$164 million; payments for offshore procurement $182 million; and defense support expenditures $167 million; a total of $513 million; thus permitting a substantial increase in Britain's gold and dollar reserves by the end of the fiscal year. But, closing the dollar gap is no longer of great immediate urgency as long as MDAP or other payments in dollars more than cover the dollar trade deficit or approach such coverage.

The serious question is the longer term one. Structural weaknesses in the British economy, as well as in the sterling area and other British international relationships, are of such magnitude and persistence that relatively small adverse developments may quickly bring on another "crisis" and requests for further economic assistance.

Even without another crisis, it is an open question whether, once the current adventitious sources of economic aid are terminated, the United Kingdom can maintain its financial and economic responsibilities without additional and major internal adjustments.

For the time being, aid to the United Kingdom will apparently comprise:

(1) Military Defense Assistance Program (MDAP). The supply of end-use items and military "hardware" by our Department of Defense.

(2) Offshore Procurement of military items, including aircraft, tanks, ammunition under contracts entered into by the United States Department of Defense with manufacturers in Great Britain.

(3) Some direct economic aid in 1956 to complete the SAC program, unless that program is cancelled.

(4) An amount for technical assistance, possibly in the neighborhood of $300,000 per annum.

Great Britain is our most important ally, and it is of vital importance to the defense of the United States that her economy be maintained in a viable condition.

Department of State

The Department of State operates in the United Kingdom through the American Embassy in London and consular offices in eight of the most important cities in the British Isles. A large part of the embassy work is concerned with trade promotion, economic reporting, and related activities. The reports fall into three categories:

1. Single-time requests which answer inquires for commercial and trade information sent to the embassy through the Department of State in Washington on behalf not only of that department but for the departments of Commerce, Agriculture, Treasury, Interior, Tariff

Commission, etc., as well. A large proportion of the single-time inquiries are for trade lists and world trade directory report prepared for the information of the American business community by the Department of Commerce.

2. Besides the single-time requests, the embassy, assisted by the consulates, prepares periodic comprehensive economic reporting programs (CERP) covering economic activities and developments in the United Kingdom. The CERP's are prepared at varying intervals, depending upon the nature and urgency of the subject matter. For the year July 1, 1953-June 30, 1954, of a total of 453 single-time requests for economic reports which were received from various United States Government agencies, 302 originated with the Department of Agriculture.

3. Voluntary reports include reports by economic officers of the embassy and consulates on subjects which are known or assumed to be of interest to the State and other departments in Washington. During the year July 1, 1953-June 30, 1954, a total of 3,437 economic reports was received by the Department of State from the embassy and consulates in the United Kingdom, of which 795 were on Agriculture, 730 on transport and communications, 356 on export control, 283 on commerce and industry, 221 on finance, and the balance on various other subjects.

The embassy has a staff of 40 persons engaged on economic activities, of whom 26 are United States nationals and 14 are foreign nationals, mostly British. Key officials in the economic field are: The Minister for Economic Affairs (who is also the Director of the Foreign Operations Mission), the Counselor of Embassy for Economic Affairs (who is also the Deputy Director of Foreign Operations Mission), the Commercial Attaché, the Agricultural Attaché, the Civil Air Attaché, the Labor Attaché, a Science Attaché, and a Treasury representative.

The cost of the economic section for fiscal year 1955 is estimated at $215,000 plus $45,000 in allowances and $60,000 for operating and other expenses, a total of $320,000 per annum for economic activities. This compares with a total annual cost of embassy operation for the fiscal year 1955 of $1,200,000 and total embassy personnel of 207, of whom 85 are Americans and 122 are locals.

The consulates are staffed by 104 persons, of whom 26 are American and 78 are locals. They engage in trade promotion, handle business complaints, cooperate with the American business community, and obtain economic information required to answer trade inquiries and prepare the more elaborate CERP's.

Social Security officials cooperate with the Department of State in a number of international activities which have special significance for the exchange of information internationally in the social welfare and maternal and child health fields.

Department of Labor

The Department of Labor operates primarily through the Labor attachés of the United States embassies abroad. The programs and objectives being generally similar for various countries, there is no separate program for the United Kingdom. In general, these programs include:

(1) A reporting service on labor developments and activities generally in the international labor field.

(2) Providing information on American ideas about labor and management practices, and cooperating with other countries in the achievement of improved working and living conditions.

(3) Contact with International Labor Organizations, carried out primarily through Labor attachés and also through a group of Labor specialists assigned abroad through FOA on a reimbursable basis.

(4) Program visits of foreign labor representatives and technicians brought to the United States by FOA.

Department of Agriculture

The Department of Agriculture, besides carrying out an elaborate reporting service on agricultural competition, supply and demand, through the Agricultural Attaché and his assistants, participates very actively in economic operations through the sale of American surplus agricultural products. In effecting these sales, specialists of that department work in close cooperation with the staff of the embassy and the FOA Mission. As mentioned above, prospective sales of agricultural commodities on a worldwide basis may reach over a billion dollars over a 3-year period. An undetermined amount will be sold in the United Kingdom. In making such sales, precautions must be taken to safeguard usual marketings of the United States and to assure that such sales will not unduly disrupt the world price of agricultural commodities. To this end, it is necessary to use private trade channels as much as practicable and to develop and expand the demand abroad for United States agricultural commodities.

To make effective use of the pounds sterling received from the sale of agricultural commodities in the United Kingdom, it is desired to use them not only to procure military equipment, materials, facilities, and services for the common defense, but also to develop new markets for United States agricultural commodities; to purchase strategic critical materials; to finance the purchase of goods or services for other friendly countries; to pay United States obligations abroad; and to finance international educational exchange activities.

A total of 10 marketing specialists visited the U. K. in the period July 1-November 1, 1954, to investigate: (1) The possibilities for expanding the United States exports of livestock products; (2) increasing the export of cotton to the U. K.; (3) to estimate the demand and market requirements for United States fruit and fruit products; (4) to evaluate the effectiveness of United States marketing programs and policies for disposal of grain, feed, and seed; and (5) to increase exports of United States tobacco to the U. K. in "normal trade," and to study tax rates and their influence on tobacco consumption in the U. K.

Department of Health, Education, and Welfare

Another department of the United States Government which conducts economic operations in the U. K. is Health, Education, and Welfare, where the office of education arranges technical training programs for educators and provides orientation and training for teachers brought to the United States under the International teacher education program, described elsewhere in the report of this task force. The Office of Education arranges for the exchange of English and American teachers, and it is expected that during the current fiscal year 109 educators will be brought to this country from the United Kingdom. This office also examines the applications of educational institutions in the United Kingdom.

Summary of Embassy Organization

1. Department of State

State Department economic operations carried out in the Economic Section, Embassy, London, and in the Economic Sections of the Consulates in the United Kingdom.

2. Foreign Operations Administration

Independent mission partially integrated with economic section of Embassy with the Chief of FOA Mission serving concurrently as Minister for Economic Affairs and the Deputy Chief of Mission serving concurrently as Counselor for Economic Affairs. (Carries out assistance programs.)

3. Department of Commerce

Maritime Administration. (Maritime attaché having status of Foreign Service reserve officer and charged with investigating costs of ship construction and ship operation).

4. Treasury Department

(a) Treasury Representative (Finance). This officer serves concurrently as finance advisor to the Ambassador and as finance advisor to the Chief, FOA Mission. He is a direct representative of the Treasury Department.

(b) Treasury Representative (Customs). This officer is also direct representative of Treasury Department.

5. Department of Agriculture

(a) Foreign Agricultural Service (Agricultural Attaché and staff). Direct representative of Agriculture Department. Functions described, pages 21 and 22.

6. Department of Defense

(Military Attaché and staff). (Naval Attaché and staff).

(a) Department of the Army. (b) Department of the Navy. (c) Department of the Air Force (Air Attaché—military—and staff).

(d) Military Assistance Advisory Group (MAAG). All three Departments of the Department of Defense are also represented in the MAAG, and the chief of the MAAG is one of the officers comprising the so-called country team along with the Ambassador and the Chief of the FOA mission.

7. General Services Administration

(a) Direct representative heading a regional office concerned with the purchase of strategic materials (with personal rank of Minister).

8. United States Information Agency (USIA)

(a) Public Affairs Officer, Cultural Affairs Officer, and staffs. This is an independent mission directly responsible to the USIA.