File No. 819.77/278

The Secretary of War to the Secretary of State

1. I am in receipt of a letter from your Department inclosing a paraphrase of a telegram from the American Minister to Panama, reporting the passage by the National Assembly of Panama, of a concession to Mr. B. B. Duncan, for railroad construction in that Republic, and quoting a provision relating to the construction of branch lines.

2. As stated in my letter to you, dated January 26, 1917, the War Department believes that the construction of branch lines in certain localities might prove detrimental to the defense of the Canal. The [Page 1189] provision quoted in the telegram of March 9, 1917, from the American Minister, grants to the contractor a much more liberal and comprehensive authority for the construction of branch lines than has heretofore come to the notice of this Department.

Under it, the contractor may build such lines at any time, to any length, and in any direction, subject only to the restriction that each line must first be authorized by the Executive Power. This concession would permit, unless forbidden by the Executive Power, branch lines which might afford approach from the coast toward the Canal Zone, or even a line across the Isthmus in direct violation of our treaty with Panama.

3. It is manifest that to safeguard the interests of the United States, some agreement should be made with the President of Panama, to the effect that no authorization for the construction of a branch line should be given until the United States Government has been consulted and assented thereto. There will doubtless be many branch lines desired which from their location would not affect the defense of the Canal, and action under such an agreement would be facilitated if certain officers stationed in Panama were designated with plenary power to act for our Government. I believe the interests of the United States would be safeguarded if the American Minister to Panama, the Governor of the Panama Canal, and the Commanding General, United States troops, Canal Zone, were so designated. I suggest, therefore, that the American Minister to Panama be instructed to endeavor to make an agreement with the President of Panama under which no authorization for a branch line under the Duncan concession shall be granted until the United States Government, through its Minister, has assented thereto; that if such agreement is made, the Minister be further instructed, when any such concession is submitted to him, to consult with the other two officers above named; that when their opinion is unanimous, the President of Panama be informed of the views of this Government in accordance with their decision, and if there is any disagreement the question be referred to the State and War Departments for final action.

Newton D. Baker