Input:
	Background: Europe's Muslim Communities

Estimates of the number of Muslims in Europe vary widely, depending on the methodology and definitions used, and the geographical limits imposed. Excluding Turkey and the Balkans, researchers estimate that as many as 15 to 20 million Muslims live on the European continent. Muslims are the largest religious minority in Europe, and Islam is the continent's fastest growing religion. Substantial Muslim populations exist in Western European countries, including France, Germany, the United Kingdom, Spain, Italy, the Netherlands, and Belgium. Most Nordic and Central European countries have smaller Muslim communities. Europe's Muslim population is ethnically and linguistically diverse; Muslim immigrants hail from Middle Eastern, African, and Asian countries, as well as Turkey. Many Muslim communities have their roots in Western European labor shortages and immigration policies of the 1950s and 1960s that attracted large numbers of North Africans, Turks, and Pakistanis especially. In recent years, there have been influxes of Muslim migrants and political refugees from other regions and countries, including the Balkans, Iraq, Somalia, and the West Bank and Gaza Strip.
Historically, European countries have pursued somewhat different policies with respect to managing their immigrant and minority populations. However, none has been completely successful. A disproportionately large number of Muslims in Europe are poor, unemployed, or imprisoned, and many feel a sense of cultural alienation and discrimination. For decades, countries such as Germany, Austria, and Switzerland viewed Muslim immigrants as temporary "guest workers." As a result, little effort was made at integration, and parallel societies developed. Britain and the Netherlands embraced the notion of multiculturalism—integration while maintaining identity—but in practice, this concept helped entrench discrete Muslim communities, functioning apart from the culture of the host country. Nor has France's assimilation policy prevented the segregation of its Muslim communities, as seen most vividly in the riots that erupted throughout France in the fall of 2005 in working class suburbs populated largely by North Africans. The protests in several European cities in early 2006 sparked by the publication in European newspapers of cartoons of the prophet Muhammad also highlight the disaffection and alienation that many European Muslims feel.

	Islamist Extremists in Europe and Links to Terrorist Groups

Although the vast majority of Muslims in Europe are not involved in radical activities, Islamist extremists and fringe communities that advocate terrorism exist and reportedly have provided cover for terrorist cells. Europe's largely open borders and previously non-existent or lax terrorism laws have also allowed some Islamist terrorists to move around freely. Following the September 11, 2001 attacks on the United States, Germany and Spain were identified as key planning bases; numerous terrorist arrests were also made in Belgium, France, Italy, and the UK. The March 11, 2004, bombings of commuter trains in Madrid, Spain that killed 191 people were carried out by an Al Qaeda-inspired group of North Africans, mostly Moroccans resident in Spain.
Even before terrorists struck London's mass transport system in July 2005, many analysts believed that the UK had become a breeding ground for Islamist extremists. Radical mosques in London apparently indoctrinated Richard Reid, the airplane "shoe bomber," and Zacarias Moussaoui, the "20 th " September 11 hijacker. UK authorities have named four young British Muslims as the perpetrators of the July 7, 2005 London attacks that killed 52 people, plus the four bombers, and injured over 700. Three of the alleged bombers were of Pakistani descent and had recently traveled to Pakistan, where some suspect they received terrorist training from remaining Al Qaeda operatives. On July 21, 2005, four Muslim immigrants tried but failed to set off four other explosions on London's metro and bus lines; no casualties resulted. And in August 2006, British police arrested several British Muslims suspected of involvement in a plot to detonate liquid explosives on airliners flying from the UK to the United States.
Nationals aligning their beliefs with Al Qaeda or radical Islam are not unique to Europe. The United States has captured or identified several U.S. citizens with similar views in the course of the fight against terrorism. However, some assert that the failure of European governments to fully integrate Muslim communities into mainstream society leaves some European Muslims more vulnerable to extremist ideologies. Many experts say that some European Muslim youth, many of whom are second or third generation Europeans, feel disenfranchised in a society that does not fully accept them; they appear to turn to Islam as a badge of cultural identity, and are then radicalized by extremist Muslim clerics. Traditionally liberal asylum and immigration laws in Western Europe, as well as strong free speech and privacy protections, have attracted numerous such clerics and Middle Eastern dissidents.
Some experts also believe that the recent wars in Afghanistan and Iraq have radicalized more European Muslims, and strengthened terrorist recruitment efforts. Many European Muslims claim common cause with suffering brethren in the Israeli-occupied Palestinian territories, as well as in Iraq, Chechnya, and elsewhere. They tend to view the "war on terrorism" as a war on Islam, and perceive an unjust double standard at work in the foreign policies of many European governments, especially those that supported the U.S.-led war in Iraq. Before being captured in September 2005, Al Qaeda training camp manager Abu Musab al-Suri noted in a communique that he had overseen the training of both Arab and non-Arab Muslims, including some individuals born or raised in Britain, the United States, and other Western countries. Al-Suri called upon the mujahideen in Europe to act quickly and strike the UK, the Netherlands, Italy, Denmark, Germany, France, and other countries with a military presence in Iraq, Afghanistan, or on the Arabian peninsula. Media reports indicate instances of French Muslim teenagers being recruited to fight in Iraq; German, Italian, and Spanish law enforcement authorities also report that they have disrupted efforts by Islamist extremists to recruit European youths for Iraq. In November 2005, a Belgian woman and convert to Islam blew herself up in an attempted suicide attack on U.S. forces in Iraq. Some analysts suggest that religious converts to Islam may be more susceptible to radicalization as a result of a mistaken desire to prove themselves in their new faith.
Others note that Europe's physical location—within a few days driving distance to Iraq or Chechnya—makes it vulnerable to fighters returning from conflict zones who have either European roots or are unable to return to their countries of origin. Press reports suggest that Iraqis and others tied to the insurgency have been active in Europe. In December 2004, German authorities arrested three Iraqis suspected of plotting to assassinate the interim Iraqi prime minister during a visit to Berlin; the three Iraqis allegedly belong to Ansar al-Islam, which has organized strikes against U.S. troops and others in Iraq. In January 2006, a German court convicted an Iraqi man of both recruiting young men for the Iraqi insurgency and smuggling extremists from Iraq into Germany, Britain, and other European countries.
Central and Eastern Europe has not been reported to be as important a haven for Al Qaeda and other terrorist groups; most countries in the region have not attracted significant numbers of Muslim immigrants. However, concerns have been raised about several countries in Southeastern Europe with large Muslim populations (e.g., Bosnia-Herzegovina). One legacy of the 1992-1995 war in Bosnia is the presence of Islamist fighters from other countries who stayed behind and became Bosnian citizens. Some Islamic charities that proliferated during and after the war reportedly served as Al Qaeda money-laundering fronts. Terrorist groups have also operated from Albania. At the same time, opposition to terrorism among indigenous Muslims in the Balkans has been strong. Most view themselves as part of Europe and are grateful for the U.S. role in defending them against Serbian aggression in the 1990s. U.S. officials say that efforts by Islamist extremists to recruit local Muslims have met with limited success, and they praise these countries' anti-terrorism efforts, especially after September 11. Nevertheless, some experts assert that Central and Southeastern Europe may pose a more significant threat than often acknowledged. The region's weak governing institutions and problems with organized crime and corruption may make it vulnerable to infiltration by terrorist groups. Observers caution that the Balkans in particular may play a role as a transit point for terrorists, a target area for recruitment, and a potential source of weapons or explosives.

	European Responses

The November 2004 murder of Dutch filmmaker Theo van Gogh brought the issue of Islamist extremism in Europe to the forefront of European political debate. Van Gogh, an outspoken critic of the treatment of women in Islam, was killed by a 27-year-old Dutch citizen of Moroccan descent and a follower of radical Islam. Since the murder, many European officials and social commentators have proclaimed that multiculturalism in Europe has failed, and called for greater integration of Muslims and other immigrants into mainstream European society. They believe that Muslims and others must embrace the native cultures of their new countries, including secularism. Some European governments have been pursuing initiatives aimed at fostering integration and promoting secularism for several years. The French government, for example, has banned "conspicuous" religious symbols in public schools, including headscarves for Muslim girls, yarmulkes, and large crucifixes. Moderate Muslim groups in France supported the ban as a means to reduce tensions in the school system and in broader society. The UK is introducing new citizenship classes to ensure that immigrants can speak English and understand British history and culture. Other analysts say that countries such as Spain, Italy, and Germany need to do more to encourage Muslim immigrants to become citizens.
Some European governments are trying to encourage moderate Muslim political voices and promote a greater role for them. Commentators note, for example, that there are few Muslim representatives in European parliaments. In 2003, Paris established an elected French Council of the Muslim Faith, an official advisory body that acts as the Muslim community's representative in dealings with the French government. French and British officials are also looking at ways to foster "homegrown imams" to minister to the needs of their Muslim communities, rather than relying on foreign imams whom they claim are often unfamiliar with the West or beholden to foreign interests. The Netherlands has reportedly created an "imam buddy system" that links foreign imams with Dutch volunteers to promote a better understanding among these imams of Dutch culture and society. Others argue that greater focus should be placed on addressing the lack of jobs and educational opportunities for Muslims, as well as racism. They say that racial violence against Muslims is on the rise in some European countries, such as the Netherlands, but governments have failed to acknowledge the scale of the problem.
Several analysts suggest that mainstreaming Muslims into European society would not necessarily translate into an embrace of European ideals; some even question whether Islam itself is compatible with European political principles and values. They point out, for example, that two British Muslim suicide bombers in Israel in April 2003 were from comfortable middle-class, Westernized suburbs. Some Muslim groups in Europe say that certain efforts toward integration, such as the French headscarf ban, are counterproductive and only serve to increase the sense of discrimination among Muslims. In the wake of the London bombings, the UK government is consulting with British Muslims on how to best tackle extremism. Some Muslim leaders argue that Muslim communities must be more vocal against extremism, and actively counter rather than tolerate radical preachers.
European governments have also sought to contain Islamist extremists and counter terrorists by tightening security measures and reforming immigration and asylum laws. UK and French security services have reportedly increased their monitoring of mosques; Germany has changed its laws to allow authorities to investigate religious groups; and France and Italy have expelled some Muslim clerics for hate crimes. Following the London attacks in 2005, the British government has sought to make it easier to exclude or deport foreign individuals who incite hatred. Also notable are European Union (EU) efforts to boost police and judicial cooperation, enhance intelligence-sharing, and strengthen external EU border controls. Security and border control services in new EU members in Central and Eastern Europe, although not quite as effective as their Western counterparts, are also improving as they seek to meet EU standards. In addition, the EU has been working to encourage good integration practices among its 27 member states and prevent radicalization.
Law enforcement challenges remain throughout Europe, as elsewhere. Long-standing traditions against intelligence-sharing, rivalries among the various local and national security services, and different national laws continue to impede more robust EU cooperation. For example, full implementation of the EU-wide arrest warrant has been slowed in Poland and Cyprus because of court rulings that found the warrant incompatible with constitutional bans on extraditing their own nationals. European governments are also struggling with balancing their efforts to curtail Islamist extremists against well-established civil liberty protections, strong privacy rights, and democratic ideals.

	Implications for the United States

U.S. officials have expressed concerns since the 2001 terrorist attacks that Europe might be a launching point for future attacks on the United States and U.S. interests abroad. The Bush Administration and Members of Congress have welcomed European initiatives to curtail Islamist extremism and improve U.S.-EU counterterrorism cooperation in the hopes that such efforts will ultimately help root out terrorist cells in Europe and beyond. The United States and the EU have been placing increasing emphasis on cooperation in the areas of intelligence-sharing, border control, and transport security. Among other initiatives, the two sides have concluded agreements to improve container security and exchange airline passenger information. Nevertheless, some challenges remain; for example, differences persist in U.S.-EU data protection regimes and, at times, have complicated closer cooperation on travel security.
Some terrorism experts and Members of Congress remain concerned about the U.S. Visa Waiver Program (VWP), despite steps taken to tighten passport requirements for participating countries. The VWP allows more than 15 million people a year short-term visa-free travel to the United States from 27 countries, most of which are in Europe. The VWP has become a sticking point in U.S.-EU relations; the EU would like the VWP to be extended to all EU members (currently 12 are excluded due to problems meeting U.S. immigration laws). Some Members of Congress oppose expanding or even continuing the VWP, noting that Islamist terrorists who hold European citizenship have entered the United States on the VWP (UK-born Richard Reid and French citizen Zacarias Moussaoui being two notable examples). Also, stolen passports from VWP countries are prized travel documents among terrorists, criminals, and immigration law violators, creating an additional risk. Other Members are more supportive of extending the VWP to new EU members, mostly in central and eastern Europe, given their roles as U.S. allies in NATO and in the fight against terrorism. Some experts also caution that eliminating or curtailing the VWP could impede transatlantic tourism and commerce.
Some analysts contend that the presence of large Muslim communities in Europe may also be influencing the policy preferences of some European governments on contentious Middle East issues and contributing to U.S.-European divisions. They argue that Europe's growing Muslim population has made some European officials more cautious about supporting U.S. policies that risk inflaming their own "Muslim streets." They suggest that this is one reason why countries such as France and Germany opposed the U.S.-led war in Iraq. Meanwhile, Europe's struggle with its own identity as it grapples with integrating Muslims into European society has called into question Turkey's long-term EU prospects. Washington has long advocated EU membership for Turkey, a country of 70 million Muslims, as a way to anchor this strategic ally firmly in the West and debunk the notion of a clash of civilizations between Islam and the West.

Output: Although the vast majority of Muslims in Europe are not involved in radical activities, Islamist extremists and vocal fringe communities that advocate terrorism exist and reportedly have provided cover for terrorist cells. Germany and Spain were identified as key logistical and planning bases for the September 11, 2001 attacks on the United States. The March 2004 terrorist bombings in Madrid have been attributed to an Al Qaeda-inspired group of North Africans. UK authorities have named four British Muslims as the perpetrators of the July 2005 terrorist attacks on London; in August 2006, British law enforcement arrested several British Muslims suspected of plotting to blow up airliners flying from the UK to the United States. This report provides an overview of Islamist extremism in Europe, possible terrorist links, European responses, and implications for the United States. It will be updated as needed. See also CRS Report RL31612, European Counterterrorist Efforts: Political Will and Diverse Responses in the First Year After September 11, by [author name scrubbed] (pdf), and CRS Report RL33166, Muslims in Europe: Integration in Selected Countries, by [author name scrubbed] et al.


Input:
	Background

Following the terrorist attacks of September 11, 2001, the United States  began military operations to combat terrorism both in the United States  and overseas. Operations to defend the United States from terrorist  attacks are known as Operation Noble Eagle. Overseas operations to  combat terrorism are known as Operation Enduring Freedom, which  takes place principally in Afghanistan, and Operation Iraqi Freedom,  which takes place in and around Iraq. Figure 1 shows the primary  locations where U.S. forces conducted operations in support of the war  in fiscal year 2003.
To support the war in fiscal year 2003, Congress appropriated $68.7 billion  to DOD: $6.1 billion in the Consolidated Appropriations Resolution, 2003,  and $62.6 billion in the Emergency Wartime Supplemental Appropriations  Act, 2003. While most of these funds were only available for expenditure  in fiscal year 2003, some could be expended in subsequent fiscal years.  Of the $68.7 billion appropriated for GWOT, almost $16 billion was  appropriated in the fiscal year 2003 Wartime Supplemental to a transfer  account called the Iraqi Freedom Fund. The Iraqi Freedom Fund is a  special account providing funds for additional expenses for ongoing  military operations in Iraq, and those operations authorized by P.L. 107-40  (Sept. 13, 2001), Authorization for Use of Military Force, and other  operations and related activities in support of the global war on terrorism.
Congress has also appropriated funds for the reconstruction of Iraq and  Department of State and U.S. Agency for International Development  projects. We are reviewing the contracts involved in the reconstruction,  as well as the funding for other projects and will be issuing separate  reports on these issues.

	Obligations for GWOT Operations

As of September 30, 2003, DOD reported obligating a total of over  $61 billion in fiscal year 2003 in support of the war. Among the operations  that comprised the war on terrorism, Operation Iraqi Freedom amounted  to about $39 billion or 64 percent of the total obligations, as shown in  figure 2. The obligations reported for Iraqi Freedom are probably  understated and the obligations reported for Operation Enduring Freedom  overstated because, according to DOD officials, the initial obligations  associated with the build up to Iraqi Freedom were charged to Enduring  Freedom. Officials in the Office of the Under Secretary of Defense  (Comptroller) reclassified reported obligations to the appropriate  operation after Iraqi Freedom began, based on anticipated and projected  GWOT operations.
Of the overall reported amount obligated within DOD for GWOT during  fiscal year 2003, the Army reported the largest amount of obligations,  46 percent of the total, as shown in figure 3. (The Army had the largest  number of military personnel engaged in the war.) In addition to the  obligations reported by the other military services, about 13 percent of  DOD’s GWOT obligations were reported by a total of 15 other DOD  organizations, such as the Defense Information Systems Agency and the  Defense Logistics Agency. Of these DOD organizations, the Defense  Logistics Agency reported the largest amount of obligations—over  $3.6 billion.
The obligations reported for GWOT fall into three categories—operation  and maintenance, military personnel, and investment. Operation and  maintenance account funds obligated in support of the war are used  for a variety of purposes, including transportation of personnel,  goods, and equipment; unit operating support costs; and intelligence,  communications, and logistics support. Military personnel funds obligated  in support of the war cover the pay and allowances of mobilized reservists  as well as special payments or allowances for all qualifying military  personnel both active and reserve, such as Imminent Danger Pay and  Family Separation Allowance. Investment funds obligated for the war are  used for procurement, military construction, and research, development,  test and evaluation. As shown in figure 4, GWOT obligations reported in  the operation and maintenance account amount to almost $44 billion or  71 percent of the total.
The Consolidated Department of Defense Terrorist Response Cost Report  displays obligations in all accounts by specific categories. As previously  cited, chapter 23 of the DOD Financial Management Regulations, which  governs how all DOD organizations report financial data for contingency  operations, defines these categories. Within the operation and  maintenance account, the operating support category had the largest  amount of reported obligations for fiscal year 2003—over $32 billion or  74 percent of the total. This category, which includes obligations incurred  for such things as training, operational support, equipment maintenance,  and troop support, had the highest level of obligations, in part reflecting  the cost of using civilian contractors to provide housing, food, water, and  other services to over 180,000 troops deployed overseas in support of  GWOT. A large part of the operating support costs category—48 percent— is in two miscellaneous categories, other supplies and equipment  ($7 billion) and other services and miscellaneous contracts ($8.5 billion).
Most of the remaining reported GWOT obligations, $15.6 billion or  26 percent, were in the military personnel accounts. Within the military  personnel account, the category reserve component called to active duty  had the highest level of reported obligations—almost $9.3 billion or  59 percent of the total. This category captures the obligations reported for  the salaries paid to reservists mobilized for active duty. According to  service officials, more reservists were called to active duty than originally  estimated and remained on active duty longer than planned. As with  operation and maintenance obligations, there was also a large  miscellaneous category, other military personnel, which accounted for  about $3.8 billion, or 24 percent, of all military personnel obligations.
In discussing the results of our analysis with the Office of the Under  Secretary of Defense (Comptroller) and the military services, there was  recognition of the large amount of obligations captured in miscellaneous  categories. The Office of the Under Secretary of Defense (Comptroller) is  considering how best to provide more specific detail in future cost reports.

	Funding Adequacy for GWOT Varied by Service

The adequacy of funding available for fiscal year 2003 GWOT obligations  reported in military personnel and operation and maintenance accounts  varied by service. The funding available for the war consists of funds  directly appropriated to the military services for GWOT, the net transfer of  funds from the Iraqi Freedom Fund, and reprogrammed funds originally  appropriated to the services for peacetime operations.
Within the military personnel accounts, as shown in table 1, in fiscal year  2003 the Army, Navy, and Air Force reported more obligations in support  of the war than they received in funding for the war. To cover the shortfall  in GWOT funding, these services had to use funds appropriated for their  budgeted peacetime operations. Officials from each of these services  explained that the shortfall was a relatively small portion of their budgeted  peacetime military personnel account. For example, the Army’s reported  shortfall of $155.2 million represents less than 1 percent of its total  peacetime appropriation. The Marine Corps, which had augmented its  GWOT military personnel appropriation with funds from its peacetime  military personnel account, ended the fiscal year with slightly less in  obligations than it had in available funding—$1.8 million or less than  1 percent of its peacetime appropriation.
Within the operation and maintenance accounts, as shown in table 2, in  fiscal year 2003 the Army, Air Force, and Navy received funding that  exceeded their reported GWOT obligations. At the same time the Marine  Corps reported more GWOT obligations than it received in funding.
In discussing our analysis of the difference between GWOT obligations  and funding with the Army, Air Force, and Navy, we were told the  following.
The Army reported slightly more funding than obligations for the war.
At the end of fiscal year 2003, the Army reported obligations that initially  appeared to be more than $500 million less than the available funding.  However, as of January 2004, the Army has subsequently updated its  fiscal year 2003 reporting to reflect about $470 million in additional  reported obligations. According to Army officials, the Army had not  included in the September 30, 2003, consolidated cost report $494 million  in obligations reported to support the Coalition Provisional Authority in  Iraq. The Army received GWOT funding in fiscal year 2003 to support this  organization, but the obligations were not captured in the Army’s  accounting system used to record most other Army obligations. The Army  also cancelled some obligations made before the end of the fiscal year,  resulting in a total adjustment to the fiscal year 2003 cost report of  $470 million. Thus the Army ended the year with about $30 million more in  funding than reported obligations.
Air Force officials told us that the $176.6 million, which appeared to be  unobligated GWOT funding, was actually obligated late in the fiscal year.  According to the officials, that amount was obligated for flying operations  requirements that the Air Force decided were related to the war, but were  not reported as such.
Navy officials told us that the apparent unobligated GWOT funds  ($299 million) were in fact obligated in support of the war but were  originally, and incorrectly, reported as obligations in support of budgeted  peacetime operations. These officials said that they would be updating  their reporting for obligations incurred in fiscal year 2003 to reflect an  additional $299 million in operation and maintenance obligations for the  war. At the same time, the Navy returned $198 million to the Iraqi Freedom  Fund that it believed was in excess of its operation and maintenance  requirements for the war. The available funding in table 2 was adjusted to  reflect the return of the $198 million. Returning these funds is in keeping  with recommendations we made in our September 2003 report discussed  above to monitor the obligation of funds in the services’ operation and  maintenance accounts and ensure that all funds transferred to the services  that are not likely to be obligated by the end of the fiscal year are  transferred back to the Iraqi Freedom Fund.
In subsequent work we plan to review GWOT obligations to detail the  specific purposes for which funds were used and to determine whether the  service requirements for which funding was obligated were war-related.  The additional Air Force flying operations’ requirements and the funds the  Navy recharacterized as being in support of the war will be included in  that review.
While the Marine Corps obligated $72.5 million more for GWOT than it had  in funds at the end of fiscal year 2003, it, like the Navy, returned money to  the Iraqi Freedom Fund. At the end of fiscal year 2003, Marine Corps  officials believed that they could not obligate $152.2 million that had been  transferred to the Marine Corps’ operation and maintenance account from  the Iraqi Freedom Fund before the end of the fiscal year and so transferred  it back to the fund. In retrospect, however, the Marines obligated more  than expected. According to Marine Corps officials, this shortfall was  covered by using normal peacetime operation and maintenance  appropriations that units deployed in support of GWOT were not going  to use.
As noted with the Army and Navy analyses, the services have reported  obligation updates to the Office of the Under Secretary of Defense  (Comptroller) for inclusion in the Defense Finance and Accounting  Service’s Consolidated DOD Terrorist Response Cost report for fiscal year  2003. The Defense Finance and Accounting Service is issuing monthly  fiscal year 2003 update reports as the obligation data is updated, which  must be added to the report as of September 30, 2003, to determine the  total fiscal year 2003 obligations reported in support of GWOT.

	Agency Comments

In official oral comments on a draft of this report, officials from DOD’s  Office of the Under Secretary of Defense (Comptroller) stated that the  department had no objections to the report. DOD also provided technical  comments and we have incorporated them as appropriate.
We are sending copies of this report to the Chairmen and Ranking  Minority Members of the House and Senate Budget Committees, the  Secretary of Defense, the Secretaries of the military services, and the  Director, Office of Management and Budget. We will also make copies  available to others on request. In addition, the report will available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staff has any questions, please contact me on (757) 552-8100  or by e-mail at curtinn@gao.gov. Major contributors to this report were  Steve Sternlieb, Ann Borseth, Madelon Savaides, Leo Sullivan, and John  Buehler.

Output:
Why GAO Did This Study

The Global War on Terrorism--principally involving operations in Afghanistan and Iraq--was funded in fiscal year 2003 by Congress's appropriation of almost $69 billion. To assist Congress in its oversight of spending, GAO is undertaking a series of reviews relating to contingency operations in support of the Global War on Terrorism. In September 2003, GAO issued a report that discussed fiscal year 2003 obligations and funding for the war through June 2003. This report continues the review of fiscal year 2003 by analyzing obligations reported in support of the Global War on Terrorism and reviews whether the amount of funding received by the military services was adequate to cover DOD's obligations for the war from October 1, 2002, through September 30, 2003. GAO will also review the war's reported obligations and funding for fiscal year 2004.

What GAO Found

In fiscal year 2003, DOD reported obligations of over $61 billion in support of the Global War on Terrorism. GAO's analysis of the obligation data showed that 64 percent of fiscal year 2003 obligations reported for the war on terrorism went for Operation Iraqi Freedom; among the DOD components, the Army had the most obligations (46 percent); and among appropriation accounts the operation and maintenance account had the highest level of reported obligations (71 percent). The adequacy of funding available for the Global War on Terrorism for fiscal year 2003 military personnel and operation and maintenance accounts varied by service. For military personnel, the Army, Navy, and Air Force ended the fiscal year with more reported obligations for the war than funding and had to cover the shortfalls with money appropriated for their budgeted peacetime personnel costs. For operation and maintenance accounts, the Army, Navy, and Air Force appeared to have more funding than reported obligations for the war. However, the Navy and Air Force have stated that the seeming excess funding ($299 million and $176.6 million respectively) were in support of the war on terrorism, but had not been recorded as such. Therefore, Navy and Air Force obligations exactly match funding. The Marine Corps used funds appropriated for its budgeted peacetime operation and maintenance activities to cover shortfalls in funding for the war.


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	Overview

those sectors where USTR has negotiating authority because of some countries’ expected opposition to further tariff reductions.
At Singapore, proposals are expected for WTO members to begin work on the next generation of trade issues. However, because these issues include areas heretofore outside the scope of detailed trade negotiations—environmental protection, investment rules, competition policy, labor standards, and bribery and corruption—it is unlikely members will reach consensus on the WTO’s role. Of these issues, only environment is on the WTO agenda already, but members have not decided how to reconcile environmental concerns with trade objectives. USTR strongly supports discussing labor standards as part of the WTO agenda. USTR may begin to address bribery and corruption issues indirectly as it seeks to expand participation in the Agreement on Government Procurement. However, many other members are just as strongly opposed to including these two issues. On the other hand, the United States is not yet prepared to agree to a negotiating program for competition policy and would prefer discussions on investment policy to take place primarily in the Organization for Economic Cooperation and Development (OECD).

	General Implementation Issues

In earlier testimony we noted that it will take time and resources to (1) completely build the WTO so that members can address all its new roles and responsibilities; (2) make members’ national laws, regulations, and policies consistent with new commitments; (3) fulfill notification requirements and then analyze the new information; and (4) resolve differences about the meaning of the agreements and judge whether members have fulfilled their commitments. It is critical that USTR monitor implementation of the agreements to ensure that other WTO members are honoring their commitments and thus that the agreements’ expected benefits are being realized. USTR and the Departments of Commerce and Agriculture have created specific units to try to monitor foreign government compliance with trade agreements, including those of the Uruguay Round.

		The New Organization

created some new bodies; however, these bodies address new areas of coverage, for example, the Councils for Trade in Services and for Trade-Related Aspects of Intellectual Property Rights. Other bodies, such as the WTO Committee on Antidumping Practices, were “reconstituted” from previous GATT committees but were given new responsibilities by the Uruguay Round agreements and now have broader membership. The WTO Secretariat, headed by its Director General, facilitates the work of the members. The work of the bodies organized under the WTO structure is still undertaken by representatives of the approximately 123 member governments, rather than the Secretariat. Early meetings of some WTO committees were focused on establishing new working procedures and work agendas necessary to implement the Uruguay Round agreements.

		Notifications

The ministers will be judging the progress of members in implementing numerous agreements to date, based on information collected from the many notification requirements placed upon member governments. These notifications are aimed at increasing transparency about members’ actions and laws and therefore encourage accountability. Notifications take many forms. For example, one provision requires members to file copies of their national legislation and regulations pertaining to antidumping measures. WTO committees began reviewing the notifications they received from member governments in 1995. The information provided allows members to identify general problems with implementing the terms of the agreements, as well as monitor each others’ specific activities and, therefore, to enforce the agreements.
Limitations in members’ reporting may make it difficult for the ministers to assess progress in some areas. The WTO Director General noted some difficulties with members’ fulfilling their notification requirements in his report in December 1995. Some foreign government and WTO Secretariat officials told us in 1995 that the notification requirements had placed a burden on them and that they had not foreseen the magnitude of information they would be obligated to provide. The WTO Secretariat estimated that the Uruguay Round agreements specified over 200 notification requirements. It also noted that many members were having problems understanding and fulfilling the requirements within the deadlines. While developing countries reportedly faced particular problems, even the United States missed some deadlines for filing information on subsidies and customs valuation laws.
To address concerns about notifications, WTO formed a working party in February 1995 to simplify, standardize, and consolidate the many notification obligations and procedures. This working party may make recommendations for changes for the ministers to consider.

		Dispute Settlement

The WTO dispute settlement mechanism is intended to be a central element in providing security and predictability to this multilateral trading system. Through it, members have a system to resolve disputes that result from violations of WTO obligations or impairment of benefits from WTO agreements. The new dispute resolution mechanism incorporates several objectives that were particularly important to the United States—time limits for each step in the dispute settlement process and elimination of a country’s ability to block the adoption of resolutions from dispute settlement panel reports. The new Dispute Settlement Understanding established time limits for each of the four stages of a dispute: consultation, panel review, appeal, and implementation. Also, unless there is unanimous opposition in the WTO Dispute Settlement Body, the panel or appellate report is to be adopted. Further, the recommendations and rulings of the Dispute Settlement Body can neither add to or diminish the rights and obligations provided in the Uruguay Round agreements nor directly force members to change their laws or regulations. However, if members choose not to implement the recommendations and rulings, the Dispute Settlement Body may authorize trade retaliation.
From January 1, 1995, to August 30, 1996, formal WTO dispute settlement procedures have been invoked in 53 instances. Most of the cases are still in progress—35 are either in the consultation phase, under panel review, or on appeal. Of the 18 closed cases, 16 have been settled or abandoned, and 2 have been closed after a final appeal.
The United States has availed itself of the dispute settlement mechanism more than any other member. The United States has initiated 17 cases on a variety of issues including patent protection in India, Portugal, and Pakistan; meat import restrictions in South Korea and the European Union (EU); and restrictions on the importation of magazines into Canada. There are currently four pending cases against actions or measures taken by the United States—two involve import restraints concerning textile and apparel products, one relates to an antidumping investigation of tomatoes from Mexico, and the other concerns the Cuban Liberty and Democratic Solidarity Act of 1996.
As of the end of August 1996, dispute settlement panels have reached decisions involving five cases. The two closed cases, which were combined into a single panel, involved a challenge by Venezuela and Brazil to a U.S. Environmental Protection Agency regulation setting forth the methods by which importers of gasoline were to determine characteristics of gasoline imported and sold in the United States in 1990. The panel found that the regulation was inconsistent with a GATT 1994 provision concerning national treatment of imported products. On appeal, the dispute settlement Appellate Body modified the panel’s report but upheld the panel’s conclusion. The other three cases, also combined into one panel, were brought by the United States, Canada, and the EU against Japan’s liquor tax. The panel found the Japanese tax to be inconsistent with GATT 1994, on national treatment grounds. Japan has filed an appeal, which is currently pending.
It is unclear to what extent the ministers at the WTO Singapore meeting will analyze the implementation of the new dispute settlement process and what criteria they would use to do so. USTR officials view this process as a success, in part because complaints can be resolved even before a panel hears the case. In addition, USTR has recently testified that the new mechanism is proving to be a very effective market-opening tool. However, it may be difficult to objectively evaluate the results of a dispute settlement process. We observed in our previous work on 5 years of dispute settlement under the U.S.-Canada Free Trade Agreement (CFTA)that it may take many years before a sufficiently large body of cases accrues to permit statistically significant observations about the process. In that report we focused on the possible effects of panelists’ backgrounds, the types of U.S. agency decisions appealed, and the patterns of panel decision-making. We learned that any effort to evaluate the functioning of the dispute settlement process presents significant analytical challenges.

	Implementation of the Agreement on Textiles and Clothing

example, increase market access in key sectors and improve protection of intellectual property rights.
Under the Uruguay Round Agreement on Textiles and Clothing, textile quotas are to be phased out over a 10-year period beginning in January 1995. Because of the 10-year phase-out, the effects of the textiles agreement will not be fully realized until 2005, after which textile and apparel trade will be fully integrated into WTO and its disciplines (practices). Integration is to be accomplished by (1) completely eliminating quotas on selected products in four stages and (2) increasing quota growth rates on the remaining products at each of the first three stages. By 2005, all bilateral quotas maintained under the agreement on all WTO members are to be removed.
During the first stage of product integration (1995 through 1997), virtually no quotas were removed by the United States and other major importing countries. The United States is the only major importing country to have published a list of products to be removed from quota for all three stages; other countries, such as the EU and Canada, have only published their integration plan for the first phase. Under the U.S. integration schedule, 89 percent of all U.S. apparel products under quota in 1990 and 67 percent of textile and apparel products combined will not be integrated into normal WTO rules until 2005. Importer and retailer representatives have expressed concern about the delay in lifting the majority of textile and apparel quotas until the end of the phase-out period. However, U.S. officials have pointed out that the Statement of Administrative Action accompanying the U.S. bill to implement the Uruguay Round agreements provided that “integration of the most sensitive products will be deferred until the end of the 10-year period.”
During the phase-out period, the safeguards provision of the textiles agreement permits a country to impose a new quota only when it determines that increased imports of a particular textile or apparel product are seriously damaging, or present an actual threat of serious damage to, its domestic industry. The agreement further provides that any quotas imposed during the phase-out period be reviewed by a newly created Textiles Monitoring Body (TMB) within WTO, which is to supervise the textile agreement’s implementation. TMB consists of individuals from 10 countries, including the United States.
The United States and Brazil are the only WTO members thus far to have imposed new quotas on imports they found were harming their domestic industries under the agreement’s safeguard procedures. In 1995, the United States issued 28 requests for consultations (or “calls”) to impose quotas and has issued 2 calls thus far in 1996 to a total of 19 countries (11 WTO members and 8 nonmembers). Brazil has issued calls to four countries to date.
As of August 1996, TMB had reviewed the imposition of seven quotas (where no agreement was reached with the exporting country). All of these quotas had been imposed by the United States. TMB found that the threat of serious damage to domestic industry had been demonstrated in one case. In three cases, TMB found that the threat of serious damage had not been demonstrated, and the quotas were subsequently rescinded; in three other cases, TMB could not reach consensus. TMB has not published details about the reasons for its decisions. Three of the cases TMB reviewed were subsequently brought before the Dispute Settlement Body by the countries subject to the U.S. safeguard action. The United States rescinded one action, and the other two cases are currently pending. report on the textile agreement’s implementation to the WTO General Council in early November.

	Implementation of Agricultural Commitments

Liberalizing agricultural trade was a key U.S. objective during the Uruguay Round. The United States anticipated that better rules and disciplines on government policies in this area would foster a more market-oriented trading system and improve the competitive position of the U.S. agriculture sector. Therefore, monitoring other members’ implementation of their Uruguay Round agricultural commitments is essential to securing anticipated U.S. gains.
Several important issues are likely to be discussed at the ministerial meeting, as the reports of two WTO committees and one WTO working party focus on, or relate to, agricultural trade. First, the WTO Committee on Agriculture will report on implementation of the agriculture agreement, including any aspects needing additional attention or review. This Committee’s report is expected to address two other issues: (1) a decision to review the impact of the agreement on net food-importing countries and (2) preparations necessary to resume the agreement’s required negotiations in 1999. Second, the WTO Committee on Sanitary and Phytosanitary (SPS) Measures will report on implementation of the SPS agreement. Third, the WTO Working Party on State Trading Enterprises will report on its efforts to better document and understand the role of STEs in WTO.

		Committee on Agriculture

implementation issue was discussed outside the Committee under the dispute settlement process, when the United States requested consultations with the EU to resolve its concerns about EU implementation of market access commitments for grain imports.
In addition to implementation issues, the Committee’s report is expected to address its responsibility for monitoring WTO members’ commitment to review levels of food aid available to net food-importing countries. This commitment recognized that least-developed and net food-importing developing countries might experience negative effects from Uruguay Round agricultural reform if it affected the availability of food supplies from external sources at reasonable terms and conditions. WTO members agreed to establish appropriate mechanisms to ensure that agricultural reform does not have an adverse impact on the provision of sufficient levels of food aid. The recent rise in global commodity prices and the near-record lows in international grain reserves have increased the cost of food imports for some countries. Some least-developed and net food-importing countries have already indicated they are concerned about the impact of agricultural reform on their countries, but U.S. officials do not believe the limited reforms implemented so far are responsible for shortages or price increases. Still, net food-importing countries expect action to be taken within the Committee to review food aid levels and establish a sufficient level of aid to meet legitimate needs. The Committee is considering whether and how such a review should be conducted and hopes to resolve this issue before the ministerial meeting. However, if resolution is not achieved within the Committee, the issue is likely to be discussed at the World Food Summit in November 1996 and again in Singapore. implementation of the agreement, preparing for negotiations to resume is also important.

		Committee on SPS Measures

The second Committee report that will address agricultural issues is the Committee on SPS Measures. The SPS agreement recognizes that members have a right to adopt measures to protect human, animal, and plant life or health. However, it requires, among other things, that such measures be based on scientific principles and not act as disguised trade restrictions. The United States was a key supporter of this agreement, recognizing that the lack of sufficient disciplines on the use of SPS measures could undermine the intent of the agriculture agreement if members were allowed to replace tariffs and quotas with unscientific animal and plant health or food safety measures. The United States has signalled its intent to use WTO channels to challenge unscientific SPS measures. For example, through WTO consultations in 1995, the United States persuaded South Korea to modify its practice for determining product shelf-life, which was adversely affecting U.S. meat and other exports. Also, in May 1996, the United States requested a dispute settlement panel be convened to review the EU’s long-standing ban on hormone-treated meat, which has substantially blocked U.S. beef imports since 1989.

		Working Party on STEs

potential to distort trade. This framework helps clarify that being sanctioned by the government does not necessarily mean that an STE is distorting trade; rather, a key factor is the presence of direct or indirect subsidies that can give an STE a greater potential to distort trade. We reported that another factor in evaluating the trade-distorting effect of STEs (or private commercial firms) is share of the world market.
The working party on STEs is developing an illustrative list of STE attributes and practices in WTO and continues to study the questionnaire used to collect information about them. The United States is working within the forum to develop a modified questionnaire that would help make STE activities more transparent. U.S. government and agricultural industry officials hope to negotiate additional disciplines on STEs when agricultural negotiations resume in 1999.

	Ongoing Negotiations in Services and Market Access

Negotiations in several service sectors and on market access for certain goods were left unfinished at the end of the Uruguay Round and may be discussed by ministers at Singapore. USTR has pursued trade liberalization and market access in these areas since the Uruguay Round, but in many cases the outcome of these efforts remains uncertain. For example, within the framework of the General Agreement on Trade in Services (GATS), negotiations covering the financial, telecommunications, and maritime service sectors have not yet resulted in final agreements. In addition, USTR hopes to achieve further market access through new tariff reductions for a variety of goods but has testified that considerably more work remains to build “the necessary international consensus” for making such reductions. because U.S. negotiators, in consultation with the private sector, concluded that other members’ offers to open their markets to U.S. financial services firms, especially those of certain developing countries, were insufficient to justify broader U.S. commitments (with no most-favored-nation exemption or other limitations). At the end of 1997, members, including the United States, will have an opportunity to modify or withdraw their commitments. Thus, the final outcome and impact of the financial services agreement are still uncertain. USTR has testified that negotiations for a financial services agreement are expected to resume in the first half of 1997, and the ministers may discuss this at Singapore.
WTO members were also not able to reach agreement on a basic telecommunications services agreement by the original deadline of April 30, 1996, and negotiations were subsequently extended to a new deadline of February 15, 1997. The United States has noted that while some members made offers that matched that of the U.S. offer in terms of openness, many others did not, thus the United States would not accept the agreement. In addition, the United States has said that in order for the extended negotiations to succeed, “more and better” offers must be made by members, including both developed and developing nations.
Similarly, negotiations for a multilateral maritime services agreement were unsuccessful and were suspended in June 1996 until the year 2000, when negotiations for all services sectors will be reopened. When suspending the negotiations, participating members agreed to refrain from applying new measures that would affect trade in this area during this time. The United States has said that other participating members to the negotiations did not offer “to remove restrictions so as to approach current U.S. openness in this area.” The United States did not submit an offer in maritime services because USTR believed that other countries were not serious about liberalization. spirits, nonferrous metals, oilseeds and oil products, and certain chemical and pharmaceutical products, but expects opposition in some of these areas from several major trading partners.

	Emerging Issues

Members are debating what work should be done by WTO on new issues related to international trade at Singapore. As tariff and nontariff barriers to trade are reduced, other areas (traditionally seen as domestic) have drawn attention as potential international trade barriers. These include (1) environmental protection, (2) investment rules, (3) competition policy, (4) labor standards, and (5) bribery and corruption issues. Although these are not traditionally discussed as trade policy topics, they reflect a broader concept of what some WTO members believe are factors affecting market access opportunities in a global economy. For example, some WTO members believe that enforcing certain environmental and labor standards can be a disguise for protectionist policies. Also, activities such as price-fixing, market sharing, and noncompetitive procurement practices can lead to market distortions and reduce access for foreign competitors. The WTO has begun to address some of these issues, but no consensus has been reached on the extent to which they should be dealt with in the WTO. Some of these negotiations in new areas could be quite controversial, based on the previous experience with including areas like agriculture and services in the Uruguay Round negotiating agenda.

		Trade and Environmental Protection

Of the emerging issues, environment has developed the furthest within the WTO. At Marrakesh in 1994, members decided to establish a Committee on Trade and Environment. Trade and environment issues overlap because some government measures to balance economic growth with environmental concerns are perceived as protectionist and may conflict with WTO obligations. At the same time, some trade policies may impede the development of sound environmental policies. In the past, GATT dispute panels have ruled against measures that conflicted with national treatment principles or that appeared to apply to areas outside a country’s sovereign jurisdiction. The United States believes that free trade and environmental protection policies can be mutually supportive and plans to convey this message at the Singapore ministerial meeting, in keeping with the 1992 United Nations Declaration in Rio de Janeiro.
The WTO Committee on Trade and Environment is to identify the relationship between trade and environmental measures and make appropriate recommendations within the context of open and equitable trade. The Committee is expected to present a report at Singapore, but it is unclear what the report will include because of the complex issues and divergent views. Members generally agree that promoting free trade and environmental protection is not inherently contradictory; however, they have not agreed on specific ways to address these issues. Several items are under discussion, including ecolabeling programs; the relationship between multilateral environmental agreements and the WTO; and the effect of environmental measures on market access, particularly in relation to developing countries.
Ecolabeling programs have received a great deal of attention by the Committee. Some members believe these programs act as trade barriers, and members have not reached an agreement about whether or not ecolabeling programs need greater transparency. USTR firmly believes that all forms of ecolabeling are subject to the WTO’s Technical Barriers to Trade (TBT) Agreement, which requires transparency and public participation when applying product standards. Other members, however, have expressed doubts about whether all ecolabeling programs are covered by the TBT agreement. USTR anticipates the WTO Committee will need to discuss this and other issues after Singapore.

		Trade and Investment Rules

specific service sectors, including business services and construction and engineering services.
Countries are debating in which forums to pursue further liberalization in investment. Therefore, any Singapore proposals to establish a work program for WTO on investment issues will have to take into account negotiations in other forums. Most notable is the OECD, whose members are working to establish a Multilateral Agreement on Investment in 1997 that would be open to both OECD and non-OECD members. Nevertheless, the EU and Canada favor discussing investment rules in the WTO because its membership is larger than the OECD. There is a wide divergence of views among other members; some lesser-developed members oppose negotiations in the WTO, according to USTR. On the other hand, the United States and other nations would like to continue focusing on the OECD negotiations rather than negotiating in the WTO, believing that (1) the OECD has the potential to achieve a higher standard of liberalization (that is, on a par with NAFTA and U.S. bilateral investment treaties) than the WTO could and (2) some WTO members are not ready for such an agreement. Still, the United States supports creating a modest work program to educate WTO members on these issues.

		Trade and Competition Policy

National competition or antitrust policies of other countries can affect opportunities and benefits for U.S. exporters and consumers. For example, price-fixing, market sharing, and other monopolistic business practices have been recognized as potential trade barriers. By distorting market competition, these practices can diminish market access opportunities, consumer choices, and other intended benefits of liberalized trade. Anticompetitive practices can also lead to trade disputes. For example, the United States has initiated two WTO dispute settlement proceedings against Japan in cases involving photographic films and paper and distribution services. before determining whether any sort of negotiating program in the WTO is appropriate. USTR has emphasized that the United States will not accept any initiative in the WTO that would threaten U.S. antitrust or antidumping laws. The United States has participated in creating guidelines and in undertaking studies of competition policy issues at the OECD, along with Japan and EU member states.

		Trade and Labor Standards

WTO members are currently considering the role of labor standards in the international trade regime. The desire to link international trade and labor issues is not new, but labor issues have been the province of the International Labor Organization (ILO), a specialized agency of the United Nations created in 1919. ILO, whose purpose is to improve working conditions and living standards for workers throughout the world, provides a forum for consideration of various labor issues including the establishment of core labor standards, which currently vary from country to country.
At the conclusion of the Uruguay Round negotiations, several members, most notably the United States and some members of the EU, proposed that labor issues be formally brought into the world trading system. However, other WTO member countries in both the developed and the developing world have been concerned that mandated international labor standards may either inhibit their economic development or act as protectionist barriers to their exports. The United States, based on a provision of the Uruguay Round Agreements Act, recommended that the WTO establish a working party to examine the relationship between trade and internationally recognized worker rights. The U.S. proposal does not envision negotiations but seeks to begin discussions limited to how core labor standards and trade can be mutually supportive in promoting growth and development. Thus far, no consensus currently exists either on bringing labor issues into the WTO, or on developing potential linkages between the WTO and ILO, a possible first step.

		Trade and Bribery and Corruption

transparency in government procurement. Bribery and corruption increase the cost and risk of conducting business in foreign countries. The difference in the way that U.S. and foreign laws treat these activities can also reduce U.S. companies’ access to foreign markets. For example, U.S. legislation passed in 1977 prohibits U.S. companies from engaging in bribery of foreign public officials. In contrast, some other countries do not have criminal penalties for engaging in the bribery of foreign public officials, and in some countries businesses are allowed to take tax deductions for bribery expenses. Other multilateral organizations have already taken steps to address bribery and corruption, with U.S. encouragement. For example, OECD members have agreed to criminalize the acceptance and payment of bribes. Members of the Organization of American States have entered into a treaty that would make this conduct criminal. The OECD has also recommended that member countries eliminate tax deductions for the payment of bribes. The Association of Southeast Asian Nations foreign ministers in a recent forum on the WTO agenda rejected the U.S. proposal to include corruption and other “social clauses” that they did not consider trade related.
The United States is promoting efforts to reduce bribery by foreign companies and government officials by encouraging WTO members to sign the Agreement on Government Procurement. To date, only 22 industrialized countries, including the United States, have done so; and none of the least developed countries are signatories. The provisions of the new agreement, which went into effect in 20 countries on January 1, 1996, promote transparency in government procurement procedures and require that countries not discriminate against foreign or foreign-owned suppliers or otherwise allow practices that would preclude competitive procurement.

	Accession of New Members

negotiations with individual WTO members over tariff and market access commitments. After these negotiations are concluded, the working party submits a Protocol of Accession and a report to the Ministerial Conference for approval. Accession is approved by a two-thirds majority vote of WTO members.
The United States expects the Singapore ministerial meeting to address the broad range of accession applications—rather than single out any particular application for attention. USTR reports there are 31 countries whose applications for accession have been accepted; active negotiations are under way on about 20 of them. Four nations have completed accession negotiations since the WTO entered into force.
The United States supports accession of countries capable of and willing to (1) undertake WTO obligations and (2) provide commercially viable market access commitments for goods and services to the WTO. The United States also uses the negotiations to address outstanding bilateral trade issues covered by the WTO. For example, USTR reports that Taiwan has made significant concessions in its bilateral negotiations with the United States over market access, services, and government procurement. Nevertheless, significant issues remain outstanding.
The accession of China to the WTO is an issue of intense U.S. interest. China gained observer status to the GATT in 1982 and requested accession to the GATT in 1986. The United States and other nations have insisted that China’s accession be approved on the basis of China’s willingness to make commercially viable commitments that provide greatly expanded market access and ensure compliance with WTO obligations. U.S.-China bilateral negotiations are ongoing, and a WTO working party meeting on China’s accession is scheduled for October 1996.
This concludes my statement for the record. Thank you for permitting me to provide you with this information.
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Output:
Why GAO Did This Study

GAO discussed the implementation of the Uruguay Round agreements and the World Trade Organization's (WTO) operations in the context of the upcoming Singapore ministerial meeting.

What GAO Found

GAO noted that: (1) implementation of the Uruguay Round agreements is complex, and the Singapore meeting will provide WTO member countries with the opportunity to take stock of their implementation efforts; (2) limitations and variations in the amount of information reported by member countries has made it difficult for WTO committees and working groups to oversee implementation of the agreements and a new dispute settlement mechanism; (3) implementation of the WTO Agreement on Textiles and Clothing has been a major area of contention between exporting and importing countries; (4) the United States has many concerns regarding the implementation of commitments to liberalize agricultural trade, and has indicated that it will propose further agricultural reform negotiations; (5) it is not clear whether efforts to liberalize trade in the services sector will be successful, since WTO member countries have been unable to reach final agreements covering some sectors; and (6) it is expected that WTO members will begin work on the next generation of trade issues in such areas as environmental protection, investment rules, competition policy, labor standards, and bribery and corruption at the Singapore meeting.


Input:
	The ALMRS/ Modernization: A Brief History

During the energy boom of the early 1980s, BLM found that it could not  handle the case processing workload associated with a growing number of  applications for oil and gas leases.  The bureau recognized that to keep up  with increased demand, it needed to automate its manual records and case  processing activities.  Therefore, in the mid-1980s, it began planning to  acquire an automated land and mineral case processing system.  At that  time, BLM estimated that the life-cycle cost of such a system would be  about $240 million.
In 1988 BLM expanded the scope of the system to include a land  information system (LIS).  The expanded system was to provide automated  information systems and geographic information systems technology  capabilities to support other land management functions, such as land use  and resource planning.  BLM combined the LIS with a project to modernize  the bureau's computer and telecommunications equipment, and estimated  the total life-cycle cost of this combined project to be $880 million.
The project was reduced in scope in 1989 to respond to concern about the  high cost and named the ALMRS/Modernization.  The project consisted of  three major components—the ALMRS IOC, a geographic coordinate  database, and the modernization of BLM's computer and  telecommunications infrastructure and rehost of selected management and  administrative systems.  Estimated life-cycle costs were $575 million (later  reduced to $403 million), and BLM planned to complete the entire project  by the end of fiscal year 1996.
The ALMRS IOC was to be the flagship of the ALMRS/Modernization, and  was to replace various manual and ad hoc automated systems.  The bureau  designated the ALMRS IOC a critical system for (1) automating land and  mineral records, (2) supporting case processing activities, including leasing  oil and gas reserves and recording valid mining claims, and (3) providing  information for land and resource management activities, including timber  sales and grazing leases.  The system was expected to more efficiently  record, maintain, and retrieve land description, ownership, and use  information to support BLM, other federal programs, and interested  parties.  It was to do this by using the new computer and  telecommunications equipment that was deployed throughout the bureau,  integrating multiple databases into a single geographically referenced  database, shortening the time to complete case processing activities, and  automating costly manual records.
Despite the promise of ALMRS IOC to significantly improve business  operations, repeated problems with its development have prevented  deployment.  For example, during a user evaluation test in May 1996,  problems were reported involving unacceptably slow system performance.   Subsequent testing in 1996 uncovered 204 high-priority software problems,  which delayed project completion by about a year.  In testing conducted in  November 1997, BLM encountered workstation failures and slowdowns  caused by insufficient workstation memory and by problems discovered in  two BLM-developed software applications.  Some of these problems had  been identified in earlier tests but had not been corrected.  Additional  testing uncovered software errors that resulted in missing, incorrect, and  incomplete data, and error files that contained accurate data.  As a result of  these problems, BLM postponed the Operational Assessment Test and  Evaluation (OAT&E) that had been scheduled for December 1997.  The  OAT&E was to determine whether ALMRS IOC was ready to be deployed to  the first state office.
In October 1998, the OAT&E was conducted and showed that ALMRS IOC  was not ready to be deployed because it did not meet requirements.  During  the test, users reported several problems, including that ALMRS IOC (1) did  not support BLM’s business activities, (2) was too complex, and (3) significantly impeded worker productivity.  For example, one tester  reported that entering data for a $10 sale of a commodity, such as gravel,  required an hour of data entry using ALMRS IOC, whereas with the existing  system, the same transaction would have taken about 10 minutes.  Users  also reported that system response time problems were severe or  catastrophic at all test sites.  One user said “It is ridiculous to spend 2 or 3  hours to enter information in this system, when it takes 30 minutes to an  hour to process the information into the legacy system.”  Finally, users  reported data converted from legacy databases were not accurate, and that  validation of the converted legacy data required inordinate effort and time.
Because these problems are significant, senior BLM officials have decided  that ALMRS IOC is not currently deployable.  According to BLM, it  obligated about $411 million on the ALMRS/Modernization project between  fiscal years 1983 and 1998, of which more than $67 million was spent to  develop ALMRS IOC software.  The $67 million does not include ALMRS  IOC costs that are part of other cost categories, such as costs for work  performed from fiscal years 1983 through 1988, project management,  computer and telecommunications hardware and software, data  management, and systems operation and maintenance.  The reported  obligations associated with the major cost categories of the ALMRS/ Modernization are summarized in table 1.
Senior BLM officials told us that although ALMRS IOC is not currently  deployable, BLM has benefited from the ALMRS/Modernization work.  BLM  has deployed about 6,000 workstations throughout the bureau, provided  office automation capabilities, and implemented a national  telecommunications network with electronic mail and internet access,  which has enhanced communications and enabled BLM to communicate  with other federal agencies.  BLM’s view of the benefits received, however,  does not reflect the fact that it has not realized the significant business- related benefits and improvements ALMRS IOC was to provide.

	Our Reviews Have Shown Long-Standing Project Weaknesses

Mr. Chairman, since May 1995 we have reported many problems and risks  that threatened the successful development and deployment of the ALMRS/ Modernization.  Our reports have discussed these issues, their causes, and  our recommended corrective actions.  BLM has been slow to implement  some of our recommendations and has not yet fully implemented others.   Following is a summary of the problems, causes, and associated  recommendations we have reported.
BLM did not develop a system architecture or formulate a concept of  operations before designing and developing the ALMRS/Modernization.   A system architecture describes the components of a system, their  interrelationships, and principles and guidelines governing their design  and evolution.  A concept of operations describes how an organization  would use planned information technology to perform its business  operations and accomplish its missions.  Designing and developing the  project without a system architecture and concept of operations  unnecessarily increased the risk that the ALMRS/Modernization would  not meet the business and information needs of the bureau.
BLM has never had a credible project schedule, reliable milestones, or a  critical path to manage the development and deployment of the ALMRS/ Modernization.  As a result, BLM has not known with any certainty how  long it would take and, therefore, how much it would cost to complete  the ALMRS/Modernization.  Because BLM has not implemented our  recommendation to establish a credible project schedule, the ALMRS/ Modernization has been driven by self-imposed deadlines.  In trying to  meet those deadlines, BLM has deferred some tasks until after  completion of the project, and has not corrected all problems when it  found them because doing so would cause it to miss the self-imposed  project deadlines.
BLM faced serious risks because it had not established a robust  configuration management program for the ALMRS/Modernization.   Configuration management is essential to controlling the composition of  and changes to computer and network systems components and  documentation.  The lack of configuration management increased the  risks that system modifications could lead to undesirable consequences,  such as causing system failures, endangering system integrity,  increasing security risks, and degrading system performance.  In  response to our recommendation, BLM later developed a configuration  management plan and related policies and procedures for the ALMRS/ Modernization.  We planned to review field office implementation of the  configuration management program after completion of the ALMRS  IOC; however, we have not done so because the system was not  deployed.
BLM incurred serious risks because it had not established a security  plan or security architecture for the ALMRS/Modernization.  The lack of  such security controls increased risks to the confidentiality, integrity,  and availability of stored and processed data.  BLM recently completed  work in response to our recommendation.  It performed a risk analysis,  developed a system security plan and architecture, identified  management and operational controls, and developed disaster and  recovery plan procedures.  As with configuration management, we  planned to review field office implementation of the security program  after completion of the ALMRS IOC, but have not done so because the  system was not deployed.
BLM invited serious risks because it had not established transition plans  to guide the incorporation of ALMRS IOC into its daily operations.   Deploying a major information system that people will use to do their  jobs requires careful planning to avoid business and operational  problems.  Without transition plans, BLM increased the risk that using  ALMRS IOC would disrupt, rather than facilitate, its work processes and  ability to conduct land and mineral management business.  In response  to our recommendation, BLM developed transition plans; however, the  plans were not adequate.  They did not outline needed changes in  organizational roles, responsibilities, and interrelationships, or address  issues such as how state and subordinate offices would deal with oil and  gas, mining, and solid mineral business process changes that would  result from implementing ALMRS IOC.
BLM faced serious risks because it had not established operations and  maintenance plans.  The lack of plans increased the risk that the bureau  would not meet its automation objectives or the daily needs of its  offices.  BLM developed operations and maintenance plans in response  to our recommendation.  We expected to review field office  implementation of the operations and maintenance plans after  completion of the ALMRS IOC; however, we have not done so because  the system was not deployed.
BLM invited serious risks because it planned to stress test only the  ALMRS IOC component—state and district offices, ALMRS IOC servers,  terminals, and workstations. This increased the risk that BLM would  deploy the ALMRS IOC nationwide without knowing whether the  ALMRS/Modernization—ALMRS IOC, office automation, e-mail,  administrative systems, and various departmental, state, and district  software applications in a networked environment—would perform as  intended during peak workloads.  BLM agreed to fully stress test the  entire ALMRS/Modernization before deploying the ALMRS IOC  component throughout the bureau.
BLM did not develop a Year 2000 contingency plan to ensure that critical  legacy systems could operate after January 1, 2000, if the ALMRS IOC  could not be delivered in 1999.  We recommended that BLM develop a  Year 2000 contingency plan to ensure continued use of those critical  legacy systems ALMRS IOC was to replace.  BLM implemented this  recommendation and began executing the plan in 1998, when it became  clear that ALMRS IOC would not be fully implemented by the end of  1999.

	Where BLM Should Go From Here

At this point, BLM has made an enormous investment in software that does  not meet its business needs.  At the same time, it has not adopted  information technology management practices required by recent  legislation or suggested by industry best practices.  Because of its large  investment, BLM should analyze ALMRS IOC to determine whether the  software can be cost-beneficially modified to meet the bureau’s needs.  In  addition, to reduce the risk that future information technology efforts will  result in a similar outcome, BLM should assess its investment management  practices and its systems acquisition capabilities.  Until these assessments  and subsequent improvement actions are taken, BLM will not be  adequately prepared to undertake any sizable system acquisition.

		Analysis of ALMRS IOC Software Is Needed

We believe that since BLM has invested over $67 million to develop the  ALMRS IOC software, the bureau should thoroughly analyze the software  to determine whether it can be modified to meet users’ needs and at what  cost.  This analysis should be part of an overall effort to identify and assess  all viable alternatives, including (1) using or modifying ALMRS IOC  software, (2) modifying or evolving existing land and recordation systems,  (3) acquiring commercial, off-the-shelf software, or (4) developing new  systems.  The alternative analysis should clearly identify the risks, costs,  and benefits of each alternative, and should be performed only after BLM is  assured that it has fully verified its current business requirements.  In this  regard, senior BLM officials said they are performing an analysis to  determine where ALMRS IOC failed to meet users’ expectations and critical  business requirements.

		Assessment of BLM’s Information Technology Investment Management Practices Is Needed

According to the acting land and resources information systems program  manager, BLM is beginning to develop plans for future information  technology modernization.  These plans are to identify alternatives to  deploying ALMRS IOC, and evaluate those alternatives based on cost,  functionality, and return on investment.  BLM also plans to document its  current and planned business processes and systems architectures as part  of this effort.
While such planning is necessary, BLM also needs to assess its investment  management practices to help avoid future problems.  The Clinger-Cohen  Act of 1996 seeks to maximize the return on investments in information  systems by requiring agencies to institute sound capital investment  decision-making.  Under the act, agencies must design and implement a  process for maximizing the value and assessing and managing the risks of  information technology acquisitions.
An information technology investment process is an integrated approach  that provides for data-driven selection, control, and evaluation of  information technology investments.  The investment process is  comprised of three phases.  The first phase involves selecting investments  using quantitative and qualitative criteria for comparing and setting  priorities for information technology projects.  The second phase includes  monitoring and controlling selected projects through progress reviews at  key milestones to compare the expected costs, risks encountered, and  performance benefits realized to date.  These progress reviews are  essential for senior managers to decide whether to continue, accelerate,  modify, or terminate a selected project.  The third phase involves a  postimplementation review or evaluation of fully implemented projects to  compare actuals against estimates, assess performance, and identify areas  where future decision-making can be improved.
According to senior BLM officials, the bureau has established an  Information Technology Investment Board to provide support for its capital  planning processes.  It intends to apply more rigorous, structured  processes to analyze its information technology investments and select,  control, and evaluate information technology investment alternatives.   Until such processes are fully in place, the bureau cannot be assured that  future investments will be properly selected, managed, and evaluated using  sound investment criteria to provide effective support for the bureau’s  mission and goals.
Further, to ensure that information technology investment processes are  carried out adequately, the Clinger-Cohen Act also requires agencies to  assess the knowledge and skills of its executive and management staff to  meet agencies’ information resources management requirements, and to  take steps to rectify any deficiencies.  The Software Engineering Institute  (SEI) has identified the need for organizations to focus on information  resources management capabilities.  Organizations should improve their  capabilities using a process to characterize the maturity of their workforce  practices, guide a program of workforce development, set priorities for  immediate actions, and establish a culture of software engineering  excellence.
According to senior BLM officials, the bureau examined the kind of skills  that its field office computer specialists had, and identified the skills they  would need.  However, the officials recognize that this was not the same as  the more comprehensive assessment suggested by SEI.  Such assessments  are needed to better identify and manage information technology  investments.  Consequently, the bureau should evaluate and, where needed,  enhance the knowledge and skills of its staff to help ensure that the  investment management processes it puts in place can be effectively  carried out by its information resources management organization.
Finally, the Clinger-Cohen Act requires agencies to develop, maintain, and  facilitate the implementation of a sound and integrated information  technology architecture.  An information technology architecture provides  a comprehensive blueprint that systematically details the breadth and  depth of an organization’s mission-based mode of operation.  An  architecture provides details first in logical terms, such as defining  business functions, providing high-level descriptions of information  systems and their interrelationships, and specifying information flows; and  second in technical terms, such as specifying hardware, software, data,  communications, security, and performance characteristics.  By enforcing  an information technology architecture to guide and constrain a  modernization program, an agency can preclude inconsistent systems  design and development decisions, and the resulting suboptimal  performance and excess cost.
As I discussed earlier, BLM did not develop a system architecture before  designing and developing the ALMRS/Modernization.  This is a key reason  why ALMRS IOC did not meet the bureau’s business needs.  BLM still has  not developed an architecture that documents its business processes and  the technology and systems that support them.  BLM needs to develop an  information technology architecture to guide its future investment plans.

		BLM Needs to Assess Its Systems Acquisition Capabilities

Research by SEI has shown that defined and repeatable processes for  managing software acquisition are critical to an organization’s ability to  consistently deliver high-quality information systems on time and within  budget.  These critical management processes include project planning,  requirements management, software project tracking and oversight,  software quality assurance, software configuration management, and  change control management.   To assist organizations in evaluating and  enhancing systems acquisition capabilities and processes, SEI has  developed models for conducting software process assessments and  software capability evaluations to determine the state of their capabilities  and identify areas requiring improvement.
BLM also needs an independent assessment of its systems acquisition  capabilities, and must ensure that it uses sound systems acquisition  processes.  As I discussed earlier, BLM did not develop several key  management controls for the ALMRS/Modernization.  BLM did not develop  a credible project schedule or develop adequate transition plans.  In  addition, the lack of a configuration management program, security plan  and architecture, and operations and maintenance plans further increased  BLM’s risks.  These problems indicate the need for BLM to ensure that the  deficiencies in its systems acquisition capabilities and processes are  acknowledged and corrected.  Until such assessments are completed and  corrective action taken, BLM should not undertake any sizable systems  acquisition or development efforts.
Mr. Chairman, that concludes my statement.  I would be happy to respond  to any questions that you or other members of the Subcommittee may have  at this time.
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Output:
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Bureau of Land Management's (BLM) Automated Land and Mineral Record System project, also known as the ALMRS/Modernization, focusing on: (1) the history of the project; (2) the results of GAO's reviews, including the key reasons for problems; and (3) where GAO believes BLM should go from here.

What GAO Found

GAO noted that: (1) BLM spent over 15 years and estimates that it invested about $411 million planning and developing the ALMRS/Modernization, only to have the major software component--known as the ALMRS Initial Operating Capacity (IOC)--fail; (2) as a result of that failure, the bureau decided not to deploy ALMRS IOC at this time; (3) GAO has previously reported on the significant problems and risks that BLM has encountered; (4) GAO has made many recommendations to reduce those risks; however, BLM has been slow to implement some recommendations and has not yet fully implemented others; (5) BLM now needs to determine whether it can salvage any of the more than $67-million reported investment in ALMRS IOC software, by analyzing the software to determine if it can be cost-beneficially modified to meet BLM's needs; and (6) in addition, to reduce the risk that future efforts will result in similar failures, BLM should assess its information technology investment practices and systems acquisition capabilities.