"In recent years, because of inherent inefficienceis, bad weather, natural disasters, and increased attention on the part of the administration to the war in the South, rice shortages have reached critical proportions. At one point in 1968 the monthly "rice ration" of an average North Vietnamese was composed of only 30 percent rice, the remainder being wheat products, corn, and manioc. North Vietnam was forced to rely on massive imports of wheat and other food grains from the Soviet Union and China in order to maintain even bare subsistence levels.

"Most of the farmers are organized into "voluntary" cooperatives whose affairs are managed by local party chapters. The government claims that more than 90 percent of all farmers and 95 percent of the arable land belong to cooperatives. The planning function is monopolized by the Central Government.

"North Vietnam has never enjoyed a foreign trade surplus. In 1971 imports were an estimated $650 million, while exports were less than one-tenth that amount. Deficits have been financed through aid from Communist countries, with whom North Vietnam conducts nearly all its trade. Recently, North Vietnam has been trying to expand its trade contacts with Western nations, especially the Scandinavian countries, and Japan. The government has not published trade statistics since 1963.

"Foreign Relations

"North Vietnam maintains diplomatic relations with over 60 states, including all Communist nations, and an expanding number of third world countries. Following the signing of the Peace Agreement, many Western European countries, as well as Canada and Japan, extended diplomatic recognition to the DRV. Prospects for a similar step in U. S. - DRV relations remain dim as long as Hanoi continues its massive violations of the Agreement. Similarly, no progress in implementing that provision of the Agreement calling for U. S. economic assistance to the DRV can be made until Hanoi is in compliance with the other provisions of the Agreement. Thus far, the DRV has shown little interest in membership in the United Nations or other international organizations.

"In recent years, the North Vietnamese have remained neutral in the Sino-Soviet schism. Hanoi relies on good relations with both the U. S. S. R and the People's Republic of China to insure

itself adequate and timely supplies of war materiel and economic assistance.

"North Vietnam's relations with Laos and Cambodia have been characterized principally by the importance those two countries assume in furthering Hanoi's continuing objective to control South Vietnam. Both countries are essential to Hanoi because of their use as conduits of North Vietnamese men and materiel. Beyond this, however, there is little doubt that as a step toward Hanoi's further goal of exercising hegemony throughout Indochina, the DRV hopes to see friendly regimes installed in both Vientiane and Phnom Penh. The DRV has long provided assistance and leadership to the Communist Pathet Lao. In Cambodia, where the North Vietnamese took a relatively hands off approach during the reign of Prince Sihanouk, they are now actively seeking the overthrow of the established government by the Hanoi-trained and supplied Communist insurgents.

SOUTH VIETNAM

"Reduction of American military aid to the Saigon government of President Nguyen Van Thieu had two major effects; it restricted the military capabilities of the South Vietnamese regime and forced it to curtail some of its operations, and it signaled critics of the Thieu administration that the Saigon leader was no longer as much a political favorite of the United States as he once had been. The political and economic difficulties of the Thieu regime increased in the second half of 1974, as a wide range of opposition elements took to the streets in demonstrations-party in reaction to the war's persistence and partly to protest the conequences of continuing inflation.

"The War. South Vietnam's army gave a good account of itself, not least of all in adapting to the new circumstances of increasingly limited American military aid. The cut in U. S. assistance forced Saigon's armed forces to reduce their use of ammunition, fuel, helicopters, and fighter-bombers and even to abandon outposts in August because of their decreased capability to defend them. worldwide price squeeze and energy shortage further restricted operations of Thieu's government.

"The long struggle for control of the country remained a stalemate, with no signs of any steps toward the kind of political

The

accommodation envisaged in the January 1973 pact that ended direct U. S. combat participation in the conflict. North Vietnam and the Vietcong, indeed, suspended their participation in the two commissions set up following the 1973 "cease-fire": the Joint Military Commission (to work out terms of the armistice) and the Joint Military Team (to search for the various combatants missing in action).

"Politics. A largely Catholic protest movement, originally aimed at eliminating corruption, grew during the year, and Buddhist, student, labor, and press elements increasingly rallied to its support. By midyear there were open demands for President Thieu's resignation. While his removal did not appear imminent at year's end, there was growing agreement that Thieu would probably not stand for a third presidential term in 1975, for which South Vietnam's constitution had been appropriately altered in January 1974.

"The anti-Thieu movement was led by a 59-year-old antiCommunist Catholic priest, the Rev. Tran Huu Thanh. Thieu called it Communist-inspired, but Hanoi claimed that the United States was behind it. Neither charge was true, and the movement's widespread appeal was demonstrated in mid-1974 when the powerful An Quang Buddhist faction announced its backing for the "People's Anti-Corruption Movement. " Thieu tried to placate the opposition by having the National Assembly pass somewhat liberalized laws controlling the press and political parties, but to no avail. In late October police and the anti-corruption, anti-Thieu demonstrators clashed on the streets of Saigon in the most violent encounter between Thieu and his anti- Communist opponents in his eight years in power.

"The basis for the growing discontent with Thieu's leadership was variously rooted: disillusionment with the 1973 "peace" inflation and other economic problems, and the persisting and costly war with the Communists (which many non- Communists apparently believed could be ended under a leader other than Thieu). Thieu had offered to resume the Paris talks, broken off by the Communists, but Hanoi had no desire to help out the South Vietnamese leader politically. The beleaguered president was not without support, however; the all-important army still backed him, and in provincial and city council elections in July pro- Thieu candidates won 300 of 478 seats (compared with 240 in the previous voting).

"Economy.

There were several bright spots in the economy,

but these were offset by the problem of simultaneously occurring inflation and recession, the worldwide increase in commodity prices, and the impact of declining U. S. financial support. Serious question was raised as to the economic ability of Saigon to continue the war with the Communists.

"The 1973-74 rice crop was a record one for South Vietnamapproximately 6.6 million tons—but additional amounts of the grain still had to be imported from the United States. Inflation moderated somewhat but was still at the rate of 80% a year. Exports were considerably higher than in 1972, but the war severely limited rubber and timber production. Oil discoveries suggested appreciable quantities of the resource in the adjacent South China Sea, and the rising world price for sugar came as a pleasant economic surprise.

"Industrial production declined, however, and unemployment grew dramatically, partly as a result of the American withdrawal. Unemployment reached nearly one million (in a work force of seven million).

"Foreign Relations. In April, U. S. Secretary of State Henry Kissinger stated that Washington was committed to provide South Vietnam whatever it needed for its self-defense, but Congress subsequently slashed American military aid to Saigon. The forced resignation of President Nixon particularly concerned the Thieu government, in light of Nixon's past backing of the anti-Communist cause in Vietnam and successor President Ford's inexperience in foreign affairs. American aid accounted for 65% of the support for combined military and civilian resources committed to prosecution of the war (compared with 78% the previous year). U. S. military assistance for the year totaled about $700 million, half the level of a year earlier.

"The following comments were made by Mr. Philip C. Habib, Assistant Secretary for East Asian and Pacific Affairs, before the Special Subcommittee on Investigations of the House Committee on Foreign Affairs on March 6, 1975 (just before the Spring offensive by the NVA).

"I welcome the opportunity to appear before you today. The House Foreign Affairs Committee has been a thoughtful and constructive participant in the evolution of U. S. policy toward East Asia, and it is appropriate that early consideration of the new and difficult

situations in Vietnam and Cambodia should take place here. In the interim since this hearing was originally scheduled, I visited Indochina briefly, accompanying a congressional delegation. I found the experience illuminating, as I believe did your colleagues, and I will draw on my observations there in my testimony today. My opening remarks will be relatively brief so that most of our time can be devoted to your questions.

"Two years ago in Paris we concluded an agreement which we hoped would end the war in Vietnam and pave the way for settlements of the conflicts in Laos and Cambodia. We felt the Paris agreement was fair to both sides. From the standpoint of the United States, the agreement in large measure met what had been our purpose throughout the long period of our involvement in Vietnam. It established a formula through which the people of South Vietnam could determine their political future, without outside interference. U. S. forces were withdrawn and our prisoners released. The Government of South Vietnam was left intact, and the agreement permitted the provision of necessary military and economic assistance to that government.

"The war has not ended in Indochina; peace has not been restored. Only in Laos have the contending parties moved from military confrontation toward a political solution. In Cambodia, the conflict is unabated. In Vietnam, after a brief period of relative quiescence, warfare is again intensive and the structure established by the Paris agreement for working toward a political settlement is not functioning. This is deeply disappointing, but it is not surprising. The Paris agreement contained no automatic self-enforcing mechanisms. Although instruments were established which could have been effective in restricting subsequent military action, the viability of those instruments-and of the agreement itself-depended ultimately on the voluntary adherence of the signatories. Such adherence has been conspicuously lacking in Hanoi's approach.

"The Communist record in the last two years, in sharp contrast to that of the GVN [Government of Vietnam] and the United States, is one of massive and systematic violations of the agreement's most fundamental provisions. Hanoi has sent nearly 200,000 additional troops into South Vietnam although the introduction of any new forces was expressly prohibited by the agreement. Amply supplied by the Soviet Union and the People's Repuhlic of China, Hanoi has tripled the strength of its armor in the South, sending in more than 400 new armored vehicles, and has greatly increased