The help that hurts.

• Author: Cohen, Andrew
• Position: U.S. Agency for International Development - Clinton Doctrine - Cover Story

The United States Agency for International Development administers billions of dollars of U.S. foreign aid, but it's better known for its scandals. U.S. AID officials were accused of running guns to the contras in the late 1980s, and under the Reagan and Bush Administrations, AID misled Congress about its expenditures and managed to misplace millions of dollars. During the 1992 Presidential campaign, however, Bill Clinton promised to "redirect and reorganize" AID, and right after the election, the agency readied itself for a radical change.

The scandal that finally prompted Clinton's reform promise concerned an AID "development" initiative that began in 1980 and continued through the Bush Administration. AID was encouraging American companies to move their operations to low-wage "export-processing" zones that it helped set up in Central America and the Caribbean Basin. "Rosa Martinez produces apparel for U.S. markets on her sewing machine in El Salvador," ran an ad financed by AID. "You can hire her for thirty-three cents an hour."

When reporters for 60 Minutes showed up in El Salvador posing as executives of a fake clothing company called New Age Textiles, U.S. officials offered further benefits. John Sullivan, the deputy director of AID's trade and investment office in El Salvador, promised the agency would split the cost of technical assistance and worker training for New Age Textiles. Sullivan also warned against "leftist groups ... trying to promote labor unions," but assured the bogus manufacturers that AID could provide a blacklist. "There are certain names that we know that you probably will not want to hire," Sullivan said.

Within two weeks of the 60 Minutes report, both houses of Congress had passed bills forbidding AID from financing export-assembly plants, maintaining blacklists, or luring American companies abroad. For their part, Bill Clinton and Al Gore began making an issue of U.S. foreign-aid policy at every campaign stop. They filmed an ad in Decaturville, Tennessee, where 650 people were put out of work when Decaturville Sportswear moved to El Salvador on the taxpayers' tab.

After the election, Secretary of State Warren Christopher promised to fulfill the President's mandate to "overhaul" AID. That overhaul has taken two directions.

One is to narrow AID's administrative focus. In late November, AID chief J. Brian Atwood announced plans to close twenty-one foreign-aid missions: It would be the first time since Harry Truman launched the...