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U.S. DEPARTMENT OF STATE
95/03/01:  TESTIMONY:  SENATE APPROPRIATION COMMITTEE ON FY-96 BUDGET
OFFICE OF THE SPOKESMAN


                            STATEMENT BY
              SECRETARY OF STATE WARREN CHRISTOPHER
                             BEFORE THE
                    SENATE APPROPRIATIONS COMMITTEE
            SUBCOMMITTEE ON COMMERCE, JUSTICE, AND STATE

                            MARCH 1, 1995



Good morning.  I am pleased to appear for the first time this year before the Senate Appropriations Subcommittee on Commerce, Justice, and State.  I am here to provide you with an overview of our proposed fiscal 1996 budget, and to highlight the foreign policy objectives the budget supports -- in particular those areas under this Subcommittee's jurisdiction.

The American people justifiably expect that their government will do what it must to protect our nation's interests in the world.  At the same time, the American people rightly demand that we apply the most rigorous standards when we decide how to spend their tax dollars.  We have been tough-minded in putting together what is an austere budget.

The International Affairs budget represents only 1.3 percent of total federal spending.  It has absorbed substantial real cuts in the last several years, and is now 45 percent lower in real terms than it was in 1984.  Despite the extraordinary challenges we face, our 1996 spending request is essentially what we are spending in the current fiscal year.  Indeed, the resources we are requesting are the rock bottom minimum we need to advance our nation's vital interests.

Consider what the world would be like if we had not had the resources we needed to sustain American leadership and protect American interests in the last two years alone.  We would have four nuclear states in the former Soviet Union instead of one, with Russian missiles still targeted at us.  We would have a full throttle nuclear program in North Korea.  We would have no GATT agreement to expand world trade.  Brutal dictators would still terrorize Haiti, and more people would risk their lives and wash up on our shores.  Very likely, Iraqi troops would be back in Kuwait.  And an unaddressed Mexican economic crisis would threaten instability along our border.

Last November's elections certainly changed a great deal.  But they were not a license to lose sight of our global interests or to walk away from our commitments in the world.  This budget advances our interests and maintains our commitments.  Approving it will be a test of our willingness to dedicate the resources necessary to protect the security and prosperity of the American people.  It will be a stern test of the first principle guiding our foreign policy:  a test of our commitment to lead.

Our foreign policy strategy is driven by four principles:  that we continue to engage and to lead; that we maintain effective relations with the world's great powers; that we adapt and build institutions that will promote economic and security cooperation; and that we continue to support democracy and defend human rights.  Today, I would like to devote particular emphasis to the first:  American leadership.

The end of the Soviet empire removed the central threat to American security, but it did not eliminate our vital stake in international engagement.  A clear-eyed assessment of our interests makes it plain that American leadership remains essential.

The spread of open societies and open markets offers an unprecedented opportunity to advance our interests.  Our former adversaries in Europe are becoming our partners in diplomacy and trade.  Dynamic growth will help fuel our economy well into the next century.  These developments matter for every American community.  Millions of American workers will clearly benefit from the market-opening agreements we helped forge, like NAFTA and the Uruguay Round of the GATT.  Just as important, they will benefit from our support for economic development, democratic government, and political stability-- the conditions upon which key new markets in Latin America, Southeast Asia, and Central Europe depend.

But we must not be complacent.  Aggression, intolerance, and tyranny still challenge the march of democracy and threaten our interests in many regions of the world.  Problems like nuclear proliferation, terrorism, and environmental degradation pose growing dangers to our nation.  The security of nuclear stockpiles in the former Soviet Union, for example, and the possibility that rogue states like Iran or Iraq might acquire nuclear weapons, are matters that directly affect the security of each and every American.

As we address these opportunities and threats, we must set strict priorities that are consistent with our interests.  But we also know that we cannot assure our security and prosperity by building a wall around our nation and abandoning the instruments of global leadership.  The world looks to us to lead.  More important still, the American people expect no less.

Today America faces a choice:  between engagement and retreat; between the concrete benefits of integration and the illusion of isolation; between sharing burdens and responsibilities with others and shirking them altogether.

We are the nation that spent trillions of dollars to defend the free world during the four decades of the Cold War.  It would be a historic mistake if America now refused to spend a fraction of that amount to consolidate those remarkable gains.

Of course there is room to differ on specific issues -- on the best ways to make peacekeeping more effective, for example, or the best possible targeting of our assistance programs.  But I believe that the wholesale rejection of all the instruments of our engagement would undermine America's ability to lead.

Those who say they are for a strong America have a responsibility to help keep America strong.

We cannot have it both ways.  We cannot be the world's most powerful nation if we do not marshal the resources to stand by our commitments.  We cannot lead if we do not have all the tools of leadership at our disposal.  Preventive diplomacy is often the first line of defense.  Those who would undermine our diplomatic capacity threaten our national interest at a vital stage in the process when peaceful solutions are still possible.

We obviously cannot lead if others do not join us -- and our friends and allies will not be there when we need them if we are not constant in meeting our commitments.  We cannot take our friends and allies for granted.

As several of our recent accomplishments suggest, maintaining American leadership requires us to be ready to back our diplomacy with the credible threat of force.  And when our vital interests are at stake, we must always be prepared to defend them alone.  Yet no American believes that our soldiers should have to take all the risks, or that our taxpayers should have to pay all the bills, when the world responds to crisis.  That is why leveraging our resources through institutions like the United Nations is a sensible bargain the American people support.  In this budget, we are requesting $445 million for our fiscal 1996 assessed share of UN peacekeeping operations.  In addition, we are seeking a supplemental appropriation of $672 million for peacekeeping arrearages.

During the Cold War, peacekeepers kept a lid on regional disputes that might have led to superpower confrontation.  Since the Cold War ended, the UN has helped to resolve conflicts in places like Afghanistan, Cambodia, El Salvador, and Nicaragua, where, in one way or another, the United States had once been engaged.  Everyone acknowledges that some missions have failed.  But no one would deny that many missions have succeeded, even under the most difficult circumstances.

There is no question that the UN can be and must be more effective.  We are committed to the reform and reinvention of the UN system.  Some progress is being made and we will press for more.  But some people argue that we should back away from the UN entirely.  I think that would be a terrible mistake for the United States and the world.

In the last two years we have developed clear peacekeeping guidelines designed to ensure that tough questions are answered before any new missions are approved and that money is not wasted.  And we are improving our consultation with Congress at every step.

As a result, there have been fewer new missions and better management of existing ones.  The UN has established an independent office with the functions of an Inspector General to sharpen oversight.  And the UN's new Under Secretary-General for Administration and Management, Joseph Connor, the former head of Price Waterhouse, is aggressively pursuing a broad agenda for reform.

But two weeks ago, the House of Representatives passed legislation -- the so-called National Security Revitalization Act -- which, intentionally or not, would end over four decades of U.S. support for UN peacekeeping.  That would violate a solemn treaty commitment -- something that the United States as a great nation should not do.  If our NATO allies and Japan were to adopt similar policies, UN peacekeeping would end overnight.

If peacekeeping were no longer an option, we would lose a tool that every American President since Harry Truman has used to advance American interests.  Peacekeepers and monitors would have to be withdrawn from vital trouble spots around the world, including the Golan Heights between Israel and Syria, the Iraq-Kuwait border, and Cyprus.  That would be an invitation to aggression and disorder.

The United States would then be left with an unacceptable choice whenever an emergency arose:  a choice between acting alone and doing nothing.

Our request for peacekeeping, Mr. Chairman, is a small price to pay to gain international participation and financing for objectives the United States supports.  It allows us to deal with threats to peace without having to deploy American troops every time.  As the President has made clear, we will vigorously oppose any efforts to curtail this commitment.

The second principle driving our overall strategy is the central importance of constructive relations with the world's most powerful nations: our Western European allies, Japan, China and Russia.  These nations have the economic or military capacity to have an impact -- for good or for ill -- on the well-being of every American.  The relatively cooperative relations that these countries now have with us and with each other is unprecedented in this century, but not irreversible.

Our strategy toward the great powers begins with Western Europe and Japan.  We must revitalize our alliances with this democratic core.  We must also seize the opportunities to build constructive relations with China and Russia, countries that were not too long ago our greatest adversaries.  Both are undergoing momentous, though very different, transformations that directly affect American interests.

Our partnership with Japan is the linchpin of our policy toward East Asia, the most dynamic and fastest-growing region in the world.  This Administration has placed the Asia-Pacific region at the core of our long-term foreign policy approach.  Realizing President Clinton's vision of a stable and prosperous Pacific community will continue to be a top priority.  Moreover, the region figures prominently in many of the central areas of opportunity that we are pursuing in 1995.

It is imperative that we reinforce our security and political ties with Japan -- as well as with South Korea and our other treaty allies in the Pacific.  Our alliance with Japan, based on shared democratic values and a common commitment to peace and stability, is central not only to our strategic position in the Asia-Pacific region but to the resolution of key security issues such as the North Korean nuclear program, to developments in regions such as the Middle East, and to the effective management of global economic and political issues in the G-7 and at the UN.

It is equally essential that the strength of our economic ties with Japan matches the overall strength of our relationship.  During this year marking the fiftieth anniversary of the end of World War II, we will highlight and heighten our close cooperation on regional and global issues -- while continuing to press for greater access to Japanese markets.

With China, we are pursuing constructive relations that are consistent with our global and regional interests.  The President's strategy of comprehensive engagement is designed to maintain our overall momentum in advancing a broad agenda with Beijing.  We want China to be fully integrated into the international community.  For that to happen, it must accept the obligations that come with membership in international institutions and adherence to international norms.

We are encouraging China's participation in regional security and economic organizations.  We are supporting its accession to the World Trade Organization on commercially acceptable terms.  We are seeking its full commitment to global nonproliferation regimes.  We are encouraging China to demonstrate greater respect for human rights.  And we have just achieved an important success in gaining China's agreement to demonstrate greater respect for intellectual property rights.

President Clinton had made it clear that the widespread pirating of computer software, videotapes, and compact discs in China is unacceptable to the United States and incompatible with China's responsibilities as an emerging economic power.  He outlined a course of action that the United States would be prepared to follow if progress was not made.  The agreement reached last weekend in Beijing shows that we can work together toward common goals.  It includes specific steps to stem Chinese copyright violations and to improve market access for information and entertainment products.  China must now act to implement the agreement, and we have a detailed protocol designed to ensure that will happen.  For our part, we will provide technical assistance to help China establish effective enforcement regimes, especially in its customs capabilities.

This agreement will help American and other foreign firms gain fair treatment in the world's fastest growing market.  It will reinforce the strength of a global trading system in which markets are increasingly open and rules are rigorously observed.  It will also advance our goal of encouraging China to exercise its full international responsibilities.  At the same time, as President Clinton emphasized on Sunday, "Greater respect for the rule of law and greater access to intellectual property products both promote a more open Chinese society."

We will continue to work with China on issues such as North Korea and other proliferation threats, Cambodia, and the control of narcotics.  Success will not come overnight.  But our goal remains a broad and full relationship with a strong, stable, open and prosperous China that is a full and constructive member of the international community.

The United States, of course, has an enormous stake in the outcome of Russia's continuing transformation.  A stable, democratic Russia is vital to a secure Europe and a stable world.  An unstable Russia that reverts to dictatorship or slides into chaos would be an immediate threat to its neighbors and once again a strategic threat to the United States.  We have no illusions about how difficult that transformation has been, and how hard it will continue to be.

There is little doubt that the conflict in Chechnya has been the most serious crisis for reform in Russia since the Soviet Union collapsed.  We have been profoundly concerned about the excessive and indiscriminate use of force, and the corrosive implications that has for Russia's future as a democratic, multi-ethnic state.

We have emphasized strongly to the Russian government that the fighting must end.  A process of reconciliation must begin that takes into account the views of the people of Chechnya and that validates Russia's commitment to democratic principles.  We also call upon the Russian government to support fully the efforts of the Organization for Security and Cooperation in Europe (OSCE) to hasten an end to the conflict and to facilitate delivery of humanitarian relief to its victims.  We especially support the call of the OSCE Chairman-in-Office for a continuous OSCE presence in Chechnya.

The tragedy of Chechnya has not altered our interest in helping Russian reformers build a nation that is finally at peace with itself and its neighbors.

Our assistance to Russia remains important because it advances that interest.  It supports the safe transport and dismantlement of nuclear weapons and materials.  It provides seed money for small business development.  It supports the development of a free press, and backs solemn commitments the United States has made to encourage Russian troops to leave the Baltic states.

Most assistance is distributed through private organizations, in areas outside Moscow.  And of our total assistance to the former Soviet Union, more than half goes to newly independent states like Ukraine, Kazakhstan and Armenia.  Cutting assistance now would hurt the friends of democracy in Russia -- the very forces that have been most critical of the Chechnya operation.

At the same time, let me stress that the pace, depth, and substance of Russia's dealings with the United States, as well as with institutions like NATO and the G-7, will depend in large measure on the pace, depth, and direction of Russia's transformation.  To the extent the Russian government upholds international norms in its internal and external policies, the cause of Russia's integration is bound to advance.  Further violence in Chechnya can only set back that cause.

The third principle guiding our overall strategy is that if the historic movement toward open societies and open markets is to advance, we must adapt and revitalize the institutions of global and regional cooperation.  After World War II, the generation of Truman, Marshall, Acheson, and Vandenberg built the great institutions that gave structure and strength to the common enterprise of western democracies:  promoting peace and economic growth.

Now, as President Clinton told the Canadian Parliament last week, "we must adapt the institutions that helped us to win the Cold War, so that they can serve us well in the 21st Century."  At the President's initiative, we and our G-7 partners will chart a strategy in Halifax this June to adapt the post-war economic institutions to the more integrated post-Cold War world.

Our 1996 budget includes $934 million in contributions to the UN and to other important international bodies.  We are also helping regional institutions and structures like NATO, the OAS, and APEC to promote peace and development.  Our support advances our interests around the world, from defending human rights and the rule of law to promoting economic growth to settling disputes peacefully to encouraging nuclear safeguards.  It enables us to influence the development of international standards to support international trade, transportation, telecommunications, and intellectual property protection.  And it strengthens cooperation in areas such as the environment, agriculture, technology, and health.

Our fourth principle is the fundamental role that democracy and human rights have in this Administration's foreign policy.  Our commitment is consistent with American ideals.  It also rests on a sober assessment of our long-term interest in a world where stability is reinforced by accountability and disputes are mediated by dialogue; a world where information flows freely and the rule of law protects not only political rights but the essential elements of free market economies.

One month ago, the State Department issued its 19th annual report on human rights practices worldwide.  The first reports were prepared under my direction in 1977 during my first year as Deputy Secretary of State.  Those early reports were small in scale and narrow in scope compared to today's effort.  The Country Reports help us to shape our diplomacy, assistance and trade policy.  They are also important in their own right, because they shine a bright light on human rights violations that might otherwise be shielded by a veil of secrecy and indifference.

Our budget also requests $1.3 billion for the United States Information Agency -- a reduction of $123 million from 1995 levels.  USIA plays a unique role in strengthening pluralism, supporting the free exchange of news and ideas, and broadening the dialogue between Americans, their institutions, and their counterparts abroad.

From public diplomacy to international broadcasting through the Voice of America, Cuba broadcasting, and Radio Free Europe/Radio Liberty to educational and cultural exchange programs, USIA brings America's message to the world.  We are all familiar with the educational exchange program that bears the late Senator Fulbright's name.  The thousands of Americans who have studied abroad, and the thousands of foreign students who have studied here, all carry with them a Fulbright legacy:  International understanding is indispensable in an interdependent world.

USIA has been at the forefront of the streamlining effort initiated by the National Performance Review.  Its consolidation of all U.S. Government non-military overseas broadcasting will generate savings of $400 million by 1997.

As part of the USIA request, we are seeking $34 million for the National Endowment for Democracy.  Since its creation under President Reagan, the NED has played a critical role in fostering democratic development around the world.  Its programs have assisted political parties, human rights organizations, free trade unions, business associations, civic education groups, and others working to strengthen the roots of civil society.  The NED is an important vehicle for advancing America's interests and ideals.

Mr. Chairman, let me add just a few words on Cuba.  The Summit of the Americas last December showed that the nations of this hemisphere have committed themselves to democratic institutions, respect for human rights, and free markets.  Today, only Cuba stands in defiance of those goals.

The fundamental aim of our Cuba policy is a peaceful transition to democracy, respect for the human rights of the Cuban people, and an open economy with opportunity for all.  This Administration is committed to a vigorous pursuit of that objective.  We believe the best means of achieving this goal is the course outlined by the Cuban Democracy Act.  The CDA maintains firm pressure on Cuba for peaceful change by denying legitimacy and resources to the Castro regime through the embargo, while reaching out to the Cuban people through humanitarian donations and enhanced communications.  As part of our USIA budget, we are requesting $26 million for Radio and TV Marti to continue providing the Cuban people uncensored news and commentary on internal and international events.

OPPORTUNITIES FOR 1995

Guided by these basic principles, in 1995 I am focusing on five key areas that offer particularly significant opportunities:  advancing the most open global trading system in history; developing a new European security order; helping achieve a comprehensive peace in the Middle East; combatting the spread of weapons of mass destruction; and fighting international crime, narcotics, and terrorism.

Open Trade, Exports and Jobs

First, we must sustain the momentum we have generated toward the increasingly open trading system that is vital to American exports and American jobs.  A core premise of our domestic and foreign policy is that our economic strength at home and abroad are mutually reinforcing.  I believe that history will judge this emphasis to be a distinctive imprint and a lasting legacy of the Clinton Administration.

This year, we will take steps to implement the Uruguay Round and ensure that the new World Trade Organization upholds essential trade rules and disciplines.  We will work with Japan and our other APEC partners to develop a blueprint for achieving open trade and investment in the Asia-Pacific region.  We will begin to implement the Summit of the Americas Action Plan for open trading in our hemisphere.  And we will start negotiations for Chile's accession to NAFTA.

At the same time, American companies and workers must be in a position to take advantage of the opportunities that these negotiations are helping to create.  That is why this Administration is sparing no effort to make sure that our companies can compete on a level playing field.  That is why I continue to sit behind what I call the America Desk at the State Department, and why I am determined to keep economic and commercial diplomacy at the core of the Department's work.

We have really changed the culture of the State Department in this respect.  I am pleased to see CEOs quoted in national publications saying that they have never seen the State Department and our Ambassadors more supportive of American business.

Our embassies around the world are working harder than ever to help win contracts, safeguard investments and support American firms and American jobs in every way they can.  This Administration has achieved an unprecedented degree of focus and coordination in our export promotion efforts.

Exports have been the driving force in our economic recovery.  They must remain the driving force for long-term growth.  Over the past two years, our export promotion efforts have created more than one million high-paying American jobs.  Our budget request for FY 1996 will help sustain that performance.

Let me add a word about an issue that I referred to earlier in the context of fundamental interests that compel American engagement and leadership in the world: the Mexican financial crisis.  Our interests are crystal clear: the prosperity of our people, the security of our borders, and the stability of our closest Latin neighbor and of other emerging markets in which we have a growing stake in American jobs, exports and investment.

In light of delays in the legislative process, the President announced on January 31 that the situation had to be addressed immediately.  With the full support of the congressional leadership of both parties, he put forth a package of support.  Under the U.S.-Mexico Framework Agreement that Treasury Secretary Rubin and Mexican Finance Minister Ortiz announced on February 21, the United States will make available up to $20 billion from the U.S. Treasury's Exchange Stabilization Fund.  Our support will be complemented by increased commitments now totalling $17.8 billion from the International Monetary Fund and $10 billion from the Bank of International Settlements.

Let me emphasize that our support is in the form of short and medium term currency swaps and loan guarantees.  Mexico will pay all costs.  As difficult as it will be, Mexico has a responsibility to implement the strict policies needed to stabilize its economy.  Mexican oil and oil product revenues will serve as assurance of repayment.  These funds will help the Mexican government move aggressively to resolve the current crisis.  Its ability to do so quickly is in the overriding interest of the American economy and the American people.

European Security Architecture

In our second area of opportunity, we are taking concrete steps to build a new European security architecture.  Deep political, economic, and cultural bonds continue to make Europe's security and prosperity essential to ours.  We are focusing on maintaining strong relations with Western Europe, consolidating democracy in Central Europe and the former Soviet Union, and engaging Russia in promoting European security.

We are pursuing these goals through continued development of NATO and its outreach to the east, strengthening the Organization for Security and Cooperation in Europe, building our relationship with the European Union, and developing a cooperative NATO/Russia relationship.

NATO remains the anchor of American engagement in Europe and the linchpin of transatlantic security.  NATO has always been more than a transitory response to a temporary threat.  It has been a guarantor of European democracy and a force for European stability.  That is why its mission has endured, and why its benefits are so attractive to Europe's new democracies.

NATO has previously welcomed new members who shared its purposes and who could add to its strength.  With American leadership, NATO agreed last December to begin a steady, deliberate process that will lead to further expansion.  We have already begun to examine with our Allies the process and objectives of expansion.  We intend to share our conclusions with the members of the Partnership for Peace this fall so that at the December Ministerial we can evaluate the results of our consultations and be ready to consider next steps.

Our strategy encourages new democracies to become responsible partners in a new European security order.  The Partnership for Peace is a critical tool for cooperation between NATO and partner states.  It is also the best path to membership for countries wishing to join the Alliance.  The President's budget request meets the commitment he made in Warsaw last July to help the states of Central and Eastern Europe participate in the Partnership for Peace, and to help potential members prepare for the obligations they will assume if they join NATO.

Our step-by-step approach to NATO expansion is designed to ensure that each potential member is judged fairly and individually, by its capacity to contribute to NATO's goals and the strength of its democratic institutions.  By following this approach, we give every new democracy a powerful incentive to consolidate reform.  We remain convinced that arbitrarily  locking in advantages for certain countries, or setting specific timetables, could discourage reformers in countries not named and foster complacency in countries that are.

The tragic war in Bosnia underscores the importance of building a more effective architecture for conflict prevention and resolution in Europe.  Together with our partners in the Contact Group, we continue to seek a negotiated solution.  The Contact Group plan with its 51/49 territorial division must be the basis for a settlement, and Bosnia's territorial integrity and independence must be respected.

As you know, the parties entered into a ceasefire and a cessation of hostilities last fall.  But we are entering a very precarious stage of this crisis.  In the coming months, we face a real risk of renewed and more destructive conflict not only in Bosnia but in Croatia and perhaps elsewhere in the Balkans.

We have used every opportunity during this period to intensify our diplomatic efforts to bring an end to the war.  Last month in Munich, Defense Secretary Perry and Assistant Secretary of State Holbrooke met with Bosnian Muslim and Croat leaders to bolster support for the Federation.  At a meeting in Paris on February 14, the Contact Group discussed an initiative, backed by Bosnian President Izetbegovic, to gain President Milosevic's recognition of Bosnia and other former Yugoslav republics, as well as his agreement to implement tougher sanctions enforcement against the Bosnian Serbs.

I remain convinced that only a negotiated settlement has any chance of lasting.  I am committed to pursuing that goal.  What we must not do is to worsen the situation by unilaterally lifting the arms embargo.  We have always believed the embargo is unfair and worked to end it multilaterally.  But going it alone would lead to the withdrawal of UNPROFOR and more violence.  Such a course would leave Sarajevo and the enclaves extremely vulnerable to Serb offensives.  It would effectively Americanize the conflict, and lead others to abandon the sanctions on Serbia.  It would undermine the authority of all UN Security Council Resolutions, including resolutions that impose sanctions on Iraq and Libya.

Middle East Peace and Security

The third area of opportunity is advancing peace in the Middle East.  Our budget allocates $5.24 billion to sustain our efforts at a decisive moment for the peace process.

Over the past few years, we have seen an extraordinary transformation in the landscape of the Arab-Israeli conflict -- one of the century's most intractable.  Clearly, however, there are still many horrible vestiges of the past that must be eradicated.  The terrorist outrage in Israel on January 22 is only the most recent, painful reminder.

The United States will stay the course to ensure that the forces of the future triumph over the forces of the past.  Toward this end, I will be traveling to the region next week to consult with the key parties about how best to move the negotiations forward.  I do not want to underestimate the challenges we face.  At the same time, we must not underestimate the opportunities we have for working toward a lasting comprehensive peace.

President Clinton and I are determined to do all we can to sustain the momentum and to support those who are willing to take risks for peace.  I believe the unprecedented meeting at Blair House on February 12 helped to improve the atmosphere between the parties and to get negotiations back on track.  Ministers from Israel, Egypt, Jordan, and the Palestinian Authority identified a series of cooperative goals that must be met in four key, related dimensions:  the peace process, security, economics, and people-to-people.  And in their declaration, Israel and the Palestinians vowed that there could be no turning back in the peace process.  The Palestinian Authority underscored its commitment to preempt terror, punish those responsible and deny safehavens to those who plan and carry out terror.

For our part, President Clinton proposed that the United States extend duty free treatment to products from future industrial zones on the West Bank and Gaza and free trade zones in Taba, Eilat, and Aqaba.  This proposal can probably do more over time to help the region's struggling economies than any aid program.  We look forward to further consultations with the Congress on this important matter.

Israel's negotiations with Syria are also entering a crucial phase.  We have made progress in narrowing the gaps between the parties.  But if a breakthrough is to be achieved in the next few months, critical decisions must be made and the process must be accelerated.  President Clinton and I will continue to do everything we can to help the parties reach such a breakthrough.

Non-Proliferation

The fourth area of emphasis is to intensify our efforts to stop the spread of weapons of mass destruction and their means of delivery.  We face a year of decision for global nonproliferation.  Indeed, our global and regional strategies for 1995 comprise the most ambitious nonproliferation effort in history.  We will carry out that effort in close consultation with the Congress.

The centerpiece of our strategy is to obtain the indefinite and unconditional extension of the Non-Proliferation Treaty, which is up for renewal this year.  I note that this Sunday marks the 25th anniversary of the entry into force of the NPT, which I believe history will record as one of the most important treaties of all time.  Achieving this objective is a key priority of our diplomacy around the world -- a point that President Clinton will stress in his speech at the Nixon Center this evening.

With the agreements President Clinton signed last December in Budapest, we can also begin to implement the START I nuclear reduction treaty.  Prompt Senate ratification of START II will in turn enable us to complete the work we began with START I.  Its elimination of missiles with multiple independently targeted re-entry vehicles will further enhance stability and lower the chances of a massive nuclear conflict.  At the same time, it will enable us to retain a strong and capable deterrent.

North Korea is also central to our non-proliferation objectives.  Let me emphasize that we have stressed to the North Koreans the need to resume North-South dialogue.  This is essential to full implementation of the Agreed Framework.  We are holding talks with North Korea to ensure implementation of the Framework.  In these talks, we have made clear to the DPRK that South Korean light-water reactors are the only financially viable option if the light-water reactor project is to proceed.

As we implement the Agreed Framework, we will continue close consultations with our allies.  I met three weeks ago with the new Foreign Minister of South Korea.  Assistant Secretary Lord has just had productive consultations in Seoul.  The South Koreans, including President Kim, have reaffirmed their determination to move forward.  We all agree that we must remain vigilant.  But we also agree that careful implementation of the Agreed Framework is far preferable to the alternatives we were facing:  a North Korea going forward with its nuclear program, a return to the Security Council for sanctions, and a costly military build-up.

Our 1996 budget dedicates $166 million to meet proliferation threats.  Of this sum, $76.3 million will go to the Arms Control and Disarmament Agency (ACDA) to support its important role in arms control policy, implementation, negotiation, and verification.

ACDA's core budget is less than 1 percent of the total 150 function.  The $22.3 million increase over the FY 1995 appropriation is related to ACDA's new responsibilities in verification of the START treaties, implementation of the Chemical Weapons Convention, and coordination of federal research and data on arms control.

Our budget also provides assistance to the International Atomic Energy Agency -- an organization vital in our non-proliferation efforts and especially in the implementation of the Agreed Framework with North Korea.  And it replenishes the Non-Proliferation Fund we use to combat nuclear smuggling, enforce export controls, and ensure missile dismantlement.

Crime, Terrorism, and Drugs

The fifth area of opportunity for 1995 is combatting international terrorists, criminals, and drug traffickers.  This Administration is aggressively fighting these threats at home.  But we recognize their global dimensions, and we are actively mobilizing other nations to help us defeat them.

Our budget request would more than double our funding to fight international crime.  And it will support a comprehensive global strategy that we are developing with our colleagues at Justice, Treasury, and other law enforcement agencies.

This strategy will include intensive diplomacy to ensure that other nations fulfill their international obligations; broader international cooperation in asset forfeiture and money laundering; and consideration of tougher requirements for obtaining U.S. visas.  The Department's own border security initiative, funded through the collection of a $20 applicant fee for machine readable visas (MRVs), will substantially improve our information systems and help ensure that criminals and fraudulent visa applicants are kept out of the United States.  We have already installed the MRV system at 136 of our busiest non-immigrant visa posts, which handle 70% of the non-immigrant visa workload worldwide.  And, as the President recently announced, the Administration will be proposing legislation to combat alien smuggling and illegal immigration.  We will be consulting closely with Congress as we put the final elements of this strategy together.

We have made substantial progress against international terrorism in just the past few weeks, from the President's Executive Order freezing the assets of certain terrorist groups to the spectacular arrest of Ramzi Yousef, the alleged mastermind of the World Trade Center bombing.  Our budget will sustain that momentum.  We know that resources for even the most modest initiatives, like printing matchbooks with photographs of terrorist suspects, can make a vital difference for our nation's safety.  Last month, the President transmitted to the Congress our proposed Omnibus Counterterrorism Act of 1995, which would give the Executive Branch new tools to improve prevention, investigation, and prosecution of terrorism.

*  *  *

Beyond these five key areas of opportunity for 1995, I want to stress that we will continue to address many other issues important to our nation's interests and to this Congress, such as promoting stability and democracy in Asia, Africa, and Latin America.  American engagement in the world is also reflected in our willingness to take on global challenges that call for international partnership, but require the leadership that only the United States can provide.

We can no longer escape the consequences of environmental degradation, unsustainable population growth, and destabilizing poverty beyond our borders.  Increasingly, they threaten not just our continued prosperity but our security.  Countries with persistent poverty, worsening environmental conditions, and feeble social infrastructure are not just poor markets for our products.  They are likely victims of conflicts and crises that can only be resolved by costly American intervention.  That is why the Clinton Administration is dedicated to restoring America's leadership role on sustainable development.  We are requesting resources for sustainable development, including funding for the multilateral development banks, the IMF, the Peace Corps, and other small agencies, and our bilateral and multilateral assistance programs.

The FY 1996 budget also harnesses the will and capacity of our nation to respond to famine, natural disasters, and the displacement of peoples from their homes.  Our request for humanitarian assistance is integral to our overall development strategy because it not only provides relief, but helps victims of violence and disaster return to the path of recovery and sustainable development.

State Department Operations

The ability of the United States to achieve success in the five areas of opportunity that I have identified for 1995, as well as the other objectives of our foreign policy, depends on providing adequate resources to the dedicated men and women who serve our nation's international affairs agencies.

At 266 diplomatic posts overseas, these men and women help American companies open markets and create American jobs.  They help keep our borders secure and keep drugs off our streets.  They protect their fellow citizens overseas.  They help ensure timely assistance to refugees and disaster victims.  They promote American culture and values abroad.  They help American families adopt foreign children.  They even, on occasion, provide assistance to Congressional delegations.  Putting a dollar value on their work is difficult, but I believe with the greatest conviction that their daily efforts pay lasting dividends for the American people.

It is essential to the vital interests of the United States that we equip our international affairs personnel with the skills and resources they need.  Just as we must maintain the best prepared armed forces to meet challenges to our nation's security, we must also maintain the best prepared diplomatic service to address the threats and opportunities that affect the well-being of each and every American.

I know that every member of this subcommittee and indeed of the Congress is committed to America's defense readiness.  I believe that we must ensure the same level of diplomatic readiness -- as one of the most effective ways to avoid having to call upon our armed forces.

Our diplomatic and foreign affairs personnel are truly the front-line sentries of America's security.  They must be equipped to do their jobs.  They must have access to modern information technology.  They must work in facilities that help, not hinder, their productivity.  They must be trained in essential diplomatic disciplines, from foreign languages to commercial promotion to the growing imperative of fighting international crime, terrorism and narcotics.

Moreover, our foreign affairs agencies must be able to meet the challenges presented by the end of the Cold War.  In the last few years, for example, we have opened 12 new embassies strung across the 11 time zones of the former Soviet Union.  All told, the number of new embassies that we are supporting has risen by 30 since 1991 -- and we have had to support these facilities without additional resources.  In addition to conducting the normal business of bilateral relations, our embassies around the world play pivotal roles in advancing diplomatic initiatives, from the search for peace in the Middle East to the recent Summit of the Americas.  And working with other government agencies, we have responded promptly and effectively to the crises in Haiti, Rwanda, Cuba, and Bosnia.

As we meet these challenges, we have a continuing obligation to make our operations as efficient as possible.  As you know, Vice President Gore has been heading up a major effort to reinvent government.  I have taken the strong position that the foreign affairs agencies are not exempt from that process.  Each of the foreign affairs agencies is proceeding vigorously with streamlining efforts.  I also support the Vice-President's decision that each of these agencies, ACDA, AID, and USIA, has a distinct mission that can best be performed if they remain distinct agencies.

At the State Department, we have been involved in the National Performance Review since the outset.  In the last two years, we have closed 17 posts overseas.  We have 1,100 fewer people at State than when I arrived in 1993.  We have abolished 30% of our Deputy Assistant Secretary positions and Ambassadors-at-Large.  We have absorbed a 26% increase in passport workload with no increase in staff.  We have reduced total senior officer positions to the point where we will meet Congressional targets ahead of schedule.  We have reduced overseas allowances and eliminated cash awards for senior officers.

After four years of essentially flat budgets, this year's request of $2.6 billion for State Department operations represents a significant decrease in real terms when uncontrollable costs such as inflation and currency fluctuations are taken into account.

Pushing for greater efficiency and higher productivity in the management of our foreign affairs is a personal commitment of mine.  I am working on a strategic plan to change the way we do business.

The strategic plan will streamline our overseas missions.  We will close 15 more posts.  It will push decision-making and responsibility downward by a further reduction in mid-level managers.  It will significantly cut back on administrative overhead.  It will expand the use of teams to better coordinate policy development at the Department and among different agencies in Washington.  And it will better focus our reporting and analysis to be sure we are not duplicating information available from other sources.

But Mr. Chairman, I would be neglecting my responsibility as Secretary if I did not tell this Subcommittee that some of the recent budget cutbacks have taken a toll on our readiness.  Without adequate funding for language training, 50% of our language-designated positions are filled below their established competency levels.  Almost 75% of the telephone systems serving our overseas posts are outdated -- so outdated that when we needed repairs in our vital 24-hour operations center, the AT&T repairman had to consult with Bell Labs on how to service the antiquated equipment.  Almost 80% of our automated data processing equipment is obsolete -- so old that we can't get maintenance contracts or locate spare parts.

That is why our FY 1996 request supports a modest $32.8 million Capital Investment Fund.  This will be used to upgrade information systems, replace overseas telephone systems, and purchase a classified mainframe computer.  It will improve our efficiency and productivity, reduce our maintenance costs on antiquated equipment, and help us continue to do more with less.

*  *  *

Mr. Chairman, I began by noting that the United States enjoys remarkable opportunities in the post-Cold War world.  It is important to remember that most of these opportunities are themselves the product of many years of American leadership on behalf of peace and stability, open trade, and political freedom.

Most of our closest allies and friends are nations that we helped rebuild after the second World War.  The structures through which we advance our interests, including NATO, the GATT, the UN, and the Bretton Woods institutions, were created largely by American leadership.  And consider our most promising new export markets, countries like South Korea, Brazil, Poland, and the Philippines.  All these countries have benefited from our support for open trade, economic development, and democratic institutions.

In short, Mr. Chairman, the United States is one of the few countries on earth with the ability to create its own opportunities.  As the most successful and powerful member of the international community, we have both an interest in maintaining the health of that community and the strength and vision to do so.  With your support, Mr. Chairman, and the necessary foundation that this budget provides, we will continue to use that strength to build a world in which America's interests and values will flourish -- a world of open societies and open markets.
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