Financial Post, Weekly edition, Sat 10 Jun 95, page 11

U.S. 'ISOLATIONISM' ALARMS G-7: But Clinton ready to veto bill aimed at cutting foreign aid.

Kelly McParland

President Bill Clinton is prepared to veto a congressional bill that would undermine one of the top items to be discussed by the Group of Seven leaders in Halifax next week, a White House spokesman said yesterday.

Chief spokesman Mike McCurry said the bill reflects an isolationist trend in Congress, which is alarming many G-7 members.

''There is great concern among other industrialized nations about whether or not the United States is going to live up to its global commitments, and certainly that concern will grow as a result of the vote in the House of Representatives,'' McCurry said.

The House voted Thursday to restructure the State Department, and slash spending on foreign aid and the United Nations, as part of moves to balance the budget and reduce U.S. operations overseas.

The legislation would cut about US$3 billion over two years and dictate to the president how much of the remainder could be spent. Contributions to international aid organizations like the World Bank and other development banks would be among the hardest hit.

The future of those organizations is one of the main topics for debate in Halifax. Although G-7 leaders agree reform is needed, there is no consensus on how this should be done.

Treasury Secretary Robert Rubin said the House vote was ''short-sighted'' and would undermine U.S. foreign policy and national security, as well as reducing export opportunities and jobs.

He described plans for a severe reduction in funding to the International Development Association, which offers low-interest loans to the poorest countries, as ''particularly alarming.''

The administration is ''fully committed'' to continuing its support of the IDA and other development banks, he said.

McCurry said Clinton will assure other G-7 leaders his administration will resist the House legislation and similar efforts in the Senate.

''He will make it clear he is willing to exercise his constitutional authority as president to veto that type of isolationist legislation, so the U.S. can live up to its global responsibilities,'' he said.

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