`Diplomatic Disarmament' Is Coming To An End

The State Dept. may get more money, and business is cheering

Secretary of State Madeleine K. Albright has run a dogged campaign to rebuild the foreign affairs budget--and it looks like she's winning. While policymakers are slashing nondefense discretionary spending by $58 billion through 2002, President Clinton is giving Albright a boost. He says that her bailiwick is a top priority for increased spending to reverse a 20% decline from the 1980s average. An official in the Administration believes there's enough money to do that.

U.S. business could be one of the big beneficiaries of the new largesse. Hard times have forced Washington to shutter two embassies and 28 consulates, which help promote U.S. business interests in emerging markets, including posts in Brazil and Indonesia. The foreign affairs budget bankrolls not only the foreign service and U.N. dues but programs of vital interest to large U.S. corporations, from the Export-Import Bank to foreign aid. Even before her Jan. 23 confirmation, Albright lobbied Clinton for more money and won support for a 7% increase in 1998, to $19.5 billion, including $9.1 billion for foreign aid and export promotion.

BUDGET HAWKS. Getting that money won't be a pushover, though. Some aid programs are under attack as corporate welfare and as the type of government subsidies and intervention the U.S. has condemned when practiced by other nations. And some budget hawks want to slash U.S. foreign aid by another 30%. Budget rules require any increase to come from popular domestic programs such as education.

Albright has lobbied assiduously to reverse what State resources chief L. Craig Johnstone calls "unilateral diplomatic disarmament." She has cultivated Senate Foreign Relations Committee Chairman Jesse Helms (R-N.C.) by agreeing, for example, to fold the Arms Control & Disarmament Agency into State, as he wished. She will speak at commencement at the University of South Alabama in the district of Representative Sonny Callahan, head of a key House Appropriations Committee panel. Her efforts are paying off. "We should provide substantial increases in funding to reassert the values we believe in," says Representative John E. Porter (R-Ill.), a member of Callahan's panel.

A broad coalition now backs her. She has the support of a bipartisan swath of former government bigwigs, from Kennedy aide Theodore C. Sorenson to the Bush Administration's national security adviser, Brent Scowcroft. They backed a recent report by a Brookings Institution-Council on Foreign Relations task force that warned if the funding trend isn't reversed, "American vital interests will be jeopardized."

Business is throwing its lobbying heft behind her. The Coalition for Employment Through Exports, whose members include blue-chip companies such as Boeing Co. and General Electric Co., along with exporters and labor unions, has contacted most congressional offices to publicize the way exports create jobs.

According to the Business Alliance for International Economic Development (BAIED), 80% of foreign aid is used to buy U.S. goods and services, supporting 200,000 U.S. jobs. A commodity import program, for instance, helped Caterpillar Inc. win a $4.8 million deal for generators with Russia that guaranteed jobs in its Lafayette (Ind.) plant.

PLUNGING SHARE. Exporters argue that trade rivals from Japan to Germany and France are using dirty tricks to wrest business from the U.S. France reimburses domestic companies up to 25% of the cost of exports of agricultural products and equipment. That doubled French farmers' share of the Moroccan wheat markets to 38% last year from 19% in 1993, while the U.S. share plunged to 36% from 76%. Other nations "[are] going to leave us in the dust," warns James C. Benfield, associate director of the BAIED, whose members include energy, agriculture, and professional-services groups.

It's not just a question of finance. Another French program allows the government to take stakes in companies controlled by foreign states, then pass the interest on to private French concerns as the companies privatize. That enabled cement maker Lafarge to shut U.S. rival Ready Mix Concrete out of Morocco.

Congress is unlikely to allow the Administration to go that far. All the same, just halting the decline in the foreign affairs budget would mark a major switch in congressional attitudes. It may well herald the start of a feistier diplomatic and commercial policy from Washington.

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