United States Treasury officials got something of a shock last week. The Foreign Operations Subcommittee of the House Appropriations Committee voted to knock out any funds for multilateral development banks. In other words, zilch for the World Bank, zero for the Inter-American Development Bank, zip for the Asian Development Bank.
The international repercussions of such action, if not reversed, would be enormous. Condemnation would rain on Washington from both the industrial and developing nations. The United States would be accused of irresponsibility, of failing to live up to its international promises and duties. Some might liken such a move to the US pullout from the League of Nations after World War I, an event that in some degree sabotaged the creation of more peaceful and constructive conditions in the world.
Fortunately, the funds are likely to be restored in full committee May 16. Rep. Jack Kemp (R) of New York, who sponsored the amendment to remove the $237 million in supplemental funds for the three institutions, is talking to Treasury officials about his charge that the banks do not take sufficient account of supply-side economics in setting conditions for loans.
``Negotiations are going along very well,'' a Kemp aide said. A Treasury official agreed: ``We are making some progress.''
A World Bank lobbyist sounded more concerned about the restoration of the funds. ``I am not quite so sure,'' he said.
Whatever, the incident illustrates how voting on appropriations for the multilateral institutions, including the International Monetary Fund as well as the development banks, has become badly mixed up in domestic politics in the last two or three years.
The loans made by the banks add up to large amounts. The World Bank alone disbursed almost $12 billion in its fiscal 1984. Many corporations in the industrial world (as well, of course, as the developing countries) benefit from the bank loans.
The Kemp amendment, according to an aide, was intended to remind the Treasury that its representatives in the multilateral institutions should fight more aggressively for conditions on loans that encourage the supply of goods and services. For example, they should object to extremely high tax rates or to a failure to provide adequate prices for farmers, he said.
Another advantage of the amendment, the Kemp aide said, was that it separated the multilateral money from extra foreign aid for Israel, also in the supplemental appropriation. Thus the aid for Israel could be pushed through rapidly even if the rest of the appropriations bill was delayed by ``Christmas-tree amendments'' on the Senate floor or in some other way.
Mr. Kemp had support from three other Republicans on the subcommittee -- Mickey Edwards of Oklahoma, Jerry Lewis of California, and John Edward Porter of Illinois. Mr. Lewis was especially concerned that the Inter-American Development Bank might make a $58 million agricultural loan in Nicaragua. The only Republican to vote in favor of the Reagan administration proposal for the multilaterals was Rep. Silvio O. Conte, ranking member of the Appropriations Committee.
The amendment raised the ire of Rep. David R. Obey (D) of Wisconsin, chairman of the subcommittee. Because the Republicans voted against the money for the banks, he turned his thumbs down on the money also.
``When the administration gets its act together on its own side of the aisle, it can come to see me about future appropriations for the banks,'' Mr. Obey said. ``But unless and until it does, funding for the banks is dead in both the supplemental and the regular fiscal-year 1986 appropriation bill, as far as I'm concerned.''
Obey and his fellow Democrats are especially sensitive about voting funds for the multilateral institutions because of an incident at election time last year. On urging of the Reagan administration, they had supported a major increase in quotas for the International Monetary Fund. To their horror, the Republican Congressional Campaign Committee attacked them in a campaign letter for ``supporting communist dictatorships'' through the loans made by the multilateral institutions.
The White House denied having even any advance knowledge of the committee's political move. But the Democrats felt betrayed. ``It was a little unfair,'' a Treasury official admitted.
Further, Democratic congressmen, faced with cutting domestic programs, are in no mood to be accused of being big spenders on the multilateral institutions. Foreign aid does not win votes, as a rule. Thus the Democrats want plenty of Republican company in voting the supplemental appropriations.
The United States is already delinquent in its contributions to the development banks.
Obey termed it ``incredible'' that the Republican subcommittee members were voting to renege on existing US international commitments made while top White House and Treasury officials were at the Bonn economic summit, talking about new international commitments.
Meanwhile, embarrassed Treasury officials are trying to assure Kemp and his Republican colleagues that they will be tough about promoting free-enterprise, supply-side measures in the banks. And Kemp, perhaps surprised by the Obey maneuver, is moving fast to reach a deal with the Treasury.