We must also be able to take advantage of opportunities in which swift action can advance us dramatically along the road to free world cooperation and prosperity. Should such opportunities arise, I shall request prompt action by the Congress to provide any additional funds needed to meet emerging requirements.

Our partners in the Alliance for Progress 17 will continue to receive our most determined support and generous cooperation. Recent improvements in the organization of the Alliance should permit an acceleration of this program and foster ever greater hemispheric unity. I am therefore proposing an expanded bilateral program for the Alliance in 1965. Upon completion of negotiations and arrangements with other member countries, legislation will also be proposed to provide additional funds for long-term, low-interest loans by the InterAmerican Development Bank.18

The sincerity of our purpose overseas is exemplified by the highly successful work of the Peace Corps.19 As a result of this record and the gratifying flood of requests for the services of the Corps, funds are requested in 1965 for 14,000 volunteers, as compared with 10,500 in 1964.

The international activities of the U.S. Government foster understanding by educational, cultural, and economic exchange with other nations, and by providing information about this country and its objectives.20 They also promote world stability by supplying the critical margin of economic resources and technical knowledge that will help developing nations to attack poverty and discontent, advance toward economic independence, and maintain their political integrity.

New obligational authority of $3.6 billion is requested for international affairs and finance activities for 1965, an increase of about $600 million over 1964. Administrative budget expenditures are estimated to be $2.2 billion in 1965, about $200 million less than in 1964. This reduction primarily reflects greater anticipated sales of certificates of participation by the Export-Import Bank.2

AGENCY FOR INTERNATIONAL DEVELOPMENT

The Agency for International Development administers and coordinates economic assistance programs in less developed countries where political stability, resistance to aggression, or accelerated economic or social progress is of importance to the United States. Expenditures for these programs are estimated to be $2.2 billion in 1965, an increase of $50 million over 1964. New obligational authority of $2.4 billion is requested for AID for 1965. This will make the total 1965 obligational availability equivalent to the amount provided for 1964 including unobligated funds carried forward from the prior

year.

In determining the allocation of its funds, the Agency for International Development is carefully weighing U.S. objectives and apply

ing increasingly rigorous standards in evaluating recipient country performance and the availability of funds from other sources. Procurement procedures insure that more than 80% of AID commitments now finance procurement of goods and services produced in the United States. Improved management will help the Agency to reduce its employment by 800 during 1965.

INTERNATIONAL AFFAIRS AND FINANCE

Trust

1 Compares with new obligational authority for 1963 and 1964, as follows: Administrative budget funds: 1963, $5,693 million; 1964, $2,994 million. funds: 1963, $34 million; 1964, $68 million.

Development loans and grants.-Increasingly, our commitments for development assistance are focused in a relatively small number of countries which are displaying the serious discipline essential to economic development; in such instances, we are attempting to encourage and sustain the acquired momentum by providing long-term assistance on favorable terms until alternative sources of financing become available. Where evidence of the necessary discipline does not exist, our assistance is being reduced or withheld.

The bulk of our long-term assistance is in the form of loans repayable in dollars. Expenditures for loans are estimated to rise in 1965 by $60 million. Complementing these loans is technical assistance financed primarily through development grants. This assistance helps provide the human skills, education, and institutions that are basic to social and economic progress. Expenditures for such grants are estimated at $225 million in 1965, approximately the same amount as estimated for 1964.

Alliance for Progress.-The principles of social and economic_reform, which underlay the creation of the Alliance for Progress less than 3 years ago, are taking root in the countries of Latin America. Though economic and social change occurs only slowly, these countries are able to use our development assistance more effectively with each passing year. To encourage and accelerate passage of these countries through the crucial early stages of progress, Alliance for Progress development assistance is being concentrated in those countries which show evidence of adopting internal policies conducive to economic development.

This budget includes new obligational authority of $550 million for the Alliance for 1965. In addition, the lending capacity of the InterAmerican Development Bank will be augmented, and resources will be provided through the Export-Import Bank, the Food for Peace program,22 and the Peace Corps. Together, these funds will enable us to maintain our current level of contribution and will fulfill our commitment to progress in this hemisphere.

Other AID programs. Our foreign assistance program provides supporting assistance grants where necessary to maintain political and economic stability in critical areas of the world, and to meet certain other security objectives. Expenditures for supporting assistance in 1965 will be $335 million, $80 million less than in 1964, as more countries become able to use development loans instead of grants.

In 1965, the Agency for International Development will continue to make voluntary contributions for international programs which complement our long-range bilateral efforts, such as the United Nations Special Fund and Technical Assistance program 23 and the Indus Basin Development program administered by the International Bank for Reconstruction and Development.24

See post, docs. XI-31-35. 23 See post, docs. II-35-37. 24 See post, docs. II-46-47.

OTHER ECONOMIC AND FINANCIAL PROGRAMS

To advance further the concept of partnership on which the Alliance for Progress is based, the United States is proposing to strengthen and expand the activities of the Inter-American Development Bank. Legislation will be proposed for the enlargement of the resources of the Bank used for long-term, low-interest loans, under arrangement subject to negotiations with the Bank's members.

The new obligational authority recommended for 1965 for international financial institutions includes $206 million as the first installment of a $412 million increase in the U.S. subscription to callable capital stock of the Inter-American Development Bank. No expenditure is contemplated under this increase, but the move will facilitate the Bank's issuance of its securities in financial markets in the United States and abroad.

The fifth and final installment of $62 million also requested in this budget for the International Development Association 25 fulfills our initial pledge to finance, along with 15 other industrial countries, the development loans provided on favorable terms by this institution. An authorization request of $312 million is now pending before the Congress for U.S. participation in a second round of pledges, recently negotiated; the first expenditure under the new pledge will not be required until fiscal year 1966.

Continuing its efforts to increase U.S. exports, the Export-Import Bank will expand its loans to foreign borrowers for the purchase of U.S. exports and also its guarantees of the private financing of U.S. exports. Under the Bank's highly successful arrangement with the recently formed Foreign Credit Insurance Association,26 more than 70 private insurance companies participate in insuring a rapidly growing volume of private U.S. export financing against both commercial and political risks. In 1965, the Bank is expected to have net receipts of $856 million, about $200 million more than in 1964, reflecting primarily an increase in the sale to private buyers of certificates of participation in its portfolio.

In recognition of the growing overseas demand for the services of Peace Corps volunteers and the continued increase in applications for service in the Corps, the number of volunteers is expected to rise from 10,500 in 1964 to 14,000 in 1965, requiring an estimated increase in expenditures of $17 million over the current year's level.

Grants of surplus agricultural commodities under the Food for Peace program are distributed for disaster relief and also made available to support economic development projects. This part of the program provides milk and other nutritious foods to millions of school children around the world and makes possible more adequate diets for workers on development projects. It is expected to continue in 1965 at about the same level as in 1964.

215 See post, docs. II-48-50.

"See American Foreign Policy: Current Documents, 1962, p. 1505.

FOREIGN INFORMATION AND EXCHANGE ACTIVITIES

Primary responsibility for improving mutual understanding with other countries and for informing them about our aims and attitudes rests with the Department of State and the United States Information Agency.

Expenditures for the exchange activities of the Department of State are estimated to decline by $18 million in 1965, reflecting primarily a nonrecurring grant of $25 million in the previous year for the establishment of a Japan-America Foundation. The quality and impact of educational and cultural exchange activities will be improved.

The United States Information Agency will carry forward its programs in 1965 with no increase in personnel. Nevertheless, the Agency will continue to expand and improve its television programing for Latin America, its radio broadcasts to Africa, and its worldwide motion picture activities.

Attention will be devoted to informational materials in support of counterinsurgency efforts in certain Far East countries. New obligational authority is being requested for 1965 to complete one new Voice of America radio facility and to modernize another.

CONDUCT OF FOREIGN AFFAIRS

27

The Department of State continues to face increasingly complex foreign affairs responsibilities. Four years ago, diplomatic and consular posts were maintained in 82 countries; today they are maintained in 111 countries. As more new nations gain their independence, this upward trend will continue. Other workloads are also expected to rise. For example, in 1965 a 10% increase over 1964 is expected in the number of passports and nonimmigrant visas issued.

Nevertheless, employment levels and total expenditures for the Department's conduct of foreign affairs are estimated to be virtually the same in 1965 as in 1964. While increased expenditures are estimated for support of the Foreign Service, including improved communications and needed office and housing facilities overseas, they will be offset by a decrease in contributions to international organizations. The budget includes amounts to pay the costs of U.S. membership in the United Nations and other international organizations which are vital elements in the multilateral approach to peace, stability, and progress. During the past year, new arrangements were approved by the General Assembly, which reduce the U.S. share of U.N. peace and security costs; 28 the estimates in this budget are based on those arrangements.

The U.S. Arms Control and Disarmament Agency, while making small reductions in its staff, will expand its contract research program in 1965. Its main work will continue to be the research needed for the

"See post, docs. XIV-1 et seq.

28 See American Foreign Policy: Current Documents, 1963, pp. 97-98, 585-587, 676; for further details, see U.S. Participation in the UN: Report by the President to the Congress for the Year 1963 (Department of State publication 7675), pp.

357-358.