Rightsizing the relationship between the State Department and USAID

The relationship between the Department of State and the U.S. Agency for International Development is central to the United States achieving its foreign policy and development objectives. Yet it is fraught with tension over jurisdiction, although mostly in Washington rather than abroad.

As Mike Pompeo takes the helm of the State Department, the new secretary and USAID Administrator Mark Green have the opportunity to right size the relationship.

Distinct disciplines between USAID and State

The core of the problem is the lack of agreement on the respective roles of the two agencies. The differences are stark at a conceptual level, but clouded when confronting practical decisionmaking involving influence and power.

The core function of Department of State is diplomacy, which involves making U.S. foreign policy and influencing the policy of other nations. The skills valued for a diplomat are negotiating, analyzing policies, and understanding the history, culture, and political dynamics of a certain country. Diplomacy is driven by short-term crises and relations but also seeks to promote long-term partnerships and stability. The time and attention of diplomats is spent primarily at the governmental level.

In contrast, the core functions of USAID are development policy and program implementation and facilitating change. Development experts focus on economic and sector specific policies and analysis of how to solve discrete development problems. The skills that are valued are knowledge of how to promote inclusive economic growth, alleviate poverty, and build institutions; program and project management; technical expertise in areas such as education, health, and evaluation; and experience in operating in challenging environments. Those in humanitarian roles deal with the here-and-now—keeping people safe and alive. But the core of development is long-term, how to change policy and behavior that will lead to progress over five, 10, or 25 years. Development practitioners engage with government officials but more frequently work with a range of local individuals and organizations in private and non-profit arenas.

While diplomacy and development are distinct professions with distinct expertise, they have interconnecting objectives requiring close coordination. Conflict arises when there are divergent views on how to prioritize competing objectives, how to accomplish a goal, and who has decisionmaking power.

The history of the State and USAID relationship

In the struggle for control of foreign assistance, there have been epic battles in the history of the State-USAID relationship.

During the Clinton administration, U.S. Senator Jessie Helms tried to merge three agencies into the State Department. He succeeded in folding the U.S. Information Agency and the Arms Control and Disarmament Agency into State. USAID emerged as an independent agency but with a new reporting requirement to the secretary of state instead of the president.

Under the George W. Bush administration, the USAID offices of policy and budget were disbanded and much of the staff and decisionmaking transferred to a new Office of Foreign Assistance Resources (known as F) in the State Department.

During the Obama administration, the Department of State insisted on managing the Haiti earthquake relief effort and the State-USAID strategic review (Quadrennial Diplomacy and Development Review (QDDR)).

In the past year, the relationship may have reached a nadir with State Department delaying funding to USAID field missions, F micromanaging USAID budget and programs, and a collapse in the joint exercise at State-USAID structural redesign.

In fact, this struggle, as related by Benn Steil in his new book The Marshall Plan, has been going on for 70 years, since the launching of the Marshall Plan:

“With respect to the program’s management, conflict erupted early on over the role of the State Department. For Republicans, the notion of Truman’s foreign service bureaucrats remaking European economies was a nonstarter. It meant incompetence, inefficiency, and a reliance on meddling over markets. It would undermine America’s economy as well as Europe’s. In response, the Herter Committee and others came together around the idea of creating a new independent agency, to be run by prominent individuals with business backgrounds, recruited from outside government.”

One exception to this history was in the Reagan administration. As former USAID Administrator Peter McPherson recalls, he regularly attended Secretary of State George Schultz’s staff meeting; when the secretary would request USAID assistance, often before a formal request, McPherson would do his best to comply. But the secretary would take “no” for an answer if USAID determined assistance was not appropriate or relevant to the situation. And State offices did not often make efforts to reverse assistance decisions.

A fresh start

With the departure of Rex Tillerson, Secretary-designate Mike Pompeo and USAID Administrator Mark Green have the opportunity to start afresh. Pompeo is known as someone who understands how complicated and fraught the world is, asks hard questions, values facts and data, and is an experienced manager who delegates—all music to a developmentalist’s ear. Green has served as politician, diplomat, development leader, and works adroitly with a range of individuals and circumstances. He is someone who appreciates and understands both diplomatic and development imperatives and can sort through the challenges of each.

What better combination to establish the frame that U.S. foreign policy interests require the Department of State to have as its ally a strong, accountable, effective development agency that can be achieved only if USAID has full responsibility for its programs.

How to improve the State-USAID relationship

While the tone and nature of the relationship between the two agencies will be driven for the next few years by the example set by their leaders, several institutional changes would facilitate the relationship and establish clearer parameters.

One is to remove the F Bureau from interfering with USAID control of its own budget and programs and instead configure it to add value—serving to coordinate assistance programs within the State Department and as the interlocutor for the proposed USAID Bureau on Policy, Resources, and Performance. Part of this reconfiguration would include rationalizing the overlapping State Department centers of aid coordination—F Bureau, EUR/ACE (Europe), and NEA/AC (Middle East).

The second is to stop meshing the budgets of Development Assistance and the Economic Support Fund by returning to the original purpose of the accounts as established by the Congress in the Foreign Assistance Act. Development Assistance was designed to meet specific development problems. The Economic Support Fund was designed to meet certain foreign policy dynamics when development objectives alone would not justify a certain level of assistance.

The third is to promote better interagency understanding through secondments (staff of one agency serving on assignment in another), as mandated among the military services under the Goldwater-Nichols law.

Those who care about the United States achieving its foreign policy and development objectives—in Congress, executive agencies, and the non-governmental sector—should give Secretary Pompeo and Administrator Green a fair chance to improve the dynamics of the State-USAID relationship. We as a nation need them to get it right and deserve no less.