gress. Our strategy is a 5-year budget, but we come down and tell you what did we achieve in the last year.

Finally, the intelligence and national security committees in particular should be aware that there is a classified annex to the National Drug Strategy. This is the second one we have produced. It is now getting to the point where it is a useful, presidentially approved, NSC-approved document, that gives guidance to our intelligence and overseas activities.

Two charts I will not talk to except to say that the cocaine, and the next chart will be heroin, trafficking organizations are surprisingly well understood. When you look at the drug threat in the abstract, there are 270 million of us, as Americans. Most of us do not use drugs. Unfortunately, around 6 percent of the country, last month, used an illegal drug-13 million people with devastating consequences-consequences that far exceed the annual loss rate in Vietnam or the Gulf War: 14,000 dead a year, $110 billion in damages.

The number one consequence drug at this period in our history is cocaine. About 3.6 million of us are chronically abusing cocaine. Thankfully, the casual use of this drug has come down by 70 percent in the last 10 years.

Having said that, this drug, unlike any other drug threat we face, is principally produced in three places on the face of the Earth: Peru, Bolivia and Colombia. We take photographs of the production. We have an excellent understanding on the process by which the precursor chemicals are moved, the money laundering is done, the drugs are smuggled. We are trying to operate against the system of the drug cartels.

The next chart talks about heroin, a little bit tougher problem. I should have mentioned that cocaine use, like any other drug, the supply grossly exceeded the demand. Probably 650 metric tons of cocaine are produced. Probably we consume about a quarter of it.

On heroin, it is even more complicated. These drugs are, again— there are nine countries that produce significant amounts of heroine. Two of them, Afghanistan and Burma, produce 80 percent or more. Unfortunately, our neighbors, both Mexico and Colombia, produce, even at their modest production levels of about 5.5 tons in Mexico and a little over 5 tons in Colombia, they produce enough to support the entire U.S. heroin demand.

When you look at it, we are using around 11 metric tons. The world produces around 360 metric tons of heroin. I mention that just to underscore the dilemma against operating against supply, and trying to influence rates of drug abuse.

This is an intimidating chart, and purposefully so. I used to be able to say I am the only living person that ever went everywhere there is a map symbol. Now we have sent an interagency committee there. We took 6 months to do it. We have studied this intelligence architecture. We know what communication systems, automation, how this is organized and what their roles and missions are. We are trying to sort out a comprehensive plan, so that the President can send to Congress, by the coming fall, a more coherent way to organize it.

Having said that, Mr. Chairman, I would argue that never in the 10 years that I have been dealing with this issue have we ever been better glued together. So without going through it in detail, the people that I asked to come in and who will be available to your staffs have a pretty good grasp on how this thing is organized. Whether it is the National command structure of FinCEN, National Drug Intelligence Center, the U.S. Interdiction Coordinator, the Tactical Intelligence Center in El Paso, Texas, the Customs Center, the DAICC at Riverside, our joint bodies, Joint Interagency

East and West, Task Force Six, Soto Cano, et cetera, the ROTHR system, the two that are in, the one that is about to go in, we hope, in Puerto Rico, the CINC will talk to his concept for the three forward operating locations, the two that are now under study.

That is the structure. It does talk to its various component parts. It has allowed us to take down about 100 metric tons of cocaine a year, and more than a ton of heroine, along with literally hundreds of thousands of pounds of marijuana. It does not solve the drug problem, but it can markedly diminish the drugs washing around our system.

This is good news. I would not have believed this possible 5 years ago. We have actually diminished the production of cocaine. When I say "we," I am not talking U.S. authorities. This is more a tribute to Peruvian and Bolivian leadership, their air force, their political leadership, their police, their judicial system, but clearly a tremendous contribution by the U.S. Air Force, by the Defense Intelligence Agency, by the CIA, by the Justice Department. But that is reality for the first time in history, we have actually brought down cocaine tonnage.

As background, though, a little more granularity, in Peru, absolutely incredible results-a 56-percent reduction in 3 years. Now, that is as much a credit to President Fujimori's political leadership as it is to the courage of Peruvian police, and also their Air Force and the U.S. intelligence system.

Bolivia, with new President Bonzair's regime, an incredibly brilliant young guy, Vice President Caroga, a new technocrat regime, they are into the Chappare, and they are absolutely changing the way this thing operates. There is a different reward/punishment system, and net coca cultivation has actually decreased dramatically. I believe in the coming year's satellite crop coverage you will see furtherage of this result.

Bad news: Colombia, 36 million people struggling for its survival; 40 percent of the country is now under the control of FARC, the ELN, or the paramilitary forces. Enormous levels of violence, rising levels of drug abuse. A very difficult peace negotiation process. Net coca cultivation is up 100 percent in 3 years. It does not yet make up for the dramatic reductions and the huge capabilities in Peru and Bolivia, but it is moving in that direction. Oh, by the way, from 10 years ago, when there was no opium production, they are now up to being probably, along with Mexican black tar, the principal source for domestic heroine that you will find on the Eastern Seaboard.

This is what we are doing about it. It is not just organization, it is also resources. Congress has been enormously supportive of this effort. There was a huge supplemental that was largely well thought out last year. It gave us another $900 million, but we have put significant new resources into it. That does include in the interdiction and foreign operations account. There has been a significant increase, in particular, for our support of Colombian police, military, alternative economic development, and other accounts.

A final thought. I picked out really six of the challenges that, from my viewpoint as the policy officer of the government, are most troublesome. First of all, this is a major threat to the American people. We did not take these kind of losses in the Gulf War. With

500-some-odd casualties, with $36 billion in expenditures, most of which were paid for by Saudi Arabia and Kuwait, this is a gigantic burden on the American people.

Second, we are concerned about our allies-not just the 800 million of us in the hemisphere, but the massive impact of drug abuse, of violence, of corruption on the democratic institutions of our global partners. We understand that there is a growing nexus between drugs, terrorism and the black market. It is not just our $57 billion a year that we spend on illegal drugs. It is the U.S. firearms going into Mexico. It is international legal support coming out of this country. It is flipping it the other way around, and seeing that the black market activities of Russian and Nigerian criminals are tied into these same drug structures.

We have got a smaller Department of Defense. I am prone to tell people it is the smallest DOD since 1939. So older or marginal equipment and general warfighting capability is coming out of the force structure. Much of it had enormous capability to deal with the kinds of low-level threats demonstrated by the counterdrug effort. So we are losing force structure and really weakening DŎD's tools at hand, regardless of the amount of money they get, to deal with these problems.

Panama is a terrible loss. I am sad about it. It was well set up. We tried to be straightforward. It is a loss to the regional capability. It is a loss to the United States. It is a loss to Panama. But we are gone. We are trying to replace an enormous capability of 2,000 counterdrug flights a year out of Howard. We are trying to replace Rodman Naval Base, with its shipside inspection capability for the U.S. Coast Guard. We are trying to replace the training apparatus that was present down in the Jungle Warfare School and other places.

I think the CINC will lay out better than I could his plans. I am absolutely delighted with the way Southern Command has restructured the battlefield. If we lose DOD's load-bearing capability, it is not just our air and sea interdiction that will suffer-because our U.S. Air Force and Navy carries the logistics burden for the Customs Department, the DEA and other U.S. operations, whether counterdrug, humanitarian, counterterrorism or what.

A final note is where we are really going. Our general foreign policy objective, as outlined by Secretary Albright, is to build multinational cooperation. There is some very good news. I say that that has a direct impact on DOD's requirements and how it goes about its business. We have built in the Organization of American States, through the CICOD committee, starting with the Santiago Summit, a commitment to 34 democratic nations that by the Canadian Summit in 2000, we will have up in running some multinational mechanism of cooperation.

We have got greatly increased cooperation with the United Nations Drug Control Program, Mr. Pino Arlacchi. A lot of that has importance to us not just in Afghanistan and Burma, where U.S. levers are weak, but also in the Caribbean and in the Andean Ridge Strategy. So we are really delighted with the way that is moving.

Then, finally, we have opened what we think are very useful contacts with the European Union. We now have a direct exchange be