[Senate Hearing 113-140]
[From the U.S. Government Printing Office]
S. Hrg. 113-140
DIFFERENT PERSPECTIVES ON INTERNATIONAL DEVELOPMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL
DEVELOPMENT AND FOREIGN ASSISTANCE,
ECONOMIC AFFAIRS, INTERNATIONAL
ENVIRONMENTAL PROTECTION,
AND PEACE CORPS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 22, 2013
__________
Printed for the use of the Committee on Foreign Relations
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COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BARBARA BOXER, California BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire RON JOHNSON, Wisconsin
CHRISTOPHER A. COONS, Delaware JEFF FLAKE, Arizona
RICHARD J. DURBIN, Illinois JOHN McCAIN, Arizona
TOM UDALL, New Mexico JOHN BARRASSO, Wyoming
CHRISTOPHER MURPHY, Connecticut RAND PAUL, Kentucky
TIM KAINE, Virginia
Daniel E. O'Brien, Staff Director
Lester E. Munson III, Republican Staff Director
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SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT
AND FOREIGN ASSISTANCE, ECONOMIC AFFAIRS,
INTERNATIONAL ENVIRONMENTAL PROTECTION
AND PEACE CORPS
TIM KAINE, Virginia, Chairman
CHRISTOPHER A. COONS, Delaware JOHN BARRASSO, Wyoming
RICHARD J. DURBIN, Illinois JAMES E. RISCH, Idaho
TOM UDALL, New Mexico JEFF FLAKE, Arizona
CHRISTOPHER MURPHY, Connecticut RAND PAUL, Kentucky
(ii)
C O N T E N T S
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Page
Barrasso, Hon. John, U.S. Senator from Wyoming, opening statement 4
Kaine, Hon. Tim, U.S. Senator from Virginia, opening statement... 1
Lane, William, International Governmental Affairs Director,
Caterpillar, and copresident, U.S. Global Leadership Campaign,
Washington, DC................................................. 20
Prepared statement........................................... 22
Moss, Todd J., Ph.D., vice president for Programs and senior
fellow, Center for Global Development, Washington, DC.......... 5
Prepared statement........................................... 8
Murphy, John, vice president for International Affairs, U.S.
Chamber of Commerce, Washington, DC............................ 14
Prepared statement........................................... 17
(iii)
DIFFERENT PERSPECTIVES ON INTERNATIONAL DEVELOPMENT
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WEDNESDAY, MAY 22, 2013
U.S. Senate, Subcommittee on International
Development and Foreign Assistance, Economic
Affairs, International Environmental
Protection, and Peace Corps, Committee on
Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:30 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Tim Kaine
(chairman of the subcommittee) presiding.
Present: Senators Kaine, Coons, Murphy, and Barrasso.
OPENING STATEMENT OF HON. TIM KAINE,
U.S. SENATOR FROM VIRGINIA
Senator Kaine. I am going to call this subcommittee meeting
to order. I am joined here by my ranking member, Senator
Barrasso, and expect others to attend.
I want to welcome our witnesses. We have got a good panel
today to address the important issues: John Murphy, who is the
vice president for International Affairs at the U.S. Chamber of
Commerce; Bill Lane, who is the copresident of the U.S. Global
Leadership Campaign and also the director of the Washington
Office for Caterpillar. And he has brought a visual aid. I
highly approve. You guys did not get the memo, Todd and John?
Finally, Dr. Todd Moss, who is vice president for Programs at
the Center for Global Development.
The purpose for this hearing, and it is the first hearing
of the International Development Subcommittee in this Congress,
is meant to complement full committee hearings that we have had
on the President's fiscal year 2014 international affairs
budget request. We have heard as full committee both from
Secretary Kerry and Administrator Shah about the justification
for the budget request from within the administration, what
they need, what they plan to do with it, and how we will be
able to measure their success. Those were important hearings.
I had the opportunity to introduce Secretary Kerry for his
first major foreign policy address as Secretary of State, which
occurred at the University of Virginia, the university started
by a former Secretary of State, Mr. Jefferson, as we call him
in Virginia, ``Mr. Jefferson.'' Secretary Kerry made the
compelling case for foreign aid.
Foreign aid is about 1 percent of the Federal budget and
Secretary Kerry laid out the good that it has done, but also in
a changing world the good that it still can do, including an
openness to change and reform. Foreign assistance has
traditionally served U.S. national security interests,
commercial interests, and also addressed global humanitarian
concerns.
During the State of the Union Address in February,
President Obama laid out a very ambitious goal about the
eradication of extreme poverty within two decades. We have
heard Administrator Shah sort of focus on two deliverables in
that score, reduction of death of children up to age 5 and
elimination of hunger, as the two measurables that we would
work on in this area.
Today's hearing is an opportunity to hear now not from
within the agency and those talented individuals, but to hear a
different perspective, private sector colleagues who have been
in the field, but now are kind of looking at it from the
outside, and especially looking at it from the private sector:
What international development does to advance American
economic interests and how those global interests, those
American economic interests, can also be yoked to significant
global advancement.
Before we hear from Senator Barrasso and the witnesses, I
will just set the stage for a couple more minutes. The history
of foreign assistance investments in this country generally was
justified by national security concerns. The primary trend-
setting U.S. investments through the Marshall Plan and
thereafter were a way to prevent or slow down Communist
influence and secure United States support during a cold-war
era.
Post-cold war, there was a need to make a change and the
focus of foreign aid shifted to the Middle East, to transition
to democracy in Eastern Europe and the Republics of the former
Soviet Union, and then more recently to combating illicit drug
production and trafficking. Without the strong national
security rationale that was immediate and apparent because of
the cold war, the foreign aid budgets decreased during the
1990s, and post-9/11 foreign assistance ticked back up because
it became a tool in U.S. counterterrorism strategies.
We also have a very significant effort to focus on
commercial interests and the humanitarian concerns that occur
around the country, around the world. As we are talking about
humanitarian concerns, I know all of us in at least some part
of our minds are thinking about those in our own Nation that
are dealing with the horrible weather and tornado tragedy in
Oklahoma. Those humanitarian issues are not just elsewhere;
they are here as well, and the United States has always been a
leader in responding to them.
There has been a huge shift in development assistance in
the last couple of decades and it is a shift that we ought to
mention because it affects what we do going forward and how we
measure the success of what we do. That shift has been where
assistance dollars come from. Basically the story I would say
of the last 20 years has been a dramatic increase in private
sector resource flows to development assistance. The resource
flows from developed to developing countries are currently
dominated by private transactions, such as foreign direct
investment, portfolio investment, philanthropy, remittances.
Collectively these account for now 87 percent of the global
total of development assistance.
The donor governments and multilateral development
assistance only account for 13 percent of resource flows. This
is a complete reversal from decades past, where the
governmental assistance used to be about 80 percent and total
private development assistance at 20 percent.
Foreign direct investment, just using that, developing
countries saw a 293-percent increase from 2000 to 2010 in FDI.
If you look at the 30-year period from 1980 to 2010, the
statistics are even more stark. The bilateral and multilateral
assistance in that 30-year period grew by 280 percent. Now,
this is a global dollar number. But foreign direct investment
inflows to developing countries grew by nearly 7,000 percent,
admittedly from a very low base. But you can see where the
momentum is going.
This is happening, the shift of development assistance into
the sort of private side of the equation, for a number of
reasons. The recent recession transformed the world economy,
including a reordering of relative national economies. Emerging
economies, particularly China, have begun to be involved in
assistance in new ways. Developing countries are seeing more
rapid growth, growth of a middle class, strong commodity
prices. They have liberalized trade. Mexico is a wonderful
example of a country that is trade liberalized and is now a
more open economy, making foreign direct investment and trade
easier.
Developing countries' share of global GDP is steadily
rising. Overseas markets represent 95 percent of the world's
consumers and 80 percent of its purchasing power. Now half of
U.S. exports go to the developing world, and these markets in
all likelihood are growing and will continue to grow at a
faster pace than our traditional trading partners.
All of those factors have accounted for this tremendous
increase in the private sector foreign direct investment and
the increase in development dollars on the private side of the
ledger.
The United States has a number of tools that have
facilitated this and should continue to: the Export-Import
Bank, the Overseas Private Investment Corp., the U.S. Trade and
Development Agency, and the Millennium Challenge Corporation.
So truly we are in the midst of a dramatic revolution in the
way that international development is done. Some of that
revolution has been because of smart policy, but some of it has
just been because of markets and innovation and the growth of
economies, not necessarily intentional policy, but just facts
on the ground that changed the way development assistance is
done.
So we are here today to have the hearing to talk about
these new perspectives on development assistance in light of
the presentation of the President's budget, looking forward to
what we should focus on. I look forward to hearing from the
panel. We have got three great witnesses about a number of
issues.
The U.S. Government interest in international development.
We continue to need to make that case to our public about every
dollar we spend in the budget. International development is no
different.
How this public-private partnership model is growing and
the importance of nurturing those partnerships, the way the
United States can better leverage private partners, and in a
public-private model what that says in terms of accountability
and how we should measure the success of our efforts. And
always, always, the most important question in any hearing like
this: How we can improve. We can talk about things that are
working well. We can talk about things that are not working
well. But at the end of the day I know my ranking member and I
and the members of this committee are always looking for
strategies to help us do a better job, and I hope we will hear
some creative ideas, both about things that work and things
that do not, but how we can do a better job, from our witnesses
today.
With that, I would like to turn it over to my ranking
member, Senator Barrasso.
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM WYOMING
Senator Barrasso. Well, thank you so much, Mr. Chairman. I
really appreciate your very thoughtful comments. Thank you for
your leadership in organizing this hearing. I look forward to
working with you during this session of Congress and beyond on
this very important topic and issue.
I want to welcome all of our witnesses, thank each and
every one of you for being here with us today, and appreciate
your sharing your knowledge and your analysis and your
perspectives with our subcommittee.
I really do appreciate, Mr. Chairman, your efforts to have
our first subcommittee hearing on the examination of the costs
and impacts of international development assistance. The
American people are very generous, as you have just stated.
Individuals, groups, and communities across our country give
their time and their precious resources to help others, both
people to people here, as we are seeing now with Oklahoma and
the tragedy there, but also to people around the world. There
is a very long history of people across this Nation generously
supporting victims of international disasters, famines,
diseases, and wars.
I hear from a lot of people at home in Wyoming about
foreign assistance and they want to make sure that--as they ask
the questions, they want to know what is the purpose of foreign
aid? is it effective? how effective is it? is any being wasted?
who is it helping? and what value does it add to the United
States? This hearing is going to provide a great opportunity to
discuss these questions and find some of the answers.
In fiscal year 2012 the United States spent over $37
billion for international development. That is about a 5.7-
percent increase from the previous year. About 147 countries
received some form of bilateral assistance from the United
States. U.S. foreign assistance is often aimed at promoting
democracy and economic development, as well as humanitarian
efforts, as you have mentioned, Mr. Chairman.
With the national debt, however, quickly approaching $17
trillion, it is irresponsible for us to just borrow more money
to fund initiatives if they are failing to provide results or
real value for the taxpayers. The government must be a good
steward of U.S. taxpayer funds. Every government branch and
agency needs to be carefully evaluated and streamlined to
eliminate duplication and wasteful spending. So I believe each
program must be carefully analyzed to ensure it is being
designed and implemented in the most effective and efficient
manner. The time for unaccountable government spending must
come to an end.
In October 2012, the USAID's Office of the Inspector
General indicated that one of the most significant challenges
facing their agency is the ability to demonstrate results
through performance management and reporting. All foreign aid
programs need to be rigorously evaluated. Most aid programs are
not evaluated to determine the actual impact of the assistance.
How can we determine whether taxpayer dollars are being used
wisely when it is unclear if it has succeeded or failed.
So I believe Congress needs, one, to ensure that programs
focus on U.S. priorities. Congress needs to evaluate the
effectiveness of all of the programs. We need to support
programs that are getting real results. We need to eliminate
programs that are not working.
I think these are important issues, so I look forward to
hearing the testimony of our witnesses, and I look forward to
working with you, Mr. Chairman.
Thank you.
Senator Kaine. Thank you, Senator.
We will now begin with witness testimony. We will just move
left to right: Dr. Moss, Mr. Murphy, and Mr. Lane.
STATEMENT OF TODD J. MOSS, PH.D., VICE PRESIDENT FOR PROGRAMS
AND SENIOR FELLOW, CENTER FOR GLOBAL DEVELOPMENT, WASHINGTON,
DC
Dr. Moss. Thank you. Thank you, Chairman Kaine, Ranking
Member Barrasso, distinguished members of the committee.
U.S. development policy is about more than foreign
assistance. While it is important to maintain a robust
bilateral aid program, it is probably more vital that we
consider when not to use bilateral aid and instead when it
might be better to use multilateral channels or when nonaid
development tools might be more effective.
U.S. development policy should be critical in promoting
U.S. national interests around the world--this includes our
security, economic, and humanitarian interests--and in
remaining actively engaged around the world. Unfortunately, our
aid and development policies have too often underperformed.
Yes, there are big successes where aid and development policy
have helped achieve U.S. policy aims; for example, U.S. support
for reconstruction in Liberia or independence for South Sudan.
And clearly well-run aid programs can save lives. PEPFAR is
today providing life-saving drugs for some 5 million people.
Those people would not be with us were it not for this program.
But there are also very severe limits on what we can do
with aid and development policy. We should be very humble about
our ability to shape complex systems from the outside. There
are also far too many examples of shameful failure. The United
States promised $3 billion for Haiti to build back better. Yet,
some 3 years later we have got about 400,000 people still
living in tents.
Mali as well. I had the tremendous honor to work in the
State Department and I worked closely on Mali, so I know how
badly our efforts to fight terrorism and promote democracy in
that country fell short.
Now, I believe that this disappointing record stems from a
structural problem in how the U.S. Government approaches these
issues. The current administration has launched several very
well-intentioned efforts to try to upgrade: USAID Forward, the
first-ever QDDR, and a separate White House Presidential policy
directive on global development. USAID Forward is positive in
pushing for open data and modern evaluation methods, but
overall these are very, very modest steps.
The QDDR, after sapping momentum for aid reform by taking
more than 18 months, is probably making matters worse by adding
to fragmentation and confusion in the system. The Presidential
policy directive is bold and I believe very much in the right
direction, but is not really being implemented. So I do not
believe that these efforts will fix U.S. development policy.
I also do not believe that these problems can be solved by
more money, by stronger anticorruption oversight powers, or by
another bureaucratic layer to try to coordinate U.S. agencies.
In fact, I think any of these approaches are likely to make our
tools and policy even less effective.
Instead, I see three fundamental problems. First, there are
just too many Federal agencies involved. Some 24 separate
agencies report aid to the OECD. While the British model of a
singular Cabinet-level development agency does not fit within
the United States political system, having 24 agencies does not
work either.
Second, foreign aid has too many often-conflicting
objectives. Lael Brainard, now Treasury Under Secretary, found
that U.S. foreign assistance had more than 50 different goals.
When we have too many priorities, then we have none.
Worse, our objectives are entirely divorced from the
appropriations process. Instead of setting goals and a strategy
and then allocating resources to meet those goals, our system
instead is an aggregation of congressional directives and
single-issue initiatives. Our strategy is just the sum of those
disparate parts. So if our goals are to support girls'
education in Pakistan or fight malaria in East Africa or
promote electricity in Tanzania, it might be most effective to
use AID or it might be better to use the African Development
Bank, or perhaps the Global Fund. But our system does not allow
for that decision, where you would weigh tradeoffs and consider
these different channels, it does not allow those decisions to
ever be made.
The third problem is that the interagency process is
broken. The interagency that should work out tensions and
tradeoffs in U.S. policy is, as anyone who works in the Federal
Government can attest, deeply dysfunctional. Every initiative
is a fire drill and these require intense direction from a very
small and heavily overburdened National Security Council staff.
The result is too often delay of key decisions, duplication of
effort, and ultimately little accountability. If all agencies
are collectively accountable, then no one is accountable.
The broken interagency also means that we often miss huge
opportunities to use nonaid tools to meet our foreign policy
objectives. Modest tweaks to our immigration policy, for
example, could probably be a far more efficient development
tool in many cases than aid programs, but we rarely use it as
such.
So what might make things better? I will suggest three
examples. First, limit, do not expand, the number of agencies
involved. Ideally, the budgets and staff of most traditional
international aid programs should be moved inside an empowered
USAID. DOD, I should note, also is not a development agency, so
we should avoid the temptation to ask them to take on more and
more civilian tasks.
Second, to the extent we can we should link the budget
process to goals and results, perhaps by allowing
experimentation with new kinds of development models. We should
learn from the Millennium Challenge Corporation's compact
model, where objectives and indicators are agreed over a 5-year
period. So rather than checking every receipt and micromanaging
projects, the compact is judged based on the overall success of
meeting the goals.
Congress could also provide space to experiment with new,
innovative, pay for performance contracts where U.S. taxpayers
would only pick up the tab for bills where actual results were
achieved. At the Center for Global Development we call this
``cash on delivery.''
Third, we should focus on development finance, which is the
next wave of development policy and where, frankly, the United
States is far behind. Since most poor countries are growing
quickly and many are receiving windfall gains from natural
resources, demand for traditional grant aid is shrinking. At
the same time, the demand is growing rapidly for other types of
development finance: debt, equity, venture capital, and other
kinds of patient capital that can both leverage private money
and be deployed for long-term development.
The good news is that many of these tools already exist.
The bad news is that they are spread across multiple agencies,
including OPIC, TDA, USAID, Commerce, Labor, Treasury, USDA,
USTR, and many more. A simple first step would be to bolster
OPIC with multiyear authorization, equity authority, and
perhaps a modest grant window. Even better would be to turn
OPIC into a full-service U.S. development finance corporation
by adding things like TDA's feasibility studies window, the
USAID's development credit authority, and select programs from
other agencies that promote the private sector. A U.S.
Development Finance Corporation could be built at no additional
cost to the budget by simply allowing OPIC to retain some of
its profits. More importantly, this could provide a platform
for coherence of all these U.S. policy tools in support of
private sector development.
An approach like the U.S. Development Finance Corporation
would not only be more efficient, but is probably necessary if
the United States is going to achieve our ambitious goals, such
as creating business opportunities in the new emerging and
frontier markets or promoting electricity in Africa. For all
the reasons I have outlined, our current system simply cannot
deliver on those goals.
If the United States remains stuck in the past, it will be
left behind.
Thank you.
[The prepared statement of Dr. Moss follows:]
Prepared Statement of Todd J. Moss
Thank you, Chairman Kaine, Ranking Member Barrasso, and
distinguished members of the committee. U.S. foreign assistance should
be a critical tool for promoting U.S. foreign policy and meeting other
national security, economic, political, and humanitarian goals around
the world. It should be a prominent and proud component of projecting
America's power and projecting a positive image of what America is all
about: the generosity and compassion of our people, the spreading of
free market values and economic opportunity, the bedrock belief we hold
that hard work can provide a better life for the next generation, the
inviolable rights of individuals, the aspiration that all people
everywhere should live free from tyranny. Foreign assistance should be
able to play a role in supporting all of these goals and core American
values. To be clear, foreign assistance can't deliver any of these
goals. But it can and should be a useful tool to complement our
military and diplomatic and business efforts.
Unfortunately, U.S. foreign assistance has too often not lived up
to its potential and instead been a perennial underperformer. An
underperformer for American taxpayers, an underperformer in supporting
U.S. foreign policy objectives, and an underperformer in meeting global
development goals. Yes, there are successes: U.S. support for Liberian
reconstruction, U.S. support for the global effort that eradicated
river blindness in West Africa, and especially the tremendous success
of the U.S. fight against HIV/AIDS through PEPFAR, which is providing
life-saving drugs for some 5 million people. These are 5 million lives
directly saved by U.S. foreign assistance. But there are also too many
examples, even where attention was intense and large funds promised, of
abject failure. The U.S. effort in Haiti to ``build back better,''
where some $3 billion was promised but 3 years later there are still an
estimated 400,000 people living in tents is a national shame. U.S. aid
to help fight terrorism and build democracy in Mali also clearly
failed. I had the tremendous honor to serve in the Africa Bureau of the
State Department in 2007-08 and worked closely on Mali, so I know how
badly our efforts there fell short--and it is a failure for which I
bear some responsibility.
I believe that this disappointing record of U.S. assistance stems
from a structural problem in how the U.S. Government works. Recent
efforts under the current administration--a first Quadrennial Diplomacy
and Development Review (QDDR), a separate White House Presidential
Policy Directive (PPD) on Global Development, and a set of business
reforms within USAID known as USAID Forward--are all well intentioned
and aimed to help fix the problems that everyone recognizes. But these
efforts are not working. USAID Forward is too small-ball, while the PPD
is bold and in the right direction but not being implemented. The QDDR,
in addition to sapping the administration's energy on development for
more than 18 months, is likely making U.S. policy even more confused.
To be clear, I do not believe that the problems of U.S. foreign
assistance can be fixed by more money and more staff. The aid budget
may very well be too low, but in many places it is too high. The
funding levels, which attract so much attention, are not fundamentally
germane to the problems of effectiveness. I also do not believe that
the answer lies with additional investigative powers to root out
corruption or additional bureaucratic layers to coordinate aid
agencies. In fact either of these approaches is likely to make the aid
system and U.S. policy even less effective.
I see three fundamental problems with U.S. foreign assistance:
First, there are too many Federal agencies with aid programs. Some
24 separate agencies report aid to the OECD's Development Assistance
Committee. In the latest year, just 35 percent of total foreign aid
goes through USAID. By contrast, the U.K. has a single large aid
agency, DFID, that not only is tasked to ensure internal coherence, but
also provides a development perspective within the Cabinet to inform
foreign policy goals. I don't believe that the British model works in
the U.S. political system, but I also know that having 24 agencies
involved doesn't work either. The QDDR, which embraces uncritically a
whole-of-government approach, is probably making this worse.
Second, foreign aid has too many, often conflicting, objectives.
Lael Brainard in the book on foreign aid she published just before
becoming U.S. Treasury Under Secretary for International Affairs found
that U.S. aid had more than 50 goals.\1\ That the U.S. has multiple and
often conflicting goals is not surprising--foreign policy is complex
and cannot be boiled down to a few simple absolute goals. But when we
have too many goals and priorities, then we really have none.
To make matters worse, these objectives are entirely divorced from
the appropriations process. Rather than setting goals in a national
development strategy and then allocating resources to meet these goals,
multiple single issue initiatives are given resources and the strategy
becomes the sum of those disparate parts. For example, if we want to
support reconstruction in Afghanistan or support budget reform in
Kenya, or fight malaria in Mozambique, there is no obvious or clear way
to make tradeoffs between these goals or to choose the most efficient
mechanism to accomplish them. Sometimes the best way to meet these
goals is through the World Bank or the Global Fund rather than USAID.
But of course U.S. support to the multilateral development banks is
made by the Treasury and congressional responsibility is with your
committee and the House Financial Services Committee, while
appropriations are handled by the State and Foreign Operations
Subcommittees. This leads to a particular disconnect on the House side,
with little ability to make clear decisions as to whether bilateral or
multilateral aid is more effective for particular goals. So the direct
tradeoff between the Bank, the Global Fund and USAID is never made. In
short, part of the problem is the sprawling Federal Government and part
of the problem is Congress. One way to consider the tradeoffs among the
various bilateral and multilateral vehicles would be to formally
consider the options against efficiency and alignment with national
interests, as the United Kingdom has done with its bilateral and
multilateral aid reviews.\2\
Third, the interagency process is broken. The interagency that
should work out the tensions and tradeoffs among various objectives is,
as anyone who works in the Federal Government can attest,
dysfunctional. Every initiative is a fire drill and requires intense
NSS staff direction and oversight. But NSS too small and overburdened
to really do more than a few priority tasks. The result is too often
delay of key decisions, frequent duplication of effort, and little
accountability. If there are multiple agencies collectively accountable
then in reality no one is accountable. And critically, the broken
interagency combined with narrow mandates often means that we miss huge
opportunities to use non-aid tools to meet our foreign policy
objectives. Immigration policy, for instance, is probably a far better
and more efficient development tool than our aid program, but we rarely
use it as such.\3\
What steps would make things work better?
First, limit, don't expand, the number of agencies involved.
Ideally the budgets and staffs of most international programs should be
moved into USAID. If this is too politically difficult, and I suspect
it probably is, then agencies should be forced to secund staff and pass
through their budgets to USAID for those critical projects. While the
whole-of-government mantra suggests the more agencies involved the
better, the opposite is true. The fewer number of agencies involved--
and the fewer offices of the State Department--the better. Whole-of-
government may work in small European governments with a handful of
agencies and a small number of people who all know each other and can
horse-trade to work out problems. This does not--and I believe cannot--
work in the U.S. context because of the sheer size and fragmentation of
the Federal Government.
Second, link the budget process to goals and results--and allow
experimentation with new models. This would imply Congress granting
greater flexibility to the agencies to determine allocations and
specific projects, but also could provide a mechanism for holding those
agencies accountable by adding measurable indicators. This approach
could draw heavily on the MCC's compact model where objectives and
indicators are agreed over a 5-year period. Rather than checking every
receipt and micromanaging the projects, the compact is judged based on
the overall success of the portfolio in meeting the stated objectives.
Congress could even provide USAID and other agencies space to
experiment with innovative pay-for-performance contracts where U.S.
taxpayers would only be picking up the bills for actual achievements.
We at the Center for Global Development call this Cash-on-Delivery and
see it as an opportunity to make aid--and tax dollars--about outcomes,
not inputs or even outputs, while also building local management
capacity and innovation and reducing transaction costs.\4\
Third, development finance is an obvious target for efficiency
gains. Some consolidation of agencies with overlapping activities is
highly desirable, and the lowest-hanging fruit are the various Federal
activities to promote private sector development. At a time when most
low-income countries are growing quickly and receiving windfall gains
from resource discoveries, demand for traditional grant aid will be
diminishing. U.S. development policy must be careful not to remain
stuck in the past. What countries want, and where the United States is
really best placed to help, is with other types of development finance:
debt, equity, venture, and other kinds of patient capital that can
leverage private capital and be deployed for long-term development.
The good news is that many of the tools already exist. The bad news
is that they are spread across multiple Federal agencies, including the
Overseas Private Investment Corporation (OPIC), the Trade and
Development Agency (TDA), USAID, Commerce, Labor, Treasury, USDA, USTR,
and more. And, like traditional aid, only rarely do they work well
together. In the 2012 State of the Union, President Obama noted the
absurdity that there are 12 different agencies that deal with exports
and pledged to ``merge, consolidate, and reorganize the Federal
Government in a way that best serves the goal of a more competitive
America.'' What applies to export promotion also applies to development
finance.
To be clear, I do not support the merger of OPIC into the Commerce
Department--indeed that would be a tremendous mistake because the
purposes of those agencies are very different. But I do believe a
consolidation among the development finance tools would be highly
beneficial. A first simple step would be to bolster OPIC into a full-
service U.S. Development Finance Corporation.\5\ This would imply
granting OPIC additional authorities such as multiyear authorization,
equity authority, and a modest grant window. It could also bring in
complementary tools we already have in other agencies, such as TDA's
feasibility study window, USAID's Development Credit Authority (DCA),
and international programs of agencies like the Small Business
Administration.
A U.S. Development Finance Corporation could be built using
existing staff and resources and at no additional cost to the U.S.
budget by allowing OPIC to simply retain its profits. More importantly,
a bilateral development finance corporation could provide a platform
for coherence of U.S. policy tools in support of the private sector,
allow the U.S. to better compete in new markets, and limit the repeated
scrambling within the interagency. An approach like the USDFC would not
only be more desirable from an efficiency standpoint, but is likely
necessary if the U.S. is going to achieve ambitious goals, such as
building market opportunities in the next wave of frontier markets or
promoting electrification in Africa. For all the reasons outlined
above, our current system simply cannot deliver those goals.
The United States must remain engaged with the world, especially in
the fastest growing markets and emerging regions of the globe. U.S.
foreign assistance and our other development policy tools must be
modernized if we are to succeed, and not be left behind by others who
are showing more flexibility and more innovation. Thank you for the
opportunity to testify today.
----------------
End Notes
\1\ Brainard, Lael. 2006. ``Security by Other Means: Foreign
Assistance, Global Poverty and American Leadership.'' Brookings
Institution Press, Washington, DC. Brainard's ``Spaghetti Bowl'' of
U.S. foreign assistance legislation, objectives, and organizations is
attached as Annex A.
\2\ A version of an American multilateral aid review that I
completed is attached as Annex B.
\3\ Clemens, Michael and Kaci Farrell. 2011. ``Beyond Aid:
Migration as a Tool for Disaster Recovery.'' Center for Global
Development, Washington, DC.
\4\ Birdsall, Nancy and William Savedoff. 2010. ``Cash on Delivery:
A New Approach to Foreign Aid. Center for Global.''
\5\ Forthcoming paper, ``U.S. Development Finance Corporation:
Strengthening OPIC to Promote Private Sector Development in Emerging
Markets,'' by Benjamin Leo, Todd Moss, and Beth Schwanke. Center for
Global Development, Washington, DC.
ANNEX A
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
ANNEX B
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Kaine. Thank you, Dr. Moss.
Mr. Murphy, welcome.
STATEMENT OF JOHN MURPHY, VICE PRESIDENT OF INTERNATIONAL
AFFAIRS, UNITED STATES CHAMBER OF COMMERCE, WASHINGTON, DC
Mr. Murphy. Thank you, Mr. Chairman, Senator Barrasso. I am
pleased to speak today about the importance of funding a robust
international affairs budget from the perspective of the U.S.
business community. No priority facing our Nation today is more
important than putting Americans back to work. As a nation, the
biggest policy challenge we face is to create the 20 million
jobs needed in this decade to replace the jobs lost in the
recent recession and to meet the needs of a growing work force.
World trade must play a central role in reaching this job
creation goal. After all, outside our borders are markets that
represent 80 percent of the world's purchasing power, 92
percent of its economic growth, and 95 percent of its
consumers.
Many Americans are already seizing these opportunities. One
in three manufacturing jobs depends on exports. One in three
acres on farms is planted for exports. And nearly 300,000
small- and medium-size businesses export today, accounting for
more than a third of all U.S. merchandise exports.
Now, in this context the international affairs budget plays
a vital enabling role for U.S. companies to tap foreign markets
to create jobs and prosperity at home. The indispensable role
this investment makes in national security and advancing our
humanitarian values is something you both alluded to.
The business case for the international affairs budget is
straightforward. It supports and protects U.S. diplomats who
are on the front lines of American commercial diplomacy and
export promotion efforts. It provides technical advice so
developing countries can adopt more open and accountable
political, legal, and economic systems and become better
markets for U.S. companies in the bargain. This is more
important than ever before because developing countries last
year purchased more than half of all U.S. exports for the first
time.
However, U.S. companies risk falling behind if the Federal
Government fails to maintain a significant diplomatic and
economic presence overseas or to provide American businesses
with the essential tools to level the playing field.
Competition is fierce in fast-growing markets in Southeast
Asia, Latin America, Africa, and firms based in other parts of
the world are actively working to boost their own market share,
and this competition is only becoming more intense.
Some studies estimate that China's Government-supported
economic development programs in Latin America, Asia, and
Africa grew twenty-five-fold in the 5-year period from 2002 to
2007. In its first official report on foreign aid policy, the
Chinese Government indicated that its budgeted foreign aid grew
by nearly 30 percent per year between 2004 and 2009. While the
United States and most developed countries have been moving
away from tied aid, China's development assistance is often
contingent on requirements to purchase products or services
from Chinese companies. For example, the Chinese Government has
offered loans to African governments on the condition that they
buy telecommunications equipment only from Chinese companies.
In this challenging environment, unilateral disarmament is
not the answer. So we need the international affairs budget.
Let me give some examples. We see this with the Export-Import
Bank--Ex-Im--which provides vital financial guarantees to help
American businesses export. Last year Ex-Im supported export
sales that sustained nearly 255,000 American jobs at 3,400
companies. Ex-Im is especially important to small- and medium-
sized businesses, which account for more than 85 percent of its
transactions.
Now, without Ex-Im U.S. companies would be unable to sell
their goods abroad in many circumstances. Other countries
provide their own exporters with an estimated $1 trillion in
export finance through their own official export credit
agencies, often on terms more generous than Ex-Im can provide.
So without Ex-Im American companies would be left at a sharp
disadvantage relative to the size of their economies. European
governments provide three times as much official trade finance
to their exporters as Ex-Im does, and China and India provide
four times as much. Further, far from being a subsidy for
corporations, Ex-Im charges fees for its services that
generated more than a billion dollars net in revenue for the
U.S. Treasury last year alone.
Similarly, OPIC, the Overseas Private Investment
Corporation, provides U.S. investors with financing,
guarantees, and political risk insurance when private sector
financing is unavailable. Often this is in support of key
foreign policy objectives. Now, partnering with the private
sector is a hallmark of OPIC's work and historically every
dollar of OPIC support has leveraged about $2.70 in private
sector investment.
Like Ex-Im, companies that use OPIC's services pay
interest, fees, and premiums for those services, and this
allows OPIC to operate on a self-sustaining basis at no cost to
the U.S. taxpayer. Last year OPIC earned a net profit of $272
million.
Now, a third example is the U.S. Trade and Development
Agency. USTDA works to increase U.S. exports by connecting
American companies with targeted development projects in
emerging companies. Last year it identified $2.2 billion in
U.S. exports to emerging markets that were directly
attributable to its programs. From Thai training grants to
strategically timed reverse trade missions, USTDA helps U.S.
firms compete on an international playing field that is often
skewed against them.
Programs supported by USAID, the MCC, and other
multilateral development banks offer many other examples, which
I will leave aside given the short time. Just consider quickly
the following examples of collaboration between U.S. companies
large and small and programs supported by the U.S.
international affairs budget. In 2011 Wal-Mart partnered with
USAID on a regional agreement in Central America named Tierra
Fertil, ``Fertile Soil,'' to support farmers in that region,
and the initiative helped farmers diversify their crops and
improve their quality, all while meeting real market needs.
Miss Jenny's Pickles, a small North Carolina business and
proud U.S. Chamber member, is run by entrepreneurs Jenny Fulton
and Ashlee Furr. In 2011 they began exporting their pickles to
China thanks to export finance provided by Ex-Im and their
products are now available in more than 800 stores across the
United States in addition to China, and they are now eyeing
Canada and Germany as potential export markets.
In conclusion, U.S. companies and the workers they employ
need the support of these agencies, which are funded by the
U.S. international affairs budget. They need them to be
competitive. This partnership requires sustained sufficient
funding. The international affairs budget strengthens our
economy by shoring up these export markets, promoting
development and good governance, and reaffirming U.S.
leadership. At stake is America's standing in the world, our
ability to exert positive influence, our reputation and our
brand, and our best hopes of reducing unemployment.
The U.S. Chamber looks forward to working with members of
the subcommittee on this and other issues.
Thank you very much.
[The prepared statement of Mr. Murphy follows:]
Prepared Statement of John Murphy
Thank you Chairman Kaine, Senator Barrasso, and distinguished
members of the subcommittee. My name is John Murphy, and I am Vice
President for International Affairs at the U.S. Chamber of Commerce.
The U.S. Chamber of Commerce is the world's largest business
federation, representing the interests of more than 3 million
businesses of all sizes, sectors, and regions, as well as State and
local chambers and industry associations. I am pleased to speak today
about the importance of funding a robust International Affairs Budget
from the perspective of the U.S. business community.
No priority facing our Nation is more important than putting
Americans back to work. More than 7 percent of the U.S. workforce is
unemployed--a figure that soars to nearly 15 percent when those who
have stopped looking for jobs and the millions of part-time workers who
want to work full time are included. As a nation, the biggest policy
challenge we face is to create the 20 million jobs needed in this
decade to replace the jobs lost in the recent recession and to meet the
needs of America's growing workforce.
World trade must play a central role in reaching this job-creation
goal. After all, outside our borders are markets that represent 80
percent of the world's purchasing power, 92 percent of its economic
growth, and 95 percent of its consumers. The resulting opportunities
are immense, and many Americans are already seizing them: One in three
manufacturing jobs depends on exports, and one in three acres on
American farms is planted for hungry consumers overseas. Nearly 300,000
small and medium-sized businesses export, accounting for more than one-
third of all merchandise exports.
In this context, the International Affairs Budget plays a vital
enabling role for U.S. companies to tap foreign markets and create jobs
and prosperity at home. Although it represents a little more than 1
percent of all federal spending, the International Affairs Budget is
critical to creating jobs, saving lives, and protecting our national
security.
As former Defense Secretary Robert Gates has stated, ``America's
civilian institutions of diplomacy and development have been
chronically undermanned and underfunded for far too long . . . relative
to the responsibilities and challenges our Nation has around the
world.'' America must utilize all of the tools and resources it has to
strengthen U.S. national interests and ensure our global
competitiveness.
the business case
The business case for the International Affairs Budget is
straightforward. It supports and protects U.S. diplomats, who are on
the front lines of American commercial diplomacy and export promotion
efforts. Programs funded by the International Affairs Budget directly
promote sustainable economic reforms in developing countries that
ultimately benefit American companies and workers.
U.S. foreign assistance programs provide technical advice and build
stronger political, legal, and economic policy regimes in developing
countries that help these nations become reliable trading partners.
This is more clearly the case than ever before, as developing countries
last year purchased more than half of all U.S. exports for the first
time in years.
In this vein, the U.S. Agency for International Development (USAID)
supports programs that help countries improve their business regulatory
environments and embrace international commerce. These programs can
move developing countries away from rigid government-controlled
economies toward competition and market orientation, which in turn
creates new opportunities for American companies and workers.
Similarly, the Millennium Challenge Corporation (MCC) provides grants
to countries for economic reforms but only if they demonstrate a
commitment to democratic governance and economic freedom.
The International Affairs Budget has also provided modest
investments over the years in the multilateral development banks
(MDBs), including the World Bank, the African Development Bank, the
Asian Development Bank, the Inter-American Development Bank, and the
European Bank for Reconstruction and Development. In addition to an
array of educational and health programs, the MDBs support programs
that strengthen governance institutions and build infrastructure that
facilitates U.S. investment and exports.
Over the years, the World Bank and the regional banks have funded
successful programs to get children into school; build infrastructure
to allow entrepreneurs and farmers to transport their goods to market;
strengthen judiciaries; support private sector job creation; and combat
measles, diarrhea, malaria, and other preventable illnesses. These
efforts helped developing countries add two decades to life expectancy,
cut the mortality rate of children under age 5 by 50 percent, and
reduce by half the proportion of people living in poverty.
American businesses understand these institutions' vital role in
fostering prosperity in developing nations. MDB loans and expertise
help developing countries become reliable trading partners and open up
their markets for U.S. goods. These loans come with conditions, such as
strengthening transparency, promoting good governance, and improving
the investment climate.
The U.S. investment in the MDBs has a huge multiplier effect. For
instance, the United States has invested $2 billion in the World Bank's
capital base since its creation in 1944. The U.S. funding has leveraged
contributions from other donors, allowing the World Bank to provide
nearly $500 billion in financing and invaluable expertise to developing
countries.
boosting trade and investment
Other agencies supported by the International Affairs Budget also
play a direct role in supporting economic growth and job creation at
home. For example, the Export-Import Bank of the United States (Ex-Im)
provides vital financial guarantees to help American businesses export.
Last year, Ex-Im supported export sales that sustained nearly 255,000
American jobs at 3,400 companies.
Ex-Im is especially important to small and medium-sized businesses,
which account for more than 85 percent of Ex-Im's transactions. Tens of
thousands of smaller companies that supply goods and services to large
exporters also benefit from Ex-Im's activities. It's worth noting that
Ex-Im has tripled the amount of exports to sub-Saharan Africa it
supports since 2009.
Without Ex-Im, many U.S. companies would be unable to sell their
goods abroad. Because other countries provide their own exporters with
an estimated $1 trillion in export finance through their own official
export credit agencies--often on terms more generous than Ex-Im can
provide--American companies would be left at a sharp disadvantage
without Ex-Im. Relative to the size of their economies, European
governments provide three times as much official trade finance to their
exporters as Ex-Im does. China and India provide four times as much.
Further, American taxpayers can cheer the fact that Ex-Im regularly
helps reduce the Federal deficit by hundreds of millions of dollars.
Far from being a subsidy for corporations, Ex-Im charges fees for its
services that generated more than $1 billion in revenue for the U.S.
Treasury last year alone. This is a significant, yet often overlooked,
attribute of Ex-Im.
Finally, Ex-Im loans expose the U.S. taxpayer to little risk
because they are backed by the collateral of the goods being exported.
Borrowers have defaulted on less than 2 percent of all loans backed by
Ex-Im over the past eight decades, a default rate lower than commercial
banks.
The Overseas Private Investment Corporation (OPIC), the U.S.
Government's development finance institution, is also a critical
agency. It mobilizes American private capital to address major
development challenges in emerging markets, often in support of key
foreign policy objectives. It helps U.S. businesses of all sizes take
advantage of lucrative growth markets, and it turns a profit year after
year.
OPIC provides U.S. investors with financing, guarantees, and
political risk insurance when private sector funding is unavailable.
OPIC's activities are perhaps most notable in Africa: OPIC in 2012
committed $907 million to projects in sub-Saharan Africa, helping to
create jobs, raise living standards, and stimulate economic growth
opportunities in the U.S. and abroad.
Partnering with the private sector is the hallmark of OPIC's work.
Historically, every dollar of OPIC support has leveraged about $2.70 in
private sector investment. Since 1971, OPIC has supported more than
$200 billion of investment which, in turn, has generated about $75
billion in U.S. exports and supported more than 275,000 American jobs.
OPIC services are not free. Companies that use these services pay
interest, fees, and premiums for the services, in addition to repayment
of principal amounts on loans. This allows OPIC, like Ex-Im, to operate
on a self-sustaining basis at no cost to the U.S. taxpayer. Last year,
OPIC earned a net profit of $272 million, and the agency has helped
reduce the Federal budget deficit for 35 consecutive years.
OPIC's authorization has been extended 10 times via a succession of
appropriations bills and continuing resolutions. For a period of time
in 2008, that authorization lapsed completely, and the agency was
unable to process any transactions. This has made the investment
community wary. The Chamber urges Congress to provide OPIC with
permanent authorization. Doing so will provide assurance to the
business community of OPIC's long-term involvement in their projects,
most of which carry tenors of 10 years or more.
Another important agency supported by the International Affairs
Budget is the U.S. Trade and Development Agency (USTDA). USTDA works to
increase U.S. exports and help companies expand overseas by connecting
American companies with targeted development projects in emerging
economies. Last year, USTDA identified $2.2 billion in U.S. exports to
emerging markets that were directly attributable to its programs. For
every $1 programmed by USTDA, the Agency identified over $63 in exports
of U.S.-produced goods and services.
USTDA's programs directly support U.S. businesses facing
competition from companies subsidized by foreign governments. From tied
training grants to strategically timed reverse trade missions, USTDA
helps U.S. firms compete on an international playing field that is
often skewed against them.
USTDA responds directly to the needs expressed by the U.S. business
community. To better position U.S. firms in the international arena and
invest in projects that will most likely provide the highest return,
USTDA has reprogrammed its funds toward priority sectors including
energy, transportation, and information and communications technology.
Over 90 percent of contracts awarded by USTDA are performed by small
businesses. Once U.S. small businesses are introduced to overseas
export opportunities, many go on to succeed in securing new contracts
in foreign countries.
public--private collaboration
Consider the following examples of collaboration between the
private sector and programs supported by the U.S. International Affairs
Budget:
PepsiCo, USAID, and the United Nations World Food Programme
in 2011 partnered to improve yields, production, and the
availability of healthy food in East Africa. The program--
dubbed Enterprise EthioPEA--uses chickpea production to address
famine and malnourishment in the Horn of Africa and stimulate
economic development in Ethiopia.
In 2011, Wal-Mart partnered with USAID on a regional
agreement named
Tierra Fertil (Fertile Soil) to support farmers in Costa Rica,
Nicaragua, Honduras, Guatemala, and El Salvador. The initiative
helped farmers diversify their crops and improve their
quality--all while meeting real market needs.
Working with the Inter-American Development Bank (IDB), The
Coca-Cola Company has rolled out a program to improve access to
clean water in partnership with American entrepreneur Dean
Kamen (President of DEKA R&D and inventor of the Segway
scooter) and the NGO Africare. This collaboration focused on
Kamen's new water purification system, but the partnership with
the IDB is vital to bringing this technology to communities in
need in rural parts of Latin America (and Africa through
Africare).
Miss Jenny's Pickles, a small North Carolina business run by
entrepreneurs Jenny Fulton and Ashlee Furr, in 2011 began
exporting their pickles to China with export finance provided
by Ex-Im. Their products are now available in more than 800
stores across the United States, and Miss Jenny's Pickles is
now eyeing Canada, Hong Kong, and Germany as potential export
markets.
a competitive world
The global economy provides many avenues to create American jobs
and spur economic growth if the United States builds the necessary
foundation to ensure American companies can be competitive. For
American businesses and workers to seize these opportunities, we must
use the full range of available tools to achieve success in these
demanding environments.
U.S. companies risk falling behind if the Federal Government fails
to maintain a significant diplomatic/economic presence overseas or
provide American businesses with tools that can help level the playing
field. Competition is fierce in fast-growing markets such as those in
Southeast Asia, Latin America, and sub-Saharan Africa, and firms based
in other regions are actively working to get their own market share.
This competition will only become more intense. Some studies
estimate that China's Government-supported economic development
programs in Latin America, Asia, and Africa grew twenty-five-fold in
the 5-year period from 2002 to 2007. Indeed, in its first official
report on foreign aid policy, the Chinese Government indicated that its
budgeted foreign aid grew by nearly 30 percent per year between 2004
and 2009.
While the United States and most industrial countries have been
moving away from tied aid, China's development assistance is often tied
to requirements to purchase products or services from Chinese
companies. For example, the Chinese Government has offered loans to
African governments on the condition that they buy telecommunications
equipment only from Chinese companies.
In this challenging environment, unilateral disarmament is not the
answer. U.S. companies and the workers they employ need the partnership
of the agencies funded by the U.S. International Affairs Budget to be
competitive. That partnership requires sufficient and sustained funding
of these agencies.
Representing just over 1 percent of Federal spending, the
International Affairs Budget is an investment that will strengthen our
economy by shoring up vital export markets, promoting economic
development and good governance, and reaffirming U.S. leadership. At
stake is the standing of the United States as the world's leading
power, our ability to exert positive influence around the world, our
reputation and brand overseas, and our best hopes for escaping high
unemployment. The U.S. Chamber of Commerce looks forward to working
with the members of the subcommittee on this and other issues.
Senator Kaine. Thank you, Mr. Murphy.
Mr. Lane.
STATEMENT OF WILLIAM LANE, INTERNATIONAL GOVERNMENTAL AFFAIRS
DIRECTOR, CATERPILLAR, AND CO-PRESIDENT, U.S. GLOBAL LEADERSHIP
CAMPAIGN, WASHINGTON, DC
Mr. Lane. Thank you, Chairman Kaine, Senator Barrasso. I am
extremely happy to be here today. I am Bill Lane, Caterpillar's
director for government and corporate affairs. I am appearing
today--but I am also appearing today in my capacity as
copresident of the U.S. Global Leadership Coalition, an
organization that brings together Republicans and Democrats,
business and NGO leaders, veterans and retired military brass,
and faith-based volunteers from across the country. What units
our strange bedfellow coalition is the conviction that
development and diplomacy programs are vital to America's
economy, our national security, and our values.
I am proud to have worked for Caterpillar for the past 38
years. As one of America's most successful exporters,
Caterpillar has long realized that our prosperity is directly
linked to economic currents and trends that are occurring
outside of our borders. Today trade supports more than 38
million jobs in the United States and the emerging markets of
the developing world are growing at a much faster rate than in
the developed world. Already, they are the destination of more
than half of U.S. exports and, as I said before, growing at a
much faster pace than what we are seeing in the traditional
markets.
But success in this requires engagement, persistence,
commitment, and at times support from the U.S. Government. I
recall 30 years ago American business often said we believe in
trade, not aid, in effect saying U.S. Government programs
should focus on reducing trade barriers rather than fostering
development. That may have been a great sound bite, but it did
not fully reflect the reality of international commerce. While
we believe in the importance of free trade more now than ever
before, we also know that countries that have been devastated
by AIDS or malaria do not grow, nor do countries that lack
transparency or the rule of law.
While we must always make sure that U.S. Government
resources are spent wisely, the reality of international
commerce is that trade and aid are often mutually supportive.
The State Department, USAID, the MCC, OPIC, just to name a few,
are funded by just 1 percent of the U.S. budget. At Caterpillar
we have found that this teamwork approach--working with the
government--bears results. Teamwork has been demonstrated
through private-public partnerships where one can leverage
government funds with the creativity, innovation, and core
business resources of the private sector.
For example, last year Coca-Cola, the largest employer in
Africa, committed millions of dollars on the continent as part
of a new partnership with USAID and the Peace Corps to expand
sustainable access to clean water. I must say, as part of my
work on the HELP Commission, of all the brands I saw in this
part of the world, the Peace Corps has one of the strongest
brands I have seen anywhere and it really does reflect well on
our values and our priorities.
At Caterpillar we are working closely with the global
communities to build infrastructure and the International Youth
Foundation to train young people in the developing world.
For me, the best example that illustrates the importance of
the international budget is Colombia. In the late 1990s
Colombia was on the verge of being a narcoterrorist state. With
the leadership of President Clinton and Speaker Hastert, the
United States and Colombia began a multifaceted partnership
called Plan Colombia. It was a sustained program that included
security and development assistance to tackle narcotics-funded
insurgency.
The bottom line is it worked. Thanks to the substantial
improvements in the equipping, training, and professionalism of
the Colombian security forces, the drug lords and the
associated guerrilla groups effectively lost control of the
countryside. At the same time, United States development
assistance helped Colombians build infrastructure, provide
education and medical care, and put in place judges and police
who respected the rule of law and human rights. USAID assisted
rural farmers in developing alternative crops to the coca
plant, which has helped lead to a sharp decline in the
smuggling of Colombian narcotics into the United States.
During this same time, United States trade with Colombia
tripled, reaching over $14 billion in 2011. The United States
is now Colombia's largest trading partner and the free trade
agreement that went into force last year is expected to add
billions more in annual commerce between our two countries.
For the folks living in Peoria, IL, Plan Colombia and the
reforms embraced by the free trade agreement meant that
Caterpillar now has a destination that consistently ranks as
one of its top 10 export markets. Perhaps more remarkably,
Americans also have proof that in Washington Republicans and
Democrats can work together over a sustained period of time and
get results.
Mr. Chairman, at Caterpillar we like to say that the road
to development literally begins with the road. It should go
without saying that we know how to produce equipment needed to
build those roads. But it is the development and diplomacy
programs funded by 1 percent of the U.S. budget that in the
broadest sense provides the foundation that allows development
to take place.
Like you, we are concerned about getting the most results
from each Federal dollar spent. We also know how important it
is that U.S. global leadership and competitiveness be enhanced
and not undermined. Yet international affairs programs have
been cut by nearly 20 percent over the past 3 years. This is
not in America's best interests. So on behalf of the hundreds
of companies that are members of the U.S. Global Leadership
Coalition, we strongly encourage the Senate to oppose further
cuts and to invest in a strong and effective international
affairs budget.
Thank you.
[The prepared statement of Mr. Lane follows:]
Prepared Statement William Lane
Chairman Kaine, Ranking Member Barrasso, and members of the
subcommittee, thank you for the opportunity to discuss the
International Affairs Budget. I am appearing today in my capacity as
copresident of the U.S. Global Leadership Coalition (USGLC), an
organization that brings together Republicans and Democrats, national
security and foreign policy experts, and business, faith-based and
community leaders all across the country. What unites this ``coalition
of strange bedfellows''--including a ``Who's Who'' of America's leading
corporations--is the conviction that the diplomacy and development
programs funded in the International Affairs Budget are vitally
important for America's economic future, national security, and global
influence.
As director of Caterpillar's Washington, DC, office, I am cognizant
of the difficult budget choices the Congress has to make, especially in
this onerous fiscal environment. Every government agency deserves
scrutiny of its costs and effectiveness. Yet, from a business person's
perspective, the International Affairs Budget--which represents a
little more than 1 percent of the overall Federal spending--represents
a smart investment in American global leadership that fuels economic
growth and job creation at home.
exports, american jobs, and emerging markets
For major manufacturers like Caterpillar, it has been clear for
some time that America's prosperity is tightly bound to economic
currents and trends emerging beyond our borders. Overseas markets
represent 95 percent of the world's consumers and 80 percent of its
purchasing power. Trade already supports one in three manufacturing
jobs, and one-third of American agriculture is destined for consumers
overseas.
Overall, trade supports more than 38 million jobs in the United
States, and
export-related jobs pay, on average, 15 percent more than the average
wage. Studies indicate that every 10-percent increase in exports is
associated with a 7-percent increase in employment.
Half of those exports today are to the developing world, and those
markets will grow at a far faster pace than many of our more
traditional trading partners. In sub-Saharan Africa, 17 countries have
maintained rates of economic growth of 5 percent to 7 percent per year
for the last decade and African economies are expected to nearly double
in size to $2.6 trillion by 2020. According to Standard & Poors Latin
America's economies grew by more than 3 percent last year--better than
the U.S. and Europe--with countries like Peru and Chile growing in the
5-7 percent range.\1\ These markets represent tremendous opportunities
for American companies and businesses.
the role of u.s. government development and diplomacy
But we can't do it alone. Businesses succeed in overseas markets in
conditions where there are stable governments, transparency,
predictability, adequate financial infrastructure, free market economic
policies that allow for competition, and rule of law. Those conditions
are often lacking in many of today's emerging nations and require a
coordinated approach that includes the development programs, diplomatic
efforts, and trade promotion activities of the U.S. Government.
In the past some have called for a shift toward ``trade, not
aid''--arguing that U.S. Government programs should focus on promoting
commerce rather than fostering development. Based on my experience in
this area, which includes service on the 2007 HELP Commission, the real
answer is ``trade and aid,'' each of which are mutually supporting.
In these countries the road to development--and the investment,
commerce, and trade that follow--may begin (literally) with a road.
Here I am referring to the basic infrastructure that must be improved
and, in some cases, created from scratch using machinery and expertise
often supplied by companies like Caterpillar. In fact, more than half
of Caterpillar's exports now go to non-OECD countries, primarily in the
developing world.
In all, effective development programs funded in the U.S.
International Affairs Budget spur economic reform, advance the rule of
law, improve governance, and raise standards of living--building more
peaceful, prosperous societies that desire--and can afford--American
products and services.
For example, the Millennium Challenge Corporation (MCC) provides
economic assistance to developing nations based on a competitive
selection process in which the countries must show a strong commitment
to ruling justly, investing in their citizens, and economic freedom.
The U.S. Agency for International Development (USAID) supports programs
that help countries improve their business regulatory environments and
open their economies to foreign competition.
The International Affairs Budget also supports the multilateral
development banks (MDBs), including the World Bank, the African
Development Bank, the Asian Development Bank, the Inter-American
Development Bank, and the European Bank for Reconstruction and
Development. MDB loans come with conditions, such as strengthening
transparency, promoting good governance, and improving the investment
climate, that open developing markets to U.S. goods and transform them
into more reliable trading partners.
colombia case study
The story of Colombia, which has endured a narcotics-funded
insurgency for decades, provides an excellent example of ``smart
power'' in action to advance American interests and prosperity.
In 1999 the U.S. and Colombia began a multifaceted partnership
called ``Plan Colombia'' involving security, developmental, and
governance assistance.
Back then, the country was engulfed in drug-related violence and
lawlessness. In fact, about 11,000 Colombian towns had no government
presence at all. Since then, substantial improvements in the equipping,
training, and professionalism of the Colombian security forces led to a
dramatic decrease in violence and the drug lords and their associated
guerrilla groups effectively lost control of the countryside they had
dominated for so long.
At the same time, U.S. governance and development assistance helped
Colombians build infrastructure, medical care, education, and competent
judges and police who respected the rule of law and human rights. USAID
assisted rural farmers in developing alternative crops to the coca
plant, and with the help of the Colombian Government, we have seen a
sharp decline in the smuggling of Colombian narcotics into the United
States.
Since Plan Colombia began the country's GDP has averaged close to
4.5 percent growth and now ranks as the 4th-largest economy in Latin
America. U.S. trade with Colombia has tripled since 2000, reaching over
$14 billion in 2011. The U.S. is now Colombia's largest trading partner
and our exports include machinery, oil, agricultural products, organic
chemicals, and plastics. The free trade agreement that went into force
last year is expected to add billions more to annual commerce between
our two countries.
Colombia is one of the top 10 export markets for Caterpillar, and
their booming mining industry presents the potential for still further
growth. The more trucks and tractors we sell overseas, the more jobs
are created in places like Peoria where those vehicles are
manufactured.
These kinds of results are not limited to Colombia. In Vietnam, a
trade-acceleration program funded by the USAID led to the revision or
enactment of more than 100 laws and regulations over the course of a
decade. The USAID program cost roughly $1 million, and since 2001 U.S.
exports to Vietnam increased more than 700 percent.
public-private partnerships
In spite of all the progress made in recent years, American good
will, innovation, and resources are still needed to address the world's
most pressing humanitarian and developmental problems. Consider that
millions of children die prematurely every year from preventable
diseases, tens of millions of children are not attending school, and
more than a billion people are without clean water or basic sanitation.
These afflictions are holding back entire regions of the world--the
regions with the most quickly growing populations--from being secure,
productive participants in the global economy.
As Bill Gates has said, ``Investing in the world's poorest people
is the smartest way our government spends money.''
One of the more promising developments in recent years has been the
increasing use of private-public partnerships to provide foreign
assistance in more effective and creative ways.
In 1969, 70 percent of financial flows to developing countries came
in the form of official development assistance and the remaining 30
percent from private sources. Today, those ratios have more than
reversed, with over 80 percent of financial flows coming from private
sources.
The U.S. Government uses these partnerships to get the maximum
impact of scarce public funds by leveraging the creativity, innovation,
and core business resources of the private sector to promote economic
growth and opportunity.
For example, last year Coca-Cola--the largest employer in Africa--
has committed several million dollars on the continent as part of a new
partnership with USAID and the Peace Corps to expand sustainable access
to clean water.\2\
In Central America Wal-Mart has partnered with USAID to help
farmers in Costa Rica, Nicaragua, Honduras, Guatemala, and El Salvador
in diversifying their crops to meet real market needs.
In these and many other cases, a modest investment of public funds
in partnership with the private sector can substantially improve
standards of living in the developing world, all of which leads to more
promising trade and investment for American companies doing business in
these countries.
conclusion
In a ferociously competitive international business climate, the
U.S. Government's International Affairs Budget is one of the most cost-
effective instruments we have to provide a vital link between America's
businesses and workers and some of the fastest-growing overseas
markets. In this environment the U.S. cannot unilaterally disarm,
leaving our business at a distinct competitive disadvantage.
Programs such as the Overseas Private Investment Corporation, the
Export-Import Bank, and the U.S. Trade & Development Agency--all funded
by the International Affairs Budget--are essential to maintaining a
level playing field for our companies doing business around the world,
boosting U.S. exports overseas and creating more American jobs at home.
These efforts and other forms of international engagement require
adequately funded and staffed U.S. embassies, targeted and accountable
governance, development, and security assistance programs, and
effective export credit and trade promotion agencies--capabilities
threatened by deep cuts to the International Affairs Budget. Yet, these
programs have in fact been cut nearly 20 percent in the past 3 years.
Too much is at stake to diminish U.S. global leadership and
competitiveness in a world that is only growing more interconnected and
interdependent--as well as more turbulent--virtually every day.
On behalf of the hundreds of companies that are members of the U.S.
Global Leadership Campaign, we strongly encourage the members of the
subcommittee to support the investments contained in the International
Affairs Budget--for a more secure and prosperous America, for a safer
and better world.
----------------
End Notes
\1\ http://www.standardandpoors.com/ratings/articles/en/us/
?articleType=HTML&assetID=12453
50590911.
\2\ http://www.peacecorps.gov/resources/media/press/2129/.
Senator Kaine. Thank you to all the witnesses.
We will begin two rounds of questions, 7 minutes, and I
will just begin with one picking up on Mr. Lane's--actually, a
combination question. Dr. Moss, you talked about the fragmented
nature of the number of agencies within the Federal space that
work on the international development area. In looking at that
testimony and the chart that you provided, it was the kind of
thing that makes you think, boy, this is a complicated system.
Mr. Lane, you talk about Colombia and the obvious success
in Colombia, and that was a sort of a full-government approach
from the United States. It involved military, it involved other
security agencies like DEA, it involved trade, it involved
Congress taking steps with respect to the free trade agreement,
USAID. A lot of different parts of the U.S. Government played a
role in this comprehensive plan and it has been a success
story.
So we all agree that the budget is important, needs to be
spent the right way. We do not want to be overly fragmented.
How do we wrestle with this question of better organization to
get more bang for the buck without sacrificing the kind of
comprehensive approach that in Colombia's case has seemed to
have been successful?
Dr. Moss. When we think about our relations with partners
in difficult states overseas, we are going to have complex
interests. We are never going to have a single interest.
Agencies that we can bring to bear have different objectives.
DOD and State, very often they are complementary, what they are
looking at, but their objectives are very often different. The
same with USAID.
To just give you one example, DOD is obviously going to be
interested most in security and looking at very short-term
security concerns. USAID, perhaps they are going to take a
longer term development perspective. Maybe they are thinking
about long-term transformation, of trying to build a capable
partner over 10 or 20 years. The State Department is trying to
ensure that we have solid partnerships with as many friends
around the world at the same time. So AID might want to focus
our resources in places where they think they can be
transformative over the long term, so they would want to
perhaps close missions that are too small or are not working,
whereas State would see our AID missions as part of our
international diplomacy, part of making friends around the
world. Their preference would be to spread it around the world.
And DOD, of course, wants to go where the action is.
So you have the triple D's of defense, diplomacy, and
development. Sometimes they come together, but very often they
do not. Perhaps in the case of Colombia these things came
together and they worked quite well, but those are more often
than not the exception rather than the rule. So I think we
should build the system in a way that can manage those tensions
and make those tradeoffs, rather than assuming we are all one
big happy family, we all have the same objectives, and we are
all moving in the same direction. Those were the exceptions.
Senator Kaine. Mr. Lane.
Mr. Lane. Yes, Mr. Chairman. Back in 2006 to 2008 I was on
the HELP Commission, which looked at the effectiveness of
foreign aid. I have to say we all came back with various
conclusions, but some were very revealing. One was where we
have a unified mission it really works. In Colombia, when you
went and visited the U.S. Embassy in Bogota there was a focus.
It was a very complex mission, but I have to tell you people
knew what the objective was and everyone was working well
together and working well with the Colombian Government.
You move over to Egypt, it was the exact opposite. It
seemed to be a very bifurcated operation. You go to Honduras,
where the focus was on infrastructure, ag development, here,
too, results that were quantifiable and positive. So it really
varied quite a bit.
As far as the reorganization that Dr. Moss talks about,
there has to be some consolidation that takes place. What is
realistic and what is not, given the purview of the State
Department, is subject to debate. But where foreign assistance
works, it works. In Africa, taking on the plague of AIDS, you
went to small towns in northern Uganda which were coming back
to life and it was because of the PEPFAR program. At the time,
and this was in 2007, I found that President George Bush was
more popular in northern Uganda than he was in Texas, and I
think that is probably still true.
Senator Kaine. Good example.
Mr. Murphy, I want to drill down on something. You
testified about the degree to which other nations provide more
export assistance than we do. Was the stat that European
nations generally about triple and India and China about four
times the kinds of export assistance to their private sector?
If you would elaborate on that a little bit?
Mr. Murphy. Sure. I was referring in that case particularly
to trade finance. Just about every country around the world has
an official export credit agency. In fact, China has three or
four of them. It has been very notable that there has been a
huge increase in the resources that countries are making
available to finance exports. The OECD has estimated there is
$1 trillion of this trade finance sloshing around the global
economy today. In the case of China, one estimate is that it
provide four times as much as our little Ex-Im Bank is
providing, and India similarly.
So what we find is that there are many circumstances where
U.S. exporters are going head to head with competitors from
other countries. Those other countries, they have secured the
finance that they need to make the deal, often on very generous
terms. And if the U.S. company does not have that same kind of
backing, they are going to lose the bid.
There are other circumstances as well. I know a small
medical device manufacturer in Maryland that has been making
inroads in the Chinese market. They would be unable to make
sales there if they did not have export finance from Ex-Im,
from the official U.S. export credit agency. They would not
qualify without that. So it is a fundamental reality that
American companies often need this kind of support.
Senator Kaine. Hearing your testimony, the notion that we
are bringing down trade barriers, which is generally something
I strongly support, that is important. But if the financial
assistance provided is wildly different among nations, that is
a different kind of a trade barrier that takes a leveling
playing field and makes it unlevel again.
Mr. Murphy. Yes. I would just add that securing that level
playing field is an important goal of this administration, as I
understand it. There have been negotiations conducted in the
OECD, for instance, on large aircraft, and those agreements
have resulted in aircraft manufacturers in the United States
and in Europe being obliged to pay much higher fees, such that
the financing terms are now really on a par with commercial
financing.
So that effort is ongoing. But we also see that, just
sticking with aircraft for a moment, China is developing a huge
domestic civil aircraft industry, and there is no sign that
they are going to be committing in the near term to follow
those same kinds of disciplines to keep the financing at a
commercial level.
Senator Kaine. Senator Barrasso.
Senator Barrasso. Thank you, Mr. Chairman.
Dr. Moss, you touched in your testimony the idea of U.S.
Government implementing kind of a pay for performance contract
in order for the U.S. taxpayer to only pick up the bill for
actual achievements. You are hearing that discussion now with
health care in the United States in terms of doctors taking
care of patients. I wonder if you could just explain a little
bit how this approach would work to foreign aid. I think you
call it ``cash on delivery.''
Dr. Moss. Yes, thank you. The traditional way that we
measured projects was on inputs: How much money did we spend,
how many things did we deliver? The next level was, which is
still a leap in many areas, is let us measure outputs. We spent
$10 million for school construction. Did those schools actually
get built? How many teachers actually got trained? That would
be a big leap forward if we were going to say, look, we will
pay only for the number of teachers trained, only for the
number of kilometers of road actually built, and we will come
after and do that.
Our system does not handle that all that well because it is
contingent finance. It might be multiyear. So certainly we
should be thinking about flexibility to allow our budget system
to handle these contingent financial obligations.
But the golden chalice here is not to go to outputs, but to
go one step further to outcomes. Outcomes are the real results
that we are looking at. What the cash on delivery model does is
pays for outcomes. What do I mean by that? Let us say we want
to support girls' education in Pakistan. What we would pay is
not for--we would not say how much money are we going to spend
on education. We would not even say how many schools are we
going to build; teachers we are going to train. We are actually
going to pay for educated girls in Pakistan, by perhaps through
how many children have taken an additional test and what are
those test results published.
Because what that would do is not only would we only be
paying for what we hope to achieve, but there is no way sitting
in Washington we are going to figure out how do we actually get
girls educated in Pakistan. We would put the onus of that onto
the authorities there to figure out: Is it building schools? Is
it training teachers? Is it something else? Usually it is
something else that we do not recognize, and cash on delivery
puts that there and also is--in terms of taxpayer value, it
guarantees you are only paying for things that you actually
get.
The trick is going to be trying to make this fit within the
U.S. budget system.
Senator Barrasso. You had mentioned so many conflicting and
competing policy objectives that sometimes you are not able to
achieve any of them. It is clear that we have to streamline,
focus our top priorities. When I think about assistance, what
objectives should be left to others to handle? where should we
work on our core competencies? Someone mentioned Tanzanian
electricity. I had a chance to be there with Melinda Gates and
see what the Gates Foundation is doing there in terms of
agriculture work, in terms of disease prevention and treatment,
early detection.
How do you see that playing out?
Dr. Moss. I think it makes sense that there needs to be a
lead agency on a particular issue. In the case of electricity
in Tanzania, it is obvious that a lot of agencies would think
that they could take the lead. Even DOD might think that they
could do that well. But really OPIC is the logical agency. OPIC
has the expertise and, more importantly, they have the business
model that can crowd in private finance.
You do not want to do electricity in Tanzania with grant
financing. You want it to be commercially viable. But you need
that public policy nudge. OPIC would be the logical lead. But
given that OPIC is a small agency, the State Department--this
would not make my former colleagues happy--the State Department
is very expansive and imperial in a sense within the
interagency, everybody wants to take the lead. I am sure USAID
thinks they could take the lead there, too.
But I do think in projects that should be largely
commercial and business-driven, an agency like OPIC makes the
most sense and we need to be able to give them the tools to
achieve that.
Senator Barrasso. Mr. Murphy, could I ask you about
unlawful takings. We hear in our office from U.S. businesses
concerned about property of businesses being expropriated by
foreign governments. Do you believe U.S. assistance should
continue to be provided to countries that do this sort of
unlawful taking of U.S. business assets and properties?
Mr. Murphy. I think there are a number of elements of U.S.
foreign policy that can and should be brought into play to
support U.S. companies when they are faced with expropriation.
It is a matter of public statute, for instance, that the
Generalized System of Preferences, and the preferential access
to the U.S. market it provides, should not be given to a
country that expropriates without compensation. I think in the
area of foreign aid as well that is something that should be
taken very much into consideration.
Senator Barrasso. Mr. Lane, you talked about what we needed
to do in terms of foreign aid. From your past experience, not
just from Caterpillar but the commissions on which you served,
and you talked about economic development, for national
security, as well as consistent with our values. Then you
mentioned the free trade agreement with Colombia. I had a
chance to visit with President Santos in Cartagena in January
2011 and at that time he was saying: The United States has made
this incredible investment to turn what could have been a
narcostate around and they are saying, but we were delaying the
free trade agreement for extended periods of time. And at what
point do--sometimes we have invested wisely and then, through
either a political position that we take or a military
position, kind of undermine what another branch of our
government is trying to do and accomplish with a country.
I just wondered if you could comment.
Mr. Lane. As a businessman, this is a source of
frustration,
because what we often find in any kind of negotiations of trade
agreements or the implementation thereof, we often fall prey to
the notion that the perfect is the enemy of the good, and at
some point, you have just got to take a good deal. But often we
wait and wait. In business we never wait and wait. Once it is a
good deal, we take it and we start getting results.
It should not take longer to expand the Panama Canal than
pass a free trade agreement with Panama, and that is nearly
what happened. And by the way, for a couple of years we found
that our exports to Panama--expanding the Panama Canal was a
big deal for Caterpillar. Anything that moves that kind of dirt
really gets our attention--we were at times exporting more to
Panama with 3 million people than to Korea, which is one of the
10 largest economies.
So we wanted a sense of urgency. I think that is what we
all need to do at some point. It is always seductive to hold
out for the perfect, but at some point let us take a good deal
and move on. It took way too long to get a lot of those FTAs
through. I hope when we move forward with the agreements with
Europe and the TPP and others we get to a point where we can
actually get something to where it starts benefiting the U.S.
economy and the global economy.
If I could just end with one observation, in my entire
career at Caterpillar exports have been important. We have
always taken export markets seriously. But the places where we
used to export were developed countries, it was Europe, it was
Japan, Canada, Australia, and oil-producing countries. Today
exports are more important to Caterpillar than ever before.
Well over half of what we produce we export. But over half of
our exports now go to non-OECD countries: Colombia, Chile,
Peru, South Africa. These are important markets that are
driving employment in the United States, driving employment in
Illinois. It is absolutely critical that we recognize at some
point that, while it is not a perfect process, when we engage
in countries and we help them develop it pays dividends down
the road, and at times big dividends.
Senator Barrasso. You know, Mr. Chairman, if you get a
chance to look at the book ``The Path Between the Seas: The
Building of the Panama Canal,'' it was the first time a
President of the United States left the United States during
his Presidency, and it was Teddy Roosevelt and he was there
operating a steam shovel in this big picture. I do not know if
it was a Caterpillar.
Mr. Lane. If I could do a commercial, it is a Bucyrus steam
shovel, and we just acquired that fine company about 2 years
ago and it is just an outstanding organization. We thought we
made big products until we bought Bucyrus. The steam shovels
they produce make some of the largest trucks in the world look
small.
Senator Barrasso. Thank you, Mr. Chairman.
Senator Kaine. Thank you, Senator Barrasso.
Senator Murphy.
Senator Murphy. Thank you very much, Mr. Chairman, Ranking
Member. Thank you for holding this hearing.
I am sorry to the panel that I was delayed in getting here.
But I trust it has been a good discussion.
I wanted to maybe raise a general point and open it up to
all three panelists. Having not heard your testimony, I am not
exactly sure who to direct this to. As the Arab Spring turns
into the Arab summer and fall and winter, and as we continue
our withdrawal from Afghanistan and transition our role in
Iraq, we are going to be in a position in which we are
providing more and more economic aid and political support to
very new democratic governments and, frankly, very imperfect
democratic governments. Though we have been doing this for a
long time, Pakistan probably the best example, we are likely
going to be doing it more and more.
My Pakistani-American friends complain all the time that we
are sending too much of our aid through that government and
that if we really want to make a difference in Pakistan we
should be putting the money directly into NGOs that are going
to be able to spend that money more efficiently on the ground.
It has always struck me that, if you want to simplify it, two
reasons for the aid we give. One is to directly support the
people of the country. Second is to bolster a government that
we have an interest in continuing to operate in that nation.
So I guess I sort of pose this question because, whether it
is in Pakistan or Afghanistan or Iraq or Libya or perhaps a
year or two from now Syria, we are going to be constantly
confronted with this decision about how we balance putting
perhaps efficient money on the ground directly through service
providers versus putting money through governments which may
have large elements of corruption in them, but are vital to our
national security interests, thus giving us a reason to support
them.
Maybe I will run down the line and get your impressions. I
am sure the answer will probably be a bit that we have to
borrow from both columns, but I would love your thoughts.
Mr. Lane. Senator, allow me to address this from a
strategic, not tactical perspective, because I think Dr. Moss
is probably the best one from a tactical. Two months ago I was
with former Secretary of Defense Gates and he made an
observation that really stuck with me. He said: You know, when
you think of the great revolutions, the American Revolution,
the French Revolution, the Russian Revolution, the Chinese,
with the exception of the American Revolution, the first 10
years went badly. We had a Whiskey Rebellion and that was about
it. Everywhere else you had enormous excesses.
We are going to have to show patience with what is going on
in the Middle East. That means we are going to have to stay
engaged. We are going to have to constantly readjust our
policies. But more than anything else, we have to have a sense
of consistency and patience in order to get results. Whether we
do this, whether we provide assistance directly or through NGOs
or what have you, there are better experts on that. But more
than anything else, we have to make sure that we do not get
ourselves in a position where it is our way or no way. We have
got to stay engaged to make sure that that part of the world
starts benefiting from the benefits of the global economy and
democracy.
Mr. Murphy. Just a brief comment, but I think your point
about working with the private sector and nongovernmental
organizations makes a lot of sense. But it is my understanding
that in the case of U.S. development assistance actually less
than 7 percent is actually given to foreign governments per se.
So I think that when I have had our interactions from the U.S.
Chamber with USAID and when our member companies have had
collaborative programs in different countries, I think that
leadership at AID has gotten the message, and I think there is
increasingly less and less of a reliance on simply transferring
funds to foreign governments.
Senator Murphy. Dr. Moss.
Dr. Moss. This gets to the point about what are we actually
trying to achieve. If you are trying to have an immediate
humanitarian response and the government does not have capacity
and you do not have confidence, you obviously have to use
contractors or NGOs. But if the point, as it will be in most of
the Arab Spring countries, is that we are trying to help build
a capable state, going around the state actually undermines our
long-term objective.
Actually, I do not think--it is a false choice to say we
either have to go through NGOs or we have to cut blank checks
to governments. Cutting blank checks to governments, that is
not going to happen, nor should it happen. But there are some
pretty innovative mechanisms, including what USAID has been
doing in Afghanistan, which is probably the toughest
environment to operate in, which is to have projects that are
technically--they are called on budget. They are technically
part of the ministry, but the money does not actually just go
to the ministry and then we hope for the best. What you
actually do is you reimburse on a basis of what they actually
achieve.
So this is where I think what I mentioned earlier, that
these innovative pay for performance contracts can balance the
need for taxpayer--getting taxpayer value, while also trying to
achieve the results we are trying to get, which is things like
service delivery, but also building the capacity of our partner
states. It does not help for the United States to come in and
build a gold standard health care system, but when we leave
there is nothing left behind. So we have to do that slow, hard
work with partner governments that we are trying to bolster and
we have to find mechanisms to link those to results. Otherwise
we are going to be chasing our tails.
Senator Murphy. In my remaining minute here let me make a
non sequitur to a different issue. I was a member of the
Foreign Affairs Committee in the House before I came here and
in the only foreign operations budget that we debated there an
amendment was attached that passed our committee that said
simply this: ``The United States could not provide any foreign
aid to any nation that voted against the United States at the
United Nations more than 50 percent of the time.'' That passed
the Foreign Affairs Committee against my objection and many
others.
I just want to ask a simple question: Do any of you think
that that would be a good United States policy, to condition
aid upon the particular country voting with the United States
more than 50 percent of the time at the United Nations?
Mr. Lane. I think in this space you want as much
flexibility as possible. And whenever you put constraints on
that flexibility I think it hurts U.S. influence and our
ability to get results. So I would always be very mindful of a
proclamation that takes the United States out of the game.
Senator Murphy. Mr. Moss.
Dr. Moss. I would just add, if our sole objective was to
win U.N. votes, then that makes perfect sense. But that is way
down on the list of U.S. national security interests. It is
irritating, but it is certainly not our sole objective.
Senator Murphy. Thank you.
Thank you, Mr. Chairman.
Senator Kaine. Thank you, Senator Murphy.
We will have a second round of questions and do it as a 5-
minute round.
The whole issue of metrics and accountability in measuring
the success of your investment, Senator Barrasso raised that in
his opening question. That is something that we should seek
across every line item in the Federal budget and we need to
seek it here. But it strikes me that as the model is changing
so heavily, where less than 20 percent of the expenditures are
governmental expenditures and 80 percent private, the question
of coming up with the right metrics is a little bit
challenging, or at least it is a different kind of a challenge
than existed before.
Talk a little bit about metrics and accountability in this
new reality, where the bulk of the dollars are coming from the
private side?
Dr. Moss. The way that a lot of metrics, they have been
added on on top of all of the other, all of the other
oversight, if we think about what we are trying to achieve, we
think about how little leverage we actually have through our
aid and development program, and that lots of other things are
going on. We are trying to just impact events at the margins.
These are going to be high-risk ventures. None of us here would
want to risk our jobs on the success of Project X in rural
Afghanistan, because that is going to be largely out of your
hands.
It is also that we are trying to achieve difficult things,
always under short time constraints, with lots of unknowns. So
what do we want in that situation? We want people to have the
flexibility to experiment, innovate, try to figure out what is
working and what is not working, stop doing what is not working
and plus up what is working.
But our system--this is what a former USAID administrator
calls the counter-bureaucracy. The system has made it that
everyone is so scared of having a bad project that they are
very, very risk averse. So it is the specter of the auditor
general hanging over every project that means that we are not
getting creative projects and, frankly, if things start going
badly, the incentives are not to cut things off, but to try to
sweep things under the rug a little bit.
So what I think the answer is to be very, very clear on
what the objectives of the project or effort will be, try to
come up with some metrics that you think would indicate success
or failure, and then we need to step back a little bit and
judge it based on those metrics. I think of it more like
venture capital. No venture capitalist would run a fund where
their board was nitpicking every single project, because they
would expect 80, 90 percent of those to fail. But what you want
are those 10-percent winners that are going to really hit. That
is how we need to think about our development assistance, as
venture capital, and we want to judge that portfolio.
That is why I mentioned the MCC compacts, which have
indicators, there is a 5-year period, and there are going to be
some failures, but a couple of big successes are going to make
the entire system work better, and that is the kind of approach
that I think we should try to give to our development agencies.
Senator Kaine. Mr. Lane.
Mr. Lane. If I could, because this is a great question.
When we were looking at the assistance programs around the
world, initially when your minders take you out in the field
they want to show you the best project they have ever seen. So
you do that for a while and you say: Show us the worst. Show us
the biggest waste of American tax dollars you have ever
participated in. And there is always this pregnant pause and
then they go: We will show you a U.N. project. It always worked
out that way.
But what I think you have right now, I think Raj Shah,
Administrator of USAID, has done a terrific job trying to bring
in a matrix and get a results-oriented programs. But I have
found that the best programs are where you do not measure
success based on any one matrix; you do it based on the overall
success of the country or the program.
If you were to look at Plan Colombia on a day-to-day basis
or a month-to-month basis, there would be lots of frustrations.
But you look at it from a 10-year perspective, it may have been
the greatest turnaround story of our generation, and you know
when it has occurred. People start talking about the program,
like we need another Plan Colombia or another Marshall Plan or
what have you. During the Marshall Plan there were a lot of
problems with the Marshall Plan, which no one recalls any more.
MCC I think really has been a breakthrough policy. It is
not being funded to the degree that it was envisioned
initially, but when you see that the countries have a stake and
they get to set the priorities and they are accountable, you
are starting to see sort of a template, whether it is
microfinance, whether it is ag development programs, whether it
is infrastructure, whether it is better, more transparency in
corporate governance. There seems to be a desire all over the
world for essentially the same things.
So I think it is a plus. I think it is something we can
really build upon. But I would be cautious about having any one
measure that is going to define success or failure. It is
whether you are moving the ball down the field, not at what
point do you score a field goal.
Senator Kaine. Thank you.
Senator Barrasso.
Senator Barrasso. Just following up on that, Mr. Chairman,
because I agree with you in terms of the metrics and the
accountability. As you just said, Mr. Lane, it has to do with
the overall success of the country. You used the word
``accountability''; accountable to whom? Is there a point
where--I think, Mr. Moss, you wrote about this at one point. Is
there a point where too much money raised from either other
countries, others in the international community that want to
be helpful, that too much aid detracts from accountability, say
to the citizens of the country itself? If you could comment a
little bit about that.
Dr. Moss. Yes. Thank you for that question. Look, whenever
anybody faces a windfall gain it changes the dynamics of
everything. I went in with some neighbors on the $600 million
lottery last week. We did not win. I think I could handle the
pressures of winning the lottery, but I know that that would
change all of my relationships. My son is here with me today.
He is going to look at me differently. I think these relatives
and old friends come out of the woodwork.
The pressures become enormous when you have money fall out
of the sky for you. That is true for aid if you have an
external donor that is supporting the majority of your funds or
if you have some offshore natural resource gain and you are all
of a sudden getting these dividends. You did not do anything to
deserve that. You are just getting these windfall gains. That
undermines, in the case of the lottery winner, it undermines
your incentives to work like a normal participant in society.
That works for countries as well.
What countries should be doing is building a vibrant local
economy and having a fair and broad-based tax system. When you
get a windfall gain from the outside, that undermines that
system. So absolutely, having too much money sloshing around in
the system, especially in weak states that do not have systems
to spend money well, can make things much, much worse. I think
we need to be very, very cautious about that.
Senator Barrasso. Thanks.
Do either of you want to add anything?
[No response.]
Senator Barrasso. Thank you, Mr. Chairman.
Senator Kaine. Two additional questions that I wanted to
follow up on. Dr. Moss, in your opening testimony you really
focused toward the end about the need to ramp up our efforts in
development finance. You indicated that we are sort of falling
behind. I would like you to elaborate a little bit on that.
What are other nations doing in the development finance area?
You talked about some of the assets that we have, but what
could we do more and why is development finance now such a
critical component of a successful development program?
Dr. Moss. Thank you. Development finance is the future of
development policy right now. We are still going to need
traditional grants, but that is not where things are moving.
China certainly has very large resources and they can bring all
kinds of assets to bear. OPIC's competitors, one example, many
of them can participate in projects through equity. OPIC is
barred from participating in equity. They have to use a debt
instrument. That puts them in a subordinate position. It makes
it very difficult for some of the other partners to work with
them. It is just a minor difference but in practical terms it
can make a big deal.
Multiyear authorization. If the agency is always looking
for--it has got one more year of lifeline, that makes it a
little bit more risk averse. It makes it viewed as a less
reliable partner to outsiders. If it had multiyear or, dare I
say, permanent authorization, then that would make it a better
partner on the outside and it would give it some more
confidence to take some greater risks.
The reason I think that the time is right here is that,
trying to reorganize the Federal Government, massive lift. The
kinds of proposals that we are talking about with creating a
U.S. Development Finance Corporation is basically just
bolstering OPIC. OPIC is most of the way there and you could
just take programs that are sprinkled across the interagency,
put them under OPIC, and get a lot more bang for your buck, and
I do not think that you would instigate all of the antibodies
that you always get when you start talking about restructuring.
Senator Kaine. Other thoughts on the development finance
side?
[No response.]
Senator Kaine. The second question is, from any of you,
probably the most significant policy change that is part of the
President's development budget, foreign aid budget, is the food
aid policy change. In the status quo, food aid, largely U.S.-
produced and U.S.-flag shipped food aid. The proposal is to
mandate that at least 55 percent of food aid be sort of in that
structure, but more of a focus on local food production. As I
heard Dr. Shah describe it, sort of for two purposes: One, the
development of an indigenous agricultural sector is one of the
best guards against hunger; and second, you deal with some of
the other--you get food to the ultimate recipients quicker.
Your thoughts on that policy proposal?
Dr. Moss. I am a huge supporter of it. I think it could go
further, but it is a good first step, and this is both from an
efficiency standpoint and from value for the taxpayer. The
program is designed to reduce hunger and try to prevent hunger
in the future. That is clearly the way to go.
Senator Kaine. Additional thoughts, Mr. Murphy?
Mr. Murphy. I would just add that, my real background is in
trade policy and in Geneva at the World Trade Organization,
where there are efforts under way in connection with having
some kind of package of deliverables for a ministerial
conference at the end of the year, the long-running agriculture
negotiations are still a part of that. It is clear that it is a
priority of many countries around the world to have some kind
of limitations on food aid, because--and I cite that--this is a
recognition that comes from countries that we need approaches
that are more similar to what the President is approaching when
it comes to delivering food aid. Otherwise the disruption in
local markets could be significant. There is a broad, close to
a consensus among WTO members on that.
Senator Kaine. Mr. Lane, any additional comment?
Mr. Lane. The only nuance I would add is--and this would be
a subject for probably another hearing--but the restrictions,
the MARAD restrictions dealing with Ex-Im Bank and all sorts of
transportation, diminishes the value of the bank. It causes
bureaucratic slow-ups and much higher costs, and it really does
undercut the effectiveness or our ability to use the Ex-Im Bank
in a lot of projects.
So at some point modernizing the way in which some of these
agencies work, whether it deals with content requirements or
using U.S. shipbottoms, is something that could be really
reformed and allow the agencies to be much more effective.
Senator Kaine. Great. Thank you.
Senator Coons has joined us. We had a 7-minute opening
round and we will just let you roll.
Senator Coons.
Senator Coons. Thank you, Senator Kaine. Is this your
maiden hearing here?
Senator Kaine. It is.
Senator Coons. I would like to congratulate Senator Kaine,
who has joined us on the Foreign Relations Committee and who I
very much look forward to working closely with on the issues
before this subcommittee. I chair the Subcommittee on Africa
and have in the last Congress and this Congress, and am
particularly focused on how we can be more successful at our
development goals, our security goals, and our diplomacy and
values goals in Africa. I think, if I understand correctly, you
have already had a vigorous conversation about some duplication
and overreach in our assistance agencies, some challenges in
terms of focus and efficiency, and the potentially very
constructive role of the private sector in achieving these
goals.
I was with, if I am not mistaken, Scott Eisner of the U.S.
Chamber announcing the U.S.-South Africa Business Council just
a few months ago and see very real potential for better
alignment, better innovation, better strengthening of our
complementary goals in development and in economic growth in
Africa in particular.
Mr. Murphy, if I might just start with you. Would you share
a little bit on how in the context of the continent of Africa
the U.S. Government and the public sector side could do a
better job of streamlining and focusing in order to promote an
effective and meaningful partnership with the private sector,
to make sure that we are taking advantage of the huge
opportunities on the continent? Of course, Mr. Lane, Dr. Moss,
I would encourage you to comment on that as well.
I recently came out with a report on the at least 10
agencies that have some hand in this: Ex-Im, OPIC, USTDA, and a
raft of others. Any particular things you would urge us to do
on this?
Mr. Murphy. Well, Senator, first I just want to say thank
you for your leadership, particularly with regard to Africa
there. I know that my colleagues who are focused on that
program have greatly appreciated that.
Clearly, the case that can be made here for a more
strategic approach to U.S. foreign policy objectives and
commercial objectives in Africa, to wed that together, is a
powerful one. So you mentioned your efforts in this space and
legislation that you have had a hand in that the Chamber has
supported. What is needed is the kind of concerted approach
that the United States had in the case of Colombia, and we had
a very positive conversation about this.
What worked in Colombia was that an approach was
established that was bipartisan, that was ongoing over many
years, and that received adequate resources from across a
variety of U.S. Government agencies, and on top of that as well
a very important ingredient is that the Colombians, they owned
the strategy. It evolved over time. It shifted away gradually
from military toward--in that case--toward a more economic
development front, and now of course we have just celebrated
the first anniversary of the free trade agreement and U.S.
exports were up 20 percent last year. So we are starting to see
other kinds of benefits.
I think we in the private sector would really hold that up
as kind of a model, that if there can be the staying power of a
concerted strategy that cuts across different agencies, that
engages the private sector, that makes trade and commercial
engagement a key driver, and that receives adequate resources,
those would be the top of our list.
Senator Coons. Well, thank you. You certainly raised an
important underlying theme: A strategy that receives adequate
resources and is sustained.
If I might, Mr. Lane, as you move to this topic, USGLC has
done a wonderful job, I think, at building and sustaining
bipartisan support--at a time when there is not bipartisan
support for much of anything here--for what is at times
difficult to fight for. The 150 Accounts are often the target
of political rhetoric.
Help me understand what has made that successful for
Caterpillar, for USGLC, and why that is important?
Mr. Lane. The U.S. Global Leadership Coalition is really
sort of a unique operation. I have never been involved in
something where NGOs and businesses work so well together,
where actually Republicans and Democrats have sort of walled
off the political rancor and moved forward in a way that has
been positive.
I like to say, given my experience in Washington and at
Caterpillar, that at the time I do not think I appreciated
this, but on reflection--and I say this as a moderate
Republican, if there is any left--I now believe Bill Clinton
was America's greatest free trade President and George Bush 43
did more to help poor people around the world, especially in
Africa, and neither one of them got one vote for those
signature accomplishments.
It is our objective, ``our'' objective, in this case the
business community: How can we make sure people get rewarded
for doing the right thing? That is a daunting challenge. But in
the realm of foreign assistance I think we are all doing a good
job working well together in this space, and I really
appreciate the leadership that you all are showing on this
account.
As far as your question, in Africa one of the most
memorable visuals I had was going into Kampala, and there was a
sign produced, obviously, by someone in the U.S. Government and
it had the logos of all the different agencies that were doing
work. It was State Department and it was Commerce and USAID,
none of which were memorable. The only two brands that really
stand out, where people outside the United States really get
it, one is the American flag and the other one is the Peace
Corps. Wherever we would travel, those were the two strongest
brands. Everything else was just sort of background noise.
I would urge to the degree we can do it--and I realize
there are all sorts of institutional roadblocks--but to the
degree we can bring things together and have greater focus,
whether it is getting the signature organizations working
together or under one roof, it would really help with the
effectiveness of delivering results.
Senator Coons. I think that is a good observation.
If I might, Dr. Moss, just to your point, I think in your
written testimony, that U.S. aid--and this is mostly in sub-
Saharan Africa--has saved roughly 5 million lives. One of the
signature accomplishments of the Bush administration was the
launch of PEPFAR.
We are today at a point where there are some obvious
potential ways that we could be more efficient, more
streamlined, and thus help more people, at a time when we are
under persistent budget pressure. One of the development models
that I think holds some real promise is the Millennium
Challenge Corporation in terms of it having clear standards and
clear accountability. In a recent meeting with the President of
Liberia, she was clearly intimately familiar with what had to
be done in order to achieve a compact, and I think it is a
salutary thing to have clear and measurable standards and
procedures and outcome.
What has been most successful and what has been least
successful about the MCC? It was not listed by Mr. Lane as one
of the best known, most memorable changes in development
policy.
Mr. Lane. We talked about it earlier.
Senator Coons. But I do think it has--there was initially--
there was a lot of wasted time and effort in terms of fighting
over prioritization and culture. I view it in the few countries
I have been able to visit MCC projects and in my conversations
with folks at MCC, it has begun to harmonize and be
complementary to the other preexisting development structures.
How is it working out and is it worth sustaining in its
current form or growing?
Dr. Moss. I am overall a very big fan of the MCC. I do not
think it was an accident that they decided to set up the MCC as
a separate agency. They were trying to start fresh and not be
bound by some of the problems that occur in the existing system
that I mentioned earlier.
But I think the lesson of MCC is not the one that we all
expected initially. I think it was initially sold as the
innovation was going to be that eligibility for compacts would
be based on clear third-party criteria. If you are over the
hurdle you are in, if you are not over the hurdle you are out.
That is useful. There have been some fights over that.
But the real innovation for MCC and where I think you can
take the MCC model to other agencies and other contexts is this
5-year compact, where you have an actual partnership with the
partner government on the ground, you have a set of agreed
metrics, the compact is judged over a multiyear period based on
those metrics. That is the kind of model that can work even in
countries that would never meet MCC eligibility criteria.
So I think that we can learn a lot from that. I also think
that the MCC has pushed the evaluation agenda. Administrator
Shah has done pretty well within USAID to get an evaluation
policy within AID. But using a rigorous independent evaluation
is the way that you can actually figure out, did these
results--how were they achieved, what lessons could we learn
and apply going forward. The MCC has also really led the way
there.
So I think it has really been a tremendous success, but not
necessarily in the ways that we always think.
Senator Coons. Thank you, Dr. Moss.
If I might just--sort of one last question about how our
values agenda lines up with our development, diplomacy,
security agenda, and the role of the private sector. I often
say that we are in a race in Africa with a number of
competitors. China is the most visible, but certainly Russia
and Brazil and India and others are very actively engaged in
the continent, see its potential.
And yet, when an American potential development partner
comes in, they are often accountable for compliance with the
Foreign Corrupt Practices Act and transparency standards, or
accountable to their shareholders or the American press for
environmental impact of a proposed development project. So in
certain cases they simply choose not to. There was one in
Uganda recently that I was familiar with where an American oil
development company chose not to continue with their project,
in part because there were some very difficult tradeoffs with
environmental standards. They stepped back and there was I
believe a Chinese company right behind them willing to take it
on.
In instances where we decline to provide funding for a
compact because of noncompliance with human rights standards or
freedom of the press or democracy, following the constitution
in terms of succession, there are other sources of funding
which stand immediately next to us and provide an alternative.
How can American companies successfully compete in an
environment where at times their competitors are not bound by
comparable standards in terms of transparency and promoting
multiparty democracy and respect for human rights? And how can
our work through State, AID, MCC, and others reinforce that
constructively?
[Pause.]
Senator Coons. I see no immediate volunteers.
Dr. Moss. I actually think the FCPA is a good example where
a lot of the initial concerns about competitiveness are--it has
flipped. What the United States has done through the FCPA is
actually raised the global standard and in a way has helped to
protect companies from getting themselves in trouble. I think
that if we base our rules and regulations on transparency,
respect for human rights, on our values, and we implement
those, we can help to raise the bar across the marketplace.
If there is a company from another country that is willing
to come in and pay bribes and asset strip to get it done, that
is not going to succeed in the long term. I do not believe
that--I think the point is we should take the long view here
and not be mercantilist about individual political deals. We
should not sell out our values in order to get a particular
deal, because in the long run if we are right the world will
move toward standards, just like we have seen on
anticorruption.
I do not believe that companies that undermine the rule of
law to get contracts now will succeed over the long term. Those
will come back to bite them. That is part of the reason that we
went with the FCPA in the first place. So I think we should
stick to our guns.
Mr. Lane. Senator, the issue has been around for a long
time. Caterpillar in 1974 was one of the first companies to
have a worldwide code of conduct. It was right after the Gulf
Oil--I am really dating myself now--scandals in the early
seventies.
It is amazing. It occurred, that type of activity, occurred
all over the world, and it still occurs in some parts of the
world. But during the same time period, by playing by the
rules, it is amazing, you still become a successful
organization. Where a country really gets explosive growth is
where they get enough things right where they start attracting
foreign investment in a big way. When that happens, that is
where you see the transformation really take place.
Earlier we were talking about the promise of the MCC, and I
really think there is a lot of promise there. But if you could
start getting a lot of the little things--little things are big
things, really--right, at some point the combustion takes place
and you start attracting foreign investment.
Where we did the biggest deep dive in the HELP Commission
was in Honduras, and the north-south highway, you had the Port
of Cortes improvement. You had the ag development programs
where we were trying to encourage people to grow something
other than corn and rice and start growing sweet potatoes and
cucumbers and what have you. It started raising incomes two,
three times for farmers that had two or three hectares, and it
really makes a difference, and at some point the foreign
investment kicks in. And when it kicks in in a big way, you
really do see enormous growth, and the first thing that you
have when you have enormous growth is a need for more
infrastructure, and the best way to get more infrastructure is
to buy Caterpillar products. So let me end with a commercial.
Senator Coons. I will note you are the only witness today
who brought an actual physical embodiment of the underlying
product, and you managed to work that in.
Mr. Lane. The reason why I brought that, just so you know,
and we spent a lot of time talking about Colombia, but this is
a D-11 bulldozer, the biggest bulldozers in the world. They are
produced in East Peoria, IL. In Colombia, with the coal mines
in Colombia, there are more D-11 bulldozers there than anywhere
else in the world. So it is amazing how this international
commerce really does lift all ships, even some that are
bulldozers that are very heavy.
Senator Coons. One more question if I might, just in
closing. I will reference back to Dr. Moss' point. Of course I
think we should stick to our guns. Of course I think--but I
think we need all of the taxpayer dollars that we are spending
across a dozen agencies and with our partners in the private
sector we need to be pushing in the same direction, and we need
to be welcoming and encouraging those voices, those
institutions, and those groups within developing countries,
particularly in Africa, which is my primary focus, that also
have that value, that also have that priority of improving
worker protection, improving environmental protection,
improving transparency, because on that playing field I think
we will always win.
But in the absence of it, one thing that distinguishes the
current environment from 10 or 20 years ago is the number of
other potential sources of foreign investment that are not
asking those questions and are not advancing those interests.
That is, I think, something that we need to be really focused
on and attentive to as we try and all pull in the same
direction.
Thank you so much for your testimony today.
Thank you for the chance to ask questions.
Senator Kaine. I want to thank my colleagues for
participating. To the witnesses, you have given us a lot to
think about. You have made the case very strongly that the U.S.
foreign development programs and budget are important. The
notion that you mentioned, Bill, a bit ago, that in the past
you might talk about trade not aid, and yet aid done right
promotes trade, lays the groundwork for trade, builds the road
on which then trade occurs, that testimony comes through loud
and clear.
You have also given us some examples of things that have
worked and why, and things that are not working as well as they
can and how we can improve them. This is an important topic for
America's continuous global leadership. We appreciate all your
testimony and look forward to doing more work together.
With that, just as we are about to now vote on the floor,
the hearing is adjourned.
[Whereupon, at 12 p.m., the hearing was adjourned.]
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