The Military Government is endeavoring to encourage such trade as will reduce the area’s dependence upon American funds. Credits realized from South Korea exports, unless balanced in kind by imports approved as essential, are to be used to purchase commodities similar to those making up the Civilian Supply list and certified for import by the Military Government. On July 15, 1947, Korea was declared open to small numbers of foreign businessmen, who might desire to develop trade possibilities within the framework established by the military authorities. Meanwhile, trade has been undertaken with Hong Kong and Macao, and some critically needed materials have been obtained by barter in exchange for Korean surpluses. Recent negotiations with the Egyptian government have led to an agreement to exchange 730 tons of tungsten concentrates for 3,000 bales of long-staple Egyptian cotton. All dealings with Japan are restricted to a governmental level, and China has imposed conditions which make legitimate trade virtually out of the question. Actually, a growing smuggling trade is going on both with Japan and China, and via Hong Kong and Macao. An essential step for promoting Korea’s trade on a sound basis would be development of an efficient customs service. _United States Investment in Rehabilitation_ There is one basic policy question which overhangs all financial and economic programs for Korea: How long will the occupation of South Korea continue on a unilateral basis? Until this question is answered in terms of months or years, no satisfactory decision can be made on United States financial or developmental programs for the area. The characteristics of the South Korean economy are such that there is no compromise which provides effective utilization of dollars, and at the same time leaves open the decision concerning the duration of the occupation. If a serious decline in the living standard, and possibly economic disintegration are to be avoided, South Korea must have (_a_) unification with North Korea, or (_b_) substantial relief supplies, or (_c_) relief and rehabilitation supplies of $200 to $300 million a year for several years. The third alternative would provide a possible basis for an indefinite continuance of occupation. The capital investment in a permanently separate South Korea would be wasteful, and the likelihood of a stable economy resulting therefrom would be in doubt for some years. South Korea is a depleted and eroded country with no minerals worth mentioning; an agriculture dependent on nitrate input, and a backward people. In terms of the needs of the East Asia area, an investment in rehabilitation and industrialization, which would permit South Korea to subsist on its own industrial output at its standards of the past 10 years with a minimum of relief, could be justified only by political and strategic consideration of the highest order.