APPENDIX II-Continued STRATEGIC AND CRITICAL MATERIALS STOCKPILES-GOALS, OBJECTIVES AND INVENTORIES-Continued APPPENDIX III Summary of Explanation of New Formula for Computing Demand or requirements calculations 1. A projection for peacetime Gross National Product (GNP) over three-year period is made. To this are applied factors which repreent the anticipated shifts in civilian expenditures, in investment denand, and in exports and imports that would occur under wartime onditions. At the same time, Department of Defense wartime expendiures are calculated. This figure is combined with the shifts in the ivilian economy to yield a projected wartime GNP for each of the hree years in the emergency planning period. The civilian portion of this wartime GNP projection is divided into "Essential Civilian Expenditures" and "General Civilian Expenditures." 2. The resulting wartime GNP projection expressed in three categories (military, essential civilian, and general civilian) is then converted into demands on 109 industries through an input/output table to produce gross estimates of total output required to satisfy each of the three categories of expenditures. These gross estimates of total output are expressed in dollars for each of the three years in the 'emergency planning period." 3. Meanwhile, the consumption of 68 basic materials by each of he 109 industries is calculated based on historical consumption rates over a period of from 12 to 20 years. Projections of requirements For materials are made based on these historical consumption rates. A range of possible error in forecasting is applied to these material equirements projections. 4. The result is a series of planning factors (expressed in terms of material consumption ratios) by which the gross dollar estimates of otal output can be translated into tons or pounds of required maerials. This translation process yields wartime material requirements stimates for 68 materials in 109 industries broken down as to whether they satisfy military, essential civilian or general civilian needs. 5. To these wartime materials requirements estimates are applied factors which account for the possibility of substituting one material for another that may be in short supply. Substitution factors are calculated for each material in each industry. The time required for substitution to take place in industry is also taken into account, since he benefits of substitution would be felt least in the first year of nobilization and would grow in each succeeding year, as plants and Industrial processes were converted to the use of substitute materials. 6. Applying substitution factors to the material requirements estinates (Step 4) produces Final Materials Estimates; in other words, (107) a forecast of the needs for 68 materials in 109 industries for military use, essential civilian use, and general civilian use in each of the three years of the projected emergency planning period. The material requirements estimates for each industry are summed to give a total, nationwide figure for each use (military, essential civilian, general civilian) and each year. Supply calculations 1. Based on data from the Commerce Department's Office of Business Research and Analysis and the Interior Department's Bureau of Mines, estimates are made of wartime supplies of 68 materials in 124 countries. 2. Through a process that involves State Department desk officer ratings and Federal Preparedness Agency review, a political reliability index is developed for each of the 124 countries. This political reliability index is applied to the wartime supply estimates to yield projections of accessible supplies. 3. These estimates of accessible supplies are further discounted to acount for transportation (chiefly shipping) losses expected during wartime. The final product is Estimated Delivered Supplies for each use (military, essential civilian and general civilian) for each year of the three-year emergency planning period. Additional calculations 1. The Estimated Delivered Supply for each of the 68 materials is compared with the Final Material Estimate (Step 6) to forecast whether there will be an abundance of the material, a balance of needs and supplies or a deficiency. 2. Forecasted deficiencies dictate materials which require stockpiling. However, before stockpile goals are established, a series of so-called "Special Planning Factors" are applied to the materials where a deficiency is projected to take account of any peculiarities that may apply to a specific material. These special factors include consideration of materials that have a high proportion of end uses in military applications, materials for which consumption may change depending on whether the war is nuclear or non-nuclear (opium, for example), materials which are subject to technological innovation, to cartelization, or to transportation constraints (non-air-transportable, for example), and similar idiosyncracies. The special factors are used to trigger reviews of the estimated requirements for materials that fall into these categories. 3. After any "Special Planning Factors" have been taken account of. the stockpile goals are established, based primarily on the projected differences between requirements and supplies. These goals are separately expressed for military, essential civilian and general civilian uses in each of the three years of the emergency planning period. The stockpile formula is reportedly designed to permit an audit to be conducted for every material goal. Due to the sensitivity of some of the information involved, a complete "audit trail" for each material is classified. Following the setting of the goals, attention is given to what is the best form (industrially, economically, militarily) for stockpiling each given material. |