Venice Breach: Elizabeth Schambelan on the US pavilion at the Biennale.

SINCE THE EVENTS of 2001, public diplomacy--aka "soft propaganda"--has become a hot item on foreign-policy agendas to a degree not seen since the start of the cold war, and it should come as no surprise that the State Department is expected to take a leading role in the battle for hearts and minds. Testifying before Congress last August on the September 11 Commission's public-diplomacy recommendations, assistant secretary of state for educational and cultural affairs Patricia S. Harrison said that "after 9/11, we redirected funds to enable us to move quickly and reach beyond elites." She went on to detail a series of new outreach projects, such as Hi, a glossy Arabic-language monthly that attempts to neutralize prospective jihadists with articles on yoga and Internet dating. While the State Department has spent four million dollars on Hi so far, one of its more "elite" programs--supporting American representation in the Venice Biennale and other international arts festivals--is literally going begging.

As was first reported last summer, the Fund for US Artists at International Festivals and Exhibitions (FUSAIFE), which partially subsidized American representation at the Venice Biennale, has been dissolved, leaving the State Department casting about for a partner to help organize and pay for an exhibition in the US pavilion in 2005. The only candidate known to be in the running as we go to press is the Solomon R. Guggenheim Foundation. For seventeen years, the artists representing America at Venice have been chosen via an open competition in which curators submit proposals to a selection panel convened by the National Endowment for the Arts (NEA). To many people in the art world, the notion of handing over the decision to a single institution resonates, in a very unfortunate way, with the Bush administration's own preference for unilateral action. Robert Storr, recently named artistic director of the 2007 Biennale, sums up the consensus: "An open peer review process is absolutely essential for anything of this kind." Beyond the issue of the selection process, the pavilion's plight reflects broader concerns about the fraying web of federal and philanthropic support that creates the context in which American art represents itself as such on the international stage.

FUSAIFE was formed in 1987, when four institutions--the Pew Charitable Trusts, the Rockefeller Foundation, the NEA, and the United States Information Agency, which was later absorbed into the State Department's Bureau of Educational and Cultural Affairs (ECA)--joined to support American participation in international visual- and performing-arts festivals. The partnership was conceived as "bridge funding"--a transitional measure that would remain in place until the government could take over. By 2003, post--September 11 retrenchment had led many foundations to scale back their international exchange programs, and the Pew and the Rockefeller decided that sixteen years of bridge funding was a bridge too far. At a meeting that December, the partners voted to dissolve the fund, with disbursements ceasing at the end of 2004. Lea Perez, director of ECA's Office of Citizen Exchanges, says there was concern about what this would mean for the 2005 Biennale: "There was agreement at that meeting that we might need to look at options broader than ones that we had looked at in the partnership. And by that I mean we might go to one source and say, 'Would you work with us?'" That one source was the Guggenheim, which has owned the pavilion since 1986 and whose director, Thomas Krens, has openly expressed his desire to organize an exhibition there.

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But at that point, the Guggenheim wasn't inclined to step up to the plate. "When our initial exploratory contacts didn't lead to an easy solution," says Perez, "we issued a request for proposals from organizations that would have replicated the open competition." On May 5, 2004. ECA announced that it would offer a grant of $170,000 to a nonprofit organization that could oversee a competition, take on other administrative duties, and raise $170,000 in matching funds by a June 2 deadline. No applicants were able to meet ECA's criteria in that window--not even Arts International, the New York--based nonprofit that had administered FUSAIFE since its inception. "It was an extremely difficult time line," says Arts International program manager Kay Takeda. The bureau was back to a one-source solution: the Guggenheim.

Meanwhile, curators were poised with their own proposals but had nowhere to send them. Heidi Zuckerman Jacobson, MATRIX curator at the UC Berkeley Art Museum and Pacific Film Archive, contacted the State Department in July 2004 to ask if there would still be an open call. She was told, as she remembers it. "Well, these are strange times." After that, says Jacobson, "Nothing happened. They never followed up. The whole process has been very ambiguous and nontransparent."

ECA officials adamantly assert the bureau's continuing commitment to supporting American participation in international biennials and to holding open competitions. They say there is no truth to speculation that other ECA programs have siphoned funds from arts exchanges. As private funding waned, Perez points out. ECA's commitments to the visual-arts component of FUSAIFE increased from $200,000 in fiscal year 2001 to $350,000, including the $170,000 for the 2005 Biennale, in fiscal year 2004.

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But despite an upward trend beginning in 2001, the bureau's budget for educational and cultural exchanges in 2002 was 19 percent lower than in 1993 (with figures adjusted for inflation), according to a study by the Center for Arts and Culture. And "morale is low" at ECA, says a report by the State Department's Office of the Inspector General, partly because staffers feel that "many in the Department still do not accord exchanges the importance they deserve." Indeed, there's little to indicate that those at the top of the organizational chart accord fine-arts exchanges any importance at all--which may be why "Hi" hopes are giving way to low expectations for the US pavilion at Venice next summer. For better or worse, it seems that in the new Kulturkampf, contemporary art will remain at the rear of the campaign.

Elizabeth Schambelan is editor of artforum.com.