The course of the war over the past two years has been marked by Communist efforts to offset the impact of the allied military build-up and the allies' military successes which have accompanied that build-up. Since early 1966, the allies have gained the initiative, carrying the war to eneny base areas, frustrating his offensive plans, and breaking his grip on the populace in portions of the central coastal provinces. Communist losses in the first quarter of this year have risen 70 percent above the monthly averages for last year. US losses have increased by over 90 percent, however, and GVN losses, which had declined during 1966, are now rising markedly. Moreover, the enemy has demonstrated the capability to replace his enormous losses, although probably at some cost in quality. The Viet Cong's position in the countryside has been eroded in many areas. Allied military pressure in some areas disrupted the enemy's organization, and the attendant lowering of Viet Cong morale has been reflected in increased Chieu Hoi rates. Current enemy plans and intentions, as demonstrated in prisoner interrogations, captured documents, and patterns of activity, apparently involve an intensive, grinding positional warfare campaign in the northern provinces, where ready access to logistical supplies, replacements, and substantial artillery and antiaircraft support enhance his capabilities. Over the next two months, this activity is to be supplemented by coordinated offensive thrusts in the central coastal provinces and the western highlands, combined with major actions in the III Corps area. In the final analysis, the current campaign constitutes a crucial test of our ability to prevent a stalemate and maintain the momentum of our recent successes. The enemy's military capabilities are such that he seems likely to achieve some of his objectives, although the allies almost certainly will be able to blunt his anticipated offensives, inflict heavy losses, and prevent decisive erosion in most pacified areas during the next few months. The situation thereafter will largely depend, as it has in the past, on the question of the will to persist of either side rather than on the attainment of an overwhelming military victory.