or adequate opportunity to express themselves. He had "to admit (that) . the adverse effect was not taken fully into account."

The Nixon administration, imposed the export controls in a shockingly seatof-the-pants, patchwork, short-term, stop-gap, crisis-reaction way.

The decision was made in an information vacuum.

It was based on inadequate information unsystematically gathered. In fact, no individual or agency is statutorily entrusted with export control decisionmaking. There is an ad hoc inter-agency commission that meets occasionallyusually motivated by impending crises-but no staff or committee has the formal ask of looking to commodity supply and demand.

Thus there was no prior, intelligent, systematic analysis of the impact that the soybean control might have on the economy. There seems to be no evidence of any written decision that spelled out the ramifications of this momentous decision.

The government does not have a clearcut statement of procedure or systematic requirements for reporting. There is inadequate model building and systems analysis to deal with forecasting per se. The tools for such a system do exist. Sophisticated systems to measure, analyze and forecast are routinely used by industry, the academic community and government at various levels. Now we have a responsibility to so equip the U.S. government.

Reporting is purely crisis-oriented. For example, in the Commerce Department, experts are spread thin and jump from commodity to commodity depending upon how many inquiries and complaints they receive from industry, Congress, etc.

Decisions when they are made-are based on inadequate information gathered unsystematically and in an ill-coordinated fashion. Simply stated, there is no coordinated reporting and forecasting system in the U.S. Government.

Mr. Chairman, S. 3209 establishes a National Resource Information System to answer many of the points I have raised:

It will give one agency sole monitoring responsibility for collecting all data in the government on supply and demand of major raw materials and foodsutffs.

It will make an annual report to Congress and the public on critical resources.

It will make regular projections of future demand and supply for major resources based on such factors as per capita consumption rates and population growth for, for example, the next five, ten, fifteen years.

It will have authority to contract for research in academic institutions to augment agency work.

It will have the authority to subpoena industrial information necessary for maintaining accurate and adequate national resource inventories.

It will provide for guarding confidentiality of company information of a competitive nature.

With thorough information, sophisticated analysis and constant monitoring we can overcome our ignorance about world reserves of essential materials and food and the demands on them.

We will have created a distant early warning system to prevent us from blundering into more painful crises. It will tell use what and when to conserve, how much to produce, how to avoid shortages or gluts now caused by ignorance, when to begin significant research programs.

Mankind has reached such a state of interdependence and technological sophistication that the need for such an information system is essential.

The CHAIRMAN. Our next witness is Elmer Staats, Comptroller General, General Accounting Office. Elmer, we are glad to hear from you.

STATEMENT OF ELMER STAATS, COMPTROLLER GENERAL, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY JOHN E. MILGATE; JOSEPH R. FERRI; AND DAVID WILSON

Mr. STAATS. Thank you very much, Mr. Chairman. I have with me this morning three colleagues from the General Accounting

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Office, Mr. Milgate, Mr. Ferri, and Mr. Wilson. We will be happy to have them participate in the question period. I have a prepared statement. I would like to read it if I may.

The events of 1973 and 1974 highlight the serious problems for the United States and other countries due to growing shortages of basic commodities and resources. In the United States these shortages have contributed to the highest rate of inflation in more than 20 years. Agricultural exports have boomed. The cost of and dependence on mineral and fuel imports have risen greatly. For the first time in many years, exports of agricultural products have been restricted.

Marked changes in international economic forces and increases in world population have contributed to the escalation of inflation and commodity shortages. The Government is finding that its organization and policies, comfortable in situations of plenty, are inadequate in a climate of shortages.

Although many interpretations of the basic causes of and the possible solutions to shortages have been made, the nature and dimensions of future commodity and resource problems have not been defined or agreed upon. Meanwhile, supply problems and rising prices are going to be with us.

We at GAO are concerned with the implications these shortages have for the effective management of Federal programs and the accomplishment of National policy objectives. We have already reported on several related problems. I cite only four of them here, and the rest are in an attachment to our statement:

In May 1973, we provided the Committee on Foreign Affairs with a summary of European views on dependence of the free world on Middle East oil.

In July 1973, we reported that the massive sales of wheat to Russia seriously diminished our grain reserves and precipitated dramatic price increases to American consumers.

In July 1973, October 1973, and February 1974, we reported on the necessity for the Government to improve management of its commercial forests to help alleviate the timber shortage.

In February 1974, we reported on the feasibility of establishing a centralized Government data base for developing policies on energy matters.

Attachments to this statement list other related studies we have made or are making.

The Congress, including these committees, has moved to cope with some aspects of the commodity and resource problems. The proposed Domestic Supply Information Act and the National Resource Information System bills are two examples of growing congressional concern.

Upwards of 50 bills have been introduced calling for export controls on a variety of key agricultural and industrial commodities and many more have been introduced on long-range alternative solutions to the short-supply problems.

The executive branch as well has shown growing concern with commodity problems. The Office of Management and Budget, (OMB) has set up an office to look at short-supply situations.

OMB also is in the process of completing an extensive reassessment of U.S. export promotion programs in light of current inflation and commodity shortages. The Economic Research Service at Agriculture has restructured its organization to be more responsive to commodity forecasting work.

We noted with interest the Secretary of Commerce's statement of April 5, 1974, before the International Finance Subcommittee of the Senate Committee on Banking, Housing, and Urban Affairs. The Secretary stated that difficult and quick decisions were necessary on short-supply situations in 1973 and the needed data were not on hand. He outlined several steps under review to correct deficiencies in data availability within the Government, including studies to develop a program for collecting monthly production and inventory data from industry.

In general, we believe that a number of executive branch steps taken have been in the right direction. They tend, however, toward piecemeal solutions.

We are here today to summarize a major report by the GAO on the U.S. actions needed to cope with commodity shortages. As you know, this report is being released today. I believe all of you have copies of it before you.

FORECASTING AND MONITORING

The ability to monitor and forecast future commodity positions is essential if potential shortages are to be foreseen and averted. Our work at the Departments of Agriculture, Commerce, Interior, and State disclosed that:

There is wide diversity in the structure, staffing, and quality of the forecasting groups within the executive branch agencies.

Most forecasting groups do not have a clear statement of purpose, research autonomy, and access to those who make decisions. Despite the interdependence of many short-supply problems, there is no interagency short-supply forecasting system or set of procedures for notifying other agencies of supply problems.

The systems that do exist are not generally geared to serving broad national program objectives.

We concluded there is a pressing need to improve forecasting and monitoring programs if agencies are to be valuable contributors to a better system of managing our resources.

Except for the Department of Agriculture's Economic Research Service, which recently has been reorganized, agency forecasting groups have not attempted to reconsider their data requirements and administrative procedures in order to correct relatively poor forecasting performances.

We are making a series of recommendations to the Secretaries of Agriculture, Commerce, Interior, State, and the Office of Management and Budget. These recommendations are intended generally to upgrade the functions in these agencies by: providing a clear mandate and focus of responsibility, calling for more effective use of data processing equipment and better forecasting methods, better interagency exchanges and joint consideration of information of

common concern, and increased in-house research skills and educational curriculums to maintain such skills.

THE SHORT-SUPPLY DECISIONMAKING SYSTEM

There are 28 groups below the departmental level and five policymaking groups above the departmental level which are or might be involved in short-supply decisions. This means that it is almost impossible to pinpoint accountability for actions taken or to determine who is actually responsible for dealing with short-supply problems. The decision to limit ferrous scrap exports in 1973, for example, involved the Department of Commerce, with limited consultation with the Council on International Economic Policy, the Cost of Living Council, the Council of Economic Advisers, and the Special Trade Representative. In contrast, the simultaneous decision to control soybeans involved the same five groups, plus Agriculture, State, Treasury, the Office of Management and Budget, the National Security Council, and the Council on Economic Policy—a total of 11 agencies.

In these decisions there was an absence of clear-cut analysis of priorities considered, alternatives available, and the domestic and international impact of decisions-undoubtedly reflecting the haste with which the decisionmakers perceived their responsibility to insure adequate domestic supplies. There was little or no attempt on the part of the executive branch to advise the Congress of: actions to be taken, expected duration of controls, or the extent of anticipated and actual domestic and international impacts of controls.

We are recommending that the Council on Economic Policy and the Office of Management and Budget identify or establish a focal point organization or central mechanism to:

Work with departmental commodity forecasting groups to establish data and reporting requirements.

Coordinate data input and policy interests of executive branch departments and interrelated economic policy councils.

Permit an opportunity for private and public groups concerned with specific commodity policy to express their views on such policy.

Report periodically to the Congress and the public on specific and general commodity situations.

We believe the Congress should also consider the need for legislation to establish a central mechanism for developing and coordinating long-term policy planning.

IMPACT OF EXPORT CONTROLS

The Government has resisted short-supply export controls because of the domestic and international economic disruptions they precipitate. Export controls imposed in 1973 on soybeans, ferrous scrap. petroleum, and related commodities challenged the credibility of the U.S. commitment to free trade among nations and its reputation as a reliable supplier. They also hampered multilateral trade negotiations for reducing trade barriers.

The adverse international reaction to U.S. export controls was, in part, caused by the Government's failure to communicate to foreign governments its intention to impose restrictions. Although the Department of State assisted later in developing export licensing arrangements, it was not asked to foresee the possible foreign reaction to controls and was not included in the original decision to impose controls.

Belatedly, the need for consulting with foreign governments was recognized. Bilateral and multilateral discussions have started on developing methods for ameliorating global commodity shortages that require the imposition of export controls. The Secretary_of State has announced his intention to maximize the role of the Department in future export control decisions.

Traditional importers of U.S. products have sought alternative sources of supply. Japan and the European Economic Community increased soybean imports from Brazil and expanded investment in that country's soybean production and processing facilities.

No comprehensive analysis of the domestic and foreign impact has been made although such an assessment appears to be necessary and desirable.

We are recommending that the Council on Economic Policy begin a comprehensive review of the foreign and domestic impacts of 1973 export controls. Such an after-the-fact analysis could help develop appropriate administrative controls and could provide the Congress and policy makers with information and insights that would minimize the adverse impact of export controls if similar Government actions are needed in the future.

IMPLEMENTING SHORT-SUPPLY CONTROLS

The Office of Export Administration of the Commerce Department functions as the executive branch's short-supply export control implementation agency. It has been primarily responsible for the control of strategic materials abroad which led to its location in Commerce's Bureau of East-West Trade.

In the past, short-supply control actions were temporary and occurred infrequently. Thus, the Office of Export Administration responded to short-supply problems in 1972-73 on an ad hoc basis. Officials assumed the situations were temporary and shortly there would be sufficient supplies to satisfy domestic and foreign demand. As a consequence of the flurry of short-supply problems that emerged, the Office temporarily expanded its activities. Audit assistance was provided by temporarily assigning numerous personnel from other Government groups. Even though shortage situations continue to mount in frequency and intensity, no provision has been made to establish a permanent program for licensing exports, monitoring export flows, developing alternative export control systems, and insuring compliance.

We are recommending that Commerce consider expanding its activities by establishing a high-level organization with sufficient staffing and funding to respond to short-supply situations on a higher priority basis.