mation, in the form presented in these reports, is not available from any other source.

During the year, studies studies were undertaken on the military resources of 18 selected developing countries. Compilations of U.S. and foreign military equipment that are on "the world market" were prepared. In addition, a comprehensive study on the pattern of armament acquisitions, military expenditures, force levels, and other military resources of more than 20 developing countries, covering the last 15 years was initiated and is expected to be completed early in 1969. This study emphasizes countries which have been involved in arms competitions with other states and is designed to provide indicators and insights into the characteristics of an "arms race."

A major contribution to ACDA's arms transfers research is an Agencysponsored project at M.I.T. on "The

Control of Local Conflict." This study includes an analysis of the role of conventional arms acquisitions in relation to arms races and the outbreak of local conflict in the developing world. The study also examines possible measures for the control of such transfers. The M.I.T. program, in addition, involves the use of political-military gaming techniques to develop possible arms transfer controls, as well as other measures, appropriate to the prevention, containment, and termination of various types and stages of local conflict.

Several major studies were started which will contribute considerably to the Agency's competence in the arms

transfer field. One is a detailed analysis of the various arms registration and publication proposals that have emerged in international forums since World War II. A major ingredient in this study is a report on "The Reporting of International Arms Transfers" prepared under ACDA contract with U.C.L.A. A related project is being conducted on a reimbursable basis by the Department of Commerce. This is a study of current practices of foreign countries in reporting arms exports and imports. The subject of arms registration was under active consideration during the 1968 session of the U.N. General Assembly where the Danish delegation tabled, and then withdrew, a resolution to request the Secretary-General of the United Nations to poll the member states on their views on the subject. It may well be put forth for discussion again. It is, therefore, important that ACDA conduct a comprehensive review of the pertinent

issues and assist in the establishment of U.S. positions on them.

A broad look at the Military Assistance Program for Latin America since its inception was undertaken in order to single out its arms control implications. A major assist in this effort is the Agency's reimbursable agreements with the Bureau of Intelligence and Research, Department of State, by which ACDA has been provided, and will continue to receive, detailed analyses on the organization, composition, functions, and attitudes of the armed forces of particular Latin American nations and the role of U.S. military assistance in their development.

Conventional Arms Transfers

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THE PARIS TALKS ON VIET-NAM and the indicated Soviet willingness to discuss limitations on strategic weapons have tended to heighten interest in the problems of economic adjustment to changes in defense spending. Elimination of Viet-Nam spending— even if partially offset by some increases in the non-Viet-Nam portion of the defense budget-might mean job displacements nationally of well over one million in number. An additional, although much smaller, number of displacements would take place in the event of an agreed limitation on strategic systems. Although economists are agreed that Government tax and spending policies can be used effectively to create the requisite number of job opportunities to maintain full employment after Viet-Nam and after any arms control agreement, they also are agreed that there could be short-term transitional problems of relating quickly job seekers with job opportunities. There also could be particular problems for areas and communities which are especially dependent economically on defense dollars.

ACDA-sponsored economic impact research has concentrated rather heavily on these so-called "structural" problems. The University of Colorado has just completed a study for the Agency which synthesizes and reevaluates the results from three previous

studies of the reemployment experience of defense workers laid off in 1963-1965 from the Boeing plant in Seattle, the Martin plant in Denver, and the former Republic Aviation plant on Long Island. The Colorado study finds that variations in the personal characteristics (i.e., sex, education, age, etc.) and degree of skill of workers do not have as great an influence on reemployment success as traditionally has been thought. Such success is more strongly related to factors affecting the availability of jobs and workers' knowledge of the location of jobs. The study points up the need for better information channels for workers after mass layoffs.

Another study recently completed for the Agency by the Department of Employment of the State of California dealt with the potential application of production worker skills at missile plants to job requirements in nondefense industry. It was found that such skills are not as specialized as had been thought and that there are many opportunities for missile workers to apply their skills elsewhere with little or no retraining. The California study, which matched the job requirements in the missile plant with those in civilian occupations in the state, will be furnished by the U.S. Department of Labor to state Bureau of Employment Security offices throughout the country for use in de

fense mass layoff situations which may arise.

A study now being completed for the Agency by the University of Illinois on pensions, severance pay and related fringe benefits for defense workers finds that, although such benefits for defense workers compare favorably with those for workers in other fields, the pension and severance pay provisions for defense workers are rather poorly suited to easing economic adjustment after mass layoff. The pension and severance pay provisions, since they are related to longevity of service, tend to provide inadequate cash benefits to workers who are young and have low seniority. Given the dynamics of the defense market, workers who have been laid off from defense plants thus far have tended to be younger and more junior in service. The study points out that supplemental unemployment benefits, which generally are proportionate to the losses incurred by a worker during unemployment, are unfortunately not widely used in defense industry. The study suggests that the probable solution to the problem of adequate protection for displaced defense workers lies in some strengthening and improvement of the FederalState Unemployment Insurance system.

Several new studies were sponsored by the Agency this year on economic impact. The University of Pittsburgh was awarded a contract to study the time lags which might occur in generating economic activity following the initiation of new or expanded public programs after disarmament. The University is concentrating upon four selected programs oceanography, mass transit, urban development, and highway constructionand is focusing on both the legislativeadministrative time lag in providing funds for actual expenditure and the economic time lags in creating employment associated with different

stages of the budgetary-expenditure

process.

The Division of Economic Growth of the Bureau of Labor Statistics is conducting a study for the Agency of the probable effects on aggregate and industry employment of changes in defense spending as the result of cessation of hostilities in Viet-Nam and of various possible arms control measures. The study necessarily makes certain assumptions in regard to the timing of cessation of hostilities in Viet-Nam and alternative Government policies for maintaining total demand in the economy. The Bureau of Labor Statistics already has completed, under the study, the projection of the national economy to 1970 based upon the assumption of continuation of hostilities in Southeast Asia without significant escalation or deescalation of the conflict. It also concluded that about 10 percent of total military and civilian employment in that year will be defense-generated as compared with about 8 percent in 1965. The projections to 1970 will be updated to 1971 if circumstances so require.

ACDA recently signed a contract with the University of Colorado for a comprehensive review of the whole economic impact problem. In addition to several of its own scholarsone of whom is Dr. Kenneth Boulding, President of the American Economic Association—the University is utilizing in the study the services of a number of leading economists at other universities. The study is looking into what has been learned thus far from ACDA and other studies of the problems of economic adjustment to reduced defense spending and what other information is required for effective economic adjustment planning and decision making. The study will rely on outputs from the Bureau of Labor Statistics study mentioned in the preceding paragraph to establish the quantitative framework of economic change.

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THE VERIFICATION FOR COMPLIANCE WITH INTERNATIONAL ARMS CONTROL

AGREEMENTS to protect U.S. security interests is one of the fundamental tenets of U.S. policy. Such verification may in specific cases involve mutual inspection by bilateral agreement or multilaterally by an international agency.

A field testing organization has been active since early in the Agency's history working on the problems of developing and testing inspection concepts. It was originally established as a joint venture with the Department of Defense, but is now the responsibility solely of ACDA.

In anticipation of possible requirements for inspection in the nuclear arms area as well as in the conventional, or general purpose forces area, tests have been conducted in both categories since 1963 and are part of an ongoing program. During 1968 five such tests were underway.

Tests Related to
General Purpose Forces

Between 1963 and 1968 there had been four tests conducted within the United States involving elements of inspection systems which might be used for inspecting general purpose air and ground forces.

During 1968 the first international test was conducted using the accumulated knowledge from the preceding tests in a realistic fashion in a foreign environment. This was Field Test-15, or FIRST LOOK.

During the summer, ACDA, in cooperation with the British Ministry of Defence, conducted the exercise in Southern England. This cooperation included sharing financial, technical, and leadership responsibility. It was the largest exercise of its kind to date. and was designed to investigate conventional arms control inspection techniques.

Headquartered at a deactivated RAF base near Newbury, Berkshire, under the command of Test Director British Army Brigadier Paul S. Ward, C.B.E., the joint force of 480 personnel, with representatives from all U.S. and British Armed Forces, continued and refined the work started in the earlier ACDA tests. Under far more realistic conditions, they looked into effective team size, the necessity to have inspection teams actually enter military installations, and the degree to which technology in the form of aerial reconnaissance and unmanned sensors could assist or reduce the need for a human ground inspection system.

Emphasis throughout the test was placed on examining whether small

teams of inspectors, operating completely openly and nonintrusively, could provide adequate assurance that a declared level of forces was being maintained and could provide the necessary degree of knowledge either to assure that there were no treaty violations or substantiate on a timely basis violations which might affect a nation's security. Utilizing British Army Landrovers, each subsystem's inspection team spent 13 weeks monitoring a military population of approximately 30,000 British Army and RAF personnel in the 2,000 square mile test area.

FIRST LOOK aroused consider

able international interest. During the course of the exercise visitors included journalists and scientists as well as distinguished military and diplomatic leaders representing nations from all parts of the world. Groups of leaders came from NATO, the ENDC in Geneva, the British Foreign Office and Ministry of Defence, Members of Parliament, and the Western European Union. Dis

tinguished individual visitors included Supreme Allied Commander, Europe, General Lyman L. Lemnitzer.

The tremendous volume of recorded data will, when analyzed, provide invaluable information on the relative importance of various elements of a conventional weapons verification system. The analysis phase of FIRST LOOK is now in progress in the Field Operations Office of ACDA. A preliminary report is scheduled for January 1969, to be followed by a detailed report in the fall of 1969.

Tests Related to

Nuclear Arms Control

Work was initiated or continued on four field tests relating to arms control initiatives in the nuclear field.

The requirements imposed by the Nonproliferation Treaty on the IAEA's safeguards system will increase over the next few years. It will

Field Tests, Arms Control Verification

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