GENERAL ACCOUNTING OFFICE (GAO) VISITS TO THE COUNTRIES WHERE DEFENSE EMPLOYS ABOUT 90 PERCENT OF ITS FOREIGN NATIONAL WORK FORCE--GERMANY, ITALY, JAPAN, KOREA, AND THE PHILIPPINES--IDENTIFIED ANNUAL EXCESS WAGE COSTS OF $37 MILLION AND EXCESS ACCRUED SEPARATION LIABILITIES OF $132 MILLION. OVERCOMPENSATION AGGRAVATES AN ALREADY ALARMING BALANCE-OF-PAYMENTS DEFICIT, WHICH IS MAGNIFIED BY DOLLAR DEVALUATIONS IN SUCH AREAS AS JAPAN AND GERMANY. TO REDUCE PAY EXCESSES, DEFENSE SHOULD COMBINE PAY AND BENEFITS WHEN DETERMINING ANNUAL COMPARABILITY ADJUSTMENTS. THE WAGE-SETTING PROCESS SHOULD BE MONITORED MORE CLOSELY, WITH THE INTENT OF FURTHER IMPROVING AND STANDARDIZING WAGE SURVEY PROCEDURES. SEPARATION-PAY LIQUIDATION PLANS SIMILAR TO THAT USED IN KOREA SHOULD BE ADOPTED. LABOR COST SHARING SHOULD BE PURSUED WITH HOST GOVERNMENTS, PARTICULARLY WHERE DEFENSE IS UNABLE TO REDUCE EXCESS LABOR COSTS BY OTHER MEANS. FURTHER, EXISTING FOREIGN LABOR AGREEMENTS SHOULD BE REVIEWED, AND NEGOTIATIONS TO REVISE THOSE CONTAINING OUTDATED OR OVERLY RESTRICTIVE PROVISIONS SHOULD BE INITIATED. ALSO, WAYS OF HIRING MORE AMERICANS SHOULD BE EXPLORED. THE APPENDIX CONTAINS PRIOR GAO RECOMMENDATIONS ON FOREIGN NATIONALS, ALONG WITH AGENCY RESPONSES. (AUTHOR ABSTRACT MODIFIED--RCB)