Our economic deregulation program has achieved major successes in five areas:

Airlines: The Airline Deregulation Act is generating healthy competition, saving billions in fares, and making the airlines more efficient. The Act provides that in 1985 the CAB itself will go out of existence.

Trucking: The trucking deregulation bill opens the industry to competition and allows truckers wide latitude on the routes they drive and the goods they haul. The bill also phases out most of the old law's immunity for setting rates. The Congressional Budget Office estimates these reforms will save as much as $8 billion per year and cut as much as half a percentage point from the inflation rate.

Railroads: Overregulation has stifled railroad management initiative, service, and competitive pricing. The new legislation gives the railroads the freedom they need to rebuild a strong, efficient railroad industry.

Financial Institutions: With the help of the Congress, over the past four years we have achieved two major pieces of financial reform legislation, legislation which has provided the basis for the most far-reaching changes in the financial services industry since the 1930's. The International Banking Act of 1978 was designed to reduce the advantages that foreign banks operating in the United States possessed in comparison to domestic banks. The Depository Institutions Deregulation and Monetary Control Act, adopted last March, provides for the phased elimination of a variety of anti-competitive barriers to financial institutions and freedom to offer services to and attract the savings of consumers, especially small savers.

Recently, I submitted to the Congress my Administration's recommendations for the phased liberalization of restrictions on geographic expansion by commercial banks. Last year the Administration and financial regulatory agencies proposed legislation to permit the interstate acquisition of failing depository institutions. In view of the difficult outlook for some depository institutions I strongly urge the Congress to take prompt favorable action on the failing bank legislation.

Telecommunications: While Congress did not pass legislation in this area, the Federal Communications Commission has taken dramatic action to open all aspects of communications to competition and to eliminate regulations in the areas where competition made them obsolete. The public is benefitting from an explosion of competition and new services.

While these initiatives represent dramatic progress in economic deregulation, continued work is needed. I urge Congress to act on communications legislation and to consider other proposed deregulation measures, such as legislation on the bus industry. In addition, the regulatory commissions must maintain their commitment to competition as the best regulator of all.

The other part of my reform program covers the regulations that are needed to protect the health, safety, and welfare of our citizens. For these regulations, my Administration has created a management program to cut costs without sacrificing goals. Under my Executive Order 12044, we required agencies to analyze the costs of their major new rules and consider alternative approaches, such as performance standards and voluntary codes, that may make rules less costly and more flexible. We created the Regulatory Analysis Review Group in the White House to analyze the most costly proposed new rules and find ways to improve them. The Regulatory Council was established to provide the first Government-wide listing of upcoming rules and eliminate overlapping and conflicting regulations. Agencies have launched "sunset" programs to weed out outmoded old regulations. We have acted to encourage public participation in regulatory decision-making.

These steps have already saved billions of dollars in regulatory costs and slashed thousands of outmoded regulations. We are moving steadily toward a regulatory system that provides needed protections fairly, predictably, and at minimum cost.

I urge Congress to continue on this steady path and resist the simplistic solutions that have been proposed as alternatives. Proposals like legislative veto and increased judicial review will add another layer to the regulatory process, making it more cumbersome and inefficient. The right approach to reform is to improve the individual statutes, where they need change, and to ensure that the regulatory agencies implement those statutes sensibly.

PAPERWORK REDUCTION

The Federal Government imposes a huge paperwork burden on business, local government, and the private sector. Many of these forms are needed for vital government functions, but others are duplicative, overly complex or obsolete.

During my Administration we cut the paperwork burden by 15 percent, and we created procedures to continue this progress. The new Paperwork Reduction Act centralizes, in OMB, oversight of all agencies' information requirements and strengthens OMB's authority to eliminate needless forms. The "paperwork budget" process, which I established by executive order, applies the discipline of the budget process to the hours of reporting time imposed on the public, forcing agencies to scrutinize all their forms each year. With effective implementation, these steps should allow further, substantial paperwork cuts in the years ahead.

TIGHTENING STANDARDS FOR GOVERNMENTAL EFFICIENCY AND INTEGRITY

To develop a foundation to carry out energy policy, we consolidated scattered energy programs and launched the Synthetic Fuels Corporation; to give education the priority it deserves and at the same time reduce HHS to more manageable size, I gave education a seat at the Cabinet table, to create a stronger system for attacking waste and fraud, I reorganized audit and investigative functions by putting an Inspector General in major agencies. Since I took office, we have submitted 14 reorganization initiatives and had them all approved by Congress. We have saved hundreds of millions of dollars through the adoption of businesslike cash management principles and set strict standards for personal financial disclosure and conflict of interest avoidance by high Federal officials.

To streamline the structure of the government, we have secured approval of 14 reorganization initiatives, improving the efficiency of the most important sectors of the government, including energy, education, and civil rights enforcement. We have eliminated more than 300 advisory committees as well as other agencies, boards and commissions which were obsolete or ineffective. Independent Inspectors General have been appointed in major agencies to attack fraud and waste. More than a billion dollars of questionable transactions have been identified through their audit activities.

The adoption of business-like cash management and debt collection initiatives will save over $1 billion, by streamlining the processing of receipts, by controlling disbursements more carefully, and by reducing idle cash balances. Finally this Administration has set strict standards for personal financial disclosure and conflict of interest avoidance by high Federal officials, to elevate the level of public trust in the government.

V. PROTECTING BASIC RIGHTS AND LIBERTIES

I am extremely proud of the advances we have made in ensuring equality and protecting the basic freedoms of all Americans.

—The Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance (OFCCP) have been reorganized and strengthened and a permanent civil rights unit has been established in OMB.

—To avoid fragmented, inconsistent and duplicative enforcement of civil rights laws, three agencies have been given coordinative and standard-setting responsibilities in discrete areas: EEOC for all employment-related activities, HUD for all those relating to housing, and the Department of Justice for all other areas.

—With the enactment of the Right to Financial Privacy Act and a bill limiting police search of newsrooms, we have begun to establish a sound, comprehensive, privacy program.

Ratification of the Equal Rights Amendment must be aggressively pursued. Only one year remains in which to obtain ratification by three additional states.

The Congress must give early attention to a number of important bills which remain. These bills would:

—strengthen the laws against discrimination in housing. Until it is enacted, the 1968 Civil Rights Act's promise of equal access to housing will remain unfulfilled;

—establish a charter for the FBI and the intelligence agencies. The failure to define in law the duties and responsibilities of these agencies has made possible some of the abuses which have occurred in recent years;

—establish privacy safeguards for medical research, bank, insurance, and credit records; and provide special protection for election fund transfer systems.

EQUAL RIGHTS AMENDMENT

I remain committed as strongly as possible to the ratification of the Equal Rights Amendment.

As a result of our efforts in 1978, the Equal Rights Amendment's deadline for ratification was extended for three years. We have now one year and three States left. We cannot afford any delay in marshalling our resources and efforts to obtain the ratification of those three additional States.

Although the Congress has no official role in the ratification process at this point, you do have the ability to affect public opinion and the support of State Legislators for the Amendment. I urge Members from States which have not yet ratified the Equal Rights Amendment to use their influence to secure ratification. I will continue my own efforts to help ensure ratification of the Equal Rights Amendment.

MARTIN LUTHER KING, JR.

Dr. Martin Luther King, Jr. led this Nation's effort to provide all its citizens with civil rights and equal opportunities. His commitment to human rights, peace and non-violence stands as a monument to his humanity and courage. As one of our Nation's most outstanding leaders, it is appropriate that his birthday be commemorated as a national holiday. I hope the Congress will enact legislation this year that will achieve this goal.

FAIR HOUSING

The Fair Housing Act Amendments of 1980 passed the House of Representatives by an overwhelming bipartisan majority only to die in the Senate at the close of the 96th Congress. The leaders of both parties have pledged to make the enactment of fair housing legislation a top priority of the incoming Congress. The need is pressing and a strengthened federal enforcement effort must be the primary method of resolution.

CRIMINAL CODE

The Federal criminal laws are often archaic, frequently contradictory and imprecise, and clearly in need of revision and codification. The new Administration should continue the work which has been begun to develop a Federal criminal code which simplifies and clarifies our criminal laws, while maintaining our basic civil liberties and protections.

PRIVACY

As our public and private institutions collect more and more information and as communications and computer technologies advance, we must act to protect the personal privacy of our citizens.

In the past four years we acted on the report of the Privacy Commission and established a national privacy policy. We worked with Congress to pass legislation restricting wiretaps and law enforcement access to bank records and to reporters' files. We reduced the number of personal files held by the government and restricted the transfer of personal information among Federal agencies. We also worked with the Organization for Economic Cooperation and Development to establish international guidelines to protect the privacy of personal information that is transferred across borders.

VI. PROTECTING AND DEVELOPING OUR NATURAL RESOURCES

Two of our Nation's most precious natural resources are our environment and our vast agricultural capacity. From the beginning of my Administration, I have worked with the Congress to enhance and protect, as well as develop our natural resources. In the environmental areas, I have been especially concerned about the importance of balancing the need for resource development with preserving a clean environment, and have taken numerous actions to foster this goal. In the agricultural area, I have taken the steps needed to improve farm incomes and to increase our agricultural production to record levels. That progress must be continued in the 1980's.

ENVIRONMENT

Preserving the quality of our environment has been among the most important objectives of my Administration and of the Congress. As a result of these shared commitments and the dedicated efforts of many members of the Congress and my Administration, we have achieved several historic accomplishments.

PROTECTION OF ALASKA LANDS

Passage of the Alaska National Interest Lands Conservation Act was one of the most important conservation actions of this century. At stake was the fate of millions of acres of beautiful land, outstanding and unique wildlife populations, native cultures, and the opportunity to ensure that future generations of Americans would be able to enjoy the benefits of these nationally significant resources. As a result of the leadership, commitment, and persistence of my Administration and the Congressional leadership, the Alaska Lands Bill was signed into law last December.

The Act adds 97 million acres of new parks and refuges, more than doubling the size of our National Park and National Wildlife Refuge Systems. The bill triples the size of our national wilderness system, increasing its size by 56 million acres. And by adding 25 free-flowing river segments to the Wild and Scenic River System, the bill almost doubles the river mileage in that system. The Alaska Lands Act reaffirms our commitment to the environment and strikes a balance between protecting areas of great beauty and allowing development of Alaska's oil, gas, mineral, and timber resources.

PROTECTION OF NATURAL RESOURCES

In addition to the Alaska Lands Act, over the past four years we have been able to expand significantly the national wilderness and parks systems. In 1978, the Congress passed the historical Omnibus Parks Act, which made 12 additions to the National Park System. The Act also established the first two national trails since the National Trails System Act was passed in 1968. Then, in 1980, as a result of my 1979 Environmental Message, the Federal land management agencies have established almost 300 new National Recreational Trails. With the completion of the RARE II process, which eliminated the uncertainty surrounding the status of millions of acres of land, we called for over 15 million acres of new wilderness in the nation's National Forest, in 1980 the Congress established about 4.5 million acres of wilderness in the lower 48 states. In addition, the Administration recommended legislation to protect Lake Tahoe, and through an Executive Order has already established a mechanism to help ensure the Lake's protection. Finally, in 1980 the Administration established the Channel Islands Marine Sanctuary.

Administration actions over the past four years stressed the importance of providing Federal support only for water resource projects that are economically and environmentally sound. This policy should have a major and lasting influence on the federal government's role in water resource development and management. The Administration's actions to recommend to the Congress only economically and environmentally sound water resource projects for funding resulted not only in our opposing uneconomic projects but also, in 1979, in the first Administration proposal of new project starts in 4 years.

One of the most significant water policy actions of the past four years was the Administration's June 6, 1978 Water Policy Reform Message to the Congress. This Message established a new national water resources policy with the following objectives:

—to give priority emphasis to water conservation;

—to consider environmental requirements and values more fully and along with economic factors in the planning and management of water projects and programs;

—to enhance cooperation between state and federal agencies in water resources planning and management.

In addition, the Executive Office of the President established 11 policy decision criteria to evaluate the proposed federal water projects, the Water Resources Council developed and adopted a new set of Principles and Standards for water projects which is binding on all federal construction agencies, and improved regulations were developed to implement the National Historic Preservation Act and the Fish and Wildlife Coordination Act. As a result, water resource projects must be determined to be economically sound before the Administration will recommend authorization or appropriation. Over the years ahead, this policy will help to reduce wasteful federal spending by targeting federal funds to the highest priority water resource projects.

In the pursuit of this policy, however, we cannot lose projects. In the part that sound water resource projects play in providing irrigation, power, and flood control. We must also recognize the special needs of particular regions of the country in evaluating the need for additional projects.

ADDRESSING GLOBAL RESOURCE AND ENVIRONMENTAL PROBLEMS

The Global 2000 Report to the President, prepared in response to my 1977 Environment Message, is the first of its kind. Never before has our government, or any government, taken such a comprehensive, long-range look at the interrelated global issues of resources, population, and environment.

The Report's conclusions are important. They point to a rapid increase in population and human needs through the year 2000 while at the same time a decline in the earth's capacity to meet those needs, unless nations of the world act decisively to alter current trends.

The United States has contributed actively to a series of U.N. conferences on the environment, population, and resources, and is preparing for the 1981 Conference on New and Renewable Sources of Energy. Following my 1977 Environmental Message, the Administration development assistance programs have added emphasis to natural resource management and environmental protection. My 1979 Environmental Message called attention to the alarming loss of world forests, particularly in the tropics. An interagency task force on tropical forests has developed a U.S. government program to encourage conservation and wise management of tropical forests. The Administration is encouraging action by other nations and world organizations to the same purpose. The United States is a world leader in wildlife conservation and the assessment of environmental effects of government actions. The January 5, 1979, Executive Order directing U.S. government agencies to consider the effects of their major actions abroad, is another example of this leadership.

COMMITMENT TO CONTROL OF POLLUTION AND HAZARDOUS CHEMICALS

Over the past four years, there has been steady progress towards cleaner air and water, sustained by the commitment of Congress and the Administration to these important national objectives. In addition, the Administration has developed several new pollution compliance approaches such as alternative and innovative waste water treatment projects, the "bubble" concept, the "offset" policy, and permit consolidation, all of which are designed to reduce regulatory burdens on the private sector.

One of the most pressing problems to come to light in the past four years has been improper hazardous waste disposal. The Administration has moved on three fronts. First, we proposed the Oil Hazardous Substances and Hazardous Waste Response, Liability and Compensation Act (the Superfund bill) to provide comprehensive authority and $1.6 billion in funds to clean up abandoned hazardous waste disposal sites. In November 1980 the Congress passed a Superfund bill which I signed into law.

Second, the administration established a hazardous waste enforcement strike force to ensure that when available, responsible parties are required to clean up sites posing dangers to public health and to the environment. To date, 50 lawsuits have been brought by the strike force.

Third, regulations implementing subtitle C of the Resource Conservation and Recovery Act were issued. The regulations establish comprehensive controls for hazardous waste and, together with vigorous enforcement, will help to ensure that Love Canal will not be repeated.

THE FUTURE

For the future, we cannot, and we must not, forget that we are charged with the stewardship of an irreplaceable environment and natural heritage. Our children, and our children's children, are dependent upon our maintaining our commitment to preserving and enhancing the quality of our environment. It is my hope that when our descendants look back on the 1980's they will be able to affirm:

—that we kept our commitment to the restoration of environmental quality;

—that we protected the public health from the continuing dangers of toxic chemicals, from pollution, from hazardous and radioactive waste, and that we made our communities safer, healthier and better places to live;

—that we preserved America's wilderness areas and particularly its last great frontier, Alaska, for the benefit of all Americans in perpetuity;

—that we put this nation on a path to a sustainable energy future, one based increasingly on renewable resources and on energy conservation;

—that we moved to protect America's countryside and coastland from mismanagement and irresponsibility;

—that we redirected the management of the nation's water resources toward water conservation, sound development and environmental protection;

—that we faced squarely such worldwide problems as the destruction of forests, acid rain, carbon dioxide build-up and nuclear proliferation; and

—that we protected the habitat and the existence of our own species on this earth.

AGRICULTURE THE FARM ECONOMY

The farm economy is sound and its future is bright. Agriculture remains a major bulwark of the nation's economy and an even more important factor in the world food system. The demand for America's agricultural abundance, here and abroad, continues to grow. In the near-term, the strength of this demand is expected to press hard against supplies, resulting in continued price strength.

The health and vitality of current-day agriculture represents a significant departure from the situation that existed when I came to office four years ago. In January 1977, the farm economy was in serious trouble. Farm prices and farm income were falling rapidly. Grain prices were at their lowest levels in years and steadily falling. Livestock producers, in their fourth straight year of record losses, were liquidating breeding herds at an unparalleled rate. Dairy farmers were losing money on every hundredweight of milk they produced. Sugar prices were in a nosedive.

Through a combination of improvements in old, established programs and the adoption of new approaches where innovation and change were needed, my Administration turned this situation around. Commodity prices have steadily risen. Farm income turned upward. U.S. farm exports set new records each year, increasing over 80 percent for the four year period. Livestock producers began rebuilding their herds. Dairy farmers began to earn a profit again.

RECENT POLICY INITIATIVES

Several major agricultural policy initiatives have been undertaken over the past year. Some are the culmination of policy proposals made earlier in this Administration; others are measures taken to help farmers offset the impact of rapid inflation in production costs. In combination, they represent a significant strengthening of our nation's food and agricultural policy. These initiatives include:

FOOD SECURITY RESERVE

The Congress authorized formation of a 4 million ton food grain reserve for use in international food assistance. This reserve makes it possible for the United States to stand behind its food aid commitment to food deficit nations, even during periods of short supplies and high prices. This corrects a serious fault in our past food assistance policy.

COMPREHENSIVE CROP INSURANCE

The Congress also authorized a significant new crop insurance program during 1980. This measure provides farmers with an important new program tool for sharing the economic risks that are inherent to agriculture. When fully operational, it will replace a hodgepodge of disaster programs that suffered from numerous shortcomings.

SPECIAL LOAN RATES

Another legislative measure passed late in the 2nd session of the 96th Congress authorizes the Secretary of Agriculture to provide higher loan rates to farmers who enter their grain in the farmer-owned grain reserve. This additional incentive to participate will further strengthen the reserve.

INCREASED LOAN PRICES

In July 1980, I administratively raised loan prices for wheat, feedgrains, and soybeans to help offset the effects of a serious cost-price squeeze. At the same time, the release and call prices for the grain reserve were adjusted upward.

HIGHER TARGET PRICES

The Agricultural Adjustment Act of 1980 raised the target prices for 1980-crop wheat and feed grain crops. This change corrected for shortcomings in the adjustment formula contained in the Food and Agriculture Act of 1977.

FUTURE AGENDA

The food and agricultural policies adopted by this Administration over the past four years, including those described above, will provide a firm foundation for future governmental actions in this field. Expiration of the Food and Agriculture Act of 1977 later this year will require early attention by the Congress. With relatively minor changes, most of the authorities contained in the 1977 Act should be extended in their present form. The farmer-owned grain reserve has proven to be a particularly effective means of stabilizing grain markets and should be preserved in essentially its present form.

Beyond this, it will be important for the Congress to keep a close eye on price-cost developments in the farm sector. As noted above, some of the actions I took last year were for the purpose of providing relief from the cost-price squeeze facing farmers. Should these pressures continue, further actions might be required.

My Administration has devoted particular attention to the issues of world hunger, agricultural land use, and the future structure of American agriculture. I encourage the Congress and the next Administration to review the results of these landmark enquiries and, where deemed appropriate, to act on their recommendations.

Following a careful review of the situation, I recently extended the suspension of grain sales to the Soviet Union. I am satisfied that this action has served its purpose effectively and fairly. However, as long as this suspension must remain in effect, it will be important for the next Administration and the Congress to take whatever actions are necessary to ensure that the burden does not fall unfairly on our Nation's farmers. This has been a key feature of my Administration's policy, and it should be maintained.

VII. FOREIGN POLICY

From the time I assumed office four years ago this month, I have stressed the need for this country to assert a leading role in a world undergoing the most extensive and intensive change in human history.

My policies have been directed in particular at three areas of change:

—the steady growth and increased projection abroad of Soviet military power, power that has grown faster than our own over the past two decades.

—the overwhelming dependence of Western nations, which now increasingly includes the United States, on vital oil supplies from the Middle East.

—the pressures of change in many nations of the developing world, in Iran and uncertainty about the future stability of many developing countries.

As a result of those fundamental facts, we face some of the most serious challenges in the history of this nation. The Soviet invasion of Afghanistan is a threat to global peace, to East-West relations, and to regional stable flow of oil. As the unprecedented relations, an and overwhelming vote in the General Assembly demonstrated, countries across the world, and particularly the nonaligned, regard the Soviet invasion as a threat to their independence and security. Turmoil within the region adjacent to the Persian Gulf poses risks for the security and prosperity of every oil importing nation and thus for the entire global economy. The continuing holding of American hostages in Iran is both an affront to civilized people everywhere, and a serious impediment to meeting the self-evident threat to widely-shared common interests, including those of Iran.

But as we focus our most urgent efforts on pressing problems, we will continue to pursue the benefits that only change can bring. For it always has been the essence of America that we want to move on, we understand that prosperity, progress and most of all peace cannot be had by standing still. A world of nations striving to preserve their independence, and of peoples aspiring for economic development and political freedom, is not a world hostile to the ideals and interests of the United States. We face powerful adversaries, but we have strong friends and dependable allies. We have common interests with the vast majority of the world's nations and peoples.

There have been encouraging developments in recent years, as well as matters requiring continued vigilance and concern:

—Our alliances with the world's most advanced and democratic states from Western Europe through Japan are stronger than ever.

—We have helped to bring about a dramatic improvement in relations between Egypt and Israel and an historic step towards a comprehensive Arab-Israeli settlement.

—Our relations with China are growing closer, providing a major new dimension in our policy in Asia and the world.

—Across southern Africa from Rhodesia to Namibia we are helping with the peaceful transition to majority rule in a context of respect for minority as well as majority rights.

—We have worked domestically and with our allies to respond to an uncertain energy situation by conservation and diversification of energy supplies based on internationally agreed targets.

—We have unambiguously demonstrated our commitment to defend Western interests in Southwest Asia, and we have significantly increased our ability to do so.

—And over the past four years the U.S. has developed an energy program which is comprehensive and ambitious. New institutions have been established such as the Synthetic Fuels Corporation and Solar Bank. Price decontrol for oil and gas is proceeding. American consumers have risen to the challenge, and we have experienced real improvements in consumption patterns.

The central challenge for us today is to our steadfastedness of purpose. We are no longer tempted by isolationism. But we must also learn to deal effectively with the contradictions of the world, the need to cooperate with potential adversaries without euphoria, without undermining our determination to compete with such adversaries and if necessary confront the threats they may pose to our security.

We face a broad range of threats and opportunities. We have and should continue to pursue a broad range of defense, diplomatic and economic capabilities and objectives.

I see six basic goals for America in the world over the 1980's:

—First, we will continue, as we have over the past four years, to build America's military strength and that of our allies and friends. Neither the Soviet Union nor any other nation will have reason to question our will to sustain the strongest and most flexible defense forces.

—Second, we will pursue an active diplomacy in the world, working, together with our friends and allies, to resolve disputes through peaceful means and to make any aggressor pay a heavy price.

—Third, we will strive to resolve pressing international economic problems, particularly energy and inflation, and continue to pursue our still larger objective of global economic growth through expanded trade and development assistance and through the preservation of an open multilateral trading system.

—Fourth, we will continue vigorously to support the process of building democratic institutions and improving human rights protection around the world. We are deeply convinced that the future lies not with dictatorship but democracy.

—Fifth, we remain deeply committed to the process of mutual and verifiable arms control, particularly to the effort to prevent the spread and further development of nuclear weapons. Our decision to defer, but not abandon our efforts to secure ratification of the SALT II Treaty reflects our firm conviction that the United States has a profound national security interest in the constraints on Soviet nuclear forces which only that treaty can provide.

—Sixth, we must continue to look ahead in order to evaluate and respond to resource, environment and population challenges through the end of this century.

One very immediate and pressing objective that is uppermost on our minds and those of the American people is the release of our hostages in Iran.

We have no basic quarrel with the nation, the revolution or the people of Iran. The threat to them comes not from American policy but from Soviet actions in the region. We are prepared to work with the government of Iran to develop a new and mutually beneficial relationship.

But that will not be possible so long as Iran continues to hold Americans hostages, in defiance of the world community and civilized behavior. They must be released unharmed. We have thus far pursued a measured program of peaceful diplomatic and economic steps in an attempt to resolve this issue without resorting to other remedies available to us under international law. This reflects the deep respect of our nation for the rule of law and for the safety of our people being held, and our belief that a great power bears a responsibility to use its strength in a measured and judicious manner. But our patience is not unlimited and our concern for the well-being of our fellow citizens grows each day.

ENHANCING NATIONAL SECURITY, AMERICAN MILITARY STRENGTH

The maintenance of national security is my first concern, as it has been for every president before me.

We must have both the military power and the political will to deter our adversaries and to support our friends and allies.

We must pay whatever price is required to remain the strongest nation in the world. That price has increased as the military power of our major adversary has grown and its readiness to use that power been made all too evident in Afghanistan. The real increases in defense spending, therefore probably will be higher than previously projected; protecting our security may require a larger share of our national wealth in the future.

THE U.S.-SOVIET RELATIONSHIP

We are demonstrating to the Soviet Union across a broad front that it will pay a heavy price for its aggression in terms of our relationship. Throughout the last decades U.S.-Soviet relations have been a mixture of cooperation and competition. The Soviet invasion of Afghanistan and the imposition of a puppet government have highlighted in the starkest terms the darker side of their policies, going well beyond competition and the legitimate pursuit of national interest, and violating all norms of international law and practice.

This attempt to subjugate an independent, non-aligned Islamic people is a callous violation of international law and the United Nations Charter, two fundamentals of international order. Hence, it is also a dangerous threat to world peace. For the first time since the communization of Eastern Europe after World War II, the Soviets have sent combat forces into an area that was not previously under their control, into a non-aligned and sovereign state.

The destruction of the independence of the Afghanistan government and the occupation by the Soviet Union have altered the strategic situation in that part of the world in a very ominous fashion. It has significantly shortened the striking distance to the Indian Ocean and the Persian Gulf for the Soviet Union.

It has also eliminated a buffer between the Soviet Union and Pakistan and presented a new threat to Iran. These two countries are now far more vulnerable to Soviet political intimidation. If that intimidation were to prove effective, the Soviet Union could control an area of vital strategic and economic significance to the survival of Western Europe, the Far East, and ultimately the United States.

It has now been over a year since the Soviet invasion of Afghanistan dealt a major blow to U.S.-Soviet relations and the entire international system. The U.S. response has proven to be serious and far-reaching. It has been increasingly effective, imposing real and sustained costs on the U.S.S.R.'s economy and international image.

Meanwhile, we have encouraged and supported efforts to reach a political settlement in Afghanistan which would lead to a withdrawal of Soviet forces from that country and meet the interests of all concerned. It is Soviet intransigence that has kept those efforts from bearing fruit.

Meanwhile, an overwhelming November resolution of the United Nations General Assembly on Afghanistan has again made clear that the world has not and will not forget Afghanistan. And our response continues to make it clear that Soviet use of force in pursuit of its international objectives is incompatible with the notion of business-as-usual.

BILATERAL COMMUNICATION

U.S.-Soviet relations remain strained by the continued Soviet presence in Afghanistan, by growing Soviet military capabilities, and by the Soviets' apparent willingness to use those capabilities without respect for the most basic norms of international behavior.

But the U.S.-Soviet relationship remains the single most important element in determining whether there will be war or peace. And so, despite serious strains in our relations, we have maintained a dialogue with the Soviet Union over the past year. Through this dialogue, we have ensured against bilateral misunderstandings and miscalculations which might escalate out of control, and have managed to avoid the injection of superpower rivalries into areas of tension like the Iran-Iraq conflict.

POLAND

Now, as was the case a year ago, the prospect of Soviet use of force threatens the international order. The Soviet Union has completed preparations for a possible military intervention against Poland. Although the situation in Poland has shown signs of stabilizing recently, Soviet forces remain in a high state of readiness and they could move into Poland on short notice. We continue to believe that the Polish people should be allowed to work out their internal problems themselves, without outside interference, and we have made clear to the Soviet leadership that any intervention in Poland would have severe and prolonged consequences for East-West detente, and U.S.-Soviet relations in particular.

DEFENSE BUDGET

For many years the Soviets have steadily increased their real defense spending, expanded their strategic forces, strengthened their forces in Europe and Asia, and enhanced their capability for projecting military force around the world directly or through the use of proxies. Afghanistan dramatizes the vastly increased military power of the Soviet Union.

The Soviet Union has built a war machine far beyond any reasonable requirements for their own defense and security. In contrast, our own defense spending declined in real terms every year from 1968 through 1976.

We have reversed this decline in our own effort. Every year since 1976 there has been a real increase in our defense spending, and our lead has encouraged increases by our allies. With the support of the Congress, we must and will make an even greater effort in the years ahead.

The Fiscal Year 1982 budget would increase funding authority for defense to more than $196 billion. This amount, together with a supplemental request for FY 1981 of about $6 billion, will more than meet my Administration's pledge for a sustained growth of 3 percent in real expenditures, and provides for 5 percent in program growth in FY 1982 and beyond.

The trends we mean to correct cannot be remedied overnight; we must be willing to see this program through. To ensure that we do so I am setting a growth rate for defense that we can sustain over the long haul.

The defense program I have proposed for the next five years will require some sacrifice, but sacrifice we can well afford.

The defense program emphasizes four areas:

1. It ensures that our strategic nuclear forces will be equivalent to those of the Soviet Union and that deterrence against nuclear war will be maintained; 2. It upgrades our forces so that the military balance between NATO and the Warsaw Pact will continue to deter the outbreak of war, conventional or nuclear, in Europe; 3. It provides us the ability to come quickly to the aid of friends and allies around the globe; 4. And it ensures that our Navy will continue to be the most powerful on the seas.

STRATEGIC FORCES

We are strengthening each of the three legs of our strategic forces. The cruise missile production which will begin next year will modernize our strategic air deterrent. B-52 capabilities will also be improved. These steps will maintain and enhance the B-52 fleet by improving its ability to deliver weapons against increasingly heavily defended targets.

We are also modernizing our strategic submarine force. Four more POSEIDON submarines backfitted with new, 4,000 mile TRIDENT I missiles began deployments in 1980. Nine TRIDENT submarines have been authorized through 1981, and we propose one more each year.

The new M-X missile program to enhance our land-based intercontinental ballistic missile force continues to make progress. Technical refinements in the basing design over the last year will result in operational benefits, lower costs, and reduced environmental impact. The M-X program continues to be an essential ingredient in our strategic posture, providing survivability, endurance, secure command and control and the capability to threaten targets the Soviets hold dear.

Our new systems will enable U.S. strategic forces to maintain equivalence in the face of the mounting Soviet challenge. We would however need an even greater investment in strategic systems to meet the likely Soviet buildup without SALT.

STRATEGIC DOCTRINE

This Administration's systematic contributions to the necessary evolution of strategic doctrine began in 1977 when I commissioned a comprehensive net assessment. From that base a number of thorough investigations of specific topics continued. I should emphasize that the need for an evolutionary doctrine is driven not by any change in our basic objective, which remains peace and freedom for all mankind. Rather, the need for change is driven by the inexorable buildup of Soviet military power and the increasing propensity of Soviet leaders to use this power in coercion and outright aggression to impose their will on others.

I have codified our evolving strategic doctrine in a number of interrelated and mutually supporting Presidential Directives. Their overarching theme is to provide a doctrinal basis, and the specific program to implement it, that tells the world that no potential adversary of the United States could ever conclude that the fruits of his aggression would be significant or worth the enormous costs of our retaliation.

The Presidential Directives include:

PD-18: An overview of our strategic objectives PD-37: Basic space policy PD-41: Civil Defense PD-53: Survivability and endurance for telecommunications PD-57: Mobilization planning PD-58: Continuity of Government PD-59: Countervailing Strategy for General War.

These policies have been devised to deter, first and foremost, Soviet aggression. As such they confront not only Soviet military forces but also Soviet military doctrine. By definition deterrence requires that we shape Soviet assessments about the risks of war, assessments they will make using their doctrine, not ours.

But at the same time we in no way seek to emulate their doctrine. In particular, nothing in our policy contemplates that nuclear warfare could ever be a deliberate instrument for achieving our own goals of peace and freedom. Moreover, our policies are carefully devised to provide the greatest possible incentives and opportunities for future progress in arms control.

Finally, our doctrinal evolution has been undertaken with appropriate consultation with our NATO Allies and others. We are fully consistent with NATO's strategy of flexible response.

FORCES FOR NATO

We are greatly accelerating our ability to reinforce Western Europe with massive ground and air forces in a crisis. We are undertaking a major modernization program for the Army's weapons and equipment, adding armor, firepower, and tactical mobility.

We are prepositioning more heavy equipment in Europe to help us cope with attacks with little warning, and greatly strengthening our airlift and sealift capabilities.

We are also improving our tactical air forces, buying about 1700 new fighter and attack aircraft over the next five years, and increasing the number of Air Force fighter wings by over 10 percent.

We are working closely with our European allies to secure the Host Nation Support necessary to enable us to deploy more quickly a greater ratio of combat forces to the European theater at a lower cost to the United States.

SECURITY ASSISTANCE

As we move to enhance U.S. defense capabilities, we must not lose sight of the need to assist others in maintaining their own security and independence. Events since World War II, most recently in Southwest Asia, have amply demonstrated that U.S. security cannot exist in a vacuum, and that our own prospects for peace are closely tied to those of our friends. The security assistance programs which I am proposing for the coming fiscal year thus directly promote vital U.S. foreign policy and national security aims, and are integral parts of our efforts to improve and upgrade our own military forces.

More specifically, these programs, which are part of our overall foreign aid request, promote U.S. security in two principal ways. First, they assist friendly and allied nations to develop the capability to defend themselves and maintain their own independence. An example during this past year was the timely support provided Thailand to help bolster that country's defenses against the large numbers of Soviet-backed Vietnamese troops ranged along its eastern frontier. In addition, over the years these programs have been important to the continued independence of other friends and allies such as Israel, Greece, Turkey and Korea. Second, security assistance constitutes an essential element in the broad cooperative relationships we have established with many nations which permit either U.S. bases on their territory or access by U.S. forces to their facilities. These programs have been particularly important with regard to the recently-concluded access agreements with various countries in the Persian Gulf and Indian Ocean regions and have been crucial to the protection of our interests throughout Southwest Asia.

RAPID DEPLOYMENT FORCES

We are systematically enhancing our ability to respond rapidly to non-NATO contingencies wherever required by our commitments or when our vital interests are threatened.

The rapid deployment forces we are assembling will be extraordinarily flexible: They could range in size from a few ships or air squadrons to formations as large as 100,000 men, together with their support. Our forces will be prepared for rapid deployment to any region of strategic significance.

Among the specific initiatives we are taking to help us respond to crises outside of Europe are:

The development of a new fleet of large cargo aircraft with intercontinental range; the design and procurement of a force of Maritime Prepositioning Ships that will carry heavy equipment and supplies for three Marine Corps brigades; the procurement of fast sealift ships to move large quantities of men and material quickly from the U.S. to overseas areas of deployment; increasing training and exercise activities to ensure that our forces will be well prepared to deploy and operate in distant areas.

In addition, our European allies have agreed on the importance of providing support to U.S. deployments to Southwest Asia.

NAVAL FORCES

Seapower is indispensable to our global position, in peace and also in war. Our shipbuilding program will sustain a 550-ship Navy in the 1990's and we will continue to build the most capable ships afloat.

The program I have proposed will assure the ability of our Navy to operate in high threat areas, to maintain control of the seas and protect vital lines of communication, both military and economic and to provide the strong maritime component of our rapid deployment forces. This is essential for operations in remote areas of the world, where we cannot predict far in advance the precise location of trouble, or preposition equipment on land.

MILITARY PERSONNEL

No matter how capable or advanced our weapons systems, our military security depends on the abilities, the training and the dedication of the people who serve in our armed forces. I am determined to recruit and to retain under any foreseeable circumstances an ample level of such skilled and experienced military personnel. This Administration has supported for FY 1981 the largest peacetime increase ever in military pay and allowances.

We have enhanced our readiness and combat endurance by improving the Reserve Components. All reservists are assigned to units structured to complement and provide needed depth to our active forces. Some reserve personnel have also now been equipped with new equipment.

MOBILIZATION PLANNING

We have completed our first phase of mobilization planning, the first such Presidentially-directed effort since World War II. The government-wide exercise of our mobilization plans at the end of 1980 showed, first, that planning pays off and, second, that much more needs to be done.

OUR INTELLIGENCE POSTURE

Our national interests are critically dependent on a strong and effective intelligence capability. We will maintain and strengthen the intelligence capabilities needed to assure our national security. Maintenance of and continued improvements in our multi-faceted intelligence effort are essential if we are to cope successfully with the turbulence and uncertainties of today's world.

The intelligence budget I have submitted to the Congress responds to our needs in a responsible way, providing for significant growth over the Fiscal Year 1981 budget. This growth will enable us to develop new technical means of intelligence collection while also assuring that the more traditional methods of intelligence work are also given proper stress. We must continue to integrate both modes of collection in our analyses.

REGIONAL POLICIES

Every President for over three decades has recognized that America's interests are global and that we must pursue a global foreign policy.

Two world wars have made clear our stake in Western Europe and the North Atlantic area. We are also inextricably linked with the Far East, politically, economically, and militarily. In both of these, the United States has a permanent presence and security commitments which would be automatically triggered. We have become increasingly conscious of our growing interests in a third area, the Middle East and the Persian Gulf area.

We have vital stakes in other major regions of the world as well. We have long recognized that in an era of interdependence, our own security and prosperity depend upon a larger common effort with friends and allies throughout the world.

THE ATLANTIC ALLIANCE

In recognition of the threat which the Soviet invasion of Afghanistan posed to Western interests in both Europe and Southwest Asia, NATO foreign and defense ministers have expressed full support for U.S. efforts to develop a capability to respond to a contingency in Southwest Asia and have approved an extensive program to help fill the gap which could be created by the diversion of U.S. forces to that region.

The U.S. has not been alone in seeking to maintain stability in the Southwest Asia area and insure access to the needed resources there. The European nations with the capability to do so are improving their own forces in the region and providing greater economic and political support to the residents of the area. In the face of the potential danger posed by the Iran-Iraq conflict, we have developed coordination among the Western forces in the area of the Persian Gulf in order to be able to safeguard passage in that essential waterway.

Concerning developments in and around Poland the allies have achieved the highest level of cohesion and unity of purpose in making clear the effects on future East-West relations of a precipitous Soviet act there.

The alliance has continued to build on the progress of the past three years in improving its conventional forces through the Long-Term Defense Program. Though economic conditions throughout Europe today are making its achievement difficult, the yearly real increase of 3 percent in defense spending remains a goal actively sought by the alliance.

The NATO alliance also has moved forward during the past year with the implementation of its historic December 1979 decision to modernize its Theater Nuclear Force capabilities through deployment of improved Pershing ballistic missiles and ground-launched cruise missiles in Europe. Our allies continue to cooperate actively with us in this important joint endeavor, whose purpose is to demonstrate convincingly to the Soviet Union the potential costs of a nuclear conflict in Europe. At the same time, we offered convincing evidence of our commitment to arms control in Europe by initiating preliminary consultations with the Soviet Union in Geneva on the subject of negotiated limits on long-range theater nuclear forces. Also, during 1980 we initiated and carried out a withdrawal from our nuclear weapons stockpile in Europe of 1,000 nuclear warheads. This successful drawdown in our nuclear stockpile was a further tangible demonstration of our commitment to the updating of our existing theater nuclear forces in Europe.

In the NATO area, we continued to work closely with other countries in providing resources to help Turkey regain economic health. We regretted that massive political and internal security problems led the Turkish military to take over the government on September 12. The new Turkish authorities are making some progress in resolving those problems, and they have pledged an early return to civilian government. The tradition of the Turkish military gives us cause to take that pledge seriously. We welcomed the reestablishment of Greece's links to the integrated military command structure of the Atlantic Alliance—a move which we had strongly encouraged—as a major step toward strengthening NATO's vital southern flank at a time of international crisis and tension in adjacent areas. Greek reintegration exemplifies the importance which the allies place on cooperating in the common defense and shows that the allies can make the difficult decisions necessary to insure their continued security. We also welcomed the resumption of the intercommunal talks on Cyprus.

THE U.S. AND THE PACIFIC NATIONS

The United States is a Pacific nation, as much as it is an Atlantic nation. Our interests in Asia are as important to us as our interests in Europe. Our trade with Asia is as great as our trade with Europe. During the past four years we have regained a strong, dynamic and flexible posture for the United States in this vital region.

Our major alliances with Japan, Australia and New Zealand are now stronger than they ever have been, and together with the nations of western Europe, we have begun to form the basic political structure for dealing with international crises that affect us all. Japan, Australia and New Zealand have given us strong support in developing a strategy for responding to instability in the Persian Gulf.

Normalization of U.S. relations with China has facilitated China's full entry into the international community and encouraged a constructive Chinese role in the Asia-Pacific region. Our relations with China have been rapidly consolidated over the past year through the conclusion of a series of bilateral agreements. We have established a pattern of frequent and frank consultations between our two governments, exemplified by a series of high-level visits and by regular exchanges at the working level, through which we have been able to identify increasingly broad areas of common interest on which we can cooperate.

United States relations with the Association of Southeast Asian Nations (ASEAN) have also expanded dramatically in the past four years. ASEAN is now the focus for U.S. policy in Southeast Asia, and its cohesion and strength are essential to stability in this critical area and beyond.

Soviet-supported Vietnamese aggression in Indo-china has posed a major challenge to regional stability. In response, we have reiterated our security commitment to Thailand and have provided emergency security assistance for Thai forces facing a Vietnamese military threat along the Thai-Cambodian border. We have worked closely with ASEAN and the U.N. to press for withdrawal of Vietnamese forces from Cambodia and to encourage a political settlement in Cambodia which permits that nation to be governed by leaders of its own choice. We still look forward to the day when Cambodia peacefully can begin the process of rebuilding its social, economic and political institutions, after years of devastation and occupation. And, on humanitarian grounds and in support of our friends in the region, we have worked vigorously with international organizations to arrange relief and resettlement for the exodus of Indo-chinese refugees which threatened to overwhelm these nations.

We have maintained our alliance with Korea and helped assure Korea's security during a difficult period of political transition.

We have amended our military base agreement with the Philippines, ensuring stable access to these bases through 1991. The importance of our Philippine bases to the strategic flexibility of U.S. forces and our access to the Indian Ocean is self-evident.

Finally, we are in the process of concluding a long negotiation establishing Micronesia's status as a freely associated state.

We enter the 1980's with a firm strategic footing in East Asia and the Pacific, based on stable and productive U.S. relations with the majority of countries of the region. We have established a stable level of U.S. involvement in the region, appropriate to our own interests and to the interests of our friends and allies there.

THE MIDDLE EAST AND SOUTHWEST ASIA

The continuing Soviet occupation of Afghanistan and the dislocations caused by the Iraq-Iran war serve as constant reminders of the critical importance for us, and our allies, of a third strategic zone stretching across the Middle East, the Persian Gulf, and much of the Indian subcontinent. This Southwest Asian region has served as a key strategic and commercial link between East and West over the centuries. Today it produces two-thirds of the world's oil exports, providing most of the energy needs of our European allies and Japan. It has experienced almost continuous conflict between nations, internal instabilities in many countries, and regional rivalries, combined with very rapid economic and social change. And now the Soviet Union remains in occupation of one of these nations, ignoring world opinion which has called on it to get out.

We have taken several measures to meet these challenges.

MIDDLE EAST

In the Middle East, our determination to consolidate what has already been achieved in the peace process—and to buttress that accomplishment with further progress toward a comprehensive peace settlement—must remain a central goal of our foreign policy. Pursuant to their peace treaty, Egypt and Israel have made steady progress in the normalization of their relations in a variety of fields, bringing the benefits of peace directly to their people. The new relationship between Egypt and Israel stands as an example of peaceful cooperation in an increasingly fragmented and turbulent region.

Both President Sadat and Prime Minister Begin remain committed to the current negotiations to provide full autonomy to the inhabitants of the West Bank and Gaza. These negotiations have been complex and difficult, but they have already made significant progress, and it is vital that the two sides, with our assistance, see the process through to a successful conclusion. We also recognize the need to broaden the peace process to include other parties to the conflict and believe that a successful autonomy agreement is an essential first step toward this objective.

We have also taken a number of steps to strengthen our bilateral relations with both Israel and Egypt. We share important strategic interests with both of these countries.

We remain committed to Israel's security and are prepared to take concrete steps to support Israel whenever that security is threatened.

PERSIAN GULF

The Persian Gulf has been a vital crossroads for trade between Europe and Asia at many key moments in history. It has become essential in recent years for its supply of oil to the United States, our allies, and our friends. We have taken effective measures to control our own consumption of imported fuel, working in cooperation with the other key industrial / nations of the world. However, there is little doubt that the healthy growth of our American and world economies will depend for many years on continued safe access to the Persian Gulf's oil production. The denial of these oil supplies would threaten not only our own but world security.

The potent new threat from an advancing Soviet Union, against the background of regional instability of which it can take advantage, requires that we reinforce our ability to defend our regional friends and to protect the flow of oil. We are continuing to build on the strong political, economic, social and humanitarian ties which bind this government and the American people to friendly governments and peoples of the Persian Gulf.

We have also embarked on a course to reinforce the trust and confidence our regional friends have in our ability to come to their assistance rapidly with American military force if needed. We have increased our naval presence in the Indian Ocean. We have created a Rapid Deployment Force which can move quickly to the Gulf—or indeed any other area of the world where outside aggression threatens. We have concluded several agreements with countries which are prepared to let us use their airports and naval facilities in an emergency. We have met requests for reasonable amounts of American weaponry from regional countries which are anxious to defend themselves. And we are discussing with a number of our area friends further ways we can help to improve their security and ours, both for the short and the longer term.

SOUTH ASIA

We seek a South Asia comprising sovereign and stable states, free of outside interference, which can strengthen their political institutions according to their own national genius and can develop their economies for the betterment of their people.

The Soviet invasion of Afghanistan has posed a new challenge to this region, and particularly to neighboring Pakistan. We are engaged in a continuing dialogue with the Pakistan government concerning its development and security requirements and the economic burden imposed by Afghan refugees who have fled to Pakistan. We are participating with other aid consortium members in debt rescheduling and will continue to cooperate through the UNHCR in providing refugee assistance. We remain committed to Pakistan's territorial integrity and independence.

Developments in the broad South/Southwest Asian region have also lent a new importance to our relations with India, the largest and strongest power in the area. We share India's interest in a more constructive relationship. Indian policies and perceptions at times differ from our own, and we have established a candid dialogue with this sister democracy which seeks to avoid the misunderstandings which have sometimes complicated our ties.

We attach major importance to strong economic assistance programs to the countries in the area, which include a majority of the poor of the non-Communist world. We believe that these programs will help achieve stability in the area, an objective we share with the countries in the region. Great progress has been achieved by these countries in increasing food production; international cooperation in harnessing the great river resources of South Asia would contribute further to this goal and help to increase energy production.

We continue to give high priority to our non-proliferation goals in the area in the context of our broad global and regional priorities. The decision to continue supply of nuclear fuel to the Indian Tarapur reactors was sensitive to this effort.

AFRICA

The United States has achieved a new level of trust and cooperation with Africa. Our efforts, together with our allies, to achieve peace in southern Africa, our increased efforts to help the poorest countries in Africa to combat poverty, and our expanded efforts to promote trade and investment have led to growing respect for the U.S. and to cooperation in areas of vital interest to the United States.

Africa is a continent of poor nations for the most part. It also contains many of the mineral resources vital for our economy. We have worked with Africa in a spirit of mutual cooperation to help the African nations solve their problems of poverty and to develop stronger ties between our private sector and African economies. Our assistance to Africa has more than doubled in the last four years. Equally important, we set in motion new mechanisms for private investment and trade.

Nigeria is the largest country in Black Africa and the second largest oil supplier to the United States. During this Administration we have greatly expanded and improved our relationship with Nigeria and other West African states whose aspirations for a constitutional democratic order we share and support. This interest was manifested both symbolically and practically by the visit of Vice President Mondale to West Africa in July (1980) and the successful visit to Washington of the President of Nigeria in October.

During Vice President Mondale's visit, a Joint Agricultural Consultative Committee was established, with the U.S. represented entirely by the private sector. This could herald a new role for the American private sector in helping solve the world's serious food shortages. I am pleased to say that our relations with Nigeria are at an all-time high, providing the foundation for an even stronger relationship in the years ahead.

Another tenet of this Administration's approach to African problems has been encouragement and support for regional solutions to Africa's problems. We have supported initiatives by the Organization of African Unity to solve the protracted conflict in the western Sahara, Chad, and the Horn. In Chad, the world is watching with dismay as a country torn by a devastating civil war has become a fertile field for Libya's exploitation, thus demonstrating that threats to peace can come from forces within as well as without Africa.

In southern Africa the United States continues to pursue a policy of encouraging peaceful development toward majority rule. In 1980, Southern Rhodesia became independent as Zimbabwe, a multiracial nation under a system of majority rule. Zimbabwean independence last April was the culmination of a long struggle within the country and diplomatic efforts involving Great Britain, African states neighboring Zimbabwe, and the United States.

The focus of our efforts in pursuit of majority rule in southern Africa has now turned to Namibia. Negotiations are proceeding among concerned parties under the leadership of U.N. Secretary General Waldheim. This should lead to implementation of the U.N. plan for self-determination and independence for Namibia during 1981. If these negotiations are successfully concluded, sixty-five years of uncertainty over the status of the territory, including a seven-year-long war, will be ended.

In response to our active concern with issues of importance to Africans, African states have cooperated with us on issues of importance to our national interests. African states voted overwhelmingly in favor of the U.N. Resolution calling for release of the hostages, and for the U.N. Resolution condemning the Soviet invasion of Afghanistan. Two countries of Africa have signed access agreements with the U.S. allowing us use of naval and air facilities in the Indian Ocean.

Africans have become increasingly vocal on human rights. African leaders have spoken out on the issue of political prisoners, and the OAU is drafting its own Charter on Human Rights. Three countries in Africa— Nigeria, Ghana, and Uganda—have returned to civilian rule during the past year.

U.S. cooperation with Africa on all these matters represents a strong base on which we can build in future years.

Liberia is a country of long-standing ties with the U.S. and the site of considerable U.S. investment and facilities. This past April a coup replaced the government and a period of political and economic uncertainty ensued. The U.S. acted swiftly to meet this situation. We, together with African leaders, urged the release of political prisoners, and many have been released; we provided emergency economic assistance to help avoid economic collapse, and helped to involve the IMF and the banking community to bring about economic stability; and we have worked closely with the new leaders to maintain Liberia's strong ties with the West and to protect America's vital interests.

NORTH AFRICA

In early 1979, following a Libyan-inspired commando attack on a Tunisian provincial city, the U.S. responded promptly to Tunisia's urgent request for assistance, both by airlifting needed military equipment and by making clear our longstanding interest in the security and integrity of this friendly country. The U.S. remains determined to oppose other irresponsible Libyan aspirations. Despairing of a productive dialogue with the Libyan authorities, the U.S. closed down its embassy in Libya and later expelled six Libyan diplomats in Washington in order to deter an intimidation campaign against Libyan citizens in the U.S.

U.S. relations with Algeria have improved, and Algeria has played an indispensable and effective role as intermediary between Iran and the U.S. over the hostage issue.

The strengthening of our arms supply relationship with Morocco has helped to deal with attacks inside its internationally recognized frontiers and to strengthen its confidence in seeking a political settlement of the Western Sahara conflict. While not assuming a mediatory role, the U.S. encouraged all interested parties to turn their energies to a peaceful and sensible compromise resolution of the war in the Sahara and supported efforts by the Organization of African Unity toward that end. As the year drew to a close, the U.S. was encouraged by evolution in the attitudes of all sides, and is hopeful that their differences will be peacefully resolved in the year ahead so that the vast economic potential of North Africa can be developed for the well-being of the people living there.

LATIN AMERICA AND THE CARIBBEAN

The principles of our policies in this hemisphere have been clear and constant over the last four years. We support democracy and respect for human rights. We have struggled with many to help free the region of both repression and terrorism. We have respected ideological diversity and opposed outside intervention in purely internal affairs. We will act, though, in response to a request for assistance by a country threatened by external aggression. We support social and economic development within a democratic framework. We support the peaceful settlement of disputes. We strongly encourage regional cooperation and shared responsibilities within the hemisphere to all these ends, and we have eagerly and regularly sought the advice of the leaders of the region on a wide range of issues.

Last November, I spoke to the General Assembly of the Organization of American States of a cause that has been closest to my heart—human rights. It is an issue that has found its time in the hemisphere. The cause is not mine alone, but an historic movement that will endure.

At Riobamba, Ecuador, last September four Andean Pact countries, Costa Rica, and Panama broke new ground by adopting a "Code of Conduct," that joint action in defense of human rights does not violate the principles of nonintervention in the internal affairs of states in this hemisphere. The Organization of American States has twice condemned the coup that overturned the democratic process in Bolivia and the widespread abuse of human rights by the regime which seized power. The Inter-American Commission on Human Rights has gained world acclaim for its dispassionate reports. It completed two major country studies this year in addition to its annual report. In a resolution adopted without opposition, the OAS General Assembly in November strongly supported the work of the Commission. The American Convention on Human Rights is in force and an Inter-American Court has been created to judge human rights violations. This convention has been pending before the Senate for two years; I hope the United States this year will join the other nations of the hemisphere in ratifying a convention which embodies principles that are our tradition.

The trend in favor of democracy has continued. During this past year, Peru inaugurated a democratically elected government. Brazil continues its process of liberalization. In Central America, Hondurans voted in record numbers in their first national elections in over eight years. In the Caribbean seven elections have returned governments firmly committed to the democratic traditions of the Commonwealth.

Another major contribution to peace in the hemisphere is Latin America's own Treaty for the Prohibition of Nuclear Weapons. On behalf of the United States, I signed Protocol I of this Treaty in May of 1977 and sent it to the Senate for ratification. I urge that it be acted upon promptly by the Senate in order that it be brought into the widest possible effect in the Latin American region.

Regional cooperation for development is gaining from Central America to the Andes, and throughout the Caribbean. The Caribbean Group for Cooperation in Economic Development, which we established with 29 other nations in 1977, has helped channel $750 million in external support for growth in the Caribbean. The recent meeting of the Chiefs of State of the Eastern Caribbean set a new precedent for cooperation in that region. Mexico and Venezuela jointly and Trinidad and Tobago separately have established oil facilities that will provide substantial assistance to their oil importing neighbors. The peace treaty between El Salvador and Honduras will hopefully stimulate Central America to move forward again toward economic integration. Formation of Caribbean/ Central American Action, a private sector organization, has given a major impetus to improving people-to-people bonds and strengthening the role of private enterprise in the development of democratic societies.

The Panama treaties have been in force for over a year. A new partnership has been created with Panama; it is a model for large and small nations. A longstanding issue that divided us from our neighbors has been resolved. The security of the canal has been enhanced. The canal is operating as well as ever, with traffic through it reaching record levels this year. Canal employees, American and Panamanian alike, have remained on the job and have found their living and working conditions virtually unchanged.

In 1980, relations with Mexico continued to improve due in large measure to the effectiveness of the Coordinator for Mexican Affairs and the expanded use of the U.S.-Mexico Consultative Mechanism. By holding periodic meetings of its various working groups, we have been able to prevent mutual concerns from becoming political issues. The Secretary of State visited Mexico City in November, and, along with the Mexican Secretary of Foreign Relations, reviewed the performance of the Consultative Mechanism. The office of the Coordinator has ensured the implementation of my directive to all agencies to accord high priority to Mexican concerns. Trade with Mexico rose by almost 60 percent to nearly $30 billion, making that country our third largest trading partner.

These are all encouraging developments. Other problems remain, however.

The impact of large-scale migration is affecting many countries in the hemisphere. The most serious manifestation was the massive, illegal exodus from Cuba last summer. The Cuban government unilaterally encouraged the disorderly and even deadly migration of 125,000 of its citizens in complete disregard for international law or the immigration laws of its neighbors. Migrations of this nature clearly require concerted action, and we have asked the OAS to explore means of dealing with similar situations which may occur in the future.

We have a long-standing treaty with Colombia on Quita Sueno, Roncador, and Serrano which remains to be ratified by the Senate.

In Central America, the future of Nicaragua is unclear. Recent tensions, the restrictions on the press and political activity, an inordinate Cuban presence in the country and the tragic killing by the security forces of a businessman well known for his democratic orientation, cause us considerable concern. These are not encouraging developments. But those who seek a free society remain in the contest for their nation's destiny. They have asked us to help rebuild their country, and by our assistance, to demonstrate that the democratic nations do not intend to abandon Nicaragua to the Cubans. As long as those who intend to pursue their pluralistic goals play important roles in Nicaragua, it deserves our continuing support.

In El Salvador, we have supported the efforts of the Junta to change the fundamental basis of an inequitable system and to give a stake in a new nation to those millions of people, who for so long, lived without hope or dignity. As the government struggles against those who would restore an old tyranny or impose a new one, the United States will continue to stand behind them.

We have increased our aid to the Caribbean, an area vital to our national security, and we should continue to build close relations based on mutual respect and understanding, and common interests.

As the nations of this hemisphere prepare to move further into the 1980's, I am struck by the depth of underlying commitment that there is to our common principles: non-intervention, peaceful settlement of disputes, cooperation for development, democracy and defense of basic human rights. I leave office satisfied that the political, economic, social and organizational basis for further progress with respect to all these principles have been substantially strengthened in the past four years. I am particularly reassured by the leadership by other nations of the hemisphere in advancing these principles. The success of our common task of improving the circumstances of all peoples and nations in the hemisphere can only be assured by the sharing of responsibility. I look forward to a hemisphere that at the end of this decade has proven itself anew as a leader in the promotion of both national and human dignity.

THE INTERNATIONAL ECONOMY

A growing defense effort and a vigorous foreign policy rest upon a strong economy here in the United States. And the strength of our own economy depends upon our ability to lead and compete in the international marketplace.

ENERGY

Last year, the war between Iraq and Iran led to the loss of nearly 4 million barrels of oil to world markets, the third major oil market disruption in the past seven years. This crisis has vividly demonstrated once again both the value of lessened dependence on oil imports and the continuing instability of the Persian Gulf area.

Under the leadership of the United States, the 21 members of the International Energy Agency took collective action to ensure that the oil shortfall stemming from the Iran-Iraq war would not be aggravated by competition for scarce spot market supplies. We are also working together to see that those nations most seriously affected by the oil disruption— including our key NATO allies Turkey and Portugal—can get the oil they need. At the most recent IEA Ministerial meeting we joined the other members in pledging to take those policy measures necessary to slice our joint oil imports in the first quarter of 1981 by 2.2 million barrels.

Our international cooperation efforts in the energy field are not limited to crisis management. At the Economic Summit meetings in Tokyo and Venice, the heads of government of the seven major industrial democracies agreed to a series of tough energy conservation and production goals. We are working together with all our allies and friends in this effort.

Construction has begun on a commercial scale coal liquefaction plant in West Virginia co-financed by the United States, Japan and West Germany. An interagency task force has just reported to me on a series of measures we need to take to increase coal production and exports. This report builds on the work of the International Energy Agency's Coal Industry Advisory Board. With the assurances of a reliable United States steam coal supply at reasonable prices, many of the electric power plants to be built in the 1980's and 1990's can be coal-fired rather than oil-burning.

We are working cooperatively with other nations to increase energy security in other areas as well. Joint research and development with our allies is underway in solar energy, nuclear power, industrial conservation and other areas. In addition, we are assisting rapidly industrializing nations to carefully assess their basic energy policy choices, and our development assistance program helps the developing countries to increase indigenous energy production to meet the energy needs of their poorest citizens. We support the proposal for a new World Bank energy affiliate to these same ends, whose fulfillment will contribute to a better global balance between energy supply and demand.

INTERNATIONAL MONETARY POLICY

Despite the rapid increase in oil costs, the policy measures we have taken to improve domestic economic performance have had a continued powerful effect on our external accounts and on the strength of the dollar. A strong dollar helps in the fight against inflation.

There has also been considerable forward movement in efforts to improve the functioning of the international monetary system. The stability of the international system of payments and trade is important to the stability and good health of our own economy. We have given strong support to the innovative steps being taken by the International Monetary Fund and World Bank to help promote early adjustment to the difficult international economic problems. Recent agreement to increase quotas by fifty percent will ensure the IMF has sufficient resources to perform its central role in promoting adjustment and financing payments imbalances. The World Bank's new structural adjustment lending program will also make an important contribution to international efforts to help countries achieve a sustainable level of growth and development.

SUGAR

In 1980, Congress passed U.S. implementing legislation for the International Sugar Agreement, thus fulfilling a major commitment of this Administration. The agreement is an important element in our international commodity policy with far-reaching implications for our relations with developing countries, particularly sugar producers in Latin America. Producers and consumers alike will benefit from a more stable market for this essential commodity.

COFFEE

At year's end, Congress approved implementing legislation permitting the U.S. to carry out fully its commitments under International Coffee Agreement Specifically, the legislation enables us to meet our part of an understanding negotiated last fall among members of the Agreement, which defends, by use of export quotas, a price range well below coffee prices of previous years and which commits major coffee producers to eliminate cartel arrangements that manipulated future markets to raise prices. The way is now open to a fully-functioning International Coffee Agreement which can help to stabilize this major world commodity market. The results will be positive for both consumers—who will be less likely to suffer from sharp increases in coffee prices—and producers—who can undertake future investment with assurance of greater protection against disruptive price fluctuations in their exports.

NATURAL RUBBER

In 1980, the International Natural Rubber Agreement entered into force provisionally. U.S. membership in this new body was approved overwhelmingly by the Senate last year. The natural rubber agreement is a model of its kind and should make a substantial contribution to a stable world market in this key industrial commodity. It is thus an excellent example of constructive steps to improve the operation of the world economy in ways which can benefit the developing and industrialized countries alike. In particular, the agreement has improved important U.S. relationships with the major natural rubber-producing countries of Southeast Asia.

COMMON FUND

The United States joined members of the United Nations Conference on Trade and Development, both developed and developing nations, in concluding Articles of Agreement in 1980 for a Common Fund to help international commodity agreements stabilize the prices of raw materials.

ECONOMIC COOPERATION WITH DEVELOPING NATIONS

Our relations with the developing nations are of major importance to the United States. The fabric of our relations with these countries has strong economic and political dimensions. They constitute the most rapidly growing markets for our exports, and are important sources of fuel and raw materials. Their political views are increasingly important, as demonstrated in their overwhelming condemnation of the Soviet invasion of Afghanistan. Our ability to work together with developing nations toward goals we have in common (their political independence, the resolution of regional tensions, and our growing ties of trade for example) require us to maintain the policy of active involvement with the developing world that we have pursued over the past four years.

The actions we have taken in such areas as energy, trade, commodities, and international financial institutions are all important to the welfare of the developing countries. Another important way the United States can directly assist these countries and demonstrate our concern for their future is through our multilateral and bilateral foreign assistance program. The legislation which I will be submitting to you for FY 82 provides the authority and the funds to carry on this activity. Prompt Congressional action on this legislation is essential in order to attack such high priority global problems as food and energy, meet our treaty and base rights agreements, continue our peace efforts in the Middle East, provide economic and development support to countries in need, promote progress on North-South issues, protect Western interests, and counter Soviet influence.