Foreign Affairs, Defense, and Trade: Key Issues for the 109th Congress

CRS Report for Congress
Foreign Affairs, Defense, and Trade:
Key Issues for the 109 Congress
December 27, 2004
Bruce Vaughn and Connie Veillette
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Foreign Affairs, Defense, and Trade:
Key Issues for the 109th Congress
The 109th Congress will likely address a number of pressing foreign affairs,
defense and trade issues. This report identifies the issues most likely to be taken up
in the first session, and provides information and analysis to support Congress in
shaping U.S. policy on these key issues. The report also provides lists of selected
CRS products that provide more detailed analysis.
Since the terrorist attacks of September 11, 2001, Congress has increasingly
been confronted with issues relating to the war on terrorism and homeland security.
Congress will likely be particularly interested in the cost and progress of military
operations in Iraq and Afghanistan, including reconstruction efforts, the ongoing war
against terrorism in other parts of the world, Middle East stability and peace
initiatives, Asian security, and the proliferation of weapons of mass destruction.
Each of these topics receives particular attention in this report.
In addition to identifying key foreign policy challenges affecting U.S. interests
around the globe, this report also describes the various means, both legislative and
oversight, by which Congress will likely shape U.S. policy. Major decisions relating
to foreign economic and security programs are discussed in the context of
authorization legislation, and annual appropriation and supplemental appropriation
requests, including ongoing military operations, reconstruction efforts, global health
programs, and global counter-terrorism activities. The report also examines how
U.S. relations with countries in Europe, the Middle East, Asia, Latin America, and
Africa may affect U.S. interests such as counterterrorism, non-proliferation, and
counter-narcotic programs. It identifies possible flash points — the Korean
Peninsula, Iran, Israeli-Palestinian peace efforts — that may arise during the year.
Defense issues will likely be topics of considerable interest in the 109th
Congress, including providing the proper level of funding for current military
operations, guiding Department of Defense “transformation” initiatives, setting
priorities on major weapons systems, and determining the proper size of military
forces. Other defense issues covered include base realignment and closure and
overseas basing requirements, special operations forces, ballistic missile defense,
military personnel issues, and defense business operations.
The 109th Congress likely will be faced with an extensive trade agenda which
will include the possible renewal of the President’s trade promotion authority and
consideration of bilateral free trade agreements with Bahrain, the nations of the
Central American Common Market, and the Dominican Republic, as well as the
monitoring of ongoing free trade negotiations with a number of other nations. Other
trade issues covered in the report include World Trade Organization related
legislation, the end of textile and apparel quotas, trade deficit concerns, and efforts
to rewrite and reauthorize the Export Administration Act. This report will not be

Issues of Continuity and Change in Foreign, Security, and Trade Policy.......1
Policy Priorities...................................................4
Iraq and Afghanistan...........................................4
Situation in Iraq...........................................4
Situation in Afghanistan....................................6
Cost and Budget Issues.....................................8
The International Counter-Terror Effort...........................10
Pakistan ................................................11
Saudi Arabia.............................................12
Possible Flashpoints...........................................12
The Korean Peninsula.....................................12
Iran ....................................................14
Israeli-Palestinian Peace Efforts.............................15
Proliferation and Weapons of Mass Destruction.....................16
Intelligence Reform...........................................17
Reorganization of the Intelligence Community..................17
Oversight Issues..........................................18
Foreign Affairs...................................................19
Global Issues Overview........................................19
Foreign Affairs Resources and Policy.........................19
Foreign Aid, Development and the Millennium Challenge Account.20
HIV/AIDS and International Health Issues.....................21
United Nations Reform....................................22
Peacekeeping, Stabilization, and Reconstruction: New Tools.......23
Economic Sanctions.......................................24
Africa ......................................................25
Overview ...............................................25
Sudan ..................................................26
HIV/AIDS Pandemic......................................27
Asia .......................................................28
Overview ...............................................28
China and Northeast Asia..................................28
Taiwan .................................................29
India and Pakistan........................................29
Southeast Asia...........................................31
Europe .....................................................32
Overview ...............................................32
Transatlantic Relations.....................................33
Stability in the Balkans....................................33
Latin America and the Caribbean................................34
Overview ...............................................34
Colombia and the Andean Counterdrug Initiative................35
Haiti ...................................................35
Cuba ...................................................36
Mexico .................................................36

Middle East.................................................37
Overview ...............................................37
Syria and Lebanon........................................38
Democracy and Reform....................................39
Libya ..................................................39
Defense and Security..............................................40
Overview: Defense Strategy and Military Force Planning.............40
Defense Budget Trends and Issues for Congress.....................41
Defense Transformation........................................42
Base Realignment and Closure..................................43
Army Size and Requirements...................................44
Special Operations Forces......................................45
Other Acquisition/Technology Issues.............................46
Navy Shipbuilding........................................46
Air Forces Modernization..................................46
Ballistic Missile Defense...................................47
Robust Nuclear Earth Penetrator.............................47
Military Personnel............................................47
Recruiting and Retention...................................47
Reserve Benefits.........................................49
Defense Business Operations: Management and Competitive
Outsourcing .............................................49
International Trade and Finance......................................51
Overview ...................................................51
Renewal of Trade Promotion Authority............................52
Free Trade Agreements/Implementing Legislation...................53
WTO-Related Legislation......................................55
Trade Deficit Concerns........................................56
End of Textile and Apparel Quotas...............................57
Export Administration Act......................................59

Foreign Affairs, Defense, and Trade:
Key Issues for the 109 Congress
Issues of Continuity and Change in Foreign,
Security, and Trade Policy
Francis T. Miko, Specialist in International Relations (7-7670)
Robert L. Goldich, Specialist in National Defense (7-7633)
The 109th Congress will face early funding and oversight issues under pressure
of tight fiscal conditions in 2005. Challenges are likely to include providing the
necessary resources to secure stability, democracy, and reconstruction in Afghanistan
and Iraq, continue the global fight against terrorism, dissuade Iran, North Korea, and
perhaps other countries from pursuing nuclear weapons, and adequately fund a
number of other high priority programs. In February, the Administration is expected
to ask for supplemental appropriations for defense, Iraq, and Afghanistan.
Many experts believe that long-term progress in the war on terrorism may rest
on the ability of the United States and other Western democracies to win the global
battle for “hearts and minds” especially in the Islamic world from which the Muslim
terrorists seek to draw recruits and support. Opinion polls show increasingly negative
perceptions of U.S. actions, intentions, and motives in many countries, possibly
suggesting the need to develop and expand programs to counter these trends.
A key instrument in the fight to win “hearts and minds” is public
The 109 Congress may address in the authorization and appropriations process steps
to strengthen the State Department’s capabilities in public diplomacy, as well as
programs designed to improve America’s image abroad, such as cultural exchanges,
education programs, international broadcasting, and democracy initiatives,
particularly targeted to Muslim countries. Success in Iraq and Afghanistan might do
much to help the U.S. image. If the United States is able to seize the opening created
by the death of Yasir Arafat to help move the Israeli-Palestinian peace process
forward, that too could help strengthen U.S. credibility abroad. Attention is also
likely to be given to policies and programs to address some of the conditions that
terrorists are able to exploit, such as regional conflicts, brutal and corrupt regimes,
failing states, and extreme poverty in many parts of the world
Other countries can and do provide assistance in some of these areas. The
Congress might take up the question of how to increase multilateral cooperation and
burden-sharing, as well as how to reduce tensions with some key U.S. allies resulting
from differences over the Iraq war. There is likely to be a continuing debate over the
evolution of U.S. alliances. Some see benefits in relying more on ad-hoc “coalitions
of the willing” to respond to specific crises, thus eliminating the constraints on U.S.
action that formal alliance mechanisms entail. Others argue that U.S. alliances are

more important than ever for U.S. security and world stability, even with current
disparities in military capabilities. They maintain that a growing number of problems
can no longer be solved by individual nations acting alone and that only U.S.
leadership can bring international consensus on difficult problems.
The 109th Congress is likely to continue to take a lead in pressing for U.N.
reform, especially with regard to issues of effectiveness, waste, and fraud. Members
have been outspoken in their disappointment over recent performance of the U.N.
in several international crises. Some have even suggested that the United States
should review the utility of its continued participation in the body. Congress will
likely weigh foreign aid priorities as it debates appropriations levels for major
initiatives such as the Millennium Challenge Account for developing countries that
meet specific performance criteria, and programs to fight HIV/AIDS and other
communicable diseases. Considerable resources have been promised and provided
for these programs. Sustaining these levels while providing for other contingencies
and initiatives might prove challenging.
As the 109th Congress opens, it is facing defense issues whose proponents, and
directions, may be pulling in two notably different directions. Over the past 18
months the organization, structure, doctrine, and personnel policies of the armed
forces, especially the Army and Marine Corps, have been reoriented toward
supporting the sustained military campaigns against Islamic fundamentalist
insurgencies in Iraq and Afghanistan. The Congress has been in the forefront of this
effort, approving large supplemental appropriations to finance the wars and
conducting often pointed oversight of their prosecution. Congress has, often over
Administration objections, directed increases in military compensation and benefits
to ensure that both overall military manpower levels and troop strength in the theaters
of war can be maintained. After much congressional prodding, the Administration
has finally agreed to increasing active duty Army strength. Funds have been directed
toward Iraq/Afghanistan-specific programs such as the “up-armored” vehicles much
in the news recently, or toward refurbishing and “resetting” the equipment of units
which return from both theaters of war, knowing that in another year they will almost
certainly return. A complex restructuring of Army major combat units — arguably
the most fundamental since the early stages of World War II (1941-1945) —
designed to create more deployable units and thus shorter tours of duty in a combat
zone, as well as more tactical flexibility, is under way.
At the same time, Secretary of Defense Rumsfeld has continued to emphasize
the “transformation” of the armed forces, a process driven mostly by information
technology advances and associated changes in doctrine and concepts. As first
propounded, transformation tended to emphasize lightness, mobility, technological
sophistication, and hardware over firepower, sustainability, and the size of the force.
Although the Administration has made some adjustments to deal with the immediate
situation, it appears to have decided to continue fighting a major war in Iraq, continue
the transformation process, and maintain the existing level of effort in the Global
War on Terrorism (GWOT) centered, for now, in and around Afghanistan — all
without major increases in the size of the active duty armed forces. Thus, the
Administration’s defense programs continue to include large efforts in ballistic
missile defense and new generations of highly sophisticated tactical aircraft and
major naval combatant vessels. These, however, are frequently criticized in the

Congress as a misallocation of resources, given that the counterinsurgency campaigns
in Afghanistan and Iraq require large numbers of infantrymen, and entail intimate
contact with civilians in a way that emphasizes human more than technological
factors and expertise. In particular, many congressional critics suggest that whatever
advantages can be realized from improvements in the existing force structure, the
active duty military — particularly the Army — is simply too small to support
existing combat operations while being ready to meet potential threats elsewhere in
the world. The Administration, however, notes that even “low-intensity” conflicts
are greatly benefitting from sophisticated technology, particularly in the interrelated
areas of command, control communications, and intelligence, and argues that the
high expense of military personnel increases would not necessarily be cost effective.
It appears, therefore, that the 109th Congress will be exercising its defense-related
responsibilities in an environment marked by competing perspectives on the extent
to which the current conflicts in Iraq and Afghanistan are valid models for long-term
defense policy.
Trade issues will also be prominent in 109th Congress. Early in 2005, President
Bush is expected to request that his authority to negotiate trade agreements under
expedited congressional approval (trade promotion authority) be extended for two
years beyond its June 30, 2005 expiration date. The extension would happen
automatically unless either chamber passes a resolution of disapproval. In addition,
the President is expected to send Congress legislation to implement the U.S. free
trade agreement with Bahrain early in the first session, and may also send legislation
to implement the FTA with five Central American countries (CAFTA) and possibly
the Dominican Republic if a dispute over a recent tax placed on high-fructose syrup
drinks can be resolved. The Bush Administration will likely complete FTA
negotiations with several other countries and launch negotiations with still others this
Before the end of its first session, the 109th Congress will have to decide
whether to introduce and act on a joint resolution to disapprove continued U.S.
participation in the WTO. Furthermore, the 109th Congress may consider whether to
comply with a WTO dispute resolution against the Continued Dumping and Subsidy
Offset Act (CDSOA), also known as the “Byrd Amendment” after its chief sponsor,
Senator Robert Byrd. Anxiety about job losses from foreign competition and the
growing U.S. trade deficit is also likely to focus considerable congressional attention
on China’s trading practices, including its undervalued currency.
For more information on CRS products, see [].

Policy Priorities
Iraq and Afghanistan
U.S. forces remain engaged in combat in both Iraq and Afghanistan, but are
meeting far more resistance from anti-U.S. fighters in Iraq than in Afghanistan.
Afghanistan appears to be moving steadily, if slowly, toward stability and economic
reconstruction. In contrast, Iraq’s planned elections in January 2005 are in jeopardy
and economic reconstruction is proceeding slowly.
Situation in Iraq. [Kenneth Katzman, Specialist in Middle Eastern Affairs
(7-7612)] Operation Iraqi Freedom (OIF) accomplished the U.S. objective of
overthrowing Saddam Hussein, but replacing his regime with a stable, moderate,
democratic political structure has run into significant difficulty. That outcome would
contribute to the goal of preventing Iraq from becoming a sanctuary for terrorists, a
key recommendation of the 9/11 Commission Report, issued in July 2004. To
implement U.S. programs to stabilize and reconstruct Iraq, $20.9 billion in assistance
has been provided for Iraq through two supplemental spending bills, of which only
$11.6 billion (55%) had been obligated as of November 23, and $3.6 billion (17%)
expended. This rate of spending suggests that, at least in the first half of 2005,
Congress may not need to address further appropriations for Iraq reconstruction.
Congress will likely seek to continue close oversight of current aid programs for Iraq.
These appropriations include funds to train and equip Iraq’s various security forces.
In 2002 and 2003, President George W. Bush characterized Iraq as a gathering
potential threat to the United States because of its refusal to abandon its weapons of
mass destruction (WMD) programs and its potential to transfer WMD to terrorist
groups. The Administration stressed that regime change through U.S.-led military
action would yield benefits beyond disarmament and reduction of support for
terrorism, such as liberation of the Iraqi people from an oppressive regime and
promotion of democracy throughout the Middle East. OIF began March 19, 2003
and the regime fell on April 9, 2003. Although the overthrow of Saddam initially
appeared to be welcomed by a broad range of Iraqis, resistance to the U.S.-led post-
Saddam occupation escalated throughout 2003 and 2004, complicating U.S. efforts
to build democracy and to establish legitimate and effective Iraqi political and
security bodies. Partly in an effort to satisfy Iraqi demands for an end to occupation,
the United States decided to accelerate the hand over of sovereignty. An interim
government was named on June 1, 2004, and the hand-over took place on June 28,
2004. Current plans are for elections for a transitional National Assembly (which
will choose an interim government) on January 30, 2005, with votes on a permanent
constitution by October 31, 2005, and for a permanent government to take place by
December 15, 2005. Virtually all of these deadlines are to some degree in question
because of the persistent insurgency, which is particularly strong in the areas of
central and northern Iraq inhabited by Sunni Arabs, who were dominant in the regime
of Saddam Hussein but now see themselves likely to be displaced by the majority
Shiite Arabs. The insurgency threat will likely remain a key challenge in 2005.

U.S./International Military Operations. [Steve Bowman, Specialist in
National Defense (7-7613) and Kenneth Katzman, Specialist in Middle Eastern
Affairs (7-7612)] About 150,000 U.S. troops, joined by about 24,000 international
troops, are conducting combat against insurgents, as well as peacekeeping in areas
that are relatively stable. In an effort to prepare the way for Iraqis to eventually
secure their own country, U.S. officers, in partnership with some regional countries
and officers from NATO, are training Iraqi military, paramilitary, and police forces.
However, these forces have generally performed poorly when challenged by
insurgents. The Bush Administration asserts that U.S. policy in Iraq will ultimately
succeed as U.S. trainers and the interim Iraqi government build the new Iraqi forces.
Some believe the United States should add troops to the current level to better
combat insurgents in areas — mainly those inhabited by Sunni Arabs — in which the
insurgents are strong. Others believe the United States needs to take new steps to
recruit major international force contributors, and yet some others believe that the
United States should pull out of Iraq entirely. These options, as well as Bush
Administration assessments of the progress of stabilizing Iraq, are likely to be
discussed at hearings of several oversight committees in the 109th Congress and
during consideration of the FY2005 Supplemental to fund Iraqi operations.
Economic Reconstruction. [Curt Tarnoff, Specialist in Foreign Affairs
(7-7656)] A wide range of reconstruction projects are underway. For a variety of
reasons, not least of which is the poor security situation, these efforts have produced
a somewhat mixed picture. On the one hand, health facilities are being rehabilitated,
healthcare providers trained, and children immunized. Neighborhood councils have
been established throughout the country. School materials are being provided and
schools renovated. A range of economic policy reforms have been initiated.
Business centers have been set up and loan programs established. Positive claims
for the success of reconstruction programs have been countered by reports of slow
and ineffective implementation. Production of electricity and oil, while increasing
over time, have not achieved long-term goals, in part due to sabotage. Politically
sensitive policy reforms, including privatization of state-owned enterprises, have
been put on hold. The one consistent bright spot among reconstruction claims, a
successful health program, is now marred by reports that acute malnutrition among
children has nearly doubled since 2003. Critics suggest there has been a failure of
Administration officials to spend U.S. assistance funds with sufficient speed to make
a real impact on the country’s problems and win Iraqi hearts and minds.
CRS Report RL31339, Iraq: U.S. Regime Change Efforts and Post-Saddam
Governance, by Kenneth Katzman.
CRS Report RS21968, Iraq: Post-Saddam National Elections, by Kenneth Katzman.
CRS Report RL31833, Iraq: Recent Developments in Reconstruction Assistance, by
Curt Tarnoff.
CRS Report RL31701, Iraq: U.S. Military Operations and Costs, by Steve Bowman.

Situation in Afghanistan. [Kenneth Katzman, Specialist in Middle
Eastern Affairs (7-7612) and Christopher Blanchard, Analyst in Middle Eastern
Affairs (7-0428)] Afghanistan appears to be gradually stabilizing after more than
two decades of warfare, including a U.S.-led war that brought the current government
to power. Successful presidential elections held on October 9, 2004 might accelerate
the stabilization and economic reconstruction process. The 9/11 Commission Report
recommends a long-term commitment to a secure and stable Afghanistan. Most of
its Afghanistan-specific recommendations are a major part of the U.S. policy
framework, as encapsulated in the Afghanistan Freedom Support Act of 2002 (P.L.
107-327). To carry out U.S. stabilization and economic reconstruction programs in
Afghanistan, the United States gave Afghanistan a total of about $1.9 billion for
FY2004, mostly funded in the FY2004 supplemental appropriation (P.L. 108-106).
The FY2005 Consolidated Appropriation Act (H.R. 4818/P.L. 108-447) also
earmarks $980 million for U.S. efforts to stabilize and reconstruct Afghanistan.
Although security remains one of the most serious challenges facing
Afghanistan today, since the defeat of the Taliban in December 2001, Afghanistan
no longer serves as a safe base of operations for Al Qaeda. Afghan citizens are
enjoying new personal freedoms that were forbidden under the Taliban. Political
reconstruction is following the route laid out by major Afghan factions and the
international community during the U.S.-led war, although somewhat more slowly
than had been hoped. A loya jirga (traditional Afghan assembly) adopted a new
constitution on January 4, 2004. Because of security concerns and factional
infighting, the Afghan government delayed presidential elections from June to
October 9, 2004, and parliamentary elections from June 2004 to the spring of 2005.
The presidential elections were held amid high turnout and minimal violence.
Interim president Karzai was declared first-round winner on November 3, 2004, and
his opponents have accepted that result, despite some initial claims of vote fraud.
U.S. officials have expressed concern that Taliban insurgents, Al Qaeda
operatives, and associated regional terrorist organizations are profiting from and
consolidating the illegal cultivation and trafficking of opium and heroin in
Afghanistan, with an associated increase in corruption of regional and local officials.
The continuing survival of warlords and regional militia, some of whom benefit
directly from the narcotics trade, remains a significant challenge to the authority of
Afghanistan’s elected government as well as to the general security and stability of
the country and its population. Each of these trends undermines progress that has
been made by Afghan and international authorities in their efforts to improve the
lives of ordinary Afghans and reform the country’s political and economic systems.
In light of the 9/11 Commission Report recommendation that the United States make
a full commitment to the stability and security of Afghanistan, Administration
officials have placed renewed emphasis on counternarcotics as a key component of
U.S. efforts in Afghanistan. On November 17, 2004, the State Department
announced the interagency “Plan Afghanistan” initiative, which will redouble U.S.
counternarcotics efforts in Afghanistan through public-awareness outreach, judicial
reform, alternative development programs, interdiction, and a broad opium poppy
eradication campaign. State Department officials intend to support the initiative with
$780 million in reprogrammed funding from a variety of accounts.

U.S./International Military Operations. [Andrew Feickert, Specialist in
National Defense (7-7673) and Kenneth Katzman, Specialist in Middle Eastern
Affairs (7-7612)] U.S. security stabilization measures focus on strengthening the
central government by building an Afghan National Army; deploying a 6,500-person
multinational International Security Assistance Force (ISAF) to patrol Kabul and
other cities; setting up 19 regional enclaves to create secure conditions for
reconstruction (Provincial Reconstruction Teams, PRTs); and disarming militia
fighters. Although some international agencies have been skeptical of the concept
of PRTs because they blend military activity with reconstruction, some observers say
the PRTs have generally had a positive impact on security and have facilitated
reconstruction. Thus far, about 15,000 militia fighters have handed in their weapons
under the U.N.-run program that provides them subsidies and training to enter
civilian life. Separately from ISAF, about 18,000 U.S. forces, joined by 2,000 troops
from 36 other nations, continue to combat a low-level Taliban-led insurgency in
some parts of the country, and the insurgency appears to have lost traction over the
past year. Some Taliban are said to be considering entering the legitimate political
Economic Reconstruction. [Rhoda Margesson, Analyst in Foreign
Affairs (7-0425)] Because Afghanistan’s security appears to be improving,
economic reconstruction is proceeding not only in Kabul but in all regions, including
Qandahar — the former seat of the Taliban regime. As evidence of success, an
accelerated U.S. economic reconstruction plan showcased the completion of the first
layer of the Kabul-Qandahar roadway project (Phase I) on December 16, 2003.
According to USAID, Phase II paving is well underway, as is work on shoulders,
bridges, and the road’s drainage system. Numerous other examples of U.S. economic
reconstruction initiatives are analyzed in a General Accounting Office (GAO) report:
Afghanistan Reconstruction (GAO-04-403, June 2004.) The international community
continues to provide significant amounts of aid and resources for the reconstruction
effort and has indicated a willingness to assist in the long-term restoration of
Afghanistan. The outcomes of international donor conferences since January 2002
resulted in pledges (through 2009) of more than $13 billion, with more than $3
billion disbursed as of September 2004. Reconstruction needs are estimated by
some to be more than $15-$30 billion over the next decade.
CRS Report RL30588, Afghanistan: Post-War Governance, Security, and U.S. Policy,
by Kenneth Katzman.
CRS Report RS21922, Afghanistan: Presidential and Parliamentary Elections, by
Kenneth Katzman.
CRS Report RL32686, Afghanistan: Narcotics and U.S. Policy, by Christopher
CRS Report apfor37, Afghanistan Reconstruction (in the CRS Foreign
OperationsAppropriations Briefing Book), [
brbk/html/apfor37.html ].

Cost and Budget Issues. [Amy Belasco, Specialist in National Defense
(7-7627)] In early February 2005, the Administration is expected to submit its
request for additional funding to cover the cost of war-related operations in Iraq and
Afghanistan, and enhanced security for defense installations for the rest of FY2005.
This supplemental funding request would be in addition to the $25 billion that
Congress already provided in Title IX of the regular FY2005 Department of Defense
(DOD) appropriations to cover those costs for the first few months of the fiscal year.
Potential Size of Supplemental and Previous Funding. According to
press accounts, DOD may request an additional $65 billion to $80 billion more for
FY2005 in its February request. Including the $25 billion already appropriated would
bring total funding for military operations in Iraq and Afghanistan and enhanced
security between $90 billion and $105 billion in FY2005 — a level that would be
substantially higher than the $65.2 billion provided to DOD in the FY2004
Emergency Supplemental (P.L. 108-106). Although the $25 billion already provided
for FY2005 war costs is likely to run out by January, DOD can use its FY2005
peacetime appropriations to finance or “cash flow” war operations for several
additional months. Nonetheless, Congress is likely to face pressure to enact
supplemental appropriations quickly. Such supplemental funds support over 300,000
military personnel who are dedicated to operations in Iraq, Afghanistan and enhanced
security, including both those deployed and those supporting these missions.
Since the September 11 attacks, Congress has appropriated about $203 billion
for Iraq, Afghanistan and enhanced security for DOD installations, including the $25
billion for FY2005. As of the end of FY2004, DOD had allocated about $178
billion to the three missions: about $105 billion for the cost of Iraq; about $50 billion
for Afghanistan; and about $23 billion for enhanced security for defense installations.
By the third year since the September 11 attacks and the Taliban’s 2001 defeat,
operations in Afghanistan cost about $10 billion and enhanced security for defense
installations about $3.6 billion annually, spending levels that are about half the size
of those two years earlier. With the recent rise in U.S. military personnel in
Afghanistan to about 18,000, costs may creep upwards, but that could be offset by
lower costs for enhanced security as DOD reduces the number of reservists providing
guard duty at bases in order to provide more reserve forces in Iraq. On the basis of
recent experience, DOD may assume that the cost of Afghanistan and enhanced
security is about $14.0 billion in FY2005.
Funding For Iraq. The cost of operations in Iraq, however, has proved to be
higher than expected because of the upsurge in attacks on U.S. and Iraqi forces in
recent months. Obligations for military operations in Iraq, which are contractual
costs, grew from about $44.2 billion in FY2003, the year when the U.S. invaded, to
an estimated $62.6 billion in FY2004. Although personnel costs could grow because
of the recent decision to increase the number of U.S. military personnel in-country
to 150,000 to cope with the increased intensity of operations and to provide enhanced
security before January’s elections, that could be offset by the fact that fixed
expenses — e.g., for basing facilities — may not need additional funding. If DOD
assumes its FY2005 costs for operations for Afghanistan and Iraq and enhanced DOD
security will be similar to FY2004, then the Administration’s request for a
supplemental in February might be as low as $50 billion, but most observers expect
the request to be higher because the DOD will ask for more funds to re-set the force.

Re-setting the Force and Protecting Troops. Current costs, however,
reflect some but not all of the amounts needed to repair or replace damaged or
destroyed equipment, sometimes referred to as “resetting the force,” costs that may
prove to be substantial. Although DOD received about $5 billion in each of the
previous two supplementals to replace equipment, press reports suggest that the
services may request substantially more in the FY2005 supplemental. The Army, in
particular, could request several billions of dollars to “modularize” or re-design
combat and combat-related units, a transformation initiative launched last year. That
initiative is intended both to increase the number of units available for deployment
to reduce the strain on personnel and to increase the capability and responsiveness
of these new units. The Army plans to pay for the cost of establishing these units
entirely from supplementals, which could be controversial. The Air Force and the
Marine Corps may also request funding to replace and repair equipment, repair that
has been delayed because equipment remain in theater. If DOD again expands its
requirements, the supplemental funding request could also include funding for force
protection equipment — e.g., uparmored HUMVEE vehicles and body armor for
troops — beyond the nearly $2 billion already appropriated as part of the initial $25
billion in war funding and the substantial funding from earlier supplementals. DOD
may also request funds to replace those transferred from other programs to pay for
immediate force protection needs.
Potential Issues. During consideration of the supplemental request,
Congress is likely to debate the scope of the U.S. commitment in Iraq — both the
number of troops needed and potential long-term costs. That may include whether
the size of the active-duty Army needs to be expanded in order to meet requirements
in Iraq over the next several years and prevent excessive stress on personnel from
frequent deployments. DOD has argued that it can accommodate these needs with
a temporary increase in the number of active-duty personnel and an ongoing
restructuring initiative that would shift about 100,000 military personnel from less
to more critical skill specialties. Congress required that DOD permanently increase
military personnel end-strength by 23,000 in FY2005. Congress may again debate
whether benefits for military personnel need to be expanded in order to ensure that
the Army meets its recruitment and retention goals.
On the issue of costs, Congress may focus on both the near and long-term cost
and the effect on the deficit. According to a June 25, 2004 CBO estimate, the cost
of the military operations in Iraq and Afghanistan, and enhanced DOD security could
total an additional $131 billion to $245 billion between FY2005 and FY2009,
depending on the number of U.S. troops needed and the pace of a drawdown plan.
Congress may also debate whether some or all funds should be provided in regular
rather than supplemental appropriations, whether the Army’s proposed
transformation and restructuring should be entirely funded in the supplemental, and
whether troops’ force protection needs are adequately funded in the supplemental.
Funding provided in emergency supplemental appropriation acts is not subject to
limits set in annual budget resolutions. Another likely issue is the amount of funding
flexibility to give DOD and the type of oversight mechanisms that Congress may
require. The FY2005 supplemental may also include funds for construction of the
new U.S. Embassy in Baghdad.

CRS Report RS21644, The Cost of Operations in Iraq, Afghanistan, and Enhanced
Security, by Amy Belasco.
The International Counter-Terror Effort
[Raphael Perl, Specialist in International Affairs (7-7664)]
Terrorism is a global, national, and transnational phenomenon. Understanding
the global nature of the threat and the international policy response is central to
formulation of policy and its implementation. How to best combat the increasingly
decentralized Al Qaeda network, and how to enlist allies in this endeavor, remain top
policy concerns for both the Administration and Congress. Important as well is how
to best address escalating terrorist/insurgent activity in Iraq and Afghanistan. The
issue of Saudi support for terrorist causes remains an issue as well. Questions
relating to funding and prioritization of anti-terrorism programs are likely to remain
ongoing issues of congressional concern throughout the 109th Congress. This is
especially the case as Al Qaeda has announced its intention to raise the costs of
counter-terrorism for the United States.
Another likely subject of congressional focus is implementation of new
intelligence reform measures (Intelligence Reform and Terrorism Prevention Act of
2004 [S. 2845/P.L. 108-458]), particularly how these measures will play out in
practice and within a framework mindful of the protection of civil liberties and the
potential for abuse posed by a more centralized intelligence structure. Although the
focus of the 9/11 Commission’s efforts centered on intelligence issues,
recommendations touched other areas as well. Anti-terrorism finance policy, in
particular, is one area flagged by the Commission as ripe for fine-tuning, if not
reform, and the 109th Congress is likely to pursue this issue. Others include denial
of terrorist sanctuaries, through a range of programs including assistance to failing
states and identifying ways to measure success, or lack thereof, of counter-terrorism
policy and programs.
Finally, there is the issue of the impact of counter-terrorism policy on other
foreign policy goals, such as reducing drug production in Afghanistan and promoting
democracy in Middle Eastern and Southeast Asian countries upon whose support the
United Stated relies in the war on terror. As it increasingly considers whether that
support for such authoritarian regimes fuels support of, and recruitment for terrorist
causes, the 109th Congress is likely to give this issue increased attention as it
exercises its legislative and oversight functions.
CRS Report RL32522, U.S. Anti-Terror Strategy and the 9/11 Commission Report,
by Raphael Perl.
CRS Report RL32518, Removing Terrorist Sanctuaries: The 9/11 Commission
Recommendations and U.S. Policy, by Francis T. Miko, coordinator.
CRS Issue Brief IB10119, Terrorism and National Security: Issues and Trends, by
Raphael Perl.

Pakistan. [Alan Kronstadt, Analyst in Asia Studies (7-5415)] Pakistan
continues to play a vital role in U.S.-led counterterrorism efforts. Al Qaeda forces
that fled from Afghanistan with their Taliban supporters remain active on Pakistani
territory. Al Qaeda is believed to have links with indigenous Pakistani terrorist
groups that have conducted anti-Western attacks and that support separatist militancy
in Indian Kashmir. Al Qaeda founder Osama bin Laden and his lieutenant, Ayman
al-Zawahiri, are believed to be in Pakistan. Two December 2003 attempts to
assassinate President Musharraf, and failed attempts to assassinate other top Pakistani
officials in summer 2004, were linked to both Al Qaeda and to indigenous terrorist
groups. There are concerns that U.S.-designated terrorist groups have ties with some
low-level elements of Pakistan’s security apparatus and/or Islamist political parties.
In the latter half of 2003, the Islamabad government began limited military operations
in the traditionally autonomous tribal areas of western Pakistan where Islamic
militants are active. Such operations intensified in 2004. Numerous top Al Qaeda
leaders have been killed or captured in Pakistan; more are believed to be at large in
Pakistan. While Pakistan has claimed success in its battles with Islamic militants in
the tribal areas, all “high-value targets” were found in the country’s urban centers,
especially Karachi.
The United States maintains close counterterrorism cooperation with Pakistan,
aimed especially at bolstering security and stability in neighboring Afghanistan.
Along with direct Foreign Military Financing for Pakistan totaling $675 million for
FY2002-FY2005, Congress has allocated additional defense spending to reimburse
Pakistan for its support of U.S. counterterrorism operations (reimbursement totals
$1.32 billion for July 2003 - December 2004). In July 2002, the United States began
allowing commercial sales that enabled Pakistan to refurbish at least part of its fleet
of American-made F-16 fighter aircraft. Major Foreign Military Sales arrangements
since that time have been worth up to $1.82 billion. The 9/11 Commission Report
calls for provision of long-term and comprehensive support to the government of
President Musharraf so long as that government remains committed to combating
extremism and to a policy of “enlightened moderation.” The Intelligence Reform
and Terrorism Prevention Act of 2004 (S. 2845/P.L. 108-458), passed at the end ofth
the 108 Congress, requires the President to report to Congress on U.S. efforts to
support Pakistan. With passage of H.R. 4818 (the Foreign Operations FY2005
Appropriations Act), Congress approved the first of five annual appropriations of at
least $600 million for Pakistan as called for by the President (additional funds for
development assistance, law enforcement, and other programs bring the FY2005 total
to $700 million). The 109th Congress will likely continue congressional oversight of
U.S.-Pakistan relations, especially in the areas of counterterrorism/defense
cooperation and arms sales, WMD proliferation, democratization and human rights
protection, counternarcotics, and development assistance.
CRS Issue Brief IB94041, Pakistan-U.S. Relations, by K. Alan Kronstadt.
CRS Report RL32259, Terrorism in South Asia, by K. Alan Kronstadt and Bruce
CRS Report RL31624, Pakistan-U.S. Anti-Terrorism Cooperation, by K. Alan

Saudi Arabia. [Alfred B. Prados, Specialist in Middle East Affairs (7-
7626)] The September 11, 2001 attacks kindled criticisms within the United States
of alleged official Saudi involvement in terrorism, or of Saudi laxity in acting against
terrorist groups. A high percentage of the September 11 hijackers (15 out of 19) were
Saudi nationals. Some maintain that Saudi domestic and foreign policies have
created a climate that may have contributed to terrorist acts by Islamic radicals. In
particular, critics of Saudi policies have cited reports that the Saudi government has
permitted or encouraged fundraising in Saudi Arabia by charitable Islamic groups and
foundations linked to Al Qaeda. Saudi officials maintain that they are working
closely with the United States to combat terrorism, which they say is aimed even
more at the Saudi regime than at the United States. The U.S. State Department has
noted enhanced Saudi efforts to pursue terrorists since mid-2003, particularly through
enactment of measures to ban money laundering and control charitable contributions.
The 9/11 Commission Report, released in July 2004, described Saudi Arabia as
having been “a problematic ally in combating Islamic extremism,” while noting that
Saudi cooperation in opposing terrorism has improved. The Intelligence Reform andth
Terrorism Prevention Act (S. 2845/P.L.108-458), passed at the end of the 108
Congress, would require the President to submit to Congress a strategy for U.S.-
Saudi collaboration. Regarding other legislation, H.R. 4818, the Foreign Operations
Appropriations Act for FY2005 (included in the Consolidated Appropriations Act for
FY2005 [P.L. 108-447]) imposes a ban on U.S. assistance to Saudi Arabia, but
provides for a presidential waiver. In this connection, Saudi Arabia receives a small
amount of U.S. grant aid ($25,000 per year) under the International Military
Education and Training (IMET) program; Saudis have paid for all equipment they
have acquired from the United States for many years. The U.S.-Saudi relationship
and Saudi role in the war on terrorism are likely to remain prominent topics ofth
concern to the 109 Congress.
CRS Issue Brief IB93113, Saudi Arabia: Current Issues and U.S. Relations, by
Alfred Prados.
CRS Report RS21913, Saudi Arabia: Reform and U.S. Policy, by Jeremy Sharp.
CRS Report RL32499, Saudi Arabia: Terrorist Financing Issues, by Alfred Prados
and Christopher M. Blanchard.
Possible Flashpoints
The Korean Peninsula. [Larry Niksch, Specialist in Asian Affairs (7-

7680)] The Bush Administration faces a daunting task in 2005 in turning the six-

party talks on North Korea’s nuclear weapons program toward the U.S. goal of
verifiable dismantlement of the program. There reportedly is a general assumption
within the U.S. intelligence community that, within the past year, North Korea has
reprocessed 8,000 nuclear fuel rods into weapons-grade plutonium and may have
produced up to six to eight atomic bombs. The talks have been stalemated since they
began in April 2003. Since July 2004, North Korea has refused to attend a plenary
session of the talks, setting forth demands for U.S. concessions under the heading of
U.S. abandonment of its “hostile policies” toward North Korea. While the focus of

current diplomacy is on arranging another plenary session, the stalemate in the talks
has more serious factors and ramifications. Most serious, North Korea’s strategy
since late July 2004 has weakened the Bush Administration’s proposal of June 23,
2004, as a basis for future negotiations. That proposal called for a short freeze of
North Korea’s nuclear program followed by a relatively rapid dismantlement of the
program. North Korea initially would receive oil from South Korea and Japan and
a provisional security guarantee from the participants in the talks, including the
United States. Once dismantlement was in process, the United States would
negotiate with North Korea over reciprocal measures such as energy assistance to
North Korea and removal of North Korea from the U.S. list of terrorism-supporting
countries. North Korea denounced the proposal as a “sham proposal” in a Foreign
Ministry statement of July 24, 2004. Pyongyang may have been encouraged to adopt
a “kill strategy” toward the proposal by the lack of endorsements or support for the
proposal by the other participants in the six-party talks — China, South Korea, Japan,
and Russia. By mid-2004, too, North Korea had established its “reward for freeze”
proposal (emphasizing a limited freeze of its plutonium program rather than
dismantlement) in a strong position in the six-party talks. China, Russia, and South
Korea were expressing support for elements of the proposal, and China and Russia
openly expressed skepticism toward the Bush Administration’s claim that North
Korea operated a secret uranium enrichment program to produce uranium-based
atomic weapons.
North Korea’s successes in the six-party talks are due to a multi-faceted strategy,
which Pyongyang adopted after the August 2003 plenary session. This strategy has
been aimed at influencing the other governments participating in the talks and
isolating the United States, including threats to abandon talks and vociferously
denying the U.S. claim of a secret uranium enrichment (HEU) program. In contrast,
the Bush Administration’s approach in the talks has been relatively passive, based on
an assumption operating in 2003 that North Korea would alienate the other
governments through provocative behavior. The Administration did not issue a
detailed proposal until June 23, 2004, relying instead on a demand that North Korea
agree to “complete, verifiable, irreversible dismantlement” (CVID) of its nuclear
programs before the United States would negotiate. Even after it issued the June 23
proposal, the Administration launched no diplomatic and public diplomacy campaign
to promote it. The Administration also issued no comprehensive critique of the
“reward for freeze” proposal and has not blunted the influence of North Korea’s
denial strategy regarding HEU on China, Russia, and South Korea. The
Administration has claimed publicly that the other participating governments support
the U.S. objective of CVID, and it frequently praises China’s role. However, off-the-
record statements by Administration officials and reportedly a National Security
Council memorandum of June 2004 express dissatisfaction with the state of the talks,
including China’s role.
The Administration appears to face two basic issues in the six-party talks. One
is how to move a U.S. agenda into a dominant position in the talks, including how
to respond to recent Chinese and South Korean criticisms that the United States
should present a more flexible and detailed settlement proposal. A second issue
would be the type of U.S. response if the talks remain stalemated. Here, the options
appear to be between allowing the talks and the North Korean nuclear issue to
proceed indefinitely without resolution — an attempt to contain North Korea’s use

of nuclear weapons and materials — or taking direct actions to pressure North Korea
to accept dismantlement, including sanctions and/or interdiction of North Korean sea
and air traffic.
CRS Issue Brief IB91141, North Korea’s Nuclear Weapons Program, by Larry
CRS Issue Brief IB98045, Korea: U.S.-Korean Relations: Issues for Congress, by
Larry Niksch.
Iran. [Kenneth Katzman, Specialist in Middle Eastern Affairs (7-7612)]
The Bush Administration has pursued several avenues to attempt to contain the
potential strategic threat posed by Iran, at times pursuing limited engagement with
Iran and at other times expressing support for efforts to change its regime. Some
experts believe a potential crisis is looming over Iran’s nuclear program, and, despite
past differences between the United States and Europe over whether to engage or
punish Iran, the Bush Administration is working with several allies and other
countries to try to head off a nuclear breakout by Iran. The Bush Administration has
said it is skeptical of a November 15, 2004 agreement between Iran and France,
Germany, and Britain for Iran to suspend enrichment of uranium, pending a broader
deal to permanently curb Iran’s nuclear program. U.S. skepticism grew after a
November 17, 2004 press report provided information with regard to revelations by
an Iranian opposition group that Iran has additional nuclear sites not previously
declared to the International Atomic Energy Agency (IAEA). Virtually simultaneous
with the opposition allegations, Secretary of State Powell cited intelligence
information that Iran is working to develop missiles suitable for carrying nuclear
warheads. U.S. sanctions currently in effect ban or strictly limit U.S. trade, aid, and
investment in Iran and penalize foreign firms that invest in Iran’s energy sector, but
unilateral U.S. sanctions do not appear to have significantly slowed Iran’s WMD
programs to date. Some advocate military action against Iran’s nuclear infrastructure,
but others believe that a combination of diplomatic and economic rewards and
punishment is the only viable option on the nuclear issue.
Other major U.S. concerns include Iran’s policy in the Near East region,
particularly Iran’s material support to groups that use violence against the U.S.-led
Middle East peace process, including Hizballah in Lebanon and the Palestinian
groups Hamas and Palestinian Islamic Jihad. Some senior Al Qaeda activists are in
Iran as well, although Iran claims they are “in custody” and will be tried, and the 9/11
Commission has found that some officials in Iran might have facilitated or at least
tolerated travel through Iran by Al Qaeda operatives. Iran reportedly is providing
funding and political support to some armed Shiite Islamic factions there, according
to press reports.
Iran’s human rights practices and strict limits on democracy have been
consistently and harshly criticized by official U.S. reports, particularly Iran’s
suppression of religious and ethnic minorities. However, Iran does hold elections for
some positions, including that of president, suggesting that there might be benefits
to engaging Iranian officials. According to this view, new sanctions or military
action could harden Iran’s positions without necessarily easing the potential threat
posed by Iran. Others believe that there will be little progress on democracy or on

the strategic and foreign policy threat posed by Iran unless and until the regime ruling
Iran is removed. Several bills recommending regime change in Iran and providing
funds for pro-democracy groups were introduced in the 108th Congress, but did not
receive floor action. Some Members have said they will reintroduce similar
legislation. H.R. 4818, the FY2005 Consolidated Appropriations Act (P.L. 108-447),
provides $3 million for U.S. efforts to support Iranian pro-democracy activists. Some
believe that internal opposition groups are not capable, even if given substantial U.S.
aid, of accomplishing regime change. Many believe that a U.S. military effort to
overthrow Tehran’s regime is unrealistic in light of the commitment of U.S. forces
in Iraq and elsewhere and in the face of likely opposition to such a move by most
Iranians. The 109th Congress is likely to hold hearings on U.S. options to curb Iran’s
nuclear program and to curtail other objectionable aspects of Iranian policy.
CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth
CRS Report RS21592, Iran’s Nuclear Program: Recent Developments, by Sharon
CRS Report RS21548, Iran’s Ballistic Missile Capabilities, by Andrew Feickert.
Israeli-Palestinian Peace Efforts. [Carol Migdalovitz, Specialist in
Middle Eastern Affairs (7-2667)] President Bush has announced that the effort to
forge peace in the Middle East will be the highest foreign policy priority of his
second term. The President has said that the death of Palestinian Authority (PA)
Chairman Yasir Arafat on November 11, 2004 could create an opening to renew the
stalemated peace process. In a joint appearance with British Prime Minister Tony
Blair on November 14, the President declared his willingness to use the next four
years to “spend the capital of the United States” on establishing a democratic
Palestinian state living in peace with Israel.
President Bush is the first U.S. President to declare that a Palestinian state is
part of his vision for the future. To implement this vision and achieve a settlement
by 2005, the State Department, the United Nations, the European Union, and Russia
formulated the Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian
Conflict. Yet neither Israel nor the Palestinians took steps required by the Roadmap.
Israeli Prime Minister Sharon and the Bush Administration refused to deal with
Arafat, whom they identified with terrorism and as an obstacle to peace. Instead, in
December 2003, Sharon announced a unilateral plan to disengage from the
Palestinians by withdrawing from the Gaza Strip and four settlements in the West
Bank in 2005. On April 14, 2004, President Bush welcomed the plan and reiterated
his commitment to the Roadmap. He stated that it was unrealistic to expect
negotiations to lead to a return to the armistice lines of 1949, apparently accepting
that Israel would annex major West Bank settlements. He also declared that a
solution to the Palestinian refugee issue would be found by settling refugees in a
Palestinian state, rather than in Israel, thus rejecting a Palestinian “right of return.”
Palestinian presidential elections have been scheduled for January 9, 2005, and the
impetus for Israeli unilateralism may have changed. Sharon has indicated his
willingness to discuss disengagement and other matters with the new Palestinian

leaders, while President Bush also has said that he is willing to work with a new
Palestinian leadership that fights terror and seeks democratic reform.
Congress supports Israel and its efforts to achieve peace with its neighbors.
Congress supports Israel with generous foreign aid — $360 million in Economic
Support Funds, $2.2 million in Foreign Military Financing for FY2005, and an as-yet
undetermined tranche of the $9 billion in loan guarantees approved in FY2003. It
prohibits funding for the PA unless the President certifies that it is in the U.S.
national interest, and conditions aid for a Palestinian state on its leaders rejecting
terrorism, holding democratic elections, and cooperating with Israel on security. On
December 8, President Bush exercised his authority to waive prohibitions on aid to
the Palestinian Authority to allow it to receive $20 million in direct aid. Separately,
the Administration is providing $2.5 million in technical assistance for the January

9 election and $1 million to fund international election observers. The 109th

Congress will likely scrutinize aid for the Palestinians and encourage an end to
violence and a return to the peace process. Congress has supported Israeli
sovereignty over Jerusalem and moving the U.S. Embassy from Tel Aviv to
CRS Issue Brief IB91137, The Middle East Peace Talks, by Carol Migdalovitz.
CRS Issue Brief IB92052, Palestinians and Middle East Peace, by Clyde Mark.
CRS Issue Brief IB85066, Israel: U.S. Foreign Assistance, by Clyde Mark.
Proliferation and Weapons of Mass Destruction
[Amy Woolf, Specialist in National Defense, (7-2379)]
The United States has long sought to slow or stop the proliferation of nuclear,
chemical, and biological weapons (known as weapons of mass destruction —
WMD). These policies have been codified in international treaties and agreements,
incorporated into bilateral initiatives between the United States and other nations,
and built into unilateral U.S. responses to activities undertaken in other nations.
They can include diplomatic initiatives to discourage proliferation; economic
policies, such as export controls, sanctions, incentives, or assistance to nations where
proliferation might occur; and, in some cases, military action to counteract
proliferation. The Bush Administration has continued to support many long-standing
policies designed to preclude proliferation to a wide range of nations across the
globe. In the wake of September 11, 2001, it has also specifically focused on new
policies and programs that seek to ensure that rogue nations or terrorist groups do not
acquire WMD.
The 109th Congress will authorize and appropriate funding, and conduct
oversight for U.S. programs that are designed to address the risks and consequences
of WMD proliferation. Many of these programs address U.S. concerns about
proliferation of weapons or materials from specific countries, such as Russia,
Pakistan, North Korea, and China. For example, the United States provides about $1
billion per year in assistance to Russia and the other former states of the Soviet
Union to help them secure nuclear, chemical, and biological weapons, materials, and

knowledge that might leak out to other nations. The Bush Administration has also
introduced the Proliferation Security Initiative (PSI), under which the United States
and more than a dozen other nations have agreed to disrupt trade in WMD
technologies by interdicting vessels, aircraft or other modes of transport in their
territory or territorial waters when suspected of carrying WMD-related cargo. When
reviewing these programs, Congress may address questions about the total amount
of money allocated to these efforts, the amounts allocated to specific projects and
programs, and the amounts that might be allocated to similar programs outside the
former Soviet Union. Congress may also review the degree of international
cooperation and whether the programs are meeting their stated objectives in a timely
The 109th Congress will also likely face issues related to the proliferation of
nuclear and other capabilities to nations such as Iran and North Korea. Iran, in an
agreement with the International Atomic Energy Agency, has recently agreed to
suspend its uranium enrichment program, and it plans to conduct further negotiations
on its nuclear program with Great Britain, France, and Germany. The United States
has not joined in these discussions, and does not fully support the approach taken
thus far, but has not rejected the process. After breaking off its cooperation with the
IAEA, North Korea reprocessed its nuclear fuel rods, providing it with enough
plutonium, analysts believe, for several nuclear weapons. The United States is
meeting with China, Japan, Russia, and South Korea, in six-party talks with North
Korea in an effort to convince that nation to give up its nuclear weapons program.
Congress will not only review the progress of these discussions, but it may also
address questions about possible alternative approaches that might help contain or
reverse proliferation in these nations.
CRS Report RL30699, Nuclear, Biological, and Chemical Weapons and Missiles:
The Current Situation and Trends, by Sharon Squassoni.
CRS Report RL31559, Proliferation Control Regimes: Background and Status, by
Sharon Squassoni.
CRS Report RL32115, Missile Proliferation and the Strategic Balance in South Asia,
by Andrew Feickert and K. Alan Kronstadt.
CRS Report RL31555, China and Proliferation of Weapons of Mass Destruction and
Missiles: Policy Issues, by Shirley Kan.
Intelligence Reform
Reorganization of the Intelligence Community. [Alfred Cumming,
Specialist in Intelligence and National Security (7-7739)] After months of
negotiation over how to overhaul the U.S. Intelligence Community (IC) in the wake
of the terrorist attacks of September 11, 2001, the U.S. Senate and the House of
Representatives agreed on a package of intelligence reforms at the end of the 108th
Congress known as the Intelligence Reform and Terrorism Prevention Act of 2004,
S. 2845/P.L. 108-458. In reaching an eleventh-hour consensus, reform advocates
were able to head off the prospect of having to re-start their efforts at the beginning
in the 109th Congress.

Efforts to reform the IC initially were sparked by the recommendations of the
9/11 Commission (officially known as the National Commission on Terrorist Attacks
Upon the United States), which concluded that the current Director of Central
Intelligence lacked critical authorities that, in the Commission’s view, any agency
head or chief executive officer must have to effectively carry out his or her duties.
Efforts to reach final legislative agreement between the two chambers almost
foundered in large part over divergent views as to just how much budgetary and
personnel authority to accord a newly established Director of National Intelligence
(DNI), who would oversee the IC’s 15 separate intelligence agencies. The Senate
advocated a DNI with stronger authorities than did the House. Several key House
members opposed the stronger DNI authorities because of their concern that such
broader authorities could weaken the control of the Department of Defense over
essential intelligence collection and analysis deemed critical to supporting the
military, particularly during times of war. In the end, agreement turned on the
acceptance of compromise language calling on the President to issue guidelines that
would ensure the effective implementation and execution of the DNI’s authorities in
a manner that respects and does not abrogate the statutory responsibilities of various
U.S. departments. The 109th Congress will face the challenge of exercising oversight
over the implementation of intelligence reform.
Oversight Issues. [Richard Best, Jr., Specialist in National Defense (7-
7607)] Members of Congress have expressed continuing concern with the
organization and work of the Intelligence Community. The conclusions of the 9/11
Commission that there are serious problems with the organization of the Community
and with human intelligence (humint) collection led to a widespread determination
to support changes in the intelligence effort. The House Intelligence Committee has
been especially critical of the CIA, claiming in 2004 that the agency reflected “a
dysfunctional denial of any need for corrective action.” There are other concerns
regarding the quality of intelligence estimates in view of a failure to find Iraqi
weapons of mass destruction that the Community had indicated were undoubtedly
present. Director of Central Intelligence Porter Goss has undertaken extensive
management changes in the CIA and Congress may seek to evaluate the effectiveness
of his initiatives. The Intelligence Community deploys a wide variety of expensive
technical sensors — satellites, manned and unmanned aircraft, and ground
installations — to collect information about a variety of targets. Taken together,
these systems cost billions of dollars annually and there is a concern that the
Intelligence Community and the Defense Department have not developed an optimal
mix of systems, and that there may be waste and duplication of effort.
CRS Issue Brief IB10012, Intelligence Issues for Congress by Richard A. Best, Jr.
CRS Report RL32506, The Proposed Authorities of a National Intelligence Director:
Issues for Congress and Side-by-Side Comparison of S. 2845, H.R. 10, and
Current Law by Alfred Cumming.

Foreign Affairs
Global Issues Overview
[Francis T. Miko, Specialist in International Relations (7-7670)]
Since the terrorist attacks of September 11, 2001, the Administration and
Congress have increased spending substantially on foreign policy programs. In the
face of rising budget deficits, significant increases in foreign policy budgets are not
expected for FY2006. However, the 109th Congress may address steps to strengthen
the State Department’s capabilities in public diplomacy, as well as specific programs
in order to improve America’s image abroad, including cultural exchanges, education
programs, international broadcasting, and democracy initiatives, particularly targeted
to Muslim countries.
Congress is likely to consider foreign assistance programs designed to address
some of the underlying causes of hostility to the West and support for terrorism,
such as regional conflicts, brutal and corrupt regimes, failing states, and extreme
poverty in many parts of the world. Congress may address weaknesses in U.S.
capabilities to support stabilization and reconstruction programs in post-conflict
situations. These considerations may also be reflected in the debate over the use of
economic sanctions as a foreign policy tool. Congress will likely review and need
to balance U.S. foreign aid priorities as it considers funding levels for major
initiatives. Considerable resources are likely to be requested for the Millennium
Challenge Account to help poorer countries which meet specific performance criteria.
Similarly, the Administration and Congress have emphasized programs to fight
HIV/AIDS and other communicable diseases. Sustaining these levels while
providing for other contingencies and initiatives might be challenging.
The 109th Congress is likely to continue to pay attention to the policies and
operations of international organizations. Congress has taken the lead in pressing for
U.N. reform and accountability. Members have been outspoken in their
disappointment over recent U.N. performance in several international crises, and
alleged fraud and waste in some U.N. programs. Some have even suggested that the
United States should reassess the utility of its continued participation in the body.
Congress has demonstrated on-going concern over international organized crime
through its legislative and oversight activities, especially drug trafficking, money
laundering, and human trafficking. These problems are likely to continue to get
attention in hearings and legislation.
Foreign Affairs Resources and Policy. [Larry Nowels, Specialist in
Foreign Affairs (7-7645) and Susan Epstein, Specialist in Foreign Policy and
Trade (7-6678)] Over the past decade, and especially since the terrorist attacks of
September 11, the President and the Congress have supported significantly higher
funding levels in support of U.S. foreign policy programs. The international affairs
budget has grown from $18.7 billion in FY1996 to a ten-year high (excluding Iraq
reconstruction funds) in FY2005 of $29.8 billion. While fighting the global war on
terrorism has been the top foreign policy budget priority since September 11, the
Bush Administration has also launched a five-year, $15 billion program to combat
international HIV/AIDS, established a new, innovative foreign aid program — the

Millennium Challenge Account — that is promised to grow to $5 billion by 2006,
added 1,100 State Department personnel under the Diplomatic Readiness Initiative,
and secured American embassies and other facilities around the world.
Nevertheless, with rising budget deficits reaching over $400 billion in FY2004,
efforts to slow or reduce discretionary spending are expected in the near-term. The
White House will reportedly submit an FY2006 budget proposal that will hold
spending, except for Defense and Homeland Security, to 1% growth. For the first
time during the Bush Administration, Congress cut the President’s total foreign
policy budget request, trimming the $31.6 billion proposal by nearly 6%. At the
same time, the combination of previously announced spending commitments for
HIV/AIDS and other foreign aid programs, plus possible new initiatives regarding
debt reduction, reconstruction and stabilization capacity, and other initiatives will
make the foreign policy budget debate especially difficult in 2005.
Congress will debate the broad outlines of the FY2006 resources, including
amounts for foreign affairs programs, during the early months of the 109th Congress.
After establishing targets for foreign policy, defense, and domestic spending in the
Budget Resolution, Congress will turn its attention to appropriation bills, where
details for specific international affairs spending will be decided. Roughly 95% of
the foreign policy budget is included in two spending measures: Foreign Operations
and Commerce, Justice, State and the Judiciary.
CRS Report RL32311, Appropriations for FY2005: Foreign Operations, Export
Financing, and Related Programs, by Larry Nowels.
CRS Report RL32309, Appropriations for FY2005: Commerce, Justice, State, the
Judiciary, and Related Programs, by Susan Epstein and Ian Fergusson.
Foreign Aid, Development and the Millennium Challenge Account.
[Larry Nowels, Specialist in Foreign Affairs (7-7645)] The significance of foreign
aid as a tool of U.S. foreign policy has been elevated since the terrorist attacks of
September 11 showed that failing states could be exploited by terrorist groups as safe
havens. In September 2002, the Administration established global development as
the third “pillar” of its National Security Strategy, along with defense and diplomacy.
Since 9/11, the United States has allocated over $100 billion for foreign assistance,
nearly half of which supports the global war on terrorism and reconstruction efforts
in Iraq and Afghanistan.
During the same period, President Bush launched two major additional foreign
assistance initiatives. The President’s Emergency Plan for AIDS Relief (PEPFAR)
pledged $15 billion over five years (2004-2008) to combat the HIV/AIDS epidemic
in the developing world. In FY2004, the United States created an innovative foreign
aid program — the Millennium Challenge Account — that extends sizable aid grants
to a few, low-income nations that have been determined, through a competitive
process, to have the strongest policy reform records and where new investments are
most likely to achieve their intended development results.
Finding the resources to sustain these growing aid pledges, plus responding to
possible new initiatives and unforseen foreign policy contingencies, may be the

greatest foreign assistance challenge faced by lawmakers in the 109th Congress. The
Administration has discussed plans to expand democracy programs in the greater
Middle East and to seek a “quick response” fund to support the State Department’s
new Coordinator for Reconstruction and Stabilization. Aid donors are expected to
consider a substantial expansion of existing debt relief programs for heavily indebted
poor countries, an initiative that President Bush indicated in 2004 he would support.
Unanticipated humanitarian and security emergencies, such as that in Darfur, Sudan,
may also add pressure to an already extremely tight budget environment. Congress
considers foreign aid spending and policy issues largely in the Foreign Operations
appropriations bill. During the FY2005 debate, lawmakers reduced the President’s
foreign assistance budget (a subset of the larger foreign policy budget) request by
$1.7 billion, or nearly 8%, the first time in three years such cuts have occurred.
Efforts to prioritize, focus resources, and find savings will likely characterize the
foreign aid debate early in the 109th Congress.
CRS Report 98-916, Foreign Aid: An Introductory Overview of U.S. Programs and
Policy, by Curt Tarnoff and Larry Nowels.
CRS Report RL32427, The Millennium Challenge Account: Implementation of a New
U.S. Foreign Aid Initiative, by Larry Nowels.
HIV/AIDS and International Health Issues. [Tiaji Salaam, Analyst in
Foreign Affairs (7-7677)] Global health has become a major component of U.S.
foreign aid, and is expected to be a major priority for the 109th Congress. There is
growing concern among policy makers that health could significantly impact
economic growth, national security, and political stability in many parts of the world.
According to the Joint United Nations Programme on HIV/AIDS (UNAIDS), there
are about 40 million people living with HIV/AIDS worldwide, with about 5 million
of those infected in 2004. Infectious diseases, particularly HIV/AIDS, tuberculosis
(TB) and malaria, are taking a significant toll on productivity, profitability, and
foreign investment. The CIA has reported that these diseases could reduce GDP by
as much as 20% or more by 2010 in some sub-Saharan African countries.
Congressional debate focuses on international HIV/AIDS funding levels; the
resurgence of malaria, TB, and other infectious diseases; the decay of international
health infrastructure in developing countries; and the challenges of containing disease
outbreaks. Although the United States has spent more than any other country on
combating HIV/AIDS, some still challenge the United States to increase spending
and to revise laws that place restrictions on how funds are spent. Since its inception,
the United States has contributed $1.1 billion to the Global Fund. Congress is
expected to appropriate $437.8 million to the Fund in FY2005, including $87.8
million not used in FY2004 due to parameters set in the U.S. Leadership Against
AIDS, Tuberculosis, and Malaria Act of 2003 (P.L.108-25). The law states that U.S.
contributions to the Fund for FY2004 through FY2008 are limited to one-third of
contributions actually paid to the Fund. Global contributions did not meet the fiscal
requirement. Observers argue that “the one-third requirement” hinders the Fund’s

A large number of countries in sub-Saharan Africa are hampered by inadequate
health systems, including shortages of medical personnel. Many countries, already
struggling to treat their adult population, are unprepared to treat children, as they lack
anti-retroviral treatment (ART) made for children. The Senate and the House passed
legislation that focuses on children orphaned and made vulnerable (OVC) by
HIV/AIDS in the 108th Congress. Part of the legislation called for these children to
receive ART. Although the legislation did not go to conference, there has been
significant discussion on this issue in both chambers. It is expected that another bill
will be introduced in the 109th session.
The SARS outbreak in 2003 demonstrated that public health systems and the
availability of resources to deal with sudden, widespread disease outbreaks were
clearly inadequate. It also demonstrated that state responsibility within a globalized
world does not end at its borders and that future containment relies on openness and
cooperation. The growing global interdependence between domestic health policy
and foreign policy creates new challenges in the prevention of and response to
infectious diseases and bioterrorism, such as transparency, surge capacity,
management of public fear and information disclosure, coordination of national
responses, and lack of funding. Finally, acute health issues stemming from conflict
and crisis amplify the need to engage other actors, including international human aid
providers, development specialists, and the military.
CRS Report RL3143, AIDS Orphans and Vulnerable Children (OVC): Problems,
Responses and Issues for Congress, by Tiaji Salaam.
CRS Report RL31712, The Global Fund to Fight AIDS, Tuberculosis and Malaria:
Background and Current Issues, by Raymond W. Copson and Tiaji Salaam.
CRS Report RS21181, HIV/AIDS International Programs: Appropriations,
FY2003-FY2005, by Raymond W. Copson.
CRS Issue Brief IB100500, AIDS in Africa, by Raymond W. Copson.
CRS Report RL32001, AIDS in the Caribbean and Central America, by Mark P.
United Nations Reform. [Marjorie Ann Browne, Specialist in
International Relations (7-7695)] United Nations reform, as variously defined, has
drawn the attention of many in Congress and the executive branch as well as in other
U.N. member governments. In the past, congressional views and expectations on the
need for United Nations reform have resulted in significant arrearage in U.S.
contributions, especially to U.N. regular budget and peacekeeping accounts, and led
to Congress’s specifying conditions to be met before the release of U.S. funds
appropriated to finance these contributions or arrearages.
As the 109th Congress convenes, several issues have arisen to focus
congressional attention on the United Nations, including its reform. These issues,
which may affect the credibility of the organization and its top officials, include
allegations related to the U.N. oil-for-food program and associated investigations;
allegations of sexual exploitation and abuse by members of U.N. peacekeeping forces

and missions; the effectiveness and transparency of the U.N. administrative apparatus
to investigate wrong-doing, especially by mid- and top-level officials; and the
capacity of the United Nations to provide security for its activities around the world,
as evidenced by what some have viewed as the slow response of the U.N. Secretary-
General in authorizing U.N. staff presence in Iraq in the wake of the August 2003
bombing of the U.N. Office in Baghdad.
Congress will also have before it, possibly by summer, a report of a Task Force
on the United Nations, created by the U.S. Institute of Peace and requested by the
House and Senate Appropriations Committees in the FY2005 Consolidated
Appropriations Act. This task force of 12 experts is to “study the United Nations’
efforts to meet the goals of its Charter.” Another report expected to attract review
and study in Congress is that of the Secretary-General’s High-level Panel on Threats,
Challenges and Change, issued on December 2, 2004. This report recognizes failures
and shortcomings in the organization and offers far-ranging recommendations, many
of which require the attention and commitment of U.N. Member States to implement.
CRS Issue Brief IB86116, U.N. System Funding: Congressional Issues, by Vita Bite.
CRS Issue Brief IB90103, United Nations Peacekeeping: Issues for Congress, by
Marjorie Ann Browne.
CRS Report RL30472, Iraq: Oil-for-Food Program, International Sanctions, and
Illicit Trade, by Kenneth Katzman.
Peacekeeping, Stabilization, and Reconstruction: New Tools. [Nina
M. Serafino, Specialist in Foreign Affairs (7-7667)] The perception, underscored
by the 9/11 Commission Report, that international terrorism will exploit weak,
unstable states has been a major factor in convincing many policymakers of the need
to strengthen U.S. and international capabilities to foster security, good governance,
and economic development in conflict and post-conflict situations. To that end, theth
second session of the 108 Congress supported, albeit with considerable reservation,
two Bush Administration initiatives to bolster U.S. and international capabilities: the
new State Department Office of the Coordinator for Reconstruction and Stabilization
(S/CRS) and the five-year (FY2005-FY2009) Global Peace Operations Initiativeth
(GPOI). The Administration may well ask the 109 Congress to support and fund
proposals to enhance “stabilization and reconstruction” (S&R) civilian capabilities.
It may also ask Congress to reconsider its decision to deny funding for a Conflict
Response Fund to support S/CRS activities. It is expected to ask the 109th Congressth
for continued GPOI funding for FY2006. The Administration may also ask the 109
Congress to support proposals to prevent conflicts, as opinion grows that appropriate
policies to prevent conflicts may be more cost-effective than coping with their
Despite President Bush’s initial aversion to U.S. and U.N. “peacekeeping,”
since September 11, 2001, his Administration has sought to develop and improve
U.S. and international capabilities to perform S&R operations to address the
problems of failed states, as well as to develop effective strategies for prevention.
(The term “stabilization and reconstruction” lacks a strict definition, but is usually
understood to encompass those kinds of tasks and missions to promote security and

encourage stable and democratic governance following interventions that in the past
were loosely labeled “peacekeeping.”) With a recognition that many stabilization
and reconstruction tasks are often better performed by civilians, in mid-2004 the
Secretary of State created S/CRS to monitor states in crisis and to plan and
coordinate civilian efforts to deal with such states. That office was similar to the
State Department office earlier proposed by Senators Lugar and Biden in the
Stabilization and Reconstruction Civilian Management Act of 2004 (S. 2127).
Congress endorsed S/CRS in the FY2005 Consolidated Appropriations Act
(H.R.4818, Division D, Section 480). The S/CRS office has also been charged with
developing plans to enhance civilian capabilities for S&R missions.
Congressional defense committees initially resisted funding the Bush
Administration’s $661 million GPOI to train some 75,000 foreign military troops,
60% of them from Africa, in peacekeeping skills over five years and to support an
Italian-run constabulary (police trained with military skills) training center on the
grounds that it would divert money from more pressing military needs. When the
Administration insisted, Congress provided $100 million for GPOI in H.R. 4818
(Division J, Section 117): $80 million from DOD and the remainder from
Department of State appropriations. Some $20 million in a Conflict Response Fund
to support FY2005 activities and initiatives by S/CRS was provided by the Senate in
its version of the FY2005 Foreign Operations Appropriations Act (S. 2812), but
deleted in the conference agreement.
CRS Issue Brief IB94040, Peacekeeping and Related Stability Operations: Issues of
U.S. Military Involvement, by Nina M. Serafino.
CRS Issue Brief IB90103, United Nations Peacekeeping: Issues for Congress, by
Marjorie Ann Browne.
CRS Report RL32141, Funding for Military and Peacekeeping Operations: Recent
History and Precedents, by Jeffrey Chamberlin.
CRS Report RL32321, Policing in Peacekeeping and Related Stability Operations:
Problems and Proposed Solutions, by Nina M. Serafino.
Economic Sanctions. [Diane E. Rennack, Specialist in Foreign Policy
Legislation (7-7608)] The United States maintains economic sanctions that restrict
most transactions with those countries it has identified as supporters of international
terrorism: Cuba, Iran, Libya, North Korea, Sudan, and Syria. The United States
maintains an arms embargo on Burma, the Democratic Republic of Congo, Haiti,
Iraq, Liberia, People’s Republic of China, Rwanda, Somalia, and the aforenamed
terrorist states. The United States limits foreign aid to about two dozen states or
regions and the terrorist states. Finally, the United States maintains economic
restrictions on individuals identified as narcotics traffickers, terrorists, those who
disrupt the Middle East peace process, those who engage in the proliferation of
weapons of mass destruction, and diamond traffickers (when the diamonds have not
been subject to a certification process). These individuals and entities number in the

The 109th Congress might be called on to determine which is the most exigent
issue — terrorism, proliferation of weapons of mass destruction, or human rights and
democracy — and shape U.S. law to address that exigency. The President or the
State Department reports to Congress annually on human rights (February), drug
trafficking (March and September), cooperation with U.S. anti-terrorism efforts
(May), religious freedom (May), and human trafficking (June); each report affords
the Congress an opportunity to oversee foreign policy activities of the
Administration. Country analysis provided in each report could be the impetus for
imposing sanctions on countries with objectionable practices.
Other sanctions-related events that might garner congressional attention early
in the 109th Congress, include an upcoming Presidential report to Congress on the
use of U.S. foreign assistance for education in Pakistan; United Nation negotiations
relating to Sudan — its civil war and the crisis in Darfur, which has been
characterized by Secretary of State Powell and U.S. Representative to the United
Nations, John Danforth, as genocide; Presidential determinations issued in early
December that North Korean and Chinese companies have recently engaged in
proliferation activities benefitting Iran; a report issued by the International Atomic
Energy Agency that credits Iran with promising to freeze its nuclear development
program; recent movement toward normalization of relations between the United
States and Libya, a country still considered to be a supporter of acts of international
terrorism by the Department of State; and the Secretary of State’s recent comments
on political developments in Ukraine and options for the United States.
CRS Report RL31910, China: Economic Sanctions, by Dianne E. Rennack.
CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances, by Mark
P. Sullivan.
CRS Issue Brief IB10061, Exempting Food and Agriculture Products from U.S.
Economic Sanctions: Status and Implementation, by Remy Jurenas.
CRS Report RL32604, Libya: Legislative Basis for U.S. Economic Sanctions, by
Dianne E. Rennack.
CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation
Sanctions: Selected Current Law, by Dianne E. Rennack.
CRS Report RL32606, Sudan: Economic Sanctions, by Dianne E. Rennack.
Overview. [Nicolas Cook, Specialist in African Affairs (7-0429)] Policy
priorities of the 109th Congress with regard to Africa are likely to mirror and extendth
those of the 108 Congress. These include decisions on the level and programmatic
focus of U.S. aid in support of socio-economic development, healthcare, HIV/AIDS
efforts, food aid, democratization, and trade. With respect to these issues, Congress
may consider the contrasting policy and operational roles of the U.S. Agency for
International Development (USAID) and the Millennium Challenge Corporation,
which Congress funded below the level requested by the Administration. A possibly

enhanced role for Africa in diversifying U.S. oil supplies may draw increasing
congressional attention. Congress may also be called on to consider a possible
U.S.-Southern African Customs Union free trade agreement.
U.S. efforts to maintain peace and security in Africa are likely to remain key
policy foci, notably in Sudan and Liberia. The 108th Congress appropriated $200
million for humanitarian aid and reconstruction and $250 million for peacekeeping
in Liberia in FY2004. U.S. funding for Liberia may rise significantly, by regional
standards, if provisional U.S. plans to retrain the Liberian military proceed. Congress
is likely to continue to closely monitor levels of U.S. support for current U.N.
peacekeeping operations in Burundi, Cote d’Ivoire, the Democratic Republic of the
Congo, Ethiopia/Eritrea, Sierra Leone, and Western Sahara. The United States has
actively helped to mediate or end conflicts in these countries, but Congress may
consider seeking changes in the structure or level of U.S. support for those operations
that fail to produce intended outcomes.
U.S. counterterrorism (CT) efforts are key facets of U.S. engagement in
sub-Saharan Africa and may expand. The United States funds two major
counterterrorism initiatives in Africa — the East Africa Counterterrorism Initiative
(EACTI) and the Pan Sahel Initiative (PSI). The Administration is considering a
possible expansion of PSI, which Congress may be called upon to fund. Dubbed the
Trans-Sahel Counter Terrorist Initiative, it would cover the whole pan-Sahel region
and encourage further regional CT cooperation. Close congressional monitoring of
the activities of the Combined Joint Task Force-Horn of Africa, a U.S. regional
counterterrorism military operation based in Djibouti, is probable. U.S. efforts to
promote regional peace and stability in Africa through diplomacy and mediation, and
through U.S. military training programs, such as the Africa Contingency Operations
Training Assistance, will likely draw the continuing attention of Congress, which
may also consider prospects for rebuilding failed states, like Somalia. The emerging
role of the new State Department Office of the Coordinator for Reconstruction and
Stabilization may become important in this regard.
Sudan. [Ted Dagne, Specialist in International Relations (7-7646)]
Congress will likely continue to monitor and respond to the ongoing crisis in Darfur
in western Sudan that has led to a major humanitarian disaster, with an estimated 1.6
million people displaced and more than 200,000 refugees forced into neighboring
Chad. Some observers estimate that up to 70,000 people have been killed as a result
of the conflict from 2003 to the present, though reliable casualty data are lacking. The
government of Sudan has denied or severely restricted access to international relief
officials in Darfur, although aid is now flowing to the area. Violence against
civilians, however, continues unabated, according to U.N. officials. USAID officials
assert that up to 320,000 persons could die by the end of 2004, irrespective of the
international response. In August 2004, the African Union deployed 305 troops from
Nigeria and Rwanda to protect an estimated 80 cease-fire monitors in Darfur. The
mandate of these troops is to monitor a cease-fire agreement reached in April 2004
between the government of Sudan and two rebel groups — the Sudan Liberation
Army and the Justice and Equality Movement. In late September 2004, the
government of Sudan agreed to accept 3,500 more troops, although the mandate of
the African Union force does not allow it to protect civilians.

In September 2004, the Bush Administration declared the atrocities in Darfur
genocide. In a testimony before the Senate Foreign Relations Committee, Secretary
of State Powell stated that “genocide has been committed in Darfur and that the
Government of Sudan and the Janjaweed bear responsibility.” In July 2004, the
House and Senate declared the atrocities in Darfur genocide. On October 7, 2004,
the House passed H.R. 5061, the Comprehensive Peace in Sudan Act of 2004, and
the Senate passed similar legislation (S. 2781) in September 2004. In response to the
growing humanitarian crisis in Darfur, Congress approved additional funds for relief
purposes. In FY2005, Sudan is expected to receive an estimated $500 million in
humanitarian and development assistance. Meanwhile, Congress remains actively
engaged in monitoring the North-South peace negotiations between the Government
of Sudan and the Sudan People’s Liberation Movement (SPLM). On November 19,
2004, the Government of Sudan and the SPLM signed a Memorandum of
Understanding in Nairobi, Kenya, pledging to finalize a peace agreement by
December 31, 2004. The agreement itself was signed at a special U.N. Security
Council meeting in Nairobi, Kenya, in December 2004. The Security Council also
passed a resolution urging the parties to implement a peace accord and expressing its
readiness to consider establishing a U.N. peace support operation.
HIV/AIDS Pandemic. [Raymond Copson, Specialist in International
Relations (7-7661)] Sub-Saharan Africa has been far more severely affected by
AIDS than any other world region. In July 2004, UNAIDS (the Joint U.N.
Programme on HIV/AIDS) reported that in 2003, 25 million people were living with
HIV/AIDS in the region, including 3 million newly infected during the year. Africa
has about 10% of the world’s population but nearly two-thirds of the global total of
infected people. The infection rate among adults averages an estimated 7.5% in
Africa, compared with 1.1% worldwide. UNAIDS projects that between 2000 and
2020, 55 million Africans will likely lose their lives to the epidemic. The total level
of U.S. funding for international HIV/AIDS programs, and specifically for the Global
Fund to Fight AIDS, Tuberculosis, and Malaria, is likely to remain an issue of
concern in the 109th Congress. The pace at which the President’s Emergency Plan
for AIDS Relief (PEPFAR) is expanding treatment of African AIDS victims with
antiretroviral drugs may be examined through hearings. Some may urge that the
United States do more to promote the use of inexpensive generic antiretrovirals,
while others may advocate continued caution on the issue. Achieving the appropriate
balance between treatment and prevention programs, including premarital abstinence
programs, may also be considered.
CRS Issue Brief IB95052, Africa: U.S. Foreign Assistance Issues, by Raymond
CRS Issue Brief IB10050, AIDS in Africa, by Raymond Copson.
CRS Report RL32643, Sudan: The Darfur Crisis and the Status of the North-South
Negotiations, by Ted Dagne.
CRS Report RL31947, The Sudan Peace Process, by Ted Dagne.
CRS Report RL31247, Africa and the War on Terrorism, by Ted Dagne.

Overview. [Richard Cronin, Specialist in Asian Affairs (7-7678)] The
continuing impact of the 9/11 attacks and the antiterrorist campaign has begun to
perceptibly influence U.S. security strategy and bilateral relationships with key Asian
countries. Some analysts see the beginnings of a tectonic geopolitical shift involving
a “rising” China, the marked strengthening of U.S.-Japan alliance cooperation, South
Korea’s continuing commitment to engagement rather than pressure on North Korea,
and the Pentagon’s plans to transform and realign U.S. forces in the Asia-Pacificst
region to meet 21-century challenges. Especially since the war in Iraq, the United
States has depended on China to prevent rash actions by a nuclear-armed North
Korea, but Beijing’s growing economic ties with South Korea and its high-profile
effort to foster close economic and political ties with Southeast Asia tend to
underscore unease in Asia about Beijing’s ambitions and U.S. staying power. Some
Asia-Pacific friends and allies view the U.S. preoccupation with antiterrorist
cooperation with Southeast Asian countries, especially those with a Muslim majority
or a large Islamic minority as excessively narrow given China’s growing
assertiveness and influence. Pro-independence sentiment in Taiwan may also test the
ability of the United States to balance its support for Taiwan with its need for
cooperative ties with China. The projected $157 billion trade deficit with China for
2004, and the continuing willingness of Asian trading partners to buy Treasury bonds
and thereby prevent a sharp rise in U.S. interest rates could be a subject of increased
congressional attention. Relations with South Asia, especially Pakistan and India,
continue to be dominated by the effort against Al Qaeda and the Taliban in
Afghanistan and the Pakistan-Afghanistan border region. U.S. success in the
antiterrorist campaign in Afghanistan and Pakistan could depend importantly on
parallel efforts to moderate India-Pakistan tensions over Kashmir and gain full
cooperation from Pakistan to eliminate the illicit nuclear supply network established
in the 1990s by its most prominent nuclear scientist, A. Q. Khan.
China and Northeast Asia. [Kerry Dumbaugh, Specialist in Asian Affairs
(7-7683)] China’s growing U.S. trade surplus and the economic implications of
China’s currency peg to the U.S. dollar, the Six-Party Talks to convince North Korea
to halt its nuclear weapons program, and complications involving Taiwan’s politicalth
situation are three issues that may prompt congressional action early in the 109
Congress. China, one of the fastest growing markets for U.S. exports, has also been
one of the fastest growing sources for U.S. imports, producing large and increasing
trade deficits ($124 billion in 2003). While low-cost imports from China have
benefitted U.S. consumers and some firms using Chinese components, they have put
competitive pressures on other U.S. manufacturing industries. The 109th Congress
will likely focus on efforts to boost U.S. exports to China and respond to Chinese
trade practices deemed “unfair” or harmful to U.S. firms and workers, such as its
currency peg, industry subsidies, possible dumping, and poor labor practices.
Members may also seek to address China’s rapid economic integration and pursuit
of free trade agreements with East Asian countries. Additionally, China’s rapidly
growing demand for energy may lead to further price spikes, market pressures, and
other issues affecting U.S. energy supplies that may demand congressional attention.
In Taiwan, President Chen Shui-bian was sufficiently assertive late in 2004 in
rebuffing China’s claims of sovereignty and insisting that Taiwan be treated as an

independent sovereign state that the Bush Administration felt compelled to publicly
warn that long-standing U.S. support for Taiwan is not unconditional. Some
Members of Congress who strongly support Taiwan may seek to persuade the White
House to maintain or increase U.S. support. Finally, the Bush Administration,
concerned about North Korea’s nuclear weapons program, has urged China to use
what Secretary Colin Powell called its “considerable influence with North Korea.”
But continuing stalemate may spell deep trouble for the future of Six-Party Talks
involving North and South Korea, Japan, Russia, China, and the United States.
Congressional oversight might include whether the Administration has over-valued
China’s cooperation on North Korea at the expense of U.S. concerns over China’s
continuing threats to Taiwan and weapons proliferation activities.
Taiwan. [Kerry Dumbaugh, Specialist in Asian Affairs (7-7683); and
Shirley Kan, Specialist in National Security Affairs (7-7606)] In legislative
elections on December 11, 2004, Taiwan’s opposition Nationalist Party (the KMT)
dealt a surprising setback to the ruling Democratic Progressive Party (DPP) by
increasing the KMT legislative majority to a more comfortable margin. The DPP had
hoped to gain an unprecedented legislative majority after incumbent DPP President
Chen Shui-ban won a second presidential term by a razor-thin margin in elections on
March 20, 2004. Chen is on record as saying that Taiwan “is an independent,
sovereign country,” and he has promised to maintain this “status quo” despite
Beijing’s vow to “pay any price” to prevent it. Absent a legislative majority, Chen
now is likely to have trouble implementing the more controversial of his policies.
The DPP’s growing departure from the KMT’s long-held “one-China” policy has
caused the Bush Administration to scale back its earlier enthusiasm for supporting
Taiwan. Since late 2003, U.S. officials often have balanced criticisms of the
People’s Republic of China (PRC) with periodic warnings that U.S. support for
Taiwan is not unconditional, but has limits.
Congressional oversight covers the Administration’s implementation of the
Taiwan Relations Act (TRA) in managing peace and stability, including offering
security assistance to Taiwan. Since the early 1990s, and accelerating after 1999, the
People’s Liberation Army (PLA) in mainland China has modernized with a missile
buildup and modern weapons acquired primarily from Russia. The Pentagon’s
annual report to Congress warned in May 2004 that “the cross-strait balance of power
is steadily shifting in China’s favor.” It also warned Taiwan that its “apparent lack
of political consensus over addressing [military challenges] with substantially
increased defense spending is undoubtedly seen as an encouraging trend in Beijing.”
Despite increasing U.S. concerns over the years and offers of arms sales, Taiwan’s
legislature has delayed consideration of a proposed $18 billion Special Budget to
acquire submarines, anti-submarine warfare aircraft, and missile defense systems.
Moreover, Taiwan is cutting its annual defense budget for 2005. The U.S. policy
debate includes issues about whether the United States should clearly articulate more
limited or greater commitment to Taiwan’s self-defense, should have higher-level
communication, should work closer with Taiwan’s military to boost deterrence and
readiness, and should promote cross-strait dialogue.
India and Pakistan. [Alan Krondstadt, Analyst in Asian Affairs ( 7-5415)]
In the wake of the terrorist attacks on the United States, Congress and President Bush
waived existing proliferation-related sanctions on India. New Delhi’s post-9/11 offer

of full support for U.S.-led anti-terrorism efforts was viewed as reflecting a sea
change in U.S.-India relations enabled by the collapse of the Soviet Union and the
end of global bipolarity. Positive interaction has become the norm as the two
countries pursue a “strategic partnership” based on counterterrorism cooperation,
joint military exercises, growing defense trade, and a “Next Steps in Strategic
Partnership” initiative that seeks to expand cooperation in the areas of civilian
nuclear activities, civilian space programs, and high-technology trade, and expand
dialogue on missile defense. India’s status as a de facto nuclear weapons state that
is not signatory to the major nonproliferation treaties continues to constrain bilateral
cooperation in these areas. The sale to India of major U.S.-made weapons systems
may accelerate in 2005. In the interests of regional stability, the United States
supports an ongoing India-Pakistan peace initiative and remains concerned about the
potential for conflict over Kashmiri sovereignty to cause hostilities between these
two nuclear-armed countries. Congress also continues to have concerns about abuses
of human rights and religious freedoms in India, along with bilateral trade and the
continuation of reforms in the still relatively closed Indian economy. Moreover, the
spread of HIV/AIDS in India has attracted congressional attention as a serious
The United States seeks to balance an acute interest in Pakistan’s continued
counterterrorism cooperation, especially as regards Afghan stabilization and the
capture of Al Qaeda leadership, with tandem concerns about weapons proliferation
and the perceived need to encourage development of a more democratic and
moderate Pakistani state. Key U.S. concerns regarding Pakistan include regional
terrorism; weapons proliferation; tensions over Kashmir; and democratization and
human rights protection. The U.S.-Pakistan relationship was transformed after
September 11, 2001 with the ensuing enlistment of Pakistan as a pivotal ally in U.S.-
led counterterrorism efforts. Congress and President Bush waived existing
proliferation- and coup-related sanctions on Pakistan, and large-scale U.S. assistance
resumed in the final months of 2001. The roles of Islamist political parties and
indigenous terrorist groups in Pakistan complicate policymaking by both Islamabad
and the U.S. government. Moreover, evidence of the “onward” proliferation of
Pakistani nuclear weapons materials and technologies became stark in 2004 when
Pakistani metallurgist A.Q. Khan confessed to having sold these to North Korea,
Iran, and Libya. The Bush Administration claims that Khan’s global network has
been terminated, but Pakistan refuses to allow U.S. or international investigators
access to Khan, and questions about the possible complicity of the Pakistani military
and/or government remain unanswered. Some Members of Congress have expressed
concerns that despite the holding of national elections in 2002, the Pakistani military
has marginalized the country’s non-Islamist parties and consolidated its grip on
power in contravention of democratic principles. The State Department determined
that Pakistan’s record on human rights remained poor in 2003. The United States
reportedly has received pledges from Islamabad that all cross-border terrorism in
Kashmir would cease and that any terrorist facilities in Pakistani-controlled areas
would be closed. Pakistan received nearly $2 billion in U.S. assistance for FY2002-
FY2004. President Bush called for establishment of a five-year, $3 billion aid
package for Pakistan beginning in FY2005.

Southeast Asia. [Mark Manyin, Analyst in Asian Affairs (7-7653), Emma
Chanlett-Avery, Analyst in Asian Affairs (7-7748) and Bruce Vaughn, Analyst
in Asian Affairs (7-3144)] When dealing with Southeast Asia, Congress primarily
will be concerned with overseeing and funding efforts to combat radical Islamist
terrorist groups in the region, particularly the Jemaah Islamiya (JI) network, which
has extensive ties with Al Qaeda. To combat the threat, the Bush Administration has
pressed countries in the region to arrest suspected terrorists, deployed troops to the
southern Philippines, increased intelligence-sharing operations, restarted military
relations with Indonesia, and provided or requested from Congress over $1 billion
in aid to Indonesia, the Philippines, and Thailand. Partly due to these efforts, JI’s
ability to conduct large-scale attacks appears to have diminished significantly.
Further pursuit of the war on terrorism in Southeast Asia poses several
challenges. The first is distinguishing between, on the one hand, groups that
advocate pan-Islamic agendas and sponsor terrorism against Western targets and, on
the other hand, situations in which violence has arisen because of national
government action or neglect and does not threaten U.S. interests. Second, the
United States has to work around the increasing ambivalence of many Southeast
Asian governments — particularly in Indonesia and Malaysia, which are
predominantly Muslim countries — toward working with the United States on
security matters. Additionally, the Administration faces the challenge of forging
closer cooperation with Indonesia, the locus of much terrorist activity, while military
ties remain subject to congressionally imposed human rights and accountability
conditions that have not been met.
Other regional issues of interest to Congress are likely to include secessionist
movements that both threaten Indonesia’s territorial integrity and also give rise to
human rights concerns, China’s growing influence, Burma’s military dictatorship,
and “human security” issues such as HIV/AIDS and trafficking in drugs and women.
Additionally, two trade agreements currently being negotiated would be subject to
congressional approval: a U.S.-Thailand FTA and a U.S.-Vietnam agreement on
Hanoi’s accession to the WTO, a move that would require Congress to decide
whether or not to extend permanent normal trade relations (PNTR) status to Vietnam.

CRS Issue Brief IB93097, India-U.S. Relations, by K. Alan Kronstadt.
CRS Issue Brief IB94041, Pakistan-U.S. Relations, by K. Alan Kronstadt.
CRS Report RL32259, Terrorism in South Asia, by K. Alan Kronstadt and Bruce
CRS Report RL332615, Pakistan’s Domestic Political Developments, by K. Alan
CRS Report RL31815, U.S.-China Relations: Current Issues for the 108th Congress,
by Kerry Dumbaugh.
CRS Issue Brief IB98034, Taiwan: Recent Developments and U.S. Policy Choices, by
Kerry Dumbaugh.
CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990, by Shirley Kan.
CRS Report RL32466, Rising Energy Competition and Energy Security in Northeast
Asia: Issues for U.S. Policy, by Emma Chanlett-Avery.
CRS Report RL31672, Terrorism in Southeast Asia, coordinated by Mark Manyin.
CRS Report RL32688, China-Southeast Asia Relations, by Bruce Vaughn.
CRS Report RL32394, Indonesia: Domestic Politics, Strategic Dynamics, and
American Interests, by Bruce Vaughn.
CRS Report RS20749, Burma-U.S. Relations, by Larry Niksch.
Overview. [Kristin Archick, Analyst in European Affairs (7-2668)]
Congress is likely to take an interest in a number of policy issues concerningth
European security, the Balkans, Russia, and Eurasia during the 109 Congress. U.S.
relations with its European allies and friends in both NATO and the European Union
(EU) have been severely strained over the last few years amid the crisis in Iraq and
other foreign policy and trade disagreements. Some European partners have lost
confidence in U.S. leadership and question the U.S. commitment to NATO and
further EU integration. At the same time, NATO continues its post-Cold War
evolution, and Members of Congress will likely be looking for improved European
military capabilities to enable the allies to shoulder a greater degree of the security
burden, both within and outside of Europe. Congress is also likely to strongly
support continued close U.S.-EU law enforcement cooperation against terrorism.
The Balkans remain a key area of concern, with U.S. forces still engaged in Bosnia
and Kosovo. The EU’s takeover of the NATO peacekeeping force in Bosnia will be
closely watched and will be an important test for NATO-EU relations. The future
status of Kosovo and bringing Balkan war criminals to justice remain two important
challenges. And Members of Congress will probably continue to support drawing
the countries of the Western Balkans closer to NATO and the EU, and will continue
to encourage the EU to put Turkey on an irreversible membership track.

Russia, despite its continuing military weakness, also remains of great interest
to U.S. policymakers given its political influence and geographic reach, especially
in regions of concern to Washington, such as Ukraine, Moldova, Central Asia, and
the South Caucasus. Congress is likely to continue to debate the appropriate balance
between securing Russia as a friend able to contribute to the fight against terrorism,
and addressing worries about Moscow’s commitment to democracy, human rights,
and non-proliferation. Russia’s human rights abuses in Chechnya, as well as
escalating Chechen terrorism, will probably continue to trouble Members of
Congress, and may be increasingly raised by European counterparts as an issue of
concern for both NATO and the EU.
Transatlantic Relations. [Kristin Archick, Analyst in European Affairs
(7-2668)] U.S.-European relations have been fundamentally challenged in recent
years as numerous foreign policy and trade conflicts have emerged in the transatlantic
partnership. The crisis over Iraq is most notable, but the list of disputes includes the
Israeli-Palestinian conflict, the International Criminal Court, the U.S. treatment of
prisoners at Guantánamo Bay and Abu Ghraib, genetically-modified food, aircraft
subsidies, and climate change. Different U.S. and European perspectives on the role
of multilateral institutions and the use of force are at the core of many of these
disagreements. The Bush Administration says that it will make mending transatlantic
relations a priority in its second term, but contentious issues such as Iran and the
possible lifting of the EU’s arms embargo on China may be stumbling blocks.
Supporters of strong transatlantic ties stress that the United States and Europe face
a common set of international challenges, have few other prospective partners, and
share an increasingly interdependent and mutually beneficial economic relationship.
However, others question whether the two sides of the Atlantic still share the same
values and interests, and whether enough commonality remains to make the
partnership work. Congress is likely to continue to evaluate how the transatlantic
relationship serves U.S. interests, and may seek to play a role in shaping the debate
over the future of U.S.-European relations.
Stability in the Balkans. [Steven Woehrel, Specialist in European Affairs
(7-2291)] U.S. policymakers have seen stability in the Balkans as an important part
of creating a Europe “whole, free, and at peace,” a key U.S. policy objective.
European countries currently provide the lion’s share of troops and aid to the region,
although the U.S. role remains substantial. In foreign aid appropriations legislation,
the 109th Congress will consider how much aid to provide to assist reforms in Bosnia,th
Serbia and Montenegro, Kosovo, and other countries in the region. The 109
Congress will also debate the conditions under which that aid should be given. Aid
to Serbia could be conditioned on Belgrade’s cooperation with the International
Criminal Tribunal for the former Yugoslavia, as previous Congresses have done.
The Bush Administration has gradually reduced U.S. troop levels in the
Balkans, as conditions on the ground have permitted and in agreement with NATO
allies and other countries that contribute troops. In December 2004, a European
Union military contingent took over from the NATO-led Stabilization Force in
Bosnia. Several hundred U.S. troops remain in Bosnia to help fight terrorism, track
down war criminals, and assist defense reforms. There are about 1,800 U.S. troops
in Kosovo as part of a NATO-led peacekeeping force. A possible withdrawal of U.S.
forces from Kosovo may have to await a decision on the final status of the province;

that is, whether it should remain an internationally administered, autonomous
province under nominal Serbian sovereignty, or become an independent country, or
perhaps have some other status. The 109th Congress, like the 108th, may consider
resolutions about Kosovo’s final status, including those advocating independence for
Kosovo. A review conducted by the United States and other leading Western
countries in mid-2005 may lead to the beginning of final status talks.
Congress will monitor the progress of the countries of the region in fighting
terrorism. Since the September 11, 2001 attacks, Al Qaeda cells in Albania and
Bosnia have been shut down by local governments, in cooperation with the United
States. However, rampant organized crime and corruption in the region continue to
provide an environment in which terrorists can operate.
CRS Report RL32577, The United States and Europe: Possible Options for U.S.
Policy, by Kristin Archick.
CRS Report RL32342, NATO and the European Union, by Kristin Archick and Paul
CRS Report IB10087, U.S.-European Union Trade Relations: Issues and Policy
Challenges, by Raymond Ahearn.
CRS Report RS21744, Bosnia and International Security Forces: Transition from
NATO to the European Union in 2004, by Julie Kim.
CRS Report RL32136, Future of the Balkans and U.S. Policy Concerns, by Steven
CRS Report RL31053, Kosovo and U.S. Policy, by Steven Woehrel and Julie Kim.
Latin America and the Caribbean
Overview. [Mark P. Sullivan, Specialist in Latin American Affairs (7-
7689)]Legislative and oversight attention to Latin America and the Caribbean in the
109th Congress will likely focus on continued counternarcotics efforts, especially in
the Andean region; trade issues, including consideration of several free trade
agreements and the status of negotiations for the Free Trade Area of the Americas;
efforts to deal with threats to democracy in such nations as Haiti and Venezuela;
debate over the best means to foster political change in Communist Cuba; and efforts
to increase cooperation on border security and anti-terrorism efforts, especially with
Mexico. U.S. support for Colombia has included significant foreign assistance and
material support to assist the government in combating drug trafficking and the
threats posed by guerrilla and paramilitary terrorist groups. Haiti’s persistent poverty
and political instability will likely remain a congressional concern, as will the
question of whether the United States is providing adequate support for the success
of the U.N. Stabilization Mission in Haiti. Congress will likely maintain an active
interest in neighboring Mexico with myriad migration, trade, and border issues
dominating the agenda. At this juncture, it is unclear whether Congress will consider
implementing legislation for a combined U.S.-Dominican Republic-Central America
Free Trade Agreement (DR-CAFTA), or for an agreement only with the five Central

American governments (CAFTA). The Administration has warned the Dominican
Republic that it would not include the country in the agreement unless it rescinds a

25% tax on beverages containing high-fructose corn syrup.

Colombia and the Andean Counterdrug Initiative. [Connie Veillette,
Analyst in Latin American Affairs (7-7127)] The Andean Counterdrug Initiative
(ACI) is the primary U.S. program that supports Plan Colombia, a plan developed by
the Colombian government to combat drug trafficking and related guerrilla activity.
Because Plan Columbia was developed as a six-year plan, the 109th Congress will
most likely review its progress in response to an anticipated Administration request
to continue U.S. assistance after FY2005. Such consideration could provoke a
broader debate on the effectiveness of U.S. counternarcotics policy in the region.
U.S. support for Plan Colombia began in 2000, when Congress passed legislation
providing $1.3 billion in interdiction and development assistance (P.L. 106-246) for
Colombia and six regional neighbors: Bolivia, Peru, Ecuador, Venezuela, Brazil, and
Panama. Funding for ACI from FY2000 through FY2005 totals approximately $4.2
billion. Colombia produces 80% of the world’s supply of cocaine and increasing
amounts of high-quality heroin. Illegally armed groups of both the left and right are
believed to participate in the drug trade. In addition to the basic debate over what
role the United States should play in Colombia’s struggle against drug trafficking and
illegally armed groups, Congress has repeatedly expressed concern with a number of
related issues. These include continuing allegations of human rights abuses; the
expansion of U.S. assistance for counterterrorism and infrastructure protection; the
health and environmental consequences of aerial fumigation of drug crops; the
progress of alternative development to replace drug crops; the level of risk to U.S.
personnel in Colombia, including the continued captivity of three American hostages
by the Revolutionary Armed Forces of Colombia (FARC); and the current
demobilization talks between the Colombian government and paramilitaries.
Haiti. [Maureen Taft-Morales, Specialist in Latin American Affairs (7-
7659)] The main issue for U.S. policy will be how to contain Haiti’s growing
instability. Ongoing violence and the lack of a functioning infrastructure make it
difficult to pursue other Administration goals in Haiti, such as decreasing narcotics
trafficking, promoting democracy, and alleviating poverty. A further Administration
goal, of limiting illegal immigration, has been challenged by some Members as not
affording adequate protection for Haitian asylum-seekers. Since armed rebellions led
to the departure of President Jean-Bertrand Aristide in February 2004, an interim
government has taken over, but security conditions are so tenuous that observers are
calling Haiti a failed state in danger of descending into civil war, anarchy, or a
criminal state. The Haitian National Police are considered understaffed and
underequipped to maintain order. The U.N. Stabilization Mission in Haiti
(MINUSTAH) is also understaffed, as member governments have sent only about
half the troops that were authorized. MINUSTAH’s ability to carry out its mandate
to establish law and order is further hampered by the diversion of its resources to help
protect and deliver emergency assistance following natural disasters that left
thousands dead or homeless. As political disarray continues, human rights violations
are increasing, and elections scheduled for late 2005 are placed in greater jeopardy.
The FY2005 Foreign Operations Appropriations Act (incorporated as Division D into
H.R. 4818, the FY2005 Consolidated Appropriations Act [P.L. 108-447]) requires
the Administration to provide Congress reports on a multi-year assistance strategy

within 90 days, and on a reforestation strategy, including funding requirements,
within180 days of the bill’s enactment. Supporters of trade preferences for Haiti
have said they may bring them up for reconsideration in the new Congress.
Cuba. [Mark P. Sullivan, Specialist in Latin American Affairs (7-7689)] As
in past years, the main issue for U.S. policy toward Cuba in the 109th Congress will
be how to best support political and economic change in the one of world’s
remaining Communist nations. Since the early 1960s, U.S. policy toward Cuba under
Fidel Castro has consisted largely of isolating the island nation through
comprehensive economic sanctions. Another component of U.S. policy consists of
support measures for the Cuban people, including private humanitarian donations and
U.S.-sponsored radio and television broadcasting to Cuba. The Bush Administration
has further tightened restrictions on family and educational travel and on the
provision of private humanitarian assistance. While there has been broad agreement
in Congress on the overall objective of U.S. policy toward Cuba — to help bring
democracy and respect for human rights to the island — there have been several
schools of thought on how best to achieve that objective. Some advocate maximum
pressure on the Cuban government until reforms are enacted, while others argue for
lifting some U.S. sanctions that they believe are hurting the Cuban people. Still
others call for a swift normalization of U.S.-Cuban relations. Over the past several
years, Congress has continued its high level of interest in Cuba with a variety of
legislative initiatives regarding sanctions and human rights. Both chambers have
approved resolutions condemning the poor human rights situation, and both have
approved appropriations measures easing Cuba sanctions, especially on travel. None
of the provisions easing sanctions has made it through conference. The Bush
Administration regularly has threatened to veto measures that would ease Cuba
Mexico. [K. Larry Storrs, Specialist in Latin American Affairs (7-7672)]
Congressional interest in Mexico is expected to focus on immigration issues in 2005
because President Bush and President Fox both expressed the desire shortly after
President Bush’s re-election to follow up on his earlier immigration proposal.
President Bush called in January 2004 for an overhaul of the immigration system to
permit the matching of willing foreign workers with willing U.S. employers when no
Americans can be found to fill available jobs. Under his proposal, temporary legal
status would be granted to new foreign workers who have work offers in the United
States and to undocumented workers already employed in the United States for a
term of three years that could be renewed but would end at some point. The proposal
is in line with Fox-Bush pledges in 2001, subsequently stalled because of terrorism
concerns, to achieve more orderly and humane migration flows between the
countries, and is similar to several recent congressional initiatives with guest worker
and/or amnesty provisions. Congress is also expected to deal with immigration
provisions that were left out of the Intelligence Reform and Terrorism Prevention Act
of 2004, (S. 2845/P.L.108-458) passed at the end of the 108th Congress, including
provisions in the pre-conference House version that would have prohibited the
acceptance of Mexican consular ID cards and the issuance of drivers’ licenses to
undocumented aliens, and that would have required the completion of a section of a
wall along the border in California. With regard to trade issues, Mexico is the
United States’ second most important trading partner, linked together in the North
American Free Trade Agreement (NAFTA), but there are various disputes between

the countries. Mexico has complained, for example, that the United States is still
failing to grant Mexican trucks access to U.S. highways, and the United States has
complained about Mexico’s 20% tax on soft drinks made with high-fructose corn
syrup (HFCS).
CRS Report RL31726, Latin America and the Caribbean: Issues for the 108th
Congress, coordinated by Mark P. Sullivan.
CRS Report RL32337, Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2005 Assistance, by Connie Veillette.
CRS Report RL32250, Colombia: Issues for Congress, by Connie Veillette.
CRS Report RL31740, Cuba: Issues for the 108th Congress, by Mark P. Sullivan.
CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current
Congressional Concerns, by Maureen Taft-Morales.
CRS Report RL31876, Mexico-U.S. Relations: Issues for Congress, by K. Larry
Middle East
Overview. [Alfred B. Prados, Specialist in Middle East Affairs (7-7626)]
Insurgency in Iraq, chronic Arab-Israeli tensions, and threats to U.S. interests posed
by international terrorism and weapons proliferation continue to mark the Middleth
East landscape and are likely to be topics of major concern during the 109 Congress.
In the Persian Gulf area, U.S. and allied forces continue to battle a combination of
former Saddam Hussein loyalists, radical Islamic fundamentalists, and infiltrators
from neighboring countries seeking to overthrow the U.S.-sponsored interim
government in Iraq and force the withdrawal of U.S. and other international
peacekeeping forces. Some think the recent death of Palestinian President Yasir
Arafat may offer an opportunity to reinvigorate stalled Israeli-Palestinian peace
negotiations, but others doubt that any likely successor will command enough
prestige to conclude a viable agreement with Israel in the near term. Israeli leaders,
on their part, may be unwilling or unable to pursue further negotiations. Although
Iran agreed to suspend its uranium enrichment activities, many observers believe that
Iran’s leadership remains committed to acquiring nuclear weapons, and U.S. officials
are worried about Iranian attempts to meddle in Iraq’s fragile political scene.
Prospects for regional stability, smooth political succession in regional countries with
aging leaders, and implementation of U.S.-sponsored initiatives to promote
democracy and development in the greater Middle East are also likely to be topics of
congressional interest during the months ahead.
Congress is likely to play an important role in monitoring U.S. force
deployments and military expenditures resulting from the on-going conflicts in Iraq
and Afghanistan. An Administration request for supplemental funding to defray
these costs is anticipated early in 2005. Congress will also face future requests by the
Administration to provide funds to cover economic and military assistance to
countries that play central roles in Arab-Israeli peacemaking endeavors and the war

on terrorism, notably Israel, Egypt, Jordan, and the Palestinians. In its oversight
function, Congress will likely scrutinize the policies of other key regional actors,
including countries on the State Department’s terrorism list. In this connection, the
Administration is moving toward normalizing relations with apparently rehabilitated
terrorist sponsor Libya, while it has suggested the possibility of additional sanctions
against Syria, a move which has some support in Congress. Legislation to implement
recommendations of the 9/11 Commission Report, which addresses several aspects
of U.S. Middle East policy, was passed at the end of the 108th Congress.
Syria and Lebanon. [Alfred B. Prados, Specialist in Middle East Affairs
(7-7626) and Aaron Pina, Analyst in Middle East Affairs (7-4589)] Syria is
entangled in a number of important U.S. policy issues in the Middle East, including
the war on terrorism, the spread of weapons of mass destruction, efforts to resolve
the Arab-Israeli conflict, the situation in Lebanon, and the turmoil in Iraq since the
overthrow of former Iraqi President Saddam Hussein. U.S. officials have taken
increasing interest in Syrian actions, demanding that Syria cooperate more effectively
in monitoring the Iraq-Syria border to curb infiltration of foreign fighters into Iraq,
end support for Palestinian and Lebanese terrorist organizations, withdraw forces
from Lebanon, and support other U.S. objectives in the region. Although Syrian
officials maintain that they are trying to accommodate U.S. concerns, Administration
officials and Members of Congress have increasingly favored use of additional
economic sanctions to pressure Syria to stop activities at variance with U.S. policies.
On December 12, 2003, President Bush signed H.R. 1828, the Syria Accountability
and Lebanese Sovereignty Restoration Act (P.L. 108-175), which banned most U.S.
exports to Syria and imposed other penalties. Some U.S. officials have suggested the
possibility of stricter sanctions either under P.L. 108-175 or additional legislation.
The 108th Congress passed H.R. 4818, the FY2005 Consolidated Appropriations Act,
which authorizes an undetermined amount to make grants to non-governmental
organizations and individuals inside Syria to support the advancement of democracy
and human rights.
Syria’s dominant role in Lebanon is a key concern. The remnants of civil war
in Lebanon and tensions between Israel and Syria over the Israeli occupation of
southern Lebanon continue to be factors in Syria’s continued military presence in
Lebanon. Additionally, some Syrians see the historic national theme of “Greater”
Syria (Pan-Syrianism) as encompassing Lebanon. The October 20, 2004 resignation
of the Lebanese Prime Minister Rafik Hariri concurrent with the Syrian-influenced
extension of Lebanese President Lahoud’s six-year term by three years further
suggests Syrian dominance in Lebanese political life; yet there remains some debate
within the Lebanese political sphere whether Syria is an occupying power or an
invited guest of Lebanon. According to various reports, Syrian troop levels have
decreased from a high of 35,000-40,000 in 1976, to a present deployment of roughly
14,000. In addition to political activities, Syria also lends credible support to the
Lebanon-based, pro-Iranian Shi’i nationalist militia Hizballah (Party of God).
Although nearly all Israeli forces have been withdrawn from Southern Lebanon,
excluding the disputed region known as Shib’a Farms, Hizballah continues to launch
attacks against Israeli interests in southern Lebanon in an effort to eject Israel entirely
from what it regards as Southern Lebanon. Syria’s role in Lebanon may inspire
follow-up legislation to the Syria Accountability and Lebanese Sovereignty
Restoration Act passed by the 108th Congress.

Democracy and Reform. [Jeremy Sharp, Analyst in Middle Eastern
Affairs (7-8687)] Since the September 11, 2001 terrorist attacks, many experts have
stated that the fight against terrorism cannot be won using force alone; it must be
accompanied by long-erm policies that address development and reform issues in
Arab and Muslim-majority countries. The Bush Administration has launched several
initiatives to promote democracy and reform in the Middle East and in countries with
significant Muslim populations. The 109th Congress will consider funding levels for
these programs and conduct oversight to review their effectiveness in promoting
good governance and development in a region dominated by autocratic regimes. In
addition, some lawmakers have suggested that U.S. bilateral assistance programs to
Arab governments, such as Egypt, should place greater emphasis on encouraging
reform. Some critics argue that U.S. efforts to promote democracy in the Middle
East will only encourage opponents of U.S. policy in the region who may perceive
U.S. involvement as an exercise in U.S. imperialism or an imposition of democracy
by the West.
Through annual foreign operations and State Department appropriations
legislation, Congress currently provides funding for the following programs: the
Middle East Partnership Initiative (MEPI) — a State Department program designed
to encourage reform in Arab countries by strengthening Arab civil society,
encouraging micro-enterprise, expanding political participation, and promoting
women’s rights ($75 million for FY2005); the State Department’s Human Rights and
Democracy Fund (HRDF) — an account that funds human rights promotion in
Muslim-majority countries ($11 million for FY2005); and the National Endowment
for Democracy’s (NED) Muslim Democracy Program ($4 million for FY2005).
Beyond U.S.-sponsored programs, the Administration proposed and participates in
the “Broader Middle East & North Africa Initiative,” a G-8-led development and
reform initiative aimed at fostering economic and political liberalization in a wide
geographic area of Arab and non-Arab Muslim countries. At this time, it is unclear
what resources the United States will devote to the initiative.
Libya. [Clyde Mark, Specialist in Middle Eastern Affairs (7-7681)] U.S.-
Libyan relations were broken by a series of military encounters in the 1970s and
1980s, including the 1986 U.S. accusation of Libyan involvement in the Berlin
nightclub bombing followed by U.S. air strikes on Libya, and the 1988 bombing of
Pan Am 103. Throughout this period, the United States applied a series of sanctions
that prohibited commercial contacts with Libya. A trial of two Libyan nationals
charged with bombing Pan Am 103 ended in 2001 with one acquittal and one
conviction. To comply with a U.N. resolution, Libya offered to compensate each of
the Pan Am 103 victims with an initial payment of $4 million when the U.N.
sanctions were lifted, another $4 million payment when the United States lifted its
sanctions, and a final $2 million payment when the United States removed Libya
from the terrorism list. Libya extended the deadline twice and the United States
lifted all but the terrorism sanctions, which prohibit transfers of military and dual use
items. In December 2003, Libya renounced chemical, biological, and nuclear
weapons, and opened the country to international inspection. With the lifting of travel
and financial sanctions, U.S. business interests have returned to Libya, and the
United States and Libya have opened preliminary diplomatic relations. The FY2005
Consolidated Appropriations Act provides the opportunity for increasing trade with
Libya by adding a Presidential waiver of existing restrictions against Export-Import

Bank transactions (Section 113, Title I, Division J, P.L. 108-447). Congress
probably will continue to monitor events in Libya, including its compliance with
non-proliferation and compensation obligations, and the President’s handling of the
remaining terrorism sanctions.
CRS Issue Brief IB89118, Lebanon, by Clyde R. Mark.
CRS Issue Brief IB92075, Syria: U.S. Relations and Bilateral Issues, by Alfred B.
CRS Report RL32260, U.S. Foreign Assistance to the Middle East: Historical
Background, Recent Trends, and the FY2005 Request, by Jeremy M. Sharp.
CRS Report RS21457, The Middle East Partnership Initiative: An Overview, by
Jeremy M. Sharp.
CRS Report RL32407, The Greater Middle East Initiative: An Overview, by Jeremy
M. Sharp.
CRS Issue Brief IB93109, Libya, by Clyde Mark.
CRS Report RL32604, Libya: Legislative Basis for U.S. Economic Sanctions, by
Dianne Rennack.
CRS Report RS21823, Disarming Libya: Weapons of Mass Destruction, by Sharon
Squassoni and Andrew Feickert.
Defense and Security
Overview: Defense Strategy and Military Force Planning
[Stephen Daggett, Specialist in National Defense (7-7642)]
Since the end of the Cold War, often with prodding from Congress, successive
Administrations have repeatedly tried to articulate the principles that should guide
national security policy, defense strategy, and military force planning. During the
Bush Administration, strategy has been under extensive, continuing, and evolving
review. In September 2001, shortly after the attacks of September 11, the Defense
Department released the congressionally mandated “Quadrennial Defense Review”
(QDR), which laid out the premises of defense strategy. In September 2002, the
White House issued a broader statement of “The National Security Strategy of the
United States,” which, among other things, asserted a right to act preemptively to
prevent unacceptable threats from arising. In May 2004, the Joint Chiefs of Staff
completed a formal statement of “The National Military Strategy of the United
States.” The next Quadrennial Defense Review is required no later than February

2006, and the Defense Department is already beginning preparations.

For military planners, the main burden of the evolving strategic guidance from
these and other reviews has been to expand the range of military capabilities that
policymakers expect to have available. Administration officials have dismissed the

old requirement that forces be prepared for two major theater wars as much too
limiting. The 2001 QDR mandated that forces be prepared to defend the homeland,
to deter threats in four major regions while simultaneously engaging in smaller-scale
contingency operations, to swiftly defeat larger-scale attacks in two regions, and to
win decisively in one area. This is now called the “1-4-2-1 strategy construct.” The
war-fighting requirement has since been refined to mandate the ability to deploy an
adequate force to a distant theater within 10 days, defeat an enemy within 30 days,
and recover quickly enough to handle a second conflict 30 days later.
Subsequently, other requirements have been added. Forces should be able to
defeat challenges ranging from terrorism in ungoverned areas, to irregular warfare
including insurgencies, to other asymmetric threats that do not directly challenge U.S.
strengths, to disruptive threats from future competitors that would challenge U.S.
power in space or other realms, and to potentially catastrophic threats, particularly
from non-state or rogue-state actors possessing weapons of mass destruction. A
demanding goal recently under discussion is to be able to keep 200,000 troops in
place in stability operations for five years while remaining prepared for other major
operations and without exceeding guidelines limiting overseas rotations of active or
reserve personnel. Having laid out a full range of requirements, senior officials are
now trying to establish metrics by which to assess how well current forces perform
and, in the long run, to help guide how limited resources will be allocated. New
requirements have led to major changes in the organization of the Army and, in
coming months, may shape decisions on weapons programs and on active and reserve
troop levels that are of considerable interest to Congress.
CRS Report RS21754, Military Forces: What Is the Appropriate Size for the United
States? by Edward Bruner.
Defense Budget Trends and Issues for Congress
[Stephen Daggett, Specialist in National Defense (7-7642)]
Defense spending is a major focus of action in Congress every year, initially in
debate over the annual congressional budget resolution and later when Congress
considers annual defense authorization and appropriations bills. Last year, the
Administration requested $422 billion in funding for national defense in regular
FY2005 appropriations bills and later asked for an additional $25 billion in
emergency funding for Iraq and Afghanistan. For FY2006, last year’ s projection was
for about $440 billion in regular defense funding, which is subject to change when
the White House budget is submitted in February 2005. The Administration is also
expected to ask for supplemental FY2005 defense appropriations ranging from $65
billion to $80 billion in February, and may later amend the FY2006 budget to ask for
another $25 billion or so for Iraq and Afghanistan, as it did last year. In all, Congress
is likely to act on requests of well over $500 billion for defense in the first session
of the 109th Congress.
One issue for Congress, to be addressed early in the year in action on the budget
resolution, is how trends in defense fit with steps that may be needed to control
federal budget deficits. In the past, dating back to the Gramm-Rudman-Hollings
deficit control acts of the 1980s, defense budgets have been constrained by efforts to

rein in budget deficits. Last year, for the first time in several years, defense spending
was an issue in action on the budget resolution, when the Senate rejected a proposal
to trim the Administration’s recommended total by $7 billion. With defense slated
to grow by about $20 billion a year for the next several years in White House
projections, one issue in Congress may be whether to limit future growth in defense.
Even if Congress does not decide to trim projected levels of defense spending,
some potentially controversial trade-offs within the defense budget may be on the
agenda. Already several Members of Congress have objected strongly to a reported
cut in the rate of shipbuilding in the FY2006 Navy budget. Last year, Congress
increased the statutory end-strength of the Army by 20,000 troops and of the Marine
Corps by 3,000 troops over Pentagon objections. For the present, these increases are
being paid for with supplemental appropriations. One issue is whether such increases
should be maintained in the future, and if so, how to pay for them. The ongoing
restructuring of the Army also has equipment and operating costs that were not fully
covered in earlier Army budget plans, and one issue is whether these costs should be
covered by delaying Army programs such as the Future Combat System (FCS).
Other weapons programs may also be matters of debate. Last year, Congress cut
back on some high-profile space programs, including the Space-Based Radar and the
Transformational Communications Satellite. Funding for those and other very costly
space programs may be on the agenda again this year. There also remain questions
about the overall affordability of long-term weapons acquisition programs, including
the F-22 fighter, the F-35 Joint Strike Fighter, and missile defense, particularly to the
extent that there continues to be cost growth in these and other programs. Finally,
Congress has, in recent years, added substantial amounts for military personnel pay
and benefits. There continues to be significant support in Congress for additional
benefit increases, particularly for military reservists. A key budget issue is how to
offset the long-term costs of any new personnel benefits.
CRS Report RL32305, Authorization and Appropriations for FY2005: Defense,
by Stephen Daggett and Amy Belasco.
CRS Report RL32310, Appropriations for FY2005: Military Construction,
by Daniel H. Else.
CRS Report RL32468, FY2005 Defense Budget: Frequently Asked Questions,
by Jeffrey Chamberlin.
Defense Transformation
[Ronald O’Rourke, Specialist in National Defense (7-7610)]
The Administration argues that defense transformation (i.e., large-scale change
and reform of U.S. defense capabilities) is needed to effectively meet 21st-century
security challenges, and has justified many of its proposals for DOD on the grounds
that they are needed for defense transformation. One potential transformation-relatedth
issue for the early days of the 109 Congress is the Administration’s plan to
reorganize the Army into a modular force organized around brigade-sized units. A
second is the Administration’s plan to significantly revise overseas basing
arrangements for U.S. forces, which could affect U.S. military capabilities, the 2005

Base Realignment and Closure (BRAC) round, and U.S. relations with allies. A third
is the Administration’s reported intent to plan U.S. military capabilities so as to meet
four kinds of military challenges — conventional military threats, irregular conflicts
(such terrorism, insurgencies, and civil wars), potential catastrophic events (defined
as the acquisition, possession, and possible use of weapons of mass destruction
against vulnerable, high-profile targets by terrorists and rogue states), and potential
disruptive threats (i.e., breakthrough technologies that could marginalize current U.S.
military advantages). Some observers believe this “four challenges” approach could
lead to reduced funding for development and procurement of traditional military
systems like aircraft, ships, and heavy armored vehicles.
CRS Report RL32238, Defense Transformation: Background and Oversight Issues
for Congress, by Ronald O’Rourke.
CRS Report RL32476, U.S. Army’s Modular Redesign: Issues for Congress, by
Andrew Feickert.
Base Realignment and Closure
[David E. Lockwood, Specialist in U.S. Foreign Policy and National Defense
(7-7621) and Daniel H. Else, Specialist in National Defense (7-4996)]
Early in the first session of the 109th Congress (no later than March 15), the
President will appoint nine members to the Base Realignment and Closure (BRAC)
Commission. In so doing, he will consult with senior congressional leaders, as
follows: Speaker of the House (2 nominees); Majority Leader of the Senate (2
nominees); Minority Leader of the House (1 nominee); Minority Leader of the Senate
(1 nominee). The three remaining appointments can be made by the President
without consultation. In addition, it should be noted that BRAC law requires Senate
confirmation for all nominees. In mid-May of 2005, the Secretary of Defense will
forward to the BRAC Commission a list of recommended actions to realign or close
a significant number of military installations within the United States and its
territories. At the same time, an independent panel created by Congress, commonly
referred to as the Overseas Basing Commission, will recommend a strategy for
realigning U.S. military installations overseas — paralleling a similar effort that is
being undertaken by the Department of Defense.
The domestic 2005 BRAC round is expected to be the last of five base closure
rounds conducted in the transition following the end of the Cold War. The previous
rounds, instituted in 1988, 1991, 1993, and 1995, resulted in 97 major military
installations being closed or realigned, and affecting a total of 451 bases of all sizes.
The net savings accrued from the first four rounds have been estimated at about $17
billion to date. Overall, the four rounds of BRAC closures and realignments are
widely regarded to have been a success. While numerous communities were
adversely affected at the outset, over time many recovered — and even prospered.
Some communities in rural areas, however, have not recovered.
In 2001, after much opposition from Members of Congress, the Department of
Defense secured approval for a 2005 BRAC round. Subsequently, in February and
March 2004, the Pentagon initiated a series of important steps by publishing its force

structure plan, infrastructure inventory, and base selection criteria. At this time, the
Department of Defense is analyzing its current and future basing needs and drawing
up the list of realignment and closure actions that will be implemented. In May 2005,
the BRAC Commission will receive DOD’s final list, review it, and forward its own
recommendations to the President sometime in September. The President must
submit his approved list to the 109th Congress no later than November 7, 2005.
Congress then has 45 days to pass a motion of disapproval or the Commission’s list
becomes law.
In the previous four BRAC rounds, the Commissions included former Members
of Congress, former retired military leaders, former U.S. ambassadors, notable
business leaders, former House and Senate staff members, as well as former White
House staff members. Also, previous BRAC Commissions made relatively modest
changes to the Pentagon’s closure and realignment list. They approved 85 percent of
DOD’s selection overall. Information currently circulating in the press, and
elsewhere, indicates that approximately a hundred U.S. installations will be closed
or realigned in the 2005 round, and that there will be many more realignments as
compared to closures.
CRS Report RL30051, Military Base Closures: Agreement on a 2005 Round,
by David E. Lockwood.
CRS Report RL32216, Military Base Closures: Implementing the 2005 Round,
by David E. Lockwood.
CRS Report RS21822, Military Base Closures: DOD’s 2005 Internal Selection
Process, by Daniel H. Else and David E. Lockwood; see also Online Video:
CRS Report RS21975, U.S. Military Overseas Basing: Background and Oversight
Issues for Congress, by Jon D. Klaus
Army Size and Requirements
[Andrew Feickert, Specialist in National Defense (7-7673)]
Under the provisions of the 2005 National Defense Authorization Act (H.R.
4200/P.L. 108-375), the active Army’s current mandated ceiling of 482,400 soldiers
will grow to 502,400 by the end of 2005 and to 512,400 by the end of 2009. The
Army opposes this legislated end-strength increase of 30,000 soldiers, preferring
instead to raise and lower its end-strength on a temporary basis through personnel
actions such as mandatory extensions of enlistments. The Army’s primary concern
is how to pay for these 30,000 soldiers since Congress did not appropriate funds to
pay for end-strength increases. The Army reportedly estimates that it will cost $3.6
billion dollars annually in pay and benefits for the additional soldiers, while the
Congressional Budget Office reportedly puts the figure at about $2.6 billion annually.
The Army is undertaking a total organizational transformation to better meet
current and future operational requirements. The Army is currently redesigning its
current 10 active duty division force to be a 43 or 48 brigade-level force by FY2007.
The reserves will also convert to a brigade-centric force over time. This redesign

effort, as well as associated restructuring and stabilization initiatives, is intended to
sustain both the active and reserve Army through a potentially long-term, manpower
and resource intensive war on terror. While supporters suggest that the additional
brigades could help ease the deployment strain on the Army, critics argue that such
a complete organizational transformation creates additional and unnecessary strains
on the Army and its resources.
The Army’s major equipment program, the Future Combat System (FCS), is
an approximately $117 billion research, development, and acquisition program,
consisting of 18 manned and unmanned systems tied together by an extensive
communications network. FCS is intended to replace such current systems as the
M-1 Abrams tank and the M-2 Bradley infantry fighting vehicle with advanced
networked combat systems. FCS has been described by both the Army and its critics
as a high risk program because many of its key technologies are still conceptual in
nature. The Army has slipped the initial operational capability of the first
FCS-equipped brigade from 2012 to 2014 and intends to eventually field up to 15
FCS-equipped brigades. The Army is presently providing certain FCS systems, such
as unattended sensors and unmanned aerial vehicles, to units in Iraq and Afghanistan
and intends to “spiral in” certain FCS technologies and systems into the current force
as they become available. The Army is concerned that the FCS may become the “bill
payer” for the 30,000 soldier end-strength increase as well as for escalating costs
associated with the wars in Iraq and Afghanistan.
CRS Report RL32476, U.S. Army’s Modular Redesign: Issues for Congress, by
Andrew Feickert.
CRS Report RS21754, Military Forces: What Is the Appropriate Size for the United
States? by Edward Bruner.
Special Operations Forces
[Andrew Feickert, Specialist in National Defense (7-7673)]
U.S. Special Operations Forces (SOF) play a leading role in the war on terror.
SOF forces are operating at a very high tempo world-wide. They are presently
undergoing a modest expansion, limited primarily by the extremely high standards
demanded of special operations personnel. SOF is experiencing retention difficulties
among senior, retirement-eligible non-commissioned officers and warrant officers.
Many of these most experienced operators are leaving the military at the 20-year
mark for jobs in the private sector as security specialists or for jobs with the federal
government such as with the CIA. Congress may elect to consider what, if any, steps
could be taken to improve SOF personnel retention. Another issue is the 9/11
Commission recommendation that U.S. SOF should become responsible for covert
paramilitary operations which are presently under the purview of the CIA. The
Administration has ordered the Secretary of Defense and the Director of Central
Intelligence to review the advisability of such a transfer of responsibility. While some
suggest that SOF responsibility for paramilitary operations might improve the
planning and execution of these operations, others argue that it will only add
additional requirements to SOF forces that are presently operating at full capacity and
could detract from their primary mission of locating and destroying terrorists.

CRS Report RS21048, U.S. Special Operations Forces (SOF): Background and Issues
for Congress, by Andrew Feickert.
Other Acquisition/Technology Issues
Navy Shipbuilding. [Ronald O’Rourke, Specialist in National Defense
(7-7610)] A leading Navy acquisition issue for the early days of the 109th Congress
will be the number of Navy ships that the Administration proposes to procure in
FY2006. Press reports have suggested that the Administration’s proposed FY2006
defense budget could request funding for the procurement of four new Navy ships.
This is fewer than the seven fully funded ships (plus two partially funded ships) that
the Administration requested in its proposed FY2005 budget, and less than the
average of nine or more ships per year that would be needed over the long run to
maintain a Navy of about 300 ships. Some Members are concerned that the
Administration’s plans for Navy shipbuilding could over time reduce the Navy to
significantly less than 300 ships and possibly endanger parts of the current Navy
shipbuilding industrial base. These concerns have been heightened by the absence
of a current, officially approved, consensus plan for the future size and structure of
the Navy, and by reports that the Administration is considering reducing force-level
goals for at least some parts of the fleet.
CRS Report RL32665, Potential Navy Force Structure and Shipbuilding Plans:
Background and Issues for Congress, by Ronald O’Rourke.
Air Forces Modernization. [Christopher Bolkcom, Specialist in National
Defense (7-2577)] The Air Force’s top priority is the F/A-22 Raptor originally
designed to dominate aerial combat. New roles such as attacking advanced, ground-
based air defenses may also be feasible. At issue are the aircraft’s cost, schedule, the
number to be procured, and whether cheaper aircraft might do the same job. The F-35
Joint Strike Fighter (JSF) is the largest aviation program in terms of estimated cost
($233 billion) and numbers (2,900 aircraft). This multirole aircraft will be produced
in three variants for the Air Force, Marine Corps, and Navy. At issue is the extent
to which the JSF is needed relative to other aircraft such as the F/A-22 and the
Navy’s F/A-18E/F Super Hornet. Aerial refueling and long range bomber aircraft are
also key modernization issues. The Air Force’s KC-135 Stratotanker fleet is old and
in need of replacement. Leasing Boeing 767 aircraft was proposed in the 108th
Congress. The estimated cost and the terms of the lease proved controversial, and this
option now appears untenable. DOD will not make a decision on replacing the aerial
refueling fleet until analyses of aerial refueling requirements and potential
alternatives are completed in 2005. The lack of funding for long-range bomber
modernization, despite achievements in recent military operations, will also be
debated in the 109th Congress.

CRS Issue Brief IB92115, Tactical Aircraft Modernization, by Christopher Bolkcom.
CRS Report RL32447, Military Helicopter Modernization, by Christopher Bolkcom.
CRS Report RL31544, Long-Range Bombers, by Christopher Bolkcom.
CRS Report RS20941, Air Force Aerial Refueling, by Christopher Bolkcom.
Ballistic Missile Defense. [Steven Hildreth, Specialist in National
Defense (7-7635)] Congress largely supports Ballistic Missile Defense (BMD),
having appropriated almost $100 billion since the Reagan Strategic Defense Initiative
(SDI) was launched in FY1985. Congress plays a major role in developing U.S.
BMD policy and overall direction, as well as in program guidance, management, andth
oversight. In the 109 Congress, the Administration is expected to request support
for: 1) annual BMD budget requests of $10-$11 billion; 2) continued deployment of
a national BMD capability in Alaska, California, and perhaps elsewhere; 3) continued
testing of national BMD technologies to build confidence in and increase
effectiveness of the system now being deployed; and 4) BMD programs such as the
Airborne Laser, the Space Tracking and Surveillance System (SSTS), and the Missile
Defense System Interceptor program that some in Congress, the executive branch,
and the private sector believe should be terminated.
CRS Report RL31111, Missile Defense: The Current Debate, by Steven A. Hildreth
Robust Nuclear Earth Penetrator. [Jonathan Medalia, Specialist in
National Defense (7-7632)] The Robust Nuclear Earth Penetrator (RNEP) program
is studying the feasibility and cost of modifying an existing nuclear bomb into one
that can penetrate the ground perhaps a few tens of feet, greatly increasing its ability
to destroy deeply buried facilities that an adversary might use to shelter leadership
or weapons of mass destruction (WMD). A decision on whether to proceed awaits
the outcome of the study. Supporters assert that this weapon would deter potential
adversaries from threatening the United States by holding their most prized assets at
risk; critics respond that it would make nuclear-weapon use more likely. It wasthth
debated in the 108 Congress and is likely to be at issue in the 109 as well.
CRS Report RL32599, ‘Bunker Busters’: Sources of Confusion in the Robust Nuclear
Earth Penetrator Debate, by Jonathan Medalia.
CRS Report RL32347, Robust Nuclear Earth Penetrator Budget Request and Plan,
FY2005-FY2009, by Jonathan Medalia.
Military Personnel
Recruiting and Retention. [Lawrence Kapp, Specialist in National
Defense (7-7609)] Since the September 11 terrorist attacks, and especially since the
invasion of Iraq in 2003, military personnel have participated in extended and hostile
deployments to an extent unprecedented since the inception of the All-Volunteer
Force in 1973. Some analysts believe that these deployments are overtaxing U.S.

military personnel and will likely have a negative impact on military recruiting and
retention. This concern is most pronounced with respect to Army personnel, who
have borne the brunt of the occupation of Iraq.
Active Component military recruiting and retention rates, however, have
remained generally strong to date. For example, all of the Services met their active
duty enlisted recruit quantity and quality goals in FY2004. The Services also met or
exceeded nearly all their active duty enlisted retention goals for FY2004, although
the Navy failed to meet its retention goal for sailors with fewer than six years of
service by about 2% and the Air Force failed to meet its retention goal for airmen in
their second enlistment by about 5%. Recruiting and retention rates for Active
Component officers have also remained generally strong, although there are some
specialities (for example, certain types of pilots and medical personnel) where lower
than optimal retention rates, sometimes over the course of many years, have produced
officer shortages.
The Reserve Components have met most of their recruiting and retention goals
in FY2004. The Army Reserve, Naval Reserve, Marine Corps Reserve, and Air
Force Reserve all exceeded their recruiting and retention goals for enlisted personnel
in FY2004. However, while the Army National Guard and the Air National Guard
met their enlisted retention goals, they failed to meet their recruiting goals. The
recruiting problem was most acute in the Army Guard, which missed its recruit
quantity goal by about 13% in FY2004, after having missed its FY2003 recruit
quantity goal by a similar margin. The Air National Guard missed its recruit quantity
goal by about 6% in FY2004. The Army National Guard also failed to meet two key
benchmarks for recruit quality: only 84% of its non-prior service enlistees had high
school diplomas versus the DoD standard of 90%, and only 57% scored above
average on the Armed Forces Qualification Test versus the DoD standard of 60%.
With respect to officers, some of the Reserve Components — especially the Army
National Guard and Army Reserve — have had difficulties maintaining an adequate
population of junior officers in recent years. This may be partially due to negative
impacts created by the high operations tempo which the Reserve Components have
experienced over the past three years. However, some of the major causes of these
shortfalls — for example, the high number of lieutenants who are separated from the
Army National Guard and Army Reserve because they are not educationally qualified
for promotion — existed before September 11th.
In FY2005, the active Army may encounter enlisted recruiting problems due to
the small size of its Delayed Entry Program (DEP). The DEP is made up of those
individuals who have signed a contract to join the military at a future date but who
have not yet “shipped” to basic training. Typically, the Army likes to have about

35% of the coming year’s recruit quota already enrolled in the DEP. However,

because the Army drew heavily on its DEP in FY 2004 to meet its recruit quantity
goal, and because it fell short of its FY 2004 goal for new recruit contracts by 15%,
it started FY2005 with only about 18% of the 80,000 individuals it hopes to send to
basic training in the upcoming fiscal year. This relatively low level of the DEP may
make it difficult for the Army to achieve its quantity goal for FY2005. The Army’s
plan to meet this challenge includes increasing the size of its recruiting force by
nearly 20% and offering more generous enlistment incentives. The Army may also

face challenges in meeting its retention goal for FY2005, which is 14% higher than
it was in FY2004.
Congress has a number of options to address any recruiting and retention
shortfalls that do occur. The traditional policy levers used by Congress and DOD
include increased funding for advertising, increasing the size of the recruiting force,
and larger enlistment, re-enlistment, and critical skills retention bonuses. Some have
also argued that, in order to prevent serious recruiting and retention problems from
surfacing in the future, the frequency and duration of military deployments needs to
be decreased promptly. To facilitate this, they have advocated increasing the size of
the military, reducing the number of U.S. military personnel deployed, or shortening
the duration of rotations.
Reserve Benefits. [Lawrence Kapp, Specialist in National Defense
(7-7609)] During the Cold War era, the Reserve Components were a manpower pool
that was rarely tapped. From 1945 to 1989, reservists were involuntarily activated
by the federal government only four times, an average of less than once per decade.
Since the end of the Cold War, and especially in the aftermath of the September 11th
attacks, the nation has relied much more heavily on the Reserves. Since September
11, 2001, the military has activated about 450,000 reservists into federal service. As
the Reserves have been transformed from a “force of last resort” in the Cold War era
to an integrated part of the military services in more recent years, some have argued
that compensation for reservists needs to be enhanced in order to maintain a quality
force and to ease the transition of reservists to and from active duty. Others have
voiced concerns about the costs associated with such proposals and the impact that
improved reserve benefits will have on active component recruiting and retention
patterns. The major benefits improvements issues considered by the 108th Congress
were access to TRICARE (the military’s health care system) for non-activated
reservists and income protection for mobilized reservists. The 108th Congress
approved several provisions that provided certain categories of non-activated
reservists with access to TRICARE; however, these provisions are not as expansive
as some advocates desired. Both the House and the Senate approved measures to
protect the income of some mobilized reservists in the 108th Congress; however,
neither of these provisions became law. Proposals to lower the age at which retired
reservists begin drawing retired pay also generated significant congressional interest,
but did not advance far in the legislative process. The 109th Congress will likely face
similar issues as DOD continues to utilize a substantial number of reservists in Iraq,
Afghanistan, and other places around the world.
CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers,
by Lawrence Kapp.
Defense Business Operations: Management and
Competitive Outsourcing
[Valerie Bailey Grasso, Analyst in National Defense (7-7617)]
The management of DOD service contracts, and contractors, has been a topicth
of congressional interest that will likely extend into the 109 Congress. Competitive
sourcing was a major initiative identified by the first Bush Administration’s

Presidential Management Agenda, and it was one of five government-wide initiatives
to improve the management and performance of the federal government. In the
FY2005 National Defense Authorization Act (P.L. 108-375), Congress directed that
DOD provide new accountability on the reporting of the size and scope of the service
contractor workforce. The DOD Inspector General is required to report to Congress,
by February 1, 2005, on whether DOD has a sufficient number of employees to
satisfactorily conduct public-private competitions and administer any resulting
contracts, and whether DOD has implemented a conclusive and dependable system
to track and assess both the cost and the quality of functions performed by DOD
service contractors.
DOD is required to submit two reports to Congress, by the end of April 2005,
on managing certain aspects of its business operations. The first report is to provide
guidance on the establishment of policies for the management and oversight of the
contractors that support deployed forces in Iraq, including the roles and
responsibilities of military commanders, coordination of the movement of contractor
security personnel, establishment of rules of engagement for armed contractor
security personnel, and the establishment of categories of security, intelligence, law
enforcement, and criminal justice functions to determine if they are inherently
governmental and should be performed by contractor personnel or military personnel.
The second report will provide policy guidance and report on DOD’s plan to manage
contractor personnel who support deployed forces, including procedures for making
and documenting decisions regarding contractor personnel, a description of
disciplinary and criminal actions brought against contractor employees, an
explanation of the legal status of contractor employees engaged in security functions
in Iraq after the transfer of sovereignty to Iraq, and a plan for the collection of data
on the number and type of contractors, the monetary value of the contracts, the
number of casualties, and the number of defense contractor personnel in Iraq.
Congress has expressed concern over another management issue raised by the Air
Force’s and Boeing’s handling of the KC-767 tanker aircraft leasing contract, which
resulted in the resignation of two senior Air Force officials and the conviction of a
high-ranking Air Force civilian acquisition executive. Congressional hearings,
especially in the Senate, are likely to focus on the DOD investigation into this matter;
the DOD review is scheduled to be completed by mid-January 2005. In carrying out
its oversight responsibilities on this and other matters, the 109th Congress will face
challenges as DOD accounts for its contracting actions and managerial results.
CRS Report RL30392, Defense Outsourcing and the OMB Circular A-76 Policy, by
Valerie Bailey Grasso.
CRS Report RL32229, Iraq: Frequently Asked Questions about Contracting, by
Valerie Bailey Grasso.

International Trade and Finance
[William H. Cooper, Specialist in International Trade and Finance (7-7749)]
The 108th Congress completed a very full trade agenda with the passage of
legislation to implement U.S. free trade agreements (FTAs) with Australia, Chile,
Singapore, and Morocco; to broaden the tariff preferences for sub-Saharan African
countries under the African Growth and Opportunities Act (AGOA III); to comply
with two adverse World Trade Organization (WTO) determinations by repealing the
Extraterritorial Income (ETI) exclusion benefit for exporters and repealing the 1916
Antidumping Act; to authorize the President to grant Armenia and Laos permanent
normal trade relations (PNTR) status; and to reauthorize the Overseas Private
Investment Corporation (OPIC).
The 109th Congress is expected to face a trade agenda that will be at least as
extensive. Early in 2005, President Bush is expected to request that his authority to
negotiate trade agreements under expedited congressional approval (trade promotion
authority), be extended for two years beyond its June 30, 2005 expiration date. Such
a request would happen automatically unless either chamber passes a resolution of
disapproval. In addition, the President is expected to send Congress legislation to
implement the U.S. free trade agreement (FTA) with Bahrain early in the first
session, and may also send legislation to implement the FTA with five Central
American countries (CAFTA), and possibly the Dominican Republic if a dispute over
a recent Dominican tax placed on high-fructose syrup drinks can be resolved. The
Bush Administration will likely complete FTA negotiations with several other
countries and launch negotiations with still others in the near future.
Before the end of its first session, the 109th Congress will have to decide
whether to introduce and act on a joint resolution to disapprove continued U.S.
participation in the WTO. Furthermore, the 109th Congress may consider whether to
comply with a WTO dispute resolution against the Continued Dumping and Subsidy
Offset Act (CDSOA), also known as the “Byrd Amendment” after its chief sponsor,
Senator Robert Byrd.
On January 1, 2005, multilateral quotas on trade in textiles and apparel will
have permanently expired. Congress may grapple with the potential impact of the
expected increased competition from Chinese apparel on U.S. producers and on U.S.
suppliers in developing countries that may not be able to compete with Chinese
manufacturers. Congress will also likely face issues related to the impact of a
depreciating dollar and U.S. trade deficits. The 109th Congress may also consider
reauthorization of the long-expired Export Administration Act.

CRS Report RL32698, Trade Legislation in the 108th Congress, by Raymond Ahearn.
CRS Report RL31356, Free Trade Agreements: Impact on U.S. Trade and
Implications for U.S. Trade Policy, by William H. Cooper.
CRS Issue Brief IB10123, Trade Negotiations in the 109th Congress, by Ian
Fergusson and Lenore Sek.
CRS Report RL31974, Trade Agreements: Requirements for Presidential
Consultations, Notices, and Reports to Congress Regarding Negotiations, by
Vladimir N. Pregelj.
Renewal of Trade Promotion Authority
[Lenore Sek, Specialist in International Trade and Finance (7-7768)]
Under Title XXI of the Trade Act of 2002 (P.L. 107-210) as amended, Congress
approved expedited procedures (no amendment, limited debate, and an up or down
vote) for legislation to implement trade agreements, as long as the trade agreements
were entered into before July 1, 2005 and other conditions were met. This
congressional consent to expedited procedures, along with provisions setting forth
negotiating objectives and the authorization to enter into agreements, is called “trade
promotion authority” (TPA). The Trade Act of 2002 also provided for a two-year
extension of TPA, and an issue for the 109th Congress is whether or not to disapprove
the two-year extension.
Under the Trade Act of 2002, the two-year extension is automatic as long as two
conditions are met. First, the President must request the extension by April 1, 2005.
Together with the request, the President must submit information such as a
description of progress in negotiations and the reasons why the extension is needed
to complete the negotiations. This information will indicate to Congress what trade
agreements the President plans to conclude in the additional two years and whether
such trade agreements might further U.S. trade policies.
A second condition for the two-year extension of TPA is that neither the House
nor the Senate adopt an extension disapproval resolution before July 1, 2005. While
any Member may introduce a disapproval resolution, it is not in order for the Senate
to consider any extension disapproval resolution not reported by the Committee on
Finance, or for the House to consider any extension disapproval resolution not
reported by the Committee on Ways and Means and the Committee on Rules.
If neither the House nor the Senate adopts a disapproval resolution, the
President is automatically granted the two-year extension of TPA. The extension
could cover trade agreements reached in the current Doha Round of WTO
negotiations and possibly additional free-trade agreements. If at least one chamber
of Congress, however, adopts a disapproval resolution, then any trade agreements
entered into after June 30, 2005 would be considered for implementation under
normal legislative procedures. A vote on TPA extension will be seen as an indication
of congressional support for, or opposition to, the President’ s trade agenda.

CRS Report RL31844, Trade Promotion Authority (Fast-Track Authority for Trade
Agreements): Background and Developments in the 107th Congress, by Lenore
CRS Report RS21004, Trade Promotion Authority and Fast-Track Negotiating
Authority for Trade Agreements: Chronology of Major Votes, by Carolyn C.
CRS Report 97-896, Why Certain Trade Agreements Are Approved as
Congressional-Executive Agreements Rather Than as Treaties, by Jeanne J.
Free Trade Agreements/Implementing Legislation
Ian Fergusson, Analyst in International Trade and Finance (7-7-4997) and J. F.
Hornbeck, Specialist in International Trade and Finance (7-7782)]
Congress may be asked to approve one or more free trade agreements (FTAs)th
in the first months of the 109 Congress. These FTAs are an important component
of the Bush Administration’s policy of competitive liberalization, in which
simultaneous negotiations are undertaken to advance trade liberalization at the
bilateral, regional, and multilateral levels. FTAs have been signed with the nations
of the Central American Common Market (Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua), the Dominican Republic, and Bahrain. Other negotiations
are in progress with Panama, the Andean nations of Colombia, Ecuador, and Peru,
the Southern African Customs Union (South Africa, Botswana, Lesotho, Namibia,
and Swaziland), and Thailand. In addition, Oman, the United Arab Emirates, Egypt,
Taiwan, New Zealand and South Korea have been put forward as possible partners
for future negotiations. The United States remains engaged in negotiations for a Free
Trade Area of the Americas (FTAA) with 34 other nations of the hemisphere. The
negotiations, however, have been stalemated by disagreements between the United
States and Brazil over the scope of the negotiations, specifically whether to negotiate
agricultural subsidies, intellectual property, investment, and services.
The Dominican Republic-Central America Free Trade Agreement (DR-CAFTA)
may prove to be the most contentious of the agreements. On May 28, 2004, the
United States and the Central America Common Market (CACM) countries signed
the U.S.-Central America Free Trade Agreement (CAFTA). On August 5, 2004, the
Dominican Republic, having completed separate negotiations with the United States,
was added to the agreement (the DR-CAFTA) in a subsequent signing by all parties.
In the United States, the DR-CAFTA has been controversial, with concerns over (1)
allegations of weak enforcement of labor standards in some countries, and (2) the
economic effects on all countries of liberalizing trade of the region’s major export
sectors, agriculture, textiles, and apparel. The agreement became more controversial
in September 2004, when the Dominican Republic passed a revenue bill that included
a 25% tax on beverages containing high-fructose corn syrup. The USTR accused the
Dominican Republic of breaching its commitments under both the WTO and the
proposed DR-CAFTA, and has recommended that the Dominican Republic be
excluded from the implementing legislation unless the tax is dropped. Congress
appears divided over this option, as the Dominican Republic was originally included

to obtain additional support for CAFTA. Thus, the timing of implementing
legislation for this FTA remains in doubt.
The United States and Bahrain signed an FTA on September 14, 2004 and
implementing legislation may be submitted early in the 109th Congress. While not
significant in economic terms, the agreement rewards Bahrain for economic
liberalization and political friendship. It is also considered a step toward the creation
of a Middle East Free Trade Agreement by 2013. In the region, the United States
currently has FTAs with Jordan, Israel, and Morocco. The Bahrain agreement may
be considered individually or it may be combined with consideration of other
In debating implementing legislation, Congress may, explicitly or implicitly,
question several aspects of the Administration’s trade policy. Do these agreements
fulfill the obligations of trade promotion authority? Do the DR-CAFTA’s labor
provisions reflect the intention of Congress? Do these FTAs serve broader U.S.
trade and foreign policy interests? Do these FTAs provide an economic benefit
commensurate with the negotiating resources needed to conclude them, or would
resources be better spent negotiating in multilateral or large regional forums such as
the WTO or FTAA? Do geopolitical considerations have a disproportionate
influence on the selection of FTA partners, and if so, is that justified? Of primary
importance to legislators, however, may be the manner in which a potential trade
agreement affects the employment or business prospects of constituents. Individual
members will have to decide whether the threat of lost jobs, and lost market-share to
import-competing industries, or cuts in agriculture subsidies outweigh the prospect
of new employment or new markets for exporters.
CRS Report RL32540, The Proposed U.S.-Panama Free Trade Agreement, by J.F.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the U.S.-Central America Free Trade Agreement (CAFTA), coordinated by K.
Larry Storrs.
CRS Report RL32638, Middle East Free Trade Area: Progress Report, by Mary Jane
CRS Report RS21846, Proposed U.S.-Bahrain Free Trade Agreement, by Martin A.
CRS Report RL31870, The U.S.-Central America Free Trade Agreement (CAFTA):
Challenges for Sub-Regional Integration, by J. F. Hornbeck.
CRS Report RS21868, U.S.-Dominican Republic Free-Trade Agreement, by Lenore

WTO-Related Legislation
[Lenore Sek, Specialist in International Trade and Finance (7-7768), Jeanne J.
Grimmett, Legislative Attorney (7-5046) and Vladimir N. Pregelj, Specialist in
International Trade and Finance (7-7747)]
During the first half of 2005, the 109th Congress might vote on whether the United
States should continue as a member of the World Trade Organization (WTO). The
provisions on such a vote are found in section 125 of the 1994 legislation that
implemented the Uruguay Round of multilateral trade agreements (P.L. 103-465).
Under that act, the U.S. Trade Representative (USTR) must submit to the Congress an
annual report on the activities of the World Trade Organization, and every fifth year a
more comprehensive report that includes a broad analysis of the costs and benefits of
continued U.S. participation in the WTO. The deadline for the next of these
comprehensive reports is March 1, 2005.
Once Congress receives this comprehensive report, any Member of Congress is
permitted to introduce a joint resolution withdrawing the approval of the United States from
the agreement establishing the WTO. Such a resolution is privileged and has to be
introduced within 90 days after Congress receives USTR’s report. In 2000, the House voted
down a disapproval resolution by a margin of 363-56. While any such vote in the 109th
Congress may have symbolic importance, it also offers Congress an opportunity to debate
the costs and benefits of U.S. participation in the WTO. In this context, congressional
frustration with U.S. trading partners over disputes involving agriculture, aerospace, and
softwood lumber could be manifested in floor debates and statements.
The 109th Congress also might face votes related to trade disputes in the WTO. Of
note, the United States lost a case against a U.S. law that redistributes U.S. antidumping and
countervailing duties to domestic parties (the “Byrd Amendment”), and the WTO has
authorized other countries to impose duties on U.S. products. The Congress might monitor
this case to observe the consequences to U.S. industries, and it might consider whether or not
to change the disputed law.
CRS Report 98-928, The World Trade Organization: Background and Issues, by
Lenore Sek.
CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in
Pending Cases, by Jeanne J. Grimmett.
CRS Report RS217763, WTO Dispute Settlement: Stages and Pending U.S. Activity
Before the Dispute Settlement Body, by Todd B. Tatelman.
CRS Report RS21918, United States’ Withdrawal from the World Trade
Organization: Legislative Procedure, by Vladimir N. Pregelj.
CRS Report RL32645, The Doha Development Agenda: The WTO Framework
Agreement, coordinated by Ian F. Fergusson.
CRS Report RL32700, Seeking Withdrawal of Congressional Approval of the WTO
Agreement: Background, Legislative Procedure, and Practical Consequences,
by Vklademir N. Pregelj.
CRS Report RL32053, Agriculture in WTO Negotiations,
by Charles E. Hanrahan.

Trade Deficit Concerns
[James Jackson, Specialist in International Trade and Finance (7-7751) and
Wayne Morrison, Specialist in International Trade and Finance (7-77667)]
In 2004, the nation’s current account, a broad accounting of the net difference
between the goods and services the nation exports and imports annually, will surpass
the record $500 billion deficit recorded in 2003. The cumulative amount of
successive deficits is raising concerns about how large a current account deficit the
United States can finance through inflows of foreign capital. Prospects that foreign
investors could reduce their purchases of U.S. Treasury securities and other U.S.
assets (portfolio investments) likely will increase pressures on the 109th Congress to
address the federal government’s budget deficit, because the inflows are bridging the
gap between domestic supplies of and demand for capital. Foreigners are now major
investors in U.S. corporate stocks and bonds and hold some 45% of publicly traded
U.S. Treasury securities. At some point, foreign investors may become
uncomfortable with the large share of U.S. assets in their holdings and reduce their
purchases of U.S. assets.
Given current U.S. economic policies, a reduction in foreign capital inflows
would have a wide-ranging impact on the U.S. economy. These capital inflows likely
are keeping U.S. interest rates below the level they would have reached without the
foreign capital and they allow the United States to spend beyond its means, including
financing its current account deficits. Congress likely would find itself embroiled in
any financial crisis arising from relatively lower levels of foreign capital inflows
through its direct role in conducting fiscal policy and in its indirect role in the
conduct of monetary policy through its supervisory responsibility over the Federal
Capital flows also affect the international exchange value of the dollar. Demand
for U.S. assets, such as financial securities, translates into demand for the dollar,
since U.S. securities are denominated in dollars. As demand for the dollar rises or
falls according to overall demand for dollar-denominated assets, the value of the
dollar changes. Over the past three years, the average exchange value of the dollar
has fallen by about 15 percent, mostly against the euro and other currencies that float
A sustained change in capital inflows and the value of the dollar would directly
affect the U.S. current account balance by altering the level of U.S. exports and
imports of goods and services, which in turn could affect a broad range of sectors in
the U.S. economy. Although foreign trade is still a relatively small part of the overall
U.S. economy, changes in the trade accounts alter the composition of jobs in the
economy and can affect the overall level of economic activity. Also, reduced levels
of foreign capital inflows can have a negative effect on the rate of economic growth
by reducing the rate of U.S. business investment and foreign direct investment in
U.S. businesses. Such events could increase pressure on Congress to pursue policies
that promote U.S. exports and to confront more aggressively those nations that
attempt to deflect economic adjustments by supporting their currencies through
official purchases of U.S. securities, thereby supporting the exchange rate of the
dollar relative to their own currencies.

In particular, the continued rise in the U.S.-China trade imbalance and
complaints from U.S. manufacturing firms and workers over the competitive
challenges posed by cheap Chinese imports have led to increased pressure on the
Bush Administration to take a more aggressive stance against “unfair” Chinese trade
policies, including China’s policy of pegging its currency (the yuan) to the U.S.
dollar. Many Members of Congress contend that the peg constitutes a form of
“currency manipulation” that is both unfair and detrimental to U.S. economic
interests because it artificially lowers the prices of Chinese exports to the United
States while making U.S. exports to China more expensive. China has refused to
alter the peg, arguing that such a move would destabilize the economy, especially
because of the poor state of China’s banking system. In October 2003, the Bush
Administration established a “joint technical cooperation program” to advise China
on financial market reforms in the hope that such reforms will induce China to move
more quickly towards adopting a floating exchange rate system. The Bush
Administration, however, is constrained somewhat in the extent to which it is willing
to press the issue, since the Chinese are major purchasers of U.S. Treasury securities
and an abrupt change in this role could have far-ranging implications for the
CRS Report RS21951, Changing Causes of the U.S. Trade Deficit, by Marc
Labonte and Gail Makinen.
CRS Report RL32165, China’s Exchange Rate Peg: Economic Issues and Options for
U.S. Trade Policy, by Wayne Morrison.
CRS Issue Brief IB91121, China-U.S. Trade Issues, by Wayne Morrison.
CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy:
Evidence Based on Foreign Investment Data, by James K. Jackson.
CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
CRS Report RS21857, Foreign Direct Investment in the United States: An Economic
Analysis, by James K. Jackson.
End of Textile and Apparel Quotas
[Bernard A. Gelb, Specialist in Industry Economics (7-7738) and Vivian C.
Jones, Analyst in International Trade and Finance (7-7823)]
Attempts to resolve issues between textile and apparel exporters and importers
over the years resulted in a number of agreements (bilateral and multilateral) that
restricted the amounts of textiles and apparel traded and did not adhere to the basic
rules of the General Agreement on Tariffs and Trade. Nearly all such agreements
were combined in 1974 into a “temporary” Multifibre Arrangement (MFA) that
applied a common set of rules. The Agreement on Textiles and Clothing (ATC),
reached in 1994 during the Uruguay Round of trade negotiations, ended the MFA by
establishing a ten-year transition period for producers in developed countries to plan
for and adjust to intensified competition from developing countries. Quotas, which
effectively raise the prices of goods, were scheduled to be eliminated in four stages.
The final stage, covering the most import-sensitive and largest group of products, is
effective January 1, 2005, when textile and apparel trade will be subject to the same

rules governing other products. The ending of quotas will remove a hindrance to
industries in the lowest-labor-cost nations to win markets from their counterparts in
other developing countries and in industrialized countries. Countries that had some
assured market access along with restricted quantities will face more open
competition, particularly in apparel assembly, which is labor-intensive.
Imports of textiles and apparel into the United States began to surge in the early
1960s and have risen very rapidly in the last 20+ years — winning large portions of
U.S. markets. Employment in U.S. textile and apparel manufacturing has decreased
by about 50% and 60%, respectively, since 1980, due to increases in imports and
industry productivity. Textile employment has declined less rapidly partly because
U.S. tariff preference programs generally require U.S. fiber and fabric to be used in
the apparel that is exported to the United States duty free. With large increases in
U.S. imports of textile and apparel expected to result from the lower prices of
imported goods and entry of previously denied goods, it is probable that employment
in U.S. textile and apparel manufacturing will fall further. Textile and apparel
industry sources predict job losses in the hundreds of thousands. The overall U.S.
economy arguably will benefit, however, partly from the extent to which textile and
apparel prices fall or do not rise as much as they would with quotas.
Developing countries were the main proponents of the ATC, and most of the
group initially was expected to gain from the quota phase out. Now, it is widely
expected, and feared by many, that a few — led by China and India — will be major
beneficiaries at the expense of the others, although countries that are geographically
closer to the major consuming markets — North America and the European Union
— are likely to be less negatively affected. Advantages of countries covered by U.S.
tariff preferences will be diminished. A number of the countries concerned about
their prospective loss of markets and the negative impact of on their economies have
appealed to the WTO for measures that would ease the transition.
A textile-specific safeguard provision in China’s WTO accession agreement
allows the United States and other Member countries to impose temporary quotas on
textile and apparel from the People’s Republic of China if they determine that
Chinese-origin imports of a product are causing “market disruption.” In effect
through December 31, 2008, the provision requires China to hold its shipments of the
goods in question at a level no greater than 7.5% more than the quantity that entered
during the previous year. The quotas may continue for a maximum of a year unless
reapplied for, or unless an agreement is reached between the parties. The United
States imposed safeguard quotas on three groups of products on December 23, 2003,
and on socks on October 28, 2004. Several additional industry petitions for
safeguards are pending, as well as renewal requests for the safeguards due to expire
in late December 2004, according to textile and apparel industry sources. Almost all
of the petitions recently submitted pertain to products presently under quota
restrictions, as the U.S. industry believes the products will be threatened with market
disruption once all quotas are lifted in January 2005.
Retailers and other importers of textiles and apparel oppose the safeguards,
saying that many U.S. industry job losses are due to technology improvements rather
than Chinese competition, and contending that limiting Chinese imports will cause
market inefficiencies that will result in higher prices to U.S. consumers. Chinese

officials have voiced displeasure with the imposition of the safeguards and reserved
the right to challenge implementation through the WTO dispute settlement process.
In an apparent act of concern over U.S. safeguard implementation and
international pressure, China announced on December 12, 2004 that it would increase
export tariffs on certain lower-end textile and apparel products by an unspecified
amount beginning January 1, 2005, in part to “ensure a smooth transition for textile
integration following the end of the quota system.” Many textile interests are
skeptical that the duties would be large enough to offset what they believe is a 30 to

40 percent price advantage that China will enjoy over other nations.

CRS Report RL32168, Safeguards on Textile and Apparel Imports from China, by
Vivian C. Jones.
CRS Report RS20889, Textile and Apparel Quota Phaseout: Some Economic
Implications, by Bernard A. Gelb.
CRS Report RL31934, Textile and Apparel Trade Issues, by Bernard A. Gelb.
Export Administration Act
[Ian Fergusson, Analyst in International Trade and Finance (7-4997)]
In the 109th Congress, there may be continued efforts to rewrite and reauthorize
the Export Administration Act of 1979 (EAA). The EAA provides the statutory
authority for export controls on sensitive dual-use goods and technologies, items that
have both civilian and military applications including those items that can contribute
to the proliferation of nuclear, biological, and chemical weaponry. The EAA, which
originally expired in 1989, periodically has been reauthorized for short periods, with
the last incremental extension expiring in August 2001. At other times, the export
licensing system created under the authority of EAA has been continued by the
invocation of the International Emergency Economic Powers Act (IEEPA). In the
108th Congress, H.R. 55 was introduced on January 7, 2003, but no action was taken
on the bill. In addition, the House has attempted to make incremental changes to the
export licensing system through the National Defense Authorization Act. In both
years, these provisions were removed in conference after facing opposition from the
Senate and the Administration.
In the 107th Congress, S. 149 was passed by the Senate on September 6, 2001;
a companion bill, H.R. 2581, was heavily amended to reflect the national security
concerns of members of the House International Relations Committee and House
Armed Services Committee. Although approved by both committees, this bill was
not considered by the full House. The Administration publicly supported S. 149.
The debate of dual-use export controls ultimately becomes one of choosing the
right balance between national security concerns and commercial considerations.
Those who claim the current system does not adequately address national security
concerns maintain that it compromises national security by failing to prevent the
spread of dual-use technologies and goods to countries suspected of participating in
the proliferation of weapons of mass destruction or supporting international
terrorism. In their opinion, foreign countries have no right to import U.S. technology,
but rather such imports are a privilege that should take into account other U.S. policy

interests, including nuclear non-proliferation, human rights, and suppression of
terrorism. They contend that export controls can be effective because the United
States possesses advantages in high-technology areas such as encryption,
high-powered computing, synthetic materials, specialized manufacturing and testing
equipment, and precision machine tools that cannot be replicated overseas.
Other observers maintain that current export controls disadvantage U.S.
business by subjecting exports of goods and technology to cumbersome and
ineffective licensing procedures that cede sales and market share to overseas
competitors that do not face such a comprehensive control regime. They maintain
that most technology cannot be controlled and is available from foreign sources.
Furthermore, they assert that it is necessary to sell current technology overseas in
order to provide the funds for research and development necessary to develop new
technology vital to U.S. security interests and to remain competitive in the future.
CRS Report RL31832, The Export Administration Act: Evolution, Provisions, and
Debate, by Ian F. Fergusson.
CRS Report RL31175, High-Performance Computers and Export Control Policy:
Issues for Congress, by Glenn McLoughlin and Ian F. Fergusson.