Statement for the Record by Frank E. Loy
Under Secretary of State — designate for Global Affairs
before the Committee on Foreign Relations
U.S. Senate

October 2, 1998

Mr. Chairman and Members of the Committee:

I am pleased to have the opportunity of meeting with you today. I know this is a busy time of year, and I want to thank you, Mr. Chairman and the Members of the Committee for finding the time to hold this hearing. May I take this opportunity to introduce some of my family who are here today: my wife, Dale Haven Loy, a painter; my son Eric, who lives and works in Hollywood; my daughter, Lisel, who works for the Counselor to the Secretary of the Interior; and my son-in-law, Martin Moe, who practices law with Skadden Arps.

First, I want to express my appreciation to the President for nominating me to this important position, and to the Secretary of State for her support and for many years of friendship.

I have had a rather varied career -- in law and business; in government; and in the world of foundations and non-profit organizations. These experiences have proved, fortuitously, an excellent preparation for the Office of the Under Secretary for Global Affairs. Therefore, let me just spell out a bit of my background.

I was born in Germany and lived there and in Switzerland and Italy until I came to the United States at the age of 10. After graduating from UCLA and then the Harvard Law School, I served 21 months in the US Army.

The law and business phase of my career began at this point when I joined the Los Angeles firm of O’Melveny & Myers, practicing corporate and corporate finance law. This proved useful in my business career, which started with a four year stint as Senior Vice President for International Affairs of Pan American Airways. I left Pan Am to manage with some colleagues, under a contract, the extensive non-railroad businesses of the Penn Central Transportation Company, which had entered bankruptcy several years earlier. My job was to build up the businesses so that they could form the core of a new company that would emerge from bankruptcy under acceptable terms. That effort was successful, and in 1978 a new New York State Exchange-listed company was born. I served for about a year as the President of this new entity.

My career in government comes in three parts. Early on, I served as Special Assistant to the Administrator of the Federal Aviation Administration and, I should add, organized and headed its first economic analysis planning shop. Some years later I entered the State Department for the first time, serving as Deputy Assistant Secretary for Economic Affairs. Most of my responsibilities involved setting policy and negotiating international agreements in the areas of aviation, shipping and telecommunications.

In late 1979 I returned to the State Department at the request of Deputy Secretary Warren Christopher to head what was then the Bureau of Refugee Programs. This was a small bureau struggling to manage a particularly large budget made necessary by two rapidly expanding programs: worldwide refugee assistance and refugee admissions. The skills I had honed in managing large and complex enterprises proved critical in guiding the Bureau through this expansion.

My association with the non-profit world started in 1981 when I became President of the German Marshall Fund of the United States, an American foundation focusing on Europe and the US, largely in the fields of politics, economics and the environment. During my tenure we launched several new entities and programs, including the Institute of International Economics and the Congressional Study Group on Germany.

With the fall of the Berlin Wall in 1989 our program changed dramatically, as we were then able to participate in the conversion of former communist countries of Eastern Europe to democratic regimes and to market-based economies.

During this period I also intensified my association with a number of non-profit organizations whose interests and philosophy I shared. I joined the board of the Environmental Defense Fund because it was interested in assessing the economic implications of various environmental programs, and was willing and anxious to work with the business community and other parts of American society. I served as chairman of its board from 1983 to 1990. In that period the organization developed and launched what was called the "third wave of environmentalism," i.e., solving environmental problems by relying on economic incentives and market-based mechanisms.

I also became a member of the boards of directors of other environmental organizations such as the Regional Environmental Center for Central and Eastern Europe, headquartered in Budapest, the League of Conservation Voters, and Resources for the Future. In addition I have been active as chairman of The Foundation for a Civil Society, a non-profit organization that seeks to develop the civil institutions required by countries in the former Eastern Europe transitioning from communism to democracy.

Now let me turn to my vision of the position of Under Secretary for Global Affairs.

We live today in a world in which our interests can no longer be defined solely by the quality of our relations with particular countries or regions. The globalization of the world economy, the increased mobility of people and our ability to witness events in far off places via the Internet and CNN have all contributed to a change in the way we see problems and the way we respond to them.

I am excited about the challenge of assuming the Office of the Under Secretary for Global Affairs -- if I am confirmed -- because it offers an opportunity to make a real difference in the day-to-day lives of the American people. Let me provide a few illustrations -- issues on which, if confirmed, I pledge to work with you.

1.  First, promotion of the Rule of Law is assuming an increasingly more important role in US foreign policy, as countries move -- at times with assistance from the US -- toward more open and democratic societies.

The Rule of Law concept involves everything from ensuring the sanctity of free and fair elections, to advising police and militaries on how they need to operate democratic societies, to promoting civil and judicial codes that provide the predictability and fairness US companies need to expand their investments and operations overseas.

I should note that an important element of the Administration’s promotion of democracy abroad is the promotion of women’s rights, and particularly women’s participation in the political arena, and elimination of violence against women.

2.  Second, I share whole-heartedly your commitment to reduce the flow of illegal narcotics into the United States and to curb the power of international criminal and money laundering cartels that are associated with trafficking and with terrorism worldwide. These activities destroy societies from within by damaging the health of their citizens and undermining their faith in institutions. Criminal activities that exploit the weaknesses of societies in transition threaten their fragile progress toward democracy. Societies forced constantly to defend themselves from criminal enterprise are incapable of marshaling the energy to build strong economic institutions.

3.  Third, recent events in Kosovo, Sierra Leone, and Central Africa, remind us of the problems and human suffering involved in large-scale migration and large numbers of refugees. The Congress has been exceptionally generous in maintaining a sizable budget to help the United States deal with these issues largely through international agencies and a variety of non-governmental organizations. If confirmed, I want to broaden and strengthen particularly our collaboration with non-government organizations, this private-public partnership.

4.  Fourth, I view the tasks of protecting our oceans and our environment as a critical national interest. Recently, discussion on this issue has centered heavily on efforts to combat global climate change. I know that there is controversy about how to tackle these tasks. I am certain that, if confirmed, we will have plenty of opportunities to review together the best way to deal with this problem.

But in broader terms, I suspect there is considerable agreement among us that we owe it to ourselves and our children to find ways in which humankind -- in increasingly large numbers -- can achieve higher standards of living without despoiling the very systems upon which our life and wealth depend -- our water, our air, our soil, and the diversity of life. I think we can accomplish that if we go about it in a smart way: by spurring technological innovation, by harnessing the power of economic incentives, and -- when problems are beyond our control -- by appropriate, thoughtful international cooperation.

Mr. Chairman, Members of the Committee, thank you again for holding this hearing and for providing me an opportunity to tell you something about my background and my qualifications for this very important position. If I am confirmed I look forward to a close working relationship with the Committee.

I would be happy to respond to any questions you have.