 
Guarantees 


272 

25 


541 
103 

470 


1,644 


2,457 
128 
470 




Subtotal 


297 


1,114 


1,644 


3,055 




Growth 












ESF 


10 


80 


789 


879 




Development Assistance 
PL 480 
Guarantees 
Counterpart 2 


8 

(100) 


87 

90 
(220) 


327 

410 

1,240 

(520) 


422 

410 

1,330 

(840) 




Subtotal 


118 


477 


3,286 


3,881 




Equity 












Development Assistance 

PL 480, II 

Guarantees 

Counterpart 2 

Peace Corps 

State, Refugees 


66 

(100) 
2 


196 
17 
40 

(220) 
18 
15 


1,096 

70 

160 

(880) 

94 

78 


1,361 

87 

200 

(1,200) 

114 

93 




Subtotal 


168 


506 


2,381 


3,055 




Democracy 












ESF 
USIA 


8 

7 


20 
36 


85 
179 


113 
222 




CADO 


— 


1 


4 


5 




Subtotal 


15 


57 


268 


340 





Operating Expenses 



26 



34 



TOTAL 2 



400 



1,720 



6,205 



8,325 



'Figures do not include incidental activities or programs such as narcotics and OPIC insurance; the total 
used in the text of the paper is $8.4 million. 

^Counterpart figures are local currency generations from ESF or PL 480 balance-of-payments financing 
for AID-supported activities in the region. Since they are programmed for development purposes, they are 
included in sector subtotals but not in the overall total. 



APPENDIX C 



Political Situation and Developments 
in Individual Countries 

Belize. Belize obtained its independence 
in 1981. In the first postindependence 
election in 1984 the opposition United 
Democratic Party, led by Manuel 
Esquivel, won control of the parliament. 
In a peaceful transition of power, 
Esquivel became prime minister. 

Costa Rica. Costa Rica is recognized 
as Central America's longest existing 
democracy, dating back to the elections 



of 1889 with only brief interruptions. 
The latest presidential elections were 
held in February 1986 and were honest 
and open. Oscar Arias, a social 
democrat, won the close election and 
was inaugurated on May 8, 1986. A new 
legislature also took office. 

El Salvador. With U.S. support for 
democratic pluralism, and despite guer- 
rilla opposition, El Salvador held free 
and open nationwide elections without 
effective disruption in 1982, 1984, and 
1985. Democratic institutions and habits 
have gained steadily during these years, 



\pril 1987 



81 



WESTERN HEMISPHERE 



as is evidenced by the growing participa- 
tion by opposition parties in El Salva- 
dor's political life. Mid-level members of 
two of the leftist parties that backed the 
guerrillas in 1980, and whose cadres had 
been in self-imposed exile, have begun to 
return and have carried out political 
activities without incident. 

Guatemala. Democracy began its 
return to Guatemala with the election of 
a Constituent Assembly in July 1984, 
following a generation of military rule 
and political violence. The country held 
open and highly competitive elections in 
November and December 1985, which 
international observers verified were 
honest and orderly. Vinicio Cerezo, a 
Christian Democrat, obtained a national 
mandate from two-thirds of the elec- 
torate in the presidential runoff election 
and took office in January 1986. 
Violence and poverty pose enormous 
challenges to the Cerezo government. In 
the spring of 1986, the new government 
enacted comprehensive economic 
reforms to stimulate the economy and 
provide new job opportunities for the 
country's 8 million people. Considerable 
external assistance will be needed to 
support the government's efforts to 
foster institutional development and 
economic growth at levels to sustain 
Guatemala's ongoing democratization. 

Honduras. The democratic trend 
was strengthened in Honduras through 
presidential and legislative elections in 
1981 and 1985. The national presiden- 
tial, legislative, and municipal elections 
in November 1985 were orderly, open, 
and enthusiastically celebrated. Presi- 
dent Jose Azcona's inauguration in 
January 1986 was the first transfer of 
power in Honduras from one elected 
civilian to another in 53 years. Due to 
the large number of candidates, the elec- 
tions were based on a system in which 
the candidate with the largest number of 
votes in the party with the largest 
number of votes becomes president- 
elect. While orderly, this somewhat con- 
fusing system prompted the Honduran 
Congress to enact an electoral reform 
law in 1986, which seeks to regulate 
party primaries and internal elections 
and sets the stage for national elections 
in 1989. 

Nicaragua. In the years since the 
NBCCA report, the Sandinista govern- 
ment has moved in an opposite direction 
from the Central American democra- 
cies—against the trend demonstrated by 
those countries and counter to the open, 
pluralist system that the Sandinistas 



originally promised their people and the 
Organization of American States. In 
1986, Nicaragua was less democratic, 
more heavily armed, and more depend- 
ent upon the Soviet bloc than ever 
before. The government has increased 
its repression of religious groups, the 
press, and opposition political parties. 
The Sandinista military threat and sup- 
port for subversion, insurgency, and ter- 
rorism impede the progress of 
democracy in the rest of Central 
America. Moreover, just as the Somoza 
dictatorship ultimately sparked national 
rebellion, the Sandinistas' betrayal of 
the Nicaraguan people's desires is 
breeding internal resistance. The San- 
dinistas' oppression of the Nicaraguan 
people and their hostility to their 



democratic neighbors remain Central 
America's most pressing security 
problem. 



Panama. In September 1985, less 
than a year after his inauguration, Pre 
dent Nicolas Barletta resigned under 
pressure from the military, as well as 
from party and cabinet leaders. His co 
stitutional successor was First Vice 
President Eric Arturo Delvalle. Panan 
remains basically an open society, but 
Barletta's resignation marked a setbac 
to democratization. Although the 
presidential election of 1984 remains 
disputed, the legislative assembly elec- 
tions, with a few notable exceptions, 
were regarded as legitimate and 
established a vociferous, if weak, 
legislative opposition. 






- 



APPENDIX D 



United States Information Agency 

In support of the NBCCA's objectives of 
strengthening democracy and improving 
the quality and availability of educational 
opportunities in Central America, USIA 
has undertaken the following activities. 

Scholarships. Since 1984, USIA has 
greatly increased its academic exchanges 
program and established a pilot program 
for undergraduates known as the Cen- 
tral American Program for Under- 
graduate Scholarships (CAMPUS). In 
1986, there were 580 academic 
exchanges, of which 154 were CAMPUS. 
USIA hopes to maintain this level of 
exchanges, given ongoing funding and 
authorization from Congress. A new, 
million-dollar university partnership pro- 
gram will begin in FY 1987. Another 
new exchange program, designed to put 
foreign professionals in contact with 
their American counterparts, will begin 
in 1987. 

Central American Book Initiative. 

In mid-1985, USIA instituted this pro- 
gram to provide Spanish translations of 
U.S. books to university libraries and 
faculty, as well as to government leaders 
and institutions in Central America. 
More than 50,000 books have been 
presented. USIA plans to continue the 
program at reduced levels, devoting 
special attention to the donation of 
university texts in the humanities and 
social sciences. 



Professional Leadership 
Exchanges. USIA programmed 150 
International Visitors and 80 Voluntar 
Visitors from Central America in FY 
1986, a dramatic increase from FY 19: 
levels and up somewhat from FY 1985 
USIA hopes to maintain these prograr 
at current levels, assuming no drastic 
cuts in overall program budget levels. 

Teaching of English. USIA has 
established a regional English Teachir, 
Office in Panama to develop and 
improve English-language competencj 
throughout Central America. Addition 
ally, USIA has organized training 
workshops for Central American libra) 
ians, teachers of English, and Binatior 
Center administrators. Plans are to co 
tinue these efforts at somewhat reduct 
levels. 

The educational infrastructure in 
Central America constrains the rate at 
which the region can absorb additional 
resources and programs. USIA staff ai 
funding limitations also make further 
expansion difficult. The agency believe 
it is programming at the maximum levi 
possible given these limitations and wil 
continue to be flexible in the applicatio 
of its resources to ensure the greatest 
possible impact. 



Caribbean Basin Initiative 

Background. President Reagan 
announced the Caribbean Basin Initia- 
tive at a meeting of the Organization ol 
American States in February 1982. He 



82 



Department of State Bulle 



WESTERN HEMISPHERE 



liroduced important new elements in 
■iti. 
I Congress passed the Caribbean 
■sin Economic Recovery Act to enact 
ft CBI on July 28, 1983. The law came 
|o effect on January 1, 1984, with 20 
Iintries and territories designated as 
lieficiaries— Antigua and Barbuda, 
jjrbados, Belize, the British Virgin 
Bands, Costa Rica, Dominica, 
■minican Republic, El Salvador, 
lenada, Guatemala, Haiti, Honduras, 
fnaica, Montserrat, Netherlands 
litilles, Panama, St. Christopher and 
Ivis, St. Lucia, St. Vincent and the 
lenadines, and Trinidad and Tobago, 
le Bahamas subsequently was desig- 
jted on March 14, 1985, as was Aruba 
■rmerly a part of the Netherlands 
litilles) on April 11, 1986. 
I Other countries— Canada, Mexico, 
Id Venezuela— are making their con- 
Ibution to the effort to help the Carib- 
lan Basin realize its economic poten- 
ll. Mexico and Venezuela have assisted 
t i Caribbean beneficiaries in saving 
lergy costs. Canada is offering a free 
t ide program to the Caribbean 
( mmonwealth nations. 

I Duty-free Access. The CBI provides 

■ years of duty-free access for most 
i|S. imports from designated 

1 neficiaries. The exceptions include 
I :h items as textiles and apparel, 
] troleum, footwear, flat goods (e.g., 
I ives, luggage, belts, and wallets), and 
i ined tuna. CBI ethanol also enters 
i ty free, but only if it meets the rules 
i origin established in the 1986 tax law. 

The CBI has been in effect for 3 
jars. It has been successful in 
i couraging the growth of nontradi- 

■ nal exports from the Caribbean Basin 
; the United States at a time when 

i ices have fallen substantially and 
irkets have contracted or shifted for 
iditional exports, such as petroleum 

. d sugar. U.S. nonpetroleum imports 
)m the region have been growing at an 
timated average annual rate of 7.1% 

' 983-86). The CBI thus enables the 
lited States to form a partnership with 

) e Caribbean Basin beneficiaries in 

I eating jobs and fostering economic 

.owth through trade. 

Textile Initiative. President Reagan 
inforced the CBI in February 1986 by 
lowing special access to the U.S. 
arket for apparel assembled in the 
aribbean Basin region from cloth cut 
id formed in the United States, 
kmaica, Haiti, Trinidad and Tobago, 
id the Dominican Republic have signed 
jecial access agreements for textiles. 



Tax Benefits. The initial CBI 
legislation offered a convention tax 
benefit, under which the expenses of 
business meetings in the CBl countries 
can be deducted from U.S. taxable 
income. To be eligible for this provision, 
a country must sign a tax information 
exchange agreement with the United 
States. 

Investment Incentive. CBI coun- 
tries which have a tax information 
exchange agreement in force are eligible 
under our new tax law for investments 
with funds generated in Puerto Rico 
(through Sec. 936 of the IRS Code). 
Jamaica and Barbados have such 
agreements in effect; several other coun- 
tries have concluded agreements which 
have not yet entered into force. 

The CBI Represents an Opportu- 
nity. While the CBI may not have met 
the expectations of many, it is doing 
what it was intended to do— offering 
opportunities for export expansion and 
diversification. Many countries have 
taken the difficult steps to open up their 
economies to market forces so as to 
encourage savings, investment, and 
exports; they are taking risks to gain the 
greatest benefits from the CBI. How- 
ever, further economic policy changes 
are needed to encourage private enter- 
prise and attract foreign investment, if 
the CBI countries want to compete in 
today's markets. 



Overseas Private 
Investment Corporation 

During the past 3 years, the Overseas 
Private Investment Corporation has 
intensified its efforts to facilitate U.S. 
investment in Central America. During 
FY 1984-86, OPIC insured annually an 
average of 13 projects in the region. This 
is more than double the average during 
the previous 3-year period. To some 
degree, this has been due to active 
efforts to encourage host country 
governments to improve their project 
approval procedures. Also during the 
last 3 years, OPIC has provided more 
than $43 million in financing for 20 proj- 
ects in 5 countries. This number of proj- 
ects reflects OPIC's extensive efforts to 
identify and package development- 
related investments in the region. 

Other efforts to encourage invest- 
ment in the region include investment 
missions to Costa Rica in FY 1984 and 
to Belize in FY 1986. OPIC's Opportu- 
nity Bank, a data base which serves to 
match investment opportunities with 



U.S. investors and host country part- 
ners, now lists 145 project opportunities 
and 548 U.S. firms that have expressed 
interest in doing business in the region. 
In addition, OPIC has registrations for 
insurance for 112 projects in Central 
America, worth $387 million in total 
investment. While only a minority of 
these registered projects will actually 
become operational, the number appears 
high enough to ensure that OPIC's past 
achievements in the region should be 
matched in the coming years. 



Trade Credit Insurance 
Program of Eximbank 

One NBCCA recommendation was that 
"new official trade credit guarantees be 
made available to Central America" to 
offset the decline in the availability of 
U.S. bank lines and supplier credits used 
to finance imports into the region. In 
October 1984, Congress included a provi- 
sion in the Foreign Assistance and 
Related Agencies Appropriation Act, 
which established for FY 1985 a trade 
credit insurance program for Central 
America. 

Under the program, AID was 
authorized to issue guarantees of up to 
$300 million to Eximbank during FY 
1985 for export credit insurance 
authorized by Eximbank to support U.S. 
exports to Central America's private 
sector. At AID's request, its Board of 
Directors authorized country limits for 
FY 1985 totaling $255 million. 

The Continuing Appropriations Act 
of 1986 authorized AID again to issue 
guarantees to Eximbank for export 
credit insurance to be authorized by 
Eximbank during FY 1986, but at a 
reduced level of $250 million. At AID's 
request, the $250 million was allocated 
as follows: Costa Rica, $70 million; El 
Salvador, $75 million; Guatemala, $70 
million; and Honduras, $35 million. All 
country limits will expire on Septem- 
ber 30, 1987, i.e., U.S. banks may con- 
firm letters of credit under the program 
up to that date. It was renewed at a 
$275 million level for FY 1987. Conse- 
quently, toward the end of this fiscal 
year, AID and Eximbank will consider 
renewal and possible changes in the 
various country limits. 

The trade credit insurance program 
is a letter of credit facility. The central 
banks of the various countries act as 
either guarantor or borrower. U.S. 
banks, supported by Eximbank's insur- 
ance, confirm and refinance the letters 
of credit. The number of participating 
U.S. banks per country ranges from one 



\pr\\ 1987 



83 



WESTERN HEMISPHERE 



(for Costa Rica) to eight (for El Salva- 
dor). The number of local financial insti- 
tutions that have opened letters of credit 
ranges from 7 to 12. As Eximbank 
insures 100% of principal and almost all 
interest (including interest up to the day 
a claim is paid to the U.S. banks), U.S. 
banks showed considerable interest in 
the program. Since there are many par- 
ties involved in the process, the time 
necessary for its implementation is con- 
siderable, and in two countries (Costa 
Rica and Guatemala), this facility is 
growing more slowly than anticipated. 

The first letters of credit were 
opened in mid-1985. Through Decem- 



ber 31, 1986, letters of credit confirmed 
by U.S. banks totaled $195.8 million, 
broken down as follows: El Salvador, 
$109.8 million; Costa Rica, $44.6 million; 
Honduras, $32.8 million; and Guatemala, 
$8.6 million. 

As participating U.S. banks establish 
new banking relationships in Central 
America (or reestablish old ones) and 
have favorable repayment experiences, 
there is the possibility that they may be 
willing, at a future date, to do business 
on an uninsured basis. The trade credit 
insurance program then would be phased 
out or reduced. 



APPENDIX E 



Progress in Meeting 
Security Objectives 

EL SALVADOR 

Achievements: 

—Civilian control of the armed 
forces is a fact. 

—Public image of the military in El 
Salvador has changed from one of a 
defender of a nondemocratic status quo 
to protector of a democratic future. 

—Armed forces are better organized, 
trained, and equipped. 

• Mobility is better than in 1984. 

—Battlefield performance has 
improved. 

• Guerrillas now generally operate 
secretly in small units against 
economic targets versus previ- 
ous strategy of direct conflict 
with the military. 

- Frequency of direct confronta- 
tion has declined. 

- Guerrilla strength believed to 
have fallen to about 6,000 
from a high of 9,000-11,000. 

• Military operations are now sub- 
ject to rules of engagement; 
human rights violations have 
declined dramatically. 

- Most officers associated with 
human rights abuses have 
been removed from command 
positions and units associated 
with violations have been 
disbanded. 

—Armed forces are committed to an 
ambitious civic action program entitled 
"United to Reconstruct." 



GUATEMALA 

Achievements: 

—Democratization and development 
strategy initiated by the government in 
1982 and continued by the current 
elected civilian president has produced: 

• A code of military conduct which 
has improved civil-military 
relations. 

- A rural civilian population that 
now participates in defense of 
its villages. 

—Military did not participate in or 
attempt to influence the 1985 Assembly 
and presidential elections. 

—Military has achieved success on 
the battlefield: 

• The guerrilla threat is now 
restricted to mountainous rural 
areas and small Mexican border 
areas. 

- The size of guerrilla force is 
estimated to be 1,500-2,000 
and has not grown. 

—Improvement in human rights and 
political conditions has permitted the 
Administration to meet congressional 
certification requirements. 

• Political violence has been 
sharply reduced. 

• Nonlethal military U.S. aid has 
begun. 



COSTA RICA 

Achievements: 

—Assistance is being used to train 
and equip a rapid-reaction civil guard 
force of less than 1,000 men and main- 
tain a border guard force. However, cur- 
rent funding will not properly support 



I 



equipment provided in earlier years a. 
cannot support a continued training 
program. 

—U.S. security assistance has 
strengthened the will of Costa Rica to 
resist more confidently Nicaraguan 
threats and blandishments. However, 
reduced funding puts this at risk, rais 
questions by the Costa Ricans as to oi 
willingness to live up to our treaty coi 
mitments, the cornerstone of Costa 
Rican willingness to stand up to the 
Sandinistas. 



HONDURAS 

Achievements: 

—Armed forces were instrumenta 
guaranteeing the 1985 election, suppo 
ing the elected civilian leadership, and 
developing the democratic constitutioi 
system. 

—U.S. military assistance is helpii 
to build a more effective deterrent to 
cross-border incursions by Nicaragua. 

• The United States has provid< 
emergency assistance in 
response to Sandinista incur- 
sions in 1986. 

—Aging Super-Mystere fighters 
have been overhauled to extend their 
flight-life for the short term. 

— Honduran armed forces have sui 
cessfully detected and defeated terror 
and guerrilla elements that have 
sporadically surfaced since 1983. 

—Numerous combined military ex« 
cises have been conducted in Hondura 
(e.g., Ahuas Tara, Kings Guard, Blazir 
Trails, Cabanas). 

• The joint U.S. -Honduran trair 
ing exercises have provided in 
dental benefits to Honduras, 
such as medical treatment, ro; 
building, and maintenance of 
airstrips. 

• U.S. training programs and 
combined exercises have pro- 
moted increased Honduran 
armed forces professionaliza- 
tion. 



NICARAGUA 

—Support to the democratic 
resistance has impeded the total con- 
solidation of the Sandinista Marxist- 
Leninist regime. 

• Internal opposition has been 
given hope to continue strugglt 
for democracy. 

• The Sandinistas have been 
forced to divert resources that 



84 



Department of State Bullet 



WESTERN HEMISPHERE 



otherwise would be available to 
support insurgencies elsewhere. 

Simultaneous support of the Con- 
ora process and regional negotiations 
a U.S. Special Envoy have tested 
:aragua's willingness to resolve the 
ntral American crisis. 

• The Sandinistas are 
intransigent. 



—Security assistance to neighbors 
has enabled these neighbors to more con- 
fidently resist Nicaraguan pressures for 
bilateral accommodations in lieu of 
regional negotiations and has strength- 
ened their will and capability to confront 
blackmail and subversion from 
Nicaragua. 



<' 



>'PENDIX F 

I 



Dntral American 
jjvelopment Organization 

proposing the establishment of a 
DO, the NBCCA had in mind a struc- 
e that would provide a continuous and 
lerent approach to the development of 

region, a process of review of that 
'elopment, and access to that process 
those who have not before been an 
agral part of it. The NBCCA recom- 
nded that Central American partici- 
ion in our assistance programs and in 
DO should depend on acceptance of 
1 continued progress toward such 
jortant elements of democracy as 
ipect for human rights, protection of 
sonal and economic liberties, political 
ralism, free elections, mutual secu- 
', and a functioning legal system. 

The Commission recommended cer- 
1 principles to develop and institu- 
lalize cooperation among the 
mtries: 

• That development of Central 
lerica be a cooperative program with 
icy issues addressed through a proc- 

of joint deliberation among the 

I mbers of CADO; 

• That the program should promote 
I development of Central America in 

a its dimensions— economic prosperity, 
S ial change, political modernization, 
4 1 peace; 

I • That while a CADO should exer- 
I ? some control over development 
Instance, the ultimate control of aid 
lids will always rest with the donors 
li that the governments, including that 
I the United States, would not be bound 
I accept the judgments of CADO; 
I • That the structure of a CADO 
fcist be established on a sufficiently per- 
fcnent basis to demonstrate the long- 
|'m commitment of both the United 
lites and the Central American coun- 
fles to the coordination of economic 
y elopment with social and political 
«velopment; and, 

I • That a CADO must represent the 
Itiative and enjoy the support of the 



nations of the region or it cannot suc- 
ceed. 

Section 464 of the Foreign 
Assistance Act expressed the sense of 
Congress that the President should enter 
into negotiations with the countries of 
Central America to establish a CADO. 
Since passage of the legislation in 1985, 
preparatory work has been completed by 
a working group composed of the U.S. 
Government (i.e., the State Department 
and AID), the American Institute of 
Free Labor Development, the Council of 
the Americas, the Association of the 
American Chambers of Commerce in 
Latin America, and Caribbean and Cen- 
tral American Action. This work 
included several rounds of consultations 
with the government, labor, and 
business sectors of the Central American 
countries. This process culminated in a 
seminar attended by government, 
business, and labor representatives in 
San Jose in September 1986 at which the 
issues related to the establishment of an 
organization such as CADO were 
examined. 

Soundings undertaken by U.S. 
Embassies/AID Missions subsequent to 
the seminar confirmed the generally 
positive interest by business and labor 
sectors and interest on the part of most 
governments. 

In November, the Honduran tripar- 
tite organization invited one labor 
representative each from Panama, 
Guatemala, and Honduras (as an 
observer); business representatives from 
Honduras and El Salvador; and govern- 
ment representatives from the United 
States, Costa Rica, and Belize to form a 
working group to prepare draft statutes. 
(Costa Rica declined to attend.) 

The working group met in Teguci- 
galpa on December 15-17, 1986. The 
members of the working group are now 
consulting on this draft with their 
governments and the other two sectors 
in their respective countries. Another 
meeting is anticipated in March 1987. 



APPENDIX G 



Peace Corps 

In consonance with NBCCA recommen- 
dations, Peace Corps developed an 
Initiative for Central America (IFCA). 
IFCA addresses the need for teacher 
training, education, small business 
development, housing, and improved 
health in Belize, Guatemala, Honduras, 
and Costa Rica. Further, following the 
Caribbean Basin Economic Recovery Act 
of 1983, countries in that area began a 
major program to stimulate job-creating 
small enterprises. Volunteers teach basic 
skills for credit development and other 
business management skills. 

To achieve our program goals, the 
Peace Corps has increased collaboration 
with other government agencies, inter- 
national agencies, and private and volun- 
tary organizations. These collaborations 
include projects with AID, the Inter- 
American Development Bank, the Inter- 
American Foundation, the Pan Ameri- 
can Development Foundation, the 
Organization of American States, 
CARE, and CARITAS. 

Small Enterprise Development. A 

major priority is the development of 
agricultural and other businesses to 
generate income, provide food, and 
create employment. In 1987, roughly 
one-half of the Volunteers will be 
involved directly or indirectly in the 
planning, startup, and management of 
small and medium-scale income-produc- 
ing projects. The majority of these proj- 
ects will be in the area of agribusiness 
and food production. 

Health, Nutrition, and Sanitation. 

During the past two decades, host coun- 
try governments have improved their 
health services with assistance from 
AID, the Inter-American Development 
Bank, the Pan American Health 
Organization, and other development 
assistance agencies. In 1987, Volunteers 
living mostly in rural communities will 
continue to conduct health, nutrition, 
and sanitation education courses for 
rural mothers and train counterparts to 
carry on this work. Volunteer nurses will 
provide basic health care and help staff 
rural health posts. 

Environmental Education and 
Management. In 1987, Volunteers will 
continue to conduct educational courses 
for small-scale farmers and provide 
technical assistance in reforestation and 
the energy-efficient use of firewood. The 



Dril 1987 



85 



TREATIES 



Peace Corps' work in environmental 
management is enhanced by col- 
laborative support from AID. 

Appropriate Technology. Most 
countries' dependence on expensive 
imported fuel makes the introduction of 
low-cost, simple, energy-efficient 
technology an increasingly important 
development priority. Programs intro- 
ducing simple technologies that derive 
their energy from wind, water, or 
sunlight will be continued. 

Refugees 

People fleeing armed conflicts in 
Nicaragua, El Salvador, and Guatemala 
constitute the great majority of refugees 
in need of protection and assistance in 
Central America. The United States and 
other donor countries have been working 
together with various international 
organizations to ensure that refugees 
are protected and, where possible, are 
assisted to return to their homes. Coun- 
tries in the region, particularly Hon- 
duras and Costa Rica, have been 
generous in providing asylum. Resettle- 
ment outside the region has been 
necessary in relatively few cases. 

Of an estimated 300,000 refugees in 
Mexico and Central America, approx- 
imately 120,000 were receiving 
assistance from the UN High Commis- 
sion for Refugees (UNHCR), as of 
mid-1986: Mexico, 40,000; Honduras, 
44,000; Costa Rica, 30,000; Belize, 4,500; 
and Nicaragua, 2,300. Assistance for 
registered refugees in Central America 
is considered by experts to be generally 
good. Of greater concern is the large 
number of persons who have crossed 
national borders without registering 
themselves as refugees. They live 
without official refugee status and pro- 
tection and, in many cases with limited 
access to food assistance, health care, 
and other services normally provided to 
refugees. The number of this group can 
only be estimated; most authorities, 
however, assume that it is several times 
larger than the number of registered 
refugees. 

The United States is working to 
improve the situation of refugees in Cen- 
tral America. 

First, the U.S. Government contrib- 
utes a third of the UNHCR' s $40 million 
budget in Latin America. We also con- 
tribute to the Intergovernmental Com- 
mittee on Migration programs for 
refugees in the region and fund a 
quarter of the International Red Cross' 
$12-million budget for Latin America. 



Second, we are working with coun- 
tries of first asylum (i.e., the country to 
which the refugees first flee) to improve 
processing, assistance, and protection of 
refugees. 

Third, we are working with the 
UNHCR and regional governments on 
durable solutions, including integration 
opportunities in countries of first 
asylum, voluntary repatriation, and, in 
those cases where it is considered appro- 
priate, resettlement to a third country. 

Fourth, we have expanded the Latin 
American refugee admissions program 
to enable qualified refugees to resettle in 
the United States. 

The major factors affecting refugee 
flows in the region are the level of 
economic growth and political stability in 
the countries from which the refugees 
have fled and continue to flee. Those two 
factors are, of course, intertwined. 
Although the United States will continue 
its efforts (as outlined above), the 
ultimate solution to the region's refugee 
issue lies with progress toward political 
and economic stability. 

International Narcotics Control 

Central America is a significant transit 
region for narcotics entering the United 
States from South America. There also 
are areas where liberal bank and tax 
laws have created environments useful 
for narcotics-money laundering activi- 
ties. Although some marijuana grown in 
Central America is apparently entering 
the U.S. market and some opium poppy 
is now grown in Guatemala, the coun- 
tries of the region have not been major 
producers of narcotics. 

Because U.S. narcotics control 
strategy focuses on the eradication of 
narcotic crops or interdiction at the 
source (i.e., the major producing coun- 
tries), funding provided to the Central 
American countries has been limited. 
Over the past several years, Belize has 
received most of the funding provided to 
the area to support a substantial aerial 
herbicide eradication program. 

Marijuana eradication has also been 
funded in Panama and negotiations are 
underway to fund an aerial herbicide 
spray effort against opium poppy and 
marijuana in Guatemala. Costa Rica and 
Honduras have received small amounts 
of support for equipment for interdiction 
operations. Expansion of narcotics con- 
trol funding for Central America in the 
future will depend on the degree of pro- 
duction and trafficking in the area. ■ 



Current Actions 



MULTILATERAL 



Aviation 

Convention on international civil aviatior 
Done at Chicago Dec. 7, 1944. Entered ii 
force Apr. 4, 1947. TIAS 1591. 

Protocol on the authentic trilingual text i 
the convention on international civil avia 
(TIAS 1591), with annex. Done at Bueno 
Aires Sept. 24, 1968. Entered into force 
Oct. 24, 1968. TIAS 6605. 
Adherence deposited: Cook Islands, Aug. 
1986. 

Convention on offenses and certain othet 
committed on board aircraft. Done at To I 
Sept. 14, 1963. Entered into force Dec. 4 1 
1969. TIAS 6768. 

Accession deposited: Yemen (Sanaa), 
Sept. 26, 1986. 

Conservation 

Convention on international trade in 

endangered species of wild fauna and flo 

with appendices. Done at Washington M; 

1973. Entered into force July 1, 1975. TI 

8249. 

Accessions deposited: Dominican Republ 

Dec. 17, 1986; Singapore, Nov. 30, 1986. 

Notification of denunciation: United Aral 

Emirates, Jan. 27, 1987, effective Jan. 2' 

1988. 

Territorial application: Extended by Porl 

to Macao effective Apr. 22, 1987. 

Amendment to the convention of Mar. 3, 
1973, on international trade in endanger 
species of wild fauna and flora (TIAS 82' 
Done at Gaborone Apr. 30, 1983. » 
Acceptance deposited: France, Sept. 16, 

Convention on the conservation of Antar 

marine living resources, with annex for i 

arbitral tribunal. Done at Canberra May 

1980. Entered into force Apr. 7, 1982. T! 

10240. 

Accession deposited: Greece, Feb. 12, 19 

Convention on wetlands of international 
importance especially as waterfowl habit; 
Done at Ramsar Feb. 2, 1971. Entered ir 
force Dec. 21, 1975. 
Enters into force for the U.S.: Apr. 18, 1 

Finance 

Convention on the settlement of investm< 

disputes between states and nationals of 

other states. Done at Washington Mar. 1 

1965. Entered into force Oct. 14, 1966. T 

6090. 

Signature: Belize, Dec. 19, 1986. 

Fisheries 

Protocol to amend the international conv 

tion of May 14, 1966, for the conservatioi 

Atlantic tunas (TIAS 6767). Done at Pari; 

July 10, 1984. 1 

Acceptance deposited: U.S.S.R., June 9, 

1986. 



86 



Department of State Bull 



Warfare 

tocol for the prohibition of the use in war 
sphyxiating, poisonous, or other gases, 
of bacteriological methods of warfare. 
ie at Geneva June 17, 1925. Entered into 
e Feb. 8, 1928; for the U.S. Apr. 10, 1975. 
S8061. 

essions deposited: Afghanistan, Benin, 
lien (Aden), Dec. 9, 1986. 

icial Procedure 

vention on the taking of evidence abroad 
ivil or commercial matters. Done at The 
^ue Mar. 18, 1970. Entered into force Oct. 
972. TIAS 7444. 
ritorial application: Extended by U.K. to 



:ey Jan. 6, 1987. 1 

ine Pollution 

rnational convention on the establishment 

n international fund for compensation for 

iollution damage. Done at Brussels 

, 18, 1971. Entered into force Oct. 16, 

I. 3 

ession deposited: Greece, Dec. 16, 1986. 



vention for the protection and develop- 
t of the marine environment of the wider 
ibbean region, with annex, with protocol 
lerning cooperation in combatting oil 
s in the Caribbean region, with annex. 
e at Cartagena Mar. 24, 1983. 1 
ession deposited: Antigua and Barbuda, 



18, 1986. 
fication deposited: Venezuela, Nov. 11, 



illations for the prevention of pollution by 

iage from ships, Annex V to the interna- 

al convention for the prevention of pollu- 

ffrom ships (MARPOL 73/78). Done at 

don Nov. 2, 1973. 1 [Senate] Treaty 

. 100-3. 

ismitted to Senate for advice and 



tent: Feb. 9, 1987. 

lear Material — Physical Protection 

vention on the physical protection of 
ear material, with annexes. Done at Vien- 
[>ct. 26, 1979. 
ered into force: Feb. 8, 1987. 



fications deposited: Indonesia, 



5, 1986; Switzerland, Jan. 9, 1987. 

ific Settlement 

vention for the pacific settlement of inter- 
onal disputes. Signed at The Hague Oct. 
1907. Entered into force Jan. 26, 1910. 36 
.. 2199. TS 536. 
ession deposited: Nigeria, Dec. 18, 



tal 

•d additional protocol to the constitution 
,1e Universal Postal Union of July 10, 
4, general regulations with annex, and the 
wsal postal convention with final protocol 
detailed regulations. Done at Hamburg 
27. 1984. Entered into force Jan. 1. 
6; for the U.S. June 6, 1986. 



Accessions deposited: Philippines, 
Dec. 11, 1986; St. Lucia, Dec. 19, 1986. 
Ratifications deposited: Canada, Jan. 8, 
1987; Guatemala, Nov. 17, 1986; Madagascar, 
Dec. 3, 1986; Netherlands, Jan. 8, 1987. 1 

Money orders and postal travelers' checks 

agreement, with detailed regulations with 

final protocol. Done at Hamburg July 27, 

1984. Entered into force Jan. 1, 1986; for the 

U.S. June 6, 1986. 

Approvals deposited: Madagascar, 

Dec. 3, 1986; Netherlands, Jan. 8, 1987. 4 

Postal parcels agreement with final protocol 
and detailed regulations. Done at Hamburg 
July 27, 1984. Entered into force Jan. 1, 
1986; for the U.S. June 6, 1986. 
Accessions deposited: Guatemala, 
Nov. 17, 1986; St. Lucia, Dec. 19, 1986. 
Approvals deposited: Madagascar, 
Dec. 3, 1986; Netherlands, Jan. 8, 1987. 4 

Prisoner Transfer 

Convention on the transfer of sentenced per- 
sons. Done at Strasbourg Mar. 21, 1983. 
Entered into force July 1, 1985. TIAS 10824. 
Acceptance deposited: Finland, Jan. 29, 
1986. 5 

Ratification deposited: Denmark, 
Jan. 16, 1987. 5 - 6 

Territorial application: Extended by the 
U.K. to Anguilla, British Indian Ocean Ter- 
ritory, Cayman Islands, Falkland Islands, 
Gibraltar, Montserrat, Pitcairn, Henderson, 
Ducie and Oeno Islands, St. Helena, St. 
Helena Dependencies, and Sovereign Base 
Areas of Akrotiri and Dhekelia in the Island 
of Cyprus, effective May 1, 1987. 

Red Cross 

Protocol additional to the Geneva conventions 
of Aug. 12, 1949 (TIAS 3362, 3363, 3364, 
3365), and relating to the protection of vic- 
tims of noninternational armed conflicts (Pro- 
tocol II). Adopted at Geneva June 8, 1977. 
Entered into force Dec. 7, 1978. 3 [Senate] 
Treaty Doc. 100-2. 
Transmitted to Senate for advice and 
consent: Jan. 29, 1987. 

Trade— Textiles 

Protocol extending the arrangement of 
Dec. 20, 1973, regarding international trade 
in textiles (TIAS 7840). Done at Geneva 
July 31, 1986. Entered into force Aug. 1, 
1986; for the U.S. Aug. 5, 1986. 
Acceptance deposited: Portugal on behalf of 
Macao, Jan. 28, 1987. 

Weights and Measures 

Convention establishing an International 
Organization of Legal Metrology. Done at 
Paris Oct. 12, 1955. Entered into force May 
28, 1958; for the U.S. Oct. 22, 1972, as 
amended Jan. 18, 1968. TIAS 7533. 
Accession deposited: Portugal, Nov. 26, 1986. 

Wheat 

Wheat trade convention, 1986. Done at Lon- 
don Mar. 14, 1986. Entered into force July 1, 
1986. 7 [Senate] Treaty Doc. 100-1. 



TREATIES 



Food aid convention, 1986. Done at London 
Mar. 13, 1986. Entered into force July 1, 
1986. 7 [Senate] Treaty Doc. 100-1. 
Transmitted to Senate for advice and 
consent: Jan. 20, 1987. 



BILATERAL 



Argentina 

Agreement relating to the employment of 
dependents of official government employees. 
Effected by exchange of notes at Buenos 
Aires May 28 and Dec. 15, 1986. Entered into 
force Dec. 15, 1986. 

China 

Memorandum of understanding concerning 
INTELPOST field trial, with details of imple- 
mentation. Signed at Beijing and Washington 
Jan. 17 and Feb. 5, 1987. Entered into force 
Mar. 1, 1987. 

Agreements amending agreement of Aug. 19, 
1983, as amended, relating to trade in cotton, 
wool, and manmade fiber textiles and textile 
products. Effected by exchange of notes at 
Washington Jan. 15-16, 1987. Entered into 
force Jan. 16, 1987. 

Agreement concerning maritime search and 
rescue cooperation. Signed at Washington 
Jan. 20, 1987. Entered into force Jan. 20, 
1987. 

France 

Technical exchange and cooperation arrange- 
ment in the field of light water reactor safety 
research, with appendices. Signed at Paris 
and Washington Nov. 28 and Dec. 31, 1986. 
Entered into force Dec. 31, 1986. 

Guatemala 

Agreement for sales of agricultural com- 
modities. Signed at Guatemala July 2, 1986; 
with amendment signed at Guatemala 
Aug. 29, 1986. 
Entered into force: Jan. 2, 1987. 

Guyana 

Agreement amending agreement of Aug. 7, 
1986, for sales of agricultural commodities. 
Effected by exchange of notes at Georgetown 
Sept. 25 and 30, 1986. Entered into force 
Sept. 30, 1986. 

Hungary 

Agreement amending agreement of Feb. 15 
and 25, 1983, as amended and extended 
relating to trade in wool textile products. 
Effected by exchange of notes at Budapest 
Dec. 30, 1986, and Jan. 6, 1987. Entered into 
force Jan. 6, 1987. 

India 

Agreement on educational, cultural, and 
scientific cooperation, with related letter. 
Signed at New Delhi Jan. 7, 1987. Entered 
into force Jan. 7, 1987, for certain provisions; 
others upon completion of appropriate U.S. 
legislative action. 



ril 1987 



87 



PRESS RELEASES 



Agreement relating to trade in textiles and 
textile products, with annexes. Effected by 
exchange of notes at Washington Feb. 6, 
1987. Entered into force Feb. 6, 1987; effec- 
tive Jan. 1, 1987. 

Jamaica 

Agreement for sale of agricultural com- 
modities, with agreed minutes. Signed at 
Kingston Jan. 15, 1987. Entered into force 
Jan. 15, 1987. 

Japan 

Agreement on maritime search and rescue. 
Signed at Tokyo Dec. 12, 1986. Entered into 
force Dec. 12, 1986. 

Agreement relating to development of the 
XSH-60J weapon system. Effected by 
exchange of notes at Tokyo Jan. 20, 1987. 
Entered into force Jan. 20, 1987. 

Agreement concerning special measures 
relating to the agreement under Art. VI of 
the treaty of mutual cooperation and security 
regarding facilities and areas and the status 
of U.S. Armed Forces in Japan (TIAS 4510), 
with agreed minutes. Signed at Tokyo 
Jan. 30, 1987. Enters into force on exchange 
of notes indicating approval by both govern- 
ments in accordance with their respective 
internal legal procedures. 

Jordan 

International express mail agreement, with 
detailed regulations. Signed at Amman and 
Washington Dec. 31, 1986, and Jan. 30, 1987. 
Entered into force Mar. 27, 1987. 

Mexico 

Agreement of cooperation regarding trans- 
boundary shipments of hazardous substances. 
Signed at Washington Nov. 12, 1986. 
Entered into force: Jan. 29, 1987. 

Agreement of cooperation regarding trans- 
boundary air pollution caused by copper 
smelters. Signed at Washington Jan. 29, 
1987. Entered into force Jan. 29, 1987. 

Netherlands 

Protocol to amend the protocol of Mar. 31, 
1978 (TIAS 8998), relating to the air 
transport agreement of 1957 (TIAS 4782). 
Signed at Washington June 11, 1986. 
Entered into force: Feb. 2, 1987. 

Singapore 

Memorandum of understanding concerning 
INTELPOST field trial, with details of 
implementation. Signed at Singapore and 
Washington Nov. 26, 1986, and Feb. 5, 1987. 
Entered into force Feb. 5, 1987; effective 
Dec. 1, 1986. 

Switzerland 

Agreement on cooperation in radioactive 
waste management safety research, with 
appendix. Signed at Bethesda and Baden 
Aug. 26 and Sept. 26, 1986. Entered into 
force Sept. 26, 1986. 



Tunisia 

Agreement amending the agreement of 
June 11, 1986, for sale of agricultural com- 
modities. Signed at Tunis Jan. 23, 1987. 
Entered into force Jan. 23, 1987. 

U.S.S.R. 

Agreement concerning confidentiality of data 
on deep seabed areas, with related exchange 
of letters and agreed record. Effected by 
exchange of notes at Moscow Dec. 5, 1986. 
Entered into force Dec. 5, 1986. 

United Kingdom 

Memorandum of understanding for procure- 
ment of RN ship-launched harpoon weapon 
system. Signed at London Oct. 17, 1986. 
Entered into force Oct. 17, 1986. 

Venezuela 

Agreement extending agreement of Dec. 26, 
1984, establishing a Venezuela-United States 
agriculture commission. Effected by exchange 
of notes at Washington Dec. 18, 1986, and 
Feb. 6 and 13, 1987. Entered into force 
Feb. 13, 1987; effective Dec. 26, 1986. 



Department of State 



Press releases may be obtained from the 
Office of Press Relations, Department of 
State, Washington, D.C. 20520. 

No. Date Subject 

*23 2/2 Shultz: interview by news 

correspondents in Boston, 
Miami, Houston, Detroit, 
New York, and Minne- 
apolis through satellite by 
CONUS Communications, 
Jan. 29. 

Shultz: statement on William 
Casey. 

Shultz: statement before 
Senate Armed Services 
Committee. 

Shultz: arrival statement, 
Douala, Cameroon, Jan. 9. 

Shultz: departure statement, 
Douala, Jan. 9. 

Shultz: remarks at 
American-Australian 
bicentennial dinner, 
Feb. 3. 
29 2/5 Shultz: statement before the 

Senate Foreign Relations 
Committee on Iran-contra 
aid affairs, Jan. 27. 
*30 2/5 Shultz: statement before 

House Budget Committee 
on international affairs 
and State Department 
funding, Jan. 28. 
31 2/6 American Foreign Policy: 

Current Documents, 1985. 
released. 
*32 2/6 Shultz: news conference, 

Abidjan, Cote d'lvoire, 
Jan. 13. 



24 


2/2 


25 


2/3 


26 


2/4 


27 


2/4 


28 


2/4 



Memorandum of understanding concernini 
cooperation in the geological sciences. Sigl 
at Washington Feb. 6, 1987. Entered into 
force Feb. 6, 1987. 

World Meteorological Organization 

Agreement relating to a procedure for U. I 
income tax reimbursement, with annex. 
Signed at Geneva Jan. 23, 1987. Entered 
force Jan. 23, 1987. 

Zaire 

Agreement amending and extending the I 
agreement of Apr. 14, 1984, for technical 
assistance for the maintenance of the exti 
high voltage DC intertie Inga-Shaba proje 
Signed at Kinshasa July 3, 1986. Entered 
force July 3, 1986. 



'Not in force. 
2 With designation(s). 
3 Not in force for the U.S. 
4 Also on behalf of Aruba and the 
Netherlands Antilles. 
6 With declaration(s). 
6 With reservation(s). 
'Provisionally in force for the U.S. 



33 2/9 Shultz: interview on ABC- 

TV's "This Week With 
David Brinkley," Feb. 8 

*34 2/10 Shultz: remarks on receipt 
Certificate of Meritorioi 
Service by the Americai 
Legion Auxiliary, Feb. 

*35 2/10 Shultz: departure remarks 
Nairobi, Kenya, Jan. 12 
36 2/11 Shultz: statement before 
Senate Budget Commitl 
Jan. 23. 

*37 2/11 Shultz: remarks at the 

foreign policy conferenc 
for leaders in teachers 
education. 

*38 2/12 Shultz: interview on NBC- 
TV's "Evening News," 
Feb. 11. 

*39 2/13 Program for the official 
working visit to 
Washington, D.C, of 
Israeli Prime Minister 
Shamir, Feb. 17-20. 

*40 2/13 Shultz: statement before tl 
House Appropriations 
Committee, Subcommitt 
on Defense, Feb. 11. 
41 2/13 Shultz: address and questii 
and-answer session befo 
the American Bar Assoc 
tion, New Orleans, 
Feb. 12. 

*42 2/12 Frank Shakespeare sworn 
as Ambassador to the Hi 
See, Dec. 15, 1986 
(biographic data). 



88 



Department of State Built 



PUBLICATIONS 



2/19 



2/24 



2/24 



2/24 



2/26 



2/27 



2/27 



Shultz: remarks before the 
National Council for Inter- 
national Visitors, Feb. 18. 

Shultz: remarks and 
question-and-answer ses- 
sion before the American 
Association of Community 
College Trustees, Feb. 23. 

Shultz: remarks at U.S. 
Holocaust Memorial Coun- 
cil conference. Feb. 23. 

Shultz: address and question- 
and-answer session before 
the Institute of Interna- 
tional Education and the 
World Affairs Council, 
Denver, Feb. 20. 

Shultz: remarks before Peace 
Corps country directors, 
Feb. 25. 

Shultz: audiotaped remarks 
on the occasion of the 45th 
anniversary of Voice of 
America, Feb. 24. 

Shultz: statement before the 
Senate Foreign Relations 
Committee, Feb. 24. 



Not printed in the BULLETIN. 



UN 



5 releases may be obtained from the 
c Affairs Office, U.S. Mission to the 
id Nations, 799 United Nations Plaza, 
York, N.Y. 10017. 



Date 

11/5 



11/5 



11/7 



11/7 



11/11 



11/11 



11/12 



11/14 



11/14 



11/14 



Subject 

Clark: human rights, Com- 
mittee III. 
Scott: Palestinian people, 

Committee II, Nov. 4. 
Moore: refugees, Committee 

III. 
Montgomery: information, 

Special Political 

Committee. 
Byrne: apartheid, UN 

General Assembly, 

Nov. 10. 
Kennedy: IAEA report, UN 

General Assembly. 
Montgomery: information, 

Special Political 

Committee. 
Reed: International Civil 

Service Commission and 

UN Joint Staff Pension 

Board reports, 

Committee V. 
Byrne: refugees, Ad Hoc 

Committee for Voluntary 

Contributions to the 

UNHCR. 
Byrne: religion, Committee 

III. 



*155 


11/18 


*156 


11/18 


*157 


11/18 


158 


11/18 


159 


11/19 


*160 


11/18 


•161 


11/20 


♦162 


11/20 


*163 


11/20 


*164 


11/20 


*165 


11/21 


*166 


11/21 


*167 


11/24 


168 


11/24 


*169 


11/26 


•170 


11/25 


*171 


11/26 



Trible: Central America, UN 
General Assembly. 

Reed: operations activities 
for development, Commit- 
tee II. 

U.S.-U.S.S.R. bilateral talks 
adjourn. 

Okun: Libya, Security 
Council. 

Pressler: Libya, UN General 
Assembly. 

Yost: Central America, UN 
General Assembly. 

Byrne: Namibia, UN General 
Assembly. 

Byrne: Palau, Trusteeship 
Council. 

Montgomery: Israeli practice 
effecting human rights in 
occupied territories, Spe- 
cial Political Committee. 

Byrne: human rights, Com- 
mittee III. 

Michalski: Namibia, Commit- 
tee V, Nov. 19. 

Shearouse: personnel ques- 
tions, Committee V. 

Norris: Nicaragua, Commit- 
tee II, Nov. 21. 

Moore: UNRWA, Ad Hoe 
Committee on Voluntary 
Contributions. 

Walters: Cuba, Committee 
III. 

Clark: outer space, Special 
Political Committee. 

Reed: El Salvador, Special 
Meeting on Emergency 
Assistance. 



*172 11/28 



*173 11/28 



Montgomery: information, 

Special Political 

Committee. 
Lowell: remote sensing of 

the Earth from space, 

Special Political 

Committee. 
Okun: arms embargo. Secu- 
rity Council. 
Okun: Palestine, UN General 

Assembly. 
Norris: external debt crisis. 

Committee II, Nov. 28. 
Byrne: Chile, Committee III, 

Nov. 28. 
Mrs. Martin Luther King, 

Jr., presents memorial 

plaque to the UN. 
Byrne: Middle East, UN 

General Assembly. 
Byrne: Chile, UN General 

Assembly, Dec. 4. 
Walters: Nicaragua, UN 

General Assembly. 
Michalski: budget, Commit- 
tee V. 
Norris: health and environ- 
ment, UN General 

Assembly. 
Norris: front-line states, UN 

General Assembly. 
Walters: Central America, 

Security Council. 
Walters: UN finance review, 

UN General Assembly. 
UN General Assembly 

Review: 1986. 



• Not printed in the BULLETIN. 



*174 


11/28 


•175 


12/2 


•176 


12/3 


•177 


12/4 


*178 


12/4 


•179 


12/4 


•180 


12/5 


•181 


12/5 


•182 


12/8 


•183 


12/8 


•184 


12/8 


•185 


12/10 


•186 


12/19 


187 


12/31 



Department of State 



Free single copies of the following Depart- 
ment of State publications are available from 
the Correspondence Management Division, 
Bureau of Public Affairs, Department of 
State, Washington, D.C. 20520. 

Secretary Shultz 

U.S. Interests in the Persian Gulf, Senate 
Foreign Relations Committee, Jan. 27, 1987 
(Current Policy #911). 

Pursuing an Effective Foreign Policy, Senate 
Armed Services Committee, Feb. 3, 1987 
(Current Policy #912). 

Nicaragua: The Moral and Strategic Stakes, 
American Bar Association, New Orleans, 
Feb. 12, 1987 (Current Policy #918). 

Meeting America's Foreign Policy 
Challenges, Institute of International 
Education and the World Affairs Council, 
Denver, Feb. 20, 1987 (Current Policy 
#921). 

Arms Control 

The Nuclear and Space Negotiations: 
Translating Promise to Progress, Ambas- 
sador Nitze, World Affairs Council, Boston, 
Jan. 14, 1987 (Current Policy #910). 



Department 

The Department of State and the Foreign 
Affairs Budget (Public Information Series, 
Jan. 1987). 

Energy 

Oil and Energy (GIST, Feb. 1987). 

Europe 

Expulsions of Soviet Officials, 1986 (Foreign 
Affairs Note, Jan. 1987). 

Human Rights 

Soviet Repression of the Ukrainian Catholic 
Church, Jan. 1987 (Special Report #159). 

South Asia 

Indian Ocean Region (GIST, Feb. 1987). 

Western Hemisphere 

Debt and Growth in Latin America and the 

Caribbean (GIST, Feb. 1987). 
Soviet Activity in Latin America (GIST, 

Feb. 1987). ■ 



il 1987 



89 



PUBLICATIONS 



Current Documents Volume Released 



i 



The Department of State on February 6, 
1987, released American Foreign Policy: 
Current Documents, 1985. The book is 
the most recent volume in an ongoing 
Department of State series. 

Like earlier volumes in the series, 
this book presents official public expres- 
sions of policy that best set forth the 
goals and objectives of United States 
foreign policy. Included are the texts of 
major official messages, addresses, 
statements, interviews, press con- 
ferences and briefings, reports, congres- 
sional testimony, and communications by 
the White House, the Department of 
State, and other Federal agencies or 
officials involved in the foreign policy 
process. The volume contains 1,125 
pages arranged chronologically within 15 
geographic and topical chapters, and 
includes a list of documents, editorial 
annotations, maps, a list of names and 
abbreviations, and an index. 

The volume covers the first year of 
the second Reagan Administration. It 
presents the major statements by Presi- 
dent Reagan, the Secretary of State, and 
other government leaders setting forth 
the most important general principles of 
American foreign policy in 1985. Policy 
statements are included on national 
security policy, arms control, foreign 
economic policy, terrorism, narcotics, 
the role of the United States in the 
United Nations, the approach to human 
rights around the world, and the concern 
with refugees. The volume also presents 
expressions of U.S. policy on regional 
and bilateral aspects of American 
foreign relations in 1985. 

The American Foreign Policy 
documentary series began in 1950. 



Following the publication of three 
volumes covering the 1941 to 1955 
years, annual volumes entitled American 
Foreign Policy: Current Documents were 
issued for the years 1956-1967. After an 
interruption the series was resumed with 
the publication in August 1983 of 
American Foreign Policy: Basic 
Documents, 1977-1980. The annual 
volumes were revived with the publica- 
tion of American Foreign Policy: Cur- 
rent Documents, 1981. The 1982, 1983, 
and 1984 annual volumes have also been 
published. It is the Department's inten- 
tion to publish the annual volume for 
1986 later this year. 

The Department, which released a 
microfiche supplement to the 1981 
printed volume in February 1985, also 
plans to publish microfiche supplements 
to the later printed volumes in the 



series. These microfiche publication; 
include the full texts of many documlj 
printed only in part in the printed 
volumes and will also reproduce a m t 
larger and more complete selection ( 
documents than appears in the book 
American Foreign Policy: Currt 
Documents, 1985 was prepared in th< 
Office of the Historian, Bureau of Pil 
Affairs, Department of State. Copie:| 
this volume (Department of State 
Publication No. 9485; GPO Stock Nc 
044-000-02136-6) may be purchase! | 
$31.00 (domestic prepaid) from the 
Superintendent of Documents, U.S. 
Government Printing Office, 
Washington, D.C. 20402. Checks or 
money orders should be made payab tj 
the Superintendent of Documents. 



Press release 31 of Feb. 6, 1987. 



Background Notes 



This series provides brief, factual summaries 
of the people, history, government, economy, 
and foreign relations of about 170 countries 
(excluding the United States) and of selected 
international organizations. Recent revisions 
are: 

Audorra (Dec. 1986) 
Guatemala (Dec. 1986) 
Index (Dec. 1986) 
Jamaica (Jan. 1987) 
Togo (Jan. 1987) 



A free copy of the index only may bi 
obtained from the Correspondence Mana 
ment Division, Bureau of Public Affairs, 
Department of State, Washington, D.C. 
20520. 

For about 60 Background Notes a ye: 
subscription is available from the Superii 
ent of Documents, U.S. Government Pri 
Office, Washington, D.C. 20402, for $32. 
(domestic) and $40.00 (foreign). Check oi 
money order, made payable to the 
Superintendent of Documents, must acc( 
pany order. ■ 



90 



Department of State Bui 



fDEX 

^ 

>ril 1987 

«lume 87, No. 2121 



jerican Principles 

jitaining the Momentum in U.S. Foreign 

Ihlicy (Whitehead) 35 

' Auing an Effective Foreign Policy 

Jlhultz) 11 

'4s Control 

lilaest for Excellence (Reagan, excerpts) 1 

Fi'etary's Interview on "This Week With 

ijkvid Brinkley" 8 

H Arms Control Initiatives 16 

«ze. A Plan for Fully Funding NBCCA 

j ^commendations 59 

ifcil. U.S. International Trade (White 

; ()Duse statement) 32 

lia. 1986 Human Rights Report Released 

Ichifter) 37 

ogress 
Jan for Fully Funding NBCCA 

•i'commendations 59 

j);uing an Effective Foreign Policy 

Ihultz) 11 

liest for Excellence (Reagan, excerpts) 1 
9 Report on Cyprus (message to the 

■ingress) 34 

Trade Policy and the Trade Deficit 

eutter) 22 

.a Rica. A Plan for Fully Funding 

3CCA Recommendations 59 

-us. 30th Report on Cyprus (message to 

e Congress) 34 

;hoslovakia. Czechoslovak Human 

ghts Initiative (Reagan) 45 

omacy. Pursuing an Effective Foreign 

)licy (Shultz) 11 

iiomics 

nee Ministers Meet on Exchange Rates 

atement) 31 

;an Politics in Transition (Sigur) 19 

ing America's Foreign Policy 

allenges (Shultz) 5 

an for Fully Funding NBCCA 

icommendations 59 

d (Reagan) 33 

uing an Effective Foreign Policy 

ultz) 11 

jest for Excellence (Reagan, excerpts) 1 
Mexico Binational Commission Meets 

epulveda, Shultz) 54 

I Trade Policy and the Trade Deficit 

eutter) 22 

i .alvador. A Plan for Fully Funding 

) BCCA Recommendations 59 

i ironment. U.S. -Mexico Binational Com- 

j ission Meets (Sepulveda, Shultz) 54 

i ope 

.Torts from the EEC (proclamation). ... 30 

J . Arms Control Initiatives 16 

lima CSCE Followup Meeting Resumes 

! teagan) 34 

Feign Assistance 

klan for Fully Funding NBCCA 

eccimmendations 59 

Pretary's Interview on "This Week With 

avid Brinkley" 8 

Hitemala 

1'ii Human Rights Report Released 

Shifter) 37 

I 'Ian for Fully Funding NBCCA 
econimendations 59 



Haiti. 1986 Human Rights Report Released 

(Schifter) 37 

Honduras. A Plan for Fully Funding NBCCA 

Recommendations 59 

Human Rights 

Czechoslovak Human Rights Initiative 

(Reagan) 45 

Human Rights, the Soviet Union, and the 

Helsinki Process (Schifter) 42 

1986 Human Rights Report Released 

(Schifter) 37 

A Plan for Fully Funding NBCCA 

Recommendations 59 

Poland (Reagan) 33 

A Quest for Excellence (Reagan, excerpts) . 1 
The Reality About Human Rights in the 

U.S.S.R. (Schifter) 38 

Release of Soviet Political Prisoners (Depart- 
ment statement) 39 

Vienna CSCE Followup Meeting Resumes 

(Reagan) 34 

Iran. Iran-Iraq War (Reagan) 52 

Iraq. Iran-Iraq War (Reagan) 52 

Israel. Visit of Israeli Prime Minister Shamir 

(Reagan, Shamir, Shultz) 49 

Korea. Korean Politics in Transition 

(Sigur) 19 

Lebanon 

Kidnappings in Lebanon (Reagan) 51 

Secretary's Interview on "This Week With 

David Brinkley" 8 

Mexico. U.S. -Mexico Binational Commission 

Meets (Sepulveda, Shultz) 54 

Monetary Affairs. Finance Ministers Meet 

on Exchange Rates (statement) 31 

Narcotics 

International Narcotics Control Strategy 

Report Released 52 

Maintaining Momentum in U.S. Foreign 

Policy (Whitehead) 35 

U.S. -Mexico Binational Commission Meets 

(Sepulveda, Shultz) 54 

Nicaragua. A Plan for Fully Funding 

NBCCA Recommendations 59 

North Atlantic Treaty Organization. U.S. 

Arms Control Initiatives 16 

Nuclear Policy 

South Pacific Nuclear Free Zone Treaty 

(Department statement) 53 

U.S. Arms Control Initiatives 16 

Organization of American States. Collective 

Security and the Inter-American System 

(historical study) 56 

Pacific. South Pacific Nuclear Free Zone 

Treaty (Department statement) 53 

Panama. A Plan for Fully Funding NBCCA 

Recommendations 59 

Philippines. Philippine Constitutional 

Plebiscite (White House statement) .... 21 

Poland. Poland (Reagan) 33 

Presidential Documents 

Czechoslovak Human Rights Initiative ... 45 

Imports from the EEC (proclamation). ... 30 

Iran-Iraq War 52 

Kidnappings in Lebanon 51 

A Plan for Fully Funding NBCCA 

Recommendations 59 

Poland 33 

A Quest for Excellence (excerpts) 1 

30th Report on Cyprus (message to the 

Congress) 34 

Vienna CSCE Followup Meeting Resumes 34 
Visit of Israeli Prime Minister Shamir 

(Reagan, Shamir, Shultz) 49 



Visit of Zaire's President (Mobutu, 

Reagan) 15 

Publications 

Background Notes 90 

Current Documents Volume Released .... 90 

Department of State 89 

International Narcotics Control Strategy 

Report Released 52 

1986 Human Rights Report Released 

(Schifter) 37 

South Africa. 1986 Human Rights Report 

Released (Schifter) 37 

Terrorism 

Kidnappings in Lebanon (Reagan) 51 

Meeting America's Foreign Policy 

Challenges (Shultz) 5 

Pursuing an Effective Foreign Policy 

(Shultz) 11 

A Quest for Excellence (Reagan, excerpts) 1 
Secretary's Interview on "This Week With 

David Brinkley" 8 

Uniting Against Terrorism (Bush) 3 

Trade 

Imports from the EEC (proclamation). ... 30 

Korean Politics in Transition (Sigur) 19 

A Quest for Excellence (Reagan, excerpts) 1 
U.S. International Trade (White House 

statement) 32 

U.S. Trade Policy and the Trade Deficit 

(Yeutter) 22 

Treaties 

Collective Security and the Inter-American 

System (historical study) 56 

Current Actions 86 

U.S.S.R. 

Human Rights, the Soviet Union, and the 

Helsinki Process (Schifter) 42 

Meeting America's Foreign Policy Challenges 

(Shultz) 5 

1986 Human Rights Report Released 

(Schifter) 37 

A Quest for Excellence (Reagan, excerpts) 1 
The Reality About Human Rights in the 

U.S.S.R! (Schifter) 38 

Release of Soviet Political Prisoners (Depart- 
ment statement) 39 

Secretary's Interview on "This Week With 

David Brinkley" 8 

U.S. Arms Control Initiatives 16 

Western Hemisphere 

Collective Security and the Inter-American 

System (historical study) 56 

A Plan for Fully Funding NBCCA 

Recommendations 59 

A Quest for Excellence (Reagan, 

excerpts) 1 

Zaire. Visit of Zaire's President (Mobutu, 

Reagan) 15 

Name Index 

Bush, Vice President 3 

Mobutu, Sese Seko 15 

Painter, David S 56 

Reagan, President . . 1, 15, 30, 33, 34, 45, 49, 

51/52, 59 

Schifter, Richard 37, 38, 42 

Sepulveda, Bernardo 54 

Shamir, Yitzhak 49 

Shultz, Secretary 5, 8, 11, 49, 54 

Sigur, Gaston, J., Jr 19 

Whitehead, John C 35 

Yeutter, Clayton 22 



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Tie Official Monthly Record of United States Foreign Policy / Volume 87 / Number 2122 



May 1987 





ENTENI 









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*% > FY 1988 Assistance: 
Africa/11 
East Asia/30 
Europe/48 

Middle East & South Asia/59 
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Department of State 

bulletin 



Volume 87 / Number 2122 / May 1987 



The Department of State Bulletin, 
published by the Office of Public Com- 
munication in the Bureau of Public 
Affairs, is the official record of U.S. 
foreign policy. Its purpose is to provide 
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should not necessarily be interpreted as 
official U.S. policy statements. 



GEORGE P. SHULTZ 

Secretary of State 

GEORGE B. HIGH 

Acting Assistant Secretary 
for Public Affairs 

PAUL E. AUERSWALD 

Director, 

Office of Public Communication 

NORMAN HOWARD 

Chief, Editorial Division 

PHYLLIS A. YOUNG 

Editor 

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Assistant Editor 



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CONTENTS 



- 



he President 

Iran Arms and Contra Aid 

Controversy 
News Conference of March 19 



Economics 



he Secretary 

Visit to Asia 



frica 

FY 1988 Assistance Requests for 
Sub-Saharan Africa (Roy A. 
Stacy) 

rms Control 

J U.S. Tables Draft INF Treaty 

(President Reagan, U.S. 

Delegation Statement) 
f President Meets With Arms 

Negotiators (President Reagan) 
J Nuclear and Space Arms Talks 

Close Round Seven (Max M. 

Kampelman) 
INF Extended Session Ends 

(Maynard W. Glitman, 

President Reagan) 
Arms Control and Openness 

(Kenneth L. Adelman) 
Soviet Nuclear Test Vents 

Radioactive Debris 

epartment 

) Under-funding and Undermining 
Our Foreign Policy Infra- 
structure (Ronald I. Spiers) 

T How Much Security Is Enough? 
(Robert E. Lamb) 

ast Asia 

} The Cambodian Issue ( John C. 
Monjo) 
FY 1988 Assistance Requests for 
East Asia and the Pacific 
(Gaston J. Sigur, Jr.) 



36 



40 



Structural Adjustment, Dialogue, 
and U.S. -Japan Economic Rela- 
tions (W. Allen Wallis) 

U.S. Foreign Agricultural Policy 
and the Sugar Program 
(Douglas W. McMinn) 



Europe 

43 U.S. -Soviet Relations (John C. 
Whitehead) 

45 The U.S.-Soviet Bilateral Rela- 
tionship (Mark R. Parris) 

48 FY 1988 Assistance Requests for 
Europe (Rozanne L. Ridgway) 

52 U.S., Turkey Extend Agreement 
on Defense and Economic 
Cooperation (Secretary Shultz) 

Foreign Assistance 

54 U.S. Initiative for Southern 

Africa (M. Peter McPherson) 

56 U.S. Development Strategy for 
Sub-Saharan Africa (M. Peter 
McPherson) 

Middle East 

59 FY 1988 Assistance Requests 

for the Middle East and South 
Asia (Richard W. Murphy) 

Refugees 

65 Refugee Situation in Southern 
Africa (Michael H. Armacost) 

Science & Technology 

67 Multilateral Agreement on Space 

Station (Joint Statement) 

South Asia 

68 Resolving the Sri Lankan Conflict 

(Robert A. Peck) 



United Nations 

71 Human Rights in Cuba 
(Vernon A. Walters) 



Western Hemisphere 

75 Development of U.S. -Nicaragua 
Policy (Elliott Abrams, 
Philip C. Habib) 

82 Economic Assistance for Central 
America (Message to the 
Congress) 

84 FY 1988 Assistance Requests for 
Latin America and the Carib- 
bean (Elliott Abrams) 

90 Costa Rican Initiative (Elliott 

Abrams) 

Treaties 

91 Current Actions 

Press Releases 

93 Department of State 

Publications 

94 Foreign Relations Volume 

Released 

Index 




President Reagan held a meeting on March 3, 1987, with the National Security Council 
staff where he outlined the role of the staff in the formation of national security policy. 



(White House photo by Pete S 



"HE PRESIDENT 



- 



'an Arms and Contra Aid Controversy 



President Reagan 's televised address 
Ithe nation on March 4, 1987. 1 

e spoken to you from this historic 
ice on many occasions and about 
ny things. The power of the Presi- 
cy is often thought to reside within 
s Oval Office. Yet it doesn't rest here; 
ests in you, the American people, and 
your trust. Your trust is what gives a 
esident his powers of leadership and 
I personal strength, and it's what I 
mt to talk to you about this evening. 

For the past 3 months, I've been 
ent on the revelations about Iran. And 
u must have been thinking: "Well, 
ly doesn't he tell us what's happening? 
hy doesn't he just speak to us as he 
s in the past when we've faced 
mbles or tragedies?" Others of you, I 
ess, were thinking: "What's he doing 
ling out in the White House?" Well, 
3 reason I haven't spoken to you 
fore now is this: You deserve the 
ith. And as frustrating as the waiting 
s been, I felt it was improper to come 
you with sketchy reports, or possibly 
en erroneous statements, which would 
2n have to be corrected, creating even 
ire doubt and confusion. There's been 
ough of that. 

I've paid a price for my silence in 
-ms of your trust and confidence. But 
J'e had to wait, as you have, for the 
implete story. That's why I appointed 
I nbassador David Abshire as my special 
i unsellor to help get out the thousands 
i documents to the various investiga- 
! ms. And I appointed a special review 
i ard, the Tower board, which took on 
f e chore of pulling the truth together 
I r me and getting to the bottom of 
ings. It has now issued its findings. 

I'm often accused of being an opti- 
ist, and it's true I had to hunt pretty 
ird to find any good news in the 
iard's report. As you know, it's well- 
. ocked with criticisms, which I'll discuss 
| a moment; but I was very relieved to 
|i ad this sentence: "... the Board is 
i mvinced that the President does indeed 
pant the full story to be told." And that 
ill continue to be my pledge to you as 
le other investigations go forward. 

I want to thank the members of the 
iinel: former Senator John Tower, 
•;>rmer Secretary of State Edmund 
lluskie, and former national security 
•dviser Brent Scowcrofr. They have 
lone the nation, as well as me person- 
lly, a great service by submitting a 
sport of such integrity and depth. They 



have my genuine and enduring 
gratitude. 

I've studied the board's report. Its 
findings are honest, convincing, and 
highly critical; and I accept them. And 
tonight I want to share with you my 
thoughts on these findings and report to 
you on the actions I'm taking to imple- 
ment the board's recommendations. 

First, let me say I take full responsi- 
bility for my own actions and for those 
of my Administration. As angry as I may 
be about activities taken without my 
knowledge, I am still accountable for 
those activities. As disappointed as I 
may be in some who served me, I'm still 
the one who must answer to the Ameri- 
can people for this behavior. And as per- 
sonally distasteful as I find secret bank 
accounts and diverted funds— well, as 
the navy would say, this happened on my 
watch. 

Let's start with the part that is the 
most controversial. A few months ago I 
told the American people I did not trade 
arms for hostages. My heart and my best 
intentions still tell me that's true, but 
the facts and the evidence tell me it is 
not. As the Tower board reported, what 
began as a strategic opening to Iran 
deteriorated, in its implementation, into 
trading arms for hostages. This runs 
counter to my own beliefs, to Adminis- 
tration policy, and to the original 
strategy we had in mind. There are 
reasons why it happened, but no 
excuses. It was a mistake. 

I undertook the original Iran initia- 
tive in order to develop relations with 
those who might assume leadership in a 
post-Khomeini government. It's clear 
from the board's report, however, that I 
let my personal concern for the hostages 
spill over into the geopolitical strategy of 
reaching out to Iran. I asked so many 
questions about the hostages' welfare 
that I didn't ask enough about the 
specifics of the total Iran plan. 

Let me say to the hostage families: 
We have not given up. We never will. 
And I promise you we'll use every legiti- 
mate means to free your loved ones from 
captivity. But I must also caution that 
those Americans who freely remain in 
such dangerous areas must know that 
they're responsible for their own safety. 

Now, another major aspect of the 
board's findings regards the transfer of 
funds to the Nicaraguan contras. The 
Tower board wasn't able to find out 
what happened to this money, so the 
facts here will be left to the continuing 



investigations of the court-appointed 
independent counsel and the two con- 
gressional investigating committees. I'm 
confident the truth will come out about 
this matter, as well. As I told the Tower 
board, I didn't know about any diversion 
of funds to the contras. But as Presi- 
dent, I cannot escape responsibility. 

Much has been said about my 
management style, a style that's worked 
successfully for me during 8 years as 
Governor of California and for most of 
my Presidency. The way I work is to 
identify the problem, find the right indi- 
viduals to do the job, and then let them 
go to it. I've found this invariably brings 
out the best in people. They seem to rise 
to their full capability, and in the long 
run you get more done. 

When it came to managing the NSC 
[National Security Council] staff, let's 
face it, my style didn't match its 
previous track record. I've already 
begun correcting this. As a start, yester- 
day I met with the entire professional 
staff of the National Security Council. I 
defined for them the values I want to 
guide the national security policies of 
this country. I told them that I wanted a 
policy that was as justifiable and under- 
standable in public as it was in secret. I 
wanted a policy that reflected the will of 
the Congress as well as of the White 
House. And I told them that there'll be 
no more freelancing by individuals when 
it comes to our national security. 

You've heard a lot about the staff of 
the National Security Council in recent 
months. Well, I can tell you, they are 
good and dedicated government 
employees, who put in long hours for the 
nation's benefit. They are eager and anx- 
ious to serve their country. 

One thing still upsetting me, 
however, is that no one kept proper 
records of meetings or decisions. This 
led to my failure to recollect whether I 
approved an arms shipment before or 
after the fact. I did approve it; I just 
can't say specifically when. Well, rest 
assured, there's plenty of recordkeeping 
now going on at 1600 Pennsylvania 
Avenue. 

For nearly a week now, I've been 
studying the board's report. I want the 
American people to know that this 
wrenching ordeal of recent months has 
not been in vain. I endorse every one of 
the Tower board's recommendations. In 
fact, I'm going beyond its recommenda- 
tions so as to put the house in even 
better order. 

I'm taking action in three basic 
areas: personnel, national security 
policy, and the process for making sure 
that the system works. 



/lay 1987 



THE PRESIDENT 



First, personnel— I've brought in an 
accomplished and highly respected new 
team here at the White House. They 
bring new blood, new energy, and new 
credibility and experience. 

Former Senator Howard Baker, my 
new Chief of Staff, possesses a breadth 
of legislative and foreign affairs skills 
that's impossible to match. I'm hopeful 
that his experience as minority and 
majority leader of the Senate can help us 
forge a new partnership with the Con- 
gress, especially on foreign and national 
security policies. I'm genuinely honored 
that he's given up his own presidential 
aspirations to serve the country as my 
Chief of Staff. 

Frank Carlucci, my new national 
security adviser, is respected for his 
experience in government and trusted 
for his judgment and counsel. Under 
him, the NSC staff is being rebuilt with 
proper management discipline. Already, 
almost half the NSC professional staff is 
comprised of new people. 

Yesterday I nominated William 
Webster, a man of sterling reputation, to 
be Director of the Central Intelligence 
Agency. Mr. Webster has served as 
Director of the FBI and as a U.S. 
District Court judge. He understands the 
meaning of "rule of law." 

So that his knowledge of national 
security matters can be available to me 
on a continuing basis, I will also appoint 
John Tower to serve as a member of my 
Foreign Intelligence Advisory Board. I 
am considering other changes in person- 
nel, and I'll move more furniture, as I 
see fit, in the weeks and months ahead. 

Second, in the area of national 
security policy, I have ordered the NSC 
to begin a comprehensive review of all 
covert operations. I have also directed 
that any covert activity be in support of 
clear policy objectives and in compliance 
with American values. I expect a covert 
policy that if Americans saw it on the 
front page of their newspaper, they'd 
say, "That makes sense." I have had 
issued a directive prohibiting the NSC 
staff itself from undertaking covert 
operations— no ifs, ands, or buts. I have 
asked Vice President Bush to reconvene 
his task force on terrorism to review our 
terrorist policy in light of the events that 
have occurred. 

Third, in terms of the process of 
reaching national security decisions, I 
am adopting in total the Tower report's 
model of how the NSC process and staff 
should work. I am directing Mr. Carlucci 
to take the necessary steps to make that 
happen. He will report back to me on 
further reforms that might be needed. 



I've created the post of NSC legal 
adviser to assure a greater sensitivity 
to matters of law. 

I am also determined to make the 
congressional oversight process work. 
Proper procedures for consultation with 
the Congress will be followed, not only 
in letter but in spirit. Before the end of 
March, I will report to the Congress on 
all the steps I've taken in line with the 
Tower board's conclusions. 

Now, what should happen when you 
make a mistake is this: You take your 
knocks, you learn your lessons, and then 
you move on. That's the healthiest way 
to deal with a problem. This in no way 
diminishes the importance of the other 
continuing investigations, but the busi- 
ness of our country and our people must 
proceed. I've gotten this message from 



Republicans and Democrats in Congrc 
from allies around the world, and— if 
we're reading the signals right— even 
from the Soviets. And of course, I've 
heard the message from you, the 
American people. 

You know, by the time you reach i 
age, you've made plenty of mistakes. 
And if you've lived your life properly- 
so, you learn. You put things in perspt |j 
tive. You pull your energies together. 
You change. You go forward. 

My fellow Americans, I have a gre 
deal that I want to accomplish with yo 
and for you over the next 2 years. An( 
the Lord willing, that's exactly what I 
intend to do. 



■;■• 



'Text from Weekly Compilation of 
Presidential Documents of Mar. 9, 1987. 



News Conference of March 19 



President Reagan held a news con- 
ference on March 19, 1987. 1 

Q. Terry Anderson was taken cap- 
tive in Lebanon 2 years and 4 days ago, 
and today there are 8 Americans held 
hostage there. How has the Iran- 
contra affair complicated your efforts 
to win the release of the hostages? 

A. That's rather hard to tell right 
now. Indeed, the affair did get some 
hostages released, and if it hadn't 
leaked, I don't know whether the word 
of what we were doing there— I don't 
know whether we would have gotten 
more out. As the day that the informa- 
tion leaked and everything went public, 
it was my understanding that there 
were— the other two were due out in the 
next few days. But we're going to con- 
tinue to explore, as we always have, 
every opportunity to try and get them 
out. 

I happen to believe that when an 
American citizen any place in the world 
is unjustly denied their constitutional 
rights to life, liberty, and the pursuit of 
happiness, it is the responsibility of this 
government to restore those rights. 

Q. Former President Carter will be 
in Syria this weekend. Is he carrying a 
message from you about the hostages? 

A. No. 

Q. Is he making any effort in that 
regard as far as you know? 

A. I don't know. I wouldn't be sur- 
prised if he— if he was, but— and I'd be 
grateful if he did. 



I 



Q. There have been reports that 
you were told, directly or indirectly, 
least twice that the contra* were 
benefiting from the Iran arms sale. 1 
that true or were you deceived and li 
to by Admiral Poindexter [former 
national security adviser Rear Adm. 
John M. Poindexter] and Colonel 
North [Lieut. Col. Oliver L. North, a 
former aide on the National Security 
Council staff]? And I'd like to follow 
up. 

A. Let me just say, no, that is not 
true at all. When I went on the air rigl 
after the news broke and told what we 
had been doing and how we— what our 
policy was in getting into this affair, I 
did not know at that time that there w 
any money involved. I only knew that i 
had received our $12 million for the 
weapons which we had agreed to sell. 
Then, a little later, when the attorney 
general told me that he had come upon 
something that indicated that there wa 
something to do with money in Swiss 
bank accounts— and I couldn't imagine 
what it could be, because as I say, we 
got our money— but I said that I thougl 
we ought to go public with that again s> 
that you had all the information that wi 
had and not wait and have someone 
uncover this and think we were trying i 
cover up or something. 

So that was late on Monday after- 
noon. Tuesday morning, the first thing, 
we went before the joint leadership of 
the Congress and told them what we'd 
learned, that all we'd learned was that 
there was evidently some money having 
to do with this whole arrangement over 



Department of State Bulleti 



THE PRESIDENT 



re and involving some Swiss bank 
aunts. And then I came into the press 
m to all of you and told you. 

Q. Is it possible that two military 
icers who are trained to obey orders 
Ibbed power, made major foreign 
licy moves, didn't tell you when you 
Ire briefed every day on intelligence? 
did they think they were doing your 
Iding? 

D A. I don't know. I only know that 
■t's why I have said repeatedly that I 
Sit to find out, I want to get to the 
Htom of this and find out all that has 
Ipened. And so far, I've told you all 
It I know and, you know, the truth of 

I matter is, for quite some long time, 
a:hat you knew was what I'd told you. 

j Q. Robert McFarlane, who was 
In your national security adviser, 
is that in August of 1985, he called 
9 on the telephone and asked if you 
Hiited to give the green light to 
[i lei to send arms to Iran and have 
jm replenished from U.S. stocks, 
4 I that you said you did. And he said 

I I he reminded you in that conversa- 
1 1 that your Secretaries of State and 
Q 'ense were against it and you said 

M understood that, but you explained 
■ lim the reasons why you wanted to 
i horize it. Do you have no memory 
i hat, whatsoever? 

A. All I know is that I was never— 
a memory didn't fail me on the fact 
tl 1 1 had agreed to this thing. The only 
tl lg I could not recall was at what 
■■ it was I asked. And as a result of 
tl t and not being able to recall when I 
g e this permission, we now have quite 
II astern installed of people taking notes 
ii .11 our meetings and all our doings. 

[\ Q. If you don't recall, when Ben- 
j: lin Weir— Reverend Weir was 
r eased in mid-September of that 
f r, why did you think they had 
r eased him if you couldn't recall that 
y i had authorized Israel to do that? 

A. No. As I say, I'm aware— I can't 
r lember just when, in all the calls and 
netings and so forth, this was pre- 
ssed and when I gave the go ahead. 
E t this was a thing in which the Israelis 
vre willing to sell weaponry— mainly 
1 W [tube-launched, optically tracked, 
^•e-guided antitank] missiles— and 
v nted to know if they did, if we would 
fc-ee to sell them replacements when 
:- i if they needed it. 

Q. —the day before he was 
l eased? 

A. I know that I agreed to that and 
i e heard— and there are other people 
' it don't remember either who were 



present at meetings. One of them was 
Bud [McFarlane] and what his memory 
was— I don't think it was a phone call. 
He has described it as a visit to the 
hospital where I was after surgery. But 
others who were present, they didn't 
remember that conversation. But I know 
that it must have come up, and I must 
have verbally given the okay. 

Q. You said that in your heart you 
still believe that it wasn't an arms-for- 
hostage deal, but that the weight of 
the evidence presented by the Tower 
commission convinced you that it was. 
In your heart do you now believe that 
it was an arms-for-hostages deal from 
the beginning, as the Tower commis- 
sion said, and that the policy was 
flawed? 

A. But it could be that the policy 
was flawed in that it did deteriorate into 
what I myself and when I went on the 
air recently said— was arms-for-hostages 
[deal]. But let me just as briefly as I can 
take you through the steps which I did 
from the very beginning. 

We had, by way of Israel, a report 
that there were responsible people, some 
from the Government of Iran but not 
necessarily in the inner circle of— with 
Khomeini, who wanted to see if they 
could not open a dialogue with represen- 
tatives of the United States that would 
lead to a better understanding— and I'm 
sure that they had in mind a future 
government of Iran— that we could have 
the kind of relationship that we'd had 
once earlier. I thought, because our 
policy had always been based on trying 
to restore a relationship with a country 
that is very important strategically, and 
also behind the scenes to try and get an 
end to that war— an end with no victor, 
no vanquished, both countries retiring to 
their own boundaries and so forth. So, I 
wasn't going to miss that opportunity. 
And I approved our going ahead. 

One of the first things brought up 
in the meeting with those who were 
representing us was that these people 
said that they, for two reasons, needed 
something like— and they mentioned the 
arms sales. It came from them, not us. 
They said, one, for their own prestige it 
would give them a standing with the 
people that they would have to be deal- 
ing with in the future, including the 
military leaders. And, at the same time, 
it would assure them that the people 
they were dealing with did have access 
to our government at the highest levels 
and they could trust them to deal. And, 
so, our answer to that was that we had a 
policy of not doing business with a coun- 
try that supported terrorism, and Iran 



was on that list. Well, they made quite a 
pitch that they, too, were opposed to 
terrorism and that they had even done 
some things counter to terrorism- 
terrorist activities and so forth. Well, 
our reply to them was, there is a very 
practical way in which you can prove 
that, and that is, help the— use your 
influence to get the hostages out. Now, I 
have never believed, and I don't believe 
now, that Iran can give orders to the 
Hezbollah, but there is a philosophical 
relationship there that we thought they 
might be able to be persuasive and 
they've indicated that that was true. 
Now, with no further information than 
that, until I read the Tower commission 
report, after appointing the Tower com- 
mission to get to the bottom of this thing 
and see what was going on, then I found 
that the strategy talks had disappeared 
completely, and led by the Iranians, the 
conversation was totally arms-for- 
hostages. So I don't see where I could 
say now that isn't what it degenerated 
into. 

Q. They faulted you in the Tower 
commission report for caring too much 
about the hostages. If you had it to do 
all over again, would you do it again? 

A. No, I would not go down that 
same road again. I will keep my eyes 
open for any opportunity again for 
improving relations. And we will con- 
tinue to explore every legitimate means 
of getting our hostages back for the 
reason that I explained earlier. 

Q. Iran and Nicaragua are impor- 
tant up our way in Buffalo, but more 
important is Canada because we are 
right there on the border, and the 
number one irritant in U.S. -Canadian 
relations is acid rain. Now, you're 
going up there next month, and yester- 
day you announced a $2,500 million, 
5-year program, but many Canadians 
and environmental groups in this coun- 
try feel you haven't gone far enough. 
They feel that the U.S. Government 
should set standards for these emis- 
sions that cause acid rain. Is your 
Administration giving any considera- 
tion to the establishment of standards? 

A. Yes, let me say, that we've not 
just been sitting here holding back or 
anything, we have that joint commission 
with them to get at this problem. We 
have found out that the further we've 
gone, the more complex the issue of the 
source of acid rain becomes. And so 
what we've been trying to do is avoid 
going down some avenue that would 
disappoint us and we wouldn't really 
solve the problem but we would have 
wasted our resources. We've made some 



iiy 1987 



THE PRESIDENT 



progress in learning things that can be 
done and we were ready to make this 
move, there are others probably yet to 
come. We're still investigating this. 

Q. Another point they bring up is 
that the Environment Protection 
Agency isn't sufficiently involved in 
your new initiative. Do you plan to 
bring them into it in full force? 

A. Everybody will be brought into 
this thing to find out how we can solve 
it. But at the moment, too, we're dealing 
with the private sector, with the indus- 
tries, and so forth that would be involved 
in this. 

Q. At your last news conference 
4 months ago, you said that Israel has 
nothing to — United States had nothing 
to do with Israeli arms shipments to 
Iran when you knew that that was not 
true. Why did you say that? 

A. I'm glad you asked that, because 
I've read at great length references to 
that, and heard them on the air. I'm glad 
to explain. When I left here after that 
press conference and went back there, 
and our people were waiting back there 
and had been watching on the monitor 
what was going on, they told me what I 
had said. And it was evidently just a 
misstatement on my part. I did not know 
that I had said it in such a way as to 
seemingly deny Israel's participation. 
And when they told me this, and when I 
finished bumping my head, I said to 
them, "Quick, write down a correction of 
this." I didn't realize that in there, 
maybe I talked too long. I said, "I didn't 
realize that I had said that or given that 
impression. We've got to get this mes- 
sage to all of you before you went to 
work on your stories." 

So it was just a misstatement that I 
didn't realize that I had made. 

Q. But the fact is that you were 
asked it four times in that news con- 
ference, and you made this inadvertent 
statement four times you were specifi- 
cally asked about Israel's role. And 
during that early period, it now turns 
out that there were a series of state- 
ments you made that were misleading. 
One of the first statements was, you 
said that the whole story that came out 
of the Mideast was without 
foundation. 

A. No. That wasn't at the press 
conference. That was on November 6th, 
when you were shouting questions at 
me. 

Q. Well— 

A. And at that— well, right. But 
then, what I was trying to do, and I 
think some of you will recall this, I was 
trying to plead with all of you, hoping 



that this leak that came from that 
weekly paper in Beirut could be corral- 
led, because I wanted to explain that we 
didn't know— what the lives of the peo- 
ple we'd be dealing with would be endan- 
gered, and certainly our hostages could 
be in danger. And so this was all I was 
trying to say, and I remember saying, 
"Please— stop speculating and stop ask- 
ing questions." I didn't know how far we 
could go before we could get someone 
killed. And when David Jacobsen came 
here and met with you in the Rose Gar- 
den, he repeated that without knowing 
that I had said it. He said the same 
thing, and quite passionately, that you 
could get some people killed if we kept 
on with that story. 

Q. Do you feel an obligation 
always to tell the truth to the 
American people? Or sometimes do you 
feel you may have to mislead, as in 
that case, saying it's without founda- 
tion for a higher diplomatic purpose? 

A. No, there are things in which 
I— there are times in which I think you 
can't answer because of national security 
or other people's security. But no, I'm 
not— I'm not going to tell falsehoods to 
the American people. I'll leave that to 
others. 

Q. Speaking to young people in 
your re-election campaign in 1984, you 
referred to government as a sacred 
trust and you said we're going to keep 
this trust. The Tower report says that 
some of your officials in your Adminis- 
tration made untruthful statements, 
and you've acknowledged here that it 
became a trade of arms for hostages. 
Do you feel that you kept your promise 
that you made in that campaign to the 
young people and that your govern- 
ment has? 

A. Yes, I do. And from the very 
first, I told you all everything I know 
about this situation. I am still waiting to 
find out the source of extra money, the 
bank accounts, and where that extra 
money went. And that's why I appointed 
the Tower commission to get to the bot- 
tom of this and a special prosecutor. You 
see, I'm old fashioned— I call these inde- 
pendent counsels— I still call them 
special prosecutors. 

Q. If I could follow, are you 
distressed that even your own polls 
show that a majority of American peo- 
ple, including many who voted for you, 
believe that you're not telling the full 
truth on the Iran-conrra affair? 

A. In view of what they've been 
reading and hearing for all these several 
months— I can understand why they 
might think that. 






■ 



Q. In view of what you told the; 
Tower board, and what they con- 
cluded — that you had difficulty recs 
ing the decision and the timing of t 
decision to send the arms to Iran — i 
at all conceivable that you may also 
have forgotten being told about the 
diversion of funds to the contras? 

A. Oh, no. You would have hear 
me from— without opening the door t 
the office if I had been told that at ar 
time. No. And I still do not have the 
answer to that money. The only thin£ 
that I can see is that somebody in the 
interplay of transporting the weapon: 
must have put an additional price on 
them. We asked for $12 million, whic 
was the cost— no profit on those 
weapons— and we got our $12 million 
back. And it was a complete surprise 
me to discover that there was any ad 
tional money— and this, I think is the 
thing— we're still waiting for that to 1 
explained. 

Q. If I could follow in a related 
element, then — Mr. North is quoted 
the Tower report in a memo he wro 
as saying the President obviously 
knows why — he has been meeting v 
select people to thank them for thei 
support for democracy in Central 
America. Were you aware that such 
meetings that you attended were be 
used to solicit funds from private 
citizens in the United States for Ce 
tral America for the contras? 

A. I knew that there were many 
people privately giving money to thin 
of that kind— in the country here— bu 
the people I met with— and I subsequ 
ly found out that some of them were 
doing this. But when I met with then" 
met with them to thank them because 
they had raised money to put spot ad: 
television in favor of the contras in ai 
effort to try and influence Congress t 
continue giving aid. And I thought th; 
was worth a thanks. I've gone to the 
public many times since I've been her 
to get the public to help put the press 
on the Congress for us to get some 
worthwhile cause. 

Q. You said that Senator Sam 
Nunn is wrong in arguing that the 
record does not support a broad int< 
pretation of the Antiballistic Missih 
Treaty (ABM). Why is he wrong? 

A. You know, I thought somebod 
might ask about that, and I just broug 
something in here with me. Marshal 
Grechko, Soviet minister of defense ir 
1972, proclaimed about the ABM Tree 
"It imposes no limitations on the 
performance, the research, and experi 
mental work aimed at resolving the 



I 



Department of State Bulkp 



THE PRESIDENT 



pblem of defending the country 

ainst nuclear missile attack." 
Now, when some time ago we real- 

d that there was this belief that the 
M Treaty had an interpretation that 
diuld be more liberal than we had been 
ting, it still didn't change anything 
h SDI [Strategic Defense Initiative] 

:ause there was no need for us to go 
Ijyond what we were doing. But as we 
^bgressed and developed SDI, we 
talized we were coming to a time in 
Wich that narrow interpretation of the 
JBM Treaty could interfere with and 
■Jt us back in what we were trying to 
g:omplish. And this is when we took a 
|iik at this broader interpretation. 
I And I know that Mr. Sofaer [Legal 
ilviser Abraham D. Sofaer] over in the 
late Department is looking into this, 
jd he believes that there is legally a 
IJire liberal interpretation. Now, we're 
Station of laws, and we want to stay 
♦thin the law. But at the same time, we 
lieve that the Soviet Union has been 
ling even beyond a liberal interpreta- 
ln of the treaty. They've been going 
l/ond the treaty in some of the things 
hy are doing. 

I Q. You arrived at this broad inter- 
ptation quite a while ago. How soon 
1 you intend to implement it? How 
I >n do you believe you are going to be 
I'Wing down the Strategic Defense 
1 tiative? 

i A. Actually, we haven't made a 
pision because we're still operating 
t ;hin the narrow limits and have no 
\ ison to go outside them as yet, and it 
J 1 be some time before we do. But 
I 're having this— we're all of us study- 
I ; this, and we haven't arrived at a 
J :ision or set a date yet. 

Q. The Tower report said that the 
I ms deal with Iran should never have 
I en made in the first place. You have 
t id that you accept the Tower com- 
I ssion report. 

I A. Yes. 
Q. And yet your friends say that 
private you still have a deep feeling 
it you do not feel it was wrong to 
1 arms in the beginning. I want to 
1 ow, in your heart do you feel that 
Ju were right or were you wrong in 
tiling arms to Iran? 

A. We had quite a debate, and it 
fits true that two of our Cabinet mem- 
Hrs were very much on the other side. 
Ipd it turned out they were right 
jjcause, as I say, it did deteriorate into 
flat. 

But what my position was, and 
Hill is, you are faced with some kidnap- 
•Irs— they have kidnapped some of our 



citizens. Now, you cannot do business 
with them. There's no way that you can 
discuss ransom or do them any favor 
which makes taking hostages profitable. 
But suddenly, an opportunity to get into 
a conversation with a third party— and 
you find that that third party maybe can 
do something you can't do, that they can 
have an influence on these people over 
here, these kidnappers, and get your 
people free— I did not see that as trading 
anything with the kidnappers. They 
didn't get any advantage out of this; 
they didn't show any profit on what was 
going on. And the place where I was 
wrong was in not realizing that once 
that pressure was put on from the other 
side— and it did stem from the Iranian 
representatives— they saw an opportun- 
ity, they thought, to start bargaining for 
more weapons than that, more or less, 
token amount that we had agreed to sell, 
and to put the price at varying numbers 
of hostages. 

So I still believe that if someone in 
my family was kidnapped and I went out 
and hired someone that I thought could 
get that person safely home, that would 
not be engaging in ransom of the victim. 

Q. If I could follow, you're still 
arguing that somehow this event 
deteriorated, it went awry as it went 
along. I want to know whether you 
think it was wrong or right in the 
beginning. 

A. If I hadn't thought it was right 
in the beginning we never would have 
started that. It was an opportunity 
presented by people evidently of some 
substance in the Iranian Government to 
open up a channel to probably better 
relations between our two countries, 
maybe even leading to more influence in 
getting this terrible war ended there in 
the Middle East. And they, them- 
selves—there was never— when we 
entered into this, there wasn't any 
thought of hostages in this particular 
thing, they'd never been mentioned. It 
was only when they put in this request, 
as I've explained, for arms and we had 
to explain that we didn't do business 
with people that supported terrorism, 
that they offered to prove that they 
weren't supportive of terrorism, either. 

And this is how we weren't going to 
overlook an opportunity if we could get 
those hostages back. And we're not 
going to overlook an opportunity in the 
future. But we're not going to try the 
same thing again, because we see how it 
worked. 

Q. Setting aside what the Iran 
initiative turned into, as you were set- 
ting the policy in motion, did you give 



consideration to how our Arab friends 
in the region would think about the 
United States sending arms to their 
mortal enemy? 

A. I think we have a very good 
relationship— better than we've had in 
many, many decades— with the countries 
in the Middle East. And I think that we 
have proven our friendship for them to 
the place that they could understand 
what we were doing. But I also think it 
ought to be noted that countries in the 
Middle East, countries in Europe, coun- 
tries in Asia, and the communist bloc, 
have been selling arms to both sides 
in this war for the last few years and 
they've been selling about almost four 
times as much to Iraq as they have to 
Iran. And the biggest amount of sales is 
coming from the communist bloc to both 
countries. So, what I was sure of was 
that we were not affecting the balance- 
military balance between the two coun- 
tries with the small amount that we 
were going to sell. 

Q. You've said that Defense 
Secretary Weinberger and Secretary 
Shultz opposed the policy, that you 
waived their views and decided to go 
ahead anyway. Given all the other con- 
cerns that you have to deal with as 
President, how much thought did you 
give to this policy? Was it a casual 
thing or did you give it quite an exten- 
sive going over before you embraced 
the policy? 

A. The only thing I've done casually 
since I've been here in these 6 years is 
hold a press conference. 

Q. In view of Secretary Harring- 
ton's energy security study that he 
completed this week, how can we deal 
with our overreliance on insecure 
foreign oil? 

A. This is a problem that we are 
studying and I'm expecting some reports 
momentarily on this. We have to study 
this. This is why we increased the strate- 
gic reserve since we've been here. But 
we have to do more than that. And I 
have also asked Congress already for 
some acts that I think would improve the 
situation here domestically. It involves 
elimination of the windfall profits tax, it 
involves the deregulation of natural gas, 
some other things that we've already 
asked Congress for. So far, we haven't 
gotten them as yet. 

Q. What concerns you most about 
the decreasing U.S. oil production 
and the finding that it could threaten 
national security, based on that 
report? 

A. It certainly would be in— if we 
were faced with a crisis. And what has 



I ay 1987 



THE SECRETARY 



happened to us is that here in our stand- 
ard of living and all, they can't find and 
produce oil for the price that it has gone 
back down to. It was only the high price 
that could keep them in business. 

Q. Long before the diversion of 
funds to the contras, the Tower board 
has documented 2 years of an exten- 
sive military support for the contras at 
a time when Congress ruled that to be 
illegal — air strips, phoney corpora- 
tions, tax exempt foundations — all 
directed by Oliver North and John 
Poindexter, and before them Robert 
McFarlane, out of the White House. 
And — the question is, how could all 
this be taking place — millions and 
millions of dollars — without you hav- 
ing known about it, especially at a 
time when you were calling the con- 
tras the moral equivalent of our 
Founding Fathers? 

A. I don't believe— I was aware that 
there are private groups and private 
individuals in this country— I don't 
believe it was counter to our law. But 
these people were voluntarily offering 
help, just as we've seen in the past. We 
had a thing called the Abraham Lincoln 
Brigade in Spain in the Civil War there. 
And I don't know how much that would 
amount to. I don't know whether it's 
enough to keep them in business or not. 
But I do know that it is absolutely vital 
that we not back away from this. We've 
had some experiences in our country 
where the Congress has turned on a 
president. Angola was the most recent 
example, perhaps— when in Angola, 
when— being a colony, and the civil war 
broke out there, and there was a com- 
munist faction, and there was a group 
that wanted democracy. And an Ameri- 
can president asked Congress just for 
money. No blood, just money to help the 
democratic people of Angola have a dem- 
ocratic government. They don't have a 
democratic government, they have a 
communist government now, and there 
are 37,000 Cuban soldiers fighting their 
battle. 

Q. But sir, if you were truly 
unaware of the millions of dollars in 
government money and government 
operations that North and Poindexter 
were directing to the contras, what 
does this — respectfully, what does this 
say about your management style? You 
have said in your speech that your 
management style in the confra-Iran 
affair did not match your previous 
track record. The Tower board 
criticized your management style. If 
you were unaware of these things and 



forgot when you actually approved the 
Iranian arms sale, what does it say 
about the way you've been managing 
the presidency? 

A. I've been reading a great deal 
about my management style. I think that 
most people in business will agree that it 
is a proper management style. You get 
the best people you can to do a job, then 
you don't hang over their shoulder criti- 
cizing everything they do or picking at 
them on how they're doing it. You set 
the policy and I set the policy in this 
Administration, and they are then to 
implement it. And the only time you 
move is if the evidence is incontrovert- 
ible that they are not following policy or 
they have gone down a road in which 
they're not achieving what we want. 
And I think that that is a good manage- 
ment policy. 



Q. Would you — 

A. I'm not going to comment no\ 
because all that you've mentioned are 
involved in investigations and I, more 
than anyone, want these investigation 
to proceed so that I know, and will 
know, what has been going on that ha 
been kept from me in various covert 
operations. 

Q. You didn't answer the quest 
on North or Poindexter. Did they 
deceive you? You didn't answer 
whether Poindexter or North deceiv 
you. 

A. They just didn't tell me what 
was going on. 



'President's opening statement omitte 
here (Weekly Compilation of Presidential 
Documents of Mar. 23, 1987). ■ 



Secretary Visits Asia 



Secretary Shultz departed 
Washington, D.C., February 26, 1987, to 
visit Hong Kong (February 27-March 1), 
the People 's Republic of China (March 1-6), 
the Republic of Korea (March 6), and 
Japan (March 6-7). He returned to the 
United States on March 7. 

Following are the Secretary 's 
address before the Dalian Management 
Training Center on March 3, remarks at 
a banquet in Shanghai on March 5, and 
excerpts from statements in Seoul and 
Tokyo. 



DALIAN, 
MAR. 3, 1987' 

Thank you for your warm welcome, and 
I'm very pleased to have the opportunity 
to be here. It's a double pleasure. First, 
I've been looking forward to this oppor- 
tunity to visit your center. Since its first 
management program in 1980, it has 
come to serve as an important example 
of a constructive, Sino- American 
cooperation and friendship. Second, as a 
professor, I welcome this chance to 
return to the academic world, even if 
only for a day. 

And I might say that in the United 
States, at a university from which I had 
a degree and taught— M.I. T. [Massachu- 
setts Institute of Technology], known for 
its engineering— the first advanced 
management class that I taught in, it 
was almost 40 years ago, and I've been 
meeting with advanced management 



students practically every year since 
then. Somebody tell me I don't look 
that old. 

At any rate, it's good to meet witl 
students whose numbers include so 
many who already have considerable 
experience as managers and admin- 
istrators. You are well poised to gain 
greatest benefit from your advanced 
study of management practices. All o! 
you have been specially chosen for stt 
here at the Dalian Management Train 
Center. You are to be congratulated f 
that honor; but it is also an honor bea 
ing heavy responsibilities. What you 
learn here at Dalian will enhance youi 
proven managerial capabilities and 
enable you to play an even more impo 
tant leadership role in helping your 
nation meet the vast challenges of 
economic modernization. 

For our part, the people of the 
United States are both pleased and 
proud to be able to contribute to Chin; 
development efforts through this spec 
management training program. The 
work of the American teachers here ai 
the center is one more concrete 
manifestation of our interest in 
strengthening Sino-American coopera- 
tion and in seeing China further advan 
its economic modernization. 

Challenges of the Future 

Today, I want to discuss certain prob- 
lems of national growth and develop- 
ment in the midst of increasingly 



THE SECRETARY 



jatic economic and technological 
.lges taking place on a global scale. 
Our world is in the midst of an 
■iting scientific revolution— one whose 
:ial, economic, and political conse- 
jnces are only beginning to be felt. 
ne and space are contracting as 
tantaneous electronic communications 
,ke business, politics, and culture truly 
ibal for the first time. And as a result 
new information technologies, pre- 
ius measures of economic develop- 
:nt— and, by extension, military and 
itical strength— are fast becoming 
tdated. 
As we look to the year 2000 and 
irond, the future competitiveness of 
tions will be shaped not simply by 
>ir concentrations of labor and natural 
iources but, more and more, by how 
ely and effectively they are able to 
i knowledge and information. And 
like oil or mineral wealth, information 
i resource that is not depleted over 
le but, rather, increases through use 
i sharing. 
But though these changes offer our 
)ples tremendous promise, the global 
/ironment that they are reshaping is 
o bringing new challenges. More than 
jr before, the economic well-being of 
nations is dependent upon their abil- 
to adapt and compete within an open 
i growing world economy. In contrast 
;h previous decades, closed national 
.rkets, no matter how big, are no 
1 ger large enough to ensure a com- 
yjritive and prosperous economy. In this 
J w information age, any nation which 
1 ;ks to remain apart from the world 
I momy— and to restrict the free flow of 
j jds, services, investments, and ideas 
I and out of its borders— will be able to 
i so only at tremendous sacrifice. 
. bsed societies will fall behind and 
i ther. 

Over the coming decade, this will be 
1 rticularly true for those nations seek- 
if r development and modernization 
1 "ough greater economic growth. That 

■ owth will best flow not from central 

] mning but from the creative energies 

■ leased by competition in the market- 
]ice. In previous years, the exploitation 

pj natural resources, or the implementa- 
l»n of a strategy focusing on traditional 
Iinufactured items, could provide for 
i' port-led growth for many such coun- 
ties. But these tactics are growing less 
lid less effective in ensuring the com- 
U^titive participation of these nations in 
Hday's increasingly crowded global 

Market. This is particularly so as 
, ijformation-based services and new 
i chnologies rapidly become the leading 

ilge of the world economy. 



The Importance of Open Doors 

As the leaders of China and the United 
States confront the problems of how to 
ensure greater security and prosperity 
for their peoples, we both face important 
economic decisions. How should our 
respective economies take full advantage 
of the changes in the world brought 
about by new technologies? How can we 
ensure continuing economic dynamism 
and high growth? And how can we do so 
in a manner that preserves and expands 
an open international trade system and, 
thus, helps to secure a more peaceful 
and prosperous world for all? Moreover, 
how our two countries respond to these 
problems will affect our relationship. 

In suggesting a general answer to 
these issues, I will borrow the central 
metaphor that Chairman Deng used in 
his speech of October 6, 1984. At that 
time, he noted that: "China cannot 
rebuild itself with its doors closed to the 
outside, and it cannot develop in isola- 
tion from the rest of the world." 

For China, for the United States, 
and for other nations as well, this new 
information age will require, above all 
else, that we continue to open our doors 
to one another. When such doors are 
open— when people, goods, and ideas can 
flow freely between us— both Chinese 
and Americans can learn from each 
other. Through such openness, societies 
are better able to stimulate and to take 
advantage of the inherent dynamism and 
creativity of their peoples. 

Managing Change and 
Encouraging Economic Development 

Economic change in this new informa- 
tion age represents both new difficulties 
and new opportunities. Adjusting to 
change— managing its effects to the 
greatest long-term benefit— can be a 
painful but necessary process. 

In America, high-technology indus- 
tries and financial services have 
emerged as new engines of our economic 
growth. Yet, many of our traditional 
manufacturing sectors face serious 
challenges from increasingly competitive 
trading partners abroad. As a policy 
response, the United States has sought 
to reduce the role of government 
intervention in the workings of our 
economy. We have taken steps to 
encourage even greater opportunities for 
individual initiative and entrepreneur- 
ship with the marketplace. We have 
done so because we see economic 
freedom as a powerful stimulus to 
economic dynamism, adjustment, and 
innovation. 



In our international policies, we have 
worked to preserve and expand liberal- 
ized trade. We have continued to support 
growth in other countries through our 
assistance programs and through par- 
ticipation in multilateral development 
banks. We have encouraged our private 
sector to help other countries through 
commercial lending and investment. 
Here in China, for instance, our trade 
and development program has spent 
$12 million since 1982 for feasibility 
studies designed to involve American 
companies in your country's large-scale 
development projects, as well as in 
technical seminars and training 
programs. 

China's current economic situation is 
quite different from that of the United 
States, but its future role in the world 
economy is potentially very great. 



My visit is part of an 
ongoing pattern of frequent 
consultations with the 
Government of the Republic 
of Korea. I value the oppor- 
tunity to hear . . . the obser- 
vations and views of your 
leaders on matters affecting 
our mutual interests. In this 
spirit, I have discussed with 
President Chun a range of 
issues, including security 
and tension reduction on the 
Korean Peninsula, the contin- 
uing economic prosperity of 
both our nations, and the 
process of political evolu- 
tion. I have also reaffirmed 
the unwavering U.S. commit- 
ment to helping provide that 
necessary security which will 
enable the Korean people to 
continue their work for 
further economic and 
political development. 

Seoul, Korea 
March 6, 1987 



lay 1987 



THE SECRETARY 



Endowed with abundant material and 
human resources, it has the promise to 
become one of the world's major 
economic powers. And consequently, its 
economic development has tremendous 
implications for the United States, for 
Asia, and for other countries throughout 
the world. 

In recent years, under Chairman 
Deng Xiaoping' s and Premier Zhao 
Ziyang's farsighted leadership, China 
has launched a bold program of economic 
reform and modernization. The Ameri- 
can people have applauded these efforts 
at national modernization. We have been 
impressed by the remarkable successes 
that China's leaders have achieved 
through their self-confident policy of 
opening out to the world and facing 
squarely the challenges of economic and 
social reform. In a dramatic turnaround, 
China, in recent years, has had to strug- 
gle with the problem, not of too slow 
growth but of too rapid development. 

You here in Liaoning Province, 
under the direction of Acting Governor 
Li Changchun, have embarked on a 
pioneering program of economic reform 
using human, financial, and natural 
resources more efficiently. Shenyang's 
bond exchange, its leasing of enter- 
prises, and bankruptcy law have 
attracted attention because they are 
pathfinding efforts to develop new solu- 
tions to old problems. 

The potential rewards for China of 
these policies are very significant. As 
Premier Zhao Ziyang noted in his recent 
New Year's speech: "Opening to the 
outside world and enlivening the 
domestic economy are, in a nutshell, also 
reforms. They have already enormously 
benefited the whole country, and cer- 
tainly will continue to benefit every one 
of us even more substantially." 

Naturally, China faces major prob- 
lems as it strives for growth and 
development. Much must be done to 
strengthen China's transportation, com- 
munications, and energy infrastructure. 
Jobs must be created for great numbers 
of young people coming into the job 
market each year. And as China grows, 
as living standards rise, the Chinese 
people will desire greater variety and 
improved quality in diet, clothing, and 
housing. All of these factors will create 
pressures on the Chinese economy to 
increase national wealth and to enrich its 
cultural and spiritual life. 

Strengthening Our Relations 
Through Economic Interchange 

If these challenges are great, so, too, are 
the energy and creativity of the Chinese 



people. China now has the opportunity to 
create its own unique solution to the 
challenges of modernization— one which 
combines distinctive Chinese strengths 
and traditions with the exciting scien- 
tific, commercial, and intellectual 
changes at work in today's world. 

The United States is prepared to join 
with the Chinese people as they make 
the most of this special opportunity. We 
believe that such cooperation in support- 
ing Chinese modernization efforts is in 
the best interests of both our countries. 
As President Reagan noted when he 
spoke before a group of students at 
Fudan University in 1984: 

Your government's policy of forging 
closer ties in the free exchange of knowledge 
has not only enlivened your economy, it has 
opened the way to a new convergence of 
Chinese and American interests. You have 
opened the door, and let me assure you that 
ours is also open. 

Our joint accomplishments since the 
Shanghai communique of 15 years ago 
provide a firm basis for such coopera- 
tion. Since 1972, the overall relationship 
between our two countries has matured. 
Our dealings with each other, once nar- 
row and restricted in scope, have now 
broadened to include a whole range of 
commercial, scientific, cultural, and 
military matters. And this process is 
continuing. 

By working together, Chinese and 
Americans have already nurtured a 
growing bilateral economic relationship. 
American firms have invested more than 
$1.5 billion in China. Total American 
investment is exceeded only by that 
from Hong Kong and Macao. Our com- 
panies have helped to develop offshore 
oil and natural gas exploration, elec- 
tronics, textile machinery, hotels, food 
processing, and a variety of high-tech 
enterprises. Some of our projects are 
among the largest of their type in the 
world. 

And in turn, the United States has 
rapidly become one of China's largest 
and most important contemporary 
markets for exports. Only 7 years ago, 
Americans purchased under 2% of 
China's exports. Our two-way trade was 
about $1 billion. Today, we buy more 
than 10% of all Chinese exports, and our 
two-way trade has surpassed $8 billion 
for the last 2 years. 

But much more can and should be 
done. The People's Republic and the 
United States have only begun to tap 
our rich potential for mutually beneficial 
trade. An expanded exchange in goods, 
services, technologies, and investments 



will be important both to your country's 1 
modernization effort and to my coun- 
try's economic well-being. 

For this potential to be fully realized i. 
each of our countries will have to make 1 I 
special effort. It will become increasingly I 
important, for instance, for China to 
diversify its exports to the United 
States. It may be difficult for China to 
move quickly beyond its current concen- 
tration on textiles and petroleum-related 
products, but this effort must be made. 

And in turn— because trade, to be 
most effective and advantageous, must 
be a two-way street— China must also 
continue to open up its own domestic 
markets to our exports. This year, your 
exports to us have increased by 24%. 
But I am disappointed that our exports 
to you have fallen off by 19%. I hope this 
trend will soon be reversed. 

For our part, Americans need to 
learn more about China. To become 
more competitive, American business- 
men have to recognize the unique 
requirements of the Chinese market. 
American businessmen must be both 
patient and imaginative, ready to take 
full advantage of the opportunities 
created by our joint efforts to open 
markets. 

Sino-American Economic Issues 

As our economic relationship progresses 
it is inevitable that our two countries 
will face new and troubling issues. That 
shouldn't be the cause for despair. After 
all, if you have no relationship, you don't 
have any problems. It's only when you 
have a rich and growing relationship 
that you see the problem that interaction 
brings. But it does require that— in a 
spirit of patience, flexibility, and good 
will— our two countries continue to 
make every effort to deal positively with 
economic and commerical problems that 
may divide us. 

American companies want to par- 
ticipate further in China's economic 
development. And, therefore, we have 
been pleased by the steps that China has 
already taken to adjust its investment 
environment to meet the concerns of 
foreign investors. We believe this is a 
move in the right direction that holds 
promise for the future. I hope that your 
government will consider additional 
policy measures that will broaden the 
types of companies given favorable 
treatment and address the problems of 
access to your domestic markets and the 
remittance of profits. 

Here in Dalian, one of China's most 
successful open coastal cities, you have 
already shown the determination to be 



Department of State Bulletin 



THE SECRETARY 



■ 
- 



ond to none in providing a hospitable 
ate for foreign investment. I under- 
nd that you have signed up over 20 
ign-invested joint ventures for your 
economic development zone, includ- 
five U.S. -Chinese joint ventures. I 
confident that American business- 
n will increasingly discover the poten- 
you offer. 

We look forward to negotiating a 
'f v bilateral agreement on textiles that 
jht provide a more realistic and 
litable foundation for our trade in this 
:a. China is now the second largest 
tile supplier to the United States in 
ms of volume. In 1 year— between 
$5 and 1986— the value and volume of 
ina's textile exports to the United 
ites shot up by 63%. Within the 
ited States, our own textile 
ustry— which is the largest single 
ployer in our manufacturing sector- 
been adversely affected by this 
ge. 

In the field of economic services, the 
ited States permits Chinese banks 
a 1 shippers to compete freely in our 
1 rketplace. But many American pro- 
£ sionals and businesses— bankers, 
I ryers, architects, construction firms, 
a lines, shipping firms— feel they are 
( ler shut out completely or have 
S:essive difficulty entering China's 
I rket. I hope we will also see greater 
r :iprocity in this particular field. 

Although China has made significant 
I )gress toward protecting intellectual 
j )perty, Americans believe that further 
r asures should be taken to ensure 
i iivalent protection of patents, 
t .demarks, and copyrights. Without 
: ;urance that they will benefit from the 
i lits of their endeavors, our business- 
I 'n and investors will be reluctant to 
s ire much of their know-how. We were 
pased by China's decision to adhere to 
i 3 Paris convention for the protection 
( intellectual property and look forward 
1 the promulgation of a new Chinese 
ipyright law as soon as possible. 

There are, of course, many critical 
li.estions that Chinese Government 
> ficials and managers have about 
nerican policies as well. Some ques- 
'ms, for instance, involved our policies 
i the transfer of technology that China 
;eds in its modernization effort. Let me 
.sure you that this issue is receiving 
"esident Reagan's personal attention, 
'e will be taking steps in the near 
ture to further liberalize our export 
mtrols on technology of interest to 
;hina. 

The United States has already 
bproved an impressive number of 
:enses for high technology to China. 



The value of approvals for such licenses 
has totaled almost $12 billion since 1982. 
Actual exports of such high technology 
to China have grown to $3.6 billion since 
1982. During this time, we made it 
easier to export to China certain types of 
American computers, microchip-making 
equipment, and electronic instruments. 
And we are constantly reviewing other 
measures we can take, either by 
ourselves or with our allies, to ensure a 
more expeditious flow of technology to 
China. 

The Sino-American Stake 
in Open World Trade 

But technology alone is not enough to 
guarantee successful modernization. Suc- 
cess requires that an economic system be 
open and flexible enough to use these 
advanced technologies to produce goods 
and services that are competitive in the 
global market place. China and the 
United States share an important mutual 
interest in ensuring that this global 
market remains open and continues to 
expand. 

No country has a greater commit- 
ment to free and fair trade than does the 
United States. It has been one of the 
principal sources of our national pros- 
perity and technological development 
over the past four decades. And no 
region has benefited more from consist- 
ent American support for an open world 
trading system than East Asia. 
Americans welcome that fact. It is in our 
own interest that the nations of East 
Asia grow and prosper. 

But today, protectionism, in its 
varied forms, is a great danger for us all. 
We have learned from the bitter 
experience of the Great Depression 50 
years ago how protectionism can 
impoverish trading partners, provoke 
retaliation, inhibit world trade and 
economic growth, and eventually 
encourage political instability. 
Protectionism keeps prices up, reduces 
living standards, and erodes 
competitiveness. 

And so, all nations, both industrial- 
ized and developing, have an important 
stake in working together to preserve 
and expand the open world trading 
system. Consequently, the United States 
welcomes China's interest in par- 
ticipating in the General Agreement on 
Tariffs and Trade, more commonly 
known as the GATT. The process of 
Chinese accession will not be accom- 
plished overnight— the GATT rules were 
not designed for a large economy of the 
Chinese type. And all the parties cur- 
rently involved in the GATT want to 



proceed on the basis of mutual benefit. 
For our part, we are prepared to work 
actively toward a solution. In our view, 
China can play an important role by 
actively joining GATT discussions seek- 
ing to expand general trading oppor- 
tunities and enhance market access for 
exports worldwide. And China can fur- 
ther develop its foreign trade system so 
as to gain the maximum benefit from its 
GATT participation. 

Thus far, I have spoken of trade, 
investment, and technology as instru- 
ments of growth and development. They 
are important. But by themselves, they 
will not be sufficient to ensure a soci- 
ety's continuing dynamism and innova- 
tion—particularly in meeting the 
demands of this emerging information 
age. 

Our ability to absorb and benefit 
from these new technologies is not 
simply a question of physical and 
economic infrastructure. In the United 
States, we have found there must also be 
an intellectual environment that values 
and encourages the potential for 
creativity inherent in individual men and 
women. And thus, education is a critical 
element of any modernization effort. I 
believe the United States can play an 
especially constructive role in this field. 
In addition to supporting your bold 
education experiment here in Dalian, the 
United States has welcomed nearly 
20,000 Chinese students to our institu- 
tions of higher learning for study in the 
sciences, management, and humanities. 
We are confident that when they return 
to their country, they will make an 
important contribution to China's mod- 
ernization efforts. Along with our own 
academics, businessmen, journalists, and 
diplomats here in China, these students 
can provide an important bridge 
between our two countries. China's 
policy of Kai-Fang, or openness, 
recognizes that the current era of 
dramatic economic, scientific, and 
technological change, closed doors, and 
rigid ideas is a formula for stagnation 
and backwardness. 

Conclusion 

I am especially pleased that, on this trip, 
I will be going from Liaoning Province, a 
symbol of China's experimentation in its 
efforts at economic modernization, to 
Qufu, the birthplace of China's great 
sage, Confucius. The contrasting sym- 
metry between these two places— with 
their special meaning of both tradition 
and innovation— is particularly fitting. It 
suggests that China will be able to draw 
upon traditional social values and con- 



lay 1987 



THE SECRETARY 



temporary scientific knowledge in 
building a modern society and economy. 

Qufu reminds us of some of the ideals 
imparted by Confucius more than 2,500 
years ago: the importance of education; 
service to the nation; propriety in deal- 
ings with others; and concern for the 



Since I arrived . . . I have 
held very good discussions 
with both Prime Minister 
Nakasone and. . . Foreign 
Minister Kuranari .... We 
agreed the Japan-U.S. rela- 
tionship is very sound; we 
continue to see eye-to-eye on 
vital international issues 
such as arms control; and 
our cooperation remains 
essential for regional and 
global stability and prosper- 
ity. The U.S. Government 
welcomes the steady 
improvement in Japan 's 
ability to defend its own ter- 
ritory and the current and 
proposed growth in Japan 's 
assistance to the developing 
world. 

We were also quite frank 
in acknowledging that per- 
sistent trade imbalances 
threaten the well-being of 
both countries and a global 
free trade system that has 
served us both so well. We 
agreed that it is urgent that 
we redouble our efforts to 
find effective solutions to 
this serious problem. These 
solutions lie on both sides of 
the Pacific and in both 
national economic policy 
and specific trade areas. 



Tokyo, Japan 
March 6, 1987 



welfare of future generations. And, 
though separated by great time and 
distance, those ideals are quite similar to 
the values held by the men and women 
who worked to create what has become 
the United States. Such principles are 
still relevant for both our peoples today. 

And here in Dalian, the very work in 
which all of you are now engaged is an 
example of Chinese and American 
cooperation in expanding knowledge, in 
experimenting with new methods, and in 
learning from each other. 

The days of greatest promise for 
both our countries lie ahead. We can 
learn from the past without dwelling on 
it, and we can take pride in present 
achievements without being satisfied. 
But, primarily, we should look to the 
future— a future in which our countries 
will benefit from shared cooperation and 
further economic development. We look 
forward to working together to promote 
a just, secure international system in 
which all countries can prosper. 



SHANGHAI, 
MAR. 5, 1987 2 

Mrs. Shultz and I are honored that you 
would have this banquet to mark the 
occasion of our visit and to have here so 
many distinguished people who are 
known not only in Shanghai but 
throughout the world. And, of course, it 
is a special pleasure to be here just a few 
days after the 15th anniversary, as you 
noted, of the Shanghai communique, 
issued in this city February 28, 1972. 

The Shanghai communique was a 
momentous document. In it, the leaders 
of the People's Republic of China and 
the United States of America found it 
beneficial to have the opportunity, after 
so many years without contact, to pre- 
sent candidly to one another their views 
on a variety of issues. The meetings that 
produced the Shanghai communique 
marked a historic turning point between 
our two peoples. And it is particularly 
fitting that the document should be 
associated with this dynamic city, which 
has long been a center for China's con- 
tacts with the rest of the world. 

Guided by the carefully formulated 
language of the Shanghai communique, 
our two countries have turned our rela- 
tionship away from the path of hostility 
toward one of growing friendship and 
cooperation. Together with the Joint 
Communique on the Establishment of 
Diplomatic Relations of January 1, 1979, 
and the joint communique of August 17, 
1982, the Shanghai communique remains 
part of the foundation on which we have 



':-: 



together developed broad and mutual 
advantageous ties between our people 

The enduring significance of the 
Shanghai communique is symbolized k 
the fact that two of its participants in 
the ceremony 15 years ago— Ambassa 
dors Han Xu and Winston Lord— are 
now charged with even greater respoi 
sibilities for promoting good relations 
between our two countries. We work 1 
strengthen mutual understanding and 
cooperation. The United States will cc 
tinue to adhere to the principles con 
tained in these three fundamental poli 
statements on Sino-American relation 

In the Shanghai communique, our 
two governments affirmed that "nor- 
malization of the relations between th< 
two countries is not only in the interes 
of the Chinese and American peoples 1 
also contributes to the relaxation of te 
sion in Asia and the world." Today the 
words have special meaning for us, ev< 
as they did in 1972. In 1987 Chinese ai 
Americans need only recall the serious 
cost to both sides of our period of 
estrangement to appreciate the value i 
the progress that we have made since 
then. This perspective, in turn, should 
prompt both our countries to work eve 
harder to expand mutual understandin 
and cooperation. 

The Shanghai communique was a 
forward-looking document, enabling oi 
two countries to build for the future. I 
called for the development of greater 
contacts and exchanges between our 
peoples in such diverse fields as scienc< 
technology, culture, sports, and jour- 
nalism. It recognized the importance o 
facilitating the growth of bilateral trad 
and of expanding contacts among our 
senior officials. And by providing for 
increased ties across a spectrum of 
Chinese and American interests, the 
Shanghai communique helped set the 
stage for the normalization of our 
political relations in 1979. 

Through our work together, we ha\ 
seen that the original promise of the 
Shanghai communique has been more 
than justified. The program of bilateral 
science and technology cooperation 
between China and the United States is 
now the largest that either country has 
comprising 29 protocols, in areas rang- 
ing from cancer research to exploration 
of the bottom of the ocean. Our bilatera 
trade has grown to exceed $8 billion in 
each of the past 2 years— a record that 1 
personally hope our countries will con- 
tinue to break with each passing year. 
We have welcomed over 19,000 Chinese 
students to the United States, and you 
have hosted more than 1,200 American 
scholars. 



10 



Department of State Bulleti 



AFRICA 



The many visits exchanged by our 
ior officials since normalization in 
'9— beginning with Chairman Deng 
,oping and including President 
agan, President Li, Premier Zhao, 
1 Vice President Bush— have fostered 
per mutual understanding and 
:ater appreciation of the common 
,1s of our respective countries. We 
re seen that the United States and 
na have many areas of common inter- 
in the East Asian region and beyond, 
ch of us wishes to pursue an inde- 
ldent foreign policy, but this does not 
nd in the way of our increasing con- 
ts and areas of cooperation. And we 
lire the view that no one country or 
jjiup of countries should attempt to 
ininate others. 

j] The Shanghai communique also pro- 
Bed a framework within which we 
idd deal with unresolved problems. We 
j'e done much in this regard over the 
lit 15 years. And we are pleased that 
is process is continuing. In the 
linghai communique, as in the other 
ij) communiques on which our relation- 

■ o is based, the United States made 

6 ir that our policy is based on the prin- 

■ le that there is but one China. We 
j'e no intention of pursuing a policy of 
I/o Chinas" or "one China, one 

1 wan." 

li In the Shanghai communique, the 
I ited States also reaffirmed its interest 
ii i peaceful settlement of the Taiwan 
q ;stion by the Chinese themselves. We 
; lerstand and appreciate that striving 
1 a peaceful resolution of the Taiwan 
q istion is also a fundamental policy of 
1 Chinese Government. 

These principles of one China and a 
| iceful resolution of the Taiwan ques- 
t a remain the core of our China policy. 
1 lile our policy has been constant, the 
a aation itself has not and cannot 
r nain static. We support a continuing 

■ )lutionary process toward a peaceful 

r .olution of the Taiwan issue. The pace, 
idvever, will be determined by the 
4 inese on either side of the Taiwan 
E -ait, free of outside pressure. 

For our part, we have welcomed 
Ivelopments, including indirect trade 
nd increasing human interchange, 
Mich have contributed to a relaxation of 
$i tensions in the Taiwan Strait. Our 
£'adfast policy seeks to foster an 
« vironment in which such developments 
J<n continue to take place. 

The progress we have made in Sino- 
.nerican relations since 1972 is all the 
: pre meaningful when viewed in the 
ntext of the changes in the United 
:ates, China, and the international 



situation since that time. On this, my 
third trip as Secretary of State to the 
People's Republic, I have had the oppor- 
tunity to see remarkable progress being 
made in China's modernization effort. 
From the dramatic mountain scenery of 
Guilin to the rows of new apartment 
housing in Beijing, from the manage- 
ment training institute in Dalian to the 
birthplace of Confucius at Qufu, we have 
witnessed the determined efforts of 
China's people to build upon their own 
traditions toward a future of economic 
and social progress. 

I am confident that, under the far- 
sighted and bold leadership of Chairman 
Deng Xiaoping, Premier Zhao Ziyang, 
and other senior officials, including you 
here in this city, Mr. Mayor, China will 
forge its own unique solutions to the 
challenges of modernization. And in the 
context of the Chinese policy of "kai 
fang" or "openness," the American peo- 
ple are prepared to contribute where 
they can to this process, for such 



cooperation serves important shared 
interests of both our countries. 

Thus under successive leaders in 
both countries, and in evolving cir- 
cumstances, the fundamental premise of 
the Shanghai communique endures: that 
normal and cooperative relations 
between China and the United States 
are mutually advantageous, that they 
will serve the common interests of our 
two peoples in promoting economic and 
social progress, and that they will con- 
tribute to regional stability and help 
build a more secure world for us all. 

May I ask you all, then, to join me in 
a toast in the spirit of the Shanghai com- 
munique: to your health, Mr. Mayor, and 
all of our other friends here in Shanghai, 
to the continued progress and friendship 
between the peoples of the United States 
and of China. 



'Press release 54 of Mar. 5, 1987. 
2 Press release 59 of Mar. 10. ■ 



FY 1988 Assistance Requests 
for Sub-Saharan Africa 



by Roy A. Stacy 

Statement before the Subcommittee 
on Africa of the Senate Foreign Rela- 
tions Committee on March 12, 1987. 
Mr. Stacy is Deputy Assistant Secretary 
for African Affairs. ' 

Thank you very much for this opportu- 
nity to testify on behalf of the Admin- 
istration's FY 1988 foreign assistance 
request for Africa. Assistant Secretary 
Chester Crocker had very much looked 
forward to being here with you today, 
but as you know, President Reagan will 
be meeting very shortly with Kenya's 
President Moi, who is in Washington on 
an official visit, and it was necessary for 
Dr. Crocker to postpone his first 
meeting with the subcommittee during 
this Congress until another time. He has 
asked me to reiterate his desire to work 
closely with you and his wish to be 
available to the subcommittee at an 
early, mutually convenient time. 

I wish to begin by drawing the sub- 
committee's attention to the Administra- 
tion's proposal for a development fund 
for Africa— a legislative initiative which 
shares many elements in common with 
congressional proposals put forward last 
year and this year. I am pleased to note 
that the general thrust of these initia- 



tives is the same, and I believe we share 
many of the same goals. We both share 
similar convictions about the necessity of 
trying to improve the effectiveness and 
constructive impact of U.S. aid pro- 
grams in Africa. I know we share the 
same perceptions of the opportunities 
before us to advance U.S. interests by 
laving a stronger basis for a partnership 
with the nations of Africa. 

U.S. Tie to Africa 

Our national interest in a strong, 
healthy, enduring relationship with 
Africa was demonstrated by Secretary 
Shultz's visit to six countries across 
West, Central, and East Africa in 
January of this year. Although not 
presently a significant trading partner of 
the more economically advanced indus- 
trialized democracies, Africa's size and 
population make it a potentially impor- 
tant commercial and economic market. 
Its coasts border crucial shipping lines of 
communication among Europe, the Mid- 
dle East, South Asia, and the Far East. 
Its geography guarantees it a role in 
access to and security of the northern 
and western Indian Ocean and the South 
Atlantic. Although much has been writ- 
ten about its currently exploited mineral 
resources, few publications or analysts 



.ay 1987 



11 



AFRICA 



have made the explicit point that Africa 
almost certainly contains the majority of 
this planet's still-undiscovered mineral 
resources. Its current mineral produc- 
tion is essential to U.S. industry and 
commerce; Africa is at this time virtually 
the only economically affordable source 
of many strategic minerals such as 
cobalt, chromium, and the platinum 
family of metals. Africa has vast 
hydroelectric and agricultural potential 
which has scarcely been developed, let 
alone exploited. Its nearly 50 countries 
comprise almost one-third of the 
members of the United Nations, the 
single most cohesive voting bloc in the 
United Nations. These countries play an 
increasingly significant role in the for- 
mation of UN positions and policies 
which are of great importance to the 
United States— on terrorism, human 
rights, refugee affairs, Middle East 
peace talks, to name just a few. A report 
currently being prepared for the Con- 
gress will make the point that during 
this past year, like the two before it, 
there was an increased coincidence of 
African voting positions with those of 
the United States— as opposed to their 
previous strong alignment with the posi- 
tion of our major strategic adversary. 

Finally, I do not believe we can or 
should simply ignore or skip lightly over 
the fact that nearly 12% of America's 
own population traces its roots to Africa. 
Africa is, therefore, important to us, as a 
people, in cultural and historic terms. 
African countries' surge toward inde- 
pendence took place at the same time 
that we were engaged in our own 
renewed civil rights struggles in the 
1960s. Thus, the United States has a 
strong humanitarian and national inter- 
est in helping Africa meet the basic 
human needs of its people and realize its 
full human and development potential. 

In that regard, the United States has 
a very strong interest in sustaining the 
remarkable trend in policy reform and 
structural adjustment that is sweeping 
Africa. This U-turn away from socialist 
economics and antigrowth statism is one 
of the unheralded successes of U.S. 
Africa policy. So far we are winning this 
war of economic ideology, but it must be 
reinforced and deepened, and that is a 
matter of vital national interest to the 
United States. Therefore, I will plan to 
return to the subject later on in my 
testimony. 

Security Interests 

The Administration seeks modest, but 
essential, security assistance funding for 
FY 1988-$98 million for the military 



assistance program (MAP), $5 million in 
foreign military sales (FMS) concessional 
credit, $10.5 million in international 
military education and training (IMET), 
and $100 million in economic support 
funds (ESF). 

Our security assistance program is 
designed to strengthen our bilateral rela- 
tionship with countries which agree with 
and support our strategic concern about 
the northwest Indian Ocean; it is 
intended to materially support those 
nations actively resisting external 
aggression and externally instigated 
domestic destabilization; and it is carried 
out with an intent to deny opportunities 
for Soviet, Cuban, and bloc adventurism 
throughout the region. 

It has on occasion been asserted that 
the Administration's policies have con- 
tributed to instability in Africa by 
emphasizing military over economic 
assistance— by "militarizing" or con- 
tributing to the "militarization" of the 
continent. I categorically reject that 
argument. The record quite plainly 
shows the opposite. During the first 5 
years of this Administration, economic 
assistance accounted for more than 80% 
of our total assistance to Africa. When 
one considers emergency humanitarian 
assistance, the ratio is even greater in 
terms of providing for elementary and 
fundamental human needs. In FY 1986 
the ratio was $9.00 of economic 
assistance for every $1.00 of military 
assistance; and in FY 1987, it is $14.00 
of economic aid for every $1.00 of 
military aid. If the Administration's 
request for FY 1988 is enacted into law, 
the ratio will still be nine to one in favor 
of economic aid. 

I think it is important to note that 
U.S. military assistance to sub-Saharan 
Africa since the Reagan Administration 
came to office has been only 3% of total 
military assistance provided by all out- 
side countries to Africa. 

Since 1980 the United States has 
provided $568 million in military help, 
and $388 million of that total— well over 
half— has been focused in the three coun- 
tries where we have demonstrable, 
tangible, strategic interests— Sudan, 
Somalia, and Kenya. By contrast, the 
U.S.S.R. has provided $11.7 billion in 
military hardware during the same 
period. The United States ranks but 
sixth among providers of arms to Africa. 

I want to emphasize that U.S. 
military assistance is centered on train- 
ing, logistics, maintenance, engineering, 
and transportation— areas that con- 
tribute to basic military capability as 
well as to infrastructure improvements 
and nationbuilding capacity. In only very 



few cases have we provided lethal 
assistance, normally in circumstances 
similar to the current one in Chad, 
where a friend faced a demonstrably 
externally incited, directed, and provi 
sioned aggression. 

With the advent of the Africa fun 
initiative, we have considerably reduc 
our request for ESF to $100 million f 
FY 1988, which now is proposed only 
the countries where we have specific 
strategic or security interests— Chad, 
Djibouti, Kenya, Somalia, Liberia, 
Senegal, Seychelles, and Sudan. Thes 
eight countries figure prominently in 
national security strategy in terms of 
either conflict resolution (their weighl 
influence in African councils) or milit; 
access (prepositioning of supplies, 
overflight rights, possible staging are 
and are vital components of our natio 
security interests for the future. The} 
are important not just in terms of our 
own strategic posture but also as sign 
of U.S. resolve to other African coun- 
tries. I believe it is important to note 
that while the justification for ESF fo 
these countries is based on U.S. secur 
interests, the actual application of the 
assistance would be economic and 
developmental. So, rather than asking 
for $100 million in military assistance 
U.S. security needs, we are requestin; 
$100 million in economic assistance tc 
support development and even policy 
reform which will strengthen our 
democratic partners in Africa. The pr 
cipal immediate use of these funds wo 
be to support structural adjustment a 
economic policy reform in the eight k* 
recipient countries. 

The political and security interest: 
with Africa which I have just outlined 
are priorities that would rank high on 
any hierarchy of global interests. We 
reject the idea put forward by some t\ 
Africa is a "residual" in our foreign 
policy, something expendable when th 
going gets rough. 

Africa's Commitment 
to Economic Reform 

I would now like to return to the subje 
of policy change. No single program is 
more important to the overall health o 
African countries than economic refon 
Possibly the most important devek 
ment in the past half-dozen years has 
been the growing recognition among 
Africans that they need to come to gri] 
with the financial and human cost of 
misguided economic policies. The Unit* 
States, by means of the legislation und 
consideration, would help sustain and 
move Africa's economic adjustment 



12 



AFRICA 



ward policies that will stimulate 
vestment and incite new growth and 
ie spread of development and employ- 
ent opportunities. As we have all seen, 
countries beginning to take the first 
•ave steps toward a reordered and rein- 
gorated economic process, these 
langes are not easy and are not 
ithout heavy political costs to the 
3vernments involved. But without solid 
jonomic policies and well-managed, 
arket-oriented economies, all our and 
frica's other strategic and humanitar- 
n interests will be in jeopardy. There is 
l enormous opportunity today to 
)lidify the foundations that must under- 
n all our economic and strategic inter- 
its. This is an opportunity which, not- 
withstanding our own painful budgetary 
■alities, we cannot afford to let pass 
$5 by. 

The mature partnership we seek 
ith Africa took a major step forward 
1st May at the UN-sponsored Special 
Session on the Critical Economic Situa- 
jon in Africa. It was the first such UN 
■jnecial session to focus on the economic 
(beds of a single region— an event which 
' ghlighted the change in Africa's 
ij ;onomic direction. Even more remark- 
) )le was the degree of consensus among 
i frican nations themselves and donor 
8 mntries on what needs to be done to 
I -rest Africa's economic decline and 
;gin the long road back to sustainable 
rowth. Candidly, African nations have 
i ^cognized, and have had the great 
1 >urage to do so publicly, that past 
I ;atist policies have failed to produce the 
:onomic growth needed to improve the 
ring conditions of their peoples. 
At the UN special session, the 
iricans presented an action program 
-hich, among other things, included a 
3mmitment to give priority to agricul- 
? ire and to undertake a variety of other 
B conomic, fiscal, and policy reforms. 
- hey also pledged to strengthen invest- 
1 lent incentives, review public financing 
I olicies, improve economic management, 
nd encourage domestic resource mobili- 
^ation and the role of the private sector. 
No fewer than 22 sub-Saharan 
drican countries in the IDA-eligible 
International Development Association] 
■ ategory have embarked on or are about 
jio initiate major structural reform pro- 
! ;rams. Let me cite just a few examples. 

• Senegal has substantially 
increased agricultural producer prices, 
reduced subsidies, embarked on reform 
:>f its parastatal sector, reduced tariffs 
>n industrial products, opened rice 
trading to the private sector, and raised 
itility rates to minimize the burden on 
'he national budget. 



• Zaire and Zambia have devalued 
their currencies, eliminated most trade 
and price controls, and increased 
agricultural prices. 

• In Zaire, in addition, the govern- 
ment has established a market-based 
foreign exchange system. 

• Zambia, meanwhile, has intro- 
duced a foreign exchange auction for 
most commercial transactions. 

• Kenya has mounted a major 
stabilization effort, liberalized import 
licensing and maize and fertilizer 
marketing, and adopted a flexible 
exchange rate policy. 

• Somalia and Uganda have lib- 
eralized prices for a variety of agri- 
cultural products. They have been 
rewarded with large increases in 
agricultural production. 

• Guinea closed down its entire 
state banking system and allowed the 
establishment of three commercial 
banks. 

• Ghana has changed its financial 
policy so that interest rates, which used 
to be highly negative in real terms, are 
now positive. 

The above listing is illustrative and 
is not intended to be comprehensive. For 
a more detailed description of the 
African reform process, I would like to 
insert into the record a paper entitled 
"A Summary of Some Development 
Effects of African Economic Reforms." 

Many of the benefits to the masses, 
particularly at the lower end of the 
economic ladder, will take time, but 
some early results can already be seen. 
In general, adjustment programs are 
more likely to have a positive redistribu- 
tion of income effect by correcting 
discrimination against the rural sector, a 
bias which has hurt the poor. In most 
cases, income transfers under adjust- 
ment programs— from urban consumers 
to farmers and shifts in public expend- 
itures to less capital-intensive urban- 
based projects— improve the equity of 
income distribution and strengthen the 
antipoverty focus in government 
programs. 

However, the adjustment process 
has not been without cost. Using a sam- 
ple of 13 countries which have launched 
structural adjustment programs and for 
which reliable statistics exist, the World 
Bank reports that consumption in many 
of them has been declining for a number 
of years and that all but one (Ghana) are 
likely to see per capita income consump- 
tion stagnate or decline further in the 
next 3 years. Each of those 22 reform 
programs strikes at the heart of the con- 
stituencies on which political power, 
patronage, and the support of the 



forceful urban elites have been based. 
Clearly such belt-tightening carries with 
it considerable risk for reformist govern- 
ments. Staying the course will be 
increasingly difficult, and that is why it 
is so important that the United States be 
willing, in effect, to put its money where 
its mouth is— to support our friends as 
they try to put into effect the very 
reforms we have been trying so hard to 
get them to face up to. In doing so, we 
must not stand idly by while they run- 
alone— the substantial political risks and 
costs that will be so incurred. 

Just to maintain current levels of per 
capita income over the period 1987-89, 
substantial resources over and above 
those in sight need to be found. For six 
countries— Zambia, Zaire, Senegal, 
Niger, Madagascar, and Tanzania— this 
gap could amount to an additional $700 
million per year. Moreover, the quality 
of assistance, and its timeliness and 
responsiveness to political and economic 
priorities, must also be improved. 

U.S. Response 

The United States has been at the center 
of the growing dialogue with African 
countries. Between 1980 and 1985, 
development assistance and ESF to 
Africa increased sharply, reaching $770 
million in 1985. Regrettably the trend 
was reversed in 1986, with development 
assistance and ESF assistance to Africa 
dropping to $603 million. In 1987 the 
downward trend continued, driven by 
Gramm-Rudman-Hollings targets and a 
failure by Congress to appropriate the 
funds necessary to sustain our global 
foreign policy objectives. Excluding the 
FY 1987 supplemental request submitted 
to Congress, development assistance and 
ESF assistance to Africa in FY 1987 is 
projected at $478 million. However, even 
if the supplemental request of $50 
million were approved for Africa, the 
level in 1987 would still be only $528 
million— a decline of 31% relative to 
1985. 

Fortunately, the outlook for 1988 is 
somewhat better, but the needs are still 
great. The Administration has put 
together an economic and security 
assistance request that we believe is 
responsive to Africa's requirements but 
which still takes into account our own 
painful budgetary stringencies. It is 
absolutely vital that Congress fund the 
Administration's FY 1988 request in 
full; without the FY 1987 supplemental 
and the full funding of our FY 1988 
request, we will be unable to reverse the 
downward trend of assistance to Africa. 



May 1987 



13 



AFRICA 



In this regard, Secretary Shultz's recen 
comments on the foreign affairs budget 
are worth repeating: 

The President's foreign affairs budget 
might usefully be looked upon as a form of 
national insurance. In asking the Congress to 
devote only two cents out of every budget 
dollar to our foreign policy goals, the Presi- 
dent has determined the minimum premium 
we must pay as a people to safeguard the 
peace and lead the free world. Those who 
would cut the foreign affairs budget even 
further are gambling needlessly with our 
nation's future. 

No one can say for sure how large the 
gamble will be. We know we pay some price 
every day in terms of lost opportunities to 
influence events. Perhaps a crisis that could 
have been averted today by timely and 
relatively inexpensive military or economic 
assistance, or through diplomatic efforts, will 
explode in our faces the day after tomorrow. 

The Development Fund for Africa 

This brings me to the main topic of 
today's hearing— the Administration's 
proposal for a development fund for 
Africa. 

Following an exhaustive interagency 
examination of our relationship with 
Africa, we came to the conclusion that, 
at this time of budgetary constraints, we 
needed to make better use of our limited 
aid resources in Africa and that the 
development fund for Africa would do 
just that. The fund brings important new 
features to our assistance program, 
including a special long-term commit- 
ment to Africa, no-year funding, and the 
elimination of functional accounts. 

The Africa fund provides the balance 
that we need at this moment in Africa's 
economic development. It would enor- 
mously facilitate our ability to promote 
growth and long-term development in 
Africa and is more responsive in 
timeliness to the wave of economic 
reform that must be the foundation for 
sustainable development. The fund 
would provide both project assistance at 
the village level as well as quick- 
disbursing program assistance to sup- 
port policy realignment at macro and 
sector levels. I should stress that the 
Administration— and the Africans 
themselves— do not see these types of 
assistance as an "either/or" proposition. 
Both are essential and are mutually sup- 
portive. Without a proper macro- 
economic or sector framework, many 
projects would be doomed to failure. 
Conversely without projects, targeted 
activities in population, environmental 
management, health, and child survival 
would be hampered. 



Since my AID colleague will be 
addressing the programmatic assistance 
content of the fund, I will limit my 
testimony to two major programs incor- 
porated in the fund— the African 
Economic Policy Reform Program and 
the Southern Africa Initiative. 

African Economic Policy 
Reform Program. This Administration 
believes strongly that a continuing flow 
of U.S. assistance at statistically signifi- 
cant levels is necessary to sustain the 
continentwide abandonment of statist 
strategies and assist African inter- 
national competitiveness. Consolidation 
of these trends would constitute a major 
American success and a significant 
defeat for our adversaries' influence in 
the Third World. The economic bind in 
which most African states find them- 
selves, and the prevalence of one-party 
and military regimes, tend to promote a 
search for radical solutions while 
creating low-cost openings for Libya and 
the Soviets. An African disavowal of 
statism has the potential, over time, to 
transform the African politico-economic 
landscape to the advantage of both 
African peoples and the United States. 

Market economics and private 
sector-led development are now on trial 
in Africa as government after govern- 
ment feels the public outcry from the 
austerity measure inherent in structural 
adjustment and economic reform. Our 
goal must be to keep our partners 
headed in this direction and to 
demonstrate convincingly that it is the 
West, not the Soviet bloc, that is the 
natural and effective partner of African 
countries seeking to develop and 
modernize. 

The African Economic Policy 
Reform Program (AEPRP)— a program 
designed to support market-oriented 
policy reforms in Africa— is one of the 
most effective instruments the United 
States has for this. Originally designed 
as a $500 million, 5-year program, the 
AEPRP has had to be scaled back 
because of severe budget pressures flow- 
ing from the low level of foreign 
assistance appropriations. In the first 3 
years of this program's existence, alloca- 
tions for the AEPRP totaled $150 
million— about half the amount foreseen 
for the period. Nonetheless, although 
much more could have been accom- 
plished with increased funding, the 
AEPRP has played an important role in 
sustaining reform in such countries as 
Zambia, Malawi, Rwanda, Mali, Mauri- 
tius, Senegal, Togo, Guinea, and Zaire. 
Moreover, the AEPRP has had an 
important catalytic effect in introducing 



policy reform criteria into programs 
funded from the World Bank and othe 
sources. The AEPRP has provided us 
with a capacity to conduct a dialogue 
with and to assist African reform effoi 
and to influence multilateral institutio 
and other donors with additional 
resources to commit to Africa. This 
reason alone would justify the existenc 
of a substantial AEPRP as a separate 
program within the development fund 
for Africa. 

The Southern Africa Initiative. 

Southern Africa's political orienta- 
tion, stability, and economic well-bein^ 
are central to U.S. policy. America's 
national interest in the region is best 
served by a community of pluralistic, 
representative societies which are sect 
from external threats and which are si 
ported by open and competitive 
economies. This is also what the peopli 
and governments of southern Africa 
have professed to aspire to. The 
alternative— economic regression, lack 
progress in solving the political proble 
of the region, and increased militariza- 
tion and resort to violence— can only p 
vide opportunities for those who wish 
toward the United States and who see^ 
to promote southern African instability 
and expand their influence in the regie 

Without skillful U.S. diplomacy, 
active coordination with our allies, anc 
well-crafted aid and investment pro- 
grams, positive trends toward econom 
reform and dissociation from the Sovk 
bloc could be overwhelmed by a combii 
tion of South African actions, front-lin 
state susceptibility to Soviet offers of 
military assistance, and rising violence 

For these reasons, as well as our 
interest in retaining Western access to 
southern African strategic mineral anc 
metal supplies, we must remain activel 
engaged in promoting peaceful change 
and economic growth in South and 
southern Africa. It is clear beyond que: 
tion that there is new thinking about 
political change and economic growth 
taking place in the region, and inside 
South Africa specifically. The fact that 
increasing numbers of South Africans 
are beginning to talk about what shouk 
replace apartheid and that the front-lin 
states have withheld action on their ow 
sanctions, is itself evidence of the force 
of change at work. Our goal, as a natio 
must be to encourage change and give 
substance and support. Adequate fund- 
ing for the Southern Africa Initiative is 
essential to the pursuit of these 
objectives. 

The Southern Africa Initiative— 
which would provide funding for promo 



14 



Department of State Bullet 



AFRICA 



n of trade and investment, market- 
iented policy reform, and improvement 
regional transportation links— spells 
t a positive vision for the region, not a 
structive one based on threats, sanc- 
ms and countersanctions, and polariz- 

recriminations. This is precisely a 
ne when the United States and our 
ies should be seeking to maximize our 
luence and our leverage. We need to 
ert every possible effort to avoid 
maging the economic, social, and 
litical futures of the people and 
vernments of southern Africa which 
; seek to help. Tangible support by the 
lited States for the region's economic 
lalth will send powerful and positive 
Irnals to both the South African 
Iivernment and the black-ruled states 
I the region at a time when negative 
I ernative scenarios loom darkly on the 
Jjrizon. 

The Western donors' commitment to 
je economic development of a free 
duthern Africa is clear. Our allies are 
ready doing more. U.S. assistance to 
I? area has been impressive, totaling 
1 .2 billion in the 1981-85 period, but 
■ r share as a percentage of total 
lestern bilateral and European Corn- 
unity assistance is relatively small- 
lout 15%. Our West European allies 
1 9 heavily engaged in southern Africa 
i rough bilateral as well as multilateral 
jograms. For example, the European 
i immunity, under the 5-year commit- 
i ?nts made in 1986 at Lome III, proj- 
its giving $1.7 billion to the region with 
I out 40% of funding directed to the 
j insport sector. The Dutch provide 
I arly $230 million annually to southern 
| Yica, and the United Kingdom is 
| larging both its aid to the Southern 
j "rica Development Coordination Con- 
:rence (SADCC) and to Mozambique. 
I le five Nordic countries have 
I nounced a 50% increase in total aid to 
le southern African region, from $2 
I ilion over the past 4 years to $3 billion 
•: the next similar period. Italy has 
I ported a total pledge to southern 
ifrican regional projects of $150 million, 
| presenting about one-third of total 
(alian aid to sub-Saharan Africa. 

The overall European commitment 
I the transport sector, SADCC's 
ghest priority, is to be commended. 
ine first phase of the rehabilitation of 
jie often-talked-about Beira corridor in 
j ozambique has now been fully sub- 
jribed by European donors. 

I also wish to mention the important 
jmtribution of the private sector, par- 
cularly from Zimbabwe, to the rehabili- 
ktion of the Beira corridor. A private- 
hctor Beira corridor group, which 



includes U.S. companies, has been 
established expressly for this purpose. 
Zimbabwean businesses are investing in 
the transportation infrastructure and are 
planning industrial and agricultural ven- 
tures in the corridor area that will help 
to revive the troubled Mozambique 
economy. Zimbabwean private sector 
firms are contributing throughout the 
region to the strengthening of national 
economies. Through trading and 
developing investment relationships, 
these firms provide food, capital and 
consumer goods, and spin-off employ- 
ment opportunities that not only 
stimulate neighboring economies but 
serve as a model to show neighboring 
governments how a healthy private sec- 
tor can lead to growth and benefits for 
all. 

We have a supplemental request 
before Congress for a "down payment" 
for this vitally important initiative. 
Assuming favorable action on the 1987 
supplemental and FY 1988 requests, $93 
million in additional funding will be 
available for the first 18 months of this 
initiative. The full 5-year funding of the 
initiative would certainly not place the 
United States out in front of our allies in 
southern Africa who, as I have indicated 
earlier, are committed to doing more 
themselves. I should add that the 
Southern Africa Initiative has been 
included in the development fund for 
Africa because it is in conformity with 
the fund's principal objectives— long- 
term development and policy reform. 
Given the importance we attach to this 
region, I wish to enter into the record 
our program planning and policy docu- 
ment for southern Africa, entitled "An 
Initiative for Economic Progress in 
Southern Africa." It responds to the 
requirements of Section 505 of the Com- 
prehensive Anti-Apartheid Act of 1986, 
and supports our request for an FY 1987 
supplemental and our FY 1988 request 
for funding. 

U.S. Multilateral Actions 

On the multilateral front, the Admin- 
istration has also played an important 
catalytic role. Last year, the Interna- 
tional Monetary Fund (IMF) and World 
Bank executive boards approved a U.S. 
proposal for a structural adjustment 
facility using $2.7 billion special drawing 
rights in trust fund reflows. These 
reflows will be channeled to low income 
countries— primarily in Africa— with pro- 
tracted balance-of-payments problems. 
The structural adjustment facility will 
provide substantial support to countries 
engaged in major structural adjustment 
programs, thereby alleviating their 
financial pressures. 



We have also agreed to support a 
substantially larger IDA VIII replenish- 
ment which, together with voluntary 
contributions, will total about $12.4 
billion. Our contribution will be the 
largest, with a total pledge of $2,875 
billion. Under IDA VIII, Africa's share 
will rise to between 45-50%. This com- 
pares with $9 billion for IDA VII and an 
African share of 36%. 

Negotiations for the African 
Development Bank's (AfDB) fourth 
general capital increase have been com- 
pleted, and we expect the Board of 
Governors to give their approval by 
June. The proposal under consideration 
posits a 200% increase in the bank's 
capital base. This would be the largest 
ever. In addition, talks are just begin- 
ning on the fifth replenishment of the 
African Development Fund, the AfDB's 
soft loan window. 

I believe it is extremely important 
that the Congress look carefully and 
seriously at the issue of U.S. funding for 
the international lending institutions; in 
Africa, the multinational banks provide 
nearly four times the amount of the 
entire U.S. bilateral assistance program. 
Yet we are falling behind on our pledges 
to replenish funds for these institutions, 
and, seeing the United States fall fur- 
ther into arrears, our major industrial- 
ized partners and allies may be tempted 
to let up on their own solemn commit- 
ments. This would have disastrous 
effects for Africa, for which, in many 
respects, the possibility of borrowing 
from an international financial institu- 
tion may be the best alternative to put- 
ting themselves into hock or escrow to 
the Soviets and others of our 
adversaries. 

These additional multilateral finan- 
cial flows will clearly help but, as stated 
earlier, more flows are necessary in 
many African countries just to sustain 
current per capita income levels. We, 
therefore, urge full funding of the 
Administration's FY 1988 request for 
Africa. 



Human Rights 

This is not the place to catalogue 
Africa's recent record in the field of 
human rights; that record is fully por- 
trayed in our 1986 human rights report 
which has just recently been delivered to 
the Congress. But I would like to empha- 
size the fact that human rights concerns 
and an interest in fostering respect for 
democratic norms are a key ingredient 
of this country's Africa policy and of our 
relationships with the diverse countries 
of that continent. Aware as I am of your 
own strong commitment to these goals, I 



|1ay 1987 



15 



ARMS CONTROL 



want to reaffirm to you and to your sub- 
committee that I share that commitment 
and underscore my own belief that the 
United States can be and should be 
proud of what it has done and is trying 
to do to advance human rights goals in 
Africa. In fact, I am prepared to say 
categorically that no other country is 
doing more. No other country has 
argued more forcefully for respect for 
human rights; no other country ties its 
economic assistance and political ties 
more explicitly to respect for human 
rights; no other country— as a country- 
produces an annual report on human 
rights performance of every country in 
the world as part of its diplomatic prac- 
tice. Although the human rights compo- 
nent is only one of a large array of fac- 
tors in our relationship with other coun- 
tries, it is a very important one. I think 
it is worth taking note of some repre- 
sentative examples from Africa where 
human rights issues are important to our 
policy. 

• Sudan enjoyed a return to democ- 
racy in 1986, but continues to suffer 
from the effects of a protracted ethnic 
and cultural conflict compounded by 
foreign intervention. We have con- 
sistently pressed for movement toward 
national reconciliation there. 

• In Liberia there has been some 
improvement in political conditions, and 
the 1986 municipal elections were 
apparently conducted in a fair and open 
manner. But much mistrust still lingers 
over the 1985 national elections and 
subsequent coup attempt, and the 
Liberian Government is working to over- 
come the effects of earlier press ban- 
nings and repression against opposition 
groups. We have welcomed these 
developments and are urging further 
progress in dealing with the problems 
that remain. 

• In Uganda President Musevini's 
government appears to have brought 
peace through much— if not all— of the 
country, and he is committed to healing 
the wounds of war and to progress 
toward national reconciliation and 
economic recovery. Our aid program, 
albeit small, gives us credibility on 
economic reform issues and moral influ- 
ence on account of our strong position 
against the human rights abuses of 
previous regimes. 

• As a close friend, we are con- 
cerned about the human rights situation 
in Kenya, particularly the Kenyan 
Government's recent actions against 
political dissidents. Kenya has an open 
political system which has demonstrated 
a capacity to conduct dialogue and 
debate on issues of national importance 



in a fair and responsive manner in the 
past. We believe that adherence to these 
standards would result in a stronger and 
more vibrant democracy. 

• In Ethiopia, on the other hand, 
the process of villagization continues 
unabated, and that country's govern- 
ment seeks unswervingly to implement a 
true Marxist state. 

• In Angola, I regret to say I believe 
there has been a pulling back from 
earlier indications of a willingness on the 
part of the Popular Movement for the 
Liberation of Angola (MPLA) to search 
for a negotiated settlement to the con- 
flict. The MPLA now appears to have 
opted for a course of military victory 
with ensuing misery and suffering 
inflicted upon the hapless people of 
Angola. 

• In Zaire although we continue to 
be concerned about sporadic reports of 
inhumane treatment of prisoners and 
political dissidents, the government has 
lifted its ban on prison visits by the 
International Committee of the Red 
Cross (ICRC) and created a new govern- 
ment ministry to investigate and recom- 
mend redress for cases of abuse at the 
hands of government authorities. We 
have conducted a continuing dialogue on 
human rights with the Government of 
Zaire, including with President Mobutu, 
and will continue to do so. 

• Finally, I don't believe we should 
let this discussion end without noting the 
sharp deterioration of the human rights 
situation inside South Africa, a situation 
which can give none of us any satisfac- 
tion and which has to call for a continu- 
ing effort to maximize our influence 
while doing the least possible damage to 
those whom we seek to assist. 



In closing, I would like to summan 
the case for our assistance program fo 
Africa. Although there are links to U.5 
strategic policy in other parts of the 
world, notably the Middle East and 
Southwest Asia, they do not form the 
principal rationale for a strong U.S. re 
tionship with Africa. Africa's need for 
external assistance as its nations grow 
toward becoming mature democratic 
partners in the free society of nations 
self-evident. The U.S. national interest 
in furthering and strengthening our re 
tionship with Africa is equally self- 
evident. I want to work with you in trj 
ing to maximize what the United State 
can offer, both by way of influencing t! 
development of Africa as well as throu 
what we can offer Africans as they wo 
toward democratic advance. I would 
stress that this budget request is not a 
hastily conceived "wish list" but, rathe 
reflects a number of painful choices we 
have had to make as part of our con- 
tribution to the congressionally man- 
dated deficit reduction. The U.S. effor 
to assist in the development of demo- 
cratic societies in Africa which can joir 
proudly in partnership with the rest of 
the democratic community of nations ii 
obviously in our own national interest, 
from an economic standpoint, from a 
political standpoint, and from a U.S. 
national security standpoint. The inves 
ment on our part is small; the reward- 
not just for Africa but also for the 
United States— is great. 



'The complete transcript of the hearing 
will be published by the committtee and wu 
be available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. ■ 



U.S. Tables Draft INF Treaty 



PRESIDENT'S REMARKS, 
MAR. 3, 1987' 

Working closely with our friends and 
allies in Europe and Asia, the United 
States has pursued— ever since my initial 
proposal of November 1981— deep, 
equitable, and verifiable reductions of 
land-based U.S. and Soviet longer range 
INF [intermediate-range nuclear force] 
missiles, with the objective of their com- 
plete global elimination. Most recently 
we've been preparing a detailed treaty 
text to implement these agreed objec- 
tives and to follow the specific formula 
on which Mr. Gorbachev and I agreed at 



our meeting in Iceland last October. TI 
calls for reductions to an interim globa 
ceiling of 100 warheads on U.S. and 
Soviet longer range INF missiles, with 
none in Europe, along with constraints 
on shorter range INF missiles and pro\ 
sions for effective verification. I remaii 
firmly committed to these objectives. 

Having long sought progress in this 
area, therefore, I welcome the statemei 
by Soviet General Secretary Gorbachev 
on Saturday that the Soviet Union will 
no longer insist on linking agreement o 
reductions in INF to agreements in 
other negotiations. This removes a 
serious obstacle to progress toward INI 



16 



Department of State Bullet 






ARMS CONTROL 



' ) ductions and is consistent with the 
iderstanding which Mr. Gorbachev and 
■eached at our 1985 Geneva summit 
eeting: that we would, indeed, seek a 
parate agreement in this important 
ea. I want to congratulate our allies 
r their firmness on this issue, 
jviously, our strength of purpose has 
/d to progress. 

To seize this new opportunity, I have 
structed our negotiators to begin the 
'' -esentation of our draft INF treaty text 
Geneva tomorrow. I hope that the 
>viet Union will then proceed with us 
serious discussion of the details which 
!i; 'e essential to translate areas of agree- 
ent in principle into a concrete agree- 
ent. And I want to stress that of the 
lportant issues which remain to be 
solved, none is more important than 
rification. Because we're committed to 
nuine and lasting arms reductions and 
ensuring full compliance, we will con- 
iue to insist that any agreement must 
; effectively verifiable. 

To explore further the implications 
these latest developments, I have also 
.ked our senior negotiators in 
sneva— Ambassadors Max Kampelman, 
ike Glitman, and Ron Lehman— to 
turn to Washington to meet with me 
ter this week. Following these discus- 
ins in Washington, I will send a team 
ck to Geneva to take up once again the 
tailed negotiations for an INF reduc- 
ns agreement. 

We'll continue, at the same time, our 
ry close consultations on INF issues 
th our friends and allies in Europe and 
ia. It was, after all, allied firmness 
id unity in carrying out NATO's 1979 
icision which helped to bring the Soviet 
ion back to the negotiating table and 
d to this opportunity to achieve a 
eductions agreement to the mutual 
jnefit of both East and West. And as 
e proceed, it is well to remember that 
Dthing is more important to the cause 
'. peace than the credibility of our com- 
mitment to NATO and our allies and to 
le vitality of these alliances of free 
ations. 



.S. DELEGATION 
STATEMENT, 
tAR. 12, 1987 

In March 12, the United States tabled 
t the negotiations on intermediate- 
ange nuclear forces in Geneva a treaty 
irticle providing for on-site inspection, 
'his treaty provision was developed in 
lose consultation among NATO allies. 



With this article, the United States 
has completed tabling its draft INF 
treaty, the other parts of which the 
United States put forward on March 4. 

The United States looks forward to 
working out with the Soviet Union in 
Geneva an effective verification regime, 



including on-site inspection, as an essen- 
tial part of a sound and durable INF 
treaty. 



'Made to reporters assembled in the 
Briefing Room at the White House (Weekly 
Compilation of Presidential Documents of 
Mar. 9, 1987). ■ 



President Meets With Arms Negotiators 



PRESIDENT'S STATEMENT, 
MAR. 6, 1987' 

I have just met with Ambassadors 
Kampelman, Glitman, and Lehman to 
hear their report on the nuclear and 
space arms talks in Geneva. The level, 
intensity, and seriousness of the effort in 
Geneva have brought us closer to signifi- 
cant reductions in nuclear arms. 

As you know, the Soviet Union has 
recently offered to move ahead with an 
agreement to cut longer range inter- 
mediate-range nuclear force (INF) 
missiles. This is something the United 
States and our allies have long urged. 
This week, at my direction, the 
American delegation in Geneva proposed 
a draft treaty incorporating the 
understandings which General Secretary 
Gorbachev and I reached on this subject 
at Reykjavik. Because of the oppor- 
tunities for progress that are opening 
up, I have asked Ambassador Glitman to 
return to Geneva immediately. He and 
his team will continue working hard to 



remove the remaining obstacles to an 
INF agreement. I hope this will in turn 
spur progress in other aspects of the 
Geneva negotiations, particularly agree- 
ment on deep reductions in strategic 
nuclear arms. 

I am determined to maintain the 
momentum we have generated. For that 
reason, Secretary of State Shultz will go 
to Moscow to meet with Foreign Minis- 
ter Shevardnadze. The Soviet Govern- 
ment has agreed that this visit will take 
place from April 13 to 16. These talks 
will provide a good opportunity to 
review the entirety of our relationship, 
including regional conflicts, human 
rights, and bilateral issues and to con- 
solidate the progress we have made. 
Most important, I hope these discussions 
will result in recommendations to 
General Secretary Gorbachev and me on 
further steps we might take to move for- 
ward in all aspects of our relations, 
including the Geneva negotiations. 



'Text from Weekly Compilation of 
Presidential Documents of Mar. 9, 1987. 




The President at a luncheon meeting on March 6, 1987, with (left to right) Ambassador 
Maynard W. Glitman, U.S. negotiator at the INF talks; Ambassador Max M. Kampelman, 
head of the U.S. delegation to the nuclear and space arms negotiations and U.S. negotiator 
at the defense and space talks; Ambassador Ronald F. Lehman II, U.S. negotiator at the 
START talks; and White House Chief of Staff Howard Baker 



Vlay 1987 



17 



ARMS CONTROL 



Nuclear and Space 
Arms Talks Close 
Round Seven 



Following is a statement by Ambas- 
sador Max. M. Kampelman, head of the 
U.S. delegation to the nuclear and space 
arms negotiations, in Geneva on March 6, 
1987. 

Today marks the end of the seventh 
round of our talks. The American delega- 
tion believes this has been a useful and 
productive round. We have made solid 
progress in recording, on paper, our 
areas of agreement and disagreement in 
all three negotiating groups, a step 
which the United States first proposed 
at the Vienna meeting of Secretary 
Shultz and Foreign Minister Shevard- 
nadze in early November. The process 
has succeeded in clarifying our dif- 
ferences where they continue to exist, 
and we believe this to be indispensable 
for achieving the final agreement we 
seek. 

On Wednesday [March 4], the United 
States submitted a formal INF 
[intermediate-range nuclear forces] 
treaty in an effort to expedite construc- 
tive movement toward agreement on the 
reductions and ultimate elimination of 
intermediate-range nuclear weapons. 
This comprehensive document repre- 
sents the work of many months and 
reflects our view that there are good 
prospects for reaching agreement in 
INF. 

One obstacle, among others, to 
reaching such an agreement has been 
Soviet insistence since Reykjavik on link- 
ing INF to progress in the other two 
negotiating groups. We are pleased, 
therefore, that the Soviet Union in 
recent days has removed this obstacle 
and withdrawn its objections to negotiat- 
ing and implementing an independent 
INF agreement separately and on its 
own merits. In view of recent develop- 
ments, the INF negotiating group will 
continue to meet for an additional 
period. 

It is the intention of the United 
States to push forward in the START 
[strategic arms reduction talks] and in 
the defense and space negotiating 
groups. In our quest for reductions in 
strategic nuclear arms, substantial prog- 
ress has been made, and we would like 
to formalize agreement for 50% reduc- 
tions. We also seek agreement on explor- 
ing a stable transition from an offensive 
dominant military force structure, which 



now characterizes the military structure 
of our two countries, to one in which 
greater emphasis is placed on finding 
effective defenses. 

The eighth round is now scheduled 
to resume on April 12, 1987. ■ 



INF Extended 
Session Ends 



Following are statements by Ambas- 
sador Maynard W. Glitman, U.S. 
negotiator at the intermediate-range 
nuclear forces (INF) talks, made in 
Geneva on March 26, 1987, and by Presi- 
dent Reagan on March 27. 



AMBASSADOR GLITMAN'S 
STATEMENT 

The extended session of the U.S. -Soviet 
INF negotiations concluded today, 
March 26, 1987. It has been agreed that 
the negotiations on nuclear and space 
arms will resume on April 23, 1987. 
Accordingly the INF negotiating group 
will resume its work on that date. It is, 
of course, understood that this date 
could be adjusted at the upcoming U.S.- 
Soviet meeting of foreign ministers in 
Moscow. 

The extended session just concluded 
has been useful and constructive in many 
areas. The United States completed the 
explanation of its draft treaty tabled on 
March 4 which provides for the reduc- 
tion of longer range INF missile war- 
heads to 100 globally, with zero in 
Europe, as agreed by the United States 
and Soviet leaders at Reykjavik. 

The U.S. side repeated its longstand- 
ing position that there must be equally 
global constraints on shorter-range INF 
missile systems as an integral part of 
this INF treaty to ensure its viability 
and effectiveness. 

Finally during this session, the 
United States also amplified its com- 
prehensive and effective verification 
regime tabled as part of the treaty, 
including provisions for on-site 
inspection. 

While the United States believes 
that useful progress has been made in 
this round, difficult issues remain before 
us. Substantive issues need to be 
resolved, and detailed work needs to be 
done in all areas which should be covered 
by an INF treaty. For its part, the 
United States has already placed a 
detailed and comprehensive draft treaty 
on the negotiating table. The United 



States will return to the negotiations i 
April prepared to engage in intensive 
work toward the earliest possible cone 
sion of a sound and durable INF treat\ 



PRESIDENT'S STATEMENT' 

Yesterday marked the close of the 
special extended session of negotiation 
between the United States and the 
Soviet Union on intermediate-range 
nuclear forces, a part of the nuclear ar 
space arms talks in Geneva. We 
extended this session beyond the Marci 
closure of the other NST negotiating 
groups in order to make further prog- 
ress toward our long-held goal of deep 
equitable, and effectively verifiable 
reductions in U.S. and Soviet longer 
range INF (LRINF) missiles, with the 
ultimate objective of their complete 
global elimination. 

On March 4, at my direction, our 
U.S. negotiators tabled a draft INF 
treaty text which follows the formula 
that General Secretary Gorbachev and 
agreed upon at our meeting in Iceland 
October 1986. We have now presented 
and explained in detail to the Soviets o 
draft treaty text, which calls for reduc 
tions to an interim global ceiling of 10( 
warheads each on U.S. and Soviet lonj 
range INF missiles, with none in 
Europe, along with constraints on 
shorter range INF (SRINF) missiles ai 
provisions for effective verification. 

U.S. and Soviet negotiators have 
established working groups to facilitafc 
discussion of the draft treaty which we 
put forward, and they are working to 
develop a joint text. These discussions 
with the Soviets have been businesslikt 
and productive. 

I want to emphasize that our posi- 
tion on these negotiations is based on 
very close consultations with our frienc 
and allies in Europe and Asia, whose 
security is most directly affected by th« 
Soviet INF buildup. Our allies, more- 
over, made substantial contributions to 
our proposals. 

We and our allies have made clear 1 
the Soviets that an INF agreement mu: 
be effectively verifiable. As I have 
pointed out previously, of the issues 
remaining to be resolved, none is more 
important than verification. Our draft 
treaty text, therefore, includes a com- 
prehensive verification regime to ensuri 
compliance with the treaty. 

We have three key objectives in 
seeking such verification provisions: 

• To enhance confidence in the 
agreement, which in itself will contribut 



18 



Department of State Bulleti 



ARMS CONTROL 



greater security and stability in 

•ope and Asia; 

To deter violations by increasing 

risk of detection; and 

• To permit quick detection of any 
)ublesome activities, thereby providing 
nely warning of a potential or real 
reat to allied security. 

On-site inspection will be an impor- 
f i "" it element of any effective verification 
rime. Such inspections will assist in 
rifying the initial exchange of data on 
F systems and the subsequent destruc- 
n, dismantlement, and conversion of 
iINF systems and will play an impor- 
lt role in ensuring continued com- 
ance with treaty limitations. 

Another key provision of our draft 
ct concerns SRINF missiles. We and 
r allies have made clear since 1981 
it constraints on SRINF are essential 
Ian initial INF agreement so that the 
Jviet Union cannot undercut LRINF 
liitations through a buildup in SRINF 
rssiles. These constraints, therefore, 
list provide the United States with a 
Iht to equality with the global level of 
jtaloyed Soviet SRINF systems. 
IJ At Reykjavik, General Secretary 
Irbachev and I reaffirmed the impor- 
II it principle agreed by our negotiators 
jj ring the INF negotiations of 1981-83; 
'i -nely, that an interim INF agreement 
I ist include constraints on SRINF 
|;tems in order to "ensure the viability 
l i effectiveness of an agreement on 
1 iger range missiles." In recent weeks, 
Ivvever, the Soviets have backtracked 
f m this position and are now saying 
1 it the question of shorter range INF 
I ssiles should be taken out of the cur- 
I it INF negotiations and be dealt with 
i tead in separate negotiations. 
i This new Soviet position on shorter 
i lge missiles would allow the Soviet 
I don a continued monopoly of these 
litems and would leave them free to 
1 rease their existing force. This clearly 
i lot acceptable to us or our allies. 
; The crucial issue now is whether the 
4 viet Union is prepared to accept equal 
iistraints on SRINF missiles in the 
litext of an initial INF agreement or 
liether it will insist on maintaining 
• periority over us in this important 
S3a and, with this superiority, the abil- 
I to undercut any INF agreement, 
lice the United States obviously cannot 
yrmit such an outcome, we will con- 
liue to insist that equal constraints on 
|orter range INF missiles must be an 
I .egral element of an initial INF treaty. 
I I remain fully committed to achiev- 
•]? an equitable and verifiable INF 
iductions agreement. For this reason, I 
blcomed Mr. Gorbachev's recent state- 



lay 1987 



ment on INF, which removed an obstacle 
to progress that the Soviets had imposed 
at Reykjavik. The United States then 
put forth a comprehensive, realistic draft 
treaty for Soviet consideration. Now is 
the time, therefore, for the Soviet Union 
to live up to its previous commitments 
on INF and to come to terms on an 
equitable agreement. 

Finally, let me say a word about the 
strength and unity of our alliances. It 
was, above all, NATO's cohesion in car- 
rying out its 1979 "two-track" decision 
on INF that helped to bring the Soviets 
back to the negotiating table and per- 
suaded them to negotiate seriously. Our 
own commitment to the security of our 
friends and allies in both Europe and 
Asia, all of whom have been threatened 
by Soviet INF missile deployments, 



remains as strong as ever. We will con- 
tinue to work closely with them as we 
seek Soviet agreement to equitable and 
verifiable INF reductions. 

The United States and the Soviet 
Union have agreed to begin round eight 
of the NST negotiations on April 23. 
Thus, the INF negotiating group, along 
with the strategic arms and defense and 
space negotiating groups, will resume 
their work on that date. The United 
States and the Soviet Union have agreed 
at the same time, however, that this date 
could be adjusted when Secretary Shultz 
and Soviet Foreign Minister Shevard- 
nadze meet in Moscow on April 13-15 to 
discuss these and other issues on the 
broad U.S. -Soviet agenda. 



■Text from Weekly Compilation of 
Presidential Documents of Mar. 30, 1987. 



Arms Control and Openness 



by Kenneth L. Adelman 

Address before the Conference on 
Disarmament (CD) in Geneva on 
February 5, 1987. Mr. Adelman is Direc- 
tor of the U.S. Arms Control and Disar- 
mament Agency. 

Two years ago, when I first addressed 
the Conference on Disarmament, Donald 
Lowitz [U.S. Representative to the CD] 
sat by my side here; he was serving as 
your president that month. Since then, 
you have had the good fortune to know 
Don as I've known him for my adult life: 
a warm and wonderful person, who 
served his country whenever called 
upon— and who believed in this con- 
ference and its goals and who believed in 
all of you. You saw this side of Don. I 
had seen him as a marvelous husband to 
Shana— herself such a perfect embodi- 
ment of what's fresh and caring about 
America— as a fabulous father to Amy, 
Teddy, and Josh and a loving grand- 
father to David. How they will all miss 
him. How we will all miss him. 

I understand that you have already 
heard President Reagan's tribute to 
Don. Let us, as the President said, pur- 
sue the goals Don pursued and, by so 
doing, give living monument to his work 
here. I would like now to convey to you 
the President's greetings at the opening 
of this session. 

As the Conference on Disarmament 
resumes its work in 1987, I would like to 
extend my wishes for a productive session. 
Although the opening of the conference has 
been shadowed by the sad and untimely loss 
of our Ambassador, Donald Lowitz, I am 



certain we can join together in making 
progress in this forum as a fitting testimonial 
to his memory. 

Your work constitutes an important and 
integral part of efforts undertaken by the 
international community to make our world 
more peaceful. The issues with which you deal 
are complementary to those being addressed 
bilaterally between the United States and the 
Soviet Union. The promise of Reykjavik, 
which has given us the vision of a world with 
significantly reduced levels of nuclear 
weapons, has become an indicator of what is 
possible. It inevitably draws attention to the 
issues on your agenda and should encourage 
you in your efforts to increase international 
stability and cooperation. 

One of the most important tasks facing 
you is the working out of a comprehensive, 
effectively verifiable ban on chemical 
weapons. This task is made even more dif- 
ficult by the fact that capabilities for chemical 
warfare are increasing and that, contrary to 
international agreement, chemical weapons 
are being used in various parts of the world. 
You have a heavy responsibility. For as you 
consider the provisions of a treaty, you must 
make sure that a global ban will, in fact, 
eliminate the capability for chemical weapons 
to be used against future generations. An 
effective convention will require an unprece- 
dented degree of openness on the part of all 
states. 

I reaffirm the commitment made by the 
United States in 1984 when we tabled our 
draft treaty banning chemical weapons 
worldwide. The United States delegation will 
make every effort to work for the total 
elimination of these terrible weapons and for 
the verification provisions necessary to 
ensure that they never again enter the 
arsenals of the world's armies. 



19 



ARMS CONTROL 



Your efforts in this and in other fields are 
to be commended. We are committed to 
working with you in the vital task of bringing 
stability to a still insecure world and in 
achieving responsible solutions to the problem 
of reducing the world's arms. 

Shift in the 

Arms Control Agenda 

In the 2 years since I last spoke to this 
forum, the world has witnessed some 
dramatic developments in arms control. 
I would single out especially the 
remarkable meeting between President 
Reagan and General Secretary Gorba- 
chev in Reykjavik last October. From the 
U.S. perspective, Reykjavik marked a 
historic turning point in our arms control 
dialogue with the Soviet Union. Why? 
Because for the first time, we engaged 
the Soviet Union in serious 
negotiations— not just public initiatives 
but serious, hands-on negotiations— on 
the subject of deep reductions in offen- 
sive nuclear arms. 

This is a goal that President Reagan 
has been striving for since he first pro- 
posed the "zero-zero" option for 
intermediate-range nuclear forces (INF) 
and deep strategic arms reductions in 
1981 and 1982. At that time, you may 
remember, there were many people in 
our own country and elsewhere who 
argued that such ambitious arms reduc- 
tion proposals had no real place in the 
arms control dialogue. Many claimed 
that these deep-cuts proposals were too 
far-reaching and could never be the basis 
for productive negotiations with the 
Soviet Union. And when the Soviet 
Union walked out of the arms talks at 
the end of 1983— totally unjustifiably, I 
might add— many of these same critics 
reiterated their arguments, believing 
that events had vindicated their views. 

But President Reagan persisted. 
And his persistence has paid off in a real 
shift in the arms control agenda. Now, 
at last, the two sides are talking in 
nuclear arms control about agreements 
that, if signed— and if complied with 
fully— would effect real and deep reduc- 
tions in offensive nuclear arsenals, par- 
ticularly in the most destabilizing 
systems. No more are we looking at 
arrangements like the SALT [strategic 
arms limitation talks] accords of the 
1970s, which permitted vast growth in 
the arsenals of both sides— a fourfold 
increase in the number of Soviet 
strategic nuclear weapons, (i.e., strategic 
ballistic missile warheads and bomber 
weapons)— since SALT I was signed in 
1972. Thanks to President Reagan's per- 
sistence, the agenda in nuclear arms con- 
trol is now, irreversibly, deep offensive 
weapons cuts. 



The Need for Openness 

There is another development to which I 
would call your attention— a develop- 
ment that has occurred outside the field 
of arms control proper but which, if it 
were to come to pass, could have poten- 
tially broad ramifications for arms con- 
trol and even for the deliberations of this 
forum. That is the increasing discussion 
of "openness," of glasnost, in the Soviet 
Union. Indeed, First Deputy Foreign 
Minister Vorontsov addressed it here 2 
days ago. It is not clear yet where this 
focus on openness might lead. It is not 
clear yet what glasnost is to mean or if 
openness in the Soviet context will be 
genuine openness by the standards of 
truly open societies. Experience warns 
us to temper hope with skepticism. 

But we can speak conditionally. We 
can express hope. We can say that if this 
glasnost, this development, were ever to 
come to real fruition, we could very well 
find ourselves standing on the threshold 
of a new era for the cause of arms con- 
trol and disarmament. For openness and 
arms control go together, on two levels. 

First, there is a clear connection 
between openness and international 
trust, between peace and the open 
society. Andrey Sakharov, that great 
world hero and a Soviet hero, has spoken 
of "the indissoluble bond between inter- 
national security and trust on the one 
hand and respect for human rights and 
an open society on the other." Societies 
that respect the rights of their citizens, 
that respect freedom of speech, freedom 
of religion, freedom of the press, 
freedom to travel and to emigrate, 
freedom of assembly— that defend the 
rights of individuals to criticize their 
leaders and to vote them in and out of 
office— such societies also keep their 
international treaty commitments. Such 
societies can be expected to behave in a 
fashion that promotes world peace. Such 
societies do not crave new territory. 
Such societies do not menace their 
neighbors. Conversely, as President 
Reagan said not long ago, "... a govern- 
ment that will break faith with its own 
people cannot be trusted to keep faith 
with foreign powers." 

Second, there is a direct, practical 
link between openness and progress in 
arms control. That link lies in the prob- 
lem of verification. Verification has 
always defined the outer frontier of 
what we can achieve in arms control. We 
can control effectively only what we can 
effectively verify. But verification is 
often directly limited, in turn, by the 
degree of openness permitted by the 
states that subscribe to an arms control 
agreement. 



II 



1 



In open societies like the United 
States, relevant information on defense 
programs is readily available. That is 
why, when dealing with open, 
democratic societies, one would not ha\ 
to rely exclusively on so-called national 
technical means of verification or 
elaborate verification mechanisms to 
verify arms agreements. I have often 
said that the Soviet Union could tell if 
we ever were engaged in violating arm, 
agreements simply by subscribing to 
half-a-dozen publications— The New Yor 
Times, The Washington Post, Aviation 
Week, and a handful of others. 

That is one reason why the United 
States has called for greater openness i 
all nations. Since 1982, the United 
States has consistently pressed for 
resolutions on disarmament and open- 
ness in the UN General Assembly. In 
1982, our resolution on disarmament ai 
openness was adopted by the General 
Assembly. It explicitly stated the con- 
nection between advancing disarmamei 
on the one hand, and openness, free 
discussion, and free dissemination of 
information in all nations, on the other. 
It encouraged all nations to advance th 
cause of openness as a way of advancin 
the cause of disarmament and arms 
control. 

And that is my message to you to- 
day: the path to more ambitious arms 
control, in all areas, lies through the 
gate of greater openness. To quote Dr. 
Sakharov, the issue here "is not simply 
moral one, but also a paramount, prac- 
tical ingredient of international trust ai 
security." 

The world is still very far from 
achieving this kind of openness, which 
one reason why arms control remains a 
very difficult, very painstaking busines. 
Take an issue as rudimentary as pub- 
lished figures on defense spending. In 
1985, according to our best estimates, 
the United States and the Soviet Union 
each devoted the equivalent of approx- 
imately $250 billion to defenses. Figure 
on U.S. defense spending are, of course 
widely available in open sources. They 
are broken down by category. They are 
extensively discussed and scrutinized in 
the U.S. Congress and elsewhere. 
Figures for Soviet defense spending, or 
the other hand, must be derived from 
careful analysis. Why? Because pub- 
lished Soviet figures bear no relation to 
the reality of the Soviet defense effort. 

The Soviet Union claims to have 
spent 20.3 billion rubles on defense in 
1985. Assuming the official exchange 
rate of approximately $1.50 per ruble, 
that comes to about $35 billion. Now, 
that is a ridiculously small sum for the 



20 



Department of State Bullet 



ARMS CONTROL 



clared defense budget of a state 
jarded as a military superpower. It 
ars no relation to the $250-billion 
ure I mentioned a moment ago, which 
■gests what it would cost the United 
ates to mount an effort equivalent to 
present Soviet defense effort. There 
no way in the world that the Soviet 
lion could be mounting its current 
fense effort on its declared budget of 
.3 billion rubles. It is spending many 
les that. 

Or again, take the public statements 
the two sides on the issue of strategic 
fenses. The U.S. Strategic Defense 
tiative (SDI) is an openly declared 
Dgram. Its budget is published and 
ted on by the U.S. Congress. Its 
ivities are reported to the Congress, 
iere it is widely discussed and debated, 
e President of the United States often 
cusses this program in his speeches. 
Yet to this day, even as we negotiate 
defense and space issues with the 
viet Union, the Soviet Union con- 
ues to deny that it has the equivalent 
an SDI program. We know this denial 
be false. We know that it began 
estigating several advanced strategic 
'ense technologies before we did. We 
3W it is extensively engaged in 
e )loration and development of these 
I hnologies. We know, for example, 
t .t the Soviet Union has an extensive 
1; er research program involving about 
3 000 scientists and expenditure of 
■ ources worth approximately $1 billion 
a ear. And it is researching a host of 
flier technologies as well, 
i Can it surprise anyone that our prog- 
I ;s in arms control is often slow and 
A ting when there is a lack of openness 
a i honesty between governments about 
* ;n such elementary facts as this? 

< mprehensive Ban 
c Chemical Weapons 

■{ ere is, in short, almost no area of 
I ns control in which greater openness 
\ 'iild not open the way to greater prog- 
jhs. In some of these areas, lack of 
cenness is among the most crucial bar- 
t rs to meaningful agreement. Thus, 
i less the Soviet Union moves to the 
(enness it now talks about, accomplish- 
Ihnts are limited, if not thwarted 
• ogether. That movement is necessary 
i- progress on an issue before this con- 
K'ence now. 

[ Of the tasks before you, my govern- 
unt considers the negotiations on 
i hieving a comprehensive and effec- 
ij'ely verifiable global ban on chemical 
:apons to have the highest priority, 
ternational negotiators have been 



striving to remove the chemical weapons 
threat since the late 19th century. Here 
it is 1987. Nearly a century has passed 
since the Hague conference prohibited 
use of chemical projectiles in 1899. Yet 
the problem of chemical weapons 
remains. Indeed, as the world edges 
toward the 21st century, the chemical 
weapons danger continues to grow. 
Shockingly, we have witnessed use of 
chemical weapons by some nations in 
this decade and even during the past 
year. 

It is high time that chemical 
weapons use be rendered a thing of the 
past. It is high time that these barbaric 
weapons were banished from the face of 
the Earth. But it is obvious that if these 
weapons are to be banned, a thorough 
and effective mechanism of verification 
is necessary. My country will not accept, 
and no free nation should accept, a ban 
without sound machinery of verification. 

A chemical weapons ban without 
confidence of compliance will be no more 
effective than the Hague conference's 
1899 prohibition on use of artillery con- 
taining poison gas, which did nothing to 
prevent extensive use of chemical 
weapons in the First World War. It will 
be no better than so many of the 
misguided disarmament measures of the 
1920s and 1930s, which, in Walter 
Lippman's famous formulation, were 



"tragically successful in disarming the 
nations that believed in disarmament" 
while permitting aggressor nations to 
maintain and expand their arsenals. 
Until an effectively verifiable chemical 
weapons ban is in place, the American 
people will insist, rightly, that the 
United States maintain adequate 
chemical forces to deter use of these 
heinous weapons by an aggressor. 

While the establishment of pro- 
cedures for the effective verification of 
arms control agreements is often 
extremely demanding, both techno- 
logically and politically, in the case of 
chemical weapons the challenges are 
especially great. 

The toxic chemicals which are or 
could be used as agents of warfare are, 
in general, not very different from a 
variety of substances having legitimate 
civilian use. Similarly, the chemical proc- 
ess equipment used in their production 
can be found in the legitimate manufac- 
ture of pesticides or corrosives. Chemical 
agents can be stored in bulk, facilitating 
transportation as well as concealment. 
Chemical munitions have no particular 
characteristics which distinguish them 
from other types of munitions. They, 
too, are small and easily transported and 
concealed. 

Thus, as I mentioned before, the 
issue of openness goes to the heart of 



Soviet Nuclear Test Vents 
Radioactive Debris 



The first announced Soviet test in their 
resumed nuclear explosion test program 
occurred on 26 February 1987 (GMT). 
This test was accomplished by a release 
of radioactive nuclear material that was 
detected outside Soviet territory. 

The 1963 Limited Test Ban Treaty 
(LTBT) prohibits nuclear explosions that 
cause "radioactive debris to be present 
outside the territorial limits of the State 
under whose jurisdiction or control" the 
explosions were conducted. 

Since the LTBT came into force over 
20 years ago, the Soviet Union's 
underground nuclear test practices have 
resulted in the venting of radioactive 
matter on numerous occasions and have 
caused radioactive matter to be present 
outside the Soviet Union's territorial 
limits in violation of its legal obligations 
under the Threshold Test Ban Treaty 
(TTBT). The debris from these Soviet 



tests does not pose calculable health, 
safety, or environmental risks, and these 
infractions have no apparent military 
significance. However, our repeated 
attempts to discuss these occurrences 
with Soviet authorities have been con- 
tinually rebuffed. 

The U.S. Government views with 
concern the recent Soviet venting of 
nuclear material and has called on the 
Soviets to bring its testing practices into 
full conformity with the LTBT. 

As the United States proceeds with 
its efforts to strengthen the existing 
Threshold Test Ban and Peaceful 
Nuclear Explosion Treaties, particularly 
in the area of verification, we regret the 
Soviet Union's initiation of its new 
testing program with a test that once 
again calls into question their commit- 
ment to their treaty obligations. 



ACDA press release of Mar. 12, 1987. 



jay 1987 



21 



ARMS CONTROLS 



achieving a chemical weapons ban. Arti- 
cle III of the rolling text of the draft 
convention on chemical weapons 
requires each state party to declare 
whether it possesses chemical weapons. 
And yet, today, the United States is the 
only country in this room, or in the 
world, that publicly admits to having 
chemical weapons and has made public 
its stockpile locations. That, to me, is 
astonishing— especially when so many 
countries are pressing the urgency of a 
chemical weapons ban. Some are even 
criticizing the United States for develop- 
ing chemical weapons. 

The production of chemical weapons 
is not illegal. The use of chemical 
weapons is illegal. Since it signed the 
1925 Geneva protocol, the United States 
has never used chemical weapons; others 
have— others who don't even publicly 
admit to possessing chemical weapons; 
others with representatives in this very 
room. The world expects better than 
this. 

The United States openly declares 
its possession and development of 
chemical weapons. The Soviet Union, 
along with other nations, does not. The 
world expects better than this. 

The United States has presented 
publicly an extraordinary amount of 
information concerning its binary 
weapons program. The details are known 
to everyone. The Soviet Union has told 
us nothing about its chemical weapons 
program. The world expects better than 
this. 

The United States invited all 
members of this body to Tooele, Utah, to 
examine procedures for the destruction 
of chemical weapons. The Soviet Union 
has yet to accept the invitation. The 
world expects better than this. 

The United States will devote some 
$500 million under the fiscal year 1987 
defense budget to the elimination of its 
current chemical munitions stocks. The 
Soviet Union, apparently, has no similar 
chemical weapons elimination or 
demilitarization program. The world 
expects better than this. 

The United States maintained a 
unilateral moratorium on the develop- 
ment of chemical weapons for 17 years. 
The Soviet Union has never ceased pro- 
ducing chemical weapons and continues 
today to expand its facilities and 
capabilities. The world expects better 
than this. 

Compliance Concerns 

It is because of this state of affairs, 
because of this glaring lack of openness 
in the realm of chemical weapons, that 



we are more than ever convinced that 
confidence in compliance is essential to 
any chemical weapons ban. We are con- 
vinced that nothing less than an inspec- 
tion regime institutionalizing the right of 
short-notice access, upon demand, to any 
location or facility suspected of produc- 
ing or storing chemical weapons will 
effectively deter noncompliance— the 
challenge-inspection provisions of article 
X of the U.S. draft conventions. 

But every article of the convention 
must be designed to contribute to this 
overall objective of confidence in com- 
pliance. And to be effective, each provi- 
sion must be clearly and unambiguously 
defined, written, and understood. It will 
do little good to have broad agreement 
on the basic provisions if inspection pro- 
cedures are inadequate or imprecise. 

At present, it is a point of consensus 
among all our governments that each 
state party will provide international 
access to its destruction sites, to its pro- 
duction facilities to be eliminated, and to 
its facilities for producing permitted 
chemicals. But working out precise pro- 
cedures for all these tasks was only just 
begun by Ambassador Lowitz and his 
delegation. And the vital question of how 
to ensure confidence in compliance with 
regard to undeclared sites still remains 
at issue. 

But, again and again, wherever we 
turn in this negotiation, it is precisely 
the absence of openness, the absence of 
glasnost, that is standing in the way of 
further progress. In the draft conven- 
tion, I count no less than 13 different 
types of declarations that each state 
party will be expected to make about its 
stockpiles and their destruction, about 
its chemical weapons production 
facilities and their elimination, and about 
its chemical industry. 

Article IV is a key element in this 
series of declarations— calling for the 
declaration of all stockpiles. Everyone 
agrees that each state party should 
declare the amount and composition of 
its stockpile. Everyone agrees with the 
basic objective that the complete 
stockpile should be destroyed. And yet, 
the Soviet Union continues to reject two 
particular "openness" provisions which 
are necessary if we are to have con- 
fidence that this objective is fulfilled. 
One is the early and complete declara- 
tion of the stockpile locations and onsite 
verification to ensure that the declara- 
tion reflects reality. The second is onsite 
monitoring of the stocks until destruc- 
tion to ensure that some weapons are 
not clandestinely diverted to undeclared 
sites before destruction. And it is 
obvious that we face the serious risk that 



a state will not declare all its stockpile 
locations or the entire amount of its 
stockpile. 

The consequences of lack of open- 
ness in this realm are unfortunate and 
are not lost on world public opinion. I 
think the 1983 yearbook of the 
Stockholm International Peace Resear 
Institute identified the problem— and t 
solution— as well as anyone. 

Faced with a high degree of uncertaint; 
about Soviet CW intentions, Western defen 
authorities have no prudent option but to 
assume that they present a threat. If it 
decided to do so, the Soviet government coi 
probably find a way for reducing the ambi 
guities attaching to its CW stance in Weste 
(and non-aligned country) eyes without at tl 
same time jeopardizing Soviet security to tl 
point of net detriment. Yet even though tht 
need for such mistrust-reducing measures i: 
so evidently growing, it seems that Moscow 
has not chosen to act in such a manner, a 
failure which is becoming more and more c< 
spicuous and damaging. 

Clearly, there is a gap between the 
way certain states conduct business 
today and the way they promise they 
will behave under a convention bannin; 
chemical weapons. And it is simply not 
possible for a nation to yield national 
control over its own defense to an inte 
national agreement— as we will be aski 
to do when we have a convention read; 
for signature— on the basis of a mere 
promise of a new and better pattern ol 
behavior by other states. 

The Soviet Union says it is 
interested in real openness. But will it: 
deeds in this forum match its words? V 
hope so. We hope to see signs of real 
glasnost, here in this forum, in the 
coming weeks and months. 

I believe that a turn to real glasnoi 
could transform our discussion and 
sweep away a host of difficulties. I 
believe it could remove the barriers th; 
some have attempted to erect to the 
inspection procedures absolutely essen 
tial to make a chemical weapons ban 
worth the paper it is printed on. Genui 
openness, real glasnost, were it to 
emerge in the Soviet Union and in the 
Soviet Union's dealings with the rest o 
the world— nothing could be more 
welcome to Americans. Nothing would 
do more to make possible progress in t 
relationship between our two govern- 
ments. Nothing would so improve the 
prospects not only for real advances in 
arms control but for the entire cause ol 
world peace. Nothing would be a bettei 
tribute to your dedicated and importan 
work. Nothing would be a better monu 
ment to Donald Lowitz's work and 
life. ■ 



22 



DEPARTMENT 



Underfunding and Undermining 
Our Foreign Policy Infrastructure 



»y Ronald I. Spiers 

Statement before the Subcommittee 
In International Operations of the House 
foreign Affairs Committee on February 
f6, 1987, and excerpts from a statement 
\efore the Subcommittee on Commerce, 
Yustice. State, and Judiciary of the 
House Appropriations Committee on 
larch k, 1987. Ambassador Spiers is 
index Secretary for Management.' 1 



EBRUARY 26, 1987 

am here today to discuss the Presi- 
dent's authorization request for the 
department of State. 

In 1987, the President's budget 
lequest for State Department operations 
''as cut by $1.3 billion; the effect of this 
i ut has been further exacerbated by 
; verseas inflation and exchange-rate 
isses, which have reduced our purchas- 
lg power by another $55-$60 million. 
The Department of State, which is 
. le oldest and clearly one of the most 
nportant departments of the govern- 
lent, is also one of the smallest. The 
ost of the State Department's opera- 
ons at home and abroad amounts to 
nly four-tenths of 1% of the Federal 
udget. The cost of a single Trident sub- 
larine could pay the salaries and 
xpenses for all State Department 
perations, including our more than 250 
osts overseas, for a year, leaving some 
! ver to help us enhance our much- 
eeded security programs. 

As it stands now, these deep cuts in 
ur budget are severely damaging 
•tate's foreign policy infrastructure; 
hey will force us to renege on treaty 
bligations to international organizations 
' nd leave us no choice but to defer into 
he indefinite future security programs 
o protect our people and facilities 
broad from international terrorism. 

Even before the latest fiscal blows, 
re were making plans to reduce our 
: -verseas personnel by about 4%. We are 
liring fewer people this year. Many 
acancies simply will not be filled. We 
Lre also facing as much as a 7% cut, 
hrough attrition, in personnel 
'lomestically. 

To date, we have hauled down the 
lag at seven of our consulates overseas. 
We are now in the process of closing 
;even more posts. Our overseas posts 
iire the capillaries of our diplomatic 
iiystem; they enhance our ability to 



gather information, to expand our con- 
tacts and influence, and to provide serv- 
ice to American businesses and our 
citizens abroad. 

In addition, this year we will not be 
able to fund fully our language programs 
at posts overseas— and this at a time 
when it is important to improve our 
officers' language capabilities. This year, 
we've had to postpone urgent security 
construction projects in Ankara, Berlin, 
Rabat, and Brussels. We've had to cut 
our plans for high-speed telecommunica- 
tions circuits by half and cancel 85% of 
our planned replacements of emergency 
radio systems worldwide. 

We have requested a fiscal year (FY) 
1987 supplemental of $119 million to 
help us carry out our most critical pro- 
grams over the next year until FY 1988. 
These funds, if approved, would help us 
ensure that the basic foreign policy 
infrastructure is maintained in the State 
Department. 

We are all concerned that funding at 
the levels currently in prospect will 
translate into a serious weakening of the 
Department of State, our nation's insti- 
tutional arm for conduct of foreign 
policy. Unfortunately, rather than deter- 
mining foreign policy goals and objec- 
tives that are best for the people of the 
United States and providing the financ- 
ing necessary to achieve these goals, we 
are letting resources constrict our 
foreign policy. 

If we are to continue our role as a 
world power, we must be prepared to 
fund a foreign affairs policy and pro- 
gram budget of the size and dimension 
to support it. 

For FY 1988, the Department is 
requesting authorizations for appro- 
priations totaling $3,609,768,000. This 
represents an increase of $541,831,000 
above our FY 1987 funding level, assum- 
ing, as we must, approval of supplemen- 
tal appropriations. In this bill, as submit- 
ted by the Administration, we are 
requesting current authorization of 
$3,104,099,000. In addition, we plan to 
utilize permanent authorization totaling 
$85,958,000 for payment to the Foreign 
Service Retirement Fund; $416,911,000 
of the $417,962,000 authorized by the 
Omnibus Diplomatic Security and Anti- 
Terrorism Act of 1986; $1 million for 
the Fishermen's Protective Fund and 
$1.8 million for the Fishermen's 
Guarantee Fund authorized by the 
Fishermen's Activities Authorization 
Act of 1986. 



For FY 1989, we are requesting 
authorizations for "such sums as may be 
necessary." 

We are keenly aware of the part we 
must play in the President's and Con- 
gress' efforts to reduce the Federal 
budget deficit. We are presenting an 
austere budget that continues our ini- 
tiatives in the security and substantive 
reporting areas but absorbs reductions 
in crucial administrative support areas. 

Fiscal Year 1988 Authorization 

The 1988 budget request covers four 
categories of appropriations as follows: 

First, we request $2,737,141,000 for 
the administration of foreign affairs— to 
cover the Department's basic diplomatic 
and consular functions, salaries, operat- 
ing expenses, allowances, overseas 
building construction and maintenance, 
and diplomatic security. 

Our request is a $520.4-million net 
increase from the FY 1987 level and has 
the following components: 

• $250 million for salaries and 
expenses, $51.8 million of which is for 
the implementation of the new Federal 
Employees Retirement System; $62.7 
million for wage and price inflation; and 
$104.7 million for the diplomatic security 
program; 

• $310 million for buildings pro- 
gram, of which $211 million is for the 
diplomatic security program; and 

• Savings of $41.4 million, reflecting 
a reduction in the Foreign Service 
Retirement and Disability Fund. 

Second, in the category of inter- 
national organizations and conferences, 
the Department requests $506 million to 
cover assessed contributions to inter- 
national organizations of which the 
United States is a member, contributions 
for UN peacekeeping activities, and 
American participation in multilateral 
international conferences. 

Third, under the heading of inter- 
national commissions, $32,706,000 is 
requested to meet our treaty com- 
mitments under boundary agreements 
with Canada and Mexico— and to cover 
our share of expenses as a member of 11 
international fisheries commissions. 

Finally, in the "Other Appropria- 
tions" category, we are requesting 
$333,921,000. The largest part of this 
category will provide assistance to 
migrants and refugees through contribu- 
tions to a variety of international 
organizations and voluntary organiza- 
tions including the Intergovernmental 
Committee for Migration, the UN High 
Commissioner for Refugees, and the UN 
Relief and Works Agency. Also included 



/lay 1987 



23 



DEPARTMENT 



in this category are resources for 
bilateral science and technology 
agreements with Yugoslavia, the Asia 
Foundation, and the Soviet-East Euro- 
pean Research Training Fund. 

Technical Provisions in 

FY 1988-89 Authorization Bill 

In addition to our request for authoriza- 
tion of appropriations, our draft bill this 
year contains several additional sections, 
largely of a technical nature. Among the 
more important are proposals to: 

• Provide a statutory pay basis for 
the Directors of International Telecom- 
munications Policy and the Office of 
Foreign Missions, reflecting their status 
as presidential appointees, and adjust 
pay levels for ambassadors at large; 

• Modify the authority provided by 
the Foreign Service Act for use of 
limited appointments for specific pur- 
poses such as consular agents; 

• Provide certain benefits, com- 
parable to those provided to CIA [Cen- 
tral Intelligence Agency] former spouses 
last year, for former spouses of members 
of the Foreign Service not now eligible 
for them because their divorces occurred 
prior to February 1981; and 

• Provide certain insurance author- 
ity for the Diplomatic Reception Rooms 
and for liability coverage related to 
official activities abroad. 

The subcommittee has been provided 
with the full text and explanation of 
these and the remainder of the amend- 
ments. With your permission, I ask that 
a short summary of them, which we have 
prepared, be inserted in the record. 

Effects of Proposed Cuts 

We have suffered severe cuts in funding 
to support the foreign affairs infra- 
structure. These cuts have been com- 
pounded by the effects of fluctuations in 
exchange rates, differing rates of infla- 
tion between the United States and the 
countries in which we maintain missions, 
and continuing need for expenditures to 
enhance the security of our posts and 
personnel abroad. These factors in com- 
bination have led to a weakening of our 
foreign affairs infrastructure. The toll is 
great since discretionary spending is 
only a small portion of the total foreign 
operations budget. But when we were 
forced to make cuts, they had to be 
made in "discretionary" areas. These 
turn out to be areas where cuts under- 
mine the ability of the foreign affairs 
establishment to function as it was 
intended; for example, in travel for con- 
sultation and investigation and in 
language training. This has resulted in 



closed posts, elimination of positions, 
reduction of intake into the Foreign 
Service, and deferral of needed 
maintenance projects. The damage will 
be even worse in years to come. 

What does this mean in the real 
world? It means that the political officer 
seeking to understand developments in a 
major European country can no longer 
attend a political party convention, 
thereby reducing his contacts with prac- 
ticing politicians. Those contacts are the 
bread and butter of his job. Not only 
does he glean from them information 
about political developments, he also 
uses them as an opportunity to seek sup- 
port for U.S. policies. Such contacts are 
also, by their very nature, a demonstra- 
tion of the U.S. commitment to work 
cooperatively with other countries. The 
cuts also mean that the young officer, 
who should be continuously enhancing 
his knowledge of foreign languages and 
cultures, will not be given the oppor- 
tunity to achieve language fluency and, 
thus, a greater degree of understanding 
of the nation in which he finds himself. 
It means that developments which initi- 
ally could seem minor, but which may 
grow to be of major importance to the 
United States, are more likely to be 
missed. 

Similarly, there is the economic or 
commercial officer who, because of 
travel restraints, is not able to carry out 
our program of export promotion. How 
many trade opportunities will be missed? 
How many chances to establish agency 
or licensing relationships for American 
firms? What opportunities to bid on 
major government projects go 
unreported? What are the costs of these 
missed opportunities in terms of reduc- 
tion of our trade deficit and jobs in the 
export sector of manufacturing and 
agriculture? 

And what of U.S. citizens abroad 
who depend on the foreign affairs infra- 
structure as their lifeline to America? 
What happens to the American in prison 
when his only tie to home— a visit by a 
U.S. consular officer— is no longer pos- 
sible because there are no funds? What 
happens when, because of cuts, the staff 
of a consular section must delay process- 
ing a passport or registering a birth 
abroad? What happens to American 
tourism and the dollars it provides for 
our economy if visas can no longer be 
issued expeditiously? What happens 
when checks of visa applicants are not as 
thorough as they should be in today's 
troubled world? 

These are illustrative of the prob- 
lems we face if we permit our dedicated, 
career foreign affairs infrastructure to 
atrophy. Obviously, the men and women 
of the foreign affairs agencies will do the 
best job possible, whatever the resource 



constraints, but it will not be the job w< 
have come to expect. We have put for- I 
ward a budget which is exceptionally 
lean. Even with full funding, given inte 
national economic realities, further 
reductions of posts and personnel abroj | 
may be inevitable. Reductions in that 
proposed funding by the Congress can ! 
only make conditions worse. 

At stake is our ability as a nation tc I 
understand and influence the world we 
live in. It is in no one's interest to make 1 
the State Department primarily a sup- 
port mechanism for other Federal agen 
cies, thereby weakening the agency 
which coordinates and takes into accoui i 
all U.S. Government activities abroad 
and all interests of the United States. 
We cannot cut away personnel and posi ; 
tions and reduce training and the tools 
necessary to perform diplomatic func- 
tions and still retain the corps of 
qualified and experienced people needei 
to carry out the diplomacy of the Unitei 
States. We risk having other nations 
interpret our cutbacks as a sign of the 
withdrawal of the United States from a 
active, global role. 



Security and 
Construction Programs 

Let me turn to some specifics. My 
purpose here is to move from the broad 
level to more focused ones by inviting 
your attention to some of our most 
prominent— and controversial— 
programs. While we fully understand tl 
dilemma the Congress faces under cur- 
rent budgeting limitations, I think it is 
my responsibility to try to drive home 
some realities of our efforts abroad, 
which are currently in serious jeopardy. 

Diplomatic Security. Let me begin 
with a brief discussion on the issue of tr 
security of our installations and person- 
nel abroad, since this will be covered 
more comprehensively in a later session 

Last summer, the Congress passed 
and the President signed the Omnibus 
Diplomatic Security and Anti-Terrorism 
Act of 1986. This landmark legislation, 
which resulted from careful crafting by 
the Congress, gave us a major start on 
the authority and resources necessary tc 
implement the recommendations of the 
Advisory Panel on Overseas Security 
chaired by Adm. Bobby Inman. 

This legislation authorized $2.4 
billion to launch a worldwide diplomatic 
security effort. Consequently, we have 
begun a multiyear program to replace 
and upgrade facilities at our most 
vulnerable posts overseas. The Inman 
panel found that buildings at 134 of our 
263 posts were substantially below 
minimum security standards. This led to 
our joint commitment to begin the most 
extensive construction program in the 



24 



DEPARTMENT 



"" 



Department's history. To complement 
.hat, we also have upgraded security at 
■nany of our most threatened posts. We 
iave installed specially designed walls 
tad gates at 74 posts where they were 
^specially necessary and have made 
Inajor security improvements at 107 
!>ther posts. And we have initiated steps 
'o strengthen our ability to defend 
gainst the increasingly sophisticated 
fforts of hostile intelligence agencies. 

While the embassies themselves con- 
inue to be the principal targets of the 
errorist, we are also highly concerned 
«th the safety of Americans abroad out- 
ide the workplace. We are attacking 
his problem in two ways. 

First, since the personal security of 
ur employees and their families 
epends, in large measure, on defensive 
kills, we are expanding our security 

• wareness training for employees and 
neir dependents. During the past year, 
!ur security experts also have visited 30 

ritical and high-threat posts to instruct 
•■ mericans and foreign national 

mployees in protective tactics such as 

ersonal defense, hostage survival, and 

sfensive driving. 

Second, we are implementing a 
> 'sidential security program which 

eludes installation of mechanical 
. icurity systems; augmentation of guard 

rces and enhancement of their mobil- 
i y; and improved communications 

inabilities. 

We are also improving exchanges of 
telligence with our allies and com- 
unication among U.S. agencies. The 
?w interagency threat-alert system has 
iproved our ability to give our 
nbassies— and American communities 
/erseas— early warning of impending 
iti-American terrorist action and 
lalyses of terrorist threats and trends. 
American business overseas has also 
^cognized the need for action as the 

:- ireat of terrorism abroad has increased. 

Ii 1985, we established the Overseas 

. ecurity Advisory Council, comprised of 

" ?presentatives of other interested U.S. 

t jencies and American business organi- 
itions, to provide an institutional link 

■ stween the government and the private 
;ctor on security matters. Under its 

! 2gis, more than 120 corporate security 
irectors and representatives of public 
iterest groups, as well as 138 sub- 
diaries of U.S. firms, participated in a 

iorvey of the security needs of the 

• .merican private sector overseas. 

With the programs to provide for the 
nost urgent security needs of our people 
jbroad initially funded and underway, 
ij'e are now shifting the focus of our 
fforts toward programs which will 
nhance our technical security posture. 



When added to ongoing require- 
ments of $157.3 million and 536 posi- 
tions, these program increases result in 
a total FY 1988 diplomatic security 
budget request of $231.7 million and 794 
positions. This is much to ask in a year 
of severe budgeting constraints, but I 
believe both the Congress and the 
Executive want to provide the resources 
to take these needed steps. 

Foreign Buildings. In an area 
which is closely related, let me now turn 
to our construction program. 

As we all know, there has been 
criticism of the past performance of the 
Office of Foreign Buildings (FBO). Some 
was absolutely justified. However, in the 
past 3 years, we have done much to 
improve FBO's management and 
procedures. 

Indeed, such examples of misman- 
agement as the ambassador's residence 
in Cairo and several other projects of the 
late 1970s and early 1980s provide 
neither a fair nor an accurate assess- 
ment of FBO's current capabilities and 
performance. In recent years, FBO 
successfully completed six major con- 
struction projects and, in particular, in 
the last 18 months, there have been 
major improvements in FBO's leader- 
ship, management systems, and in the 
quality of its personnel. FBO has moved 
successfully from managing an average 
of four or five large projects a year to 
managing a current program of 61 major 
projects and several hundred small ones. 

FBO has also contracted with Sver- 
drup Corporation for program manage- 
ment services. This is a contract which 
has been very satisfactory and which will 
bring private sector expertise to all 
aspects of FBO's operations, both in 
terms of ongoing projects and in terms 
of transferring contemporary program 
management techniques to FBO. FBO is 
undergoing a reorganization to provide a 
structure which is capable of rapidly 
integrating these new management proc- 
esses and systems brought to the 
organization by Sverdrup and has, most 
importantly, established a system of 
management responsibility and account- 
ability for each project. 

We will continue to work closely 
with Congress in furthering our joint 
efforts in this area, but my concern is 
that FBO needs a period for consolida- 
tion of efforts already underway— with 
reality being closely monitored by us and 
in the Congress— before continuing on 
another round of organizational and pro- 
cedural changes. 

Next, let me take up several of our 
other programs which are of major 
importance and which require your at- 
tention as our authorizing committee. 



Contributions to 
International Organizations 

Armed with the clear requirements of 
congressional action, we succeeded last 
December in having the United Nations 
take what the President has described as 
"an historic step to adopt sweeping 
reforms of its organization and methods 
of operation .... designed to strengthen 
the organization's effectiveness and effi- 
ciency in carrying out its important 
political, economic, and social objec- 
tives." To follow through on these 
important reforms and to extend them 
to the specialized agencies, we need the 
continued active support of the 
Congress. 

The UN General Assembly estab- 
lished a consensus-based procedure for 
decisions on the overall size and program 
priorities of the UN budget. The United 
States and other major contributors now 
have the possibility for greatly increased 
influence over the management of UN 
resources. Properly used, this will have a 
significant and positive impact on the 
overall UN political process. 

Followthrough on the reforms 
achieved in New York requires modifica- 
tion of the Kassebaum/Solomon amend- 
ment (Section 143 of P.L. 99-93) to take 
account of these reforms and a cor- 
responding budget amendment. The suc- 
cess in the UN reform negotiations came 
too late to be reflected in the President's 
budget. The Administration is currently 
considering options to follow through on 
this issue. 

The significant accomplishment in 
New York represents the culmination of 
6 years of serious effort by the executive 
branch, working in concert with the Con- 
gress. Continuation of this combined 
effort is necessary at this critical stage 
in order to take advantage of the 
possibility we now have for effectively 
reasserting important U.S. interests 
through our strengthened participation 
in the United Nations and other inter- 
national organizations. 

Our membership and active partici- 
pation in international organizations 
benefits us in many ways. They provide 
permanent forums in which we seek sup- 
port for our policies, our interests, and 
our values, as well as to pursue multi- 
lateral programs which advance those 
interests. They provide a means of 
settling disputes peacefully, furthering 
human rights, and promoting coopera- 
tion in development assistance, 
agriculture, technology, health, and 
transportation. They also provide a 
means of access to legal decisionmaking 
and arbitration through courts and 
administrative bodies operating at inter- 
national levels. 



lay 1987 



25 



DEPARTMENT 



Consular Operations 

Perhaps the most visible casualty to the 
necessary budget reductions is the 
quality of our consular operations both 
at home and abroad. Without adequate 
resources to hire temporary help, the 
department will not be able to issue 
passports or nonimmigrant visas as 
rapidly as we now do. Today, we issue 
the majority of our passports either the 
same day or within a 10-day period if the 
application is mailed in. At most of our 
posts, we issue nonimmigrant visas 
either the same day for walk-ins or 
within 3 days for mail-in applications. 
Because there are peak seasons in both 
categories, over the years the Depart- 
ment has made a conscious management 
decision to hire only that permanent 
staff needed to process normal demand. 
To do otherwise would not be a judicious 
use of our limited resources. To meet the 
peak season demands, we have relied 
solely on temporary personnel to carry 
us through without creating enormous 
backlogs. We recognize, as do you, the 
complaints you receive when citizens or 
aliens have to wait for our services. 

The time has come when we may 
have to live with the frustration of our 
citizens and the disappointment of those 
aliens who want to visit our country for 
business or vacation purposes. We will 
do what we can to explain the reasons 
for the delays. More troubling, however, 
is the foreign exchange income the 
United States would lose in tourism 
revenues because of the delays which 
will inevitably result from a cutback on 
all services. The reduction in services 
comes at a time when the majority of 
our European and Japanese posts are 
being swamped by a record increase in 
the demand for nonimmigrant visas. 

We have no choice but to cut back. 
For example, the Bureau of European 
Affairs' budget has been hard hit, not 
only by reduced budget authorizations 
but by the strengthening of foreign 
currencies against the U.S. dollar. There 
is no money for "summer hires" to carry 
us through the deluge of applications we 
are receiving. Embassy London's nonim- 
migrant workload is up 30% over last 
year, and the consular section has had to 
take some very drastic measures to keep 
up with the demand, including closing 
for 1 day and shortening the hours of the 
visa information counter to half-days 
only. Even so, London is not sure how 
long they can stay current. Embassy 
Bonn estimates that it will have a short- 
fall of 6,248 staff -hours, representing 
34,000 visas. If German citizens follow 
their normal pattern, they take 3-4 
weeks' holiday and probably spend a 
minimum of at least $500. That is $17 



26 



million in lost revenue from the Bonn 
consular district alone. 

Another seriously affected service 
will be our ability to visit American 
prisoners. We simply do not have the 
travel money at a number of posts to be 
able to maintain the same schedule of 
visits where American citizens are incar- 
cerated in prisons which require any 
long-distance traveling. During 1986, 
2,827 Americans were reported arrested 
in 101 countries. Of these Americans, 
1,369 were jailed, the majority of them 
in developing nations. We believe fre- 
quent visits are necessary to assist with 
widely variant judicial systems, sluggish 
bureaucracies, culture shock, and health 
problems. Yet prison visits are costly. 
Embassy Mexico, for example, regularly 
has Americans imprisoned in 10 cities 
outside Mexico City. Each visit entails 
travel funds and approximately 2 days of 
an officer's time. While there may be few 
prisoners in Fiji, the consular district is 
large and officers must travel significant 
distances to prisons on Tahiti and other 
islands. In Canada, Calgary has four 
Americans imprisoned 500 miles from 
the post and has several other prisons 
located outside a 1-day trip. We have to 
begin thinking about cutting down the 
number of personal visits and conducting 
visits by telephone. 

Finally, until we know the fate of 
our supplemental requests, we have to 
worry about how we fund the substantial 
costs associated with implementation of 
the Immigration Reform and Control 
Act of 1986. 



Refugee Programs 

The American people have demonstrated 
a deep and enduring commitment to pro- 
viding assistance to victims of political 
repression. Addressing world refugee 
needs through international assistance 
programs overseas and resettlement of 
refugees to the United States continues 
to be an important U.S. foreign policy 
goal. Besides its humanitarian goals, 
refugee programs also address other 
foreign policy concerns through support 
of developing country governments 
which are shouldering the burden of sup- 
porting needy refugees while trying to 
meet the needs of their own citizens. 

For these key programs, the Depart- 
ment is requesting an authorization of 
$314.5 million for FY 1988, a reduction 
of $32.4 million from the FY 1987 appro- 
priation. At this level of funding, we pro- 
ject that the United States will maintain 
its position as an acknowledged world 
leader in assisting more than 8 million 
refugees worldwide through annual con- 
tributions of more than 25% of multi- 
lateral and bilateral refugee programs. 



We estimate that we will welcome 
approximately 55,000 refugees to a nev 
homeland in the United States. (The 
actual refugee ceilings will be deter- 
mined by the President in consultations 
with the Congress shortly before the 
beginning of the fiscal year.) 



I 



MARCH 4, 1987 

We have requested a FY 1987 sup- 
plemental of $119.5 million to help us 
carry out our most critical programs 
over the next year until FY 1988. Thes< 
funds would help us ensure that the 
basic foreign policy infrastructure is 
maintained in the State Department. 
For salaries and expenses we are 
requesting a total of $83,384,000 in sup 
plemental funds for the following items 

• $30.7 million for 1986 exchange 
rate losses. 

• $16.7 million for overseas wage 
and price inflation. 

• $3.5 million and 55 positions 
needed to establish a new Inspector 
General (IG) function in the Departmen 
This was mandated in August 1986 by 
the 1986-87 Foreign Relations Authori 
zation Act and by the Omnibus Diplo- 
matic Security and Anti-Terrorism Act 
of 1986. In response to congressional 
wishes at that time, we transferred son 
resources for this new IG from the 
former Foreign Service Program Inspe 
tor General's Office. The new IG office 
now moving at a reasonable pace towar 
full organization and is heavily engagec 
in responding to requests for investiga- 
tions and audits. The supplemental re- 
quest covers roughly one-half of the 
amount needed in 1987 to continue 
orderly development of this function. 

• $3.1 million and 39 positions to 
carry out the requirements of the 
Immigration Reform and Control Act o 
1986. The Immigration Reform and Coi 
trol Act of 1986 impacts heavily on 
Department of State consular work- 
loads, primarily in Mexico. The act 
creates new categories of immigration 
documents for special agricultural 
workers (SAWs), establishes a new tem 
porary agricultural worker category 
(H2A), and provides for the issuance of 
additional immigrant visas (NP-5). The 
$3.1 million is requested to fund staffin 
temporary duty, automation, space ren< 
vation, and communication expenses 
which will be incurred in launching this 
program. These funds will support the 
issuance of 200,000 SAWs, 100,000 H2, 
visas, and 10,000 NP-5 visas. 



Department of State Bulletii 



I 



DEPARTMENT 



• $16.7 million for the new Federal 
»mployee retirement system. 

• $6.9 million for partial funding of 
he January pay increase for American 
imployees. 

• $800,000 and 3 positions for the 
Conference on Security and Cooperation 
Jn Europe. 

• $5 million to provide a U.S. 
'national gift to the Australian 
ncentennial. 

We are requesting a one-time sup- 
plemental of $21.6 million for the con- 
i ributions to international peacekeeping 
Activities account. This supplemental will 
Jt-artially offset arrearages in the assess- 

lent fund to the UN Interim Force in 
r .ebanon (UNIFIL). 

UNIFIL remains an important ele- 

lent of stability in south Lebanon and 
(lould play a key role in future security 

rrangements between Lebanon and 
Israel. Support for UNIFIL has been an 
t. nportant and longstanding element of 
Ihe U.S. effort to bring peace to the 
lliddle East. Recent attacks against 
| INIFIL troops by groups who view the 
1 Dree as giving protection to Israel have 
laised serious doubts among the con- 
■i -ibutors about the safety of UNIFIL 
j *oops. These concerns are compounded 
I y the financial burden imposed on the 
I -oop contributors by recent cuts in the 
{ f.S. financial contributions to UNIFIL, 

'hich represent about 30% of the force's 
^ perating budget. These cuts have also 
I rought into question the steadfastness 
I f U.S. support to UNIFIL. Partial 
>| sstoration of these funds, in addition to 
I elieving a financial burden, would be a 

i Dncrete indication that the United 

tates will not halt its efforts to bring 

• eace to the region. 

For the acquisition and maintenance 
. f buildings abroad, $12 million is 

, equested for acquisition of a site and 
I rchitectural and engineering plans for 
I uilding a new embassy complex in San 
Salvador, El Salvador. The compound 

nil include an office building chancery, 
Ij.S. Agency for International Develop- 
ment office building, ambassador's 

esidence, and marine security guard 
i uarters. 

Supplemental funds are necessary 
j or new facilities because the main 
; hancery office building, located on the 
■ ;overnment-owned compound in down- 
ijown San Salvador, suffered extensive 
litructural damage in the October 1986 
jjarthquake. 

A one-time request for $2 million is 

[.ought to support activities generated 

linder the 1986 U.S-Brazil science and 
; jechnology agreement. The funds would 



be allocated to the various U.S. technical 
agencies. They would be used to initiate, 
on a matching-contributions basis, an 
intensive program of science and tech- 
nology based firmly on jointly managed 
projects of original investigation. 

For American sections of inter- 
national joint commissions, we are 
requesting a supplemental increase of 
$600,000. This supplemental will enable 
the international joint commission to 
fund a study of rising water levels of the 
Great Lakes. 

During the past 2 years, water levels 
in the Great Lakes have exceeded their 
record maximum elevations, causing 
hundreds of millions of dollars of 
damage to shoreline interests in both the 
United States and Canada. This trend is 
expected to continue into the foreseeable 
future and, in the absence of remedial 
measures, there exists the danger of 
disaster. In response to this situation, 
the Governments of the United States 
and Canada have requested the commis- 
sion to examine measures that might be 
taken to alleviate the advance effects of 
fluctuating water levels. This request 
calls for an interim report within 1 year 
and a final report no later than May 1, 
1989. 

Finally, we are requesting restora- 
tion, in FY 1987, of $130 million in 
outlay authority for the contributions to 
international organizations appropria- 
tion, which was reduced by the continu- 
ing resolution. The $225 million available 
for expenditure in FY 1987 amounts to 
an availability of less than 60% of funds 
requested to meet our assessed contribu- 
tions. Restoration of this outlay author- 
ity will enable the United States to meet 
its assessed commitments in a timely 
fashion and ensure that our voting rights 
within the various international 
organizations are maintained. Deferral 
of these outlays until 1988 would present 
many of the international organizations, 
such as the Organization of American 
States, with severe cash-flow problems 
and possibly place U.S. voting rights in 
jeopardy. 

In summary, I would like to reiterate 
that these supplemental appropriations 
are vital to help us carry out our most 
critical programs. In fact, 65% of the 
requested amount must be paid in 
accordance with statutory or mandatory 
requirements. 



'The complete transcript of the hearings 
will be published by the committee and will be 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. ■ 



How Much Security 
Is Enough? 



by Robert E. Lamb 

Address before the Discover Con- 
ference on Terrorism in a Technological 
World on January 22, 1987. Mr. Lamb is 
Acting Assistant Secretary for 
Diplomatic Security. 

I have been asked to talk with you today 
about the question of "how much secu- 
rity is enough" and, at the same time, 
tell you how to put together a security 
budget. Actually, this is two sides of the 
same coin. 

I remember, some years ago, I 
served with a crusty budget and fiscal 
officer who had been in Tokyo when a 
Japanese mob broke into the consulate 
general at Kobe-Osaka and had beaten 
up the consul general. In response, the 
Department came up with something 
like a quarter of a million dollars to pro- 
tect the consulate. We'll call this officer 
"Larry." Larry was furious. "Are we 
going to spend a quarter of a million on 
every embassy and consulate in the 
world," he asked. "How much is a consul 
general worth?" 

Simply stated, his approach was that 
we should recognize that an occasional 
consul general would be beaten up— and 
write that into the job description. Every 
consul general would then take his or 
her chances. 

In those days, each ambassador was 
given a great deal of discretion over the 
level of security at an embassy. There 
were few security practices which were 
mandated from Washington. The man- 
dated security primarily governed the 
protection of classified information. Pro- 
tection of diplomatic buildings and peo- 
ple against violent attack was largely 
discretionary— in large part because this 
kind of security was seen as the respon- 
sibility of the host government. 

Then, in 1979, our embassy in Libya 
was stormed and burned, and our 
embassy in Iran was occupied, which 
began the long national ordeal with our 
hostages in Tehran. Those episodes 
showed that there were some countries 
we couldn't count on to protect us. As 
self-evident as this may seem today, it 
was a major departure from interna- 
tional practice in 1979. 



May 1987 



27 



DEPARTMENT 



In 1983 and 1984, we suffered mass 
casualty attacks against our embassies in 
Beirut and Kuwait and our embassy 
annex in east Beirut. "Car bombs" 
forced themselves into our vocabulary. 
These attacks further eroded the basic 
premises on which embassy security 
strategy had been built. If the 1979 
attacks revealed limits to the willingness 
of some foreign governments to protect 
us, the 1983-84 attacks showed 
dramatically the limits of their ability to 
protect us. 

Today, it is recognized throughout 
the world that embassy security is a 
shared responsibility. Some countries 
can provide better security to an 
embassy than others. But all countries 
look to the embassies themselves for 
basic security measures. No government 
can protect American embassies today 
without some help from us. 

Formulating a New 
U.S. Security Strategy 

In 1984, we were going through a sea 
change in the field of embassy security, 
and the U.S. Government needed a new 
security strategy. Secretary Shultz 
turned to Admiral Inman and a very 
distinguished panel of American officials 
to help us devise such a strategy. The 
result was the first comprehensive 
rethinking of the embassy security pro- 
gram in decades. 

One of the conclusions we reached 
was the unacceptability of leaving so 
much discretion in the hands of the 
ambassador. The loss of an embassy to a 
mob or to a powerful bomb has national 
policy implications. Accordingly, it can- 
not be dealt with on a post-by-post basis. 

The U.S. Government established, as 
a matter of national policy, that no 
embassy anywhere in the world be 
vulnerable to seizure by a mob or to a 
vehicle bomb. As a result of that deci- 
sion, we embarked on three major pro- 
grams to protect our embassies: 

• The Public Access Control Pro- 
gram, to control the flow of people into 
our chanceries; 

• The Perimeter Security Program, 
to keep mobs and intruders off the 
embassy grounds; and 

• The Security Construction Pro- 
gram, to build new embassies at higher 
threat posts where existing buildings are 
just undefendable. 

There are specific standards for all 
three of these programs. They are based 
on some serious research. For example, 



the 100-foot setback for new embassy 
buildings is based on a very specific for- 
mula calculated from the pressure 
created by an explosive blast on the sur- 
face of a building built to certain 
standards. 

We found that over half of our 
embassies fell substantially below 
minimum security standards; not just 
didn't meet standards— they were 
substantially below. In establishing the 
building program, we obviously had to 
set priorities. We did; and we based 
them on the dual criteria of risk and 
vulnerability. 

One criterion we rejected was 
importance of a post. This issue surfaced 
particularly in Africa. For example, 
some asked why we put so much money 
into security in a country that is unim- 
portant to U.S. national interests. That 
issue was seriously debated, and we con- 
cluded that we will protect all posts 
based on threat and vulnerability. We 
cannot, in good conscience, say that 
someone serving his country abroad 
would get less protection than needed 
because the country in which he or she is 
serving may be less important to us. 

A variation on our policy is the 
macho ambassador who says, "I do not 
want protection. Security infringes on 
my privacy or my self-image." Because 
the murder or kidnapping of any 
embassy employee— and especially an 
ambassador— has a political cost to our 
nation as a whole, that attitude is unac- 
ceptable. Our Foreign Service is not 
abroad as individuals but as represent- 
atives of our government. We cannot 
afford not to protect them. 

Protection Outside the Workplace 

Safe embassy buildings are clearly the 
keystone of our security policy. But we 
cannot stop there. We have a respon- 
sibility for our employees and their 
families which extends beyond the work 
place. 

As we harden our embassies, we have 
seen the threat shifting to other, 
so-called softer targets: the La Belle 
disco bombing in Berlin, the shooting of 
the marines in the sidewalk cafe in San 
Salvador, the shooting of our "off-duty" 
communicators in Sanaa and Khartoum. 

Anticipating that shift, we set up 
three new programs: 

• Residential security, to protect 
our employees and their families outside 
the office; 



• More armored vehicles, to proteci 
employees going to and from work; and 

• Security awareness training, to 
help employees and their families protec 
themselves. 

A fourth, related program is our 
increased liaison with the private sector 
In 1985, we assumed the business com- 
munity would also start to become sec- 
ondary targets as the embassies became 
more secure. Mainly, this program aime 
at helping the private sector protect 
themselves by sharing information on 
threats and on protective techniques. 

Incidentally, we have not seen that 
crossover targeting happening. There is 
little documentable evidence of a shift 
from government to business targets. 
Some terrorist groups target official 
U.S. Government activities; some targei 
the private sector; some even target 
both. But we have not seen groups whic 
concentrate on government targets sud- 
denly saying, "The embassy is too 
secure, let's go down and blow up our 
local Coca-Cola plant." 

Security Against Espionage 

As a backdrop to the terrorist threat 
against our embassies, we saw another 
security threat looming larger. In the 
summer of 1984, we found that the Rus- 
sians had gotten their hands on a 
number of typewriters which were beinj 
shipped to our embassy in Moscow. 
While under Russian control, the 
typewriters were implanted with device 
which recorded characters being typed 
on the typewriter and transmitted them 
to a nearby KGB listening post. 

The sophistication of that attack 
showed us that we had not done enough 
in technical security. Successive budget 
cuts over the years had whittled away a 
our counterespionage program to the 
point that, by the early 1970s, our 
embassies were increasingly vulnerable 
to foreign intelligence services. Our 
handful of engineers were fixing the 
growing volume of security equipment a 
our posts. Our counterespionage pro- 
gram atrophied. The Department's new 
security program has sought to restore i 
strong defensive capability. The Moscow 
typewriter incident drove home the need 
to do a better job of protecting our 
embassies against spies as well as 
terrorists. 

The Security Budget 

How did we translate these principles 
into a budget? The budget itself was a 



28 



Department of State Bulletir 



EAST ASIA 



'latural product of our new program— 

almost a technical outgrowth. Any public 
>olicy should have two essential 

.■lements before it can be implemented. 

K should be a sound program with solid 
tublic support. By 1986, we had both. 
There was a broad consensus behind 

"mbassy security. The American people 

'o not like to see pictures on the evening 

fV news of foreign mobs occupying and 
urning our embassies. They do not like 

b have fanatics blowing up our buildings 
nd killing our people. And they do not 
ke having the Russian KGB bugging 
ur typewriters and our buildings. The 
lessage was loud and clear: do 

omething about it. 

With the Inman panel recommenda- 
ons, we had the first prerequisite: a 
jund program. That entire program 
as scrutinized more carefully than any 
overnment program with which I have 
/er been associated— scrutinized within 
le Department, by OMB [Office of 
management and Budget], by the Con- 
fess, and, ultimately, by the press and 

! l informed public. 

The budget request was the principal 

, ;hicle for that scrutiny and that debate. 

I argely as a result of budget reduction 
•essures, we received much less money 
tan we expected— $1 billion in 1986-87 

I >mpared to the $2 billion we requested, 
he implementation was stretched from 
years to 5. But the program remained 

: tact. 

I cannot emphasize enough that the 
ldget must flow from the program and 
)t the program from the budget. But 
:cause public programs tend to be tied 
i closely to money, the annual budget 

I r cle subjects them to continued 
rutiny. In the 1988 budget cycle, the 
epartment of State must once again 
;k whether security continues to enjoy 
e same priority. Do we want security 
'en if budget stringencies are forcing 

i > to close consulates? OMB weighs the 
lative worth of embassy security to 
her government programs. In the 1988 
ldget process, the executive branch has 
ood behind its commitment to protect 
it embassies and the people who are 
■rving our country abroad. The ques- 
on is now once again put to the 
ongress. 

rogram Successes 

i ongress will also inquire into how suc- 
cessfully we are implementing the pro- 
I'am. There, too, we have a good story 
ii tell. The attacks against our 
nbassies have not declined, although 



they rarely make the newspapers these 
days. In 1986, we had three car bomb 
attacks against embassy facilities in 
three countries. Mortars or rockets were 
fired at four embassies. Bombs were 
thrown at two, and there were thwarted 
attempts at even more. Several were 
strafed with automatic weapons fire. We 
have had innumerable intelligence 
reports of terrorist groups who have 
cased our embassies and found the 
security so good they canceled the 
operation. 



On the intelligence side, in 1986 we 
uncovered and neutralized five technical 
efforts directed against our facilities- 
more than we found in the entire 
previous decade. 

Protecting our embassies is only one 
part of our government's total antiter- 
rorism program. But it is an important 
part. Here, too, we have told those who 
would attack us that we are going to 
defend ourselves. ■ 



The Cambodian Issue 



by John C. Monjo 

Statement before the Subcommittee 
on East Asian and Pacific Affairs of the 
House Foreign Affairs Committee on 
March 11, 1987. Mr. Monjo is Deputy 
Assistant Secretary for East Asian and 
Pacific Affairs. l 

I am honored to be here today to discuss 
Cambodia. We value congressional sup- 
port for the Administration's efforts to 
achieve a peaceful solution to this tragic 
conflict. 

As you know, the Administration 
remains adamantly opposed to Viet- 
nam's occupation of Cambodia and 
strongly supports ASEAN's [Association 
of South East Asian Nations] efforts to 
block Vietnamese attempts to subjugate 
that country. We remain committed to 
maintaining maximum pressure on 
Hanoi to recognize that it is in 
everyone's interest— including theirs— to 
enter into serious negotiations which will 
end the fighting and lead to the 
withdrawal of People's Army of Vietnam 
(PAVN) troops. The Administration also 
remains adamantly opposed to a return 
to power of the Khmer Rouge in Cam- 
bodia and has made our position clear to 
all involved parties. 

Our desire for Cambodia is the 
establishment in Phnom Penh of a 
democratically elected government 
which reflects the will of the Cambodian 
people and which is not susceptible to 
outside manipulation. We believe that a 
settlement which encompasses these 
objectives and addresses the legitimate 
interests of the principal parties 
involved, including the Vietnamese, is 
possible. 



Results of ASEAN Leadership 

The Administration continues actively to 
support the ASEAN lead in the search 
for peace in Cambodia. The member 
states of ASEAN, individually and col- 
lectively, have skillfully developed inter- 
national opposition to Vietnam's occupa- 
tion of Cambodia. In part as a result of 
these efforts, Vietnam now finds itself 
more isolated than ever before. In the 
United Nations, the General Assembly 
resolution calling for Vietnamese 
withdrawal and self-determination for 
Cambodia gained a record 115 votes in 
1986. Vietnam's economic isolation has 
also compounded its already staggering 
internal problems. Vietnam, its energetic 
and literate population notwithstanding, 
is now one of the poorest countries in 
the world. Access to essential foreign 
credits and western expertise will 
remain largely unattainable for as long 
as Hanoi refuses to seek a negotiated 
settlement. 

ASEAN has also worked effectively 
to increase the international stature of 
the noncommunist resistance and to 
encourage their expanded efforts within 
Cambodia. Vietnam's political-economic 
isolation and the ability of the resistance 
forces to survive and thrive have 
thwarted Hanoi's efforts to make the 
Cambodian situation an "irreversible" 
one. 

Our support for ASEAN is also 
premised on the belief that ASEAN's 
coordinated response to Cambodia has 
helped strengthen ASEAN unity. Our 
allies and friends in Southeast Asia are 
of vital importance to the United States. 
We support their efforts to expand 
regional cooperation, and we are encour- 
aged by the progress achieved. Our hope 
is that the countries of Indochina will at 



(lay 1987 



29 



EAST ASIA 



some time be free to share in the pros- 
perity and progress which peace and 
cooperation have brought to the 
members of ASEAN. 

Internal Situation 

The last year has brought a number of 
developments of immediate or potential 
significance to the Cambodian issue. 
Inside Cambodia, the noncommunist 
resistance forces under the leadership of 
Prince Sihanouk and Son Sann continue 
their valiant opposition to the Viet- 
namese: their aim is a negotiated end to 
the PAVN occupation of their country, 
not military victory. The fight is still 
very much an unequal one: the 140,000 
PAVN troops in Cambodia remain domi- 
nant, and there is little expectation that 
the resistance forces could ever hope to 
match them militarily. 

Nevertheless, there has been some 
encouraging progress. The noncom- 
munists successfully withstood the 
1984-85 setbacks and have since then 
demonstrated a convincing staying 
power. Moreover, during the last year, 
they have succeeded in marginally 
expanding their operations inside the 
country and at setting up the beginning 
of the vitally necessary logistical and 
supply system to sustain operations in 
the interior. Most encouraging, noncom- 
munist resistance units are reported to 
have been well received by the local 
population in those parts of Cambodia 
where they operate; some villagers have 
even given the guerrillas scarce food and 
other essentials. Since the noncom- 
munists are not connected with either 
the Pol Pot atrocities or the Vietnamese 
occupation, they can serve as a focal 
point for the growing anti- Vietnamese 
feelings among the general population 
and as a legitimate political entity 
responsive to the aspirations of the 
Cambodian people. 

We continue to believe that the non- 
communists must and will play an essen- 
tial political role in the achievement of 
an acceptable resolution to the Cambo- 
dian conflict. The Administration 
believes that it is essential for us to con- 
tinue actively to support the noncom- 
munist resistance. The $5 million 
authorization the Administration has 
requested represents a key element of 
this support. Although the amount of 
money involved is modest, it sends a 
clear signal about our support for the 
noncommunists as an alternative to the 
Vietnamese and the Khmer Rouge. 



Moreover, since we are responding to a 
direct appeal from ASEAN, our support 
for noncommunists will help reinforce 
the ASEAN lead in the search for peace. 

Diplomatic Activity 

The last several months have also 
witnessed considerable diplomatic activ- 
ity related to Cambodia. While it is yet 
to be determined whether there is any 
change in substance in their position, the 
Vietnamese have been particularly active 
and have been asserting, through a 
number of different channels, that they 
desire a resolution to the conflict. They 
have repeatedly indicated their desire to 
negotiate the Cambodian question with 
the Chinese without precondition. 

Hanoi has also twice proposed talks 
between Prince Sihanouk— as the presi- 
dent of the coalition government— and 
the Heng Samrin regime; in one case 
talks would have included all four Khmer 
factions, including the Khmer Rouge. 
The Prince rejected these proposals and 
suggested instead direct talks between 
the Vietnamese and the coalition govern- 
ment, with Heng Samrin elements par- 
ticipating as part of the Vietnamese 
delegation. Sihanouk explained that he 
opposed the proposed "all-Khmer" talks 
because this would lend credence to 
Hanoi's claim that the Cambodia conflict 
was a civil war not an international con- 
flict sparked by Vietnam's invasion and 
occupation of that country. 

Others have also been active 
diplomatically. The Soviets expressed 
their desire to see the conflict resolved, 
and Foreign Minister Shevardnadze 
reportedly discussed Cambodia during 
his recent swing through Southeast 
Asia. Although the press reported that 
the Soviet diplomat had suggested that 
Soviet efforts toward an Afghanistan 
"settlement" could serve as a model for 
Cambodia, other sources in the region 
indicate that he presented no specific 
proposals. 

The Indians have also suggested that 
they would be willing to serve as 
mediator or catalyst for resolving the 
issue. Minister of State for External 
Affairs Singh recently visited Southeast 
Asia to convey what was reportedly 
Hanoi's desire for a swift settlement. 
Again, there have been no indications 
that the Indians conveyed any specific 
negotiating proposals. 

Unfortunately, we see no indication 
that the Vietnamese have made any con- 
cessions on Cambodia or have demon- 
strated a willingness to negotiate 



seriously an acceptable settlement. 
Nevertheless, Vietnam is feeling the 
weight of its Cambodian policy. 
Although it is too early to tell, there is 
the possibility that the new leadership 
might be taking another look at this 
problem and might be considering a nev 
formulation which would retreat a bit 
from its extreme objective of total con- 
trol of Cambodia. Such a policy reevalua 
tion would be welcomed and could 
possibly persuade Vietnam at some time 
of the advantages of seeking a real 
settlement. 

In the meantime, we believe that th< 
best policy for the United States is to 
continue to maintain our unwavering 
opposition to Vietnam's occupation whil 
pressing for a settlement which would 
address the legitimate interests of the 
principal parties involved and prepare 
the way for the establishment of a 
democratically elected government in 
Phnom Penh which reflects the will of 
the people. 



■The complete transcript of the hearings 
will be published by the committee and willb 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. 



FY 1988 Assistance 
Requests for East 
Asia and the Pacific 

by Gaston J. Sigur, Jr. 

Statement before the Subcommittee 
on Asian and Pacific Affairs of the 
House Foreign Affairs Committee on 
February 25, 1987. Mr. Sigur is Assist- 
ant Secretary for East Asian and Pacifi 
Affairs. ' 

I am pleased to have this opportunity to 
present our 1988 foreign assistance pro- 
posals for East Asia and the Pacific. 

In the 2 years since my predecessor 
came before your authorizing committe< 
we have witnessed a great deal of 
improvement in the region toward 
political and social progress by countries 
that share our democratic values and 
commitment to human rights. With 
broad bipartisan support in the Con- 
gress, our policies have sought to 
encourage these trends. 

These policies are based on the belie 
that we can, simultaneously, assure our 
strategic interests, discourage the influ- 



I 



30 



Department of State Bulleti 



EAST ASIA 



mce of potentially hostile powers, and 
irogressively strengthen ties of friend- 
ship with the countries in the East Asia 
and Pacific region. We are accomplish- 
ing these objectives by working with the 
friendly governments of the region to 
'strengthen their public and private 
nstitutions and by assisting them in 
advancing toward their economic goals. 

The East Asian and Pacific region 
-emains an economically dynamic and 
culturally diverse area with, generally 
speaking, good relations and close ties 
;o the United States. Technological 
advances are proceeding swiftly, literacy 
j-ates are high, and economic perform- 
ance on the whole has been impressive, 
political instability is the exception 
•ather than the rule. 

Of course, we do not try to take 
■redit for all of the progress in the 
•egion. Much of the credit in this large 
irea results from the efforts of the 
>eople and governments themselves, 
lilowever, we can be proud of the role we 
iiave played and of our contributions to 
, he achievements of this region. 

Until the recent past, our role has 
i ieen particularly noticeable with respect 
I o our crucial economic and military 
i .ssistance programs. Now we face the 
hird consecutive year of major reduc- 
•, ions in our foreign assistance efforts 
here. I am concerned that unless our 
■ urrent assistance requests are met, we 
I- will be jeopardizing our position in East 
Isia. The request I am today supporting 
«fore you represents, I believe, the 
.bsolute minimum effort to which we 
.' mist commit ourselves. Doing so is 
j lecessary in order to minimize as much 
I'.s we can the risks to these vulnerable 
', conomies. Should we fail to do so, we 
ignal our friends to turn elsewhere for 
upport and, by default, aid the Soviet 
Jnion in its continuing pursuit of 
greater influence in the area. 

Speaking for the State Department 
tfid as someone who is a student of Asia 
*nd who has spent a lifetime in the 
egion, I can tell you that, frankly, we 
ire playing with fire by continuing to 
•educe the foreign assistance budget. 
With just two cents of every Federal 
mdget dollar going for international 
iffairs, the United States is getting a 
)retty good bang for the buck. In recent 
rears, we have had to pare back con- 
siderably in our foreign assistance 
Efforts: this year, if we try to find even 
iiheaper insurance premiums, we will be 
.ruly turning our backs on our regional 
Responsibilities. 

My colleagues can better inform you 
pf details of how past cuts in assistance 



affected their agency's effectiveness in 
East Asia. In general terms, though, we 
can see a disturbing pattern emerge. We 
have already cut away the fat and most 
of the muscle; further reductions will cut 
into the bone. 

In an already lean foreign assistance 
budget, we are asking to provide deserv- 
ing friends and allies in the Asia/Pacific 
region with $263 million in economic 
assistance next year and $204 million in 
security assistance. In total percentages 
of worldwide FY 1988 requests, this 
represents 3.9% of the economic 
assistance and 3.5% of security 
assistance— a small price to pay for the 
return this country receives in strategic 
and economic benefits. 

As in the past, our economic 
assistance proposals are concentrated 
most heavily on three countries. They 
are the Philippines, Thailand— both 
treaty allies— and Indonesia. We have 
again requested the largest amount for 
the Philippines. That country continues 
to face difficult times economically but, 
in large part because of the success of 
the recent, plebiscite, promises, with our 
continued support and the continued 
strong leadership of President Aquino, 
to see itself out of these difficult times. 

Indonesia, the world's fifth most 
populous nation, highly values our 
assistance. Although per capita income 
has nearly quadrupled over the past 
decade, still almost 40% of Indonesia's 
population (66 million people) live below 
the World Bank's poverty line. With the 
collapse of oil prices in 1986 and con- 
tinued weak markets for other com- 
modity exports, Indonesia is in the midst 
of its greatest economic difficulties since 
the 1960s. I shall detail additional pro- 
grams in just a moment. 

With respect to security assistance, 
our 1988 proposals are concentrated on 
the Phillipines and Thailand. The 
Republic of Korea graduated this year 
from our program of foreign military 
sales (FMS) credits, although an active 
international military education and 
training (IMET) program continues. This 
change was brought about both by the 
recognition of Korea's booming economy 
and our own budget situation. U.S.- 
Korean close coordination on defense 
questions, however, continues unabated. 
We expect the interoperability demands 
on our joint forces will mean that many 
weapon systems will continue to come 
from American manufacturers. 

In the Philippines, where we have 
two of our most important military 
facilities anywhere on the globe and 
where there exists a strong communist 
insurgency, nearly all of our military 



assistance in FY 1988 will go to fund an 
ongoing military assistance program 
(MAP). We are asking for $110 million 
to fund military training, maintenance, 
and equipment acquisition initiatives. 
Thailand continues to face a large 
Vietnamese force just across its borders 
that is trying to subjugate Cambodia and 
which poses a significant threat to 
Thailand's security. The Thai Govern- 
ment plays a key role in frustrating Viet- 
namese adventurism. Our support is 
crucial not only because of the impor- 
tance of Thailand per se, but because of 
the stake we have in the independence, 
integrity, and prosperity of the nations 
of the Association of South East Asian 
Nations (ASEAN), of which Thailand is a 
member. 

Philippines 

Our foreign assistance request for the 
Philippines addresses the critical needs 
of a key allied nation. Under the leader- 
ship of President Aquino, the Philippine 
Government has instituted sweeping 
reforms in an effort to restore 
democratic institutions and revitalize a 
mismanaged economy. President Reagan 
reflected the broad sentiment of the 
American people when, during his 
meeting with President Aquino last 
September, he pledged the United States 
to doing all it can to help her build a free 
and prosperous Philippines. After Presi- 
dent Aquino's eloquent speech to a joint 
session, the Congress voted to appro- 
priate $200 million in additional 
economic assistance. It is in this spirit of 
shared purpose that I ask this committee 
to consider our aid request for the com- 
ing fiscal year. 

The basis for our foreign aid pro- 
posal for the Philippines is a Presidential 
pledge made in connection with the 1983 
review of our military bases agreement 
with that country. These negotiations 
ensured our continued unhampered 
access to key military facilities at Clark 
Air Force Base and Subic Bay Naval 
Base. Subsequent to the successful 
review, the President agreed to make his 
"best effort" to secure a total of $900 
million in security assistance during the 
5-year period of FY 1985-89. Thus, the 
level of our security assistance directly 
relates to our ability to maintain 
unhindered use of those military installa- 
tions. These facilities play a vital role in 
maintaining a regional balance of power, 
protecting critical sealanes, and pro- 
viding logistical support for U.S. forces 
in the Indian Ocean and Persian Gulf. 



JVlay 1987 



31 



EAST ASIA 



Developments since President 
Reagan made his "best effort" pledge 
have rendered the need for security 
assistance greater than ever. During the 
last years of the Marcos era, the Philip- 
pines experienced an unprecedented 
economic decline. Inheriting a collapsing 
economy, the Aquino government has 
since implemented free market reforms 
which have restored economic growth. 
Inflation is down, and capital flight has 
been arrested. Unfortunately, investor 
confidence necessary to trigger sus- 
tained economic growth has proved 
elusive. Recovery will be slow. It may 
well be several years before the living 
standards return to levels prevailing at 
the time we last negotiated the underly- 
ing basis for our security assistance 
commitment. 

As it struggles to achieve economic 
recovery, the Aquino government has 
moved ahead with its bold agenda of 
political reform. Earlier this month, 
Philippine voters voted overwhelmingly 
(76%) to adopt a new constitution 
establishing democratic institutions of 
government similar to those existing 
prior to the imposition of martial law in 
1972. The landslide vote in favor of the 
new constitution, in the fairest and most 
orderly election in recent Philippine 
history, was a ringing reaffirmation of 
President Aquino's political mandate 
which will bolster her government and 
further encourage efforts to implement 
broad structural reforms. No less impor- 
tant, the plebiscite's results constitute a 
setback for political extremists on both 
right and left who had sought to desta- 
bilize her government. National legis- 
lative and local elections, respectively 
slated for May 11 and August 24 of this 
year, will complete the transition to full 
democratic government. 

A virulent communist insurgency 
continues to pose a grave threat to the 
legally constituted Government of the 
Philippines. The government's participa- 
tion in peace talks initiated during the 
60-day cease-fire is evidence of its appre- 
ciation for the need to redress socio- 
economic grievances contributing to the 
insurgency's appeal. The New People's 
Army, now estimated at more than 
23,000 armed guerrillas, returned to the 
field earlier this month after communist 
negotiators spurned government 
attempts to extend a cease-fire 
negotiated late last year. In light of 
these developments, the Aquino govern- 
ment has resumed military operations 
against those seeking to undermine law 
and order and subvert the democratic 
process. 



Our proposed security assistance 
package for FY 1988 is designed to 
fulfill the President's "best effort" com- 
mitment to the Philippines. Together 
with our development assistance and 
food aid, it also aims to address a wide 
range of problems whose solution is 
essential to the success of President 
Aquino's administration. We are asking 
for $260 million in new aid to the Philip- 
pines. This request is made up of $148 
million in economic aid and $112 million 
in military assistance. 

Economic support funds totaling 
$124 million constitute the largest single 
component of our proposal. These funds 
will allow us to assist the Government of 
the Philippines in implementation of its 
strategy for economic growth and devel- 
opment in an environment of scarce 
budget resources. We are working 
closely with the Government of the 
Philippines to find the best ways in 
which this category of funding can be 
used to complement its comprehensive 
economic development strategy. We are, 
for example, supporting the Government 
of the Philippines with its structural 
reform agenda which includes trade 
liberalization, privatization, divestiture 
of nonperforming government owned 
corporations, and tax reforms. Economic 
support funds also contribute to improv- 
ing economic and social conditions in the 
vicinity of U.S. military facilities by pro- 
viding schools, roads, community 
markets, and other needed 
infrastructure. 

Development assistance in the 
amount of $13 million focuses on pro- 
grams designed to spur agricultural 
development in rural areas. Further, we 
are promoting better health care pro- 
grams. We are also seeking just over $11 
million under provisions of PL 480, Title 
II to fund maternal and infant health 
programs and school feeding activities 
among Filipinos most in need. 

Nearly all of our request for military 
assistance this fiscal year will go to fund 
an ongoing military assistance program. 
That program, for which we are asking 
$110 million, is designed to provide 
military training, maintenance, and 
equipment acquisition initiatives. 
Medical support of troops in the field is 
also a high priority. Finally, we have 
asked Congress to appropriate $2.6 
million for advanced professional train- 
ing of junior, mid-level, and noncommis- 
sioned Philippine military officers. 

This month marks the first anniver- 
sary of historic events culminating in the 
inauguration of President Aquino. Her 



government has since presided over a 
rebirth of Philippine democracy and 
taken important first steps toward 
revitalizing a stagnant economy. When 
she visited Washington in September 
1986, President Aquino asked our 
assistance in helping her bring peace and 
prosperity to the Philippine people. Our 
foreign assistance request for the next 
fiscal year reflects our commitment to 
helping her realize that goal while, at the 
same time, serving our own national 
interest in a strong, stable, prosperous 
Phillipines. 

Thailand 

Thailand is both a longstanding friend 
and important treaty ally. Our relation- 
ship is based on a shared commitment to 
freedom and democracy, mutual security 
cooperation in a wide range of areas, 
and growing trade links. Thailand plays 
a key role in resisting Vietnamese 
aggression, particularly in preventing 
the consolidation of Vietnam's occupa- 
tion of Cambodia. It has been generous 
in providing refuge to Indochinese flee- 
ing communist oppression in their own 
countries. And Thai authorities have 
worked closely with us in suppressing 
narcotics trafficking from the Golden 
Triangle. 

Our proposals for assistance to 
Thailand's economic development and 
military modernization programs are an 
integral part of our efforts to advance 
those interests which we share with the 
Thai and other regional friends. Our 
assistance is viewed by friend and foe 
alike as a gauge of the depth of our com- 
mitment to Thailand, to the success of 
ASEAN of which Thailand is a member, 
and to continuing as a major force for 
stability and development in the region. 

The 1978 Vietnamese invasion and 
occupation of Cambodia brought a large, 
experienced Vietnamese military force 
to Thailand's border. Vietnamese incur- 
sions into Thai territory occur regularly, 
while Vietnamese artillery fire has 
inflicted suffering on civilian popula- 
tions, both Thai and Khmer displaced 
persons alike. In response to Vietnamese 
aggression, Thailand instituted a modest 
program to modernize its armed forces. 
Together with other measures, such as 
the agreement for a war reserve stock- 
pile, our support for the Thai moderniza- 
tion program is intended to deter further 
Vietnamese aggression by helping Thai- 
land to become more self-reliant and to 
assume a greater role in meeting our 
shared security goals. 



32 



Department of State Bulletin 



EAST ASIA 



Our assistance package also makes 
Important contributions to Thai eco- 
lomic development. The Thai economy is 
|ust emerging from a painful period of 
idjustment made necessary by growing 
budget and trade deficits in the early 
}L980s. Recently revised figures indicate 
hat the 1985-86 Thai economic slow- 
down was more severe than originally 
ihought. While conservative economic 
management, the drop in oil prices, and 
ower world interest rates lead most 
bbservers to anticipate a return to more 
acceptable growth levels, the health of 
he Thai economy remains dependent on 
•xternal factors. U.S. security aid is 
essential to the Thai Government by 
idping it make the necessary military 
(•xpenditures to meet the threat of Viet- 
namese aggression while allowing it to 
l;ive social and economic development a 
dgh priority. Our economic assistance 
irogram, though limited in resources, 
lemains targeted toward sensitive areas 
iuch as the eradication of rural poverty 
1 /hich fueled the communist insurgency 
f the 1960s and 1970s. 

For FY 1988, we are requesting $50 
lillion in MAP and $10 million in FMS 
redits. This is substantially less than we 
equested in FY 1986 and FY 1987. By 
laking most security assistance MAP 
ather than FMS, we hope to ease the 
train falling levels of U.S. assistance 
I lace on the Thai economy. Nonetheless, 
/e expect this amount to be insufficient 
o halt a trend already underway toward 
reater Thai reliance on other countries 
o sustain their military modernization 
rogram. 

I would like to add that our economic 
ssistance and security assistance carry 
enefits beyond those immediately 
pparent in military modernization. For 
xample, one of the consequences of the 
arsh policies pursued by the communist 
.overnments of Indochina has been a 
I irge, continuous outpouring of people 
eeking refuge from oppression. For 
'hailand and the other ASEAN states, 
' hese refugees present not only humani- 
arian but security and economic issues 
.s well. Although the international com- 
nunity provides much needed financial 
upport for over 300,000 refugees and 
lisplaced persons on Thai territory, 
issuring the safety of those who have 
■eceived first asylum places additional 
jequirements on the Thai Armed Forces. 
.Similarly, the Thai Armed Forces play 
jin essential role in our joint effort to 
.'.uppress narcotics trafficking through 
he Golden Triangle. 

Our request for $5 million in 
economic support funds (ESF), which 
have been straight-lined for several 



years, provides the Thai with assistance 
in helping village communities along the 
Cambodian border. Vietnamese incur- 
sions and shelling have inflicted 
casualties and disrupted the economic 
and social stability of rural populations, 
making these people deserving of special 
help and compassion. These funds also 
ease the impact of refugee influx on Thai 
border villages, thus contributing to the 
ability of the government to sustain 
Thailand's humane first asylum policies. 

Our IMET request in FY 1988 
amounts to $2.2 million. Beyond the 
technical challenges attendant on the 
introduction of sophisticated systems, 
the need for advanced logistical training 
and management becomes pressing. The 
performance of Thai personnel in our 
courses has been very impressive. Fur- 
ther, the United States accrues indirect 
benefits from the exposure to our society 
of these future leaders who participate 
in our training programs. 

Burma 

Although Burma follows a genuinely 
nonaligned foreign policy, relations 
between the United States and Burma 
continue to improve. Much of this is 
based on the increased cooperation 
between our governments in antinar- 
cotics activities in recent years, which 
has opened the door to greater contacts 
in other areas of interest to the United 
States. 

Our principal objectives in Burma 
are to encourage the country's economic 
development and evolution into a polit- 
ically stable society friendly to the West 
and to assist the Burmese Government 
to suppress the flow of illicit opium and 
opium derivatives from Burma to inter- 
national markets. 

Despite substantial natural 
resources, Burma ranks among the 
world's poorest countries. It has a per 
capita income of less than $190 and a 
debt service ratio of over 60% on a 
foreign debt of $2.6 billion. Low com- 
modity prices have hurt Burma's export 
earnings, which have been dropping for 
several years. Burma recently applied to 
the United Nations to be included on the 
list of "least developed developing 
nations." A favorable decision is 
expected by this summer. 

The $8 million in development assist- 
ance proposed for FY 1988 represents a 
cut of almost half from the FY 1985 
level of $15 million. Agency for Inter- 
national Development (AID) projects are 
tightly focused to assist Burmese agri- 
cultural development, improve rural 
health care, and expand technical train- 



ing in a variety of fields. The AID proj- 
ects have been well-received by the 
leadership and people of Burma and 
have contributed measurably to a 
strengthening of our bilateral relations. 

The Burmese Government is fighting 
a number of insurgent and warlord 
groups, including the Burma Communist 
Party, that control large areas of the 
hinterland and finance themselves 
primarily through narcotics trafficking. 
The Burmese Government launched, 
with U.S. support, an aerial opium 
eradication campaign in 1985-86 and 
again in 1986-87. The latest operation, 
after spraying some 22,000 acres, was 
suspended short of the goal of 45,000 
acres because support troops were 
diverted to counter a major Burma Com- 
munist Party offensive. The government 
plans an expanded spray program in 
1987-88 in areas taken from the Burma 
Communist Party. 

The $260,000 proposed for IMET in 
FY 1988 will allow the Burmese Govern- 
ment to increase its own training of 
military officers. As with the other 
IMET programs, training in the United 
States will directly expose Burmese 
officers to American society and values 
and the role of the military in a 
democratic society. Because of the 
military's dominant role in Burma, this 
could have a favorable long-term effect 
on our bilateral relations. 

Indonesia 

Indonesia lies along vital air and sealines 
of communication between the Pacific 
and Indian Oceans. Direct U.S. invest- 
ments and valuable raw materials 
(especially oil and natural gas) further 
increase Indonesia's importance. 
Indonesia has compiled a record of 
political stability and sound economic 
management over the past two decades 
and has played a constructive role in 
international affairs as a moderate voice 
in the Nonaligned Movement, ASEAN, 
the Organization of Petroleum Export- 
ing Countries (OPEC), and the Organiza- 
tion of Islamic Conference. Within 
ASEAN, Indonesia has taken a leading 
role in the effort to end Vietnam's occu- 
pation of Cambodia. 

Indonesia's economy depends heavily 
on oil and gas sales. Petroleum earnings 
during 1986 were down by half, precip- 
itating the worst economic downturn in 
two decades. External debt stands at 
nearly $40 billion, with a debt service 
ratio near 40%. The government has 
announced an austere FY 1987-88 
budget 6% below the previous budget in 
real terms. During 1986 the government 



!^ay 1987 



33 



EAST ASIA 



continued its pattern of prudent macro- 
economic management and important 
trade and industrial policy reforms. With 
annual per capita income under $500 and 
2 million new labor force entrants 
annually, bilateral and multilateral 
foreign assistance continue to make an 
important contribution to political and 
economic stability. 

Our economic cooperation program 
with Indonesia consists of development 
assistance, food aid (wheat) under 
PL 480, Title I and PL 480, Title II. It 
focuses on three goals: expanding off- 
farm employment, increasing and diver- 
sifying food production, and improving 
primary health care and family planning. 
Two key elements in achieving these 
objectives are developing human 
resources and building institutions that 
can adapt and spread technologies to 
accelerate development. Our economic 
cooperation program also encourages 
government decentralization and private 
sector involvement in technological 
diffusion. 

We have allocated $45 million in 
development assistance for FY 1988, 
which is equal to FY 1987 but $15 
million less than our FY 1986 request. 
The majority of these funds will support 
traditional and ongoing economic 
development programs in Indonesia. As 
in FY 1987, a portion will be applied to 
new areas with the aim of encouraging 
further trade and economic deregulation. 
Although our $10 million request for 
PL 480, Title I, aid is only one-third of 
the FY 1987 program, we know the 
Government of Indonesia continues to 
give high priority to this program which 
helps maintain adequate stocks of a good 
grain not produced, but increasingly con- 
sumed, in Indonesia. Our $4.4 million 
request for PL 480, Title II funds in FY 
1988 will support important voluntary 
agency programs. 

The security assistance program for 
FY 1988 consists of $2 million for IMET 
and $20 million in FMS credits at con- 
cessional rates. The FMS figure is 
roughly equal to the FMS assistance pro- 
vided in FY 1986. We provided half this 
FMS amount in MAP in FY 1987. FMS 
credits at concessional rates are 
extremely beneficial to Indonesia as it 
seeks to recover from a severe economic 
downturn and budget shortfalls brought 
on by a sharp decline in oil earnings in 
1986. The Indonesian military has taken 
a disproportionate cut in already austere 
budgets. Our providing FMS credits at 
concessional rates in FY 1988 will per- 
mit further progress toward purchase of 
systems, such as the F-16 A/B, to which 
the Indonesian military accords high 
priority. 



Our security assistance has helped to 
sustain a number of important pro- 
grams, including aircraft maintenance 
and spare parts, ship overhaul and spare 
parts, improvements in air and sea 
defense systems, and— through IMET— 
advanced and specialized training for 
commanders and management personnel 
in the armed forces. Indonesia's military 
remains critically short of qualified 
technicians and program managers. 
U.S. training primarily will be in 
technical fields, and the level of IMET 
funding requested will permit up to 250 
military officers to participate in our 
training programs in FY 1988. IMET 
deserves high priority support because 
of the important role played by the pro- 
fessional military in Indonesian society, 
the utility of the program in furthering 
our foreign relations objectives, and the 
desirability of improving mutually 
beneficial service-to-service interaction. 

Malaysia 

Strategically located on the Malacca 
Strait, Malaysia's continued political 
stability and economic development are 
important to U.S. interests in Southeast 
Asia. Confronted with the Vietnamese 
occupation in Cambodia and a major 
Soviet base at Cam Rahn Bay, Malaysia 
has been near the forefront of ASEAN's 
strategy to compel a withdrawal of Viet- 
namese forces from Cambodia and a 
negotiated settlement ensuring the 
rights of the Cambodian people. 
Malaysia is an active and responsible 
member of ASEAN, the Islamic Con- 
ference, and the Nonaligned Movement. 

U.S. -Malaysian relations, based on a 
broad band of common interests, are 
excellent. After Prime Minister 
Mahathir visited Washington in early 
1984, bilateral relations were broadened 
considerably. Subsequent exchanges of 
high-level visits, including a visit by Mrs. 
Reagan in 1986, have further enhanced 
our ties. Malaysia is interested in con- 
tinued defense cooperation with the 
United States, so long as the relation- 
ship is kept consistent with Malaysia's 
nonaligned status. 

For the past several years the 
Government of Malaysia has considered 
IMET to be the most important element 
in our small security assistance program 
for Malaysia. Now faced with its first 
economic recession and consequent 
reductions in the defense budget, the 
Malaysian Government is looking for 
ways to maximize the armed forces' 
ability to utilize current equipment and 
manpower. The $1 million IMET pro- 
gram we are requesting in FY 1988 will 



provide an extremely useful means for 
the Malaysian Armed Forces to meet 
their training needs as they adjust to a 
more conventional force structure and 
more sophisticated equipment. The 
Malaysian Government considers 
exposure to U.S. defense management, 
operational doctrine, and support con- 
cepts critically important to the rapid 
modernization of armed forces increas- 
ingly designed to protect Malaysian anc 
ASEAN interests in the South China 
Sea. In the foreseeable future, the 
Malaysian Armed Forces are expected j 
look to us to fulfill as many of their 
external training needs as we find 
possible. 

The $4 million FMS request level fc 
Malaysia in FY 1988 is designed to 
restore continuity to the program as th> 
Malaysian Armed Forces adjust to theii 
new missions. Although Malaysia has 
preferred to utilize FMS credits to 
acquire spare parts for U.S. -origin equi 
ment, additional purchases are likely 
when the Malaysian economy recovers. 



Singapore 

Singapore plays an important role 
within ASEAN and occupies a pivotal 
geographic position at the juncture of 
the Pacific and Indian Oceans. Singapoi 
is a valuable port-of-call for U.S. ships 
and aircraft and offers important 
maintenance and support facilities. A 
nonaligned nation, Singapore plays a 
moderating role within the Nonaligned 
Movement and in United Nations fora. 
Singapore has been steadfast in its 
opposition to Soviet actions in South an 
Southeast Asia, and Singapore's leader: 
have publicly called for the United 
States to maintain a continuing regiona 
security presence as a deterrent to 
Soviet expansionism. Additionally, 
Singapore has strongly supported 
ASEAN's strategy for achieving a 
political settlement of the Cambodian 
problem and an end to Vietnamese occu 
pation of that country. 

For FY 1988, we are requesting an 
IMET program of $50,000. This modest 
amount of assistance serves to demon- 
strate our continuing interest in 
Singapore's security and independence. 
It supports the continued development 
of Singapore's small but highly profi- 
cient armed forces and their ability to 
protect the international sea and 
airlanes through the Strait of Malacca. 
The United States is an increasingly 
important source of military training ani 
expertise for Singapore, as well as a sup 
plier of military equipment. 



34 



'am 



EAST ASIA 



ambodia 

for more than 8 years, Vietnam has 
ised its massive military might to sub- 
Jugate Cambodia and turn it into a 
/assal state. The People's Army of Viet- 
Jiam continues to deploy about 140,000 
Occupation troops inside the country. 
Vietnamese military and civilian advisers 
; .re pervasive and are involved in all 
ispects of the government and economy, 
"he Heng Samrin regime, which Hanoi 
istalled after routing the Khmer Rouge 
rom Phnom Penh, remains dependent 
n the Vietnamese presence. 

The occupation of Cambodia by Viet- 
am represents a clear and immediate 
inreat to the security of Thailand and to 
LSEAN stability. The presence of Viet- 
amese combat troops on its borders has 
bliged Thailand to assume the onerous 
iisk of expanding its own military 
resence on the border. The exodus of 
;veral hundred thousand Cambodians to 
le border region, most of whom con- 
i nue to live there under the protection 
If the United Nations, has further 
v.rained Thai resources. Thailand has 
jsponded to the challenge, however, 
Kad has successfully countered Viet- 
amese cross-border incursions while 
icilitating UN relief efforts. ASEAN 
l is also responded effectively to the 
il ietnamese challenge. It has led the 

rowing international opposition to the 
) pupation of Cambodia and has put 
!eth into the diplomatic isolation of 
lietnam. ASEAN has also provided 
plomatic and other support to help 
lild up the international stature and 
ipabilities of the Cambodian noncom- 
unist resistance as part of a unified 
Dlicy to secure a negotiated settlement. 

The noncommunists represent the 
ily alternative to Vietnamese occupa- 
on or the return of the brutal Khmer 
ouge. We have been encouraged 
;cently by their progress in expanding 
leir political and military presence 
iside Cambodia. They have compen- 
ited for the loss of border camps in 
}85 by deploying smaller more mobile 
>rces deeper in Cambodia, where they 
•e building logistical bases to support 
<panded operations in the future. The 
lysical presence of the noncommunists 
iside Cambodia can demonstrate to the 
ambodian people that they do not have 
) choose solely between the communist 
eng Samrin regime or the communist 
limer Rouge. 

The prime goals of U.S. assistance to 
le Cambodian noncommunist resistance 
Drees are to respond to ASEAN's 
lebruary 1985 appeal for international 
apport for the noncommunist resist- 



ance; to demonstrate tangible U.S. sup- 
port for the ASEAN strategy on Cam- 
bodia; to improve the positioning and 
strength of the noncommunists vis-a-vis 
the Khmer Rouge and help provide a 
counterweight to the Khmer Rouge 
within the coalition government of 
Democratic Kampuchea; and to 
strengthen the actual effectiveness of 
the resistance forces themselves. 
Although our assistance program is not 
large, it is an important demonstration 
of our commitment and represents a 
direct, tangible response to ASEAN's 
request for the international community 
to aid the Cambodian people in their 
political and military struggle. 

The $5 million in ESF funds author- 
ized for the assistance program will pro- 
vide funds for nonlethal activities in sup- 
port of the noncommunist resistance. 
These activities will contribute directly 
to strengthening the effectiveness of the 
noncommunist resistance forces. 

Pacific Islands 

One of our principal foreign policy goals 
in the South Pacific is strategic in nature 
and relates to the long-held bipartisan 
determination that the region should not 
fall under the influence of any power 
that might be hostile to the United 
States. Another major focus of U.S. 
interest in the region is to participate in 
the growth of the South Pacific's 
regional economies and democratic 
development. In the view of this Admin- 
istration, the surest way to achieve these 
goals is to work with the governments of 
the region to strengthen their public and 
private institutions and to assist them in 
promoting economic growth. 

When considering our relationship 
with the South Pacific, it is useful to 
keep in mind an unusual characteristic of 
the region, that is, an area made up of 
almost exclusively democratic, pro free 
enterprise governments that regularly 
seek a renewal of their mandate from 
the people. The Administration of Presi- 
dent Reagan is committed to assisting 
the independent nations of the South 
Pacific maintain the institutions that 
have produced this environment of 
freedom. In the past year, it has taken 
two major steps to underscore the 
seriousness of that commitment and our 
desire to work with the region to find 
solutions to problems. 

Regional Fisheries Treaty. Last 
October one of your former colleagues 
and now Under Secretary of State, Ed 
Derwinski, represented the Secretary 
at the final negotiating session for a 
regional fisheries treaty between the 



United States and the 16 member 
nations of the Forum Fisheries Agency. 
This treaty, which we expect to be 
signed within the next few months, will 
remove from our relationship with the 
region a contentious and politically 
volatile issue produced by differing 
views on coastal state jurisdiction over 
highly migratory species of tuna. Our 
differences with the region over this 
issue were exploited by our global adver- 
saries. In this sense, the treaty is a 
vehicle for addressing national security 
concerns as well as our economic rela- 
tionships in the area. While the purpose 
of the treaty is to address and resolve a 
serious dispute between the United 
States and the nations of the region and 
the $10 million ESF assistance package 
associated with it, it will also serve the 
purpose of assisting them to develop an 
indigenous fishing industry and more 
vigorous local economies. 

The successful conclusion of the 
fisheries negotiations in October was 
followed 1 month later by our signing of 
the Convention for the Protection of the 
Natural Resources and Environment of 
the South Pacific Region and associated 
protocols. Under this convention, the 
United States agrees not to pollute the 
marine environment, to cooperate in 
environmental protection, to prepare 
environmental impact assessments for 
major projects, and to share information 
with the other convention parties. The 
convention contains a specific prohibition 
on sea disposal of radioactive wastes in 
the convention area and a provision for 
the prevention of pollution from nuclear 
testing. The convention represented a 
major policy initiative by the states of 
the region that we were pleased to 
support. 

Nuclear Free Zone Treaty. Of 

course, we have not been able to respond 
positively to every regional initiative. 
Earlier this month, for instance, we 
informed the region's governments that 
in view of our global security interests 
and responsibilities, the United States 
was not, under current circumstances, in 
a position to sign the three protocols to 
the South Pacific Nuclear Free Zone 
Treaty. At the time we noted that our 
practices and activities in the region are 
not inconsistent with the treaty or its 
protocols. We appreciate the region's 
commitment to nonproliferation repre- 
sented by the Rarotonga treaty, as we 
do the efforts by members of the South 
Pacific Forum to insure that the treaty 
took into account our regional security 
responsibilities. As you know, the United 
States has signed nuclear-free-zone 



: 1ay 1987 



35 



ECONOMICS 



treaties and protocols in the past as part 
of our constant search for ways to 
enhance nonproliferation. Accordingly, 
we did not ignore or discount the 
interests of the South Pacific Forum in 
enhancing the region's security. Indeed, 
we gave the views of our friends in the 
region the most careful attention. In the 
end, however, we could not in good con- 
science isolate the South Pacific from its 
broader strategic relationships. 

In examining the treaty protocols, 
we were concerned above all that we not 
in any way undermine the policy of 
deterrence that has been the cornerstone 
of Western security since World War II. 
We concluded that the growing number 
of proposals for nuclear-free-zones has 
the potential to undermine that policy. 
We could not ignore the fact that were 
we to sign the treaty of Rarotonga pro- 
tocols, our adherence would be used by 
others to support the creation of nuclear- 
free-zones elsewhere, a situation which 
could be exploited by our adversaries. 
The proliferation of these zones in the 
free world, unmatched by disarmament 
in the Soviet bloc, would clearly be 
detrimental to Western security. While 
our friends in the region have expressed 
disappointment with our decision, we are 
confident that the fundamental strength 
of our relations with the South Pacific 
will ensure that the region will 
understand. 

Assistance Request. For FY 1988, 
and reflecting the Administration's 
desire to work with the Congress and 
bring the budget under tight control, we 
are seeking only $4 million in develop- 
ment assistance, the minimum level con- 
sistent with our foreign policy goals in 
the region. This money will be channeled 
into programs and projects designed to 
strengthen the region's private sector, 
promote the development of rural agri- 
culture, and improve public health. In 
addition, we will seek congressional 
approval for $13.2 million in ESF to 
fund a modest bilateral assistance pro- 
gram in Fiji, help develop the region's 
ability to analyze available data on 
off-shore mineral and hydrocarbon 
resources, and develop the region's 
fisheries. The latter component of the 
ESF request has two distinct elements- 
Si. 5 million to support our ongoing 
regional fisheries development program 
and $10 million to fund the assistance 
package developed in conjunction with 
the regional fisheries treaty for treaty 
signatories. 

Finally, the Administration will seek 
your support for a modest $230,000 
military training, or IMET, program for 



the region and $300,000 in MAP to com- 
plete the small-arms replacement pro- 
gram for the Royal Fiji Military Force, 
which maintains 1,000 men in the UN 
Interim Force in Lebanon (UNIFIL) and 
the Sinai Multilateral Force and 
Observers (MFO). 

Marshall Islands, Federated States 
of Micronesia, and the Trust Territory 
of the Pacific Islands. Elsewhere in the 

Pacific, under PL 99-239-the compact 
legislation for the Marshall Islands and 
the Federated States of Micronesia— 
U.S. economic assistance to the freely 
associated states will be provided 
through the Interior Department budget. 
Therefore, the Department of State 
budget proposal contains no request for 
compact funding, and this funding is 
lodged in the Interior Department 
proposal. 

I wish to point out, however, that 
under the same public law, the Depart- 
ment of State will be responsible for the 
conduct of our relations with those 
states. The President, on October 16, 
1986, issued Executive Order No. 12569 
and directed the establishment of an 
Office of Freely Associated State Affairs 
within the Department of State to carry 
out these responsibilities. The new office 
has now been established in the East 
Asian and Pacific Affairs Bureau of the 
State Department. 



Acting pursuant to these statutes an 
executive instruments, the United State 
and the freely associated states have 
gotten off to a good start on implement- 
ing the Compact of Free Association. 
We are establishing our representative 
posts in Kolonia, Pohnpei, and Majuro, 
Marshall Islands, and the two freely 
associated states have established 
official representation in Washington. 
Both freely associated states are 
expected to become members of the 
South Pacific Forum this summer, and 
their new political status has been 
formally recognized by a number of the 
regional states, including Australia, Ne\ 
Zealand, Japan, Fiji, and Western 
Samoa. 

Palau has not yet approved the Con- 
pact of Free Association in accordance 
with its internal constitutional require- 
ment of a 75% majority and thus 
remains under the trusteeship agree- 
ment. We will continue to discuss the 
political status issues with Palau as thej 
relate to implementation of the approve 
compact but are not in a position to 
renegotiate its terms. Trusteeship-level 
funding for Palau will continue to be pr< 
vided under the Interior Department 
budget. 



'The complete transcript of the hearings 
will be published by the committee and willb 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. ■ 



t 



Structural Adjustment, Dialogue, 
and U.S. -Japan Economic Relations 



by W. Allen Wallis 

Address before the annual Executive 
Committee meeting of the U.S. -Japan 
Business Council in Kona. Hawaii, on 
February 16, 1987. Mr. Wallis is Under 
Secretary for Economic and Agricultural 
Affairs. 

I do not have to tell you that the U.S.- 
Japan economic relationship is, today, 
the most dynamic— and controversial— 
economic relationship in the world. You 
recognize better than anyone how wide- 
ranging, complex, and multifaceted it 
has become. 

Just look at the statistics. As a 
statistician, I know that figures alone do 
not begin to tell the whole story. But 
they are, indeed, impressive. Together, 
the United States and Japan account for 



60% of OECD [Organization for Eco- 
nomic Cooperation and Development] 
production; two-way trade now exceeds 
$110 billion annually; total direct invest- 
ment in each other's economies has 
reached some $25 billion and is growing 
dramatically. The United States and 
Japan together provide 75% of all new 
internationally syndicated bank lending 
and 45% of all economic assistance to 
developing countries. 

You, your companies, and the 
universe of companies that you repre- 
sent are the ones who are largely 
responsible for making all this happen. 
You are the pioneers and explorers who 
have committed time, resources, and 
talent to the Japanese and American 
markets, risking the health of your 
balance sheets on these two economies. 



36 



Department of State Bulletin 



ECONOMICS 



The Importance of 
Structural Adjustment 

h am pleased you have asked me to speak 
!on structural adjustment as an element 
of U.S. -Japan economic relations. You, 
(better than anyone, understand the con- 
stancy of change. New economic condi- 
tions develop, exchange rates shift, new 
technologies come on stream, new prod- 
ucts enter the marketplace, and the less 
innovative, less productive, and less effi- 
cient producers fall by the wayside. As 
iDainful as this process of adjustment 
may be to individual companies, overall 
It strengthens our economies and helps 
;hem reach higher levels of growth by 
promoting the more efficient and more 
productive. 

This assumes, of course, that govern- 
nent policies and programs, as well as 
private attitudes and practices, allow the 
adjustment process to go forward. In our 
narket systems, adjustment is, and must 
|'>e, a natural part of economic life. The 
j economy does not change fundamentally 
i it any one moment; if there are no bar- 
; iers to adjustment, it reacts and adjusts 
ontinuously. 

The decade of the 1970s gave us all a 
ometimes harsh lesson in the impor- 
ance of adjustment. The sharp breaks 
rith the past— on exchange rates, 
nergy, food and raw material prices, 
,nd inflation, just to name a few— called 
or major adjustments in our economies, 
iadly, we found that the flexibility 
seeded for adjustment was not always 
here. This was especially true in 
Europe, where government policies have 
"npeded the natural processes of adjust- 
lent. 

The United States and Japan by the 
arly 1980s had adjusted reasonably well 
o the dislocations of the 1970s. But new 
igns of international imbalance began to 
ppear. The United States experienced a 
eriod of strong growth and even 
tronger expressions of confidence in the 
J.S. economy. Our currency appreciated 
apidly, beyond anything explainable by 
elative inflation or by trade in goods 
nd services. 

Favorable investment opportunities 
i the United States, combined with low 
ational saving and with a poor invest- 
lent climate in most of the rest of the 
/orld, generated a large surplus on our 
apital account. We were the recipients 
f a sizable net inflow of the world's sav- 
ng. This capital inflow led us to be also 
he recipients of a sizable net inflow of 
he world's goods. The U.S. trade and 
urrent account deficits reached record 
iiroportions, month after month. 



Across the Pacific, Japan was 
experiencing a similar phenomenon in 
reverse. Strong domestic saving and 
sluggish investment, both public and 
private, led to a deficit on capital 
account. The Japanese sought 
remunerative investment opportunities 
abroad and found them in the United 
States. But the other side of the coin 
was that Japan's trade and current 
account position moved to record 
surpluses, both with the world as a 
whole and especially with the United 
States. 

International imbalances are not 
inherently bad, at least in economic 
terms. Whether they are detrimental to 
our two economies, or to the global 
economy, depends largely on the effi- 
ciency with which each economy 
operates. It can be detrimental if saving 
or consumption is artificially encouraged 
or discouraged by governmental action, 
if investment decisions are directed or 
distorted by public policy, or if the public 
sector is simply too overbearing, either 
through regulation or sheer weight. In 
these circumstances, the international 
imbalances will reflect policy-induced 
domestic imbalances and inefficiencies. 
Policies that inhibit adjustment to 
change interfere not only in the domestic 
economy but also in the global economic 
relationship among countries. 

This is why the issue of structural 
adjustment has become one of the major 
items on the international economic 
agenda and why it has received attention 
at economic summit meetings, most 
recently at the Bonn and Tokyo sum- 
mits. On the basis of the consensus 
reached at the summits, economic 
officials of the major industrialized coun- 
tries outlined in the "Plaza agreement" 
appropriate domestic structural 
measures, such as reducing rigidities in 
labor and capital markets, to provide a 
sound basis for more balanced, noninfla- 
tionary economic growth. 

The OECD is nearing the end of an 
ambitious work program on structural 
adjustment, including agriculture. The 
OECD's analysis and recommendations 
will be examined this May by OECD 
government ministers and will provide 
guidance for the hard political decisions 
that governments must make. 

The United States has approached 
its own structural reform with four prin- 
cipal economic priorities: 

• Deregulating our domestic 
economy; 

• Curtailing the growth of govern- 
ment expenditures; 

• Reforming our tax system; and 



• Opening the international market, 
in part by resisting protectionism at 
home and championing a new round of 
trade negotiations internationally. 

We have not done badly. Tax reform 
is a reality. Far-reaching steps have 
been taken in deregulation. A new trade 
round has been launched, and we are 
aggressively tackling the most intracta- 
ble problem— excessive government 
expenditure— which is the root of our 
excessive public sector deficits. We are 
making progress even on this front, and 
our Federal deficits are on a downtrend. 
All told, this is not a bad record— in fact, 
comparison with any other country 
makes it look miraculously good. 

The Political Dimension 

Whether there is an economic problem 
or not, we must face the fact that large 
imbalances, especially trade deficits, lead 
inevitably to political problems. And we 
do have a serious political problem. 
Despite 4 years of uninterrupted growth 
in the United States, the lowest inflation 
in over two decades, dramatically lower 
interest rates, real prices of energy 
below those of the early 1970s, more 
employment than ever— despite this 
record, the political process in the 
United States is virtually overwhelmed 
by sentiments in favor of protection. The 
process of adjustment is inexorable but 
is not without discomfort. That discom- 
fort translates into strong political 
forces. 

As Americans look around for 
reasons for the trade deficit, for an 
explanation for our declining 
industries— it seems only natural to 
many of them to focus on a country with 
the opposite trade position. Japan's 
large global surplus and the massive 
bilateral surplus with the United States 
are like bright neon lights attracting 
attention as we search for causes of our 
deficit. 

The United States and Japan are 
addressing the specific trade problems 
between our two countries in a number 
of forums. But both partners know that 
opening markets will not wipe out the 
massive imbalances that are the source 
of our political friction. Estimates are 
that totally free and uninhibited trade 
between the United States and Japan 
would shift the bilateral balance in the 
U.S. favor by no more than $5-$10 
billion, compared to the 1986 deficit of 
$60 billion. We both know that, funda- 
mentally, trade positions are manifesta- 
tions of other influences governing sav- 
ings, investment, and international 



-day 1987 



37 



ECONOMICS 



capital flows. If we do not work to iden- 
tify ways to reduce the domestic imbal- 
ances among these influences and to 
make our economies more efficient, then 
the political woes will persist, even 
beyond our best efforts to open markets 
and liberalize trade. 

Opening Markets in Japan 

During the last 4 or 5 years, we have 
witnessed a sea change in Japanese atti- 
tudes regarding trade, the opening of 
markets, and the Japanese economy. 
During this period, much effort by the 
Japanese Government and private sector 
has focused on liberalizing Japan's 
capital, financial, goods, and services 
markets and opening them to foreign 
products and competition. The process 
has now been extended to whole sectors 
via the MOSS [market-oriented, sector- 
selective] negotiations. Since its trade 
action plan of 1985, the guiding principle 
of Prime Minister Nakasone's govern- 
ment has been that Japan's markets 
should be free in principle, with restric- 
tions only as exceptions. 

This is not to say that the market 
opening process has been completed. 
There is much more to be done, and 
many announced policies and programs 
still need to be fully implemented. To 
address this, U.S. trade policy toward 
Japan will continue to be comprehensive 
in its scope. Our policy's main elements 
are that: 

• We will continue to seek the 
removal of individual trade barriers 
which affect a wide variety of American 
goods and services. 

• We will continue to seek open and 
liberalized markets for entire industrial 
sectors through the so-called MOSS 
process and encourage further liberaliza- 
tion of Japan's financial and capital 
markets. 

• We will continue to deal with the 
fundamental issues that lie behind our 
trade balance by encouraging better 
balance between internal saving and 
investment in both economies and by 
reducing our fiscal deficit. 

• As necessary, we will take 
unilateral action under our own trade 
laws to remove unfair trade practices. 

• We will continue to cooperate with 
Japan internationally to strengthen the 
world trading system and promote the 
success of the new trade round. 

Japan's Maturing Economy 

Japan's economy is maturing. By such 
standards as per capita income and GNP 



38 



[gross national product], it has achieved 
parity with— or surpassed— the other 
major industrialized countries. This was 
achieved, in part, by Japan's very effi- 
cient export sector, which has been able 
to adjust and transform itself by 
responding to emerging opportunities in 
international markets. Thus, Japan 
moved from labor-intensive, low-wage 
industries in the 1960s to today's 
knowledge-intensive, high-technology 
fields such as computers, semiconduc- 
tors, and telecommunications. 

However, Japan has also tried to 
hold on to those sectors where its com- 
parative advantage now is waning, such 
as steel, aluminum, shipbuilding, 
petrochemicals, textiles, and some con- 
sumer electronics. This has been at great 
cost to Japan's economy and to the 
economies of Japan's trading partners 
and competitors. 

Internal Inefficiencies 
in the Japanese Economy 

Japan's success in its export sector has 
created the appearance of a miraculously 
efficient economy. Notwithstanding that 
popular image, however, much of the 
Japanese economy is astonishingly 
backward and inefficient. It is ironic that 
Japan, which in its foreign trade has 
been so effective in directing its 
resources and talents into the most pro- 
ductive areas, has not allowed the same 
kind of efficiencies to operate in its 
domestic sector. A few examples: 

Agriculture. America's farmers are 
five times as productive as Japan's and 
could provide food to Japanese con- 
sumers at a much lower cost. Yet they 
are prevented from doing so, in many 
cases, because of quotas and high tariffs. 
Many of the products that we are inter- 
ested in selling— for example, wine, beef, 
citrus, and fruit juices— are marginal to 
the Japanese diet, and the economic 
impact on Japan's farmers of a more 
open market for these products would 
not be great. Rice is the staple of the 
Japanese table, especially at the lower 
income levels, yet it sells there for about 
seven times the world price. Soybeans 
also sell for about seven times the world 
price. Because an inefficient sector is 
protected, the Japanese consumer and 
the Japanese economy as a whole pay 
the price. 

Forestry and Paper Products. 

Japan has no problem buying logs from 
us— in fact, they go in duty free— but if 
our sawmills, which are much more effi- 
cient than Japan's, cut those logs and 
process them into plywood or paper, 



Japan levies a high tariff on them. The 
result? Japanese houses and furniture 
are more expensive than they need to 
be. Every time anyone in Japan puts pen 
to paper or remodels his house, he is 
being forced to subsidize an inefficient 
industry. A lumberman told me that he 
has seen many mills in Japan that are 
more primitive than any that have 
operated in this country in this century. 

Retailing and Distribution. Japan's 
cumbersome distribution system raises 
the price of goods, especially imported 
goods, and also restricts their availabil- 
ity. Even with the enormous fall in the 
dollar, we do not see the lower yen cost 
of foreign goods being fully passed on to 
Japanese consumers. Japan's retailing 
law limits the size of stores, so even 
though a larger retailer could provide a 
greater variety of goods at a lower price 
he can be prevented from doing so. 
Thus, there is underinvestment in large 
retail outlets. 

Depressed Industries. When indus- 
tries in Japan become depressed, Japan 
moves to subsidize them by providing 
specific tax benefits and loan 
guarantees; it also protects a number of 
them by organizing cartels and barring 
lower priced imports. Industrial users, 
therefore, are forced to buy the more 
expensive products of an inefficient 
domestic industry. Today, 22 industries 
in Japan— most of them in such basic 
materials as petrochemicals, fertilizers, 
paper, textiles, and aluminum— are 
classified as depressed. Recently, as the 
yen strengthened, the Japanese Govern- 
ment has instituted loan and other pro- 
grams which I fear may act to keep inef- 
ficient companies in business. It is vital 
that such assistance, if there must be 
assistance, promote the rapid adjust- 
ment of enterprises out of inefficient 
sectors; and this is, in fact, the 
announced intention of the government. 

Buying Practices. Many Japanese 
companies prefer to buy products made 
by companies in their own "group" or 
with which they have been doing 
business for many years. I recognize that 
part of the reason for this has to do with 
the nature of Japanese society. But the 
result is that outsiders, whether 
foreigners or Japanese, are excluded, 
and this prevents the end user from 
obtaining the best product at the best 
price. 

Financial Markets. Japan's postwar 
financial structure has taken the savings 
of the Japanese people and diverted 
them primarily into industrial invest- 
ment. Today, Japan's companies are 



Department of State Bulletin 



ECONOMICS 



financing much of their investment from 
new stock issues and corporate profits. 
Yet Japan's high rate of savings con- 
nues, so the surplus has been moving 
verseas and expanding Japan's exports, 
apan could put more of its savings to 
ork at home. Yet its financial system 
oes not effectively channel savings into 
their most productive uses where they 
would bring most benefit to the 
(Japanese people. I believe, for example, 
i that there is an unfilled demand in Japan 
ifor consumer credit and housing loans. 

Changing Course in Japan 

JJapan is now at a historic turning point 
in its relations with the international 
jeconomy. There is a consensus building 
En Japan that Japan must, once again, 
transform its economy. This time, as 
Prime Minister Nakasone told President 
IReagan last April, Japan must rely more 
;3n domestic demand as the engine of 
growth. Japanese Government officials 
and business leaders recognize that the 
economic and foreign trade structures of 
Japan, dependent as they have been on 
! consistent trade and financial surpluses 
; and the good will of the rest of the 
world, can no longer be sustained, 
oolitically or economically. 

Over the last year or so, this need 
I for change has been widely recognized. 
! A.s you know, the Maekawa commission 
recommended not only increased market 
' access and further liberalization of 
Japan's capital and financial markets but 
also the promotion of domestic demand 
and a transformation of Japan's indus- 
trial structure. 

However, Prime Minister Nakasone 
and the Maekawa commission are not 
the only ones calling for change in 
Japan. The Keidanren, Japan's most 
prestigious business organization, has 
issued its own policy proposals, stating 
that transition to a totally free trade 
1 system must become a Japanese national 
goal. It said that Japan should remove 
all import restrictions, abolish all tariffs 
on manufactured goods, undertake 
thorough deregulation of its economy, 
and achieve openness in its admin- 
istrative systems and operations. The 
Ministry of International Trade and 
Industry (MITI), in its report on the 
future of Japanese industry, said that 
Japan must open up its market further 
to foreign products and "positively 
increase" imports cf manufactured 
goods by promoting a horizontal division 
of labor so that imported manufactured 
I goods will be woven into Japan's produc- 
tion and consumption structures. 



U.S. Views on Structural 
Adjustment in Japan 

Such views in Japan dovetail broadly 
with U.S. views. While it is, of course, 
for the Japanese themselves to deter- 
mine the particular policies and reforms 
appropriate to the Japanese context, the 
United States would like to see: 

• Greater internationalization, 
deregulation, freedom, and openness 
throughout the Japanese economy; and 

• The removal of those inefficiencies 
that characterize much of Japan's 
economy. 

Consistent with our trade policy vis- 
a-vis Japan, we would also want to see: 

• Broad-gauged changes in Japan 
that remove the policies, practices, and 
attitudes that discriminate against 
foreign companies, products, and serv- 
ices; and 

• Japan becoming an importing 
superpower, not just an exporting 
superpower. 

The point I would make is not simply 
that stronger Japanese growth must be 
generated from domestic sources if cur- 
rent account imbalances are to be 
reduced in an orderly, sustainable 
fashion. Rather, it is that there is a very 
wide range of attitudes, policies, and 
institutions which have contributed to 
the one-sided, export-oriented nature of 
the Japanese economy and that efforts 
to restructure need to take the same 
wide range. 

I am talking about fundamental 
structural change in the Japanese 
economy— not, for example, the matter 
of how much more money should be 
spent on public works projects. Thus, I 
would hope Japan would undertake a 
thorough assessment of government 
policies which affect the allocation of 
resources among sectors and between 
consumption and savings. If government 
policies interfere with the transmission 
of market signals, the structure of the 
economy evolves in a distorted way. 

Let me take the example of 
agriculture one more time. I have 
already pointed out that Japan's protec- 
tionist agricultural policy directly 
reduces imports and costs consumers 
dearly. But Japanese agricultural policy 
has another, unintentional effect. Price 
supports for agricultural products in 
Japan encourage continued use of scarce 
land for farming. This system, combined 
with the tax treatment of capital gains, 
limits the availability of land for residen- 
tial purposes. The scarcity of residential 



property is reflected in the very high 
cost of housing which makes it necessary 
to secure a large mortgage. But because 
mortgage financing is scarce, it is very 
expensive. Thus, in order to have afford- 
able mortgage payments, a potential 
homeowner must come up with a large 
downpayment. The consumer's need to 
accumulate large amounts of saving to 
make a sizable downpayment and subse- 
quently heavy monthly mortgage pay- 
ments depresses the consumer goods 
market and also, perhaps, imports. 

This is just one example of the kinds 
of government policies which need to be 
changed if Japan is to build a solid 
domestic basis for growth. Whatever the 
purpose of these policies, they clearly 
have significant side effects on the level 
and structure of domestic demand in 
Japan. This has consequences both for 
the current economic situation and for 
the future. A stronger, more flexible 
domestic market is important to meet 
the immediate problem of external 
imbalances, and also to prepare Japan's 
economy for the future, when newly 
industrialized countries will increase 
competition in export markets tradi- 
tionally dominated by Japanese 
products. 

Savings, Investment, 
and Structural Imbalances 

The external imbalances I have men- 
tioned reflect internal imbalances 
between saving and domestic invest- 
ment. The surplus in Japan's balance of 
payments is essentially equal to the 
excess of its domestic savings over its 
investment. In particular, Japan's tradi- 
tional fiscal, monetary, and regulatory 
policies may be encouraging higher sav- 
ing, lower investment in housing and 
infrastructure, greater emphasis on 
export-led growth, and larger trade 
surpluses than more efficient, market- 
oriented policies might encourage. 
Japan's savings are large, and because 
its economy, except for export indus- 
tries, is generally inefficient, only part of 
those savings is invested in Japan. A 
large part is invested abroad, and 
foreign investment in Japan is relatively 
low. Thus, an important step toward 
reducing Japan's payments surplus is to 
increase the attractiveness of Japan to 
investors— both Japanese and non- 
Japanese investors. This, in turn, 
requires drastic measures to reduce the 
inefficiencies in the Japanese economy. 

Let me hasten to add that this is the 
kind of "demand expansion," not fiscal 
deficits or wasteful public works, that 
will benefit the Japanese people and also 



May 1987 



39 



ECONOMICS 



reduce the trade imbalance— that is, 
expansion of the demand for investment 
in Japan. 

The U.S. -Japan Structural Dialogue 

As you know, President Reagan and 
Prime Minister Nakasone agreed last 
April that it would be useful for our two 
governments to discuss structural 
economic issues in both our countries. 
They both recognized that it was time to 
emphasize fundamental domestic 
imbalances that create trade and other 
external imbalances— and to begin to 
correct them. The dialogue is intended to 
define better the causes of bilateral and 
multilateral imbalances and to identify 
alternative solutions. In this way, it can 
contribute to reducing external 
imbalances. 

For the U.S. side, a central theme 
for the dialogue, as we see it, is that the 
right policies can contribute not only to 
an easier adjustment by Japan to a 
changing international environment but, 
in addition, can make a much-needed 
contribution to the international adjust- 
ment of other countries. Structural 
adjustment, therefore, is now a key ele- 
ment of U.S. economic policy vis-a-vis 
Japan. 

The importance of the structural 
dialogue to both our countries is mir- 
rored in the high-level participation in 
our two meetings thus far. Both sides 
have been represented by at least five 
sub-Cabinet officials, and the Japanese 
have traveled twice to the United States 
for the meetings. My co-chairman, 
[Assistant Secretary for International 
Affairs] David Mulford of the Treasury 
Department, and I have been joined by 
Dan Amstutz, Under Secretary of 
Agriculture; Bruce Smart, Under 
Secretary of Commerce; and Michael 
Mussa, a member of the President's 
Council of Economic Advisers. 

The Japanese have sent Vice 
Ministers from Foreign Affairs, Finance, 
Agriculture, MITI, and the Economic 
Planning Agency. In the course of the 
dialogue, we will be studying the evolu- 
tion of the external imbalances; the 
macroeconomic setting in the two coun- 
tries and how it contributes to the 
imbalances; and a number of specific sec- 
toral questions, such as agriculture, 
housing, consumer credit, services, and 
labor markets. One way or another, the 
dialogue will shed some light on the prin- 
cipal factors that are contributing to our 
respective trade deficits and surpluses. 



It is important to emphasize that the 
structural dialogue is a dialogue or 
exchange of ideas, not a negotiation. The 
United States has no particular list of 
requests or specific desired outcomes. 
Rather, we hope to bring for considera- 
tion by the Japanese the U.S. perspec- 
tive on the international dimension of 
the problems, as well as some con- 
siderable experience with many of the 
issues of deregulation and market 
liberalization. 

We have had broad experience in 
making our markets work better, and 
our experience may hold some relevance 
for Japan. The U.S. economy, for exam- 
ple, recovered so vigorously from the 
1981-82 recession, in part, because we 
had removed many structural impedi- 
ments to growth through deregulation, 
tax reform, and other measures. In part, 
too, the strength of the recovery was 
because, thanks to a presidential veto, 
we avoided the usual pump-priming 
measures that are alleged to create jobs. 
I believe that had Japan implemented 
similar measures 5 or 10 years ago— 
measures such as are now recommended 
in the Maekawa report— Japan would be 
better able to adjust to its current 
economic situation. 



Exploiting Change 

In closing, let me reiterate a point I ha\ 
been making to European audiences 
when I discuss structural adjustment 
issues with them. That point is that we 
must recognize that change is not only 
inevitable but also desirable and that ou 
futures lie in exploiting change, not 
hampering it. 

Japan's changing, of course, is a 
remarkable, almost unprecedented 
development. There are few countries 
brave enough to undertake the kind of 
far-reaching review of what they must 
do to fulfill better their international 
responsibilities and promote their own 
welfare. I would stress, however, the 
need for timely action. No one would 
contend that rapid structural economic 
change is easy or painless. Demands for 
change can overwhelm the ability of a 
democratic political process to deal with 
the costs. The Reagan Administration 
has kept the negative forces of protec- 
tionism at bay. Recent currency adjust- 
ments will help make our products more 
competitive in world markets, and our 
trade deficits should start to shrink. But 
the fundamental imbalance between pro 
duction and spending, both in the Unitec 
States and in Japan, needs more work. 
Our dialogue on structural adjustment is 
a key part of that work. ■ 



U.S. Foreign Agricultural Policy 
and the Sugar Program 



by Douglas W. McMinn 

Address before the International 
Sweetner Colloquium in Palm Springs, 
California, on February 2b, 1987. Mr. 
McMinn is Assistant Secretary for 
Economic and Business Affairs. 

Before dealing with the sugar issue 
specifically, let me put it in the broader 
context of world agricultural policies, 
foreign relations, and an improved 
domestic farm economy. 

Trade in farm products has become a 
major source of friction in international 
relations. I'm sure that comes as no sur- 
prise to you. Government price support 
programs, here and abroad, have sev- 
erely weakened the link between supply 
and demand. One important result has 
been massive overproduction. The 
world's markets are glutted in nearly all 
major agricultural commodities. Export 



prices are weak, generally speaking, anc 
world trade (in volume terms) in farm 
products has contracted sharply from 
levels earlier this decade. 

World grain sales, for example, fell 
from 203 million tons in crop year 
1980-81 to an estimated 171 million tons 
in 1986-87. World production, on the 
other hand, shielded by government pro- 
grams, has continued to climb. 

In addition to excessive price sup- 
port programs, government subsidies 
and trade barriers have become rampant 
in agricultural trade. Disputes are 
multiplying, and nagging agricultural 
trade issues increasingly complicate rela- 
tions with our trading partners, many of 
whom are among our closest friends and 
allies. 

The European Community (EC) is 
responsible, along with ourselves and 
others, for some of the major distortions 
in world agricultural trade. The Euro- 



40 



Department of State Bulletin 



ECONOMICS 



Ipean Community has built its common 
;agricultural policy (the CAP) on a pro- 
tective system that aids farmers with 
jhigh price supports, stimulates over- 
production, and floods its surpluses onto 
(world markets through export subsidies, 
'import trade is also carefully managed, 
lin some cases by quotas, in others 
through variable levies. 

The Japanese have pursued protec- 
tionist policies as well, especially with 
respect to Japan's domestic rice, citrus, 
ind beef producers. The result is prices 
to consumers in Japan many times 
greater than would be the case if those 
Droducts were obtained abroad. 

In this distorted trade environment, 
America's advantageous resource base, 
advanced agribusiness technology, and 
skilled and dedicated farmers really 
zount for less and less. The value of U.S. 
igricultural exports has persistently 
ieclined in the 1980s, from a peak of 
!: 543.7 billion in fiscal year (FY) 1981 to 
if 26.3 billion in FY 1986. Through 
narketing loans, the export enhance- 
nent program, and a number of other 
jrograms, the United States has 
■i -esorted to subsidies to price agricultural 
I exports at world market prices. Enormous 
;ums are now being transferred to farm 
aroducers from taxpayers and consumers. 

The question is: how can we put an 
?nd to the damage to our exports— and 
;o world agricultural trade generally— 
;hat is being inflicted by distortive 
foreign and domestic agricultural 
oolicies? The answer is an obvious but 
difficult one. Every country must be 
Drepared to pursue meaningful reform 
an both the international and domestic 
fronts— making agriculture more respon- 
sive to market forces. 

Reform Must Include World 
Trade and Domestic Policies 

Internationally, the United States and 
its trading partners launched a new 
round of trade negotiations last year— 
the Uruguay Round. Agriculture will be 
a focus of this new round of negotia- 
tions. We are aiming for new interna- 
tional rules to discipline trade in 
agriculture and to dismantle the tradi- 
tional barriers that inhibit trade. 

Domestically, agricultural nations 
must drastically reform their own farm 
programs. This is where the real break- 
through will occur. Implementation of 
program reform will take time, but our 
goal at the end of the process is a freer 
market. Farmers in every major country 
i should be able to base production deci- 
sions on market signals. Now it isn't 
likely that every country will agree to 



abandon its farm programs altogether. 
What we seek is that government farm 
programs not give incentives to over- 
produce and that they not distort trade. 
In that kind of climate, U.S. farm 
exports could and would expand 
substantially. 

For its part, the Administration is 
submitting legislation to Congress to 
accelerate the process of putting our 
domestic programs on a more market- 
oriented basis. We would like our 
Secretary of Agriculture to have greater 
flexibility to reduce target prices. We 
would also like to pursue a policy of 
decoupling, where we would give 
farmers an option of receiving income 
support in a manner not dependent on 
production. The proposed measures 
would not cure all our trade problems, 
but they would bridle the runaway 
growth of stocks in the United States 
and reduce overall program costs. 

The Sugar Program 

The international sugar market has mir- 
rored, in many ways, the ills of world 
production and trade in agricultural 
products generally. Production spurted 
in 1981-82 in response to very high 
prices the previous 2 years. Since then, 
world markets have been unable to ab- 
sorb the excess stocks built up in that 
year and the following one. Despite 
world market prices depressed below 
costs of production in almost every pro- 
ducing country, government support 
programs have prevented any ap- 
preciable drop in production. Although 
global production and consumption of 
sugar are now roughly in balance, 
forecasters predict no significant im- 
provement in world sugar prices due to 
excess stocks. 

The sugar programs of the European 
Community and the United States are by 
far the main sources of distortion in the 
world's sugar market. The European 
Community has a tightly controlled 
sugar system. Although limited through 
internal quotas, EC production is 
millions of tons greater than would be 
the case without high domestic price sup- 
ports. The EC also provides preferential 
access to its market to certain develop- 
ing countries of Africa, Asia, and 
elsewhere. Since production in the EC' 
exceeds demand, the Europeans sub- 
sidize the disposal of sugar exports in 
third markets, competing with more effi- 
cient producers. The result is a system 
which inhibits comparative advantage, 
adds to consumer costs, and is a major 
factor depressing world prices. 



It is difficult to put a precise figure 
on the impact of European Community 
policies on the world sugar market. As a 
rough order of magnitude, however, the 
EC was a net importer of about 1 million 
tons of sugar in the early 1970s. Net EC 
sugar exports are now nearly 3 million 
tons. Thus, the swing from net importer 
to net exporter has been about 4 million 
tons, and this may considerably under- 
state the effect of EC sugar price sup- 
ports on its production. 

The high sugar price supports writ- 
ten into U.S. law by the 1981 act have 
had, predictably, much the same effect 
on domestic production and on the 
world market as the European Com- 
munity's program. In 1980, before the 
present sugar program was written into 
law, annual sugar consumption in the 
United States was 10.2 million tons. 
Domestic production was 5.7 million 
tons, and imports of 4.7 million tons 
made up the difference. In 1980, sugar 
still commanded 67% of the caloric 
sweetener market in the United States, 
despite inroads from corn sweeteners 
during previous decades. 

Since 1980, production under the 
sugar program has increased 10% to 6.3 
million tons. This is high-cost sugar. The 
average cost of refined U.S. -grown beet 
sugar was about 22<t per pound in 1984; 
raw cane sugar cost about the same. In 
the Caribbean and Central America, the 
production cost of cane sugar would be 
in the range of 12C-15C per pound for 
efficient producers. Nevertheless, 
imports for domestic consumption will 
fall to about 1 million tons this year, 
down nearly 4 million tons in just 6 
years. By 1986, U.S. sugar consumption 
had dropped to 7.8 million tons— a 
market loss of 2.4 million tons since 
inception of the 1981 sugar program— as 
high-fructose corn syrup(HFCS) cap- 
tured the soft drink market and virtually 
every other industrial use suitable for li- 
quid caloric sweeteners. Although there 
is some room for debate, it seems likely 
that the United States will become a net 
sugar exporter over the next 2-4 years if 
there is no adjustment to the program. 

Program Costs. The cost of our 
sugar program, taking into account all 
factors, is extraordinary. 

For the food processing industry, the 
program costs a bundle and gives 
another edge to foreign competition. We 
are now importing more sugar in the 
form of foods which used to be processed 
in this country. From FY 1982 to FY 
1986, the sugar entering the United 
States in the form of blends and prod- 
ucts increased by 300,000 tons. I don't 



May 1987 



41 



ECONOMICS 



need to belabor the point to many of you 
in this audience. 

U.S. consumers will have to shell out 
about $3.2 billion extra this year for 
sugar and for products containing sugar 
or corn sweeteners, as a result of the dif- 
ference between U.S. and world market 
prices. 

The sugar program also imposes an 
enormous strain of adjustment on 
foreign suppliers, many of whom are 
friendly nations that face severe 
economic difficulties and, in some cases 
like the Philippines, confront dangerous 
political challenges as well. U.S. sugar 
imports in 1981 were valued roughly at 
$2 billion. This year, the figure will be 
about $390 million. For our Central 
American neighbors— who have endured 
an economic slump throughout the 1980s 
and, in two countries, are struggling 
with communist-led insurgencies— the 
negative effects of the sugar program 
are large in comparison with the trade 
benefits in the first several years of our 
Caribbean Basin Initiative, an initiative 
aimed at promoting economic develop- 
ment. Foreign exchange earnings are 
not the whole story. Jobs lost in sugar, a 
labor-intensive industry, cannot easily be 
made up in new industries. As our 
market has become closed, some of our 
traditional suppliers have become more 
dependent on the Soviet market than on 
us to earn critically needed foreign 
exchange from sugar. 

Impact on Suppliers. The impact on 
our suppliers probably stands out in 
boldest relief in the case of the 
Dominican Republic. In 1981, exports to 
the United States of almost 750,000 
short tons earned roughly $330 million 
for that country. Total sugar sales 
amounted to more than one-third of total 
export earnings. This year's quota of 
160,000 tons for the U.S. market will 
bring in about $65 million— about one- 
fifth as much. The Dominican Republic 
recently signed a long-term agreement 
with the Soviet Union, which, for several 
years now, has been a larger buyer of 
Dominican sugar than the United States. 

The Philippines, our second largest 
supplier, will earn about $70 million less 
this year than in 1981 from sugar sales 
to the United States. While the decline 
in earnings is not as dramatic as in the 
Dominican case, the Philippine sugar 
industry is concentrated in an area 
where economic conditions have con- 
tributed to the strength of a significant 
communist insurgency. 

The U.S. sugar program, as we all 
know, is a corn program as well. HFCS 
has already captured the markets in 



which a syrup is technically suitable, and 
these constitute half of the caloric 
sweetener market. This could never have 
been done without the price umbrella 
provided by the sugar program. Before 
very long, the corn sweetener industry 
could invade sugar's remaining markets 
in the United States with crystalline 
fructose. Some experts believe that, in 
high volume, crystalline fructose could 
be produced competitively at the current 
domestic price of sugar, if that price 
were considered secure. 

The Need for Reform. If the sugar 
program is such bad economic policy, so 
costly to consumers and to our foreign 
policy objectives, what national interest 
does it serve? Frankly, I see none. The 
normal justification for protecting an 
industry from import competition, which 
this Administration strives to do only in 
exceptional cases, is to allow temporary 
breathing room to cut costs and adjust to 
competition. The sugar industry, 
however, is not undergoing any adjust- 
ment process. Quite the contrary, the 
sugar program is drawing new resources 
from other uses into inefficient sugar 
production. Many farmers are in the 
business solely as a result of the artificial 
support price. The average return per 
acre nationwide, including program 
benefits, is $279 for beet sugar and 
$168 for cane. The return for corn pro- 
duction is somewhat comparable at $155 
per acre, but similar figures for wheat 
and soybeans are in the range of 
$60-$80 per acre. The income of the 
average sugar producer (about 12,500 in 
number) is increased by nearly $200,000 
every year at the consumer's expense. 
Furthermore, unlike major crop pro- 
grams, sugar price supports cannot be 
reduced progressively under present 
law. Thus, as other crop programs inch 
toward market pricing, the incentive to 
produce sugar grows greater every year. 

What we have, then, is an agri- 
cultural program where the need for 
reform is urgent. The Administration 
has developed a program for reform. 
The main features of the Administration 
bill, which is being readied for submittal 
to Congress, are, first, a reduction of the 
loan rate from 18C per pound to 12<f per 
pound. There would be a direct payment 
keyed to a historical base, beginning 
with 6C per pound in FY 1988 and 
phased out over 5 years. A limit would 
be placed on payments to the largest 
producers. Also, the requirement that 
the program be cost free to the U.S. 
Government would be deleted. 

Sugar producers are obviously not 
going to carry the banner for lower 



prices. That puts the ball in the hands oi 
the domestic and foreign parties that 
will benefit from sugar policy reform. Ai 
especially important constituency is the 
industrial users of sugar and competing 
sweeteners. 

There is also a case to be made to 
sugar producers. It does not make sense 
even for them, to try to hang onto the 
present program forever. Some 
resources simply must be taken out of 
sugar. 

• Without a sugar price umbrella, 
HFCS would not have made such swift 
and extensive inroads on domestic sugar 
markets. If deprived of a sugar price 
umbrella, crystalline fructose would 
probably not go beyond its present 
status as a high-cost specialty item. 

• Imports have borne the brunt of 
HFCS competition thus far. But in just e 
few years, imports will be squeezed out 
entirely, and the sugar industry might 
have to live with curbs on production. 

• Some producers are marginal, 
even at current prices. With the right 
incentive, they might want to get out of 
sugar and grow something else. 

• I also think there is a sense of 
basic fairness to which we might appeal. 
It is hard to defend protection for sugar 
at levels significantly more favorable 
than for other crops. 

Conclusion 

Government agricultural policies, both 
here and abroad, have distorted world 
production patterns, imposed tremen- 
dous costs on consumers and other sec- 
tors of the economy, and severely 
strained relations among trading 
nations. Many countries, but particularly 
the EC nations, share with us the blame 
for creating these damaging conditions. 

Likewise, all countries, including 
ourselves and the EC nations, share the 
responsibility for correcting matters. 
Multilateral action is required to design 
rules that will discipline trade in 
agriculture. At the same time, every 
country must reform its own domestic 
programs. The Administration has taken 
the first step in this regard: we have 
developed an agricultural reform 
package to make U.S. agriculture more 
market based. The EC and other coun- 
tries must also begin the process of 
dismantling the distorted policies they 
have created. 

Sugar is a specific case where the 
economic and foreign policy damage 
inflicted by government agricultural 
policies is particularly severe. The costs 
to consumers, the distortions to the U.S. 
economy, and the foreign exchange and 



42 



Department of State Bulletin 



EUROPE 



|ob losses suffered by important allies 
:re large and unsustainable. The need to 

leform government sugar policy is 

j.cute. 

Unfortunately, the facts concerning 
he costs of our sugar policy are not as 
Videly known as they need to be. The 



challenge for all of us is to increase the 
public understanding of the costs to 
ourselves and others of the current U.S. 
sugar program and the tremendous 
benefits of a reformed U.S. sugar pro- 
gram. ■ 






J. S. -Soviet Relations 



y John C. Whitehead 

Address at the Forum, on U.S. -Soviet 
[trade Relations on March 5, 1987. Mr. 
I Whitehead is Deputy Secretary of State. 1 

. ,t is a pleasure for me to see so many 
lamiliar faces, and to have an oppor- 
| unity to address this final session of the 
'orum on U.S. -Soviet Trade Relations. I 
rould like to share with you my views on 
inhere U.S. -Soviet relations stand in the 
ixth year of this Administration. 

; 'rinciples 

larly in his Administration, President 
. teagan articulated an approach for deal- 
ig with the Soviet Union. He based this 
pproach on the principles of realism, 
trength, and dialogue. 

He insisted on a more realistic 
ssessment of the Soviet Union. We 
ecognize that the Soviet Government 
irofesses an ideology that conflicts with 
he beliefs and values of the American 
>eople and this government. We recog- 
lize that both we and the U.S.S.R. vie 
I or influence around the world. This 
neans that competition and periodic ten- 
ions are— and are likely to remain— 
nherent in our relationship. 

The President bases his approach on 
he need for Western strength in word 
ind deed. Over the last 6 years we have 
vorked hard to develop a Western 
illiance that is economically healthy, 
Dolitically united, and militarily strong. 
vVe are now in a position to deal with the 
Soviets from a position of renewed 
strength and confidence. 

The President also called for 
iialogue with the Soviets when it is in 
3ur interest. Realistically, we cannot 
ignore each other. Dialogue means work- 
ing with the Soviets whenever it is in 
our interest to do so. While we must be 
ready to meet all Soviet challenges, we 
will at the same time search, wherever 
possible, for common ground. We must 
try to work out our differences where 
possible, and to manage them where 
they appear irreconcilable. 



Four Challenges: 

President Reagan insisted on taking a 
broad, long view of the relationship; he 
insisted that the United States focus not 
just on arms control, but on other areas 
that affect superpower relations. Despite 
initial Soviet resistance, we have slowly 
succeeded in engaging the Soviets in 
discussions in all four areas: 

• First, arms control, because of its 
obvious significance to mankind; 

• Second, regional issues, because 
Soviet behavior in the developing world 
threatens Western security and global 
stability; 

• Third, human rights: we have 
insisted that human rights be on the 
agenda. Americans feel strongly about 
human rights and we can't isolate our 
concern from the rest of the relation- 
ship; and 

• Fourth, in our bilateral contacts 
with Soviets, we have focused on ways 
to make exchanges work more to our 
advantage. 

Let me talk in a bit more detail 
about how we view the four dimensions I 
have identified in U.S. -Soviet relations. 



Arms Control 

Year in and year out, it is arms control 
that attracts the most attention. Given 
the sheer complexity of the issues 
involved, and the consequences of 
miscalculation, it is certainly an area of 
great challenge. We have sharp dif- 
ferences with the Soviets over arms con- 
trol, but at the same time, we have made 
considerable progress, both at Reykjavik 
and in Geneva. 

At Reykjavik, the leaders of the 
United States and the Soviet Union 
discussed dramatic cuts in nuclear 
weapons— a longstanding, bipartisan 
U.S. objective. Some have taken issue 
with some of the ideas that were dis- 
cussed. But no one can take issue with 
the fact that Reykjavik was a watershed, 
a turning point in the way we negotiate 
and over what we negotiate in arms con- 



trol. Just this past weekend, the solution 
on INF [intermediate nuclear forces] 
that was worked out at Reykjavik came 
a step closer to implementation. 

We are heartened that the Soviets 
finally have fallen off their insistence 
that INF negotiations must be tied to an 
overall settlement of all arms control 
issues. We welcome General Secretary 
Gorbachev's statement of Soviet will- 
ingness to conclude a separate agree- 
ment on INF without delay. This has 
long been the U.S. position, and we are 
prepared to move ahead promptly. 

The U.S. [negotiators] tabled our 
draft INF treaty this week in an effort 
to move the talks forward, building on 
the agreement reached at Reykjavik. We 
hope the Soviets now are ready to nego- 
tiate seriously with an eye to concluding 
an INF treaty in the near future. A 
number of issues remain, including the 
treatment of shorter range missiles and 
provisions for verification and inspec- 
tion. Our team in Geneva is ready to 
tackle these questions. 

While we welcome this progress in 
INF, we continue to press for completion 
of a START [strategic arms reduction 
talks] agreement reducing strategic 
weapons. Here again considerable prog- 
ress was made in Reykjavik, and every 
effort should be made to complete a 
treaty in this area. The Soviets continue 
to link progress in START to agreement 
in effect to walk away from the SDI 
[Strategic Defense Initiative] program, 
and this we will not do. But our teams in 
Geneva continue to work hard on all of 
these subjects. 

Regional Issues 

When we look around the world, we find 
sharp differences between what the 
Soviet leaders are saying and what is 
actually happening on the ground. 
Afghanistan, Central America, South- 
east Asia, and Angola are all problem 
areas. 

Our own objectives are clear and 
straightforward. We are determined to 
take the steps necessary to protect our 
interests and to work with our friends 
and allies around the world in the cause 
of peace and freedom. 

As one means of pursuing those 
objectives, we have developed during 
this Administration an important 
regional dialogue with Soviets. It is a 
dialogue aimed at ensuring that Moscow 
understands our views— and our deter- 
mination to resist Soviet expansion. 
Combined with a demonstrated will- 
ingness to defend our interests on the 
ground, such a regular, frank series of 



May 1987 



43 



EUROPE 



.1 



exchanges can reduce the possibility of 
future confrontations and miscalcula- 
tions. Under Secretary [for Political 
Affairs Michael H.] Armacost will begin 
a new cycle of meetings on regional 
issues later this month. 

Experience has shown that local fac- 
tors often decide the outcome of Soviet 
regional policy. Something of that sort 
may be happening in Afghanistan, 
although there is cause for skepticism. 
But keeping channels of communication 
open can affect Soviet decisionmaking. 

Afghanistan 

With the Afghan New Year and 
Afghanistan Day 2 weeks away, I want 
to say a few words about Afghanistan 
and underscore the strength of this 
Administration's views on the Soviet 
occupation there. 

Almost 8 years of conflict have 
resulted in countless thousands of civil- 
ian casualties and enormous devastation 
to what once was a peaceful, nonaligned 
country. Soviet-backed forces even bomb 
towns in neighboring Pakistan. How- 
ever, after these 8 years, the Soviets 
exercise less control than before and are 
forced to back an unpopular puppet 
government that is split into warring 
factions. The resistance has shown itself 
increasingly effective militarily, to the 
surprise of some skeptics. The Afghan 
people have shown they will not submit 
to a puppet regime. 

Inside the U.S.S.R., the war is 
unpopular. The Soviets say they want to 
find a way out. Whether they mean what 
they say is less certain. Thus far, they do 
not appear ready to withdraw their 
troops and allow Afghanistan's future to 
be decided by the Afghans. We hope 
they will conclude that they should 
withdraw. If they do, they will find the 
United States no obstacle to such an 
outcome. 



Human Rights 

No discussion of our relationship with 
the Soviets would be complete without 
human rights. Because of our nation's 
history, because of our commitment to 
human rights and civil liberties, Soviet 
human rights abuses inevitably color our 
attitude toward the Soviet Government. 

Human rights are not simply a 
bilateral issue, but a matter of interna- 
tional commitments freely undertaken 
by the Soviet Union in signing the 
Helsinki Final Act and other interna- 
tional agreements. 

We keep telling the Soviets that 
steady, significant progress in human 



rights is needed if there is to be a sus- 
tained turn for the better in U.S. -Soviet 
relations. We see some evidence our 
message has begun to get through. The 
picture is mixed since there is so much 
that needs to be done, but we have seen 
some encouraging signs. 

Some prominent human rights cases 
have been resolved— Andrey Sakharov 
was released from internal exile; and 
psychiatrist Anatoliy Koryagin, poet 
Irina Ratushinskaya, and Jewish activist 
Iosif Begun were freed before the end of 
their terms. Last year the Soviets 
allowed Anatoliy Shcharanskiy, and 
eventually his family, to emigrate. 

In January, the Soviets announced 
the release of an additional 140 political 
prisoners and said they were reviewing 
the cases of 140 more. 

We see mixed but more hopeful 
signals on emigration. On the eve of the 
current review conference on European 
security and cooperation in Vienna, new 
emigration regulations were published. 
But we are concerned by the small num- 
ber of people being allowed to emigrate. 
Jewish emigration has dropped sharply 
since 1982 and has been low ever since: 
only 914 last year (compared to the peak 
of over 50,000 in 1979). 

Soviet officials have hinted emigra- 
tion will rise in 1987. They claim that 
500 Soviets received permission to 
emigrate in January, which would be a 
sharp increase over previous months. 
We cannot yet confirm this figure, but 
we do see indications of an upturn. We 
hope that any rise in emigration will be 
both significant and sustained. Mean- 
while, an unprecedented number of U.S.- 
Soviet divided family cases have been 
resolved in the last year; 20 of 28 
separated-spouses cases have now been 
resolved. 

We have witnessed what could be 
the start of a welcome new openness in 
the cultural area, with previously banned 
books and films being released. These 
steps stem primarily, in our view, from 
Soviet internal political dynamics. To the 
extent these developments represent the 
first tentative steps toward a more 
genuinely tolerant society and expanded 
freedom of expression, Americans can 
only welcome them. 

Bilateral Agenda 

Bilateral affairs are perhaps the least 
visible but more active area of interac- 
tion. Over the past year, scientific and 
cultural exchanges and people-to-people 
contacts have expanded steadily. 

• Civil aviation links have been 
reestablished. 



• An exchange of consulates in New 
York and Kiev is being implemented. 

• We've increased cultural 
exchanges. We are actively working on 
other exchange programs in medicine, 
science, education, and sports. 

• All of this is taking place despite 
developments such as the Daniloff affair 
and our measures to rein in Soviet espi- 
onage activities in the United States, 
which in the past could have put a 
damper on relations. 

• That's because we've insisted that 
our bilateral relations be firmly ground- 
ed in our interests and on reciprocity. 

Economic Relations 

Let me now say a few words about U.S.- 
Soviet economic relations. I come from 
the business community and have not 
lost my deep interest in international 
trade. Trade with the Soviet Union has 
its particular fascinations and frustra- 
tions. Most Americans believe we should 
trade with the Soviets. It seems to me 
that more trade between us is better 
than less trade. More trade means more 
integration of the Soviet economy into 
the outside world, and stronger pres- 
sures on them to maintain a peaceful 
relationship with that world. 

At the same time, we must not per- 
mit the leakage of sensitive technologies 
with clear military applications. And we 
must avoid sending signals we do not 
mean to send in areas, such as human 
rights, that for a variety of reasons have 
become associated with trade. Thus, in 
U.S. -Soviet trade we must balance a 
number of important, equally legitimate 
interests. 

People may differ on where we draw 
the line. But the rapid pace of today's 
technological advancement, quickly 
changing market conditions, and human 
rights developments suggest that we 
should be thoughtful and realistic in 
drawing such lines. 

There are some reference points. 
The President has said he favors non- 
strategic trade with the Soviets. 
Secretary of Commerce [Malcolm] 
Baldrige and Soviet Foreign Trade 
Minister [Boris] Aristov met here a few 
months ago and took positive steps in 
that direction. Just last week I spent an 
hour with his deputy. This Administra- 
tion looks for more opportunities to build 
on recent progress we have made. 

It is evident that Gorbachev is not 
satisfied with the Soviet economy and 
wants to find some way to improve it. 
Ministries have been reorganized; state 
committees or super-ministries created 
to deal with broad sectors of the econ- 
omy; new laws on domestic private 



44 



Department of State Bulletin 



EUROPE 



enterprise have been passed and fledg- 
Jing steps in the direction of democratic 
reforms are being introduced in the 
workplace; new faces are appearing. 
Some changes affect the way the 
[Soviets conduct foreign trade. New 
k-egulations have expanded the number 
,of ministries and enterprises that can 
(have direct contact with foreign firms 
and new laws have appeared on joint 
ventures. We have heard new words 
from the Soviet leadership, and in many 
leases they are interesting. We will need 
to see the resulting actions before we 
can draw meaningful conclusions. 

A number of U.S. business firms are 
[actively discussing joint venture proj- 
iects. Provided such projects make sound 
business sense to the U.S. companies 
and comply with our export laws and 
regulations, they could be one way of 
expanding our trade and commercial 
relations. For our part, we have eased 
some restraints that outlived their pur- 
pose and that unnecessarily impeded 
(U.S. -Soviet trade. 

As you know, in January we allowed 
foreign policy controls on the export of 
m and gas equipment to the U.S.S.R. to 
lapse. The U.S. oil and gas industry now 
has an opportunity to compete for Soviet 
■ markets on a more level playing field. 
. We hope we will see concrete results of 
;hat decision in the coming months. We 
will be watching developments closely. 
As an additional step, we and our 
! lilies are reviewing current export 
restrictions in hopes of simplifying the 
list of prohibited items and speeding up 
the licensing process. 

What about Jackson- Vanik? Do the 
mprovements we have seen in human 
rights give grounds to expect MFN 
most-favored-nation] status for the 
U.S.S.R. in the near future? At this 
I point, the answer has to be "no." What 
we have seen so far are promising 
trends— or, more precisely, the begin- 
nings of what we hope will be trends. 
:- We don't know if they will continue; we 
(don't know how significant they will be. 
fTime will tell and enable us to make an 
intelligent call on Jackson- Vanik and 
similar legislation further down the road. 

In short, we face many challenges: 
1 in arms control, regional issues, human 
rights, and bilateral affairs. No one said 
it would be easy. But if the Soviets are 
I interested in improving relations, we are 
ii ready to work with them to build a more 
(stable relationship, sustainable over the 
|long term. This is a time of challenge, 
ibut also of great opportunity. We look 
forward to tackling those challenges, 
I and building on those opportunities. 



The U.S.-Soviet Bilateral Relationship 



by Mark R. Parris 

Address before the Kennan Institute 
for Advanced Russian Studies on 
February 25, 1987. Mr. Parris is Direc- 
tor of the Office of Soviet Union Affairs. 

The announced theme of my talk today 
is "U.S.-Soviet Relations— Where Do We 
Go From Here." With apologies to Mark 
Katz [Research Associate at the Kennan 
Institute], with whom I agreed on that 
subject in a hurried telephone conversa- 
tion, that's not what I'd like to talk 
about today— at least not directly. 

Rather, I want to focus on an aspect 
of our relations which is too often 
overlooked— the U.S.-Soviet bilateral 
relationship. All of you here are aware of 
the four-part agenda that the Reagan 
Administration has insisted upon in its 
discussions with the Soviets over the 
past 6 years— arms control, human 
rights, regional issues, and, almost 
always in last place, bilateral affairs. 
Let's face it: arms control invariably 
grabs the headlines in our relations; 
human rights grab our emotions; 
regional crises demand our attention. 
But unless you work on the Soviet desk, 
it seems, bilateral matters generally 
miss the boat. I believe this has created 
a skewed view of the superpower rela- 
tionship. Today, I hope to redress at 
least some of the balance. 

U.S.-Soviet Relations and Detente 

U.S.-Soviet bilateral relations comprise 
the day-to-day, nuts-and-bolts, face-to- 
face aspects of our relationship. They 
include our consular, cultural, and com- 
mercial relations. They involve the 
maintenance, staffing, and protection of 
our respective diplomatic missions and 
the conduct of our respective mission 
personnel. And they include exchange 
programs and bilateral cooperation in a 
variety of fields, from science and 
technology to search and rescue. These 
may strike some as fairly mundane mat- 
ters. This audience will know better. 
Many of you, over the years, have been 
intimately involved in some of these 
activities. I think you will also be aware 
of how contentious the various issues 
which make up our bilateral relations 
with Moscow can sometimes be. 

As I was preparing my remarks for 
today, I happened to come across an old 
pamphlet published by the State Depart- 
ment in the mid-1970s during the height 



of detente. In reading through it, I came 
to a passage proudly proclaiming that 58 
of the 105 bilateral agreements con- 
cluded between the United States and 
the Soviet Union since relations were 
established in 1933 had been signed dur- 
ing the preceding 5 years. These 
included agreements on cultural 
exchanges, science and technology, 
environmental protection, medical 
science and public health, space, 
agriculture, transportation, atomic 
energy, artificial heart research, energy, 
and housing. Every one of these 
agreements, and 41 agreements in all, 
were concluded in the 2 years prior to 
the pamphlet's publication. 

As all this suggests, the expansion of 
bilateral relations was considered an 
essential feature of detente. It was part 
of a strategy of involving the Soviet 
Union in an embracing network of 
agreements that would serve to restrain 
aggressive Soviet behavior and lead to a 
safer and more stable relationship. This 
was an interesting strategy and perhaps, 
at the time, even a defensible one. After 
all, it had never been tried before. The 
only problem with it was that it did not 
work the way it was supposed to. 

Historians can debate the reasons 
for this. Certainly one factor was the 
determination of the Soviet Union to act 
in its self-interest, regardless of the 
number of agreements it had signed with 
the United States. This was, perhaps, not 
surprising. But certainly the United 
States could not ignore an unprec- 
edented military buildup far exceeding 
that needed for defense or the use of 
Cuban surrogates in Angola and 
elsewhere. Nor were we capable of 
ignoring the crushing of the Soviet 
human rights movement following the 
signing of the Helsinki Final Act. In any 
case, by the time the Soviets invaded 
Afghanistan in late 1979, we were look- 
ing around for a term other than 
"detente" to describe our approach. 
Hopes for ratification of the SALT II 
[strategic arms limitations talks] Treaty 
had been dashed. And as the Soviets 
pursued their war against the Afghan 
people, what had been an extensive net- 
work of bilateral agreements was 
stripped back to skeletal dimensions. 



>Press release 56 of Mar. 6, 1987. 



May 1987 



45 



EUROPE 



Reconstructing the Bilateral 
Relationship 

The failure of detente was very much on 
the mind of the Reagan Administration 
when it assumed office in early 1981. No 
one questioned the need to maintain a 
relationship with the Soviet Union in a 
nuclear age. But we were determined to 
establish a relationship free from the 
illusions that had doomed detente. 

In considering how the relationship 
should look, we were determined not to 
place too much of the burden on arms 
control. Arms control agreements— or 
the pursuit of them— cannot, by 
themselves, create a stable or satisfac- 
tory relationship. That was the lesson of 
SALT II. There are too many other 
areas in which our interests intersect, 
conflict, and must be managed if stabil- 
ity is to be maintained. There was 
general agreement, therefore, on the 
need to draw the Soviets into dialogue 
on issues which had, in the past, com- 
plicated our relationship— such as 
regional issues and human rights— even 
as we sought to identify areas where 
cooperation was in our interest. Thus, 
the four-part agenda I referred to. 

Compared to the rather Utopian aims 
of the detente era, this was a modest 
goal. We sought not to end conflict— that 
was a fool's errand— but to manage con- 
flict by engaging our adversary in con- 
versation, and sometimes in agreement, 
across the full spectrum of our relations. 
The broader the relationship, the more 
extensive our contacts, the clearer each 
side's perception of the other's interests 
could be expected to be and the more 
likely we would be to avoid direct con- 
frontations. The more likely it would be, 
moreover, that any agreements reached 
would be based on real interests which 
could survive the inevitable shocks and 
swings of a relationship between global 
rivals. 

In this framework, our bilateral rela- 
tionship has been an understated but 
important element. At the beginning of 
the Reagan Administration, as I've said, 
it was essentially a skeleton. Most of our 
bilateral agreements had either been 
allowed to lapse or been convenient grist 
for sanctions in the aftermath of 
Afghanistan. Those that remained in 
force were operating at only 20% of the 
pre-Afghanistan level. The imposition of 
martial law in Poland resulted in further 
erosion of the bilateral framework. 

So we were largely starting with a 
clean slate. In starting over again, we 
sought to profit from some of the 
experiences of the detente era. There 



was a perception that many of the 
bilateral agreements negotiated during 
the period had not always served our 
interests. The fact that so many had 
been singled out so quickly for sanctions 
was evidence of this. In retrospect, there 
appeared to have been a pursuit of quan- 
tity at the expense of quality. The pam- 
phlet on detente I quoted from earlier 
seemed to take as much pride in 
numbers as in substance. We have con- 
sciously sought to reverse this priority. 
Our objective has been to conclude 
agreements with the Soviets only where 
they can demonstrably be shown to be in 
our interest. For example, in negotia- 
tions on the reestablishment of direct air 
connections between our two countries, 
we were determined to avoid situations 
in which Aeroflot could systematically 
undercut Pan Am— a situation which, in 
the 1970s, led to Pan Am's abandoning 
the Moscow market. We held out for, 
and achieved, mechanisms which 
guaranteed Pan Am a fair shake finan- 
cially. Our first priority thus has been to 
base our approach on a clear understand- 
ing of our interests. 

Another has been to reconstruct the 
bilateral relationship on the basis of 
greater reciprocity than had been the 
case in the past. This attitude stemmed 
from another legacy of the detente era. 
In our efforts to move the Soviets into 
agreements, we had too often gone out 
of our way to please and sometimes took 
pains not to offend— often without any 
reciprocal benefit from the Soviet side. 
The most visible symbol of this 
phenomenon was Ambassador 
Dobrynin's personal pass to the Depart- 
ment of State parking lot. The issue was 
not Ambassador Dobrynin, a diplomat's 
diplomat who has always been respected 
by his interlocutors at the Department of 
State. It was the onesideness in the 
treatment accorded our respective mis- 
sions and mission personnel. 

U.S. travel restrictions on Soviet 
diplomats and other representatives in 
this country, to take another example, 
were much less severe than those on our 
people in the Soviet Union. Soviet 
diplomats could freely rent housing on 
the U.S. market, while U.S. diplomats in 
the Soviet Union found the conditions of 
their housing tightly controlled by 
uncooperative Soviet authorities. More 
ominously, the Soviets had been able, 
over the years, to build up their 
espionage presence in this country to 
truly serious proportions, while we con- 
tinued to abide by the rules of the game. 
By being nice guys, we only encouraged 
the Soviets to take advantage of us. 
We've since made clear that we're 
prepared to be just as nice as they are. 



Given our determination to enforce 
reciprocity and seek agreements only 
when clearly in our interest to do so, the 
process of reconstructing the bilateral 
relationship was likely neither to be 
quick nor easy. In the beginning, it 
proved easier to implement reciprocity thai 
it did to negotiate favorable agreements. 
Ambassador Dobrynin's parking pass 
was the first thing to go. This was 
followed, in 1983, by the creation of the 
Office of Foreign Missions, established 
precisely to ensure the reciprocal treat- 
ment of our missions and mission per- 
sonnel abroad. The first act of the new 
office was to initiate controls on the 
travel of Soviet diplomats designed to be 
every bit as efficient as the controls on 
our people in the Soviet Union. 

These actions did not endear us to 
our Soviet colleagues, but neither did 
they elicit retaliation. Perhaps this in 
itself was tacit admission of the 
imbalance that had prompted them. In 
any case, our objective is not simply to 
make life miserable for our Soviet col- 
leagues. No one wins from that kind of 
game. Our purpose was— and is— to 
ensure that each side's diplomatic mis- 
sions are able to function as effectively 
as possible. 

Raising the level of dialogue on 
bilateral issues, and exploring 
possibilities of agreement, was a more 
difficult task. As I noted, preliminary 
attempts to do so were not helped by the 
imposition of martial law in Poland in 
December 1981, or by the Soviet 
walkout from Geneva and the shootdown 
of the KAL [Korean Air Lines] jetliner 
in 1983. But our efforts began to bear 
fruit in the summer of 1984. A round of 
Consular Review Talks, delayed in the 
aftermath of KAL, produced an 
exchange of notes. The agreement, by 
which we gained two additional Soviet 
entry/exit points for our diplomats and 
some useful guarantees on the issuance 
of official visas, was modestly useful. 
But it was notable primarily for the fact 
that it was the first U.S. -Soviet bilateral 
agreement since the invasion of 
Afghanistan. 

At the same time, in a June address 
sponsored jointly by the Kennan 
Institute and the Wilson Center— an 
address many of you would have 
heard— President Reagan enumerated a 
number of proposals aimed at 
significantly broadening our bilateral 
dialogue. The President proposed 
negotiations on a new exchanges agree- 
ment to replace the one allowed to lapse 
after the invasion of Afghanistan. He 
called for renewed talks on opening con- 
sulates in New York and Kiev and for 



46 



Department of State Bulletin 



EUROPE 



the revival of cooperative agreements in 
environmental protection, housing, 
health, and agriculture. The Soviets 
responded. Shortly thereafter, negotia- 
tions began on a new exchanges agree- 
ment. Talks subsequently began on a 
number of the other bilateral issues the 
President had raised as well. 

The improvement in atmospherics 
resulting from these bilateral 
developments helped pave the way for 
the resumption of arms control negotia- 
tions in Geneva early in 1985. The 
return to Geneva, in turn, gave added 
momentum to the bilateral relationship 
j and made possible the subsequent agree- 
'■ ment to hold a summit meeting in 
j Geneva that November. 

The weeks and months leading to the 
summit witnessed the most intensive 
bilateral discussions since the early 
1 1970s and produced a number of 
agreements that have had a lasting 
j effect on the bilateral relationship. We 
| signed a new general exchanges agree- 
I ment, marking the resumption of official 
academic, cultural, and performing artist 
i exchanges between our two countries. 
The Soviets agreed to President 
i Reagan's proposal for a massive 
. increase in people-to-people contacts. We 
i signed an agreement on North Pacific 
Air Safety aimed at preventing a recur- 
rence of the KAL disaster. We agreed 
on the simultaneous opening of con- 
sulates in New York and Kiev. We 
agreed to work together with other 
nations to perfect the use of nuclear 
fusion for peaceful purposes. And we 
agreed to renewed consultations on 
environmental protection. 

Bilateral Agreements 
and Exchange Activities 

In the 15 months since Geneva, our 
bilateral relationship has continued to 
expand. Significantly, it has done so 
despite periodic problems, both here and 
in other areas of U.S. -Soviet relations, 
that might have doomed progress in 
earlier times. In April 1986, a civil avia- 
tion agreement was signed leading to 
the resumption of commercial airline 
service. In October, a new bilateral 
civilian space agreement was reached ad 
referendum. Under the leadership of 
Ambassador Steve Rhinesmith, the 
people-to-people exchange initiative 
agreed to at Geneva has made dramatic 
headway in bringing more, and more 
varied, participants from both sides into 
contact with one another. A September 
conference in Riga, Latvia, sponsored by 
the Chautauqua Institution, brought 200 
American citizens together with 2,000 of 



their Latvian and Soviet counterparts to 
discuss U.S. -Soviet relations. A similar 
conference is planned for New York this 
August. The U.S.-Soviet sister-cities pro- 
gram is being expanded from 6 to 16 
cities over the next 2 years and to 25 
cities over the next 5 years. The Soviets 
have also agreed to the largest exchange 
of young people in our history, including, 
for the first time, a minimum of 150 
students of high school age. Com- 
mitments have also been made for 
exchanges of young professionals in a 
number of areas, including agriculture, 
stock breeding, and medicine. 

Activity under existing agree- 
ments—such as housing, medical science, 
and public health— has been stepped up. 
Last November, HUD [Housing and 
Urban Development] Secretary Pierce 
led a large delegation to Moscow in an 
effort to expand and promote activities 
falling under the housing agreement. 
Surgeon General Koop and National 
Institutes of Health Director 
Wyngaarden both made trips to the 
Soviet Union last fall to prepare for the 
first meeting under the medical science 
and public health agreement since 1978. 
The meeting, to be held in Washington 
this spring, will consider proposals 
aimed at improving cooperation in such 
areas as cancer and heart disease 
research. In addition to renewed activity 
in these areas, we are also exploring the 
possibility of talks on cooperation in basic 
science research, in transportation, and 
in energy. 

Are we falling into the trap of 
sacrificing quality for quantity? No; 
throughout this Administration we have 
steadfastly avoided agreement for agree- 
ment's sake. In our negotiations before 
and after the Geneva summit, we have 
been prepared to walk away from 
agreements that we consider too vague 
or inadequate in terms of U.S. interests. 
And we have set up an extensive 
machinery within the U.S. Govern- 
ment—including State, the NSC 
[National Security Council], the FBI 
[Federal Bureau of Investigation], the 
Defense Department, and various other 
agencies— to scrutinize any potential 
agreements. That process can be 
frustrating, but it has produced some 
good results. The agreements we have 
reached, and the negotiations we have 
pursued, have been undertaken because 
we believe that the United States has 
something to gain. 

Those gains are not always tangible. 
A major motivation in pursuing cultural 
and people-to-people exchanges, for 
example, has been to help remove the 
artificial barriers the Soviet Government 



has placed on its citizens and to promote 
mutual understanding. We believe that 
increased contacts with American 
citizens will help to remove the distorted 
stereotypes of America that Soviet 
citizens have received from their own 
media. We believe they will help Soviet 
citizens learn how deeply we feel about 
such issues as Afghanistan and human 
rights and that these are not artificial 
problems. We don't have any illusions 
that these contacts will bring about 
major changes in the Soviet Union over- 
night. But I'm convinced it would be a 
mistake to underestimate the impact 
which exposure to thousands of 
Americans over an extended period can 
have on Soviet attitudes throughout the 
system. And at a time when the official 
line is "openness," may not the potential 
impact of such exposure be even 
greater? American access to the Soviet 
Union, its institutions, and its people 
will, in turn, give our people a more com- 
plete understanding of Soviet strengths 
and weaknesses and, therefore, a more 
complete assessment of the Soviet 
challenge to the United States. 

In some cases, we have identified 
and are realizing concrete benefits from 
our expanding bilateral relationship. In 
promoting increased science and 
technology exchanges, we have been 
particularly careful to ensure that they 
have real scientific merit, bring tangible 
benefit to the United States, and are car- 
ried out on the basis of full reciprocity. 
We have emphasized exchanges in areas, 
such as nuclear fusion and the basic 
sciences, where the Soviets have 
knowledge and skills we can benefit 
from. We have avoided exchanges where 
there is a serious possibility of 
technology transfer which could 
adversely affect our security or where 
the gain is predominantly on the Soviet 
side. We have insisted that exchange 
activities be balanced in terms of number 
of visits, information exchanged, finan- 
cial burdens, and the conditions of treat- 
ment for exchangees. And we've worked 
closely with American participants in 
such exchanges to make sure they meet 
their needs. These are the kinds of 
exchanges the President was talking 
about in his 1984 speech. They are in our 
interest, and we will continue to pursue 
them. 

In addition to exchanges, there has 
been a steady body of achievement 
resulting from our expanding contacts 
on bilateral consular and administrative 
issues. Last spring, we proposed 
establishment of a Bilateral Review 
Commission that would meet annually to 
review outstanding problems in this 



May 1987 



47 



EUROPE 



basic but increasingly important area of 
our relationship. The Soviets agreed to 
hold a trial run in Moscow last July, and 
a wide range of issues was discussed, 
ranging from diplomatic immunities, to 
customs inventories, to embassy con- 
struction. These are the kinds of issues 
which no one notices when they work; 
but the furor over the new office 
building in Moscow shows the impact 
they can have when they don't. Both 
sides found the session useful and subse- 
quently agreed formally to establish the 
commission at the Vienna meeting 
between Secretary Shultz and Foreign 
Minister Shevardnadze last November. 
A second session is currently scheduled 
for late March. 

The first session in July also spun off 
a round of consular review talks, which 
were held in late October. This round, 
like the one in 1984, also produced an 
exchange of notes, this time extending 
criminal immunities to the families of 
our respective consulate personnel— a 
small step, but one of many. 

Realism and Resiliency 

Perhaps the most remarkable aspect of 
all this bilateral activity has been the 
fact that it has continued at a brisk and 
steady pace despite setbacks and disap- 
pointments in other areas of U.S. -Soviet 
relations. The Bilateral Review Commis- 
sion, for example, was agreed to at the 
same Vienna meeting that failed to build 
on the arms control progress made at 
Reykjavik. The Reykjavik meeting itself 
produced agreement on an ambitious 
bilateral work schedule, and there has 
been no diminution in bilateral activity in 
the wake of the ongoing Soviet propa- 
ganda offensive against SDI [Strategic 
Defense Initiative]. Nor has our contin- 
uing effort to enforce reciprocity in our 
bilateral relations impeded our attempts 
to make progress elsewhere. 

A centerpiece of this effort, of 
course, has been our insistence on reduc- 
ing the unacceptable Soviet espionage 
presence in this country. In March 1986, 
we insisted on a dramatic reduction in 
the size of the Soviet Mission to the 
United Nations. Last October, the size of 
the Soviet missions in Washington and 
San Francisco was reduced to parity 
with U.S. diplomatic missions in the 
Soviet Union, ending a long imbalance. 

These decisions were not made lightly, 
nor were they made with the intention of 
damaging bilateral relations. But they do 
illustrate what, on occasion, must be 
done to maintain a bilateral relationship 
in which our own interests are given the 



necessary weight. As you know, the 
Soviets took retaliatory measures to our 
October reductions which have made the 
operation of our missions in the Soviet 
Union somewhat more difficult. The retal- 
iation was not unexpected. But it was a 
price we were prepared to pay. And, 
again, our firm steps in this sensitive 
area have not taken on broader signif- 
icance. This is, I think, a good indication 
of the underlying resiliency of the more 
realistic bilateral relationship we have 
sought to establish over the last few 
years. Both sides deserve credit for it. 

David Shipler wrote recently in The 
New York Times of a creeping inertia in 
U.S. -Soviet relations. From our vantage 
point, I can assure you I don't see it. 
Across the agenda we've defined, there 
is movement; there is dialogue; there is 
an active interchange of ideas and con- 
tacts. That is nowhere more true than in 
the area of bilateral affairs. I have no 
doubt, based on my 9 years in the area, 
that there will be more shocks like the 
Daniloff affair, KAL, maybe even Afghan- 
istan. I believe we have established a 
solid, realistic basis in our bilateral rela- 
tions for weathering these episodes. I 
believe that the progress we have made 
in this area over the past several years 
will be enduring progress, because it 
reflects our national interests. ■ 



FY 1 988 Assistance 
Requests for Europe 



by Rozanne L. Ridgway 

Statements before the Subcommittee 
on Europe and the Middle East of the 
House Foreign Affairs Committee on 
February 3 and March 3, 1987. Ambas- 
sador Ridgway is Assistant Secretary for 
European and Canadian Affairs. 1 



FEB. 3, 1987 

I am pleased to be here again this morn- 
ing as part of our ongoing discussions 
with your subcommittee. I am here with 
you today to discuss at greater length 
our relations with Spain and Portugal, 
particularly as they relate to security 
assistance. I look forward to returning in 
the near future to have a similar discus- 
sion about Greece and Turkey. 

U.S. interests have been well served 
in recent years in the Iberian Peninsula. 



First, we have seen a successful transi- 
tion of two of our close friends to stable 
democratic institutions. We are pleased 
to see that both Spain and Portugal have j 
developed strong, viable democracies. 

Second, the momentum toward 
greater political and economic integra- 
tion of our West European allies has 
accelerated. Spain and Portugal on 
January 1, 1986, began the process 
leading toward full economic integration 
into the European Community. 

This was followed in March by the 
historic decision of the Spanish people in 
a popularly held referendum in which 
they agreed with the Gonzalez govern- 
ment's position that it was in the 
national interest for Spain to remain in 
the North Atlantic alliance. 

We welcome these developments and 
anticipate that they will lead to a further 
strengthening of the political and eco- 
nomic fabric of these two key allies, 
which is clearly also in our interest. 

Let me turn now directly to the U.S. 
security assistance program and its role 
in the strength of Spain and Portugal 
and in U.S. and NATO security. 

Security assistance is a bilateral 
program designed to complement our 
broader objectives in the political, secu- 
rity, and economic areas. The program 
enables us to obtain access to important 
base facilities while at the same time 
helping allies to modernize their armed 
forces. In the cases of Spain and Por- 
tugal, these programs have long histo- 
ries and are directly related to commit- 
ments undertaken in specific bilateral 
agreements. I can tell you that our 
security assistance monies have played 
an important role in the ability of both 
countries to make a contribution to the 
common defense. 

Spain 

Our access to air and naval facilities in 
Spain are a vital link in the defense of 
the West. Among the major facilities 
used by our forces are the port and naval 
air station at Rota; Torrejon Air Force 
Base, where we base our only permanent 
forward deployed air combat power on 
NATO southern flank; and transport and 
training facilities at Zarogoza Air Force 
Base. 

We are at present negotiating with 
Spain about a successor accord to the 
1982 agreement, whose term ends in 
May 1987. In December 1985, Spain and 
the United States issued a joint com- 
munique setting forth the principles that 
would guide us in the base negotiations. 
It states, inter alia: "Upon agreement, 
the adjustments will involve a phased 



48 



Department of State Bulletin 



EUROPE 



•eduction of the U.S. military presence 
n Spain based on the assumption by the 
Spanish Armed Forces of specific respon- 
sibilities and missions currently under- 
aken by U.S. forces in Spain, while 
naintaining the overall defensive capa- 
cities and level of security for both 
;ountries and their allies." 

These remain the basis for discus- 
sion. We believe that within this frame- 
York of trust and cooperation, we can 
:raft a satisfactory agreement. We hope 
hat this new agreement will mark a 
najor milestone in our relationship with 
Spain. 

Successful negotiations must be built 
|>n the belief of both parties that the 
Ibther honors its undertakings. The pres- 
ent base talks will be made more difficult 
if we allow the perception to grow in 
[Madrid that we have not met our best- 
efforts pledges on security assistance 
itinder the 1982 agreement. In the 1982 
j.ccord, we agreed to provide Spain with 
lecurity assistance for the life of the 
agreement. Our best-efforts pledge on 
1 ecurity assistance was understood by 
:>oth sides to mean that the United 
I States would try to provide $400 million 
h foreign military sales (FMS) credits, 
1 12 million in economic support funds 
ESF), and $3 million for international 
ii'iilitary education and training (IMET) 
ach year. 

Spain has made significant improve- 
I nents in its armed forces in recent 
li ears, and FMS credits are vital to the 
I nodernization of the Spanish military. 
I Madrid has used part of its annual FMS 
: redits to finance the purchase of 72 
\\ ''-IS aircraft, thereby providing a major 
looost to Spain's air defense capabilities. 
On the ESF side, the annual appro- 
bation has helped us pursue success- 
ully a major U.S. policy objective in 
Spain— broadening and deepening the 
| letwork of ties between all levels of 

Spanish and American society. By fund- 
ling the successful work of the Joint 
: Committees on Education and Culture 
l.nd Science and Technology, the annual 
SSF appropriation has created scores of 
links between the American and Spanish 
I cademic, cultural, and research com- 
Inunities. Our IMET program continues 
lo foster ties between the United States 
li.nd the Spanish military while helping to 
rlevelop the professional skills of Spain's 
^rmed Forces. 

In FY 1986, $382.6 million FMS, 
l;il.48 million in ESF, and $2.29 million 
n IMET were appropriated for Spain, 
lightly below FY 1985 levels because of 
jramm-Rudman-Hollings reductions. 

Our assistance for FY 1987 fell 
telow the "best-efforts" level contained 



in the Administration's request from 
$400 million to $105 million in FMS and 
from $12 million to $5 million in ESF. 
Through a mixed package of offering 
Spain FMS credits at concessional rates 
for the first time and helping the 
Government of Spain to place slightly 
more expensive commercial credits, we 
believe we can put together an FY 1987 
package that meets our commitments 
and the needs of the Spanish Govern- 
ment. The Administration plans to make 
a $200 million supplemental request for 
concessional rate FMS credits and $7 
million in ESF for Spain in FY 1987. 

For FY 1988, we are requesting 
$265 million in FMS credits for Spain, 
$12 million in ESF funds, and $3 million 
for IMET. Because of budgetary con- 
straints, our FY 1988 request is quan- 
titatively below what we would like. We 
have tried to overcome this problem by 
improving the quality of the assistance 
to be provided. 

Our FY 1988 request for FMS may 
appear to be below the "best-efforts" 
level, but in the current budget situation, 
we must all make extremely hard choices 
among deserving friends and allies. This 
is our "best effort." The Spanish 
Government has so far shown great 
understanding of the difficult budget 
situation in Washington, but we must 
not abuse this cooperative attitude. In 
the face of the significant cuts in FMS 
credits for Spain, it is even more impor- 
tant that we demonstrate our good faith 
by reaching the "best-efforts" levels in 
the other two security assistance 
programs. 

Portugal 

The United States also has vital military 
and economic interests in Portugal. Por- 
tugal, along with the United States, was 
a founding member of NATO. Our mili- 
tary interests flow from Portugal's 
strategic location at the southwestern 
approaches to NATO from the Atlantic 
and agreement on the use of the Lajes 
Air Force Base in the Azores further 
west. Our use of this base goes back to 
access granted during the Second World 
War; our presence at Lajes was formal- 
ized in 1951 by a bilateral agreement 
and has been continuous since. 

Portugal is a reliable and steadfast 
ally. In 1973 Portugal alone among our 
allies allowed U.S. planes to transit en 
route to resupplying Israel during the 
Yom Kippur war. In the 1980s, Portugal 
stood foursquare with us during the Iran 
and Afghanistan crises. 

In 1983 the Portuguese and we 
renewed our use of Lajes until December 



1991. As a part of that agreement, the 
United States promised its "best 
efforts" in furnishing adequate military 
and economic assistance to Portugal. In 
economic assistance, the United States 
agreed to seek an increase in ESF, with 
the understanding that a substantial part 
of these funds would go to the regional 
government of the Azores and the other 
half to the Luso-American Development 
Foundation or development projects in 
mainland Portugal. In addition to IMET, 
we provided $105 million in military aid 
(MAP and FMS) in FY 1984 and $125 
million in FY 1985 in accordance with 
our commitment. Because of overall 
budget pressure, we were unable to 
meet this level of commitment in FY 
1986, which fell to a total for MAP and 
FMS of $110 million. 

This fiscal year, we are attempting 
to redress the problems posed by 
reduced levels of security assistance fund- 
ing through an FY 1987 supplemental 
requesting $15 million in ESF (which 
will bring total ESF to approximately 
$80 million) and $30 million in MAP for 
Portugal (which will bring the total to 
$110 million). We also expect to call on 
the southern flank amendment to the 
Foreign Assistance Act, which allows us 
to transfer used U.S. forces equipment 
to Portugal. This Administration is 
presently consulting with the Govern- 
ment of Portugal on a list of equipment 
which would complement items already 
in the inventory of the Portuguese 
Armed Forces. 

For FY 1988, we are requesting for 
Portugal $80 million in ESF, $85 million 
for MAP, $40 million for FMS credits, 
and $2.55 million for IMET training. We 
like to think of the present Portuguese 
program as a package. It consists of the 
funding levels I have just discussed 
which will be provided under terms 
which are more advantageous than in 
the past. To this we will add the real 
value to the Portuguese Armed Forces 
of the excess defense articles we will 
provide under the southern flank amend- 
ment. Taken together, we believe the 
package will meet our commitments to 
Portugal. 

The economic component of our 
assistance package is particularly impor- 
tant to the pursuit of our interests in 
Portugal. Despite some significant 
economic advances, Portugal remains 
the poorest country in Western Europe, 
with an estimated per capita income in 
1985 of $2,150. ESF funds-half of 
which are transferred by the Govern- 
ment of Portugal to the Azores— have 
been important to Portugal's struggle 
to recover from years of austerity, the 



Jay 1987 



49 



EUROPE 



absorption of 700,000 refugees from 
the former African colonies, and the 
nationalizations and expansion of the 
public sector in the 1974-75 revolu- 
tionary period. The United States has a 
major stake in the continued economic 
development of Portugal. 

Our military assistance request of 
$85 million in MAP, $40 million in FMS, 
and $2.55 million in IMET is the mini- 
mum which will allow us to fulfill our 
base agreement commitment to the Por- 
tuguese. The Portuguese Armed Forces 
are in acute need of modernization, and 
the FY 1988 assistance is necessary to 
continue the modernization program. In 
particular, FY 1988 military assistance 
will, inter alia, help enhance Portugal's 
capacity to patrol vital sealanes, upgrade 
its mixed NATO brigade, and increase 
the readiness of its fleet. 

In conclusion, the importance of 
Spain and Portugal to the overall NATO 
security posture is fundamental. The 
Portuguese base at Lajes in the Azores 
and the major Spanish air and naval 
facilities we use are strategically placed 
and vital to the Western defense effort, 
especially the alliance's naval air and 
infrastructure element. Our security 
assistance to Spain and Portugal is 
money well spent, as it promotes the 
interests of the United States, as well as 
those of Spain and Portugal and the 
NATO alliance to which we all belong. 



MAR. 3, 1987 

I welcome this opportunity to speak with 
you about our policy toward Greece, 
Turkey, and Cyprus and specifically our 
FY 1988 foreign assistance request for 
these countries. 

Southeastern Europe is an area of 
crucial importance to the United States. 
Sustaining our vital national interests 
there will require close cooperation 
between the Administration and the 
legislative branch. We have a record of 
achievement together to live up to— 40 
years ago we launched the Truman doc- 
trine in response to the threat to 
freedom in Greece and Turkey. It suc- 
ceeded in large measure because it 
enjoyed strong, bipartisan support here 
on the Hill. 

Today challenges to peace and 
security persist in southeastern Europe. 
I would like today to review our inter- 
ests and objectives there, the dilemmas 
we face, and the proposals we have for 
assistance tailored to our own interests 
as well as to the unique needs of each of 
the three countries concerned. 



I understand that the subcommittee 
also wants to look today at foreign 
assistance for Ireland and Poland. I will 
have short statements about those pro- 
grams as well. 

U.S. Interests 

Let me begin by discussing briefly the 
importance of southeastern Europe. 

America's relations with south- 
eastern Europe span the full range of 
security, political, economic, and cultural 
interests. Those interests fall into two 
broad categories— our established rela- 
tionships with old friends and our 
specific national security interests. 

Our security interests in the region 
are familiar facets of testimony before 
this committee. A great deal can be said 
about the significance of Greece and 
Turkey in the eastern Mediterranean 
and southeastern Europe, about 
Turkey's long borders with the Soviet 
Union, about the vital role of the 
Bosporus and about the military impor- 
tance of our facilities in Greece and 
Turkey. I would stress that recent 
advances in missile weaponry have not 
diminished the region's strategic impor- 
tance. The pro-Western orientation of 
Greece and Turkey remains crucial to 
our own defense. 

The proximity of the area to the Mid- 
dle East adds to its strategic impor- 
tance. For Europe the region forms both 
a bridge and a buffer with respect to the 
Middle East. A strong and prosperous 
southeastern Europe is a stabilizing 
factor in the region and an essential 
bulwark against extremism. Conversely, 
weakness in southeastern Europe will 
surely encourage, reinforce, and spread 
the divisiveness and instability that has 
shaken the Middle East, with tragic 
consequences. 

Fortunately we have well-established 
friendships with all three countries in 
this vital region, built on the strong 
foundations provided by shared values 
and mutually beneficial cooperation in a 
variety of activities. 

Two of these states, Greece and 
Turkey, are our allies in NATO, and we 
have much common and successful 
experience with them. Our ties to Greece 
reach far into our past. We identify our 
own cultural heritage closely with 
Greece, we have a strong and pros- 
perous Greek- American community, and 
over the last 40 years we have worked 
closely with Greek Governments on 
many issues. These are firm 
underpinnings. 

Our links with Turkey stretch well 
back even before our independence, but 



the bilateral relationship assumed major 
significance after World War II. This 
period of common endeavor has forged 
bonds no less strong than those with 
older friends. In recent years, we and 
Turkey have explicitly reaffirmed mutua 
desires to develop the relationship on the 
broadest possible basis. 

Cyprus is a democratic, nonaligned 
state with which we maintain a cordial 
and cooperative mutually beneficial rela- 
tionship. The United States has a strong 
and continuing commitment to help the 
Greek and Turkish Cypriot communities 
achieve reconciliation through a negoti- 
ated settlement of their differences. 



U.S. Objectives 

Our objectives in southeastern Europe 
are defined and shaped by the foregoing 
interests. 

First, we seek continued develop- 
ment of strong and broadly based 
bilateral relations between our country 
and Greece, Turkey, and Cyprus. Each is 
a good friend. It is in our interest to pur- 
sue strengthened ties. 

Second, we desire further strength- 
ening of the NATO alliance and its 
strategic southern flank: Greece and 
Turkey lie on the front lines of our own 
defense. 

Third, we are working for a just and 
lasting Cyprus settlement acceptable to 
both Cypriot communities. There can be 
no doubt that such a settlement would bf 
of tremendous benefit to all nations in 
the area and to our relations with them. 
Nor can there be doubt that our close 
ties with Greece and Turkey sustain our 
ability to play a constructive role in the 
search for a peaceful solution. 

Fourth, we support resolution of the 
differences between Greece and Turkey. 
We deeply regret the tensions between 
our two friends and allies. We have 
urged the leadership of both nations to 
renew efforts to find a basis for dialogue 
and cooperation, and we stand ready to 
help as and when we can. 

Finally, we want to promote 
vigorous democracies and dynamic 
economies throughout the area. We are 
fortunate that democracy is prospering 
there and promises to continue despite 
extremist trends nearby. Sound econo- 
mies will help assure the strength and 
permanence of free nations and their 
institutions. 

Dilemmas of Friendship 

We believe that our objectives in the 
region are mutually supportive. In fact, 



50 



Department of State Bulletin 



EUROPE 



lit is necessary that we pursue all of them 
If we are to achieve any one. This is good 
theory but difficult to put into practice. 

The fact is that tension between 
Greece and Turkey cuts across our inter- 
ests and presents us with recurrent 
dilemmas and difficult choices. Actions 
pn our part to support one country indi- 
vidually can be misperceived as under- 
cutting the other, or as a reflection of 
hilt in our policy. As members of NATO, 
the U.S. Government and the other 
nember states must contribute to solu- 
tions that adhere to recognized prin- 
ciples and do not diminish the efficiency 
imd effectiveness of that alliance. 

We must and will continue, there- 
fore, to work for reconciliation between 
Greece and Turkey. We seek to play a 
Constructive role and to preserve stabil- 
ity between the two while working 
i.oward resolution of differences. For the 
iJnited States— and we believe for our 
■lilies— this requires that we not choose 
petween Greece and Turkey in parochial 
■ lisputes nor try to impose solutions from 
Jmtside when there is no lasting basis for 
Acceptance. The totality of our own 
interests argues for patient, persistent 
•fforts with an eye always to the long 



Afferent Countries, Different Needs 

n framing our policies, we find it imper- 
itive to take into account the very dif- 
erent needs of each of our friends. The 
lifferences are striking. Turkey, for 
jxample, has a per capita income of 
ibout $1,000 a year; Greece well over 
53,000 per year; in Cyprus, the Greek 
Cypriot area over $4,400; and the 
Turkish Cypriot area just over $1,000. 
Turkey and Greece are at very different 
stages of economic development, and 
jreece derives extensive benefits from 
nembership in the European Com- 
nunities. As for military considerations, 
;he fact that Turkey borders the Soviet 
Union, Iran, Iraq, Syria, and Bulgaria 
ntroduces special security concerns 
ivhich underlay the acute need to 
nodernize its military forces. 

Prime Minister Ozal has emphasized 
that he would prefer "trade not aid." 
His approach recognizes that a nation's 
underlying strength rests on a strong, 
self-sustaining economy rooted in private 
ienterprise. We want to do more to help, 
ibut it will take time. One positive 
development was the signature in 
Washington last year of the bilateral 
investment treaty (still pending United 
I States Senate approval). In the mean- 
time, Turkey is one of the few countries 
iwith which we have a very substantial 



trade balance in our favor, and this at 
a time when Turkey faces a period of 
major foreign debt repayments. 

The economic dimension of our 
relationship is also very important to 
Greece. For example, the very low level 
of foreign investment is a major aspect 
of the country's persistent and con- 
siderable economic difficulties. We are 
holding a series of talks with Greek 
officials on ways to improve the situa- 
tion. I mention this activity to illustrate 
the importance of tailored programs and 
appropriate mixes of economic measures 
and security assistance to help our 
friends in southeastern Europe. 

Congress in recent years has held 
that notwithstanding the differing 
military and economic requirements, 
there should be a 7-10 ratio of security 
assistance for Greece and Turkey. This 
Administration continues to oppose any 
such artificial constraint. This is not 
new; it has long been our position that 
imposing a ratio is simply not an effec- 
tive way to tailor resources to the 
requirements of two such different coun- 
tries. Nor will such a ratio assure any 
particular military balance since this is a 
function of many other factors as well. 

Let me say a few words here about 
one of the most frustrating and perplex- 
ing of our dilemmas— the Cyprus prob- 
lem. I would like to review briefly the 
status of peacemaking efforts and recap 
the principal elements of our approach. 

Mandated by the UN Security Coun- 
cil, the UN Secretary General has sought 
to engage the Greek and Turkish Cypriot 
communities in negotiations leading to a 
just and lasting settlement. With our 
strong support, Secretary General Perez 
de Cuellar has persevered with his dif- 
ficult mission. Since he launched his 
Cyprus initiative in 1984, he has sought 
as a key step forward the conclusion of a 
framework agreement which would pro- 
vide an outline and a process for pro- 
ceeding to a settlement. In January 
1985, a first draft agreement was 
accepted only by the Turkish Cypriots, 
while in April 1985, a revised draft was 
accepted only by the Greek Cypriots. In 
March 1986, he presented a new draft 
framework agreement to the two sides, 
which was accepted by the Turkish 
Cypriots but not by the Greek Cypriots. 
The Greek Cypriots instead proposed as 
alternatives an international conference 
or a high-level Cypriot meeting to 
address the issues of most importance to 
them. An impasse has resulted. The 
Secretary General is seeking at this time 
to renew the momentum in the search 
for a peaceful settlement. Senior UN 
Secretariat officials visited the island in 



early February to suggest new proce- 
dural ideas to help move the process 
forward. 

We do not give our support to the 
Secretary General lightly or just because 
it is an easy and convenient out for us. 
Rather we have high regard for his per- 
sonal engagement in Cyprus issues over 
many years, and we remain convinced 
that his approach is the most promising. 
It builds on agreements previously 
reached between the parties and offers 
an ongoing process for negotiations, 
whether direct or indirect. It is predi- 
cated not on the imposition of a solution 
but on eliciting what is acceptable to the 
two Cypriot communities. 

These elements of the Secretary 
General's approach are consistent with 
our own. Promoting a just and lasting 
resolution of the Cyprus problem is a 
high priority objective of this Admin- 
istration. We have urged all parties to 
cooperate with the Secretary General at 
this crucial juncture. 

Turkey 

Let me now focus on our strengthening 
relationship with Turkey. Prime Minister 
Ozal's recent private visit highlighted 
the progress made since 1985 when 
Secretary Shultz directed a broad review 
of our bilateral relationship. Turkey 
itself has continued major advances in its 
economic and political development. 

The Secretary's visit to Turkey in 
March 1986 confirmed the momentum of 
Turkey's drive for stable democracy and 
modernization. Turkey has, indeed, con- 
tinued to make great strides in this 
direction, a movement that has been 
noted by others besides ourselves. We 
have been pleased to note such develop- 
ments over the past year as progress on 
normalizing the Turkey-EC association 
agreement, assumption by the Turkish 
Foreign Minister of the chairmanship of 
the Council of Europe's ministerial coun- 
cil, and resolution of the European 
human rights inquiry. 

Perhaps this is the best place to say 
a word about the resolution recently 
introduced in Congress on the historical 
tragedy of the Armenians. We strongly 
oppose this resolution, partly because of 
antiterrorist considerations, and in large 
measure because, however the wording 
is framed, it will inevitably be construed 
as blaming modern Turks for the tragic 
suffering and deaths of Armenians 70 
years ago. We do not believe this is the 
way to treat a friend and key NATO 
ally. Moreover, passage of the resolution 
is more likely to hinder than encourage 
the process of modernization and liberal- 



iMay 1987 



51 



EUROPE 



ization now underway in Turkey. Our 
focus should be on promoting reconcilia- 
tion between Turks and Armenians. 

We have successfully concluded talks 
on the future of our joint use bases in 
Turkey, under the rubric of the 1980 
defense and economic cooperation agree- 
ment. Last December in Ankara, the two 
sides agreed in principle to extend the 
initial 5-year term of the agreement for 
a second 5 years through December 1990. 
Continued U.S. security assistance on 
the best possible terms, economic 
assistance, defense industry cooperation, 
promotion of private sector economic 
relations, and intensified political 
dialogue all have roles to play in this 
context. The Government of Turkey has 
pledged to reciprocate U.S. efforts to 
develop further our bilateral coopera- 
tion. The English and Turkish tests of 
this agreement are currently under final 



review and shortly will be notified to 
Congress in accordance with the Case 
act. 



Assistance Requests for Turkey 

In our 1987 supplemental aid request, 
we have asked for $125 million for Tur- 
key. We believe this amount reasonable 
and justified to carry forward essential 
modernization programs. Since FY 1985, 
Congress has cut back drastically on our 
military assistance to Turkey. Levels 
have fallen from $700 million in FY 1985 
to only $490 million in FY 1987 against 
the $820 million we had requested. The 
supplemental is intended to make up 
part of the ground lost over the past 2 
years. Obviously failure to meet our 
understandings raises questions about 
our commitment, our ability, or our will- 
ingness to do what we say we will try to 
do when we are at a negotiating table. 



U.S., Turkey Extend Agreement 
on Defense and Economic Cooperation 




On March 16, 1987, at the Department 
of State, Secretary Shultz and Turkish 
Foreign Minister Vahit Halefoglu 
exchanged letters extending through 
December 1990 a bilateral defense and 
economic cooperation agreement that 
has been in effect since 1980. At the 
ceremony, Secretary Shultz said: "On 
the American side, this agreement is but 
one more manifestation of our recogni- 
tion of the vital importance of our close 
relationship with Turkey. Turkey is a. 
key friend and ally of the United States 
and a trading partner of growing impor- 
tance. Among NATO member countries, 
Turkey contributes military manpower 



second in number only to those of the 
United States itself. Over the years, 
both Turkey and the United States have 
shared a basic and abiding interest- 
ensuring that the North Atlantic 
alliance's ability to deter aggression 
remains strong and effective. Today's 
agreement should be seen in that con- 
text, not simply as one more chapter in 
productive Turkish-American bilateral 
cooperation but also as an important ele- 
ment in our larger common efforts to 
secure a more durable peace." 



'For the full text of the Secretary's 
remarks and those of Foreign Minister 
Halefoglu, see press release 61. ■ 



52 



More concretely it will result in lower 
levels of modern arms for Turkey's 
Armed Forces, thereby weakening 
NATO and our own national security. 

For FY 1988, we have proposed 
$785 million in military assistance to 
Turkey. This amount is, as before, basec 
on an assessment of Turkish needs in th 
NATO context and on what can be effec 
tively absorbed at this time. The Presi- 
dent's budget proposal is structured to 
balance these defense requirements wit! 
other national budget priorities. I would 
urge the Congress to sustain these 
levels. To do less, as I have noted above, 
quite simply has a direct adverse impact 
in lowering the military capabilities of 
NATO as a whole. Turkey, as the 
poorest country in the alliance, cannot 
make up the difference from its own 
resources. 

Specific programs for which funding 
is urgently required include the F-16 
program, the M-48 tank upgrade, and 
completion of the Meko class frigates. 
Defensive aircraft are critical to NATO'; 
eastern Mediterranean defenses. In the 
case of Turkey, F-16s are needed to 
replace 1950s- vintage F-100/F-104 air- 
craft. The F-16 will help Turkey to 
counter the massive and fully modern- 
ized Soviet armor and air forces which 
confront it. Meanwhile continued 
upgrade of Turkey's M-48 tanks to the 
A-5 configuration represents the most 
economical means of equipping the tank 
fleet with state-of-the-art optics, armor 
plating, and sufficient firepower to 
match modern Soviet tanks deployed 
against Turkey. 

The tank upgrade is an army-wide 
program for obvious reasons of logistics 
efficiency and military readiness. Since 
this approach by definition includes all 
Turkish Army tanks, questions have 
been raised regarding Turkish tanks in 
Cyprus. In the context of Cyprus, the 
present qualitative change in the Turkish 
tank force there does not materially shift 
the balance that previously existed 
between opposing forces. There have 
been changes in Greek Cypriot forces as 
well. We continue to urge restraint on 
all sides to facilitate reconciliation. As 
for the legal issues involved, I would 
note that the lifting of the arms embargo 
against Turkey in 1978 took into account 
that Turkish forces were then in Cyprus 
and sought to promote deeper engage- 
ment of the Turkish side in the negoti- 
ating process. We believe the legislative 
objective continues to be met. 

Modernization of Turkish armored 
capabilities is essential if Turkey is to 
field adequately equipped divisions to 
meet its NATO obligations. Turkey also 



Department of State Bulletin 



EUROPE 



is engaged in naval modernization and 
systems upgrade for its frigates, as well 

improving older destroyers. These 
torograms, and several others, represent 
|he minimal level of effort necessary to 
jcounter the growing obsolescence of 
Turkish forces. FY 1988 funds requested 
by the Administration will only cover 
.cash flow for these few programs, plus 
borne modest operations and mainte- 
nance requirements of existing systems. 
Funding limitations in any case will con- 
tinue to constrain initiation of new and 
much needed programs. 

We also believe that the equipment 
:hat Turkey will receive under the 
isouthern flank amendment will make an 
important contribution in meeting 
jrurkey's military modernization needs, 
discussions are currently underway on 
inatching Turkish needs to availabilities 
j)f excess U.S. equipment. 

Assistance Request for Greece 

{jet me turn now to Greece. With Greece 
ive have in the last 2 years sailed into 
ivhat Prime Minister Papandreou calls 
! 'calmer waters." We welcomed that 
:all and have worked with the Greek 
i jovernment to make it a reality. 
Together with the Greek Government in 
1985, we sketched out a step-by-step 
I ipproach to improve relations across the 
>oard and have come a long way in 
•ealizing it. Secretary Shultz's visit to 
Athens in March 1986 and Foreign 
Minister Papoulias's visit to Washington 
n November last year are hallmarks of 
;his progress. We have concluded a 
lefense and industrial cooperation 
igreement, conducted bilateral trade 
. md investment talks, made substantial 
progress on bilateral issues such as the 
/oice of America, and resolved opera- 
-ional problems affecting United States 
)ases. 

We have, however, a long way to go. 
: \Ve have yet to work out arrangements 
' with the Government of Greece for the 
'uture of our bases there. As agreed 
between the Prime Minister and 
Secretary Shultz in 1986, we hope to 
•nake progress on this issue in timely 
fashion this year to give us lead time 
oefore December 1988 when the current 
defense and economic cooperation agree- 
ment with Greece can be terminated, an 
option that Prime Minister Papandreou 
has said he intends to exercise. 

Although the question of United 
States bases tends to dominate 
headlines, we are determined to improve 
Relations and are prepared to assist 
Greece across a broad range of activ- 
ities. We look forward to a visit to 



Washington by Vice Premier and 
Defense Minister Haralamboupulos later 
this year. We hope to advance to comple- 
tion of agreements on the Voice of 
America, status of forces questions, and 
civil aviation. 

Security assistance remains an 
important element of our policy. We 
have not included Greece in our FY 1987 
supplemental because amounts available 
are limited, and Greece, unlike other 
nations which suffered assistance cuts, 
still has about $635 million in uncommit- 
ted funds from previous years. Turkey's 
$490 million in FY 1987 assistance is 
already fully committed. 

For FY 1988, we have proposed 
$436 million in security assistance. This 
sum represents our best assessment of 
the Greek Armed Forces' priorities tak- 
ing into account their resources and 
needs. The FY 1988 security assistance 
program will support Greece's military 
modernization program and thereby 
enhance NATO capabilities in the 
eastern Mediterranean. 

Specific programs include the pur- 
chase of 40 F-16 aircraft, with an option 
to buy an additional 20, to replace an 
aging fleet of F-104 and F-4 aircraft. 
Greek ground force capabilities will be 
enhanced by the planned acquisition of 
additional M-48 tanks. Short-range air 
defense capabilities will be raised closer 
to NATO standards with the addition of 
portable air defense systems and muni- 
tions. The Hellenic Navy is considering 
the acquisition of a U.S. -designed ship 
and weapons to enhance its capability 
for antisubmarine warfare. In the mean- 
time, as with Turkey, the excess equip- 
ment we will provide to Greece under 
the southern flank amendment will 
immediately enhance and augment the 
armed forces' present capabilities. 
Discussions are underway with Greek 
authorities to match Greece's needs with 
available U.S. equipment. 

Cyprus 

For Cyprus in FY 1988, we have pro- 
posed $10 million in ESF. As you know, 
in the past we have regularly proposed 
$3 million and congressional action has 
raised the total to $15 million, clearly in 
recent years at least, by way of register- 
ing a signal of American desire to pro- 
mote a Cyprus settlement. In light of 
Gramm-Rudman-Hollings considerations 
and the increasing affluence of Greek 
Cyprus, we believe the time has come to 
adjust our ESF level for Cyprus to a 
more realistic one in line with other com- 
peting priorities. Hence, we have pro- 
posed $10 million as an alternative to the 
$15 million of prior years. 



We have adjusted the mix of pro- 
grams for ESF expenditure in Cyprus to 
approximately one-third for scholarships 
and two-thirds for projects which pro- 
mote relief and development, including 
bicommunal contact. It has been difficult 
to find activities which genuinely pro- 
mote contacts and cooperation between 
the two communities, but that remains 
our goal, and we have had some success 
in such efforts as city planning for the 
Nicosia master plan. 

Assistance to Ireland 

In regard to a third U.S. contribution to 
the International Fund for Northern 
Ireland and Ireland, the Administration 
supports the commitment made in 1986 
for $120 million over a 3-year period 
($50/$35/$35). The U.S. contribution was 
conceived as a tangible sign of our sup- 
port for the political and economic goals 
of the 1985 Anglo-Irish agreement. Our 
support for those goals of reconciliation 
and economic regeneration remains 
strong. 

Although there was an increase in 
the level of violence in Northern Ireland 
in 1986, efforts by opponents of the 
agreement to force the two governments 
to abandon the accord were entirely 
unsuccessful. The commitment of the 
U.K. and Irish Governments to continue 
their dialogue, within the context of the 
agreement, remains unchanged. There 
has been some speculation about a 
change in the attitude of the Irish 
Government as a result of the election 
victory of Fianna Fail. We have no 
reason to believe that the new govern- 
ment will abandon the agreement, 
although Mr. Haughey has suggested 
that he may approach the United 
Kingdom about renegotiation of the text 
referring to the constitutional status of 
Northern Ireland. 

The establishment of operating pro- 
cedures and working relationships be- 
tween the fund and the donors is moving 
along. The fund's board of directors is 
actively reviewing projects and expects 
to approve a number in the near future. 

Assistance to Poland 

I understand that the committee is also 
interested in the status of the $10 
million earmark in development assist- 
ance funds to assist private Polish 
farmers. Our efforts to utilize the funds 
received a setback in September 1986 
when negotiations between the church 
and the Government of Poland to 
establish a private agricultural founda- 
tion were suspended. We have met on 



May 1987 



53 



FOREIGN ASSISTANCE 



several occasions recently with church 
officials and the church's organizing 
committee to identify alternative proj- 
ects to assist private farmers. We are 
encouraging the organizing committee to 
work with a U.S. private voluntary 
organization which can take the place of 
the foundation in administering the proj- 
ect in Poland. If our efforts to appro- 



priate the $10 million during FY 1987 
are not successful, we will request Con- 
gress to extend the authorizing legisla- 
tion through FY 1988. 



■The complete transcripts of the hearings 
will be published by the committee and will De 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington, D.C. 20402. ■ 



U.S. Initiative for Southern Africa 



by M. Peter McPherson 

Address before the annual con- 
sultative meeting of the Southern Africa 
Development Coordination Conference 
(SADCC) in Gaborone, Botswana, on 
February 5, 1987. Mr. McPherson is 
Administrator of the Agency for Interna- 
tional Development. 

I am extremely pleased to be here today. 
Let me express, on behalf of all donor 
governments, our appreciation for the 
hospitality of you, Mr. President [Quett 
K. J. Masire], and the Government of 
Botswana. You are gracious hosts, and 
you have made us feel as one, within an 
extended family. 

I also want to congratulate Chair- 
man Mmusi, Executive Secretary 
Makoni, and the Secretariat staff of 
SADCC. You have prepared impressive 
and substantive reports in support of 
this year's important conference theme: 
"Investment in Production." 

Before turning to that theme, I think 
we need to stop for a moment to reflect 
on SADCC. As we all know, SADCC 
grew out of the concerted efforts of 
Angola, Botswana, Mozambique, Tan- 
zania, and Zambia— the original front- 
line states— to support independence in 
Zimbabwe and Namibia. 

This transition was successful in 
Zimbabwe, and with that success came 
the recognition that stability and 
economic growth were shared regional 
concerns. The front-line states saw the 
imperative of going beyond short-term 
political considerations. They wisely 
concluded that equitable development 
and greater economic interaction 
between states was essential for peace. 

The result was SADCC, established 
in April 1980 at Lusaka. The original 
front-line states were joined by Zim- 
babwe, Lesotho, Malawi, and Swaziland. 
Together, you formalized your intention 
to pursue a cooperative strategy of 
regional development— thereby setting a 
standard of consensus: a rallying point 



where regional economic opportunities 
and problems could be addressed. 

The accomplishments of SADCC 
since that 1980 foundation are very 
impressive. The most recent annual 
progress report attests to significant 
mobilization of resources, both foreign 
and local. Transportation planning and 
cooperation may be one of the most 
impressive in the Third World. I believe 
the most important achievements have 
been the commitment to solve common 
development problems together and a 
commitment to exploitation of certain 
common assets for the advancement of 
all the people of southern Africa, doing 
so in a professional, careful fashion. 

You, as member states, have joined 
ranks and achieved this significant level 
of regional cooperation and also main- 
tained your own distinctive and independ- 
ent national systems. We applaud your 
accomplishments. Our presence here 
today is an expression of our confidence 
in SADCC and our commitment to the 
future of the organization and to your 
countries. 



Promoting a Positive 
Vision of the Future 

There was once one of you, a father of 
SADCC, who often challenged us with a 
dream of southern Africa. He did so 
always with optimism and foresight. 
Sir Seretse Khama spoke often of 
Kagisano—a guiding Tswana philosophy 
of unity, peace, harmony, and a sense of 
broader community. Kagisano was iden- 
tified inseparably with sustained 
development, democracy, and human 
rights. This, we think, is a worthy 
philosophy for all of southern Africa. We 
urge SADCC to continue to pursue the 
dream of Sir Seretse Khama from 
southern Zaire to the Cape, from the 
Atlantic to the ports of Tanzania and 
Mozambique. 

With SADCC, this region of Africa 
has a forum in which this dream of the 
future can be translated into action. 



Were Sir Seretse Khama here today, I 
am sure he would be strong, clear, and 
positive in his view of the future. He 
would note the 70 million people strong 
of SADCC countries. He would point out 
again the rich soils and mineral deposits. 
Then he would urge us all to work 
toward: 

• A southern Africa that receives 
greater added value from its mineral and 
agricultural production; 

• A southern Africa that is food 
self-reliant; 

• A southern Africa that manufac- 
tures more of its own capital goods and 
generates some internal capital from 
locally owned companies; 

• A southern Africa able to offer 
new employment and increased incomes 
to a skilled workforce, a workforce that 
can move across borders in search of 
employment; and 

• A southern Africa with diverse 
economies, yet interlinked through effi- 
cient transportation and communication 
systems, with substantial and balanced 
regional trade. 

This kind of vision is not Utopian. It 
could come in most of our lifetimes. Yet 
we cannot be blind to the formidable 
challenges that lie in the path. Much 
needs to be done. 

• First, the end of apartheid; unless 
apartheid is ended, it will poison the 
future of all, including its creators. All 
human development is rooted in equal 
opportunity. The same is true of nations, 
and SADCC, we think, represents that 
ideal. 

• Second, economic reform pro- 
grams are the prerequisites for new 
growth, and more needs to be done. 
Important structural adjustments are 
underway in Zambia, Malawi, Mozam- 
bique, and Tanzania. We, the donor com- 
munity, must strengthen our support for 
these essential efforts in order to 
generate more growth, employment, and 
additional income. 

Donors will remember the presenta- 
tion of Executive Vice President Stern 
of the World Bank at the high DAC 
(Development Assistance Committee of 
the Organization for Economic Coopera- 
tion and Development) a few months 
ago. He set forth an impressive case for 
fast-disbursing aid. 

• The countries in this region will 
need to further adjust and coordinate 
exchange rates to open regional oppor- 
tunities for increased trade. The con- 
sultation with the private sector is essen- 
tial to assure that barriers to investment 
are lifted. 



54 



Department of State Bulletin 




FOREIGN ASSISTANCE 



> Natural routes to the sea need to 
•e rehabilitated so that the region's 
■ansportation network can function, 
ostly dependence on the long routes 
rough South Africa is unhealthy 

>conomically and undermines future 
jrogress. 

> In general, southern African coun- 
tries need to reduce their current level 

)f unhealthy economic dependency on 
South Africa. There are, of course, 
mportant and mutually advantageous 
conomic links between SADCC coun- 
ts and South Africa. But SADCC 
;ountries should seek less economic 
dependency over the medium term, and 
Lhat should result in more growth and 
oenefit to all in the region. One must 
itrive for balance, and the current 
economic situation is clearly out of 
oalance. 

» Finally, we would urge that the 
economies of southern Africa develop in 
ways that capitalize on each country's 
comparative advantage, taking into con- 
sideration economies of scale. This is 
necessary for terms of trade with the 
outside world to improve. That is fun- 
j damental to create the exports to sustain 
economic security. 

Of course, a positive vision requires 
development of strong economies within 
SADCC, and Zaire as well, so that the 
region can trade and compete on a more 
equal footing with South Africa. Yes, 
SADCC countries must take their place 
in the years ahead as a source of 
technology, raw materials, and capital 
goods and as a market for regionally 
produced goods. 

The fact that many of these objec- 
tives are high on SADCC's agenda and 
are mentioned in the documentation 
prepared for this conference gives me 
great hope for the future development of 
this region and the only important role 
of SADCC. It also underscores why the 
theme of this conference— "Investment 
in Production"— makes such good sense. 

The private sector is not only an 
important player in economic growth— it 
must play the leading role. The donors 
welcome SADCC's plan to expand 
private sector involvement. We will do 
all we can to support this very desirable 
program. I know the representatives 
from the private business community 
who are here at this conference have 
noted the great potential of this region. 
We hope the private sector will respond 
to the attractive long-term investment 
opportunities. Yesterday's private sector 
session went well, and I know that many 
are talking about the possibility of a 
private sector advisory board to SADCC. 



This should be carefully considered. 

The vision set forth here is not 
without dangers. This is a time of great 
immediate peril in southern Africa. As 
the crisis of minority rule in South 
Africa deepens, the spillover effect on 
the southern African economies is real 
and dangerous— with ramifications that 
might be underestimated. It would be 
tragic if the future of this region is mort- 
gaged by sanctions within the region 
which would jeopardize the economic 
future of all the parties in this 
subcontinent. 

Let us continue to put our heads and 
hearts together and work out realistic 
strategies toward the achievement of 
our goals. I believe SADCC and its pro- 
gram of action represent the kind of 
positive strategy Sir Seretse Khama had 
in mind. We are here today to confirm 
the international partnership between 
SADCC members and the donor 
community. 

New U.S. Initiative 

For our part, the United States is 
prepared to undertake a new initiative in 
southern Africa— one which would build 
upon our current program of approx- 
imately $175-$200 million annually in 
food and economic assistance to SADCC 
and member countries. 

On July 22 of last year, President 
Reagan announced that Secretary Shultz 
and I would undertake a study of the 
U.S. assistance role in southern Africa. 
The President asked us to examine the 
needs of the region and what could be 
done to improve the transportation and 
expand trade and private investment. 

As some of you may recall, I was in 
the region last August to consult with 
SADCC governments on the develop- 
ment of such a program. I met at that 
time with the Governments of Zambia, 
Malawi, Mozambique, and Botswana and 
met personally with the presidents of 
several countries and with the SADCC 
leadership. In September, I also had ex- 
tensive discussions in Washington with 
Mozambique leadership. Out of these 
consultations, the United States has 
developed a multiyear Initiative for 
Economic Progress in Southern Africa. 
Our initiative: 

• Supports the rehabilitation of 
important transport and regional port 
facilities; 

• Supports economic, trade, and 
monetary policy reforms designed to 
attract more investment to the region, 
both foreign and indigenous. This will be 
done with quick-disbursing grants; and 



• Will help fund mechanisms to 
facilitate trade among the southern 
African countries themselves and 
between them and the rest of the world. 



We propose that this initiative 
extend over the next several years. We 
have asked our Congress for $93 million 
in additional assistance to southern 
Africa, to be committed over the next 18 
months. This will be a first installment 
on what we hope will be the development 
of significant new areas of cooperation 
between the United States and the 
region. 

On December 4, 1986, U.S. Secre- 
tary of State George Shultz said: 

There is too much at stake for us to turn 
away in despair and let destructive events run 
their course. The economic engine created by 
the talent and sweat of all the peoples of 
southern Africa is too important to be 
destroyed by reckless actions from any 
quarter. The hopes of all the region's people 
for a better life for themselves and their 
children are too precious to be squandered 
away in futile efforts to preserve apartheid in 
South Africa or by a leftward lurch toward a 
new authoritarianism. 

Secretary Shultz then pledged that 
the United States will stand with you 
and will remain engaged in the search 
for peaceful solutions and new economic 
growth. 

Conclusion 

Let me say in closing that we, as 
donors, and you, as SADCC members, 
have developed an important partner- 
ship. The donors share your vision of the 
future, and we are committed to helping 
turn vision into reality. We have come to 
know each other well over the past 
several years, both personally and pro- 
fessionally. Yes, we can accomplish a 
great deal together for the people of this 
region. 

Since this annual conference was 
held last year, one of the important 
leaders of this region has fallen. I can 
think of no greater tribute to President 
Machel than for us, in his name, to 
rededicate ourselves to your program of 
action. I am here to assure this con- 
ference that the donor community 
intends to do its part. ■ 



May 1987 



55 



FOREIGN ASSISTANCE 



U.S. Development Strategy 
for Sub-Saharan Africa 



by M. Peter McPherson 

Statement before the House Select 
Committee on Hunger on February 26, 
1987. Mr. McPherson is Administrator 
of the Agency for International Develop- 
ment (AID). 1 

I am pleased to be here today to discuss 
several questions of interest with you 
and to present to the Select Committee 
AID's proposed program for the 
Development Fund for Africa (DFA). 
Although it is difficult to discuss 
separate pieces of our African strategy 
without involving all the components of 
the program, I know you have a special 
interest in the African food situation, the 
locust problem and our ongoing locust 
control efforts, and the special programs 
being designed to assist nations of 
southern Africa. 



The African Food Situation 

Sub-Saharan Africa has been most for- 
tunate, for the past 2 years, with regard 
to climatic conditions. Rainfall has been 
good throughout Africa, and with the 
exception of five nations, the general 
food supply situation appears adequate 
for the current crop year. In fact, the 
nations identified as having exceptional 
needs by the Food and Agriculture 
Organization (FAO) all have mitigating 
circumstances precluding adequate 
harvests. In Mozambique, Angola, and 
Ethiopia, civil strife has affected food 
production. Botswana and Lesotho are 
areas with chronic food shortfalls and, 
even in good years, buy a major portion 
of their food needs from neighboring 
countries. 

We have recently reviewed sub- 
Saharan African harvest projections for 
the current crop year from the U.S. 
Department of Agriculture and the 
FAO, and the indications are that per 
capita food availabilities are at a level 
equal to food availabilities in the late 
1970s. When one considers the rapid 
population growth of sub-Saharan Africa 
and the devastation of recent drought 
years, it is a very positive situation. This 
is not to say there are no longer pockets 
of hunger in Africa, but most of the cur- 
rent food problems in sub-Saharan 
Africa are of a regional nature and are 
more closely related to market develop- 



ment, transportation infrastructure, and 
economic growth rather than overall 
indigenous availabilities. 

Knowing that the good news regard- 
ing availabilities will not last indefinitely, 
AID has made a special effort to institu- 
tionalize a food production reporting 
system in our field missions throughout 
Africa. The results have been excellent, 
and we are getting complete and current 
information on food production, food 
imports, and other donor food contribu- 
tions. In addition, we have sought to 
capture special detailed information on 
food availabilities from eight drought- 
prone nations in sub-Saharan Africa. 
Having current and reliable information 
will allow us to decrease our response 
time should another large-scale 
emergency situation occur in the future. 

The Locust Situation 
in Sub-Saharan Africa 

Perversely, climatic conditions favorable 
to sub-Saharan African agricultural pro- 
duction also favor the proliferation of 
locusts and grasshoppers which can 
generate plague-induced famine. Tradi- 
tionally, this situation is most severe 
following periods of prolonged drought. 
Thus, concomitant with the end of a 
3-year drought in 1985, all five of the 
species of grasshoppers and locusts most 
devastating to agricultural production 
threatened to escape normal control 
measures in 1986. 

Recognizing the implications of such 
a catastrophe, the United States worked 
with the FAO, other international 
organizations, other major donors, and 
the affected African countries to carry 
out an emergency control campaign in 
1986. The United States provided almost 
$9 million to a highly successful interna- 
tional effort, costing about $38 million in 
total, to reduce potential crop losses. 
Some 3.8 million hectares of land, with a 
potential production value of over $80 
million, were treated. Crop losses were 
held to less than 20% in the treated 
area, and the risk of production losses 
worth many more millions was 
eliminated in many other areas. Never- 
theless, the 1986 emergency control 
campaign was late in starting, and the 
number of eggs that will hatch during 
1987 is expected to be vastly greater. 



Consequently, the United States has 
continued to work with the international 
donor community to plan a more 
organized program to deal with the 
locust/grasshopper problem over the 
next several years. Meetings have been 
held, planning undertaken, and 
agreements negotiated on how best to 
deal with the problem technically. 
Individual country plans developed in 
conjunction with the African nations and 
other donors have been undertaken, and 
resources have been put in place. 

In addition, AID is developing a 
regional project to deal specifically with I 
the threat of grasshoppers and locusts 
over the next 3 years. It will support an ! 
environmentally sensitive program that 
provides technical assistance, pesticides 
and other commodities, and training for 
African host-country crop protection 
services. This project will support 
integrated pest management principles, 
including entomological and pesticide 
research, and the development of 
improved pest management and bio- 
logical control mechanisms at a cost to 
AID of about $15 million over 3 years. 
Roughly three times that amount is 
expected to be provided by cooperating 
countries and institutions. 



The Southern Africa Initiative 

The countries of southern Africa, in 
varying degrees, share many of the 
problems besetting all of sub-Saharan 
Africa: periodic drought, decreasing 
prices for primary products, and 
unmanageable external debt service 
burdens. They also share the experience 
of a long colonial past, instances of 
unnatural dependency on South Africa, 
and an inability to maintain local institu- 
tions and infrastructure because of war, 
destabilization, and political and 
economic uncertainty. Their population 
is about 70 million, excluding South 
Africa and Namibia. Their total GDP 
[gross domestic product] is $22 billion, 
and their average per capita GDP is 
about $320 per year. 

The Administration proposes a 
special initiative aimed at accelerating 
the economic development of southern 
Africa by helping the countries of that 
region to improve transport and expand 
trade and private investment in the 
region. In the short term, this U.S. 
initiative, whose interest areas are also 
shared and supported by a multidonor 
community, will help southern African 
countries to: 



56 



Department of State Bulletin 



FOREIGN ASSISTANCE 



Ensure that economic reform 
measures can be continued or enhanced; 

Provide more efficient, cost- 
'ective transport routes for vital 
mports and exports; 

Save on import bills (through 
educed transport costs and cheaper 
mports from the regional market), 
thereby making scarce foreign exchange 
ivailable for other urgent needs; 

• Expand export markets; and 

• Help maintain employment and 
ncome levels during a period of eco- 
nomic crisis. 



This initiative will also help set the 
stage for longer term growth and 
development through programs to: 

• Realign regional trade patterns; 

• Develop productive local 
industries and promote competitive 
exports; 

• Embark on a new economic 
reform program; 

• Implement an equitable regional 
growth strategy to raise incomes and 
increase employment; and 

• Restore the regional transport 
system to its former status— one that is 
efficient, reliable, well-managed and 
maintained, and of service to the 
majority of producers and consumers of 

i the region. 

The United States has the opportu- 
nity now to expand its help to reinforce 
the fundamental decisions that countries 
of the region must make to promote 
further private sector-led growth and 
expansion. The economic restructuring 
will, in turn, enable each country to 
attract new investment, expand trade, 
and reverse the spiral of economic 
disasters. 

The initiative will address the most 
acute constraint of the moment— the lack 
of foreign exchange to fuel increased 
production, trade, and investment. This 
will make it easier for countries to imple- 
ment national economic policy reform 
programs and help the countries of the 
region through a period of economic 
transition which will inevitably impose 
hardships on consumers and producers. 

Finally, U.S. assistance, combined 
with that of other donors, will help 
improve the physical infrastructure 
needed for efficient transportation of 
critical inputs and products for new and 
expanding markets. 



The Development Fund for Africa 

The establishment of a Development 
Fund for Africa is being sought in 
conjunction with the fiscal year (FY) 
1988 budget request for the Agency for 
International Development. The creation 
of the fund parallels congressional sug- 
gestions included in legislation intro- 
duced last year by Senators Kennedy 
and Kasten and Representative Fascell. 

Over the past years, we have been 
rethinking and refining our development 
strategy for Africa based on a better 
understanding of the continent's crisis, 
our own experience with different 
assistance programs and modalities, and 
coordination with other donors and 
private and voluntary organizations. As 
a result, we believe that our efforts to 
implement this program will be greatly 
enhanced by the enactment of the pro- 
posed DFA. In addition to eliminating 
functional accounts, which will help in- 
crease management effectiveness, the 
DFA will provide long-term funding and 
signal a special U.S. commitment to 
assisting our African friends in their 
quest for a solution of sub-Saharan 
Africa's unique development problems. 
We will be able to continue agriculture, 
health, population, child survival, educa- 
tion, and environmental activities while 
stressing private sector and policy 
reform efforts. The fact that we will be 
able to offer more flexible support to 
those countries which have made a 
significant commitment to developmen- 
tal goals is another way to accelerate 
progress. 

The major long-term objective of our 
assistance is to help African countries 
initiate and sustain economic growth 
that allows them to attain food self- 
reliance and equitable developmental 
progress. The major pieces of the 
strategy are economic stabilization and 
reform and agricultural and human 
resources development. 

In recognition of the diversity of 
conditions in Africa, AID's assistance 
programs are tailored to the specific 
needs of individual countries. In general, 
our programs support economic policy 
reforms to create incentives for growth 
and to enable African farmers as well as 
private businessmen to play a more 
dynamic role. At the same time, our pro- 
grams help develop the technologies, 
institutions, and human capital required 
for productive employment and sus- 
tained growth. In order to maximize our 
impact on these developmental goals, we 
need to create and maintain the most 
effective financing instrument possible. 
The DFA will meet this requirement. 



Our development strategy in Africa 
emphasizes increased agricultural pro- 
duction, expanded agricultural market- 
ing activities, and private sector 
development, as well as human resource 
development. As part of the Develop- 
ment Fund for Africa, we will continue 
the Africa economic policy reform pro- 
gram which makes substantial funding 
available for those nations pursuing 
aggressive policy reform activities. 
Although much of our reform work is 
focused in the agricultural sector (e.g., 
agricultural pricing, subsidies, and 
private sector competition), it also 
includes other policy reforms (e.g., civil 
service reform, trade and tariff reform, 
and increased foreign exchange 
availability). 

As noted earlier, AID is also under- 
taking a major initiative in southern 
Africa which will be a part of the 
Development Fund for Africa. Our FY 
1988 request is for $500 million to sup- 
port the Development Fund for Africa. 
In addition, $100 million for Africa from 
the economic support fund account will 
be requested to support strategic 
interests justified on political and secu- 
rity grounds. 

African Development Progress 

During the past 2 years, we have 
continually reexamined developmental 
efforts in Africa— from the standpoint of 
both the donor community and African 
recipients. We believe our recent pro- 
gram emphasis, based on a mix of basic 
human needs programs and targeted 
policy reforms, is appropriate. Our FY 
1988 program calls for a continued mix 
of project and nonproject assistance to 
complement host country efforts. It is 
important to ensure that sufficient 
resources are available to allow 
committed African nations to exercise 
greater control of their own destinies. 

A key component for our develop- 
ment activities is the emphasis we are 
placing on women and their role in pro- 
duction, marketing, and investment. 
Understanding the critical importance of 
women and how they influence develop- 
ment is a prerequisite for the success of 
our African strategy. 

The Development Fund for Africa 
responds directly to the need for change 
as defined by the African community. 
This was outlined in May 1986 during 
the UN General Assembly Special Ses- 
sion on the Critical Economic Situation 
in Africa. The most notable aspect of the 
UN meeting was the unique degree of 
unanimity among African leaders with 
regard to their prognosis for the future 



May 1987 



57 



FOREIGN ASSISTANCE 






and the developmental changes needed 
to produce positive African growth. 

African development must be led by 
Africans. It must encompass massive 
economic and financial policy reform 
which fosters market-based develop- 
ment. It must seek to stabilize chaotic 
economic imbalances and reduce the 
burden of massive debt. And, most 
importantly, it must offer the potential 
for real growth that will keep invest- 
ment capital on the continent and 
Africa's future leadership working at 
home. 

Agriculture as the 

Primary Developmental Focus 

It has become increasingly clear that the 
improved management of Africa's 
natural resources— especially land, 
water, and trees for fuelwood— must be 
an integral part of our agricultural 
assistance efforts. The depletion of soils, 
deforestation, and poor land manage- 
ment are having a major long-term 
negative impact on Africa's agricultural 
future. 

We are currently focusing on four 
major areas: agroforestry, soil and water 
conservation, fuelwood management, 
and energy. 

• In Senegal, the $10-million 
reforestation project will mobilize local 
and private resources for treeplanting. 

• The Ruhengeri Resources Analysis 
and Management project in Rwanda is 
working with local farmers to reduce soil 
erosion and improve watershed stability 
within an environmentally sensitive 
watershed. 

• In Sudan, the $4.6-million 
renewable energy project has used a 
combination of U.S. dollar resources and 
local currency to promote both the pro- 
duction and conservation of fuelwood 
resources through local institutions and 
nongovernmental organizations. 

• The Africa regional energy project 
continues to expend funds working 
directly with African governments to 
help demonstrate and disseminate self- 
sustaining public and private sector ini- 
tiatives directed at deforestation, oil 
import dependence, inefficient energy 
use, and the retarded development of 
indigenous African energy resources. 

In addition, we are sponsoring 
activities to learn more about trends and 
effects of changes in natural resource 
and energy availabilities and their 
impact on the quality of life for Africans. 

Our regionally funded remote- 
sensing activities and famine early warn- 
ing efforts allow us to provide short- 



term assistance as well as indicate the 
programmatic focus for long-term 
solutions. 

Our interest in the quality of life is 
not confined to the human experience. In 
the area of biological diversity, we have 
over 30 activities related directly to Sec- 
tion 1 19 of the Foreign Assistance Act, 
which in FY 1986 totaled about $2.5 
million. 

AID and Private 

and Voluntary Organizations 

Of particular importance in making sure 
that we keep up-to-date on trends and 
conditions in Africa are AID's relations 
with private and voluntary organizations 
working throughout the continent. 
Although the contribution of private and 
voluntary organizations is often confined 
to projects when one considers their 
relationship to AID's program in Africa, 
of equal interest is the daily contact, 
information sharing, and feedback in the 
field, as well as seminars and working 
groups here in the United States, which 
they provide. Our recent cooperative 
efforts relating to the drought are clear 
examples of the effectiveness of this 
union. 

We also believe that the kinds of 
reforms currently taking place in Africa 
frequently involve decentralization 
reaching down to the local level. Private 
and voluntary organizations, both U.S. 
and indigenous, are often ideally suited 
to foster this kind of change. 

Human Resource Development 

AID has been a partner of long standing 
with African nations in their efforts to 
improve human resources and basic 
human needs in Africa. Although we 
place a major emphasis on policy reform 
and structural adjustment, the 
maintenance of a system that allows 
growth with equity is of critical impor- 
tance to U.S. efforts in Africa. 

One of the primary areas of concern 
in Africa is population growth. During 
the past several years, an increasing 
number of African nations have begun 
taking a serious interest in population 
growth and its impact on the develop- 
ment process. Although we are planning 
bilateral development activities in 38 
sub-Saharan African countries, of 
particular interest is the proposed long- 
term, regionally funded population proj- 
ect being considered for Nigeria. With a 
population in excess of 100 million peo- 
ple, Nigeria represents about one- 
quarter of the population in sub-Saharan 
Africa. 



Of equal importance with population 
is the improvement of health care and 
effective child survival activities. We art 
currently exploring ways to expand 
health care provided through the private 
sector to ensure that services, once 
available, will continue to be affordable. 
An example of one such activity can be 
seen in Ghana, where the manufacture 
and distribution of oral rehydration salts 
have been taken out of government and 
are now carried out in the private sector 

In addition, AID continues to work 
with several African nations and the 
Centers for Disease Control in 
establishing child survival programs. 
These programs include immunizations 
and the provision of oral rehydration 
salts, as well as maternal and child 
health and nutrition education. Since 
1981, the regionally funded African 
Child Survival Initiative has been work- 
ing in 13 countries and has immunized 
8.3 million children against childhood 
diseases as well as 2 million women 
against tetanus. We are currently 
increasing support for major child sur- 
vival programs in Kenya, Niger, Sudan, 
and Nigeria. 

In education, we continue to support 
primary, secondary, and college-level 
training and institutional support as well 
as vocational and nonformal educational 
efforts. AID's participant training pro- 
gram has had a major impact on develop- 
ment in Africa. 

We will continue to support partici- 
pant training efforts through bilateral 
efforts and regional activities such as the 
Human Resource Development project. 
In addition, in the Sahel region, by 
emphasizing shorter term training in 
Francophone countries, we will be 
increasing the number of participants 
and will hopefully be able to include 
more women. 

In all of our human resource 
development activities, we are putting 
increasing emphasis on the private sec- 
tor for the delivery of services. Given 
the high cost of supplying such services 
from public resources and the limited tax 
base in most African nations, we believe 
that the only way for many services to 
be available on a continuing basis is 
through user fees. 

I believe that we have reflected 
many of your concerns in our current 
program. It is a good strategy, and we 
believe it will yield sound developmental 
results. 



•The complete transcript of the hearings 
will be published by the committee and will be 
available from the Superintendent of 
Documents, U.S. Government Printing 
Office, Washington. D.C. 20402. ■ 



58 



Department of State Bulletin 



MIDDLE EAST 



FY 1988 Assistance Requests for 
the Middle East and South Asia 



by Richard W. Murphy 

Statement before the Subcommittee 
m Near Eastern and South Asian 
Affairs of the Senate Foreign Relations 
Committee on March 23, 1987. Ambas- 
ador Murphy is Assistant Secretary for 
Wear Eastern and South Asian Affairs. 1 

'. welcome this opportunity to meet with 
/ou today and to support the Admin- 
istration's proposals for FY 1988 eco- 
nomic and security assistance for the 
Middle East and South Asia. Foreign 
assistance has become an integral part 
bf our policy, to defend and advance our 
: awn national interests and to help others 
less fortunate. Several weeks ago 
Secretary Shultz said, "We do not seek 
foreign assistance solely for the benefit 
3f others; we are pursuing our own 
national security and economic interest 
when we work with our friends and 
allies around the world." Nowhere is this 
more true than in the Near East and 
South Asia region where a number of 
our vital security and economic interests 
converge. 

The Middle East and South Asia is a 
region in great turmoil. Today there are 
five regional conflicts that threaten 
stability in the area. These include the 
Arab-Israeli dispute, the Iran-Iraq war, 
the Soviet occupation of Afghanistan, 
the west Saharan conflict, and Libya's 
invasion of Chad. Tension along the 
border between North and South Yemen 
and internal strife in Sri Lanka and 
Lebanon further endanger regional 
order. The Middle East and South Asia 
is also a region where economic strains 
and social change create pressures on 
stability. The United States has no illu- 
sion that our security assistance alone 
could resolve these conflicts and strains 
or fully protect key U.S. interests. Our 
aid is designed carefully to assist those 
friends who share our concerns. By 
aiding friends with economic and 
military financing to better protect 
themselves, we are enhancing our own 
security. 

This committee is well aware that 
our deficit situation and need to reduce 
the budget last year required deep cuts 
into programs important to many 
Americans. These cuts were painful. We 
in no way wish to minimize the pain of 
reductions in domestic programs. But we 
have a strong case for maintaining 



foreign assistance at sufficient levels 
required to protect U.S. economic and 
defense interests in this troubled region. 
Last year Congress reduced worldwide 
foreign assistance by 17%, while non- 
earmarked accounts in the Near East 
and South Asia region were cut by 25%. 
Cuts of this magnitude have strained our 
bilateral relations and harmed our 
security programs. Our FY 1988 pro- 
posal for Near Eastern and South Asian 
programs is 2% below that of last year's 
request. We urge this committee to sup- 
port the figures we have requested— 
with a keen eye to U.S. national eco- 
nomic and security interests in the 
region. 

The Middle East 

Several vital U.S. interests— strategic, 
political, and economic— converge in the 
Middle East region. First and foremost, 
we are working to foster stability in a 
region of great strategic importance to 
the United States. We encourage a just 
and lasting resolution of the Arab-Israeli 
dispute. Our foreign assistance programs 
support this commitment. Closely 
related to this, we have attempted to 
assure the security and prosperity of our 
friends in the region. Their military and 
economic security must be dealt with in 
a generous and consistent manner if 
they are to participate fully in the peace 
process. Our assistance programs play a 
key role in our relations with friendly, 
pro- Western Arab nations, many of 
which are threatened by foes of the 
peace process and must maintain the 
means to defend themselves. 

The economies of Middle East oil 
producers and nonproducers alike have 
undergone setbacks over the past year- 
lower revenues from oil exports, reduced 
worker remittances, and a drop in 
revenues from tourism as a result of ter- 
rorist threats. Many of our friends in the 
region suffer from the after-effects of 
economic contraction in the gulf states. 
We are concerned about continued 
economic deterioration and the effect 
this could have on political stability and 
on prospects for peace. 

Our foreign assistance programs 
play an essential role in helping to sup- 
port friendly states which share our 
interest in and commitment to economic 
and political stability. As noted above, 
last year, these non-earmarked country 



accounts had to be reduced by 25% as 
the foreign assistance budget declined. 
We have before us now a budget we can- 
not afford to reduce further unless we 
are also prepared to sacrifice important 
national interests. 

Israel. The United States and Israel 
have a unique and rich relationship 
based on many shared values and inter- 
ests. During this Administration, our 
relations have grown stronger as we 
have forged institutional links such as 
the Joint Political-Military Group, the 
Joint Security Assistance Program, and 
the Joint Economic Development Group. 
These institutions reinforce our tradi- 
tional ties, which we are confident will 
continue to be close and strong. 

We are seeking a total of $3 billion 
in military and economic assistance for 
Israel in FY 1988, the same level as last 
year. This is a large amount, but we are 
convinced it is justified; military 
strength and a healthy economy give 
Israel the confidence to pursue the 
search for peace. 

We request $1.8 billion in forgiven 
foreign military sales (FMS) credits. The 
all-grant terms of the FMS program will 
lessen the economic impact of Israel's 
extraordinary defense burden. This level 
of assistance is sufficient to assure 
Israel's continued qualitative military 
advantage in the region. Israel now 
faces its time of decision concerning the 
future of the Lavi aircraft project. We 
have urged the Government of Israel to 
consider lower cost alternative aircraft 
in view of the very high estimated cost 
of the Lavi, and we have advised that 
the United States would not be able to 
fund the large additional cost the Lavi 
would impose in view of our limited 
resources and our other worldwide 
commitments. 

In order to enhance our military 
assistance to Israel, last year we 
designated Israel, along with certain 
other friendly states, "a major non- 
NATO ally." This will enable it to par- 
ticipate in cooperative defense research 
and development projects without addi- 
tional appropriated funds. The new 
status also acknowledges our close 
strategic relationship. 

Our request for $1.2 billion in 
economic support fund (ESF) assistance 
directly addresses the needs of the 
Israeli economy. It will enable Israel to 
cover the financing gap in its balance of 
payments, repay some of its debt, and 
maintain foreign exchange reserves at a 
level consistent with a strong financial 
standing. 



May 1987 



59 



MIDDLE EAST 



Over the past 18 months, Israel has 
made progress in reducing inflation and 
putting its economic house in order. The 
government plans to reduce personal 
and corporate income tax rates on April 1 , 
which will improve the investment 
climate and, over the long run, lead to 
greater productivity. In addition, it has 
taken steps to allow private borrowers 
freer access to the capital market. These 
measures will help place the economy on 
the path to economic growth. More 
needs to be done to lower inflation, 
reduce government spending, and 
stimulate productive private investment. 

After years of sub-par economic per- 
formance, Israel needs growth. In 1986 
GNP grew by only 1% while consumer 
spending increased by over 12%, a disap- 
pointing performance. Investment is still 
slack, and the trade deficit grew by over 
$400 million, to $2.4 billion. Imports of 
all categories of goods increased, but 
consumer products rose most sharply. 

While Israel's total debt is very 
large, even exceeding GNP— it was over 
$24 billion in mid-1986— its structure is 
favorable. Only about 15% is short term, 
while well over one half is very long 
term and/or concessional loans provided 
by the United States and holders of 
Israeli bonds. The debt service ratio was 
38% in 1985. Most of Israel's debt to the 
United States derives from defense pro- 
curement financed under the FMS pro- 
gram. We are currently discussing the 
possibility of restructuring that FMS 
debt. 

Egypt. A strong and stable Egypt ie 
also fundamental to our strategic inter- 
ests in the Middle East. It is a bulwark 
against Soviet-armed radical states that 
threaten stability in the Middle East and 
Africa. 

The United States and Egypt have 
been partners in the peace process for 
many years and have worked continu- 
ously to expand progress toward an 
overall settlement. As Egypt demon- 
strated at the recent Islamic summit in 
Kuwait, reintegration into the Arab 
world need not be at the expense of its 
commitment to the peace treaty with 
Israel. Resolution of the Taba dispute 
and the summit meeting between then 
Prime Minister Peres and President 
Mubarak in September 1986 demon- 
strate Egypt's firm commitment to 
peace with Israel. Dialogue between the 
two governments continues as reflected 
in Foreign Minister Peres' visit to Cairo 
last month. 

Our $2.3 billion request for economic 
and military assistance will help Egypt 
meet its development and security needs 
so that it can continue to act as a force 



for peace. This amount, roughly the 
same as that appropriated last year, is a 
prudent and justified investment for fur- 
thering U.S. goals and interests in this 
key country. 

The $815 million we are requesting 
for ESF will help Egypt deal with its 
foremost domestic problem— its weak- 
ened economy. Structural distortions in 
wages and prices are the underlying 
cause of Egypt's economic problems, but 
regional economic problems, such as the 
fall in world oil prices, have exacerbated 
the situation. The budget deficit for 
Egypt's fiscal year ending June 30, 
1986, exceeded 20% of GDP. Growing 
foreign exchange constraints have also 
increased the difficulty of servicing 
Egypt's $38 billion foreign debt. Cut- 
backs in imports have slowed growth in 
GDP to under 3%, down from an 
average 9% for 1974-82. 

The ESF program will help provide 
immediate financial assistance as well as 
infrastructure which is essential for 
Egypt's economic growth and continued 
stability. For balance-of-payments sup- 
port, we again propose to allocate part 
of our ESF program as a cash grant. 
The commodity import program will pro- 
vide balance-of-payments support by 
funding imports of American manufac- 
tured goods and other commodities. The 
balance of our ESF will be devoted to 
projects to meet basic needs of the 
Egyptian people in the areas of water 
and sewerage, health, education, 
agriculture, and power as well as to pro- 
mote the growth of the private sector. 

One of the primary goals of our 
economic assistance program is to 
facilitate the Egyptian Government's 
efforts to implement economic reforms 
that are urgently needed to address the 
deteriorating economic situation. The 
Egyptians have undertaken some impor- 
tant and welcome reform measures, but 
accelerated action on a comprehensive 
approach is needed to restore economic 
health and growth. The Egyptians are 
engaged in intensive negotiations with 
the International Monetary Fund (IMF) 
and World Bank on financial assistance. 
We believe IMF and World Bank 
involvement is essential to restore 
economic viability. We are encouraged 
that the Egyptian Government is tack- 
ling its economic problems with great 
determination. 

Our PL 480, Title I program enables 
Egypt to conserve increasingly scarce 
foreign exchange for sensitive grain 
imports and implement needed reforms 
in agriculture. 



The Administration's request for 
$1.3 billion in forgiven FMS credits 
reflects our commitment to a long-term 
military supply relationship with Egypt 
to help it modernize its forces and 
replace obsolete Soviet equipment. This 
support is essential for Egypt to remain 
a credible deterrent to Libyan adven- 
turism and threats to regional stability. 

Our FY 1988 FMS program will 
fund progress payments and logistical, 
maintenance, and training support for 
existing weapon systems. Air defense 
systems, including ground-to-air missiles 
and the F-16 and E-2C aircraft, will 
continue to be the focus of this effort. 
The only significant new purchases 
planned in FY 1988 are additional M113 
armored personnel carriers and 
I(improved)-Chaparral air defense 
systems. As part of the goal of pro- 
moting Egyptian military self- 
sufficiency, we are working to reduce 
the number of U.S. training teams and 
the amount of time each team spends in 
country. This should result in a reductioi 
in the number of our security assistance 
personnel stationed in Egypt. 

Since FY 1985, our FMS assistance 
has been on a forgiven credit basis. 
Given the deterioration in Egypt's 
balance of payments, it is essential that 
we continue to offer all-grant terms. 
This helps Egypt to contain the growth 
of debt servicing obligations. We have 
offered a proposal on restructuring the 
FMS loan program to allow Egypt— and 
other FMS borrowers— to prepay FMS 
loans or defer payment of part of the 
interest due. 

The $1.75 million IMET program is 
an important adjunct to our military 
assistance program in Egypt. We use 
IMET funds to train Egyptian military 
personnel to operate and maintain U.S. 
equipment. IMET also teaches them 
U.S. military doctrine and management 
concepts and helps strengthen ties 
between the military establishments of 
the two countries. 

Multinational Forces and 
Observers. The MFO plays a significant 
peacekeeping role in the Middle East. 
Established by the Camp David accords 
to operate in the Sinai, the two 
benefiting parties— Egypt and Israel- 
agreed to contribute equally to maintain 
the forces. The United States entered 
into a strong political commitment also 
to provide an equal share of the costs. 
After high start-up costs in the initial 
years and some overestimations of its 
cost when its budgets were based on 
estimations, the MFO has successfully 
reduced both costs and budget projec- 
tions. Last year the MFO's budget was 



60 



Department of State Bulletin 



MIDDLE EAST 



£90 million. Despite our strong political 
fcommitment to contribute one-third, or 
$30 million, along with Israel and Egypt, 
Congress only appropriated $24.6 
nillion. We hope to honor our pledge to 
bur close friends with the FY 1988 
'■equest in the peacekeeping account. 

Jordan. Despite a record of careful 
planning and good husbanding of scarce 
resources, Jordan now confronts omi- 
nous regional economic trends. Jordan's 
jnce robust economy now faces rapidly 
increasing unemployment, a substantial 
trade imbalance, lower remittances from 
workers overseas, and a foreign 
exchange shortage. Jordan depends 
heavily on external receipts to drive its 
service-oriented economy, yet worker 
remittances dropped 10% in 1985 and 
again last year. The economy is not 
being replenished by sufficient invest- 
ments, which have contracted about 10% 
annually since 1983. Unemployment is 
about 8% and has been increasing, 
especially in the youth segment of the 
population. 

Jordan will continue to play a key 
role in the search for a negotiated settle- 
ment to the Arab-Israeli conflict. King 
Hussein has publicly recognized Israel's 
right to exist, has sought scrupulously to 
maintain the security of Jordan's border 
with Israel, and has repeatedly under- 
taken courageous initiatives toward a 
negotiated settlement. Yet Jordan's 
ability to be an active participant in the 
peace process is partly a function of its 
ability to meet its basic economic and 
defense needs. Our assistance to Jordan 
provides both tangible and psychological 
support against radicalism that, if 
unchecked, could undermine years of 
U.S. effort to bring Arab states and 
Israel to the negotiating table. 

Military supply has been a key ele- 
ment in our relations with Jordan for 
over 30 years. Our proposal for military 
assistance in FY 1988 is $53.8 million, 
which includes $40 million for the mili- 
tary assistance program (MAP), $12 
million in FMS credits, and $1.8 million 
for IMET. Because of budgetary con- 
straints, our FY 1987 military assistance 
allocation to Jordan was 50% less than 
1986. In FY 1988, we are requesting a 
29% increase over the sharply reduced 
level in 1987. This increase is essential 
if we are to continue tc provide spare 
parts and training to support U.S. equip- 
ment already in Jordan's inventory. 
More than three-quarters of our total 
military assistance would be in the form 
of all-grant MAP funds, instead of FMS 
credits, to help compensate for our 
budgetary stringencies. 



Our ESF proposal for $18 million 
will be used to support highlands 
agriculture, water, sewerage services, 
health, and technical training projects in 
Jordan. The ESF level proposed for 
1988 represents a slight increase over 
the $15 million allocated in 1986 and the 
$14 million in 1987. It includes two 
components— $11 million for Jordanian 
programs and $7 million for Jordan's 
recent West Bank-Gaza initiative. 

In 1986 King Hussein announced an 
ambitious effort to stimulate economic 
growth and improve living conditions in 
the Israeli-occupied West Bank and 
Gaza. Jordan's initiative is designed to 
build on its longstanding ties to those 
areas and to show its concern for 
Palestinians there. We decided to make 
an early contribution to this initiative in 
order to demonstrate our confidence in 
Jordan's efforts and to stimulate Jor- 
dan's other friends to contribute. We 
provided $5.5 million from FY 1986 
year-end funds and are providing $7 
million in 1987. Our effort will benefit 
residents of the occupied territories and 
give them a stake in progress toward 
peace. 

Lebanon. The long-term objective of 
our program in Lebanon is to support 
the aspirations of the vast majority of 
Lebanese for unity, sovereignty, and 
independence. While soberly and pain- 
fully aware of the problems that cur- 
rently exist, we continue to support the 
extension of effective authority of the 
central government throughout the 
country. Creating and maintaining a 
core of military officers through the 
IMET program, for which we are 
requesting $475,000, contributes to that 
goal because the Lebanese Army will 
have to play a critical role in any settle- 
ment. Our modest ESF request of 
$300,000— principally disaster relief 
administered through private voluntary 
organizations— is intended to help relieve 
some of the suffering that Lebanese 
civilians, including Lebanese refugees 
displaced by the civil war, bear in the 
current tragic circumstances. 

UNIFIL. Although our financial con- 
tribution to the UN Interim Force in 
Lebanon (UNIFIL) is contained in the 
State Department budget and thus is not 
under this committee's immediate pur- 
view, I want to raise the issue because 
support for UNIFIL is an important ele- 
ment in our policy in the Middle East. 
We believe that UNIFIL is a stabilizing 
element in south Lebanon and could play 
a key role in future long-term security 
arrangements between Israel and Leba- 
non. Shortfalls in the U.S. contribution 



over the past 2 years have had to be 
absorbed by UNIFIL's troop contribu- 
tors. They look to us, as the country at 
whose urging UNIFIL was established, 
to provide political support for the force 
and to meet our financial obligations. 
None of the troop contributors has 
threatened to withdraw from the force 
because of financing alone, but all have 
indicated that the financial burden 
weighs increasingly heavily in their 
decisionmaking. 

The supplemental for FY 1987 con- 
tains a request for $21.6 million for 
UNIFIL, to make up part of these 
past— $60.8 million— arrearages. Our 
request for UNIFIL for FY 1988 is 
$19.3 million, as against an anticipated 
assessment of $44.2 million. We strongly 
urge this committee to make clear its 
support for our continuing participation 
in UNIFIL funding. 

Regional Program. We are request- 
ing $20 million in ESF in FY 1988 for 
the Middle East regional program. This 
will provide grants of $12 million to 
private American voluntary organiza- 
tions for use in the West Bank and Gaza; 
$5 million for regional— that is Egyptian- 
Israeli— cooperation on scientific and 
technical projects; $1 million for multi- 
country development projects carried 
out by the Agency for International 
Development (AID) that involve popula- 
tion programs, legal training, and proj- 
ect design and evaluation in the Middle 
East and Asia. Our proposal for the 
regional account also includes $2 million 
to help support the American University 
of Beirut, an important cultural and 
educational link between the United 
States and Lebanon that is in our inter- 
est to preserve. 

Our assistance to the West Bank and 
Gaza clearly and effectively demon- 
strates American concern for the well- 
being of the Palestinians residing there. 
We believe this assistance in improving 
the quality of Palestinian economic and 
social life contributes to an improved 
climate for a negotiated settlement. It is 
a complementary but separate program 
from the Jordanian West Bank program 
which we also support. 

Since 1975, in our direct program, 
we have provided about $70 million in 
economic assistance to the West Bank 
and Gaza. We committed about $14 
million in FY 1986. Budget constraints 
forced a sharp reduction in 1987 to $8.5 
million, which permits only partial fund- 
ing of the program and prevents us from 
undertaking new activities. Our request 
for $12 million for 1988 will allow us to 
continue to support new private volun- 



May 1987 



61 



MIDDLE EAST 



tary organizations' projects as projects 
that were begun in past years are 
completed. 

The regional cooperation program is 
the second largest component of the 
Middle East regional account and funds 
scientific and technical projects in which 
Israeli, Egyptian, and American univer- 
sities jointly participate, along with their 
respective governments and other insti- 
tutions. These counterpart projects 
include arid lands agriculture, technol- 
ogy exchange in agriculture, marine 
sciences, and infectious disease research. 
The goal is further to normalize relations 
between Israel and Egypt and hopefully 
other Arab states in the future. 

Southwest Asia-Persian Gulf 

Our interests in the Persian Gulf lie in 
protecting the free flow of oil through 
the Strait of Hormuz, blocking Soviet 
expansion, and ensuring the continued 
stability of the Arab gulf states, par- 
ticularly in the face of Iranian radical- 
ism. The President, in his February 25th 
statement, reiterated our strong commit- 
ment to the stability and security of all 
our friends in the gulf region as well as 
to ensuring the free flow of oil through 
the Strait of Hormuz. 

About 60% of the free world's 
proven oil reserves and 25% of its crude 
oil production are located in the gulf. 
This oil will continue to be critical to the 
economic health of the West during the 
next decade and beyond. Our strategic 
interests require that we counter Soviet 
efforts to gain inroads in this vital area 
and help our friends guard against 
threats to their security and stability. 

Our security assistance and arms 
transfer programs in the gulf are 
designed to provide the moderate Arab 
states with means necessary for their 
own defense, individually and collec- 
tively within the Gulf Cooperation Coun- 
cil (GCC) and, in the process, defense of 
our mutual interests. 

The Iran-Iraq war, now in its 
seventh year, is of special concern to the 
moderate Arab states of the gulf. They 
view Iraq's defense efforts as critical to 
their own survival and act accordingly. 
The danger of spillover of the war has 
been particularly great since Iranian 
troops occupied Faw, just a few miles 
from the Kuwaiti border, in February 
1986. Iranian naval activity in the lower 
part of the gulf heated up in the course 
of 1986 and has continued into 1987. 
Iran has targeted facilities of nonbel- 
ligerent states, such as the United Arab 
Emirates, and has increased attacks on 
neutral international shipping in and 



62 



near the strategic Strait of Hormuz. We 
have an important stake in ensuring that 
the threatened states have the where- 
withal to defend themselves and in sup- 
porting them in order to deter Iran from 
even considering direct confrontation 
with them. 

Our extensive web of relations with 
the moderate states of the gulf have 
political, diplomatic, commercial, eco- 
nomic, and military dimensions. Our 
assistance programs and FMS to 
friendly countries help to ensure access 
to the petroleum resources of the region 
for the United States, our allies and 
friends, and access to military facilities 
should U.S. forces ever be required in 
time of crisis. By strengthening the indi- 
vidual and collective self-defense capa- 
bilities of the GCC states, we may never 
need to deploy U.S. soldiers to the gulf 
to defend our vital interests there. 

Oman. Our 1980 access agreement 
with Oman is key to U.S. strategy for 
the protection of the Persian Gulf. This 
agreement allows U.S. military access to 
certain facilities in Oman under contin- 
gency conditions. The United States and 
Oman added an economic development 
dimension to the enhanced bilateral rela- 
tionship by creating a Joint Commission 
on Economic and Technical Cooperation 
and development projects that are sup- 
ported by ESF. The Omani Government 
attaches great importance to the eco- 
nomic side of our cooperation because it 
demonstrates that our bilateral relations 
are multifaceted and not based solely on 
joint security interests. A reduction in 
this program could make more difficult 
the review of our access agreement in 
the next several years. 

Because of budgetary constraints, 
our ESF allocation for Oman in 1987 
was $15 million, about $4.5 million below 
the 1986 level. We have asked for an 
additional $5 million in the 1987 supple- 
mental budget request and $20 million in 
1988, the same amount provided in 1985. 

Our FY 1988 request for Oman also 
includes $5.15 million in FMS credits. 
The United Kingdom remains Oman's 
main military supplier, but Oman is 
interested in using FMS credits to pur- 
chase major items from the United 
States. Given their difficult economic 
situation, however, the Omanis are 
prudently assessing their allocation of 
scarce budgetary resources between 
security and economic needs. 

Yemen Arab Republic. Our FY 

1988 request for the Yemen Arab 
Republic (Y.A.R.) includes $3 million in 
MAP funds, $1.1 million for IMET, $5 
million in PL 480 food aid and $22 
million in development assistance. 



The Y.A.R. occupies a strategic, bu. 
fer area between the Marxist People's 
Democratic Republic of Yemen 
(P.D.R.Y.) and Saudi Arabia. It has bee 
threatened in the past by both direct 
attacks from, and insurgency supported 
by, successive P.D.R.Y. regimes. Last 
year's coup in the P.D.R.Y. raised anew 
the potential for outside-inspired subver 
sion because the coup brought to power 
some particularly doctrinaire com- 
munists who have advocated insurgency 
against the North. Our interests are 
served by supporting a stable govern- 
ment in Sanaa that can resist outside 
threats and meet the needs of the people 
for sustained economic development. 

The Y.A.R. is one of the poorest anc 
least developed countries in the Middle 
East. In recent years, it has been seri- 
ously affected by the sharp decline in 
Arab donor aid and a drop in worker 
remittances. While an American oil com- 
pany has found significant oil reserves ir 
the Y.A.R, it will be several years before 
the full economic benefits will be felt. 
Even then, given the large population 
and the near total lack of infrastructure 
and industry, that new income will take 
time to have a meaningful impact on the 
life of the average Yemeni or the 
Y.A.R.'s ability to fund its own needs. 

The Y.A.R. will use MAP funds to 
maintain U.S. -origin equipment and sup- 
port training for its armed forces. It 
would like to see major increases, cur- 
rently impractical given our budgetary 
constraints. It is essential that we main- 
tain and, whenever possible, strengthen 
our program as an alternative to Soviet 
military influence and to increase the 
Yemeni Armed Forces' effectiveness as 
a deterrent to further military adven- 
turism by the Marxist P.D.R.Y. Overall, 
our assistance program fosters closer 
cooperation between our two military 
establishments and develops skills 
needed for operation and maintenance of 
U.S. equipment. It also helps meet the 
Y.A.R.'s need for a strong defense and 
reliable friends, and complements long- 
standing cooperative assistance pro- 
grams with Saudi Arabia. 

North Africa 

Tunisia. Our contribution of approx- 
imately $847 million in economic 
assistance through AID between 1962 
and 1986 has helped Tunisia move into 
the ranks of middle-income countries. 
Since the 1980 Libyan-backed attack at 
Gafsa, U.S. military assistance of some 
$500 million has enabled Tunisia to 
develop a limited deterrent to further 
potential aggression from Tripoli. We 
judge those threats to be serious and 
continuing. 

Department of State Bulletin 






MIDDLE EAST 



!' 



Militarily frail, Tunisia is especially 
■ i ulnerable to pressures from Libya at 
tiis time of political development and 
l ransition. Equally important, the 
eleterious regional economic trends 
ave resulted in an urgent liquidity 
risis. In response, the Tunisian Govern- 
ment has undertaken a major structural 
djustment program which encompasses 
ncreases in basic commodity prices, 
imits on wage increases, modifications 
f price control, liberalization of imports, 
uts in subs