Message to the Congress Reporting on the Balance of Payments Deficit Incurred Under the North Atlantic Treaty.

To the Congress of the United States:

In accordance with Section 812(d) of the Department of Defense Appropriation Authorization Act, 1974 (Public Law 93-155), I am pleased to submit a report to the Congress on our further progress toward offsetting the balance of payments deficit resulting from the deployment of U.S. forces in NATO Europe.

I am now able to provide you with figures for U.S. expenditures in NATO Europe during fiscal year 1974. These figures were compiled by the Department of Commerce in consultation with the Department of Defense and the General Accounting Office. They indicate that in FY 74 the expenditures resulting from the deployment of U.S. forces in fulfillment of our NATO commitments and obligations amounted to $1,983 million (including preliminary fourth quarter data subject to revision). Attached to this report is an appendix showing how this figure was derived and what adjustments were made to conform our normal expenditure data to the letter and intent of Section 812. Minor changes in this data may occur as final quarter fiscal year 1974 figures are confirmed during the next few weeks.

As President Nixon reported to the Congress on May 16, 1974, the offset agreement concluded in April 1974 with the Federal Republic of Germany had a dollar value of approximately $2.22 billion over fiscal years 1974 and 1975. Of that amount, the fiscal year 1974 portion, approximating $1.1 billion, will be directly applicable toward meeting the requirements of Section 812, leaving approximately $883 million to be offset by our other European NATO allies.

As I noted in my report of August 20, 1974, the NATO Economic Directorate, at the direction of the North Atlantic Council, has established a mechanism for identifying allied purchases of military-related items from the United States. This was an essential step to enable us to comply with the requirements of Section 812. Representatives of the Economic Directorate consulted in Washington on October 21-22 with the Departments of State, Commerce and Defense and reported that approximately $1,050 million in purchases by allies other than the Federal Republic of Germany have been identified.

The Departments of Commerce and Defense have sought to confirm this figure by examining the U.S. balance of payments accounts and records in an effort to identify balance of payments receipts reflecting military-related sales and exports to our European NATO allies, on both a government-to-government and commercial category basis. However, this data is still incomplete and the U.S. accounting system in many cases is too aggregated to identify all of the specific purchases and payments made by the European members of NATO. For this reason our calculation of the final offset total will take into account the information being provided through the NATO Economic Directorate by our European NATO allies. On the basis of the foregoing, I continue to expect that the requirements of Section 812 will be met.

GERALD R. FORD

The White House,

November 17, 1974.

APPENDIX A. U.S. Defense Expenditures Entering the International Balance of Payments in NATO Europe

During Fiscal Year 1974, (in millions of dollars):

Personal expenditures by US Military and

Civilian Personnel and their Dependents 815

Payments to Foreign Nationals for direct and contract hire 561

Major Equipment purchased in NATO Europe 81

Construction 75

NATO Infrastructure System Payments 76

Petroleum Products (includes cost of crude oil imported into Europe) 137

Materials and Supplies 148

Payments to US and foreign contractors for contractual services 444

All Other Payments (net) 66

Total for Fiscal Year 1974 (preliminary) 2,403

B. Deductions Made Pursuant to Section 812 for Expenditures

not Resulting From the Deployment of

US Forces in Fulfillment of our NATO Commitments and

Obligations (in millions of dollars):

Expenditures for US activities not related to NATO such

as US strategic forces in NATO countries 279

Major equipment purchased in NATO Europe and imported into

the US and unrelated to US troop deployments in Europe 81

Expenditures in NATO Europe for the afloat operations of

the Sixth Fleet for US strategic purposes 60

Total for Fiscal Year 1974 (preliminary) 420

C. Expenditures Less Deductions 1,983