Foreign Affairs, Defense, and Trade: Key Issues for the 110th Congress

Foreign Affairs, Defense, and Trade:
Key Issues for the 110 Congress
December 20, 2006
Clare M. Ribando and Bruce Vaughn
Foreign Affairs, Defense, and Trade Division

Foreign Affairs, Defense, and Trade:
Key Issues for the 110th Congress
The 110th Congress will face a number of pressing foreign affairs, defense, and
trade issues in the opening days of its tenure. This report identifies major issues most
likely to be on the legislative agenda, discusses critical policy choices at stake, and
summarizes some of the major alternatives that Congress may consider. The report
lists Congressional Research Service reports that address these issues, and it
identifies key analysts and their areas of responsibility.
A major issue confronting the new Congress is what to do in Iraq. The
Baker/Hamilton-led Iraq Study Group recommended pursuing a new diplomatic
initiative, including negotiations with Iran and Syria; and making the training of Iraqi
security forces the primary U.S. military mission. The commission concluded that
the United States “could” aim to withdraw all U.S. combat brigades not necessary for
force protection by the first quarter of 2008. Congress faces an evaluation of these
recommendations and a decision as to what its role should be in implementing these
or other new policies. Supplemental appropriations for Iraq and Afghanistan may be
the initial vehicle for debate over a new course in Iraq.
U.S. and allied progress in Afghanistan may also be among the key issues in the
110th Congress along with international counter-terrorism, proliferation of weapons
of mass destruction, regional geopolitical dynamics, and trade developments.
China’s rise is reshaping global economic relations and is affecting security dynamics
in Asia and around the globe. The ongoing fight against terrorism, particularly in the
Afghanistan-Pakistan border region, and efforts to dissuade or restrain Iran and North
Korea from pursuing nuclear weapons programs are key issues for consideration, as
is the Israel-Palestinian conflict.
Defense spending, and particularly budgeting for operations in Iraq and
Afghanistan, will also be one of the major issues facing the 110th Congress. Congress
may be asked to consider large increases in funding for the Army, and it faces a
potentially difficult tradeoff between increases in the size of the Army and funding
for major weapons programs. Other defense issues include the implementation of
recent base closure plans, the status of intelligence reform, pay and benefits of
military personnel, and the role and structure of National Guard and Reserve forces.
Trade issues have become increasingly controversial in recent years, and may
well remain so as many Members grapple with the real and perceived effects of
globalization. Many Members have concerns about instances of lost jobs and lower
wages, the growing income gap in the United States, and about burgeoning U.S. trade
deficits. Debate over trade policy could be launched with the scheduled expiration
on July 1, 2007, of the Trade Promotion Authority (TPA). TPA is the authority that
Congress has delegated to the President to negotiate reciprocal trade agreements that
receive expedited congressional consideration. Congress’s decision on TPA will have
major implications for pending negotiations, and for U.S. participation in the Doha
Development Agenda (DDA) negotiations in the World Trade Organization (WTO).

Issues of Continuity and Change in Foreign, Security, and Trade Policy.......1
Policy Priorities...................................................4
Iraq and Afghanistan Overview...................................4
Situation in Iraq...........................................5
Situation in Afghanistan....................................7
Cost and Budget Issues.....................................9
U.S. and International Counter-terrorism Efforts....................12
Proliferation and Weapons of Mass Destruction.....................13
Regional Geopolitical Dynamics.................................14
People’s Republic of China and Taiwan.......................14
Iran ....................................................17
Israel and Its Neighbors: Impediments to the Peace Process........19
North Korea.............................................20
Foreign Affairs...................................................21
Global Issues................................................21
Overview ...............................................21
Transformational Diplomacy................................22
Transformational Development and Foreign Aid Restructuring.....23
Peacekeeping, Stabilization, and Reconstruction: New Tools.......24
Humanitarian Assistance and Refugees........................26
Global Health and HIV/AIDS Issues..........................27
United Nations Reform....................................29
Economic Sanctions.......................................30
Africa ......................................................31
Overview ...............................................31
Sudan ..................................................32
Somalia ................................................33
AIDS in Africa...........................................33
Asia .......................................................34
Overview ...............................................34
Japan ..................................................35
South Korea.............................................36
South Asia..............................................37
Southeast Asia...........................................39
Europe .....................................................40
Overview ...............................................40
NATO and Afghanistan....................................41
Russia ..................................................41
Kosovo .................................................42
Latin America...............................................43
Overview ...............................................43
Cuba ...................................................43
Colombia ...............................................44
Haiti ...................................................45
Mexico .................................................46
Venezuela ...............................................47

Middle East.................................................47
Overview ...............................................47
Syria and Lebanon........................................48
U.S. Foreign Assistance to the Middle East....................49
Iraq: Regional Implications.................................51
Defense and Security..............................................52
Overview: Defense Strategy and Military Force Planning.............52
Defense Budget Trends and Issues for Congress.....................53
Military Base Closure, Realignment, and Expansion.................55
Intelligence ..................................................56
Special Operations Forces......................................57
Defense Modernization and Weapon Systems.......................58
Army Modernization......................................58
Navy Shipbuilding .......................................59
Air Forces Modernization..................................59
Ballistic Missile Defense...................................60
Reliable Replacement Warhead (RRW) Program................60
Military Personnel............................................61
Recruiting and Retention...................................61
Reserve Component Benefits................................63
Military Medical Care.....................................64
Abortion and Military Medical Care..........................64
Defense Acquisition Reform and Contract Management ..............65
International Trade and Finance......................................67
Overview ...................................................67
Renewal of Trade Promotion Authority............................68
Doha .......................................................69
Free Trade Agreements/Implementing Legislation ...................70
Trade Deficit Concerns........................................71
Foreign Investment, Outsourcing, and Finance......................72
Export Promotion.............................................73
Export Administration Act......................................74
International Financial Institutions...............................75

Foreign Affairs, Defense, and Trade:
Key Issues for the 110 Congress
Issues of Continuity and Change in Foreign,
Security, and Trade Policy
[William H. Cooper, Specialist in International Trade (7-7749)
Stephen Daggett, Specialist in National Defense (7-7642)
Stuart D. Goldman, Specialist in Russian and Eurasian Affairs (7-7685)]
A number of challenging issues in foreign, defense, and trade policy are likely
to confront the 110th Congress, starting with what the Baker/Hamilton-led Iraq Study
Group (ISG) calls the “grave and deteriorating” situation in Iraq. In early 2007, the
Administration is expected to ask for supplemental appropriations for military
operations in Iraq and Afghanistan and to enhance social and political stability,
democratization, and reconstruction in those countries. After Iraq, other high
priorities will be the continuing fight against terrorism and efforts to dissuade or
restrain Iran and North Korea from pursuing nuclear weapons programs. Congress
will also consider a number of Free Trade Agreements (FTAs) and whether to extend
presidential Trade Promotion Authority (TPA). With both chambers set to pass from
Republican to Democratic control, the 110th Congress is likely to intensify its
oversight over these and other Administration policies and activities.
As the 110th Congress convenes, the issue that overshadows all others is what
to do in Iraq. Although not all Members agree entirely with the ISG’s grim
assessment of the situation in Iraq, the predominant issue in Congress no longer
seems to be whether to stay the course, but what to do differently. A key corollary
question for Congress is what its role should be in redirecting policy.
A key recommendation of the ISG calls for a major U.S. diplomatic initiative
throughout the region to help stabilize the deteriorating situation in Iraq. The group’s
report proposes U.S. diplomatic engagement with Iran and Syria, among others, and
intensified U.S. efforts to help resolve the Israel-Palestinian conflict and the crisis in
Lebanon. The 110th Congress may want to consider to what extent it supports this
recommendation and what, if any, legislative measures might be called for to
promote it.
Among the central recommendations of the ISG are to make training of Iraqi
security forces the primary U.S. military mission and to aim to withdraw all U.S.
combat brigades not necessary for force protection by the first quarter of 2008.
Congress faces an evaluation of these recommendations and a decision as to what,
if any, legislative measures might be helpful to promote these or other policies.

Following that, a central issue may be whether Congress should insert any
specific, enforceable policy prescriptions into upcoming legislation to provide
supplemental funding for the war. In early February, the Defense Department is
expected to request supplemental appropriations to cover costs of military operations
in Iraq and Afghanistan for the remainder of FY2007. During the war in Vietnam,
Congress frequently debated amendments to defense spending bills to reduce troop
strength or to cut off funding for U.S. military operations. Congress finally approved
a funding cutoff in 1973. Though Congress may not be inclined to go so far in Iraq,
there may well be support for linking funding to achievement of political
benchmarks, such as those that the ISG laid out. Some may propose a specific
timetable for withdrawing forces. Alternatively, there has been some support in
Congress for adding troops in Iraq.
Congressional action on the FY2007 supplemental appropriations bill may also
be the first round of what may be an ongoing debate in the 110th Congress over the
preparedness of U.S. military forces and the sufficiency of planned funding for
military personnel, training, and equipment. In recent years, Congress has provided
progressively larger amounts of money for war-related costs in annual supplemental
appropriations bills as well substantial and growing amounts in regular defense
budget requests. In FY2006 Congress provided over $530 billion for the Department
of Defense, of which about $120 billion were additional funds for the war. The 109th
Congress also approved a “down payment” of $70 billion for war costs in FY2007,
of which almost $25 billion was to repair and replace Army and Marine Corps
equipment lost or worn down by the war.
Now it appears that the Army, in particular, has toted up a much larger bill than
had earlier been expected as the cost of equipping and reorganizing its forces to
prepare, not only for operations in Iraq and Afghanistan, but also for possible future
operations abroad. Initial reports are that the Army and the other services have
requested an additional $125-130 billion in war-related expenses, which would bring
the total for FY2007 to almost $200 billion, although it is not yet known how much
of that the White House will request from Congress. For Congress, a central issue
is how to ensure adequate readiness while also maintaining some degree of fiscal
discipline. A key aspect of that issue is how to manage budgetary tradeoffs between
pressures to add to the size of the Army and Marine Corps and also preserve
sufficient funds to modernize military forces in the longer term.
In addition to Iraq and Afghanistan, other central foreign policy issues facing the
Administration and 110th Congress are how best to deal with the challenges posed by
the nuclear activities of North Korea and Iran. In 2007, there is likely to be a good
deal of political and diplomatic activity regarding both countries’ nuclear programs.
The 110th Congress may exercise oversight of Administration conduct in this area and
may address aspects of the issue more directly through legislative action.
European issues that the 110th Congress may address include NATO’s role in
Afghanistan, the status of Kosovo, and relations with Russia. NATO’s expanding
engagement in Afghanistan is the alliance’s largest and most problematic military
operation to date. There is controversy over restrictions some allies have placed on
the role of their forces there. The disputed status of Kosovo is set to be resolved in
early 2007, possibly in some form of independence. Russia presents a complex set

of challenges and opportunities for the United States, particularly with regard to its
policies toward neighboring states and the implications of its growing influence as
an energy supplier for Europe.
Security issues in Asia that may draw the attention of the 110th Congress
include flashpoints along the Taiwan Strait, on the Korean Peninsula, between India
and Pakistan, and along the Pakistani border with Afghanistan, as well as terrorist
activity in Indonesia, the Philippines, India, and Pakistan. Two other long-term
trends in Asia that may warrant Congressional attention are the rise of China and its
increasing influence in the region and globally and increasingly negative attitudes
toward the United States, particularly among Southeast Asian nations with large
Muslim populations and in South Korea.
Legislative and oversight attention to Latin America and the Caribbean in the
110th Congress will likely focus on continued counternarcotics efforts, especially in
the Andean region; potential immigration reform efforts as well as efforts to increase
cooperation on border security, which have been key issues in relations with Mexico;
efforts to deal with threats to democracy in such nations as Venezuela as well as the
rise of leftist populism in several Latin American countries, and debate over the best
means to foster political change in Cuba.
Key U.S. policy issues pertaining to Africa are likely to center on efforts to
promote peace and security in the region; counter-terrorism initiatives; bilateral
military cooperation and training in support of international peacekeeping; the
programmatic focus, funding levels, and objectives of diverse U.S. assistance efforts,
with a particular emphasis on fighting the HIV/AIDS pandemic; and promoting
democracy, human rights, trade, and market-driven economic growth.
In January 2006, Secretary of State Rice announced a major foreign policy
initiative that she called Transformational Diplomacy, “...a bold diplomacy to match
the President’s bold mission of supporting democracy around the world with the
ultimate goal of ending tyranny in our world.” Pursuant to this goal, State
Department personnel are to be shifted largely from Europe and Washington, D.C.
to designated critical locations in Africa, South Asia, East Asia, and the Middle East.
They are to be trained in public diplomacy skills and encouraged not merely to report
on the country in which they are posted, but to promote democratic principles there.
This initiative will likely require increased funding for the foreign operations budget.
The 110th Congress may seek to exercise oversight on how the money is spent,
whether transformational diplomacy is effective, and how foreign governments
respond to this U.S. promotion of democracy in their countries.
Trade issues have become increasingly controversial in Congress during the last
few years. This is likely to continue to be the case during the 110th Congress as
many Members grapple with the real and perceived effects of globalization and how
to balance the benefits and costs of trade liberalization. Many Members of Congress
have raised concerns over lost jobs and lower wages, over the growing income gap
in the United States, over the burgeoning U.S. trade deficits with trading partners,
especially China, and the undervaluing of China’s currency. While mainstream
economists generally assert that trade policy has a very limited role in these areas, for

many Members the trends serve as backdrop to a debate on the shape and conduct of
U.S. trade policy.
That debate could be launched early in the 110th Congress with the scheduled
expiration on July 1, 2007, of the Trade Promotion Authority (TPA). TPA is the
authority that the Congress has delegated to the President to negotiate reciprocal trade
agreements that receive expedited Congressional consideration (limited debate and
no amendments). Under this authority, the Bush Administration completed and the
Congress approved free trade agreements with Chile, Singapore, Australia, Morocco,
the Dominican Republic, Central American countries, Bahrain and Oman. Also, the
Administration signed agreements with Colombia and Peru and announced it would
send implementing legislation for these agreements for Congressional approval under
the TPA procedures.
If the President requests renewal of TPA, Congress would face a decision of
whether to accede to his request and, if so, what form the new authority should take.
Congress’s decision could have major implications for pending FTA negotiations,
such as those with Malaysia, South Korea, and Panama, and for U.S. participation in
the Doha Development Agenda (DDA) negotiations in the World Trade Organization
(WTO). The debate over TPA renewal and its outcome could have major
implications for U.S. trade policy as a whole and for the working relationship
between Congress and the President on trade for the foreseeable future.
Policy Priorities
Iraq and Afghanistan Overview
[Kenneth Katzman, Specialist in Middle Eastern Affairs (7-7612)]
Current U.S. political and military engagements in both Afghanistan and Iraq
are products of the September 11, 2001 attacks on the United States. Afghanistan
under the Taliban hosted the Al Qaeda leadership at the time of the attacks. The
Administration and some Members of Congress perceived Iraq as a sponsor of
international terrorism and intent on building weapons of mass destruction (WMD)
that could conceivably be transferred to Al Qaeda or other terrorist groups. However,
the September 11 Commission report found no evidence of an “operational”
relationship between Saddam’s regime and Al Qaeda.
U.S. forces are engaged in combat and stabilization missions in both
Afghanistan and Iraq, years after the removal of the Taliban and Saddam Hussein
regimes, respectively. Of the two missions, Iraq is far more troubled, with the
number of U.S. service members killed now exceeding 2,880 and sectarian violence
now surpassing the Sunni Arab-led insurgency as the key threat. In Afghanistan, the
Taliban movement has displayed resiliency and resurgence in 2006 as the primary
stabilization mission is being turned over to NATO peacekeeping forces. Violence
continues in both countries despite the completion of U.S.-designed political
transition processes, which culminated in Iraqi and Afghan national elections.

Situation in Iraq. [Kenneth Katzman, Specialist in Middle Eastern
Affairs (7-7612)] Operation Iraqi Freedom overthrew Saddam Hussein’s regime, but
Iraq remains unstable because of Sunni Arab resentment and a related insurgency.
These problems are compounded by Sunni-Shiite violence that some believe is a
“civil war” — a term that the Bush Administration says does not apply to the Iraq
violence. President Bush, in a series of several speeches since 2005, has asserted that
U.S. policy is showing important success, demonstrated by two elections (January
and December 2005) that chose an interim and then a full-term parliament and
government; a referendum that adopted a permanent constitution (October 15, 2005);
progress in building Iraq’s security forces; and economic growth. He has maintained
that U.S. forces should remain in Iraq until Iraq’s elected government is able to
defend itself. While continuing to build, equip, and train Iraqi security units, the
Administration has worked to include more Sunni Arabs in the power structure,
particularly the security institutions: Sunnis were dominant during the regime of
Saddam Hussein and previous Iraqi regimes, but many now feel marginalized by the
newly dominant Shiite Arabs and Kurds. President Bush has said he believes that,
over the longer term, Iraq will become a model for reform throughout the Middle
East and a partner in the global war on terrorism.
Mounting U.S. casualties and financial costs — without clear signs of security
progress — have intensified a debate within the United States over the wisdom of
the invasion and whether to wind down U.S. involvement without completely
accomplishing U.S. goals. Several senior U.S. military leaders have begun to
express less optimism about the situation in Iraq and about the progress of standing
up competent and effective Iraqi Security Forces (ISF), a pillar of the Administration
efforts to turn over more responsibility to Iraqis. A reported memo on Iraq to
President Bush by National Security Adviser Stephen Hadley, drafted in November
2006 and quoted in the New York Times (November 29, 2006), expressed doubts
about Iraqi Prime Minister Nuri al-Maliki’s willingness or ability to curb Shiite
sectarian militias that are said to be targeting Sunni Arabs and fueling a cycle of
retaliatory sectarian violence that has gripped the country.
Debates over Iraq policy options were held in the 109th Congress and, in light
of the results of the November 2006 mid-term elections, will likely continue in the
110th Congress. Some in Congress believe the U.S. mission in Iraq is not progressing
and that major new initiatives are required. Some believe that U.S. counter-insurgent
operations are hampered by insufficient U.S. troop levels. Others maintain that
sectarian violence is placing U.S. forces in the middle of an all out civil war in Iraq
and that setting a timetable for withdrawal might force compromise among Iraqi
factions. Others believe that a U.S. move to withdraw might undercut popular
support for the insurgency. Some Members maintain that the U.S. approach should
focus not on counter-insurgent combat, but on reconstruction and policing of towns
and cities cleared of insurgents, including neighborhoods of Baghdad, an approach
the Administration has adopted. Still others focus on political restructuring such as
creating three autonomous regions for Iraq’s three major communities, Sunni Arabs,
Shiite Arabs, and the mostly-Sunni Kurds. On December 7, 2006, the Senate Armed
Services Committee held a hearing on the findings of the congressionally-created Iraq
Study Group chaired by former Secretary of State James Baker and former
Congressman Lee Hamilton. The Iraq Study Group’s recommendations included
engagement of Iraq’s neighbors, including Iran and Syria, and the gradual

replacement of U.S. combat operations by stepped up U.S.-led training and advising
of Iraq’s security forces.1 The 110th Congress is likely to hold more extensive
hearings on these and other options.
U.S./International Military Operations. [Steve Bowman, Specialist in
National Defense (7-7613)] U.S. military operations in Iraq comprise several
efforts. The 147,000+ troops in Iraq are engaged in counterinsurgency operations,
training/advising Iraqi Security Forces (ISF), and targeted special operations against
terrorist cells. Increasingly heavy emphasis is being placed on improving Iraqi army
performance through embedded U.S. advisory teams in Iraqi units. In the face of
escalating violence, particularly in Baghdad and Al Anbar province, the nature of
future military operations and U.S. troop levels are undergoing intensive scrutiny in
the midst of an on-going debate among U.S. military and civilian decision-makers
regarding appropriate strategy. While an eventual handover of operations to the ISF
remains a consensus objective, opinions vary widely on how and when this can be
achieved. Some argue that, given the relatively poor ISF performance to date, at least
a substantial short-term increase in U.S. troop levels and intensified
counterinsurgency operations are necessary to establish a secure political
environment. Critics of this approach believe that the ISF must be strongly
encouraged to operate more effectively on their own, and that this will be best
achieved by a phased drawdown of U.S. troops over the next year or more, with U.S.
forces serving primarily in advisory and rapid reinforcement roles if needed. As the
United States considers its military options in Iraq, many of its major coalition allies,
including the United Kingdom, Italy, Poland, and Japan have either withdrawn or
are projecting a withdrawal of their military forces.
Reconstruction Assistance. [Curt Tarnoff, Specialist in Foreign Affairs
(7-7656)] To date, nearly $35.7 billion in appropriations from all available budget
accounts has been targeted at assisting the reconstruction of Iraq. More than $15
billion of this total has gone toward the training and equipping of Iraqi security
forces. About $10 billion has gone to building Iraqi non-security infrastructure,
including schools, hospitals, and oil, water, sanitation, and electric power facilities.
Another $10 billion has been aimed at more traditional forms of economic aid,
including providing technical expertise, training, and associated equipment to support
health care, democratization, education, civil society, private sector development and
government reform. Among the key Congressional concerns at this time is whether,
amid reports of waste and mismanagement, the funds already allocated have been
employed efficiently and effectively to achieve U.S. objectives. Looking ahead, there
are serious concerns regarding the ability of the Iraqi government to sustain U.S.-
supported infrastructure projects with the limited financial and managerial resources
at its disposal. Continuing security, infrastructure, and other challenges in Iraq may
raise pressure for further U.S. economic assistance to make up for anticipated
shortfalls in both Iraqi and other donor resources.

1 The text of the Iraq Study Group report is available at [].

CRS Report RL31339, Iraq: Post Saddam Governance and Security, by Kenneth
CRS Report RL31701, Iraq: U.S. Military Operations, by Steve Bowman.
CRS Report RL31833, Iraq: Recent Developments in Reconstruction Assistance, by Curt
Situation in Afghanistan. [Kenneth Katzman, Specialist in Middle
Eastern Affairs (7-7612)] Afghanistan’s political transition was completed with the
convening of an elected parliament in December 2005, but since then insurgent
threats to Afghanistan’s government have escalated to the point that some experts
are questioning the future of U.S. and NATO-led stabilization efforts. In the
political process, a new constitution was adopted in January 2004, successful
presidential elections were held on October 9, 2004, and parliamentary elections took
place on September 18, 2005. The parliament has become an arena for factions that
had fought each other militarily for nearly three decades to debate and peacefully
resolve differences. Afghan citizens are enjoying new personal freedoms that were
forbidden under the Taliban. Women are participating in economic and political life,
including as ministers, provincial governors, and senior levels of the new parliament.
Clouding the prior optimism has been the unexpected escalation of the
insurgency led by remnants of the former Taliban regime in 2006, after several years
in which it appeared the Taliban were mostly defeated. Taliban fighters have
conducted several increasingly larger scale attacks on coalition and Afghan security
forces in several southern provinces, setting back reconstruction and thwarting efforts
to extend Afghan government authority. In addition, narcotics trafficking is
resisting counter-measures, and independent militias remain throughout the country,
although many have been disarmed. Observers attribute the increased violence to a
number of different factors, including popular disappointment at the slow pace of
reconstruction, official Afghan corruption, ample funding from narcotics trafficking,
the continuing writ of regional faction leaders, the ability of Taliban fighters to find
safe haven in neighboring Pakistan, and possible inspiration from and cross-
fertilization between Taliban insurgents and Al Qaeda or other fighters coming from
the insurgency in Iraq.
The 110th Congress is likely to actively monitor U.S. civilian and military
assistance to Afghanistan, amid calls by U.S. and NATO military leaders to
accelerate reconstruction as a means of winning over the support of the Afghan
population. In FY2006, Congress appropriated over $3 billion in U.S. civilian and
military aid for Afghan stabilization and reconstruction, in both regular foreign aid
(P.L. 109-102) and supplemental appropriations (P.L. 109-234). U.S./NATO
stabilization measures focus on strengthening the central government and its security
forces and on promoting reconstructing while combating the renewed insurgent
challenge. The United States and other countries are building an Afghan National
Army, deploying a NATO-led International Security Assistance Force (ISAF) that
now commands peacekeeping throughout Afghanistan, and running regional enclaves
to secure reconstruction known as Provincial Reconstruction Teams (PRTs).

Opium Production and Counternarcotics. [Christopher M. Blanchard,
Analyst in Middle Eastern Affairs (7-0428)] Afghan, U.S., and European officials
have stated that poppy cultivation and drug trafficking constitute serious strategic
threats to the security of Afghanistan and jeopardize the success of post-9/11 counter-
terrorism and reconstruction efforts there. In spite of ongoing international efforts
to combat Afghanistan’s narcotics trade, U.N. officials estimate that a record opium
poppy crop was produced in Afghanistan during the 2005-2006 season, supplying
92% of the world’s illicit opium and reversing a slight reduction that occurred from
2004 to 2005. Narcotics experts describe Afghanistan’s opium economy as the
backbone of a multibillion-dollar trade that stretches throughout Central and
Southwest Asia and supplies heroin to Europe, Russia, and the United States.
Congress has appropriated more than $1.9 billion for U.S. counternarcotics
programs in Afghanistan and surrounding countries since 2001, including several
hundred million dollars for the expansion of initial counternarcotics efforts under a
new interagency “five pillar” plan that blends eradication, interdiction, alternative
livelihood assistance, judicial reform, and public awareness activities. During the
term of the 110th Congress, the full effectiveness of this plan’s initiatives should
become apparent — to date, insecurity in key opium poppy producing areas, delays
in building and reforming Afghan institutions, and widespread local Afghan
corruption have prevented its full implementation. Congress also has passed
legislation requiring several formal reports on the Afghan narcotics trade and U.S.
efforts to combat it: most recently, the FY2007 Defense Authorization Act (Section
1025 of P.L. 109-364) required the Administration to submit an updated policy
review by December 31, 2006.2 Foreign Operations programs are currently operating
under the terms of a continuing appropriations resolution (H.R. 5631/P.L. 109-289,
as amended) which provides funding at the FY2006 or the House-passed FY2007
level, whichever is less. The continuing resolution expires on February 15, 2007.
U.S./International Military Operations. [Andrew Feickert, Specialist in
National Defense (7-7673)] To contribute to stabilization efforts, the United States
has approximately 22,100 service members in Afghanistan, with approximately
12,000 of these troops under NATO command as part of NATO’s 32,000-strong
International Security and Assistance Force (ISAF). The remainder are under U.S.
command as part of Operation Enduring Freedom (OEF), which is responsible for
counterterrorism operations in Afghanistan. The United States had planned to
modestly reduce its troop presence in Afghanistan when NATO assumed
responsibility for overall Afghan security in the fall of 2006, but aggressive and more
sophisticated insurgent operations against coalition forces forestalled this reduction
and suggests that U.S. troop reductions are unlikely in the near future. The United
States and a few NATO countries such as Great Britain, Canada, and the Netherlands
— along with the Afghan National Army (ANA) — have conducted a number of
large-scale offensive operations against Taliban insurgents, but the insurgents
continue to exert significant influence and presence in a number of Afghan provinces.

2 The original policy review was submitted to Congress in October 2005. Report on Counter
Drug Efforts in Afghanistan — October 18, 2005, as required by Sec.7104, Section 207 (b)
of the Intelligence Reform and Terrorism Prevention Act, 2004 (P.L. 108-458); House
Committee on International Relations, Ex. Comm. 4575.

Many NATO countries have placed national caveats on how their troops may
be used in Afghanistan which limits their utility and creates the need for additional
forces that can participate in combat operations. At NATO’s Riga Summit in
November 2006, progress was made on modifying some of these national caveats,
but some maintain that these modifications do little to ease the burden on U.S.,
British, Canadian, and Dutch forces. U.S. and NATO forces play a limited
supporting role in combating Afghanistan’s illegal opium trade - the profits from
which help to finance the insurgents. Some argue, however, that because of the
pervasive nature of the Afghan drug trade and its central role in Afghanistan’s rural
economy, that aggressive military action without compensating economic efforts
could cause more harm than good. Some U.S. and coalition military officials also
have spoken out against proposals that could transform combat forces into “drug
police” or otherwise undercut counterterrorism and stability operations.
CRS Report RL30588, Afghanistan: Post-War Governance, Security, and U.S. Policy,
by Kenneth Katzman.
CRS Report RL32686, Afghanistan: Narcotics and U.S. Policy, by Christopher M.
CRS Report RL33503, U.S. and Coalition Military Operations in Afghanistan: Issues for
Congress, by Andrew Feickert.
Cost and Budget Issues. [Amy Belasco, Specialist in National Defense
(7-77627)] On February 7, 2007, the Administration is scheduled to submit the
regular Department of Defense (DOD) budget. The Administration may also request
what is reported to be a large FY2007 supplemental for Iraq, Afghanistan and other
global war on terror operations plus funds to cover FY2008 war costs as is required
by the FY2007 National Defense Authorization. The FY2007 supplemental request
would be in addition to $70 billion that DOD has already received.
The FY2007 Supplemental and FY2008 war cost requests would be in addition
to the $507 billion already appropriated by Congress for Operation Iraqi Freedom
(OIF) for Iraq, Operation Enduring Freedom (OEF) for Afghanistan and other global
war on terrorism operations and enhanced security for DOD (Operation Noble Eagle)
since the 9/11 attacks. That total includes about $379 billion for Iraq, $97 billion for
Afghanistan and other counter-terror operations, and $26 billion for enhanced DOD
security. Over 90% of these funds were provided in emergency bills that are not
subject to spending caps in the annual congressional budget resolutions or to the
standard year-long authorization and appropriations process. Two major war cost
and budgetary issues that could come up early in 2007 are 1) budgetary levers that
Congress could use to affect future troop levels in Iraq; and 2) the validity of the
rationale and visibility of FY2007 and FY2008 war cost requests.
Congress may turn to the Vietnam experience to look for ways to affect U.S.
policy in Iraq. Although many amendments to reduce or end U.S. military operations
in Vietnam were considered, only a half-dozen were enacted that limited or
prohibited the use of funds for military operations during the 1970s. Funding
restrictions have generally proven more effective than other tools like the War
Powers Act, which has been challenged by the executive branch on constitutional

grounds. Examples of key amendments that were enacted or debated include (1) the
Hatfield-McGovern amendment rejected by 39-55 on September 1, 1970, that would
have limited U.S. troop strength to 280,000 by April 30, 1971, and required that
remaining troops be withdrawn by December 31, 1971, unless the president found
that up to a 60-day extension was needed in case of a clear and present danger to U.S.
troops, or the president submitted a new date for congressional approval (H.R.
17123); and (2) the Fulbright-Aiken and McGovern amendments enacted in 1973
after the January peace accord with Vietnam prohibiting the obligation or expenditure
of all past and current funds after August 15, 1973 “to finance directly or indirectly
combat activities by United States military forces in or over or from off the shores
of North Vietnam, South Vietnam, Laos or Cambodia”(Sec. 108, P.L. 93-52; 87 Stat.


Congress will also be faced with assessing the Administration’s war requests,
a task that has been difficult because of piecemeal information about annual costs,
and limited information about key factors — such as past and current troop levels —
that affect costs. The Iraq Study Group called funding requests for Iraq “confusing”
and criticized the fact that it is difficult to identify the amount requested for the Iraq
operations. DOD has not provided Congress with an allocation of all previously
appropriated funds by operation, i.e. for Iraq, Afghanistan, or other counter-terror
operations. War funds are also currently mixed with regular funds during execution,
which limits visibility on how funds are ultimately spent and means that the effect
of war costs on the deficit can only be estimated.
Congressional leaders have promised increased scrutiny of DOD war costs.
Congress may also choose to consider extending the scope of the Special Inspector
General from reconstruction to DOD’s military activities rather than relying solely
on DOD’s Inspector General or the services’ audit agencies. Echoing frequently
expressed Congressional concerns, the Iraq Study Group calls on DOD to include a
full year of war costs in DOD’s regular FY2008 budget so as not to circumvent the
normal budget process or put pressure on Congress to review requests quickly to
ensure monies to support the troops. It is not clear whether DOD will provide
Congress with the detailed budget justification called for in the FY2007 National
Defense Authorization Act and initially required of the services.
Recent press reports peg service requests for the FY2007 supplemental at $100
billion to $160 billion in addition to the $70 billion already enacted. According to
the reports, the President is likely to request an additional $100 billion, or a total of
$170 billion for FY2007, which would be 45% higher than the previous year.
If troop levels remain at roughly current levels, it is not clear why the FY2007
supplemental should be larger than funding in FY2006. In that case, the FY2007
supplemental would be $50 billion in addition to the $70 billion already appropriated.
If some combat troops are withdrawn from Iraq in FY2007, as proposed by the Iraq
Survey Report, war costs would be expected to decrease. In response to a
Congressional request, CBO estimated that war costs would decrease by $11 billion
if 25,000 troops were withdrawn and by $17 billion if 60,000 troops were withdrawn.
On the other hand, if troop levels were temporarily increased as some have proposed,
war costs could increase by several billion.

Some might argue that funding should increase in order to intensify training
of Iraqi security forces. Congress has thus far appropriated $15.4 billion to train Iraqi
security forces including $3.9 billion that is available for FY2007. A three to four-
fold expansion of U.S. military personnel embedded with Iraqi forces — as proposed
by the Iraq Study Group — would be covered primarily by current military personnel
costs though some increase in training monies could also be needed.
On October 25, 2006, Deputy Secretary of Defense England issued new
guidance on war costs to the services, requiring them to submit requests based on the
“longer war against terror” rather than strictly OIF and OEF operations. In response,
the services apparently greatly increased their original requests. Since the long war
on terror is DOD’s key mission, it may not be clear why such costs be considered
emergency war supplemental spending rather than part of DOD’s regular budget.
Two issues that may be cited as reasons that war costs could be higher in
FY2007 are current readiness problems and the cost of reset — the repair and
replacement of war-worn equipment. According to various reports, current Army
readiness rates have declined to the lowest levels since the end of the Vietnam war
with roughly half of all Army units, both active and reserve, at the lowest readiness
ratings for currently available units, primarily because of equipment shortages which
may affect a unit’s ability to train fully for combat and limit the ability of the United
States to respond to other contingencies.
Equipment shortfalls reflect backlogs at maintenance depots as well as possibly
ongoing equipment upgrades designed to modularize or standardize and restructure
Army and Marine Corps units. As of FY2007, the Army and Marine Corps are fully-
funded for their reset requirements, and maintenance backlogs may fall by up to one-
half according to recent DOD reports. Together, the two services have already
received $48.6 billion for reset including $23.7 billion for FY2007. If troop levels fall
in FY2008, the Army has estimated that its reset requirements would drop from the
$17.1 billion provided in FY2007 to $10.5 in the next year with further declines in
later years. DOD’s FY2008 reset requirements will presumably reflect assumptions
about troop levels.
Readiness problems for reserves reflect primarily personnel shortages as
individuals are transferred to fill holes in deploying units, and as some reservists
bump up against the 24-month overall limit for mobilization in DOD policy. Some
have also raised concerns about whether the military can continue to meet
recruitment and retention goals because some active-duty forces are also deploying
with less than one year at home to rest and retrain.
It is not clear whether the Administration will submit a full year of war costs
with detailed justification as is required by the FY2007 National Defense
Authorization Act although the newly-confirmed Secretary of Defense, Bob Gates,
stated his willingness to do so. The FY2008 request for war costs will reflect the
Administration’s assumptions about troop levels. If troop levels decline so may
operational and reset costs though the amount would vary depending on the pace of
withdrawals and whether combat troops remain in the region or are re-deployed to
the United States. The Iraq Study Group report does not specify troop levels or
deployment location. If Congress wishes to consider these options, the Department

of Defense could be asked to identify how costs would change with different troop
CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror
Operations Since 9/11, by Amy Belasco.
U.S. and International Counter-terrorism Efforts
[Raphael Perl, Specialist in International Affairs (7-7664) and John Rollins,
Specialist in Terrorism (7-5529)]
Terrorism is a global, national, and transnational phenomenon. Understanding
current and future terrorist capabilities and the motivating factors that entice
individuals to join groups with intentions of changing U.S. policies is central to the
formulation of a successful counterterrorism strategy. How the U.S. counters
terrorist operations while developing a plan to dissuade individuals from aligning
with radical militant Islamists, remains a top policy concern for both the
Administration and Congress. Questions relating to the alignment of the
Administration’s September 2006 National Strategy for Combating Terrorism with
current and projected resources are likely to be issues of concern throughout the 110th
Another likely subject of Congressional focus is overseeing the progress of the
Administration’s efforts towards meeting the counterterrorism mission requirements
contained in the Intelligence Reform and Terrorism Prevention Act of 2004 (P.L.
108-458) and the USA PATRIOT Improvement and Reauthorization Act of 2005
(P.L. 109-177). Specific areas of focus may involve assessing post 9/11
counterterrorism and intelligence organizations and related programs that are
responsible for identifying, warning, preparing, thwarting, and responding to acts of
terrorism. These programs will be assessed for successes and failures towards
implementation as described in the aforementioned legislation including efforts that
may threaten civil liberty protections. Other issues may include terrorists’ use of
emerging technologies, availability and accessability of material used in producing
a portable weapons of mass destruction device, identifying and measuring success in
U.S. counterterrorism policies and programs and understanding how individuals are
attracted to joining cells that are decentralized from an organized terrorist group, yet
ascribe to the same philosophical beliefs and desire to cause harm to U.S. interests.
Finally, an issue that is likely to be of focus is the U.S. foreign policy impact on
international counterterrorism partners and their response to changes in U.S. strategy
and operations. As strategic options and recommendations are provided to the
Administration by the Iraq Study Group, the Department of Defense’s Iraq Military
Strategy Review Group, and the National Security Council’s Iraq assessment team,
international partners may adjust their support to global counterterrorism efforts and
the military conflicts in Iraq and Afghanistan. The possibility of international
community support fragmenting with respect to global terrorism issues is likely to
require the Administration to increase military and diplomatic efforts in certain areas,
while decreasing focus and resources in others. These strategy considerations may
change significantly should the escalation of insurgent activity in Iraq and
Afghanistan result in a civil war or failed state or if the leadership of these countries

decide to assume primary responsibility for the security of their nation. Shifts in U.S.
strategy and international partner support will have resource implications that may
prompt the 110th Congress to exercise its legislative and oversight functions.
CRS Report RL33600, International Terrorism: Threat, Policy, and Response, by
Raphael Perl.
CRS Report RL33160, Combating Terrorism: The Challenge of Measuring Effectiveness,
by Raphael Perl.
CRS Report RL33123, Terrorist Capabilities for Cyberattack: Overview and Policy
Issues, by John Rollins and Clay Wilson.
CRS Report RL33555, Trends in Terrorism: 2006, by Raphael Perl.
Proliferation and Weapons of Mass Destruction
[Sharon Squassoni, Specialist in National Defense (7-7745)]
The United States has long sought to slow or stop the proliferation of nuclear,
chemical, and biological weapons, and the missile systems that deliver such weapons
of mass destruction (or WMD). A network of international treaties, supply controls,
agreements, and initiatives constitute what has become known as the
“nonproliferation regime.” The full range of tools includes 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.
In the last two years, a few key events have helped define the contours of the
proliferation threat — the revelations that Pakistani scientist A.Q. Khan sold
sensitive nuclear technology to countries such as North Korea, Iran, and Libya;
intensified inspections in Iran leading to a resolution by the Board of Governors of
the International Atomic Energy Agency (IAEA) that Iran was in noncompliance with
its safeguards obligation under the Nuclear Nonproliferation Treaty (NPT); and North
Korea’s October 2006 nuclear test. The response to the Khan network has included
stronger implementation of export controls (especially through UNSC Resolution
1540); a growing emphasis on the 2003 Proliferation Security Initiative; and
proposals to create a more proliferation-resistant fuel cycle. Although the
Proliferation Security Initiative (PSI), created in 2003 to disrupt trade in WMD
technologies by interdicting vessels, aircraft or other modes of transport where
possible when they are suspected of carrying WMD-related cargo, has no currentth
funding allocation, several bills in the 109 Congress sought to fund those activities,
and the 110th Congress may also take up the issue. On Iran, the 109th Congress held
hearings and passed legislation (PL 109-293) to extend sanctions under the Iran-
Libya Sanctions Act, among other things. Given the apparent impasse at the U.N.
Security Council since it passed Resolution 1696 in July 2006, following Iran’s
resumption of its uranium enrichment program, and the reluctance of China and

Russia to support imposing sanctions on Iran, the 110th Congress may consider
additional legislation. On North Korea, the impasse in the Six Party Talks prompted
some lawmakers to urge the Administration to find a way to reinvigorate the talks in
the fall of 2006. In some ways, the October 2006 North Korean nuclear test
prompted China to make serious diplomatic efforts to bring North Korea back to the
table. The 110th Congress is likely to follow the talks on the North Korean nuclear
program closely.
The 110th Congress will likely 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 the
proliferation of weapons or materials from specific countries. 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 WMD, related equipment and
materials, and knowledge that might leak out to other nations. Other programs
address U.S. concerns about proliferation from and to specific countries, like North
Korea, Pakistan, and Iran. 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 manner.
CRS Report RL30699, Nuclear Biological and Chemical Weapons and Missiles: Status
and Trends, by Sharon Squassoni.
CRS Report RL31559, Proliferation Control Regimes: Background and Status, by
Sharon Squassoni, Steve Bowman, and Carl E. Behrens.
CRS Report RS21881, Proliferation Security Initiative (PSI), by Sharon Squassoni.
CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation
Sanctions: Selected Current Law, by Dianne E. Rennack.
Regional Geopolitical Dynamics
People’s Republic of China and Taiwan. [Kerry Dumbaugh, Specialist
in Asian Affairs (7-7683) and Wayne Morrison, Specialist in International
Trade and Finance (7-7767)] U.S. relations with the People’s Republic of China
(PRC) have been less contentious during the George W. Bush Administration than
they have been at any time since 1989. The two governments have resumed regular
summitry and military-to-military relations, pursued working-level visits, cooperated
on anti-terror initiatives, and worked closely to address North Korea’s nuclear
weapons activities. The two economies have also become increasingly
interconnected, with U.S. companies investing heavily in China and some PRC
companies investing in the United States. The more regularized bilateral engagement
suggests U.S. recognition of the PRC’s growing economic development and
international engagement — what has been called “China’s rise” — and the new
political clout accompanying it.

The 110th Congress is expected to focus more on U.S.-China trade relations,
which have grown increasingly strained in recent years. Key issues Members are
likely to address include a large and growing U.S. trade deficit with China ($202
billion in 2005), China’s policy of pegging its currency to the dollar and refusal to
adopt a floating currency (which some contend unfairly makes imports from China
cheaper and U.S. exports to China more expensive), Beijing’s poor record of
protecting U.S. intellectual property rights (IPR), its failure to fully implement its
WTO commitments, and its use of a number of unfair trade practices (such as use of
subsidies and dumping) that many perceive as negatively affecting various U.S.
manufacturing sectors.
Numerous bills were introduced in the 109th Congress that addressed these
issues. For example, in July 2005, the House passed H.R. 3283 to apply U.S.
countervailing duties against subsidized imports from non-market economies (such
as China); establish a comprehensive monitoring system to track China’s compliance
with specific WTO commitments and other trade pledges to the United States; and
to boost funding for U.S. trade compliance agencies. In addition, a bill introduced
by Senator Schumer (S. 295) that sought to impose a 27.5% ad-valorem increase in
U.S. import tariffs on Chinese goods garnered significant bipartisan support. The

110th Congress is likely to continue to pursue such initiatives. In addition, the 110th

Congress is expected to be more assertive in pressing the Bush Administration to
press China to improve IPR protection, comply with WTO rules, and end various
economic practices (such as a pegged currency and subsidies to domestic firms) that
are deemed harmful to U.S. economic interests.
Taiwan remains the most sensitive and complex issue in Sino-U.S. relations.
The PRC continues to claim sovereignty over the island and vows that one day
Taiwan will be reunified with China either peacefully or by force. In March 2005,
the PRC’s National People’s Congress (NPC) adopted an “anti-secession law” aimed
at creating a legal basis for PRC military intervention in Taiwan. These PRC claims,
many fear, could result in direct U.S.-PRC conflict under P.L. 96-8, the Taiwan
Relations Act (TRA), which spells out U.S. strategic interests in and arms sales
commitments to Taiwan and states that forceful resolution to Taiwan’s status would
be of “grave concern to the United States.” U.S. policy on Taiwan is complicated
further by other factors. The Taiwan government essentially is grid-locked by a near-
even split between ruling and opposition party coalitions. One hostage to this
resulting political rancor has been a substantial U.S. arms package that President
Bush authorized for sale to Taiwan in 2001. The bill has been blocked for years by
the opposition-controlled legislature, a matter of growing concern to White House
and Congressional officials.
Congressional sentiment, long favorable toward Taiwan, has sought to find
ways to support Taiwan’s interests amidst growing congressional frustrations over
Taiwan’s political gridlock and lagging defense spending. Early in the 110th
Congress, Members may seek to support a Free Trade Agreement with Taiwan —
one of that government’s high priorities — and could renew efforts to discontinue
funding for U.S. Government restrictions that limit U.S. contacts with Taiwan
officials. As in past Congresses, the 110th is likely to remain interested in helping
Taiwan gain observer status in the World Health Organization (WHO) despite
obstacles mounted by the PRC. Finally, Members in the 110th also are likely to

remain concerned about Taiwan’s waning defense spending and U.S. arms sales
Many observers are now focusing on the critical implications China’s economic
growth and increasing international engagement are having for U.S. economic and
strategic interests. PRC global outreach has grown significantly in just a few years,
and this international engagement has gone hand-in-hand with expanding political
influence. While PRC officials appear to have no qualms about working with
undemocratic or authoritarian governments, PRC outreach also has extended to key
U.S. allies or to regions where U.S. dominance previously has been unquestioned. In
pursuing its global relations, the PRC has sought to form and join international
groupings that often exclude the United States. In December 2005, for instance,
China took part in the first East Asia Summit (EAS) — a new grouping of 16 Asian
countries that includes U.S. military allies. While Russia’s President Vladimir Putin
attended as an invited observer, the United States was not asked and did not seek to
participate in any capacity.
“Energy politics” plays a key role in China’s global relationships, particularly
in the Middle East, Africa, and Latin America. Often these contacts are with
countries the United States considers “rogue regimes.” PRC negotiators, for
instance, signed significant oil deals with Iran in 2004, and Beijing has targeted other
“bad actors” for energy-related development, such as resource-rich Sudan and
Angola. Beijing and Venezuela have signed a series of agreements committing the
China National Petroleum Corporation to spend over $400 million to develop
Venezuelan oil and gas reserves. PRC energy interests also extend to Canada, with
which China in 2005 signed a series of agreements to prioritize cooperation on
energy issues — including gas, nuclear, clean energy, and oil sources, primarily
massive “oil sands” in Alberta. These and other PRC energy interests prompted the
109th Congress to begin debating the national security risks of selling American
energy assets to the PRC. The 110th Congress is likely to remain concerned about
and active on these issues. One focus for Members of the 110th may be the 13
relevant recommendations made to Congress in November 2006 by the
Congressionally-mandated U.S.-China Economic and Security Review Commission
on how the United States should respond to China’s increasing international
CRS Report RL32804, China-U.S. Relations: Current Issues & Implications for U.S.
Policy, by Kerry Dumbaugh.
CRS Report RL33684, Taiwan-U.S. Political Relations: New Strains and Changes, by
Kerry Dumbaugh.
CRS Report RL31555, China and Proliferation of Weapons of Mass Destruction and
Missiles: Policy Issues, by Shirley Kan.
CRS Report RL33604, Is China a Threat to the U.S. Economy?, by Craig Elwell, Marc
Labonte and Wayne Morrison.
CRS Report RL33416, Social Unrest in China, by Thomas Lum.

Iran. [Kenneth Katzman, Specialist in Middle Eastern Affairs (7-7612), and
Sharon Squassoni, Specialist in National Defense (7-7745)] According to the
Administration’s “National Security Strategy” document released on March 16, 2006,
the United States “may face no greater challenge from a single country than Iran.”3
That perception was initially fed by reported advances in Iran’s nuclear program and
by several comments by Iranian President Mahmoud Ahmadinejad, elected in June
2005, that Israel should be eliminated. U.S. concerns about Iran were intensified
following the military confrontation between Iranian-armed and assisted Lebanese
Hezbollah and Israel in July-August 2006 and subsequent purported efforts by
Hezbollah to topple Lebanon’s anti-Syrian governing coalition. To date, the Bush
Administration has pursued several avenues to attempt to contain the potential threat
posed by Iran, but the Administration’s focus on preventing an Iranian nuclear
weapons breakthrough has brought diplomatic strategy to the forefront of U.S. policy.
As part of that effort, the Bush Administration announced May 31, 2006, that it
would negotiate with Iran, in a multilateral framework consisting of the permanent
members of the U.N. Security Council plus Germany (so-called “P5+1”), if Iran first
suspends uranium enrichment; in past years the Bush Administration has had only
limited dialogue with Iran on specific regional issues.
Multilateral talks with Iran have remained stalled for over one year. In
September 2005, the International Atomic Energy Agency’s Board of Governors
resolved that Iran was in non-compliance with its safeguards obligations under the
Nuclear Non-proliferation Treaty (NPT). This followed inflammatory remarks about
Israel by Ahmadinejad at the U.N. General Assembly that September, as well as
indications that Iran appeared poised to abandon its uranium enrichment suspension,
brokered initially in late 2003. Although many, including Russia and China, hoped
to keep Iran’s “dossier” in Vienna at the IAEA, Iran’s complete abandonment of its
unilateral suspension, as well as its decision to end interim application of enhanced
safeguards inspections by the IAEA (per its Additional Protocol), led to the Board
referring Iran to the U.N. Security Council in February 2006. The U.N. Security
Council passed Resolution 1696 on July 31, 2006, which reiterated earlier demands
for Iran to halt its activities and return to negotiations, and hinted that sanctions
would follow should Iran fail to comply by an August 31, 2006 deadline. The foreign
ministers of France, the United Kingdom, and Germany (known as the EU-3)
continue to be closely involved in negotiating with Iran, even in the context of the
Security Council, but Russia and China have remained stumbling blocks to imposing
significant sanctions, despite what appeared to be agreement in the fall of 2006 for
such an approach. Proposals and counter-proposals have been made to little effect,
while Iran continues to improve its uranium enrichment capabilities.
Iran’s nuclear program is not the only major U.S. concern on Iran. Successive
administrations have pointed to the threat to the United States and its allies posed by
Iran’s policy in the Near East region, particularly material support to groups that use
violence to prevent Israeli-Arab peace. Such groups have long included Lebanese
Hezbollah and the Palestinian groups Hamas and Palestinian Islamic Jihad. Although
there is no evidence of an operational relationship with Al Qaeda, some senior Al

3 The National Security Strategy of the United States of America, March 16, 2006.
Available at [].

Qaeda activists are believed to be in Iran, although Iran claims they are “in custody.”
U.S. officials also accuse Iran of attempting to exert influence in Iraq by providing
arms and other material assistance to Shiite Islamist militias, some of which are
participating in escalating sectarian violence against Iraq’s Sunnis there.
The 110th Congress will likely monitor developments in U.S. policy toward Iran,
and some in Congress are proponents of a variety of options should Iran continue to
advance its nuclear program or continue efforts against U.S. interests in the region.
Some might advocate military action against Iran’s nuclear infrastructure rather than
acquiescence to the potential threat posed by a nuclear-armed Iran. Others in the
Administration and in Congress believe that only a change of Iran’s regime could end
the threat posed by Iran. Legislation expressing support for regime change and
extending certain sanctions on investment in Iran’s energy sector (Iran-Libya
Sanctions Act, ILSA), was passed in the 109th Congress. H.R. 6198, passed and then
signed on September 30, 2006 (P.L. 109-293), extends ILSA until December 31,
2011, and drops Libya from the law. It codifies existing Iran sanctions, makes
exports to Iran of weapons of mass destruction (WMD) or advanced conventional
weapons technology sanctionable, and authorizes funding for promoting democracy
in Iran. It recommends a 180-day time limit for the Administration to determine
whether a project violates ILSA. Passage of this law followed Congressional action
on an Administration request for $75 million to promote democracy in Iran. A
FY2006 supplemental appropriation (H.R. 4939, P.L. 109-234) provided a total of
$66.1 million, as follows: $20 million for democracy programs ($5 million more
than requested); $5 million for public diplomacy directed at the Iranian population
(the amount requested); $5 million for cultural exchanges (the amount requested);
and $36.1 million for Voice of America-TV and Radio Farda broadcasting ($13.9
million less than requested).
CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman.
CRS Report RS21592, Iran’s Nuclear Program: Recent Developments, by Sharon

Israel and Its Neighbors: Impediments to the Peace Process. [Carol
Migdalovitz, Specialist in Middle Eastern Affairs (7-2667)] In summer 2006,
Israel fought wars in the Gaza Strip and in Lebanon with inconclusive results that left
both situations unstable. In Gaza, Israel escalated a military offensive against Hamas
and its cohort to obtain the release of a soldier kidnaped on June 25 and to end
Palestinian rocket fire into southern Israel. Neither goal was accomplished and a low
level conflict persisted until Palestinian President Mahmoud Abbas and Israeli Prime
Minister Ehud Olmert reached an agreement for a cease-fire at the end of November.
The cease-fire is fragile, and Israel or the Palestinians could trigger a resumption of
hostilities at any time.
The United States, United Nations, European Union, and Russia (known as the
“Quartet”) insist that Hamas, which has led the Palestinian Authority (PA) since
March 2006, disavow violence, recognize Israel, and accept prior Palestinian-Israeli
agreements in order for an embargo on most international direct aid to the PA to be
lifted. President Abbas conducted protracted negotiations with Hamas to form a new
national unity government partly in order to get the Quartet-led embargo lifted, but
he has announced that the talks have reached a “dead end.” Aside from other
demands, Hamas will not meet the Quartet’s conditions. For its part, Israel seeks to
deal with Abbas. On November 27, Prime Minister Olmert declared that if the
Palestinians establish a new government committed to the Quartet’s principles and
bring about the release of the Israeli soldier, then he would enter into an immediate
dialogue with Abbas to establish an independent, viable Palestinian state with
territorial contiguity, free many Palestinian prisoners, and take other confidence-
building measures. It remains unclear how or if Abbas will produce a new
government acceptable to Israel, the United States, and others in the international
In Lebanon to the north, Israel launched an all-out war against the Hezbollah
after it attacked a military post in northern Israel and kidnaped two soldiers on July
12. The death toll was high: 119 Israeli soldiers and 41 civilians, 1,187 Lebanese
civilians, an estimated 600 Hezbollah militiamen, and 44 members of the Lebanese
security forces, and much Lebanese and some Israeli infrastructure was destroyed or
damaged. An enlarged international peace-keeping force deployed to southern
Lebanon to supervise a cease-fire and act as a buffer between Hezbollah and Israel.
However, Hezbollah has not released the kidnaped soldiers nor disarmed, is believed
to be rearming, and is pressing for an enhanced role in the Lebanese political system,
placing Lebanese democracy at risk and increasing the potential for instability north
of the Israeli border. Although Hezbollah appears to be preoccupied with domestic
Lebanese politics, it could refocus on Israel when the Lebanese situation is resolved
to its satisfaction and its resources are replenished.
Meanwhile, Syrian President Bashar al-Asad appears to be using what he views
as Hezbollah’s victory against Israel and the U.S. need for his help with Iraq to press
Israel and Washington for a renewed peace process that would end with Syria’s
regaining the Golan Heights — 450 square miles of land along the border which
Israel has occupied since 1967. Some in Israel and in the international community
also seek to revive peace talks with Syria that were suspended in 2000. Others,
including some in the U.S. Administration, prefer to keep Syria isolated until it
monitors its border with Iraq effectively, plays a constructive role vis-a-vis Lebanon,

and ceases support for Hezbollah and Hamas. They also do not want to interfere with
a U.N. investigation into the assassination of former Lebanese Prime Minister Rafiq
al Hariri for which some believe Syria may be culpable. Israeli Prime Minister
Olmert also rejects engagement with Syria until it changes its behavior.
The U.S. Administration has expressed solidarity with Israel in its conflicts with
Hamas and Hezbollah, maintaining that Israel is exercising its right to self-defense.
It has advocated for Israel’s views in the Quartet and in the United Nations and,
during the war in Lebanon, expedited the delivery of some arms to Israel. The
Administration seeks to assist in the reconstruction of Lebanon and has
reprogrammed some funds for that purpose. It also has provided humanitarian aid
to the Palestinians via international and non-governmental agencies, but no direct aid
to the Hamas-led Palestinian Authority. Congress similarly has passed resolutions
supporting Israel and condemning Hamas and Hezbollah. Israel remains one of the
largest annual recipients of U.S. foreign aid, but there have long been restrictions on
aid to the PA, which some Members sought to tighten after Hamas took power. The
110th Congress will likely continue to scrutinize aid to the Palestinians and Lebanon
and insist that Israel’s Arab neighbors meet preconditions before a return to the peace
process. The new Congress also may examine recommendations of the Iraq Study
Group, which argued that “Iraq cannot be addressed effectively in isolation from
other major regional issues” and called for a “renewed and sustained commitment”
to a comprehensive, negotiated peace on all fronts, including “direct talks with, by,
and between Israel, Lebanon, Palestinians (those who accept Israel’s right to exist),
and particularly Syria....”
CRS Report RL33530, Iraeli-Arab Negotiations: Background, Conflicts, and U.S. Policy,
by Carol Migdalovitz.
CRS Report RL33566, Lebanon: The Israel-Hamas-Hezbollah Conflict, coordinated by
Jeremy M. Sharp.
North Korea. [Emma Chanlett-Avery, Analyst in Asian Affairs (7-7748)
and Sharon Squassoni, Specialist in National Defense, (7-7745)] The U.S. goal
of denuclearizing the Korean peninsula suffered a setback when North Korea tested
a nuclear weapon in October 2006. The test followed a pattern of North Korean
provocations and escalations, including the July 2006 test-launch of several short-,
medium-, and long-range missiles. Confidence that the Six-Party Talks (with South
Korea, Japan, China, and Russia) can achieve a diplomatic solution to eliminate
Pyongyang’s nuclear weapons programs is diminishing. Since November 2005,
Pyongyang has boycotted the talks, insisting that the United States end financial
measures and pressure against foreign banks that deal with North Korea. North Korea
also calls for direct talks with the United States, but the Bush Administration holds
that it will negotiate bilaterally with Pyongyang only within the six-party framework.
Despite supporting a United Nations Security Council resolution condemning the
test, China and South Korea — the most significant trade partners and aid providers
to the North — have not fundamentally altered their approach and appear unwilling
to apply much stronger economic and legal pressure on the regime.

In the wake of the test, North Korea continues to present a range of challenges
to U.S. interests. Analysts fear that the medium and long-term implications of the
test could include a more potent nuclear threat from Pyongyang, a nuclear arms race
in Asia, and/or the transfer of nuclear weapons or material to states or groups hostile
to the United States. There are also strong concerns about the impact on the global
nonproliferation regime, particularly to other states poised to develop their own
nuclear weapon programs. In addition to these security issues, North Korea’s human
rights record, along with the plight of North Korean refugees, continue to elicit
concern. Further law enforcement concerns exist with North Korea’s counterfeiting
and narcotic trafficking programs. With the diplomatic process stalemated and with
very limited military options, these challenges are unlikely to be resolved quickly.
In 2006, Congress became more involved in, and at times critical of, U.S. policy
toward North Korea. In late September and early October 2006, Congress enacted
two pieces of legislation on North Korea. The John Warner National Defense
Authorization Act for FY2007 (P.L. 109-364), enacted on October 17, 2006, requires
the President to appoint a Policy Coordinator for North Korea by December 17 who
must then report to the President and the Congress with recommendations by January
17, 2007. It also requires the executive branch to report to Congress every 180 days
in fiscal years 2007 and 2008 on the status of North Korea’s nuclear and missile
programs. Congress’ role in North Korean policy in the 110th Congress will likely
depend on the Administration’s response to these requirements. The North Korea
Nonproliferation Act of 2006 (P.L. 109-353) adds North Korea to the Iran-Syria
Nonproliferation Act (P.L. 106-178; P.L. 109-112), authorizing sanctions on third
party “persons” for weapons-of-mass-destruction-related transfers to and from North
Korea. In particular, this could affect North Korea’s missile trade.
CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy,
by Larry Niksch.
CRS Report RL33709, North Korea’s Nuclear Test: Motivations, Implications and U.S.
Options, by Emma Chanlett-Avery and Sharon Squassoni.
CRS Report RL31696, North Korea: Economic Sanctions, by Dianne E. Rennack.
Foreign Affairs
Global Issues
Overview. [Dianne E. Rennack, Specialist in Foreign Policy Legislation,
(7-7608)] The 110th Congress inherits from its predecessor a great amount of
uncompleted work, primarily in the form of unfinished annual appropriations
measures needed to fund the U.S. government and its programs. Foreign Operations
Appropriations and State Department Appropriations are among those that the 109th
Congress did not enact. The need to fund operations of the current fiscal year, either
by a continuing resolution or passage of appropriations measures tailored to specific
agencies, expectations that the President will send up a massive emergency spending
measure to cover operations in Iraq and Afghanistan, and the shift of the majority

from one party to the other, could presage a very robust Congressional agenda in
2007. Incoming Congressional leadership vowed a vigorous first 100 legislative
hours, as well as oversight and investigation of the war in Iraq and counter-terrorism
efforts, among other things.
The Speaker of the House-elect has stated that among the many issues to form
the first 100 legislative hours, the 110th Congress would implement the
recommendations made in 2004 by the independent, bipartisan 9/11 Commission.
And in the 79 recommendations of the Iraq Study Group, released December 6, 2006,
the 110th Congress is likely to find a valuable impetus as it takes up global issues.
New global issues initiatives put forth by the Executive Branch will also
challenge the 110th Congress. In January 2006, for example, the Secretary of State
announced significant organizational and philosophical changes to be implemented
in the United States’ diplomatic and foreign assistance services, the Transformational
Diplomacy and Transformational Development initiatives.
Other global issues will carry over from previous Congresses: United Nations
reform; providing advice and consent on a new U.S. Ambassador to the United
Nations; the humanitarian crisis in — and spilling over the boundaries of — the
Darfur region of Sudan; international terrorist threats; statecraft decisions relating to
other nations engaged in behavior the United States finds objectionable — among the
most pressing, Syria, Iran, or North Korea; cyclical health disasters — most recently
avian flu — and more persistent health tragedies — i.e., Human Immunodeficiency
Virus and Acquired Immunodeficiency Syndrome (HIV/AIDS), malaria, and
tuberculosis. The 110th Congress will have opportunities, through funding,
authorizing, providing oversight, or creating new initiatives, to consider all these
Transformational Diplomacy. [Susan B. Epstein, Specialist in Foreign
Policy and Trade, (7-6678)] Throughout the George W. Bush presidency, some
foreign policy experts have expressed concern about the seeming reluctance of this
Administration to use diplomacy as a foreign policy tool, particularly in Iran, Iraq,
and North Korea. In January 2006, however, Secretary of State Condoleezza Rice
put forth a bold vision for U.S. diplomacy in the 21st century, referred to as
Transformational Diplomacy. Secretary Rice has defined Transformational
Diplomacy as working with partners “to build and sustain democratic, well-governed
states that will respond to the needs of their people” and helping others “better their
own lives, build their own nations, and transform their futures.”
Transformational Diplomacy includes global repositioning of State Department
personnel largely from Europe and Washington, D.C. to designated critical locations
in Africa, South Asia, East Asia and the Middle East. Implementation would create
regional public diplomacy centers in Europe and the Middle East. Localization of
diplomacy would include American presence posts operated by a single diplomat
working in key population centers of a country. Enhanced language and technology
skills would expand U.S. diplomacy effectiveness. Diplomats would be trained in
public diplomacy skills, and encouraged to engage and promote democratic
principles at posts, rather than just report on the culture in which they are living.

The 110th Congress will be faced with funding and oversight issues concerning
Secretary Rice’s Transformational Diplomacy when the President’s budget is
submitted in early February, 2007. Global repositioning of State Department
personnel is likely to require increased funding in the President’s FY2008 budget.
Additionally, the 110th Congress may want to convene early committee hearings with
Secretary Rice to examine how funds for the Transformational Diplomacy initiative
are being spent, whether the initiative is improving the effectiveness of U.S.
diplomacy, and how foreign governments are responding to its emphasis on
democracy promotion.
CRS Report RL31370, State Department and Related Agencies: FY2006 Appropriations
and FY2007 Request, by Susan B. Epstein.
CRS Report RL33420, Foreign Operations (House)/State, Foreign Operations, and
Related Programs (Senate): FY2007 Appropriations, by Connie Veillette, Susan
Epstein, and Larry Nowels.
CRS Report RL33470, Science, State, Justice, Commerce and Related Agencies
(House)/Commerce, Justice, Science and Related Agencies (Senate): FY2007
Appropriations, coordinated by Susan B. Epstein and M. Angeles Villarreal.
Transformational Development and Foreign Aid Restructuring.
[Connie Veillette, Specialist in Foreign Affairs (7-7127)] The significance of
foreign aid as a tool of U.S. foreign policy has come into sharper focus since the
terrorist attacks of September 11, 2001 as policy makers recognized that failing states
are permissive environments for terrorist activities. In September 2002, the
Administration elevated global development as the third “pillar” of its National
Security Strategy, along with defense and diplomacy.
The Administration has begun a number of new foreign aid initiatives since
2002. The latest is a foreign aid restructuring process that was begun in January 2006
when Secretary Rice announced a Transformational Development initiative as part
of her above-mentioned Transformational Diplomacy proposal. She created a new
position at the State Department — the Office of the Director of Foreign Assistance
— and appointed the former Global AIDS Coordinator, Randall Tobias, to the
position. He also concurrently serves as Administrator of the U.S. Agency for
International Development (USAID). Tobias has authority to coordinate the foreign
assistance programs managed by the Department of State and USAID, and provide
guidance to programs administered by other departments and agencies. He has been
charged with restructuring aid programs in support of U.S. foreign policy objectives,
and with the goal of eventually graduating recipient countries from U.S. assistance.
In response, Tobias has devised a Strategic Framework for Foreign Assistance
to guide the budgeting process and to ensure that aid programs are aligned with a
number of strategic objectives. The Framework has been used to write the FY2008
budget request for foreign aid that will be presented to Congress in February. The
key issue for Congress will be to evaluate the impact of the new Framework with
regard to its effects on program and country funding, particularly on issues in which
Congress has expressed its interest. While the Administration believes that no new
authorizing legislation is necessary to implement the Framework, Congress may

decide to write an authorization bill, or to express its intent through the annual
appropriations process.
Previous to this initiative, President Bush launched two major new foreign
assistance programs. 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 Administration also created the Millennium
Challenge Account (MCA). The MCA 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 more likely to
achieve their intended development results. In 2005, the President launched a
malaria initiative, pledging $1.2 billion in more resources through FY2010.
Finding the resources to sustain these growing aid pledges, plus responding to
unforseen foreign policy contingencies and natural disasters, may be the greatest
foreign assistance challenge faced by lawmakers in the 110th Congress. 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 in the Foreign Operations appropriations bill. After
largely supporting full funding for the President’s foreign aid appropriation requests
through FY2004, Congress has made sharp cuts the past two years, including a $1.9
billion reduction in FY2006, and a House-proposed $2.4 billion cut in FY2007.
Efforts to prioritize, focus resources, and find savings will likely characterize the
foreign aid debate early in the 110th Congress.
CRS Report RL33420, Foreign Operations (House)/State, Foreign Operations, and
Related Programs (Senate): FY2007 Appropriations, by Connie Veillette, Susan
Epstein, and Larry Nowels.
CRS Report RL33491, Restructuring U.S. Foreign Aid: The Role of the Director of
Foreign Assistance, by Connie Veillette and Larry Nowels.
CRS Report RL32427, Millennium Challenge Account, by Curt Tarnoff.
CRS Report 98-916, Foreign Aid: An Introductory Overview of U.S. Programs and
Policy, by Curt Tarnoff and Larry Nowels.
Peacekeeping, Stabilization, and Reconstruction: New Tools. [Nina
M. Serafino, Specialist in Foreign Affairs (7-7667)] The widespread perception
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, the 109th Congress supported, albeit
with some reservation, the Bush Administration’s initiatives to bolster U.S. and
international civilian and military “stabilization and reconstruction” (i.e., S&R)
capabilities. (The term “stabilization and reconstruction”is understood to encompass
the kinds of tasks and missions that in the past were loosely labeled “peacekeeping”).th
The Administration is expected to ask the 110 Congress to support the continuation
of these activities, mostly likely with expansion in some areas, and may ask Congress
to support new initiatives.

Thus far, the centerpiece of the Administration’s initiatives has been the creation
in mid-2004 of the State Department Office of the Coordinator for Reconstruction
and Stabilization (S/CRS) to monitor states in crisis and to plan and coordinate
civilian efforts to deal with such states. S/CRS was modeled on a proposal advanced
by Senators Lugar and Biden in the Stabilization and Reconstruction Civilian
Management Act of 2004 (S. 2127, 109th Congress), and endorsed by Congress in the
FY2005 Consolidated Appropriations Act (P.L. 108-447, Division D, Section 480).
The Administration is expected to ask the 110th Congress to fund the expansion
of S/CRS capabilities, in particular a proposal being developed by S/CRS for a
civilian S&R reserve force. It may also ask the 110th Congress to reconsider previous
Congress’ decisions to deny State Department funding for a Conflict Response Fund
to support S/CRS’ overseas activities. (The 109th Congress provided such funding
through the Department of Defense budget, however, granting the Secretary of
Defense with $100 million in transfer authority in each FY2006 and FY2007 for
S&R purposes in the FY2006 National Defense Authorization Act, P.L. 109-163,
Section 1207). The Administration may also ask Congress to approve new initiatives
regarding inter-agency cooperation, in line with National Security Presidential
Directive (NSPD) 44, Management of Interagency Efforts Concerning
Reconstruction and Stabilization, issued in December 2005.
Congressional consideration of the development of civilian capabilities for S&R
operations may well entail a parallel determination of the appropriate role and
capabilities for the U.S. military in such settings. DOD, as well as some key
Members of Congress (especially on the defense and foreign affairs committees),
have pushed for the development of civilian instruments to plan and carry out
activities such as political institution building, the reconstruction of physical
infrastructure, and humanitarian relief, which military forces have had to perform by
default. Civilians can better carry out such activities, according to many analysts,
and the creation of civilian capabilities would relieve military forces of the burden
of doing them in all but combat situations. Unless adequate civilian personnel are
provided, however, whether and to what extent to modify the size, structure, training,
doctrine, or equipment of U.S. military forces in order to improve S&R performance
becomes a major issue for some analysts. The Administration may ask the 110th
Congress to consider enhancing military S&R capabilities as proposals are developed
in line with the 2005 DOD Directive 3000.05, which mandates that S&R-type
operations be treated as core military missions.
Congress may also wish to consider issues regarding the scope and management
of the State Department sponsored-DOD implemented FY2005-FY2009 Global
Peace Operations Initiative, through which the United States trains and equips
foreign military forces to participate in international peacekeeping operations. Issues
regarding the wisdom of U.S. training for foreign troops may arise in the context of
an expected Administration request to increase funding for the “Section 1206”
foreign military training program authorized in the FY2006 and FY2007 National
Defense Authorization Acts (P.L. 109-163 and P.L. 109-364).

CRS Report RL32862, Peacekeeping and Conflict Transitions: Background and
Congressional Action on Civilian Capabilities, by Nina M. Serafino and Martin
CRS Report RL33557, Peacekeeping and Related Stability Operations: Issues of U.S.
Military Involvement, by Nina M. Serafino.
CRS Report RL33647, A Civilian Reserve for Stabilization and Reconstruction
Abroad: Summary of a Workshop on U.S. Proposals and International
Experiences and Related Issues for Congress, by Nina M. Serafino.
Humanitarian Assistance and Refugees. [Rhoda M. Margesson,
Specialist in Foreign Affairs (7-0425)] There is no shortage of humanitarian
emergencies worldwide stemming from natural disasters or manmade conflicts. In
the 110th Congress, humanitarian assistance is likely to continue to have a strong
measure of bipartisan support and priority. The key policy issues of concern to
Congress will likely focus on budget priorities, levels of funding, and the types of
support available worldwide. While humanitarian assistance is assumed to consist
of urgent food, shelter and medical needs, the very nature of humanitarian disasters
— the need to respond quickly in order to save lives and provide relief — often
demands an unrestricted definition on both a policy and operational level.
Congress has consistently supported humanitarian efforts as a means of
responding to crises in the short term, taking the lead, and promoting a U.S. presence.
A decision by the United States to respond in a crisis results in varying amounts of
relief and recovery assistance. Factors that may impact decision — making include
the type of humanitarian assistance required; the impact of conflict and refugee flows
on stability in the region in question; and the role of neighboring countries and the
broader international community in contributing to the relief effort. The President
can provide emergency humanitarian assistance through several sources whose
funding is authorized and appropriated by Congress. In addition to competing aid and
budget priorities, reimbursing U.S. government agencies for their expenditures, either
to replenish the emergency accounts or other accounts that have been used to provide
assistance will remain a Congressional issue.
International recovery efforts are typically complex and, in addition to the
United States, involve many actors. These include U.N. agencies, international
organizations, non-governmental organizations (NGOs), and bilateral and
multilateral donors. Therefore, the broader international response — coordination
of assistance, sharing the cost of an international recovery effort and donor fatigue
— are of significant interest to Congress and may impact levels of funding and
support available. Although it is usually impossible to predict when or where the
next humanitarian or natural disaster may occur or how much funding will be needed
in order to address it, cases of interest to Congress include a wide range of known
situations, such as Darfur, North Koreans in China, Afghanistan, and Iraq (see
Darfur, Sudan. Some experts consider the Darfur, Sudan situation to be the
worst humanitarian crisis in the world. Estimates suggest that several million
civilians have been displaced and refugees in neighboring Chad number more than

220,000. In addition to the impact of the conflict, some experts warn of the potential
for an even greater humanitarian disaster if hostilities are not brought to an end and
access by aid agencies is not increased and sustained. In FY2006, the United States
provided $776.3 million in humanitarian assistance to Sudan and Eastern Chad. As
of December 2006, the United States has provided $190.4 million for FY2007 in
humanitarian assistance to Sudan and Eastern Chad.
North Koreans in China. The status of the estimated tens of thousands of North
Koreans living illegally in China has been of concern to Congress for some time.
China sees the North Koreans as economic migrants rather than political refugees and
has cracked down periodically on the population by forcibly returning them to North
Korea where their fate is unknown, but reports of gross human rights violations
abound. United Nations relief agencies have not been granted access to conduct an
official full assessment of the unfolding situation, although a number of foreign,
private NGOs have been tacitly accepted. Estimates of the number of refugees range
from 10,000 to 300,000. In response to this situation, Congress passed H.R. 4011, the
North Korean Human Rights Act of 2004 (P.L. 108-333).
Afghanistan and Iraq. Although Afghanistan and Iraq represent two distinct
situations, at differing levels of recovery, relief and reconstruction assistance operate
on parallel tracks within close proximity to the military. The evolution of the civil-
military relationship has received mixed reviews from the aid community, in part
because of concerns about compromising neutrality and impartiality and increasing
the possibility of a targeted attack. In some cases, violence has led to the suspension
of activities or withdrawal of aid agencies from certain areas altogether. Many in
Congress hold that disaster assistance should be provided whenever possible with
foreign assistance funds through NGOs, and yet, aid worker security remains an issue
of significant concern, particularly in Iraq. The role of the military in post-emergency
transitions and reconstruction is still evolving as demonstrated by developments in
Afghanistan and Iraq. The use of Department of Defense funds and personnel may
continue to be controversial.
CRS Report RL33769, International Crises and Disasters: U.S. Humanitarian
Assistance, Budget Trends, and Issues for Congress, by Rhoda Margesson.
CRS Report RL31766, Iraq: United Nations and Humanitarian Aid Organizations, by
Thomas Coipuram, Jr.
CRS Report RL33701, Uganda: Current Conditions and the Crisis in North Uganda, by
Ted Dagne and Lauren Ploch.
Global Health and HIV/AIDS Issues. [Tiaji Salaam-Blyther, Specialist
in Foreign Affairs (7-7677)] Issues that Congress is expected to take up in the 110th
Congress, include enacting appropriations for global health programs; determining
whether to reauthorize the President’s Emergency Plan For AIDS Relief (PEPFAR);
strengthening ailing health systems in developing countries; and containing outbreaks
of infectious disease. It is estimated that HIV/AIDS, tuberculosis (TB), and malaria
together kill more than 6 million people each year. Since HIV/AIDS was identified
in 1981, about 65 million people have reportedly contracted HIV, and more than 25
million people have died from AIDS. More than 40 million people are reportedly

living with HIV/AIDS worldwide, including more than 4 million of whom were
newly infected in 2005. Each year, there are reports of about 300 million malaria
cases globally, which cause more than one million deaths annually. Between 85%
and 90% of those deaths reportedly occur in Africa. More than 80% of the estimated

14 million people living with TB worldwide live in Asia and Africa.

A number of FY2007 appropriations bills that provide funds for HIV/AIDS, TB,
and malaria have yet to be enacted. H.R. 5522, FY2007 House Foreign Operations
appropriations, provides about $3.6 billion for the three diseases, some $47 million
less than requested. H.R. 5647, FY2007 House Labor, HHS, Education
appropriations provide $121.9 million for CDC’s Global AIDS Program, meeting the
President’s request. S.Rept. 109-277, the Senate report to FY2007 Foreign
Operations appropriations, provides about $3.8 billion for the three diseases. S.
3708, FY2007 Labor, HHS, Education appropriations, does not provide funds for
global HIV/AIDS, TB, and malaria programs.
P.L. 108-25, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria
Act, authorized $15 billion to be spent from FY2004 to FY2008 on fighting
HIV/AIDS, TB, and malaria. Some health advocates would like Congress to
authorize more than $15 billion for the five-year initiative. Although P.L. 108-25
authorizes $1 billion for U.S. contributions to the Global Fund through FY2008,
appropriators have already exceeded that amount by more than $500 million. Some
argue that this has taken from U.S. spending on bilateral programs, while others
encourage the United States to contribute more. A number of Members introduced
legislation in the 109th Congress to amend language in the act, which reserves 33%
of prevention funds for abstinence programs. Others advocate that Congress increase
spending on other prevention strategies, such as those that prevent the transmission
of HIV from mother to child. A number of analysts have requested that Congress
expand the list of PEPFAR Focus Countries to include countries in other regions
where the virus is rapidly spreading, such as in Latin America, the Caribbean, Eastern
Europe, and Central Asia.
A large number of countries, especially in sub-Saharan Africa, are struggling
with inadequate health systems, which are crippled by shortages of medical
personnel. WHO estimates that there is a global shortage of 4.3 million health
workers. Of the 57 countries with critical shortages of health care workers, 36 are
in Africa and none are in industrialized nations. Global health experts contend that
the rapid infusion of funds targeted at HIV/AIDS initiatives is pulling in-country
resources and health workers away from government-run health clinics to foreign-
funded HIV/AIDS programs. This movement, health analysts purport, exacerbates
the current health worker shortage and limits the number of health professionals
capable of treating other afflictions.
Proponents of greater spending on global health argue that the global spread of
avian influenza (H5N1) and the inability of countries such as Indonesia to contain the
virus demonstrates the need to increase investment in strengthening public health
systems. Supporters also argue that increased spending might encourage state
openness and responsibility, and enhance global cooperation and containment efforts.
New and evolving infectious diseases and the potential for bioterrorism are creating
growing linkages between domestic and global health policies. These developments

have raised a host of issues for policy makers, including ensuring health data
reporting, enhancing pandemic preparedness capacity, managing public fear and
information disclosure, coordinating national and international responses to
infectious disease outbreaks, and overcoming resource and distribution challenges.
CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria
Spending: FY2004-FY2007, by Tiaji Salaam.
CRS Report RL33219, U.S. and International Responses to the Global Spread of Avian
Flu: Issues for Congress, by Tiaji Salaam.
CRS Report RL33349, International Efforts to Control the Spread of the Avian Influenza
(H5N1) Virus: Affected Countries’ Responses, coordinated by Emma Chanlett-
United Nations Reform. [Marjorie Ann Browne, Specialist in
International Relations (7-7695) and Luisa Blanchfield, Analyst in Foreign
Affairs (7-0856)] United Nations reform, as variously defined, has drawn the
attention of many in Congress and the executive branch as well as other U.N.
member governments. In the past, Congressional views and expectations on the need
for U.N. reform have resulted in significant arrearage in U.S. contributions,
especially to U.N. regular budget and peacekeeping accounts, and led Congress to
specify conditions that had to be met prior to the release of U.S. funds appropriated
to finance these contributions or arrearages.
As the 110th Congress convenes, several issues relating to U.N. reform remain
pending, although former U.N. Secretary-General Kofi Annan and U.N. member
states have proposed or put into place a series of management, programmatic, and
structural reforms aimed at improving the organization. Many of these reforms are
in various stages of implementation, while others are still being considered by U.N.
member states. Some in Congress may wish to examine how these reforms are being
implemented, as well as the extent to which previously-implemented reforms meet
their intended goals. Some Members may also want to examine reform issues that
have not been fully addressed by the United Nations.
In addition, on December14, 2006, Ban Ki-Moon of South Korea replaced Kofi
Annan as Secretary-General of the United Nations. Ban has stated that U.N. reform
will remain a priority during his tenure as Secretary General. Another potential area
of focus may be the Senate’s consideration of a nominee to replace John R. Bolton,
who resigned as U.S. Permanent Representative to the United Nations. The
appointment of a new U.S. ambassador to the United Nations may have implications
for U.S. policy toward the United Nations, as well as for ongoing U.N. reform efforts.
As the single largest financial contributor to the United Nations, the United
States has actively participated in the U.N. reform process. Some Members of
Congress and the Administration have advocated for, among other things:
strengthening U.N. internal oversight, improving U.N. human rights mechanisms,
and increasing fiscal discipline. Areas of concern that may have contributed to
current U.N. reform efforts include allegations related to the U.N. oil-for-food
program in Iraq 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; the widely-perceived ineffectiveness of
U.N. human rights mechanisms; and the capacity of the United Nations to provide
security for its activities around the world. It is anticipated that U.S. interest in U.N.
reform will continue to remain strong as reform initiatives are debated and
considered by U.N. member states.
CRS Report RL33611, United Nations System Funding: Congressional Issues, by
Marjorie Ann Browne.
CRS Report RL33700, United Nations Peacekeeping: Issues for Congress, by Marjorie
Ann Browne.
CRS Report RL33608, The United Nations Human Rights Council: Issues for
Congress,by Luisa Blanchfield.
Economic Sanctions. [Dianne E. Rennack, Specialist in Foreign Policy
Legislation, (7-7608)] The United States imposes various types of economic
sanctions on numerous countries, individuals, or entities, in furtherance of foreign
policy or national security goals. The United States maintains economic sanctions
that restrict most transactions with those countries it has identified as supporters of
international terrorism: Cuba, Iran, North Korea, Sudan, and Syria. The United
States maintains an arms embargo on Belarus, Burma, China, Liberia, Somalia,
Vietnam, and the aforementioned terrorist states (and it continues to be the policy
generally to deny export or import licenses for defense articles and defense services
for Afghanistan, Democratic Republic of Congo, Haiti, Iraq, and Rwanda). The
United States limits foreign aid to about two dozen states or regions and the terrorist
states. The United States, under authority granted the President to recognize
conditions of national emergency and to curtail transactions accordingly, limits trade,
transactions, and investment in Burma, Cuba, Iran, Liberia, North Korea, Sudan,
Syria, Zimbabwe, and the Western Balkans. 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, those who contributed to the conflict
in the Democratic Republic of the Congo, and diamond traffickers (when the
diamonds have not been subject to a certification process). These individuals and
entities number in the hundreds.
Congress has always sought — some would say it has struggled — to find the
balance among competing foreign policy and national security concerns. In the
1970s, for example, Congress enacted legislation that focused on human rights
concerns, while the 1980s ushered in increased attention to proliferation. Congress,
in recent years, has focused on implementing counter-terrorism and democracy
promotion measures. The use of economic sanctions, particularly after the events of
September 11, 2001, the onset of the war on terrorism, and the war in Iraq, seems to
have become more pragmatic, less driven by absolutes. Several countries could be
targeted for sanctions based on their human rights or proliferation records — for
example, Pakistan, Russia, or Saudi Arabia — but are recognized, and some would
say rewarded, instead as vital allies in the war on terrorism. Nonetheless, the

Administration 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), and each of these
reports could provide the impetus for calling on the Administration to exercise
statutory authority to impose economic sanctions on countries with objectionable
practices. Or Congress could initiate new legislative requirements to restrict trade,
aid, or transactions with states with objectionable behavior.
The 110th Congress is also faced with a range of recent events that could be
addressed by the use of existing, or creation of new, economic restrictions: The Six
Party talks are tentatively set to resume on North Korea’s pursuit of nuclear
capability; Iran continues pursuing its own nuclear ambitions. The crisis in the
Darfur region of Sudan is spilling into its neighboring states. Cuba appears to be
facing an imminent change in leadership. Recent events in — and U.S. relations with
— Belarus, Libya, Syria, Iran, the Palestinian territories, Lebanon, and Iraq all could
raise the possibility of imposition of new, or adjustment of existing, sanctions
CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation
Sanctions: Selected Current Law, by Dianne E. Rennack.
CRS Report 98-795, State and Local Economic Sanctions: Constitutional Issues, by
Jeanne J. Grimmett.
CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic
Sanctions: Status and Implementation, by Remy Jurenas.
Overview. [Nicolas Cook, Specialist in African Affairs (7-0429) and
Lauren Ploch, Analyst in African Affairs (7-7640)] U.S. policy prioritiesth
pertaining to Sub-Saharan Africa likely to be taken up by the 110 Congress may
build upon or amend many of those pursued by the 109th Congress, but a range ofth
new Africa-focused policy problems will also face the 110 Congress. Key U.S.
policy issues pertaining to Africa are likely to center on U.S. efforts to promote peace
and security in the region; U.S. counter-terrorism initiatives; bilateral military
cooperation and training assistance efforts, particularly in support of international
peacekeeping capacity building; the programmatic focus, funding levels, and
objectives of diverse U.S. assistance efforts; the promotion of democratic governance
and transparency, the rule of law, and human rights in Africa; and efforts to promote
U.S.-Africa trade and market-driven African economic growth. U.S. relations with
the African Union (AU) are likely to continue to focus on peacekeeping cooperation,
crisis mediation, and U.S. support for AU capacity and institution building to
advance democracy, counter-terrorism, and justice goals. U.S.-AU relations may
expand following the appointment of a new U.S. ambassador to the African Union
and the anticipated opening of an AU mission in Washington, DC.
U.S. efforts to promote peace and security in Africa are likely to remain
prominent issues of concern to U.S. policy makers. These will prospectively center
on diplomatic, policy, and logistical assistance initiatives aimed to mediate and

mitigate political and military crisis in several countries, while also supporting the
consolidation of post-conflict transition processes in others. Resolution of the crisis
in the Darfur region of Sudan is likely to remain a key Africa-related issue for
Congress, as is implementation of Sudan’s north-south Comprehensive Peace
Agreement. Peace and security concerns will also likely focus on current, emergent,
or recent military-political crises in the Democratic Republic of the Congo,
Eritrea-Ethiopia, Cote d’Ivoire, Somalia, Chad, and the Central African Republic,
and related U.S. policy responses and assistance programs, including post-conflict
rebuilding efforts, as in Liberia. U.S. funds substantially support U.N. peacekeeping
missions in many of these countries, and U.S. policy on the progress, structure and
mandate, and creation or termination of these missions will draw continuing
Congressional attention. Congress is likely to carefully monitor U.S. military
cooperation with African countries, which may be affected by the possible creation
of a Department of Defense Africa Command; U.S. counter-terrorism initiatives in
the region; and related efforts to further U.S. security goals in the region.
The role of U.S. assistance as a vehicle for implementing U.S. policy priorities
in Africa will almost certainly remain a locus of policymaking attention. Key
assistance issues will likely include the level and programmatic focus of U.S. aid in
support of economic growth, education, public health, food security, democratization
and civil society strengthening, and market-led economic growth. U.S. support
aimed at countering HIV/AIDS through support for HIV prevention, treatment, and
related goals in Africa will remain a prominent assistance issue. Congress may
consider the implications for Africa of the Administration's current reformulation of
the U.S. foreign assistance strategy, and how the new strategy compares and contrasts
with the policy approaches and operational roles of the U.S. Agency for International
Development and the Millennium Challenge Corporation. U.S.-Africa trade,
market-driven African economic growth, and related goals, particularly as they
pertain to the African Growth and Opportunity Act (AGOA), are likely to engage
some Members’ attention. Congress may be called upon to consider a possible
U.S.-Southern African Customs Union free trade agreement, though negotiations
toward this end have been slow. The economic role of China in Africa and Africa's
increasing role as a provider of U.S. oil imports and other extractive sector
commodities may draw congressional attention.
U.S. efforts to promote transparent and democratic governance, the rule of law,
and human rights in Africa are likely to draw continuing congressional interest. The
110th Congress is likely to continue to monitor and respond to ongoing political
repression, abuses of human rights, and limits on freedom of expression by the
government of Zimbabwe. Many observers see these actions, along with a
controversial land expropriation and redistribution program and centralized,
command economy policies, as having created a crisis of governance and as having
contributed to Zimbabwe’s on-going economic collapse. Congress may consider
prospective U.S. policy responses to an eventual leadership succession in the country,
which is led by President Robert Mugabe, an octogenarian who has steadfastly
defended his government’s policies.
Sudan. [Ted Dagne, Specialist in International Relations (7-7646)] In July
2004, the House and Senate declared the atrocities in Darfur genocide. On
September 9, 2004, then-Secretary of State Colin Powell, in his testimony before the

Senate Foreign Relations Committee, voiced the same assessment. On May 4, 2006,
the Government of National Unity and the Sudan Liberation Movement/Army
(SLM/A) signed the Darfur Peace Agreement (DPA), after almost two years of
negotiations. Since the crisis began in 2003, sources estimate 450,000 people have
been killed, more than 2 million displaced, and over 220,000 Sudanese are in refugee
camps in neighboring Chad. The security situation continues to deteriorate,
especially since the signing of the peace agreement in May 2006 and due to recent
troop deployments by the Government of Sudan. Meanwhile, implementation of the
Comprehensive Peace Agreement by the Government of Sudan has been selective
and at times deliberately slow, according to United Nations officials and Sudan
observers. In recent weeks, conditions in South Sudan have deteriorated. In late
November 2006, more than 150 people were killed and dozens injured, after two
days of fighting between the Sudan People’s Liberation Army (SPLA) and Sudan
Armed Forces in Malakal, South Sudan.
The crisis in Sudan continues to generate significant interest in Congress. On
October 13, 2006, President Bush signed the Darfur Peace and Accountability Act,
(P.L. 109-344), and issued a new Executive Order imposing a number of sanctions
on Sudan. CRS coverage will continue to focus on humanitarian and political
aspects of the crisis in Darfur, implementation of the Comprehensive Peace
Agreement, and the Eastern Sudan Peace Agreement.
Somalia. [Ted Dagne, Specialist in International Relations (7-7646)] In
June 2006, the forces of the Islamic Courts Union (ICU) captured Mogadishu, forcing
the militia controlled by warlords to flee the capital. ICU forces strengthened and
expanded areas under their control after the defeat of the warlords in Mogadishu, and
captured two key towns in mid-June 2006. Negotiations between the Baidoa-based
Transitional Federal Government and the ICU have not led to a final agreement. U.S.
officials have expressed concern about the presence of known terrorist individuals
in East Africa, and the possibility that some of them may be using Somalia as a
transit and hiding place. These issues, the political crisis and the on-going complex
humanitarian emergency in Somalia, the possible deployment of a peacekeeping
force, and increasing regional tension are likely to remain the focus of continuing
AIDS in Africa. [Nicolas Cook, Specialist in African Affairs (7-0429)]
Africa is the region most severely affected by AIDS in the world. With just over 11%
of the global population, it has about 63% of all infected persons (about 24.7
million), 76% of all HIV-positive women, and about 90% of all HIV-infected
children. Although Africa’s average HIV rate is about 6%, infection rates range as
high as 33.4% in southern Africa, where about half of Africa’s HIV-positive
population resides. Policy makers may consider diverse issues related to funding and
allocating U.S. AIDS funding for Africa, including the challenges some recipient
countries face in efficiently absorbing the significant inflows of foreign assistance
they are receiving. Despite the recipient countries’ limited aid absorption capacity,
some policy advocates maintain that U.S. international AIDS funding is insufficient
in the face of the severity of the pandemic in Africa. Related funding issues may
include the reauthorization of the President’s Emergency Plan for AIDS Relief
initiative; U.S. contributions to the Global Fund (see entry under HIV/AIDS and
International Health Issues); the status of anti-retroviral drug treatment and

distribution efforts; and the balance between treatment and prevention components
of anti-AIDS programs, including the role of premarital abstinence programs in
prevention. Other policy issues that might be considered include methods for the
scaling up of prevention and care programs and for increasing recipient countries’ aid
absorption capacity, and the implications of changing AIDS epidemiological trends
for AIDS policy making and program design.
CRS Report RL33591, Africa: U.S. Foreign Assistance Issues, by Ted Dagne.
CRS Report RL33584, AIDS in Africa, by Nicolas Cook.
CRS Report RL33574, Sudan: Humanitarian Crisis, Peace Talks, Terrorism, and U.S.
Policy, by Ted Dagne.
CRS Report RL33185, Liberia’s Post-War Recovery: Key Issues and Developments, by
Nicolas Cook.
Overview. [Dick K. Nanto, Specialist in Industry and Trade (7-7754)] Forth
the 110 Congress, Asia poses several critical policy choices. The fundamental issues
revolve around security from nuclear, conventional warfare, or terrorist threats; the
development of economic and financial relationships necessary for U.S. economic
well-being; and the projection of values in a manner that helps shape institutions and
attitudes favorable to the United States. While U.S. attention has been drawn to the
Middle East, Asian countries have quietly poured resources into economic
development and military modernization. This has resulted in governments in the
region that are more independent, more focused on gaining economic advantage, and
who are beginning to respond in a more lukewarm manner to certain U.S. initiatives.
Asia poses challenges yet also opens the door to opportunities. Flashpoints exist
along the Taiwan Strait, on the Korean Peninsula, between India and Pakistan, along
the Pakistani border with Afghanistan, and with terrorist activity in Indonesia, the
Philippines, India, and Pakistan. Asia also looms large as a source of disruptions to
society, be they new strains of infectious diseases, extensive natural disasters,
financial panic, or unbalanced trade flows. However, in recent years, Asia has been
relatively stable. Despite notable exceptions in North Korea and Burma, virtually all
Asian nations have undergone dramatic changes without resorting to open warfare,
recidivist representation in government, or retreating significantly from market-based
economic systems. As crises develop in Asia, the United States usually is expected
to play a lead role in resolving them.
The long-term trends and situations in Asia that warrant attention include (1)
the rise of China and Beijing’s increasing economic clout both in the region and in
trade with the United States; (2) a military buildup both of nuclear and conventional
weapons along with channels for nuclear proliferation; (3) a serious decline in
favorable attitudes toward the United States, particularly among Asian nations with
large Muslim populations and in South Korea; (4) rising nationalism and forces for
self-determination, ethnic conflicts, or terrorist incidents in several Asian nations; (5)
a growing U.S. strategic relationship with India; (6) cooperation with Pakistan in

countering al Qaeda and potential instability and anti-democratic forces within that
country; (7) the need for the United States to realign its military forces combined
with a decline in the degree to which South Koreans and Japanese feel the need for
those forces to protect them; (8) a scramble for natural resources, particularly
petroleum but also water and coal; (9) globalization and trade, along with capital
flows, that not only have generated a $356 billion U.S. trade deficit with nations of
the Asia Pacific but have led to the outsourcing of jobs to Asian nations; (10)
expanding industrial production networks that have created heavy interdependency
among economies, including between Taiwan and mainland China; and (11) a
developing network of regional free trade and security arrangements that could create
an East Asian trading bloc or a security mechanism with diminished U.S. influence.
For the 110th Congress, the likely legislative issues include levels of funding for
foreign assistance dealing with anti-terror campaigns, illegal drug trafficking,
HIV/AIDS, avian influenza, and military training; considering free-trade agreements
with South Korea, Malaysia, and Thailand now being negotiated along with
proposals for such agreements with Taiwan, Japan, and other nations; dealing with
the arguably undervalued Chinese currency and bilateral trade imbalances; and
further considering U.S.-India nuclear cooperation. Major oversight issues include
the six-party talks addressing North Korea’s nuclear weapons program, human rights
in Burma (Myanmar) and North Korea, conduct of the war on terrorism and dealing
with radical Islamists in Southeast and South Asia (particularly in Pakistan), alliance
relationships and military realignments, the rising power of China, cross-strait
tensions between Taiwan and mainland China, a future Asian trading bloc, and the
protection of intellectual property rights and other business-related issues.
Japan. [Emma Chanlett-Avery, Analyst in Asian Affairs (7-7748)] Under
the Bush Administration, U.S.-Japan ties have flourished, with many calling the
relationship “stronger than ever.” Converging U.S. and Japan objectives in
confronting North Korea’s nuclear and missile programs, and Japan’s participation
in U.S. operations in Iraq and Afghanistan have reinforced the notion of the
U.S.-Japan alliance as one of the central partnerships of U.S. foreign policy,
particularly in Asia. Since 2002, U.S.-Japan bilateral initiatives have reinforced the
new and expanded commitment to security cooperation by establishing common
strategic objectives and outlining major command changes to U.S. troops stationed
in Japan. As Prime Minister Shinzo Abe took office in September 2006, he
reaffirmed his commitment to the U.S. alliance and moved quickly to repair Japan’s
strained political relationships with South Korea and China. Congressional interest
in U.S.-Japan relations is driven by the range of U.S. security interests in East Asia,
as well as economic and trade concerns. A dispute over the safety of U.S. beef
imports appears to be largely resolved, but some Congressional concerns remain on
Japanese trade and currency practices.

CRS Report RL33740, The Changing U.S.-Japan Alliance: Implications for U.S.
Interests, by Emma Chanlett-Avery.
CRS Report RL33436, Japan-U.S. Relations: Issues for Congress by Emma
Chanlett-Avery, Mark E. Manyin, and William H. Cooper.
CRS Report RL32649, U.S.-Japan Economic Relations: Significance, Prospects, and
Policy Options, by William H. Cooper.
South Korea. [Larry Niksch, Specialist in Asian Affairs, (7-7680)] Since
the Korean War (1950-1953), the Republic of Korea (R.O.K.) has been one of the
closest allies of the United States. Since 2000, however, issues have arisen that have
divided the two governments and increasingly divide public and media opinion in
South Korea and the United States. These will be the subject of likely difficultth
negotiations between Seoul and Washington during the 110 Congress, and Congress
will have an important oversight role over these issues.
A direct congressional role might include examining and voting on a Free Trade
Agreement that is under negotiation between the United States and South Korea. A
U.S.-R.O.K. (KORUS) FTA would be the second largest FTA the United States hasth
entered into; only NAFTA would be larger. Members of the 109 Congress have
issued recommendations and warnings over how the two sides deal with certain trade
issues in the talks. Negotiations were difficult in 2006 over issues like access of U.S.
rice, autos, and pharmaceuticals into South Korea, U.S. restrictions on South Korean
textiles, and U.S. anti-dumping regulations. The negotiations face a deadline of July
1, 2007, when President Bush’s “trade promotion authority (TPA)” expires; an
agreement must be signed before July 1, 2007, if it is to receive expedited
Congressional consideration under that authority. In addition the TPA requires a 90-
day presidential notification to Congress of intent to sign the agreement; therefore the
KORUS FTA would have to be completed before April 2, 2007.
Policies toward North Korea have become a divisive issue. South Korea’s
“sunshine policy” seeks “reconciliation, cooperation, and the establishment of peace”
with North Korea through exchanges, South Korean aid, and economic cooperation
projects. The Bush Administration’s approach seeks an end to North Korea’s nuclear
capabilities and pressure on North Korea on issues like human rights. These
differences have been manifest the different positions South Korea and the United
States have taken in the six party nuclear negotiations with North Korea. South
Korea has taken a negative attitude toward sanctions on North Korea which the Bush
Administration imposed in 2005 over North Korea’s counterfeit exports and the
United Nations imposed in 2006 over North Korea’s nuclear and missile tests. The
Bush Administration has called for South Korea to cease financial payments to North
Korean leader Kim Jong-il in connection with economic cooperation projects and
cooperation in searching North Korean ships for weapons of mass destruction. The
sanctions issue has brought U.S.-R.O.K. divisions more into public view and has
resulted in more criticism of South Korea in Congress and in the U.S. media.
There have been big changes in the U.S.-R.O.K. military alliance and in the U.S.
military presence in South Korea since the outbreak of anti-American sentiment in
South Korea in 2002. The Pentagon and the R.O.K. Defense Ministry have engaged

in tough but so far successful negotiations over withdrawals of U.S. ground forces,
relocations of U.S. forces to new bases in South Korea, and plans for dismantling the
U.S.-R.O.K. Combined Forces Command into separate R.O.K. and U.S. military
commands. South Korea also dispatched over 2,000 troops to Iraq. Future issues
include withdrawals of U.S. ground combat forces after the current cycle of
withdrawals ends in September 2008; implementing the command restructuring;
South Korea’s assertion of a right to veto the employment of U.S. forces in Korea
into other crises in Northeast Asia; and South Korea’s role in the struggle against
Islamic terrorism, beginning with its response to U.S. appeals for larger allied
military contributions in Afghanistan.
CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry Niksch.
CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement (KORUS
FTA), by William H. Cooper and Mark E. Manyin.
South Asia. [K. Alan Kronstadt, Specialist in Asian Affairs (7-5415)]
Long considered a “strategic backwater,” South Asia has emerged in the 21st century
as increasingly vital to core U.S. foreign policy interests. India, the region’s
dominant actor with more than one billion citizens, is now recognized as a nascent
major power and “natural partner” of the United States, one that many analysts view
as a potential counterweight to China’s growing influence. Since 2004, Washington
and New Delhi have been pursuing a “strategic partnership” based on shared values
such as democracy, multi-culturalism, and the rule of law. They have engaged in
increasing counterterrorism cooperation, joint military exercises, high-technology
trade, and numerous other economic, security, and global initiatives, including “full
civilian nuclear energy cooperation.” This latter initiative, launched by President
Bush in July 2005 and provisionally endorsed by the 109th Congress in late 2006,
would reverse three decades of U.S. nonproliferation policy. It would require —
among other steps — conclusion of a peaceful nuclear agreement between the United
States and India, which would itself enter into force only after a Joint Resolution of
Approval by Congress. The issue of major U.S. arms sales to India may also come
before the 110th Congress. The influence of a growing and relatively wealthy Indian-
American community of more than two million is reflected in Congress’s largest
country-specific caucus.
In the interests of regional stability, the United States strongly encourages an
ongoing India-Pakistan peace initiative and remains concerned about the potential for
conflict over Kashmiri sovereignty to cause open hostilities between these two
nuclear-armed countries. Congress also continues to have concerns about abuses of
human rights, including caste- and gender-based discrimination, 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 development.
Neighboring Pakistan is the locus of three central U.S. foreign policy issues:
terrorism, WMD proliferation, and democratization. The United States seeks to
balance an acute interest in Islamabad’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. 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 religious militant
groups in Pakistan complicate policymaking by both Islamabad and the U.S.
government. Political and military efforts to pacify the country’s rugged western
tribal areas continue with little success; a “Pakistani Taliban” has emerged there as
a threat to U.S. regional interests.
The proliferation of Pakistani nuclear weapons materials and technologies to
third parties was revealed when Pakistani metallurgist A.Q. Khan’s global
proliferation network was uncovered in 2004. Islamabad 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 the 109th Congress expressed further concerns that Pakistan’s military
has marginalized the country’s secular political parties and consolidated its grip on
power in contravention of democratic principles (the next national election is slated
for 2007). The State Department has determined that Pakistan’s record on human
rights remains poor. Pakistan is among the world’s leading recipients of U.S. aid,
obtaining more than $3.5 billion in direct U.S. assistance for FY2002-FY2006,
including $1.5 billion in security-related aid. Pakistan also has received billions of
dollars in reimbursement for its support of U.S.-led counterterrorism operations.
Islamabad has for some time been eager to finalize a Bilateral Investment Treaty with
the United States, and also seeks forward movement on President Bush’s March 2006
plan to establish Reconstruction Opportunity Zones to facilitate exports from
Pakistan’s tribal areas. Both initiatives would require Congressional action. The
issue of major U.S. arms sales to Pakistan may also come before the 110th Congress.
Three smaller South Asian countries have relevance for U.S. policy makers.
Congress has supported Nepal’s development for many years. There is now cause
for cautious optimism that Nepal’s decade-long civil war, which has claimed some
13,000 lives, is drawing to a close. A November 2006 peace accord creates political
space for the Maoist rebels to join an interim government. An election slated for
June 2007 is to form a special assembly to revise the Nepali constitution. A key issue
will be the future disposition of the monarchy, which is opposed by the Maoists. A
small team of U.N. monitors will travel to Nepal to monitor the current peace
arrangements, which have Maoist and Nepal Army forces in cantonments with locked
arms under watch. In the island nation of Sri Lanka, serious violence in a 23-year-old
civil war has flared anew, with a fragile 2002 cease-fire agreement all but collapsing.
Heavy fighting between Sinhalese-dominated government forces and the separatist
Liberation Tigers of Tamil Eelam killed thousands and created a new humanitarian
emergency in 2006. The United States designated the Tigers as a terrorist group in
1997 and has cooperated with Japan, the European Union, and, especially, Norway
in thus-far unsuccessful efforts to reinvigorate the peace process. Meanwhile,
Bangladesh’s political stability and status as a moderate democratic Muslim country
are increasingly under threat. Elections scheduled for January 2007 have once again
led to conflict between the opposition Awami League Party and the Bangladesh

Nationalist Party-led government. Bangladesh has been subject to increasing Islamist
extremist-inspired violence and is plagued by corruption.
CRS Report RL33529, India-U.S. Relations, by K. Alan Kronstadt.
CRS Report RL33498, Pakistan-U.S. Relations, by K. Alan Kronstadt.
Southeast Asia. [Thomas Lum, Specialist in Asian Affairs (7-7616)] Key
U.S. challenges and interests in Southeast Asia include fighting terrorism, assessing
and responding to China’s growing influence, finding ways to gain leverage over
Burma’s domestic policies and international behavior, and promoting trade. The

110th Congress will likely conduct oversight regarding ongoing U.S.-backed counter-

terrorism programs in the region, particularly in the Philippines and Indonesia, which
are said to have reduced the threat of large-scale attacks. Jemaah Islamiyah (JI), the
main Southeast Asian Islamist terrorist group, has struck targets in Indonesia and has
links to violent Islamist groups in the southern Philippines. Malaysia, Thailand,
Singapore, and Cambodia have been known as possible terrorist targets or safe
havens. Cooperative counter-terrorism activities include intelligence sharing and
joint police investigations in Indonesia and joint military exercises in the Philippines.
In 2007, Congress will look toward enhanced military ties with Indonesia following
the lifting of U.S. sanctions against military assistance to the country in 2005.
In the past several years, China has downplayed territorial disputes and
ideological differences while significantly increasing foreign aid, trade, and its
diplomatic presence in the region. According to some analysts, these ties may serve
as a basis for China’s cultivation of security relationships in Southeast Asia. Some
Southeast Asian leaders have argued that the United States has neglected the region
or viewed it only through a prism of the global war on terrorism. However, United
States and Congressional attention to the region have expanded somewhat to include
negotiations for Free Trade Agreements (FTAs) with Thailand and Malaysia (an FTA
with Singapore was put into effect in 2004), consideration of permanent normal trade
relations (PNTR) status for Vietnam, and the signing, in 2006, of a Trade and
Investment Framework Agreement (TIFA) with the Association of Southeast Asian
Nations (ASEAN) as a possible precursor to a U.S.-ASEAN FTA.
Many pressing regional issues of interest to Congress, such as terrorism, trade,
democracy, human rights, illegal drugs trafficking, and infectious diseases such as
HIV/AIDS and avian influenza, are addressed through U.S. regional and bilateral
foreign assistance programs. U.S. assistance also aims to address the conditions that
may contribute to the rise of radical ideologies and terrorism, such as poverty and
unemployment, lack of education, failing governments, political disenfranchisement,
and violent conflict. The 110th Congress faces a deteriorating political and human
rights situation in Burma, which receives no U.S. bilateral assistance but significant
economic and military support from China, as well as the problem of imposing U.S.
sanctions on Thailand in response to the military coup that occurred in September
2006. In 2006, Burma and Laos each received a Tier 3 ranking on the State
Department’s Trafficking in Persons Report, which is a basis for denying them non-
humanitarian aid. Laos, the Philippines, and Thailand receive bilateral assistance for

counter-narcotics programs. Cambodia, Indonesia, the Philippines, and especially
Vietnam receive bilateral assistance for HIV/AIDS prevention and treatment.
CRS Report RL31362, U.S. Foreign Aid to East and South Asia: Selected Recipients, by
Thomas Lum.
CRS Report RL33445, The Proposed U.S.-Malaysia Free Trade Agreement, by Dick K.
CRS Report RL32593, Thailand: Background and U.S. Relations, by Emma Chanlett-
CRS Report RL33490, Vietnam PNTR Status and WTO Accession: Issues and
Implications for the United States, by Mark E. Manyin, William H. Cooper, and
Bernard A. Gelb.
Overview. [Julie Kim, Specialist in International Relations (7-3692)]
Transatlantic relations and developments in Europe and Eurasia will likely remain
of interest in the 110th Congress, reflecting a key U.S. goal to sustain close ties with
Europe and in foster partnerships on, or at least coordinated responses to, shared
regional and global challenges. The transatlantic agenda is full and multifaceted,
with policy concerns ranging from the difficult NATO operation in Afghanistan, to
cooperation in the war against terrorism and non-proliferation strategies, such as with
respect to Iran, to managing the largest two-way trade and investment relationship in
the world. At the same time, U.S. and European perspectives may differ on priorities
and/or mechanisms for responding to these challenges. For example, many European
governments are pressing the United States to give renewed priority to the
Palestinian-Israeli peace process. Iraq remains a difficult transatlantic issue, even if
the U.S. - European crisis over the start of the conflict in Iraq has abated. Perhaps
most importantly, according to many analysts, Europe remains in a period of
introspection, with consequences for its broad integration project and capacity for
joint action. Stalled institutional reforms within the European Union are likely to
slow further enlargement after the 2007 entry of Romania and Bulgaria; Turkey’s
prospects for EU membership are particularly controversial. Lame duck governments
in key European countries are set to give way to new leadership in the near future.
Specific transatlantic issues that may draw the early attention of the 110th
Congress include NATO in Afghanistan, the status of Kosovo, and relations with
Russia. NATO’s expanding engagement in Afghanistan constitutes the alliance’s
largest, and potentially most problematic, military operation to date. The disputed
status of Kosovo is set to be resolved in early 2007, possibly in some form of
independence, although international consensus on this is not certain. Russia presents
a host of opportunities and challenges for the Europe and the United States,
particularly with regard to its policies toward neighboring states and growing
influence as a significant energy source for Europe.

RS22163, The United States and Europe: Current Issues, by Kristin Archick and Vincent
L. Morelli.
NATO and Afghanistan. [Paul Gallis, Specialist in European Affairs (7-

7679)] NATO’s U.N.-sanctioned International Security Assistance Force (ISAF)

assumed responsibility for the stabilization of all of Afghanistan in October 2006.
The allies consider the stabilization of Afghanistan their most important mission.
ISAF’s 31,000 troops are battling a Taliban insurgency and seeking to provide
security for the reconstruction of the country. The Afghan government is struggling
to improve governance and, with NATO’s backing, to rid the country of a large and
prospering heroin industry. The mission in Afghanistan is a test of NATO’s political
will and military capability because the country has never experienced coherent
governing authority. NATO forces must operate at great distances from the allies’
home countries, and the stabilization effort may require years to succeed. There is
a dispute among the allies over “national caveats,” or restrictions that some
governments have placed on their troops to prevent them from being used in combat,
while other allies’ troops are suffering casualties. At NATO’s Riga summit in
November 2006, the allies reduced but did not eliminate the caveats. Congress is
likely to hold hearings on appropriations for Afghanistan’s stabilization, efforts to
combat the heroin trade there, and NATO’s ability to achieve its mission.
CRS Report RL33627, NATO in Afghanistan: A Test of the Transatlantic Alliance, by
Paul Gallis.
CRS Report RS22529, The NATO Summit at Riga, 2006, by Paul Gallis.
Russia. [Stuart D. Goldman, Specialist in Russian and Eurasian Affairs
(7-7685)] The United States and Russia share several key areas of cooperation:
agreement in principle that global terrorism, fueled by Islamic extremism, is the
paramount security threat, which is exacerbated by the danger of WMD proliferation,
which they also both oppose in principle; and possible major bilateral energy
cooperation based on Russia’s status as a huge oil and gas producer and exporter.
Counterbalancing this are areas of tension, such as U.S. concerns about anti-
democratic and anti-free-market trends under President Putin; Russian interference
in Georgia, Moldova, and Ukraine; Russia’s construction of a nuclear power reactor
in Iran, and its reluctance to support sanctions to dissuade Iran from pursuing illicit
nuclear activities. Russia in turn is troubled by U.S. and NATO influence
(“interference”) in many of the Soviet successor states and by what Moscow
perceives as a “double standard” applied by the West to Russia. The Bush
Administration generally has sought to emphasize cooperation with Russia — real
and potential — and to de-emphasize areas of tension that might interfere with such
cooperation, although 2006 saw a stiffening of Administration criticism of Moscow.
Many in Congress have been less tolerant of worrisome Russian behavior. Duringth
the 109 Congress, bilateral problems appeared to reach a “tipping point” in which
the negative aspects outweigh the prospects for cooperation.
Among the Russian issues that the 110th Congress is likely to address are
Cooperative Threat Reduction (Nunn-Lugar) programs in, and other foreign aid to,
Russia, and; the Jackson-Vanik Amendment and Russian accession to the WTO. In

addition, Congress is likely to continue or even intensify its oversight of U.S. policy
toward Russia concerning broad domestic political developments in that country and
Russian relations with its neighbors.
CRS Report RL33407, Russian Political, Economic, and Security Issues and U.S.
Interests, by Stuart D. Goldman.
CRS Report RS21123, Permanent Normal Trade Relations (PNTR) Status for Russia and
U.S.-Russian Economic Ties, by William H. Cooper.
CRS Report RL32866, U.S. Assistance to the Former Soviet Union, by Curt Tarnoff.
Kosovo. [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. For more than a
decade, the United States has provided significant aid and a substantial troop
deployment to the Balkans in support of this goal. Both aid amounts and the U.S.
troop commitment have declined in recent years, as the region has stabilized and
more pressing U.S. foreign policy priorities have emerged. However, the disputed
province of Kosovo remains the most difficult political problem in the Balkans.
U.N.-brokered status talks in 2006 between the ethnic Albanian-dominated Kosovo
government and Serbia made little progress, with the Kosovars demanding
independence and Serbia adamantly rejecting it, preferring autonomy. U.N. mediator
Martti Ahtisaari is expected to announce his proposed solution to the issue in the
weeks after Serbia’s January 21, 2007 parliamentary elections. Many observers
believe that he will advocate terminating U.N. oversight over Kosovo (probably
making way for a more limited EU and U.S. role) and opening the way to Kosovo’s
independence from Serbia, most likely with conditions attached. A U.N. Security
Council resolution may endorse these recommendations, although the scope of the
resolution has not yet been determined. About 1,700 U.S. troops are deployed in
Kosovo as part of a NATO-led peacekeeping force of some 16,000 troops. They are
expected to remain there for some time after the status issue is resolved. However,
as occurred in Bosnia, the force will likely be reduced or withdrawn when Kosovo
is deemed sufficiently stable and secure.
The first session of the 110th Congress may consider legislation that addresses
the status issue (perhaps including calls for early U.S. recognition of Kosovo’s
independence) as well as the post-status development of Kosovo and the region.
Those favoring independence for Kosovo may say that the Congress should take a
stand in favor of self-determination, the option favored by the ethnic Albanians in the
province (who make up over 90% of the population). Opponents may argue that
premature intervention could help nationalist extremists in Serbia, as well as
destabilize the region.
CRS Report RL31053, Kosovo and U.S. Policy, by Julie Kim and Steven Woehrel.

Latin America
Overview. [Mark P. Sullivan, Specialist in Latin American Affairs (7-
7689)] Legislative and oversight attention to Latin America and the Caribbean in the
110th Congress will likely focus on continued counternarcotics efforts, especially in
the Andean region; potential immigration reform and increased border security,
which have been key issues in relations with Mexico; efforts to deal with threats to
democracy in such nations as Venezuela as well as the rise of populism in several
Latin American countries; debate over the best means to foster political change in
Communist Cuba; and trade issues, including the potential consideration of several
free trade agreements (FTAs).
Curbing the flow of illicit drugs from South America into the United States has
been a key component of U.S. relations with Latin America for almost two decades,
and since 2000 the centerpiece of this policy has been the Andean Counterdrug
Initiative (ACI) aimed at supporting Colombia and its neighbors in their efforts to
eradicate the production of illicit drugs. Latin America has made enormous strides
in term of political and economic democratic development over the past 25 years,
with considerable U.S. support, but conditions such as persistent poverty, especially
in Haiti, and the rise of a new form of populism in such countries as Venezuela,
Bolivia, and Ecuador will continue to pose challenges for U.S. interests and policyth
in the region. The 110 Congress will also likely maintain an oversight interest in
potential terrorist threats in Latin America, as well as efforts to counter the
trafficking of persons in the region, the rise of violent gangs in Central America, and
continued efforts against HIV/AIDS in the Caribbean, where infection rates in some
countries are among the highest outside sub-Saharan Africa. With regard to trade,
Congress could face consideration of implementing legislation for FTAs with
Colombia, Peru, and Panama, which will be affected by the new political makeup of
Congress as well as the scheduled expiration of fast track Trade Promotion Authority
(TPA) in July 2007. (Also see section above on “Trade” for more on TPA and
CRS Report RL32733, Latin America: Issues for the 109th Congress, coordinated by
Mark P. Sullivan.
Cuba. [Mark P. Sullivan, Specialist in Latin American Affairs (7-7689)] Asth
in past years, the main issue for U.S. policy toward Cuba in the 110 Congress will
be how to best support political and economic change in one of the world’s
remaining Communist nations. Unlike past years, however, Congress will be
examining policy toward Cuba in the context of Fidel Castro’s temporary, and
potentially permanent, departure from the political scene because of health
conditions, which could foster a re-examination of U.S. policy. Since the early
1960s, U.S. policy has consisted largely of isolating the island nation through
comprehensive economic sanctions, including an embargo on most trade and
financial transactions. A second component of U.S. policy has consisted of measures
in support of the Cuban people, including private humanitarian donations,
U.S.-sponsored radio and television broadcasting, and democracy promotion
projects. The Bush Administration has significantly tightened economic sanctions,
including restrictions on travel (especially family, educational, and religious travel),

on the provision of private humanitarian assistance, and on payment terms for
licensed U.S. commercial agricultural exports.
Although 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, or as part of a strategy of lifting sanctions
incrementally in response to positive changes in Cuba. 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. While one or both houses have at times
approved legislative provisions that would ease U.S. sanctions on Cuba, ultimately
these provisions have been stripped out of the final enacted measures. President Bush
has regularly threatened to veto various appropriations bills if they contained
provisions weakening the embargo. The debate on policy toward Cuba will likely
continue in the 110th Congress, and there could be increased oversight of various
aspects of Cuba policy, including a review of U.S. democracy promotion efforts
prompted by a recent Government Accountability Office report criticizing the
management of such efforts for Cuba.
CRS Report RL32730, Cuba: Issues for the 109th Congress, by Mark P. Sullivan.
Colombia. [Colleen W. Cook, Analyst in Latin American Affairs (7-7901)]
U.S. assistance to Colombia is likely to be an issue for the 110th Congress. Colombia
is the sixth leading recipient of U.S. foreign assistance with more than $560 million
in assistance requested for FY2007. The United States provides assistance to
Colombia through the Andean Counterdrug Initiative (ACI), which supports Plan
Colombia, a six-year plan developed by the Colombian government to combat
Colombia’s ongoing internal armed conflict and the drug trafficking which provides
significant funding to leftist guerrillas and right-wing paramilitaries. Funding for
ACI from FY2000 to FY2006 totaled more than $5 billion. Colombia produces 70%
of the world’s supply of cocaine and over 90% of cocaine entering the United States.
The leftist Revolutionary Armed Forces of Colombia (FARC) are believed to be
participating in the drug trade, as are the remnants of the demobilized right wing
paramilitary groups. The composition of U.S. assistance to Colombia may be
considered by the 110th Congress in response to concerns about the effectiveness of
current policies in reducing cocaine production. Congress has repeatedly expressed
concern about 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
FARC; and the paramilitary demobilization process.
The 110th Congress is also likely to consider legislation to implement the U.S.-
Colombia Trade Promotion Agreement, signed November 22, 2006. Once
implemented, the agreement would eliminate duties on 80% of U.S. consumer and

industrial exports to Colombia, and eliminate all tariffs within ten years. Both the
labor and sugar provisions of the agreement are controversial. Critics of the
agreement maintain that it will weaken worker rights. There is also concern that the
agreement will adversely affect U.S. sugar producers because it significantly
increases the U.S. quota on sugar imports from Colombia. Colombia currently
benefits from trade preferences under the Andean Trade Preferences and Drug
Eradication Act, which are due to expire on June 30, 2007.
CRS Report RL32250, Colombia: Issues for Congress, by Colleen W. Cook.
CRS Report RL33370, Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2007 Assistance, by Connie Veillette.
CRS Report RS22419, U.S.-Colombia Trade Promotion Agreement, by M. Angeles
Haiti. [Maureen Taft-Morales, Specialist in Latin American Affairs (7-
7659)] The main issue for future U.S. policy regarding Haiti will be how to continue
to improve security, promote economic development, and strengthen fragile
democratic processes now that an elected government is in place. Haiti’s priorities
are many, and deeply intertwined; the Haitian government and the international donor
community are implementing an interim assistance strategy that addresses its many
needs simultaneously. The current challenge is to accomplish short-term projects
that will boost public and investor confidence while at the same time pursuing long
term development plans that will improve living conditions for Haiti’s vast poor
population and construct government institutions capable of providing services and
stability. The Haitian government is working with international donors, including
the United States, to develop a long-term poverty reduction plan. Donors are also
looking at how to ensure transparency as they begin to provide funds directly to the
government rather than through non-governmental organizations. On December 9,

2006, the 109th Congress passed a special trade preferences bill for Haiti (H.R. 6142,

the Haitian Hemispheric Opportunity through Partnership Encouragement/HOPE Act
of 2006, incorporated into H.R. 6111 as Title V). Supporters said the bill could
generate 40,000 jobs in Haiti. Some U.S. textile interests opposed it because it
would provide preferences to some garments with components originating in China
and other parts of Asia. The incoming Senate Finance Committee Chairman
reportedly promised to hold a hearing in the 110th Congress, before the HOPE act
goes into effect, so that textile industry representatives may testify on the impact they
say the bill will have (National Journal, Dec. 11, 2006).
The 110th Congress will likely consider the levels of support to provide for
security enhancing measures in Haiti such as the U.N. Stabilization Mission in Haiti
(MINUSTAH)’s disarmament, demobilization, and reintegration program, the
Haitian government’s Social Reconciliation Plan, and police and judicial reform.
The Administration partially lifted the 15-year-old arms embargo against Haiti to
allow arms and equipment to Haitian security units. Some Members have expressed
concern about doing so before the Haitian police force has been vetted for those
accused of human rights violations or other crimes. An Administration goal of
limiting illegal immigration has been challenged by some Members as not affording
adequate protection for Haitian asylum-seekers. President Rene Preval, who was

inaugurated on May 14, 2006 to a five-year term, has asked for U.S. support for
public works projects, said he would cooperate fully with counter narcotics efforts,
and urged the U.S. Congress to approve legislation providing preferential trade
treatment to Haiti.
CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current
Congressional Concerns, by Maureen Taft-Morales.
CRS Report RS21839, Haitian Textile Industry: Impact of Proposed Trade Assistance,
by Bernard Gelb.
CRS Report RS21349, U.S. Immigration Policy on Haitian Migrants, by Ruth Ellen
Mexico. [Colleen W. Cook, Analyst in Latin American Affairs (7-7901)]
Immigration and border security matters are likely to dominate U.S. interest inth
Mexico in 2007. The 109 Congress considered immigration reform, but did not
enact any comprehensive reform measures. In September 2006, Congress approved
the Secure Fence Act of 2006 (P.L. 109-367) to authorize the construction of a border
fence and other barriers along 700 miles of the U.S.-Mexico border as well as $1.2
billion in initial funding for fence construction through the FY2007 Department of
Homeland Security Appropriations Act. During the 109th Congress, both the House
and Senate approved immigration reform measures (H.R. 4437 and S. 2611,
respectively), but were not able to resolve key differences in the bills. Principal
sticking points included the House provision that would criminalize unlawful
presence and Senate provisions to adjust the status of certain illegal immigrants.
President Bush continues to express support for comprehensive immigration reform
including increased border security, a guest worker program, and the normalization
of status of some of the estimated 12 million illegal immigrants. Mexican President
Felipe Calderón, like his predecessor President Vicente Fox, is critical of the border
fence, and has charged that economic development would be a more effective means
to reducing illegal Mexican migration to the United States. Drug cartel violence inth
northern Mexico and Michoacán is also likely to be of concern to the 110 Congress.
President Calderón has stated that cartel violence threatens the Mexican state.
Trade issues will also continue to be a concern. Mexico is the United States’
second largest trading partner, and is a party to the North American Free Trade
Agreement (NAFTA) along with Canada and the United States. The three countries
are currently seeking to maintain competitiveness with other regions through the
Security and Prosperity Partnership of North America (SPP). Resolution of trade
disputes will continue to be a concern. An ongoing dispute involves granting
Mexican trucks access to U.S. highways. Another long running dispute related to
sugar and high-fructose corn syrup imports was recently resolved and Mexico has
agreed to repeal its 20% tax on soft drinks made with high-fructose corn syrup
CRS Report RL32724, Mexico-U.S. Relations: Issues for the 109th Congress, by Colleen
W. Cook.

Venezuela. [Mark P. Sullivan, Specialist in Latin American Affairs (7-
7689)] Over the past several years, U.S. relations with Venezuela have deteriorated
under the populist rule of President Hugo Chávez, with declining cooperation on
anti-drug and anti-terrorism efforts. Moreover, U.S. officials have expressed
concerns about the deterioration of democratic institutions and threats to freedom of
speech and press under President Chávez, who was first elected in 1998, survived a
recall effort in 2004, and was most recently re-elected to a six-year term in early
December 2006. Administration officials also have expressed concerns about
President Chávez’s plans for military arms purchases, his relations with such
countries as Cuba and Iran, and his efforts to export his radical brand of populism to
other Latin American countries. Comments by both Venezuelan and U.S. officials
have at times exacerbated tensions in the bilateral relationship, including in
September 2006, when President Chávez spoke pejoratively of President Bush when
addressing the U.N. General Assembly. A dilemma for U.S. policymakers has been
how to press the Chávez government to adhere to democratic principles without
taking sides in Venezuela’s polarized political environment. Despite frictions in
bilateral relations, Venezuela remains a major supplier of foreign oil to the United
States, providing about 12% of crude oil imports. At various junctures, Chávez has
threatened to stop selling oil to the United States, but Venezuelan officials assert that
this would only be in response to aggression initiated by the United States.
Nevertheless, some observers have raised questions about the security of Venezuela
as a major supplier of foreign oil.
As over the past several years, the 110th Congress will likely focus on oversight
hearings on conditions in Venezuela, energy security, and the overall status of
bilateral relations and U.S. policy, with legislative initiatives likely focusing on
funding for U.S. democracy and anti-drug initiatives in Venezuela, the human rights
situation, and energy security.
CRS Report RL32488, Venezuela: Political Conditions and U.S. Policy, by Mark P.
Middle East
Overview. [Alfred B. Prados, Specialist in Middle East Affairs (7-7626)]
Increasing disarray in Iraq, chronic Arab-Israeli tensions, and threats to U.S. interests
posed by international terrorism and weapons proliferation continue to mark the
Middle East landscape and are likely to be topics of major concern during the 110th
Congress. In Iraq, U.S. and allied forces continue to battle a four-year insurgency
that has escalated into what many describe as a civil war, pitting a mainly Sunni Arab
opposition against a Shiite Arab-led regime, bolstered by a major U.S. military force
commitment. The ethnically distinct Kurds, seeking to maintain the near
independence they have enjoyed since 1991, further complicate efforts to build a
unified state in Iraq. Iran’s apparent pursuit of a nuclear weapons program continues
to be a major U.S. concern, as do Iran’s apparent attempts to meddle in Iraq’s fragile
political scene and that of Lebanon as well. Israeli-Palestinian peace-making
endeavors have been deadlocked since January 2006, when the hard-line Palestinian
faction Hamas won a large majority of seats in Palestinian parliamentary elections.
Neither the United States, which has designated Hamas as a terrorist organization,

nor Israel is prepared to deal with a Hamas-led Palestinian regime until it recognizes
Israel’s right to exist, renounces terrorism, and accepts previous Israeli-Palestinian
agreements. During the summer, a month-long border war between Israel and the
Lebanese Shiite Muslim militia Hezbollah (also designated by the United States as
a terrorist organization) waged largely in Lebanon brought further instability to the
The 110th Congress is likely to assume a particularly active role in monitoring
U.S. force deployments, military expenditures, and benchmarks for progress in the
on-going conflicts in Iraq and to a lesser extent Afghanistan. Requests for
supplemental funding to defray the costs of these conflicts are likely to come under
close Congressional scrutiny. Congress is likely to show significant interest in
recommendations emanating from several U.S. panels such as a bipartisan panel
known as the Iraq Study Group, co-chaired by former Secretary of State James A.
Baker, III and former Congressman Lee Hamilton. Released on December 6, the Iraq
Study Group’s recommendations include a major diplomatic effort to help bring
about an end to the war, along with approaches to hostile countries like Iran and Syria
which may have some influence with Hamas and Hezbollah. Previous congresses
have not favored dealing with states that sponsor terrorism and there may be
legislative initiatives to block any dialogue with Iran or any expansion of dialogue
with Syria. On the other hand, Congress is likely to support, to varying degrees, U.S.
dealings with more moderate regional states including Saudi Arabia, Jordan, and
Egypt with some reservations (see below).
Syria and Lebanon. [Alfred B. Prados, Specialist in Middle East Affairs
(7-7626)] An array of bilateral issues affect relations between the United States and
Syria: Syria’s opposition to U.S. military operations in Iraq; its desire for hegemony
in Lebanon; its connections to Palestinian terrorist groups; Syria’s possible pursuit
of arms proliferation; and Syrian obstruction of Arab-Israeli peace negotiations.
Numerous U.S. legislative provisions and executive directives ban direct aid to Syria
and restrict bilateral trade between the two countries, largely because of Syria’s
designation by the U.S. State Department as a sponsor of international terrorism. In
particular, the U.S. government has demanded in recent years that Syria withdraw
from and cease interfering in Lebanese affairs, stop the flow of arms and fighters to
the insurgency in Iraq, and end its connections to Palestinian rejectionist groups like
Hamas. Despite some steps by Syria to accommodate U.S. demands — increased
patrols along the 375-mile Iraqi border, cooperation with the United States against
Osama bin Laden’s Al Qaeda organization (which Syria dislikes for its own reasons),
and reestablishment of diplomatic relations with the U.S.-sponsored government of
Iraq — Administration officials and some Members of Congress have increasingly
favored use of additional economic and political sanctions to pressure Syria to end
policies at variance with U.S. objectives. A recent example was the enactment of the
Syria Accountability 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
even stricter sanctions.
Syria’s dominant role in Lebanon, long a key U.S. concern, was shaken
profoundly by the dramatic series of events triggered in February 2005 by the
assassination of former Lebanese Prime Minister Rafiq Hariri, who had opposed
some Syrian policies. The crime, widely blamed on Syria or Syrian agents, led to the

withdrawal of Syria’s 15,000-member military force in Lebanon under internal and
international pressure; free elections in which an anti-Syrian bloc won a majority, and
appointment of an anti-Syrian prime minister, Fouad Siniora. However, the pro-
Syrian president remained in office; a pro-Syrian bloc led by Hezbollah won a
substantial minority, and the prime minister found his efforts increasingly stymied
by the powerful speaker of parliament, a Hezbollah ally.
The 34-day war between Israel and Hezbollah in the summer of 2006 enhanced
the latter’s prestige among many Lebanese and made it easier for Hezbollah to thwart
provisions in several U.N. Security Council resolutions calling for disarming of
Hezbollah and other militias in Lebanon. In the war’s aftermath, Hezbollah and its
allies demanded the dissolution of the Siniora cabinet and its replacement by a
“government of national unity” in which the Hezbollah-led bloc would hold more
than one third of the ministries, giving it an effective veto power.4 Tensions rose
further in late 2006 as six members or supporters of Hezbollah resigned from the
cabinet; the U.N. Security Council voted to establish an international tribunal to try
suspects in the Hariri assassination — a step opposed by Hezbollah; an anti-Syrian
member of the cabinet and leading Christian politician was assassinated; and a
massive sit-in demonstration in central Beirut by supporters of Hezbollah and allied
parties began on December 1 with the avowed intention of bringing down the Siniora
Congress has shown considerable interest in Lebanon over the years and has
periodically addressed Lebanese issues in legislation. Congress is concerned over
radical tendencies on the part of Syria and has frequently criticized Syrian efforts to
exert influence in Lebanon, especially when such influence appears to threaten the
security of Israel. Like the Administration, Congress widely condemned the
assassination of the late Lebanese Prime Minister Hariri. During the 34-day Israel-
Hezbollah fighting in mid-2006, both houses voiced support for Israel and for the
efforts of the President to bring about an end to hostilities. The continued efforts of
Hezbollah and its allies to increase their influence in Lebanon could affect future
Congressional attitudes toward Lebanon, especially if a new or modified Lebanese
regime appeared to threaten Israel. On the other hand, some Members of Congress
seem disposed to increase Lebanon’s ability to maintain internal and regional
stability through a modest increase in economic support funds and a resumption of
foreign military aid to the Lebanese Armed Forces.
CRS Report RL33487, Syria: U.S. Relations and Bilateral Issues, by Alfred B. Prados.
CRS Report RL33509, Lebanon, by Alfred B. Prados.
U.S. Foreign Assistance to the Middle East. [Jeremy M. Sharp,
Analyst in Middle Eastern Affairs (7-8687)] The 110th Congress may address the
authorization, appropriation, and oversight of foreign assistance funds to countries

4 A minority of one third of the cabinet seats plus one additional seat would provide the
Hezbollah bloc with effective veto power over cabinet decisions. Michael Slackman,
“Lebanon Talks Collapse as Shiites Vacate Cabinet,” The New York Times, November 12,


in the Middle East, historically one of the largest regional recipients of U.S. aid.
Excluding Iraq reconstruction funds, aid to Israel and Egypt accounts for almost 93%
of all annual funding to the region. More recently, however, the United States has
elevated the use of economic and security assistance in pursuit of other major U.S.
interests in the region, including support for the “front-line” states in the war on
terrorism, Iraq reconstruction, and broad regional economic and political reforms.
Foreign Operations programs are currently operating under the terms of a continuing
appropriations resolution (H.R. 5631/P.L. 109-289, as amended) which provides
funding at the FY2006 or the House-passed FY2007 level, whichever is less. The
continuing resolution expires on February 15, 2007.
Potential policy issues that may arise in the upcoming Congress include whether
or not to shift or cut U.S. assistance to Egypt. Some lawmakers believe that U.S.
military and economic aid to Egypt has not been effective in promoting reform, while
others counter that reducing Egypt’s aid would undercut the longstanding peace
between Israel and Egypt. During House consideration of the last three foreign
operations appropriations bills (fiscal years 2005-2007), there have been amendments
offered to cut Egypt’s aid, all of which failed by various margins.
CRS Report RL32260, U.S. Foreign Assistance to the Middle East: Historical
Background, Recent Trends and the FY2007 Request, by Jeremy M. Sharp.
CRS Report RL33222, U.S. Foreign Aid to Israel, by Jeremy M. Sharp.
U.S. Assistance to the Palestinians. [Paul Morro, Specialist in Middle
Eastern Affairs (7-1463)] Other issues that the 110th Congress may deal with
concern aid to the Palestinians. Since the formation of the Hamas-led Palestinian
Authority (PA) government on March 30, 2006, the United States has ceased
providing both indirect and direct foreign aid to the Palestinians with the exception
of some emergency humanitarian assistance and democracy and private sector
promotion. In 2006, the United States spent approximately $468 million of FY2006
and previously appropriated funds ($277 million on humanitarian aid and $191
million on democracy and private sector promotion), while the European Union,
which also halted most of its assistance, will disburse $815 million in humanitarian
relief, all of which is intended to bypass the Hamas-led government.
In the 109th Congress, the House (on December 7, 2006) passed and sent to the
President S. 2370, the Senate version of the Palestinian Anti-Terrorism Act of 2006
(passed June 23, 2006), which bars aid to the Hamas-led Palestinian government
unless, among other things, it acknowledges Israel’s right to exist and adheres to all
previous international agreements and understandings. The act exempts funding for
humanitarian aid and democracy promotion. It also provides $20 million to establish
a fund promoting Palestinian democracy and Israeli-Palestinian peace. The earlier
House version of the bill (H.R. 4681) was seen by many observers as more stringent
and would have made the provision of U.S. aid to the Palestinian Authority more
difficult, even if Hamas relinquishes power. H.R. 5522, the FY2007 Foreign
Operations Appropriations bill (passed on June 9, 2006), includes no appropriation
for Economic Support Fund (ESF) programs in the West Bank and Gaza Strip. ESF
funds in the region are generally channeled through either international organizations

or NGOs. The Senate version of H.R. 5522 (not enacted) recommends appropriating
$25 million for ESF programs in the West Bank and Gaza and rescinds $75 million
in prior year appropriated funds. Foreign Operations programs are currently
operating under the terms of a continuing appropriations resolution (H.R. 5631/P.L.
109-289, as amended) which provides funding at the FY2006 or the House-passed
FY2007 level, whichever is less. The continuing resolution expires on February 15,
2007. In FY2006, Congress appropriated $150 million for USAID’s West Bank and
Gaza program, though much of that has since been suspended.
CRS Report RS22370, U.S. Foreign Aid to the Palestinians, by Jeremy M. Sharp and
Christopher M. Blanchard.
Iraq: Regional Implications. [Christopher M. Blanchard, Analyst in
Middle Eastern Affairs (7-0428)] Developments in Iraq have direct political,
economic, and security implications for Iraq’s neighbors and the broader Middle
East. Moreover, Iraq’s neighbors can and do directly affect conditions in Iraq.
Looking forward, Iraq’s neighbors are likely to respond differently to potential
developments in Iraq, such as the escalation of sectarian violence into outright civil
war or the withdrawal or substantial redeployment of U.S. and coalition military
forces. Regional perspectives on the conflict in Iraq and the potential nature and
likelihood of regional responses to U.S. policy choices will be relevant to Members
of the 110th Congress as they consider the recommendations of the Iraq Study Group,
new Administration policy proposals, and an expected FY2007 supplemental
appropriations bill. Principal concerns include alleged Iranian political, financial,
and military support of various Iraqi Shiite political parties and militia groups;
Turkish apprehension about the future of northern Iraq’s Kurdish population and a
potential bid for Kurdish independence in the event of wider internal conflict; and,
Sunni Arab states’ anxiety about the fate of Iraq’s minority Sunni population,
whether as part of a unified democratic government or in the event of continuing
sectarian conflict. Common longer term concerns focus on the eventual reintegration
of a deeply changed Iraq into the regional strategic balance and global economic and
energy markets.
In addition, regional security problems will continue to complicate U.S. policy
efforts in Iraq during the term of the 110th Congress, such as the Israeli-Palestinian
conflict, the enduring threat of transnational Islamist terrorism, Iran’s nuclear
development efforts, and the ongoing political crisis in Lebanon. Some regional
experts have argued that in order for the United States and its regional counterparts
to reach a sustainable reconciliation and find a lasting solution in Iraq, related
regional crises also must be addressed comprehensively and simultaneously with
Iraq. For example, the Iraq Study Group report states its members’ judgment that
“the United States cannot achieve its goals in the Middle East unless it deals directly
with the Arab-Israeli conflict and regional instability.” Relations with each of Iraq’s
neighbors pose particular challenges for the United States, especially with Iran and
Syria, whose designations as state sponsors of international terrorism under U.S. law
may hamper diplomatic efforts to engage their respective governments.
CRS Report RS22323, Iran’s Influence in Iraq, by Kenneth Katzman.

Defense and Security
Overview: Defense Strategy and Military Force Planning
[Pat Towell, Specialist in the U.S. Defense Budget (7-2122)]
One way for Congress to assess current U.S. defense strategy and force planning
would be to review the Congressionally-mandated Quadrennial Defense Review
(QDR) published in February 2006, which was the first formal, public reassessment
of U.S. military requirements since the attacks of September 2001 and the subsequent
U.S. combat operations in Afghanistan and Iraq. The review asserted that where and
when U.S. forces would be deployed in the future was uncertain and unpredictable,
but that they could confront four types of threats. In addition to what the QDR called
traditional threats — the type of large-scale combat against mechanized forces in
which U.S. forces generally are held to be without peer — the review identified three
other types of threats that the Defense Department, heretofore, has largely
discounted: unconventional threats relying on terrorism and guerrilla operations;
catastrophic attacks on operationally critical or high-value targets using weapons of
mass destruction; and disruptive attacks that could nullify key elements of U.S.
power that may be vulnerable to attack by cyber-warfare, biotechnology or other
novel technologies.
After evaluating the document’s analysis of the range of military threats
currently confronting the country, Congress can judge how well the Bush
Administration’s plans for organizing and equipping U.S. forces, as reflected in its
fiscal 2008 budget request, address contemporary security challenges.
In the first decade after the end of the Cold War, from 1989 to1999, the end-
strength of the active-duty force dropped steadily from 2.1 million to 1.4 million,
while force structure dropped by roughly the same magnitude, with the number of
active-duty Army divisions dropping from 18 to 10, for example. But that downsized
force was, largely, a scaled-down version of the force designed to fight the Soviet
Union — a force which in 1991 had easily dominated Iraqi forces organized and
equipped along Soviet lines.
The September 2001 version of the QDR — which was substantially drafted
before the attacks of September 11 although published after that date — mandated
that forces be prepared to defend the homeland, to deter threats in four widely
separated regions and swiftly defeat two major attacks on allies or countries of
interest, defeating one of those attackers decisively enough to change its regime.
While this so-called “1-4-2-1” construct was not tightly coupled to wide-ranging
changes in force structure, the document appeared after the Office of the Secretary
of Defense had begun promoting the “transformation” of U.S. forces — particularly
those oriented toward ground combat — into smaller, more agile units that could be
deployed more readily than existing formations.
The February 2006 QDR, is seen by some as the most significant effort to
reconceptualize the national security threat environment since the end of the Cold
War more than 15 years ago. It revised some assumptions that had undergirded
strategy and force planning. For instance, it stipulated that forces should place as

high a priority on being able to stabilize a country after conflict as on being able to
win the fight in the first place. It also endorsed some ongoing organizational
changes, such as the Army’s modularity plan and the Navy’s Fleet Response Plan,
intended to increase the agility and responsiveness of the force. In addition, the
review called for some program initiatives keyed to threats other than traditional,
large-scale combat, including a 15% increase in the number of Special Operations
Forces, to better deal with guerrillas, terrorists and other unconventional threats; a
$1.5 billion five-year program to develop defenses against synthetically tailored bio-
weapons; and an acceleration by nearly 20 years — to 2018 — of the target date for
fielding a new, long-range strike weapon that could supplant aging bombers.
However, this QDR raises some challenging questions about whether the
Administration is budgeting adequately for the very diverse capabilities that would
be needed to carry out its ambitious repertory of tasks. The review stipulates that
U.S. forces should be able to remove a country’s hostile regime and then set
conditions for the restoration of civil society; but it eschews any call for enlarging the
force, despite the indications that U.S. forces — particularly the active-duty and
reserve components of the Army — are severely strained by the effort to pacify Iraq.
Moreover, although it acknowledges that U.S. forces clearly would dominate
any adversary in conventional warfare, the QDR also calls for continuing the
acquisition of some very expensive weapons programs, including the Army’s Future
Combat Systems, the Navy’s DD(X), and the tri-service F-35 Joint Strike Fighter, all
of which are viewed by many analysts as chiefly relevant to conventional warfare.
Given the severe budget constraints the Defense Department may face, Congress may
want to consider whether this investment portfolio should be altered both to meet
overall budget limits and to meet the more novel threats that the QDR outlines.
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, and particularly spending for the wars in Iraq and
Afghanistan, will be one of the first major issues on the agenda in the opening weeks
of the 110th Congress, and may be among the most difficult. Beginning the first week
of February, Congress will be faced with three very large requests for funding for
defense programs, including (1) the regular FY2008 defense budget request, expected
to total$490 billion or more; (2) a request for some or all of the projected additional
costs of operations in Iraq, Afghanistan, and elsewhere in FY2008; and (3) a request
for additional emergency supplemental appropriations to cover costs of operations
in Iraq and Afghanistan through the remainder of FY2007 — Congress approved a
down payment of $70 billion last Fall, but it appears that much more will be
requested for the rest of the year. Two issues, in particular, may be matters of
immediate controversy.
One issue is whether the Administration will comply with the McCain
amendment to the FY2007 national defense authorization act that requires the

President to submit an estimate of full, year-long FY2008 costs of operations in Iraq
and Afghanistan when the regular FY2008 budget request is submitted. The
amendment received very broad support last year, particularly in the Senate. But
senior Bush Administration officials have complained that accurate full-year
projections are not possible. Now, however, Senator McCain and other senior
Members of the defense committees appear insistent on following the practice during
earlier wars, including Korea and Vietnam, in which costs of ongoing military
operations were considered through the regular defense authorization and
appropriations process. In the absence of full year funding estimates from the
Defense Department, Congress may undertake to provide full-year funding anyway.
The second issue is how Congress will react to what reportedly will be a very
large request for additional emergency funding in FY2007 — and perhaps also in
FY2008 — not only to cover directly related costs of operations in Iraq and
Afghanistan, but also to make up equipment and personnel shortfalls that the services
believe are related to carrying on what the Bush Administration refers to as a “long
war” against global terrorism. In the past, emergency funding requests have been
approved mainly to cover unplanned costs of overseas military operations. The cost
of equipping and training the force for long-term requirements, in turn, has been
addressed in the regular defense budget. Now, however, Army leaders say that the
Iraq war has revealed some very large, long-term shortfalls, including a need for
more force protection, transport, and communications equipment, for more personnel
for specific missions, and for much fuller equipping of national guard and reserve
units that are integrated into the rotation base. The other services have also, in turn,
highlighted their own shortfalls.
It would be hard to accommodate funding to address these additional requests
within the regular defense budget, however, because the regular budget has to fit
within overall Congressional caps on total discretionary spending. So it now appears
that the Defense Department will request very large amounts — tens of billions this
year and more in years to come — in the emergency accounts as a means of avoiding
constraints on regular spending.
To some budget analysts, this appears to represent a fundamental breakdown of
budget discipline. At the same time, there has been very strong support in Congress
in recent years for adding funds to meet any apparent shortages of equipment for the
military services, particularly for the war. In recent years, Congress has added large
amounts for force protection equipment, and last year Congress pushed the Army and
Marine Corps to identify all the costs of repairing, replacing, and updating their
equipment for Iraq and Afghanistan. Many Members of Congress have also
complained about reported shortfalls of training equipment for troops preparing to
deploy abroad and for units that are relied upon as a strategic reserve in case of a
crisis elsewhere. Some Members of Congress have supported adding substantially
to the number of ground forces to ease strains on personnel.
All of these measures, however, may cost a lot of money at a time when
Congress is also concerned about reining in the budget deficit and meeting pent up
demand in some other parts of the government. The issue of trade-offs between guns
and butter and taxes may well be forced onto the Congressional agenda very early in
the new session.

CRS Report RL33405, Defense: FY2007 Authorization and Appropriations, by Stephen
CRS Report RS22455, Military Operations: Precedents for Funding Contingency
Operations in Regular or in Supplemental Appropriations Bills, by Stephen
CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected
Military Personnel Policy Issues, by Charles A. Henning, David F. Burrelli,
Lawrence Kapp, and Richard A. Best, Jr.
Military Base Closure, Realignment, and Expansion
[Daniel H. Else, Specialist in National Defense, (7-4996)]
The President has indicated his intention to ask the 110th Congress to devote the
bulk of the annual military construction appropriation to support the implementation
of the 2005 base realignment and closure (BRAC) round. Annual budget authority
requests for military construction for Fiscal Years 2008 and 2009 are projected to
exceed $12.6 billion, almost twice that of FY2004, primarily because of BRAC
requirements. In addition, some local jurisdictions in districts where installations are
gaining new defense missions and personnel have found that their existing
transportation, housing, utility, and education infrastructure is unable to absorb the
anticipated demand for services and have approached Congress for assistance.
Likewise, jurisdictions from which significant numbers of defense-related jobs will
be moved or eliminated have appealed to some Members for special assistance in job
training and economic redevelopment planning. It is likely that constituents willth
continue to invite some Members’ attention to these issues throughout the 110
In late 2005, the Defense Base Closure and Realignment Commission
(commonly known as the BRAC Commission) recommended, and the president
approved, the closing of 22 major military installations in the substantial
modification of work and an additional 33. As required by the Defense Base Closure
and Realignment Act of 1990 (10 USC 2687 note, as amended), the various military
departments (Army, Navy, and Air Force) have begun to implement these
recommendations, with a statutory deadline for completion of September 15, 2011.
While BRAC itself affects only installations located on U.S. territory, the Department
of Defense (DOD) has included the redeployment of 60,000 — 70,000 troops from
Cold War-era overseas garrisons to domestic installations in a comprehensive force
restructuring. The current BRAC round, therefore, is perhaps the largest-scale and
most intense and complex movement of forces and supporting activities undertaken
since the end of the Second World War.
The execution of the 2005 BRAC round will follow a three-phase process of
planning, construction, and movement. The planning phase, involving the creation
of more than 200 separate and coordinated programs, is nearly complete. Funding
for the construction phase, which will require some installations to absorb the
creation of hundreds of millions of dollars of new structures and the associated
transportation, communications, and utility service infrastructure, would require
appropriations during the 110th Congress. The movement phase, which of necessity

follows the conclusion of planned construction, will commence during late FY2009
and continue to the date of completion.
Necessary military construction and domestic troop movements are funded
through the BRAC 2005 account within the military construction title of the annual
Military Construction/Military Quality of Life, Veterans Affairs and Related
Agencies appropriation. Other BRAC-related activities funded from this account
include property transfers, movement and closure expenditures, environmental
remediation (including disposal of toxic waste and unexploded ordnance), among
others. Community adjustment and redevelopment efforts attended to BRAC actions
are supported by other programs funded through Department of Defense, Department
of Commerce, and Department of Labor appropriations.
Congress will consider annual appropriations requested by the president to
implement these BRAC actions. DOD has maintained that, because the nature of
warfare and the necessary structure of forces are constantly changing, there will be
a continuing need to adjust the location and nature of the supporting defense
installations every five to ten years. Since the only statutory authority to undertake
such an adjustment resides in the BRAC, which requires specific Congressional
authorization, Congress may also consider new legislation to enhance
implementation oversight of the current round and the authorization of a future
round. The current BRAC round was authorized in the defense authorization act for
CRS Report RS22147, Military Base Closures: Socioeconomic Impacts, by Tadlock
Cowan and Baird Webel.
CRS Report RS22184, Military Base Closures: Redevelopment Assistance Programs, by
Baird Webel.
CRS Report RS22065, Military Base Closures: Role and Costs of Environmental
Cleanup, by David M. Bearden.
[Richard Best, Specialist in National Security, (7-7607)]
A key question in the discussions that led up to passage of the Intelligence
Reform and Terrorism Prevention Act of 2004 (P.L. 108-458) was how best to define
in statute the relationship between the Director of National Intelligence (DNI) and the
important national intelligence agencies within the Department of Defense (DOD).
These agencies — the National Security Agency (NSA), the National Reconnaissance
Office (NRO), and the National Geospatial-Intelligence Agency (NGA) — have large
budgets and collect and, to some extent, analyze vast quantities of data in response
to tasking from the DNI. At the same time they provide intelligence directly to
DOD’s combatant commanders. They are thus integral parts of both the national
Intelligence Community and military commands. These dual responsibilities — with
the potential for having to meet different priorities — present many challenges to
senior officials in the executive branch and to many Members of Congress in
undertaking oversight of the Nation’s intelligence effort. There are difficult
questions about new surveillance systems, especially satellites and unmanned aerial

vehicles (UAVs), that have major budgetary implications for years and will affect the
future of the defense industrial base. Also crucial is the availability of information
systems that will permit intelligence to be shared in a real-time basis without
jeopardizing sources and methods.
There are other concerns about the role of DOD in collecting human intelligence
(humint) which, according to some observers, may overlap or conflict with
clandestine collection by the Central Intelligence Agency (CIA). Congress has
considered but not enacted statutory provisions that would provide authority for the
Director of the CIA to direct humint collection by any agency outside the U.S. In
addition, questions have been raised regarding counterterrorism missions undertaken
by DOD special forces and whether they are equivalent to covert actions that fall
under the provisions of the National Security Act.
CRS Report RL33539, Intelligence Issues for Congress, by Richard A. Best, Jr.
CRS Report RL32508, Intelligence, Surveillance, and Reconnaissance (ISR) Programs:
Issues for Congress, by Richard A. Best, Jr.
CRS Report RL33715, Covert Action: Legislative Background and Possible Policy
Questions, by Alfred Cumming.
CRS Report RS22017, Special Operations Forces (SOF) and CIA Paramilitary
Operations: Issues for Congress, by Richard A. Best, Jr. and Andrew Feickert.
Special Operations Forces
[Andrew Feickert, Specialist in National Defense, (7-7673)]
U.S. Special Operations Forces (SOF) play a leading role in current military
operations. SOF are operating at a very high tempo world-wide. The 2006
Quadrennial Defense Review (QDR) has called for 15% increase in special
operations forces beginning in FY2007 and some question how an expansion of
Army Special Forces by one additional battalion per Special Forces Group, and an
increase in the numbers of Navy SEALs can be achieved without relaxing the
demanding selection and qualification standards that have long been the hallmark of
these units. The Marines are also in the process of standing up a 2,600 strong Marine
Special Operations Command (MARSOC) which will have the capability to conduct
foreign military training as well as direct action missions. Classified Special Mission
Units (SMUs) conduct classified and covert special operations missions - often
referred to as ‘black” operations - and there has been concern expressed by some
officials that the Administration and U.S. Special Operations Command
(USSOCOM) may be placing undue emphasis on these SMUs and their activities at
the expense of Army Special Forces and other special operations units that conduct
“white” unclassified operations such as foreign military training and unconventional
CRS Report RS21048, U.S. Special Operations Forces (SOF): Background and Issues for
Congress, by Andrew Feickert.

Defense Modernization and Weapon Systems
Army Modernization. [Andrew Feickert, Specialist in National Defense,th
(7-7673)] The 110 Congress will face a wide range of issues regarding Army
modernization dealing with the pace and effectiveness of organizational
restructuring, competing fiscal requirements for equipment procurement and repair,
and oversight of an ambitious equipment development and acquisition program.
Modularity: The Army is involved in a total organizational transformation that
it believes will enable it to better meet current and future operational requirements.
The Army is currently redesigning its 10 active duty division force to a 42 brigade-
level force. The National Guard and Reserves are to also convert to a brigade-centric
force over time. This redesign effort, as well as associated restructuring and
stabilization initiatives, are intended to sustain both the active and reserve Army
through potentially long-term, manpower and resource intensive wars in Iraq and
Afghanistan. Some reports suggest, however, that these new “modular” brigade
combat teams (BCTs) do not have all required equipment - including key battle
command systems - and may also be experiencing selective personnel shortages.
Some maintain that these equipment and personnel shortages, further impacted by the
lack of a third infantry or heavy battalion in the BCT force structure, have resulted
in the new modular BCTs being less operationally effective than the previous
division-based combat brigades.
Equipment Reset: The wars in Iraq and Afghanistan have taken a significant toll
on the Army’s equipment. The Army is involved in a substantial equipment reset
program to repair and replace equipment damaged or lost in combat and also to
recapitalize equipment for future use. The Army predicts that it will require from
$12 to $13 billion a year for reset throughout the duration of the current conflicts and
for two to three years after the conflicts conclude. The Army has chosen to keep
significant quantities of equipment in theater and to defer some reset activities until
the war in Iraq concludes and significant number of troops return home. This
decision has created not only maintenance and equipment availability issues, but also
readiness issues as many units do not have sufficient equipment to train with. These
policy decisions have had a particularly severe impact on National Guard units that
have a domestic mission as well.
Future Combat System (FCS): The Army’s primary modernization program,
the Future Combat System or FCS, is a $117 billion-plus research, development, and
acquisition program envisioned to consist 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 conceptual in nature. The Army intends to eventually field up to 15 FCS-
equipped brigades. The Army plans to start “spiraling” out selected FCS
technologies to the current force in FY2008, but the first fully-equipped FCS brigade
will not be fielded until FY2014. The Army is reportedly considering “slowing” the
FCS program due to budgetary pressures and cuts. Potential changes include
cancelling or deferring individual platforms - most likely unmanned aerial and

ground vehicles - and possibly slowing the equipping of FCS brigades from two
brigades per year to one brigade a year.
CRS Report RL32476, U.S. Army’s Modular Redesign: Issues for Congress, by Andrew
CRS Report RL32888, The Army’s Future Combat System (FCS): Background and Issues
for Congress, by Andrew Feickert.
Navy Shipbuilding . [Ronald O’Rourke, Specialist in National Defense (7-
7610)] Navy shipbuilding has been a defense-acquisition item of interest for
Congress since the early 1990s. The defense-oversight committees have been
particularly concerned about the adequacy of the Navy’s shipbuilding rate, the cost
and affordability of new Navy ships, and the health of the shipbuilding industrial
base. The Navy in 2006 introduced a new ship force structure plan that calls for
achieving and maintaining a 313-ship fleet. The Navy in 2006 also submitted to
Congress an annually required 30-year shipbuilding plan. The 30-year plan does not
contain enough ships to fully support all elements of the 313-ship fleet consistently
over the long run — deficiencies include one amphibious ship, four cruise missile
submarines (SSGNs), eight attack submarines (SSNs), and (when calculated on a 35-
year basis) 26 cruisers and destroyers. The Navy, moreover, says that for this 30-year
shipbuilding plan to be affordable and executable, five things need to happen
regarding the size and composition of the Navy’s budget and future shipbuilding
costs. Observers have questioned whether these things will happen, and thus whether
the 30-year shipbuilding plan will be affordable and executable.
In February 2007, the Navy is to submit a proposed FY2008 budget that is
expected to include requests for funding to procure one aircraft carrier (advance
procurement funding for which has been approved by Congress every year since
FY2001), one SSN, two DDG-1000 destroyers that were procured in FY2007 with
partial funding, three Littoral Combat Ships (LCSs), one LPD-17 class amphibious
ship (the final one planned in the class), and (through the National Defense Sealift
Fund) one TAKE-1 class auxiliary cargo ship. These individual ship programs may
not be as significant a matter of debate as the question of the overall rate and
affordability of Navy shipbuilding. The Navy in early 2007 is also expected to
submit to Congress a report on the potential for applying nuclear propulsion to a
wider array of the Navy’s surface ships — an issue in which the House Armed
Services Committee expressed an interest in 2006.
CRS Report RL32665, 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)]A three-year multiyear procurement (MYP) contract for 60 F-

22A Raptors was authorized by the 109th Congress. Monitoring this MYP’sth

compliance with the governing statute (10 USC §2306b) will fall upon the 110
Congress. Rate of production, program risk, and funding of government liabilities
may become issues. The F-35 Joint Strike Fighter (JSF) is the largest aviation
program in terms estimated cost ($276 billion) and numbers (2,458 aircraft).

Development challenges have added cost and delayed production. DoD has
determined that it requires no additional C-17 Globemaster strategic airlifters beyond
the 180 under contract. Critics argue that without additional orders the C-17 line
would close due to lack of business. The 109th Congress added $2 billion to the
program and directed DoD to continue producing the C-17 beyond 2008. At issue is
how many C-17s should be built and whether DoD can afford to purchase and
operate them. Adjudicating a rift between the Army and the Air Force over the
fielding of a short-range Joint Cargo Aircraft will also confront the 110th Congress.
The consensus view is that DoD sorely needs to replace its aging fleet of KC-135
aerial refueling aircraft. A replacement program — the KC-X — is in its early stages.
At issue is what size aircraft should be acquired and what mix of capabilities is
optimal. Also, the number of aircraft to be procured is a question and whether DoD
can afford to purchase 500 aircraft, as it plans, or augment a smaller purchase with
less capital intensive measures. On the recommendation of the 2006 Quadrennial
Defense Review (QDR), the Air Force is initiating a program to field a new long-
range bomber by 2011. At issue are the number of bombers to be procured, their
capabilities, and how they will be funded.
CRS Report RL33543, Tactical Aircraft Modernization: Issues for Congress, by
Christopher Bolkcom.
Ballistic Missile Defense. [Steven Hildreth, Specialist in National
Defense (7-7635)] Ballistic Missile Defense (BMD) remains the largest acquisition
program in the defense budget. Congress largely supports the U.S. BMD program and
has appropriated about $106 billion for BMD since the start of the Reagan
Administration’s Strategic Defense Initiative (SDI) program in FY1985. For
FY2007, Congress appropriated $9.3 billion. Congress also has played a major role
in developing BMD policy and direction, and provided varying degrees of oversight
of BMD programs and management during this time. In the past several years
defense committees have expressed some concern over BMD testing in general and
have reduced funding for some longer lead BMD procurement of technologies andth
systems with more ambiguous testing successes. During the 109 Congress, the
Department of Defense deployed a National Missile Defense (NMD) capability in
Alaska and California. During the 110th Congress, Members might expect debate
over funding an expected BMD budget request of about $10 billion, whether to fund
deployment of a third NMD site in Europe, as well as oversight of programs that
have witnessed years of program delays such as the Airborne Laser (ABL) and
development of a new Kinetic Energy Interceptor (KEI — a common land/sea
interceptor), while the effectiveness of current deployed systems remains uncertain.
CRS Report RS21473, Kinetic Energy Kill for BMD: A Status Overview, by Steven A.
CRS Report RL32123, Airborne Laser (ABL): Issues for Congress, by Christopher
Bolkcom and Steven A. Hildreth.
Reliable Replacement Warhead (RRW) Program. [Jonathan Medalia,
Specialist in National Defense, (7-7632)] Most current U.S. nuclear warheads were
built in the 1970s and 1980s. The National Nuclear Security Administration (NNSA)

maintains them with a Life Extension Program (LEP), but expects the accretion of
minor changes in replacement components to reduce confidence in warheads over the
long term. Congress mandated the RRW program in 2004 “to improve the reliability,
longevity, and certifiability of existing weapons and their components.” Its first step
is a design competition; the winning design is to be selected in the near future. RRW
supporters claim that NNSA will be able to maintain RRWs over the long term; LEP
supporters argue that the current LEP program can effectively maintain existing
warheads, and that the absence of testing will reduce confidence in RRWs. Others
maintain that the scientific tools used to design RRWs have not been directly
validated by nuclear tests, and that LEP-induced changes weaken the link between
current warheads and the original tested designs, so that a resumption of nuclear
testing is the only way to maintain confidence in the stockpile. There are several
issues for Congress. Will LEP or RRW better maintain the nuclear deterrent for the
long term, or is a return to nuclear testing needed? Which is likely to cost more, LEP
or RRW? RRW is designed to offer more safety and protection against unauthorized
use, but how much is enough? Should the nuclear weapons complex be reconfigured
to support RRW? How can Congress evaluate the alternatives?
CRS Report RL32929, Nuclear Weapons: The Reliable Replacement Warhead Program,
by Jonathan Medalia.
Military Personnel
Recruiting and Retention. [Charles A. Henning, Specialist in National
Defense (7-8866)] It is anticipated that the 110th Congress will continue to closely
monitor military recruiting and retention performance, both officer and enlisted, and
possibly adjust the incentives as necessary to favor success.
Recruiting and retention are complementary military functions with both
focused on meeting the manpower and skill needs of the services. Recruiting brings
new service members into the military from civilian life while retention keeps trained
and qualified military personnel in the military beyond their original obligated term
of service. The scope of these efforts is significant. The Active Component (Army,
Navy, Air Force and Marine Corps) recruits approximately 175,000 personnel
annually and strives to retain those needed for future leadership responsibilities.
With ongoing operations in Iraq, Afghanistan and other worldwide deployments
in support of what the Bush Administration refers to as the Global War on Terror,
some analysts have anticipated that extended and frequent deployments, repeated
family separations and growing public dissatisfaction with the war effort would have
a negative impact on recruiting and retention. Others have argued that adding
additional recruiters to the force and enhanced benefits, incentives and bonuses
would continue to ensure a viable all-volunteer force for the future and support the
Congressionally authorized increase in Army end strength from 482,400 to 512,400.
Media attention and Congressional interest have focused on Army recruiting.
In FY2005 the Army established a recruiting goal of 80,000 but recruited 73,378; a
shortfall of 8% and the first time in 26 years that the Army had missed its annual
goal. The recruiting challenge was exacerbated by the low number of recruits in the

Delayed Entry Program (DEP), those individuals who have signed a contract to join
the military but who have not yet “shipped” to basic training. At the beginning of
FY2005, the DEP represented 18 percent of the FY2005 accession goal; the Army
attempts to have 25 to 35 percent of recruits in the DEP at the beginning of any fiscal
To support the FY2006 Army accession goal (again 80,000), Congress
authorized doubling the maximum enlistment bonus from $20,000 to $40,000, raised
the maximum enlistment age from 35 to 42, and established a variety of other
financial incentives to enhance recruiting. Some of these included incentives for
former soldiers to return to active duty, bonuses for serving soldiers who refer others
to a recruiter, and inter-service transfers from services that are reducing personnel.
The Army increased the number of recruiters by 1,200 (to a total of 8,400),
incrementally allowed additional moral waivers for misdemeanor offenses and
slightly relaxed the aptitude standards and tattoo prohibitions.
For FY2006, all active component services met or exceeded their recruiting
goal, bringing in over 180,000 new service members into the military. For the
reserve components, the Marine Corps Reserve and Air Force Reserve met or
exceeded their annual goals, the Army National Guard and Air National Guard barely
missed their targets with 99% and 97%, respectively, and the Army Reserve (95%)
and Navy Reserve (87%) fell short of their accession goals.
Retention was also successful in FY2006. For the active component, only the
Navy missed its retention goal while the other services met or exceeded the goals in
every category. The Navy attributed their problems to an emphasis on physical
fitness test performance that resulted in higher re-enlistment disqualification.
While military leaders and analysts consider FY2006 to be a generally
successful year for recruiting and retention, they believe that FY2007 will be a
challenge. The Army’s DEP, for example, remains a weakness with only 12,079
(about 15 percent of the FY2007 mission of 80,000) contracted soldiers to start the
new fiscal year. Recruiting targets/goals have remained high: 80,000 for the Active
Army for the third straight year, 70,000 for the Army National Guard and 26,500 for
the Army Reserve. With high targets, a strong economy and over 140,000
servicemembers deployed to OIF and OEF, analysts anticipate a challenging year.
Various media have claimed that the Army has lowered quality standards by
accepting fewer High School Diploma Graduates (HSDG) and accepting up to 4
percent of the annual accession cohort from the lowest mental category (Cat IV).
These changes, according to the Army, do not appear to have led to a significant
degradation in quality. In addition, more waivers are being granted for moral and
medical conditions that previously would have precluded enlistment.
A related emerging challenge for the Army involves the recruiting and retention
of officers. Officer production from the Reserve Officer Training Corps (ROTC) has
missed the goal for the past two years and attrition by West Point graduates
completing their active duty obligation has increased dramatically to over one-third
of the original graduating class. The Army currently projects a shortage of nearly

3,700 captains and majors by FY2008.

CRS Report RL32965, Recruiting and Retention: An Overview of FY2005and FY2006
Results for Active and Reserve Component Enlisted Personnel, by Lawrence Kapp.
CRS Report RL33518, Army Officer Shortages: Background and Issues for Congress by
Charles A. Henning.
Reserve Component Benefits. [Charles A. Henning, Specialist in
National Defense (7-8866)] Over the past several years, Congress has been sensitive
to the evolving operational role of the reserve components and has, when seen as
appropriate and equitable, focused on equalizing military benefits between the active
and reserve components. One major remaining issue is the reserve retirement age.
Proposals to lower the age at which retired reservists begin drawing retired pay
(currently age 60) generated significant interest in both the 108th and 109th Congress
but were not enacted into law. The 110th Congress may face this issue again early in
the first session.
As noted in the 2006 Quadrennial Defense Review (QDR), “During the Cold
War, the Reserve Component was used, appropriately, as a ‘strategic
reserve’...(however) the Reserve Component must be operationalized, so that select
reservists and units are more accessible and more readily deployable than today.”
This transition from strategic to operational reserve has been vividly demonstrated
since September 11, 2001 as more than 400,000 reserve component personnel have
been called to active duty and deployed in support of Operations Iraqi Freedom (OIF)
and Enduring Freedom (OEF).
Both the 108th and 109th Congresses enacted a number of significant changes
focused on equalizing benefits between the active and reserve components. First,
TRICARE health care coverage will be expanded (by the end of September 2007) to
include all reservists and their eligible family members, with participants required to
pay 28% of the estimated premiums. Second, educational assistance for reservists
has been expanded under a new program called the Reserve Educational Assistance
Program (REAP). Reservists are not required to contribute and will receive benefits
for full-time study for up to 36 months. The amount of the monthly benefit is based
on a three-tiered percentage of the Montgomery GI Bill Active Duty benefit-40, 60,
or 80 percent-as determined by the amount of time the reservist has spent on active
duty. Recently, DOD and the Department of Veterans Affairs formed a task force to
consider a “Total Force GI Bill” to enhance benefits and make program participation
for active and reserve servicemembers more consistent and equitable. Finally, in
order to preclude financial hardship as reservists transition from civilian jobs to full-
time military status, Congress has enacted a provision that provides a monthly special
payment of up to $3,000. Eligibility is based on the amount of time spent on active
duty and favors those who have experienced lengthy, frequent periods of involuntary
active duty.
CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected
Military Personnel Policy Issues, by Charles A. Henning, Richard A. Best, Jr.,
David F. Burrelli and Lawrence Kapp.

Military Medical Care. [Richard Best, Specialist in National Defense, (7-
7607)] A major concern in the 109th Congress was military care for the reserve
components. A number of initiatives were considered to enable reservists to obtain
medical care prior to and subsequent to serving on active duty (they have always had
a full benefit while on active duty). A complex three-tiered benefit for reservists
returning from active duty was enacted in 2005 as part of the FY2006 National
Defense Authorization Act, but the 109th Congress replaced it with a significantly
expanded medical benefit available to all drilling reservists and National Guardsmen.
By the end of September 2007 all reserve component members in a drilling status
will have access to TRICARE if they agree to pay 28 percent of the costs of the
benefit. Congress may choose to oversee the introduction of this new benefit as it
will affect reservists throughout the country.
A key concern for Defense Department policymakers has been the growth in the
costs of Defense health care estimated to reach $64 billion by 2015. The increasing
medical budget in large measure derives from changes enacted in 2000 to establish
Tricare for Life which supplements Medicare coverage and provides a
pharmaceutical benefit for retirees and dependents 65 and over. In 2006 DOD
officials and some Members of Congress advocated a number of initiatives to limit
cost growth, but only a few were ultimately adopted. Instead, Congress mandated
studies by GAO and outside experts on approaches to the growing costs of military
medical care. Some observers believe that the issue will be re-visited during
consideration of FY2008 authorization and appropriations bills.
CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected
Military Personnel Policy Issues by Charles A. Henning, Richard A. Best, Jr.,
David F. Burrelli, and Lawrence Kapp.
CRS Report RS22402, Increases in Tricare Costs: Background and Options for Congress
by Richard A. Best, Jr.
Abortion and Military Medical Care. [David F. Burrelli, Specialist in
National Defense (7-8033)] In 1993, President Clinton modified the military policy
on providing abortions at military medical facilities. Under then-existing law, “funds
available to the Department of Defense may not be used for abortions except where
the life of the mother would be endangered if the fetus were carried to term.” (Title
10 United States Code, sec. 1093(a)) Under the memorandum issued by President
Clinton, military medical facilities were allowed to perform abortions if paid for
entirely with non-Department of Defense (DOD) funds (i.e., privately funded).
Although arguably consistent with statutory language barring the use of Defense
Department funds, the President’s policy overturned a former interpretation of
existing law barring the availability of these services. On December 1, 1995, H.R.

2126, the FY1996 National Defense Appropriations Act, became law (P.L. 104-61).

Included in this law was language barring the use of funds to administer any policy
that permits the performance of abortions at any DOD facility except where the life
of the mother would be endangered if the fetus were carried to term or where the
pregnancy resulted from an act of rape or incest. Language was also included in the
FY1996 National Defense Authorization Act (P.L. 104-106, February 10, 1996)
prohibiting the use of DOD facilities in the performance of abortions. These served
to reverse the President’s 1993 policy change. This language was very contentious

and, in large part, explained the delay in enacting the FY1996 National Defense
Authorization Act.
Since then, language has been offered in nearly every session of Congress to
repeal, or at least partially repeal, the language prohibiting the use of DOD facilities
to perform abortions. These votes have rejected such changes and have largely been
along party lines.
With the change in Congressional control in the 110th Congress, it is possible
that legislative language expanding the availability of abortion services (e.g.,
allowing for privately funded abortion services) at military facilities would be
proposed as part of the consideration for a FY2008 National Defense Authorization
CRS Report 95-387, Abortion Services and Military Medical Facilities, by David F.
Defense Acquisition Reform and Contract Management
[Stephen Chadwick, Analyst in Defense Acquisition (7-8983) and Valerie
Grasso, Analyst for National Defense (7-7617)]
Problems with Department of Defense (DOD) acquisition policies, especially
defense contract management in Iraq, and acquisition reform issues, are likely to
present the 110th Congress with significant oversight challenges. Reports of
program cost overruns, waste, and contract mismanagement during the 109th
Congress point to a continued, if not increased, need for investigations, hearings, and
other oversight activities by the 110th Congress. A high level of scrutiny is on DOD
procurement practices in Iraq. Also, how traditional defense acquisition programs
are managed with regard to controlling costs and meeting schedules of performance,
while still meeting the needs of the warfighter, attracted a high level of attention
during the 109th Congress. This will likely continue in the 110th Congress.
A number of congressionally directed audits, investigations, and hearings
conducted during the 109th Congress concluded that cost overruns for overhead and
administrative costs, combined with alleged and documented cases of waste, fraud,
and abuse, increased the overall contract cost, schedule and performance of DOD
activities in Iraq. Some Members of Congress raised questions about the size, scope,
and costs of Iraqi contract awards, as well as the policies that govern the contracting
process. Congress has also questioned the laws governing contractor integrity, in the
face of allegations of questionable contractor behavior.
A large part of the problem is the lack of an adequate DOD accounting reporting
system to manage the many contracts that have been awarded, especially under
emergency and complex circumstances. For example, the Army’s problem in
collecting and analyzing data on the number of contractors working in Iraq, is partly
due to its own system and also a lack of collaboration among the various military
services’ contracting offices. Of special interest to the 110th Congress might be
looking into contracts providing support services to the U.S. military during and after
Operation Iraqi Freedom (OIF). This includes the status and the management history

of the Army’s Logistics Civil Augmentation Program (LOGCAP) III contract. A
number of questions have been raised about the management of the 10-year
task-order contract for providing food and shelter for the U.S. military in Iraq and
Afghanistan, awarded to Kellogg, Brown and Root. The LOGCAP III contract is due
to expire in 2007; the Army is expected to announce a future competition for the
LOGCAP IV contract.
The 110th Congress will face addressing a large body of policy discourse on the
question of what should be done next to improve the DOD acquisition system? In
response to discernible problems with DOD acquisition programs, the 109th Congress
conducted many acquisition oversight hearings, mandated significant reports on
defense acquisition, including a number of Government Accountability Office (GAO)
reports. Common themes in the hearings and reports included changing the roles of
the Office of the Secretary of Defense (OSD)/Joint Staff/Combatant Commanders
(COCOMs) and Military Departments; increasing the size and skill levels of the
defense acquisition workforce; improving procedures and performance requirements
in DOD’s acquisition of services; and preventing cost and schedule problems in
DOD’s acquisition of equipment. However, other issues were largely left out, and
might be examined more fully such as the impact of frequent senior program
leadership turnover, proper management of incentives for better industry
performance, and increasing the level of transparency of information integral to
DOD acquisition decisions. Further complicating the defense acquisition landscape
is the number of reports DOD is preparing in response to statutory initiatives, and the
outcomes of a variety of pilot programs DOD is executing to seek additional ways
to improve its acquisition policies and programs.
The magnitude, breadth, and volume of recent analysis, findings and
recommendations on defense acquisition reform appear to have one thing in
common: none suggests major systemic reorganization similar to that which created
the current defense acquisition system, the landmark Goldwater-Nichols Defense
Reorganization Act of 1986. While defense acquisition reform was not necessarily
the principal catalyst for the Goldwater-Nichols legislation, significant attention was
devoted to defense acquisition nonetheless. With such a variety of opinions and
perspectives regarding what is wrong and what needs to be fixed, the 110th Congress
may be confronted with a crucial policy-making decision point: to continue with the
current approach to defense acquisition reform, addressing discrete issues, programs
and/or policies under the defense acquisition structure founded by the Goldwater
Nichols legislation; or to pursue a comprehensive restructure of the defense
acquisition system similar in scope to the Goldwater-Nichols legislation. While this
issue may seem academic or tangential to what some may argue are true “issues,” the
overall method of pursuit of defense acquisition reform, as well as its desired
outcome(s), may be a precursor and catalyst to the creation and implementation of
more discrete structural and issue-driven reforms.

International Trade and Finance
[William H. Cooper, Specialist in International Trade and Finance, (7-7749)]
Trade issues have become increasingly controversial in Congress during the last
few years. This is likely to continue to be the case during the 110th Congress as
many Members grapple with the real and perceived effects of globalization and how
to balance the benefits and costs of trade liberalization. Many Members of Congress
have raised concerns over lost jobs and lower wages, over the growing income gap
in the United States, and over the burgeoning U.S. trade deficits with trading
partners, especially China. That debate could be launched early in the 110th Congress
with the scheduled expiration on July 1, 2007, of the Trade Promotion Authority
(TPA). TPA is the authority that Congress delegates to the President to enter into
certain reciprocal trade agreements and to have their implementing legislation receive
expedited congressional consideration. Congress’s decision could have major
implications for pending FTA negotiations, such as those with Malaysia, South
Korea, and Panama, and for U.S. participation in the Doha Development Agenda
(DDA) negotiations in the World Trade Organization (WTO). There are a number
of other countries with which the United States has been engaged in Free Trade
Agreement negotiations and Congress may consider legislation implementing those
In addition to Trade Promotion Authority (TPA) renewal and implementing
legislation for free trade agreements described earlier, other trade issues could be the
subject, directly or indirectly, of legislation during the 110th Congress. During the
109th Congress, legislation was introduced targeting China’s exchange rate and trade
practices, reflecting, in part, widespread congressional concerns over the widening
U.S. trade deficit, particularly with China, and its potential impact on the U.S.
economy. As U.S. trade with China continues apace, these concerns may be an
impetus for trade legislation in the 110th Congress.
Promotion of U.S. exports and foreign investment may be the subject of
legislation in the 110th Congress. For example, the Congress may take up re-
authorization for the Overseas Private Investment Corporation (OPIC). During the
109th Congress, the Senate and the House did not reconcile differences on legislation
to change how proposed foreign investments are reviewed in the inter-agency
Committee for Foreign Investment in the United States (CFIUS). The legislation was
passed in the wake of concerns over the assumption of control by the Dubai Ports
company of operations at some U.S. ports. The 110th Congress could return to this
issue. Furthermore, the Congress could take up legislation to re-authorize the Export
Administration Act that controls exports of dual-use technology and products and
may consider legislation funding for the International Monetary Fund (IMF), the
World Bank, and other multilateral development banks (MDBs).
In addition, the 109th Congress extended for six months trade preferences under
the Andean Trade Preferences Act (ATPA), and for an additional six months if a
country enters into a free trade agreement with the United States. ATPA extends
special duty treatment to certain U.S. imports from Bolivia, Colombia, Ecuador, and

Peru that meet domestic content and other requirements. The intention is to promote
economic growth in the Andean region and to encourage a shift away from
dependence on illegal drugs by supporting legitimate economic activities. The 110th
Congress will face the issue of whether to consider a longer-term extension of ATPA
as the June 30, 2007 expiration date of the preferences approaches.
Renewal of Trade Promotion Authority
[J. F. Hornbeck, Specialist in International Trade and Finance (7-7782)]
On July 1, 2007, Trade Promotion Authority (TPA — formerly fast track) is
scheduled to expire, and with it a special authority that Congress grants the President
to enter into certain trade agreements, specifically, those that reduce non-tariff
barriers (NTBs) as well as tariffs, and to have legislation to implement them
considered under expedited legislative procedures — mandatory introduction,
deadlines for committee consideration, limited floor debate, and no amendments —
provided the President observes certain statutory obligations in negotiating them.
TPA reflects a pragmatic response to accommodate the two branches’ responsibility
for making trade policy. The procedures allow Congress to exercise its constitutional
authority over trade and gives the President added negotiating leverage by assuring
U.S. trade partners that final agreements are given swift and unamended
consideration. The United States is currently engaged in multiple trade negotiations
that may not be completed before the current TPA expires, raising the question of its
prospects for renewal.
The core provisions of the TPA/fast track legislative procedures have remained
virtually unchanged since they were first enacted in 1974, although Congress has
expanded trade negotiation objectives, oversight, and presidential notification
requirements. While early versions of fast track/TPA received broad bipartisan
support, renewal efforts became increasingly controversial over time as fears
mounted over the perceived negative effects of trade, and as the trade debate became
more partisan in nature. Congress last renewed TPA in the Trade Act of 2002
following a pitched debate and largely partisan-line vote. Two key issues dominated:
the treatment of labor and environment provisions, and assurance of a bipartisan
congressional role in trade policy making.
As the debate over TPA renewal takes off, these two issues are still on center
stage, flanked by a handful of other trade policy concerns. Congressional decision
will be important given the number of trade negotiations, including the World Trade
Organization’s (WTO) Doha Round and bilateral agreements with South Korea,
Malaysia, and Panama, among others, that are close to being concluded before TPA
expires. Congress can choose among various options: no action; temporary
extension; revision and renewal; permanent authority; or some hybrid solution. How
this issue plays out depends on a host of variables including the status of
uncompleted negotiations, the economic effects of pursuing trade liberalization as
perceived by various stakeholders and the political will to compromise between the
Bush Administration and Congress.

CRS Report RL33743, Trade Promotion Authority (TPA): Issues, Options, and Prospects
for Renewal, by J. F. Hornbeck and William H. Cooper.
CRS Report RS21004, Trade Promotion Authority and Fast-Track Negotiating Authority
for Trade Agreements: Chronology of Major Votes, by Carolyn C. Smith.
CRS Report 97-896, Why Certain Trade Agreements Are Approved as Congressional-
Executive Agreements Rather Than as Treaties, by Jeanne J. Grimmett.
[Ian F. Fergusson, Specialist in International Trade and Finance (7-4997)]
The WTO’s Doha Development Round of multilateral trade negotiations was
suspended in July 2006 after key negotiating groups failed to break a deadlock on
agricultural tariffs and subsidies. The negotiations, which were launched at the WTO
Doha Ministerial in 2001, have been characterized by persistent differences between
the United States, the European Union (EU), and developing countries on major
issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade
remedies. The impasse has almost certainly put negotiators beyond the reach of
agreement before U.S. trade promotion authority (TPA) expires on July 1, 2007.
(Under TPA, the President must give a 90 day notification to Congress of his intent
to sign an FTA, thus making the de facto deadline April 1, 2007 for reaching an
The agricultural negotiations have become the most visible cause of deadlock
within the Doha Round negotiations. The aims of the talks have been to make
substantial improvements in market access; to reduce, or to eliminate, all forms of
export subsidies; and to achieve significant reductions in trade-distorting domestic
support. These three aims have come to be termed the three pillars of the agriculture
negotiations. Yet major differences in the agricultural proposals of the United States,
the EU, and the G-20 group of developing countries have hampered progress in the
negotiations. The United States, for example, has conditioned its offer to
substantially reduce domestic subsidies on gaining substantial market access from the
EU and, especially, from the developing countries. The EU, however, has indicated
it will not move further on market access liberalization unless developing countries
agree to open markets for services and industrial products, and the United States
makes concessions on the treatment of geographical indications for food and
agricultural products. The G-20, for its part, has indicated it will not make
substantially improved offers on non-agricultural market access (NAMA) and
services, until there is progress on domestic farm subsidies and market access.
Perhaps the most concrete result of the talks to date has been the decision to amend
the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement to
enable developing countries to obtain generic drugs through compulsory licenses to
fight public health epidemics such as HIV/AIDS, tuberculosis, malaria, and other
infectious diseases.
Because of the negotiating stalemate, it is considered unlikely that an agreement
can be reached before the expiration of TPA. More likely, the parties will attempt
to restart the negotiations in order achieve some measure of progress in the hope that
Congress will extend TPA. The state of the negotiations may also impact the 2007

farm bill. Many had looked to a Doha Round agreement to curb trade-distorting
domestic support as a catalyst to change U.S. farm subsidies, but this source of
pressure for change has dissipated with the Doha impasse. In addition, Congress may
consider legislation to amend U.S. patent law to implement the TRIPS access to
medicine decision.
CRS Report RL32060, World Trade Organization Negotiations: The Doha Development
Agenda, by Ian F. Fergusson.
CRS Report RL33144, WTO Doha Round: The Agricultural Negotiations, by Charles E.
Hanrahan and Randy Schnepf.
CRS Report RL33634, The World Trade Organization: The Non-Agricultural Market
Access (NAMA) Negotiations, by Ian F. Fergusson.
CRS Report RL33750, The WTO, Intellectual Property Rights, and the Access to
Medicines Controversy, by Ian F. Fergusson.
Free Trade Agreements/Implementing Legislation
[Ian F. Fergusson, Specialist in International Trade and Finance (7-4997)]
Congress may be asked to approve one or more proposed free trade agreements
(FTAs) in the first months of the 110th Congress. Proposed FTAs with Peru and
Colombia have been signed and may be considered under trade promotion authority
(TPA). Other negotiations are in progress with Panama, Malaysia, and South Korea.
Negotiations with Thailand and the United Arab Emirates are currently suspended.
One or more of these negotiations may be completed in time to be considered under
TPA, which expires on July 1, 2007. (Under TPA, the President must give a 90 day
notification to Congress of his intent to sign an FTA, thus making the de facto
deadline April 1, 2007 for reaching an agreement.) These proposed 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.
In the 110th Congress, legislators may first consider the proposed FTAs reached
with Peru and Colombia. The rationale for these agreements, in part, is to bolster the
legitimate economies of these countries in order to combat the narcotics trade. Some
Members of Congress, however, have advocated the modification of these
agreements to provide additional labor standards. Other agreements that may be
completed in time for consideration under TPA are those with Korea, Malaysia, and
Panama. Korea is the 7th largest trading partner of the United States; U.S. negotiators
are seeking to open the country’s well protected agricultural sector and to address
non-tariff barriers in the automobile and other manufacturing sectors. Malaysia is the
10th largest trading partner of the United States; U.S. concerns include import
restrictions on automobiles, restrictions on government procurement and financial
services, and intellectual property rights. In its negotiations with Panama, the United
States is seeking greater liberalization in the financial and commercial services sector
and in government procurement in the Panama Canal zone.

In the 109th Congress, members approved implementing legislation for the
Dominican Republic-Central America-United States Free Trade Agreement
(CAFTA-DR) and FTAs with Bahrain and Oman. Of these agreements, FTAs have
been proclaimed in force with Bahrain, and with the CAFTA-DR countries of El
Salvador, Honduras, Nicaragua, and Guatemala. CAFTA-DR proved to be the most
contentious of the agreements, passing the House by a vote of 217-215 on July 28,

2005, and by 55-45 in the Senate later the same day.

In debating future implementing legislation, Congress may, explicitly or
implicitly, question several aspects of the Administration’s trade policy. Do these
proposed agreements fulfill the obligations of trade promotion authority? Do the
labor protection provisions in these agreements 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 with the Asia-Pacific Economic
Community (APEC)? 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 face the decision of whether the threat of lost jobs, and lost market-share
to import-competing industries, outweigh the prospect of new employment or new
markets for exporters.
CRS Report RL33463, Trade Negotiations During the 109th Congress, by Ian F.
CRS Report RS22391, U.S.-Peru Trade Promotion Agreement, by M. Angeles Villarreal.
CRS Report RS22419, U.S.-Colombia Trade Promotion Agreement, by M. Angeles
CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement (KORUS
FTA), by William H. Cooper and Mark E. Manyin.
Trade Deficit Concerns
[James K. Jackson, Specialist in International Trade and Finance (7-7751)]
By year-end 2006, the U.S. current account, a broad accounting of the net
difference between the goods and services the country exports and imports annually,
is to surpass the record $717 billion deficit recorded in 2005. The cumulative
amount of successive deficits is raising concerns about the long-term impact on the
economy as a result of financing the current account deficit through inflows of
foreign capital. Given current macroeconomic conditions, however, these capital
inflows are bridging the gap between domestic supplies of and demand for capital,
including the federal government’s budget deficit.
Foreign investors are now major investors in U.S. corporate stocks and bonds
and hold more than 50% of the 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. Such a reduction
would place added strains on the U.S. economy and likely increase pressures on the

110th Congress to address difficult budget and spending issues.

International capital flows now far surpass flows of goods and services in the
global economy and are the driving force behind 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 more than 10 percent against the euro and other
currencies that float freely.
A sustained change in capital inflows would affect the value of the dollar,
which, in turn, would have a direct impact on the U.S. current account balance by
altering the level and composition of U.S. exports and imports of goods and services.
Although foreign trade is still a relatively small part of the overall U.S. economy,
changes in the trade accounts alters the composition of jobs in the economy and can
affect the overall level of economic activity. As a result, actions or events that cause
a sustained change in capital inflows would also affect the value of the dollar. The
changing value of the dollar would then have a direct impact on the U.S. current
account balance by altering the level of U.S. exports and imports of goods and
services. In turn, such a change could affect a broad range of sectors in the U.S.
economy. Such events could increase pressure on Congress to pursue policies which
promote U.S. exports and to confront more aggressively those countries 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.
CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson.
CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
Foreign Investment, Outsourcing, and Finance
[James K. Jackson, Specialist in International Trade and Finance (7-7751)]
The United States stands distinct in the world as the leading source of direct
foreign investment and as the leading destination for such investment. Generally, the
public and Congress view such investment favorably, although some groups are
concerned about foreign investment in “critical” industries and sectors they believe
could impair the economic security of the country and about job losses associated
with U.S. investment abroad. These concerns sparked a national debate about the
merits of such investment and the course of U.S. economic policies and led some
Members to introduce more than two dozen measures to address such concernsth
during the 109 Congress. Many of these issues remain unresolved and may
resurface in the 110th Congress. On the whole, most U.S. communities welcome
foreign direct investment for the taxes and potential employment that it can bring, but
these gains are being weighed against national security concerns and the potential for

job losses as U.S. companies seek out foreign locations and foreign workers to
perform work that traditionally has been done in the United States.
Other observers are concerned by the large inflows of capital that foreign
investors are bringing into the U.S. economy. Foreign investors now hold more than
50% of the publicly traded U.S. Treasury securities. This large and growing foreign
accumulation of U.S. securities has spurred some observers to argue that the large
foreign presence in U.S. financial markets increases the risk of a financial crisis, adds
uncertainty to the value of the dollar, and is affecting the U.S. trade balance. At the
same time, the capital inflows are accommodating the current mix of U.S. economic
policies and are keeping U.S. interest rates below the level they otherwise might
reach without the capital inflows. While the risk of a financial crisis associated
directly with the capital inflows seems slight, Congress likely would find itself
embroiled in any such financial crisis 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 Reserve.
Some observers are also concerned by the seemingly unlimited access foreign
investors have to invest in or to acquire U.S. firms, especially firms that are involved
in economic activities that some view as critical to U.S. economic security. Placing
restrictions on foreign investment, however, is potentially at odds with provisions of
U.S. law and with U.S. efforts within the WTO and the Organization for Economic
Cooperation and Development (OECD) to promote international standards that relax
national rules concerning foreign investment, including granting foreign firms
national treatment. In an earlier response to similar concerns, Congress passed the
Exon-Florio provision, which gives the President the authority to block foreign
investments that are deemed to threaten U.S. national security. Efforts begun in the
109th Congress to amend this process may continue in the 110th Congress with some
Members moving to strengthen Congressional oversight over the Exon-Florio
CRS Report RL33614, Exon-Florio Foreign Investment Provision: Comparison of H.R.

5337 and S. 3549, by James K. Jackson.

CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence
Based on Foreign Investment Data, by James K. Jackson.
Export Promotion
[M. Angeles Villarreal, Analyst in International Trade (7-0321)]
Several U.S. government agencies promote exports of U.S. goods and
investment abroad. Congressional focus in the 110th Congress may concern funding
levels at a time of budgetary pressure, adherence of U.S. export promotion practices
with WTO rules, and the extent to which these programs are providing value to the
U.S. economy. Export promotion programs of the Department of Agriculture and the
Overseas Private Investment Corporation (OPIC) are authorized through FY2007 and
the Ex-Im Bank through FY2006. In the 109th Congress, legislation was passed to
reauthorize the Bank’s charter, which expired on September 30, 2006, for five years
through September 30, 2011. In the 110th Congress, there may be efforts to

reauthorize export promotion programs of the Department of Agriculture and OPIC.
Funding for these programs recently has not been controversial, especially because
many of these programs relating to credit guarantees and insurance are self-sustaining
through fee collection and interest payments. However, export promotion funding
for non-revenue generating activities may receive renewed scrutiny at a time of tight
Export promotion can be categorized into seven distinctive functions: (1)
combating foreign export subsidies; (2) developing foreign markets; (3) financing
and insuring U.S. trade; (4) providing information, counseling, and export assistance
services; (5) negotiating reductions in foreign trade barriers; (6) funding feasibility
studies; and (7) government-to-government advocacy efforts. There are 19 federal
agencies that promote exports, most notably the Foreign Agricultural Service of the
Department of Agriculture, the International Trade Administration of the Department
of Commerce, Export-Import Bank (Ex-Im), Overseas Private Investment
Corporation (OPIC), the Trade and Development Agency, Economic and Business
Bureau of the Department of State, the Small Business Administration, and the U.S.
Trade Representative. The U.S. Trade Policy Coordinating Committee (TPCC),
established by the Export Enhancement Act of 1992 (P.L. 102-429), coordinates and
sets priorities for these and other federal agencies involved in promoting exports.
The latest available TPCC estimates show that the U.S. government agencies spent
$1.4 million on export promotion activities, approximately one-half going to
agricultural promotion activities.
CRS Report 98-568, Export-Import Bank: Background and Legislative Issues, by James
K. Jackson.
CRS Report 98-567, The Overseas Private Investment Corporation: Background and
Legislative Issues, by James K. Jackson.
CRS Report RL33553, Agricultural Export and Food Aid Programs, by Charles E.
Export Administration Act
[Ian F. Fergusson, Specialist in International Trade and Finance (7-4997)]
In the 110th Congress, there may be a new effort 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 of
time, 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 109th Congress, H.R. 4572 (Hyde) was introduced on December 16, 2005, but
no action was taken on the bill. This legislation would have increased penalties for
export control violations, amended certain enforcement provisions in the act,
established objectives for U.S. participation in multilateral control regimes, and
reauthorized the 1979 Act for two years.

The last instance in which EAA renewal legislation received extensive
consideration was in the 107th Congress. S. 149 (Enzi) was passed by the Senate on
September 6, 2001; a companion bill, H.R. 2581 (Hyde), 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 Bush
Administration publicly supported the Enzi bill.
The debate of dual-use export controls ultimately becomes one of choosing the
right balance between national security concerns and commercial considerations.
Some claim the current system compromises national security goals by failing to
prevent the spread of dual-use goods and technologies to countries suspected of
proliferation of weapons of mass destruction or to countries in support of
international terrorism. According to this 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
Other critics claim that current export controls disadvantage U.S. business by
subjecting exports of goods and technology to cumbersome and ineffective licensing
procedures that cedes 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 claim 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 RS20517, Military Technology and Conventional Weapons Export Controls:
The Wassenaar Arrangement, by Richard F. Grimmett.
International Financial Institutions
[Martin A. Weiss, Analyst in International Trade and Finance (7-5407)]
Congress has annual legislative and oversight responsibilities regarding U.S.
involvement in the international financial institutions (IFIs). The IFIs are comprised
of the International Monetary Fund (IMF) and the multilateral development banks
(MDBs): the World Bank, the African Development Bank, the Inter-American
Development Bank, the European Bank for Reconstruction and Development, the
Asian Development Bank, and several smaller sub-regional institutions.
Three key MDB funding initiatives were authorized during the 109th Congress
for MDB concessional lending facilities. Since these facilities lend to the poorest

member countries at below-market interest rates, their resources are periodically
replenished by donor nations. The FY2006 Foreign Operations appropriations bill
(PL109-102) authorized the U.S. contribution over three years of $2.85 billion to the
fourteenth replenishment of the World Bank’s International Development
Association; $461 million to the eighth replenishment of the Asian Development
Fund, and $407 million to the tenth replenishment of the African Development Fund.
The 110th Congress may consider appropriations to complete these replenishments
by FY2008.
In addition to IFI funding, the 109th Congress addressed several policy issues
through legislation and oversight hearings regarding the institutions. It appears that
many of these issues may be of continued interest to the 110th Congress. Five
potential IFI issues that Congress may address during the 110th Congress are the
future of multilateral debt relief; the anti-corruption policies of IFIs; the
environmental impact of IFI programs; efforts to reform the governance structure of
the IMF to provide greater representation to poor and developing country members;
and the role of the IMF in monitoring international exchange rates.
CRS Report RS22534, The Multilateral Debt Relief Initiative, by Martin A. Weiss.
CRS Report RL33626, International Monetary Fund: Reforming Country
Representation, by Martin A. Weiss.