Dollars and Sense Diplomacy

Lawrence S Eagleburger & Robert L Barry. Foreign Affairs. Volume 75, Issue 4. July/August 1996.

Responding to increasingly intense pressure to eliminate the budget deficit, the US has slashed its spending on foreign relations. The international affairs budget has fallen 51% in real terms since 1984, and the Clinton administration’s 1997 request is lower than the current budget. Ideally, Congress would reverse this disturbing trend and allocate more funds to the struggling agencies with international responsibilities. The US would then be able to keep its consulates and embassies open, pay its overdue bill to the UN, and fund the trade promotion agencies that support the 300,000 American jobs tied to exports. However, presidential candidates Dole and Clinton are not calling for such increases, nor would Congress respond favorably if they did. The alternative is to make a virtue out of necessity and restructure the agencies that carry out US foreign policy. The current structure of the US foreign policy bureaucracy invites foreign countries, both allies and adversaries, to play agencies or issues against each other. A consolidated structure would buy the US more effective diplomacy for the buck, satisfying the budget hawks in Congress. More important, it would take advantage of the synergies of the US’ various foreign policy aims, compensating for the funding cuts that have crippled the country’s ability to promote its interests abroad.

Pressure to eliminate the budget deficit has grown increasingly intense, and the United States has responded by slashing its spending on foreign relations. The international affairs budget has fallen 51 percent in real terms since 1984, and the Clinton administration’s request is lower than the current budget. The decline is even more striking since bigticket items, such as aid to Israel and Egypt, have been left untouched. And Congress has denied the administration even these modest amounts, forcing the president to veto the State Department authorization bill in April.

Ideally, Congress would reverse this disturbing trend and allocate more funds to the struggling agencies with international responsibilities. The United States would then be able to keep its consulates and embassies open, pay its overdue bill to the United Nations, and fund the trade promotion agencies that support the 3oo,ooo American jobs tied to exports. Perhaps it could even raise slightly the one-tenth of one percent of GDP devoted to foreign aid, a sum that makes the United States the most miserly of the industrialized countries. But presidential candidates Dole and Clinton are not calling for such increases, nor would Congress respond favorably if they did.

The alternative is to make a virtue out of necessity and restructure the agencies that carry out U.S. foreign policy. Underlying the current system is the false premise that the United States’ objectives abroad-promoting national security, free trade and U.S. exports, and respect for human rights-often conflict with one another. In fact, those interests are intertwined. Progress toward democratic government fosters open markets, and American involvement in regional security encourages democracy and free trade. But the current structure of the U.S. foreign policy bureaucracy invites foreign countries, both allies and adversaries, to play agencies or issues against each other. A consolidated structure would buy the United States more effective diplomacy for the buck, satisfying the budget hawks in Congress. More important, it would take advantage of the synergies of the United States’ various foreign policy aims, compensating for the funding cuts that have crippled the country’s ability to promote its interests abroad. There is no time to lose. As Congress swings the budget ax and imposes solutions, the State Department, U.S. foreign policy, and all Americans suffer.

Balkans on the Potomac

Reinventing diplomacy should begin with the lead U.S. foreign affairs agency, the Department of State. Its chief problem is Balkanization at the upper levels, and a critical initial step is a radical reduction in the number of assistant secretaries. Previous attempts to redress the department’s flaws, most recently the 1995 Strategic Management Initiative, have been narrowly conceived and cosmetic in effect. The State Department cannot regain its leading role in American foreign policy by merely reducing its operating expenses or closing overseas posts. It needs an ambitious overhaul.

The State Department currently has assistant secretaries divided by region, such as the Near East, and function, such as human rights, each with a supporting bureau. There are too many assistant secretaries and their views are too divergent for the secretary of state to meet with them as a group, except on rare occasions. They report to the five under secretaries responsible for political affairs; economics, business, and agricultural affairs; arms control and international security affairs; management; and global affairs. Policy coordination does not normally take place at the under secretary level either; when assistant secretaries appeal to their immediate superiors, disputes are often perpetuated rather than settled. Above the under secretaries are the secretary and deputy secretary, who could bring some order to the process by focusing on these internal conflicts. But like most of their predecessors, Secretary of State Warren Christopher and Deputy Secretary of State Strobe Talbott have rightfully been too preoccupied with the outside world to keep the peace in Foggy Bottom.

The first step toward significant reform is to trim the number of assistant secretaries, leaving those responsible for the regions and specialized support services such as intelligence and security. The task of policy integration should be returned to the regional assistant secretaries, who deal with functional issues such as trade policy, human rights, and the environment on a daily basis. Personnel now in bureaus with purely functional mandates should be folded into regional bureaus, reversing the process by which they have swelled and added country specialists and geographic subdivisions of their own. Thirty years ago, the State Department was organized along these lines, and it worked better than today.

Getting rid of the superfluous assistant secretaries will be a challenge. Congress expressly created many of these positions, and these assistant secretaries have strong political constituencies. Most have titles that resonate with the general public-democracy, human rights, and labor; diplomatic security; oceans and international environmental and scientific affairs. They have counterparts in other cabinet departments and congressional committees with whom they have formed tight bonds. No doubt, some will misinterpret these vital efforts as an attack on these issues that are often of global concern. But whereas today’s structure presents the United States’ various aims abroad as competing alternatives, this reform would, by stressing the links between these objectives, make it possible for the United States to promote them more effectively.

A Well-Crafted Merger

This first step within the State Department would pave the way for a more controversial move: its merger with the U.S. Information Agency, the Agency for International Development, and the Arms Control and Disarmament Agency. The resulting new Department of Foreign Affairs would improve the coordination of U.S. foreign policy while allowing those obsessed with expenditures on international affairs to declare victory.

Over the strong protests of the Clinton administration, congressional Republicans, led by Senator Jesse Helms (R-N.C.), called for such a move last year. In March Congress passed an ill-crafted compromise that would have given the administration the choice of eliminating one of these three agencies through a merger with State, while allowing the remaining two to operate independently with greatly reduced funding. The administration objected to this suggested bargain, and Clinton vetoed the State Department authorization bill in April. Some critics of Helms’ proposal argued that State was rife with management problems and could not absorb several other agencies and their functions. Indeed, the Helms plan at once went too far and not far enough. The critics were correct in charging that it grafted new fiefdoms onto a flawed structure and promised to compound the problems of an organization that had grown beyond the control of the secretary and his deputy. However, reversing the sequence-creating a simplified State Department before bringing in other agencies-would make a merger possible.

As the smallest and most redundant, the Arms Control and Disarmament Agency would be the easiest to accommodate. The under secretary for arms control and international security affairs would take on the ACDA director’s role, and the agency’s staff would be split among support organizations and policy groups. Arms control experts are still very much in need, but, with the end of the Cold War, a separate agency is no longer justified.

The U.S. Information Agency is a considerably larger entity, and it supplies the secretary of state with much-needed advice on public diplomacy. It is already well integrated into U.S. diplomatic missions abroad and thus can easily be brought into the Department of Foreign Affairs by expanding the responsibilities of the under secretary for global affairs. The USIA’s Washington-based staff should not form an independent agency within the department; they should be assigned to regional bureaus and support functions.

Because it administers large grant programs that Congress closely supervises, the Agency for International Development must preserve some independence from the department, although this distinction will become less important as AID budgets decline and only a handful of major country programs survive. AID integration should follow the precedent set by the Alliance for Progress, the ambitious Kennedy administration assistance program for Latin America. Policy planning should take place at the assistant secretary level, and AID policy groups should work directly with the country desks. Technical support on issues such as energy and the environment would be provided by a unit attached to the under secretary for global affairs. A separate audit unit, based in the United States rather than abroad to keep overseas staff lean and costs down, would provide oversight. In the field, all but the very largest programs-those that dispense assistance to Israel and Egypt-would be handled by staff fully integrated into the local American embassy. The U.S. experience in Eastern Europe shows that such streamlined operations can function more flexibly and cheaply than traditional AID missions, which routinely require two or more years to set up new programs. Congress would have to abandon its predilection for micromanagement and encourage the organization to simplify its intricate regulations, which give the modest U.S. assistance program extremely high overhead costs.

Giving Trade Its Due

Most previous plans for consolidation have not treated trade as central to U.S. foreign policy. But in today’s highly competitive economic environment, export promotion and free trade rank among the United States’ top priorities, and American ambassadors now spend more time on assisting U.S. businesses than on any other single function. These efforts are beginning to pay off: competing countries are increasingly worried about losing market share to the United States, and they have started to complain bitterly about U.S. tactics, annoyed that the United States is finally employing the same methods they have long exploited.

U.S. trade policy suffers from a lack of communication among the many Washington-based agencies that set and implement it. Trade negotiations are housed in the White House in the Office of the U.S. Trade Representative, while the Department of Commerce and a constellation of more than a dozen other agencies, large and small, handle export promotion. The trade representative, brandishing the stick of tariffs, develops a negotiating strategy with dissatisfied domestic constituencies in mind and often springs plans on other U.S. agencies and ambassadors overseas without careful discussion of their ramifications. The result, as in the case of U.S. trade relations with China, is a tendency to rely on bilateral sanctions as the approach of first resort. Rather than develop a coalition of like-minded countries or turn to multilateral agencies like the World Trade Organization to advance its aims, the United States issues threats, but the offending partner usually ignores them, recognizing that they are empty because they would harm American companies that benefit from the status quo. In Japan, China, and Indonesia over the past two years, confrontational tactics have produced few gains, but they have damaged U.S. credibility and contributed to heightened tension.

Contradictory U.S. policies, confusing to foreign governments, have their origins in a fragmented bureaucratic structure. The solution lies in merging the Office of the U.S. Trade Representative with the Commerce Department’s International Trade Administration and other trade promotion agencies into a freestanding International Trade Agency with a seat on the National Security Council and representation in all relevant interagency groups. This agency would bring together the yin and yang of U.S. trade interests, using multilateral forums as well as bilateral negotiations to open markets and ensuring that trade policy is effective and rhetorically resonant. The United States should not relinquish the possibility of unilateral action, but it must adapt to the more competitive trade environment and strengthen the World Trade Organization by relying on its dispute-settlement procedures. A negotiating strategy that mobilizes incentives as well as sanctions and reflects the wide range of U.S. interests will open more markets than controversial tactics attuned to short-term domestic considerations.

Bottoms Up

Harsh budget cuts have already incapacitated many of the United States’ diplomatic posts and severely damaged the morale of Americans and foreigners who serve at U.S. embassies and consulates. To make ends meet in tropical Indonesia, for example, the embassy had to cut the only large discretionary item in its budget: air conditioning. Its staffing cuts bore no relation to U.S. interests. While Washington agencies bickered, the embassy could not augment its commercial staff to take advantage of opportunities for expanding exports, nor could it cut excess support staff and reallocate the funds. The result was a mission poorly equipped to further new priorities, such as promoting American business.

This disparity between needs and resources is likely to grow over the next few years, as the attempt to balance the budget drives down spending on international affairs still further. Top-down consolidation in Washington would save money and make the agencies more effective. At the same time, U.S. posts abroad need to be restructured from the bottom up. In 1993 the Pentagon conducted its BottomUp Review, which is a model of downsizing to meet post-Cold War requirements. By consulting local commanders and urging them to submit recommendations, rather than dictating new budget targets to agency heads and major commands and ordering them to spread the cuts at their discretion among their subordinates, the Defense Department speedily adopted a force structure better suited to today’s needs at a significantly lower cost.

In theory, chiefs of mission have the authority to shape their staffs in response to changing needs and budgets, but in reality, they lack the power to restructure across agency lines. Washington maintains a tight grip on the reins of reform. One ambassador reported that a few days after he took the requirement to propose cuts to his State staff seriously and offered up five positions, his local CIA chief ruefully confessed that Washington had raised his personnel ceiling by five. In Indonesia, a proposal to reorganize export promotion on an interagency basis won the approval of all agencies’ local representatives. The USIA was prepared to convert its separate library outside the embassy complex into a one-stop resource for U.S. business that would house the local representatives of several relevant agencies. Each was to lend its expertise to the joint operation, and the plan was strongly supported by the U.S. business community and got off to a good start during Clinton’s 1994 visit to Jakarta. But this local initiative collapsed amid haggling in Washington over how to divide the costs and floor space, and in the end the cooperative model was scrapped.

The State Department must recognize that although policymakers in Washington should articulate overall strategy, a cookie-cutter solution to unique local problems is doomed to fail. A bottom-up restructuring of overseas personnel would require a specific mandate from the president to his personal representatives, ambassadors, and mission chiefs around the world to reorganize their staffs, and that mandate would expressly apply to all agencies represented at the post, not just the State Department staff. Mission chiefs would also have to be given budget ceilings for operating expenses, including personnel costs, that reflect the importance of their host country to U.S. interests. The successful chief of mission would break down interagency walls, build teams that shift according to changing circumstances, and create a lean, results-oriented organization.

At present, the U.S. foreign affairs bureaucracy is not prepared for a bottom-up approach. Senior officials have fallen into the habit of referring to embassies and consulates as platforms where representatives from Washington can land, refuel, have a meeting or two, and then continue on their way. Officials based in the United States then bear the main burden of relations with foreign countries. This skewed approach relegates overseas posts to mere diplomatic pit stops and encourages mission chiefs to maintain administrative support personnel and fire substantive experts. Budget cuts have not required such a shift, but, combined with this attitude prevalent among policymakers, they will ultimately eviscerate the United States’ ability to defend its interests and project its influence abroad.

A Mission to Save All Missions

The lack of consensus about the purpose of the U.S. presence overseas has paralyzed reform efforts. The dominant view is that foreign service officers are hunter-gatherers of information. When asked as part of the Strategic Management Initiative to identify the most valuable service performed by overseas personnel, many members of the Washington policy community selected “analysis.” This struck a chord with those who remember how George Kennan’s 1946 “long telegram” from Moscow shaped U.S. policy toward the Soviet Union for decades. But Kennan wrote his magnum opus as a result of growing frustration with Washington’s policy and its apparent disregard for the reports from the embassy in Moscow. That his primer on Soviet foreign policy resonated with the policy community was largely coincidence. Today facsimile machines, e-mail, telephones, and backchannel telegrams provide a seamless web of communications between Washington and the field, most of it mercifully out of sight of the ambassador and the senior officials at home. If anything, the problem is a suffocating deluge of analysis.

If not analysis, what? America’s representatives abroad should focus on advocacy-promoting America’s exports, explaining its policies, protecting its citizens, urging democracy, human rights, and open markets, and fostering security arrangements that ensure peace and America’s prosperity. Reporting on these issues is important, but doing something about them should be the new organizing principle for America’s overseas missions. U.S. defense attaches and CIA personnel can contribute more by encouraging their counterparts in other countries to adopt new security or human rights policies than by reporting the latest news from the trenches. Economic analysts and AID staff can contribute to export promotion if they are permitted to escape their restrictive bureaucratic boxes. Only if they work together and share information and access can USIA, AID, and State personnel foster democracy.

Overseas missions should be charged with weaving into a coherent whole the various threads of U.S. foreign policy. Foreigners are frequently puzzled by the different messages they hear from highlevel visitors from Washington. One week, the trade representative threatens sanctions over protection of intellectual property. Then an assistant secretary of state warns that Congress will revoke trade privileges if human rights are not respected. A congressional delegation follows, accentuating the positive aspects of the relationship, remaining silent on the actions its members so vigorously proscribe at home. Commerce officials come next, emphasizing how much the United States values the trading relationship and predicting that increased trade will lead to an open society and market reforms.

The United States does not have the luxury of reorganizing piecemeal. Mergers that simply graft agencies onto State’s existing structure set a bad precedent. And once Washington heedlessly downsizes or shuts overseas posts, reviving them will be impossible. The forthcoming U.S. elections provide an opportunity to seize the reform initiative. Regardless of the victor in November, there will be new faces in the cabinet and new opportunities for restructuring. The United States cannot overcome the challenges of the next century with an outmoded State Department and an obsolete mission.