The Secretary of Defense ( Johnson ) to the Secretary of State


Dear Mr. Secretary: I have the honor to refer to the several communications of the Secretary of State and the Acting Secretary of State dated 7 September 1948, 24 September 1948 and 28 February 19491 respectively, relating to United States labor policy in the Canal Zone.

The National Military Establishment fully recognizes the vital importance of obtaining a sound and long-range solution of this problem, in order to reduce the basis of such hostile criticism of United States administration on the Isthmus of Panama as is set forth in the note from the Panamanian Embassy which you have forwarded to me. On the other hand, so many factors are involved in this question that I am frankly doubtful whether it is either practical or desirable to make any immediate departure from our present policy in this matter. I am not convinced that a change solely for the purpose of answering this particular charge of discrimination would be in the best interest of the United States.

Some idea of the complexity of Canal Zone labor policies may be gathered from the memorandum of Governor F. K. Newcomer, dated 21 October 1948,2 which was forwarded to you on 29 October. As indicated [Page 714] therein, the recommendations of Brigadier General Frank McSherry in 1947 have resulted in the creation of a Canal Zone Personnel Board under the jurisdiction of the Commander in Chief, Caribbean Command, U.S. Army, to accomplish coordination in labor policy among the various U.S. Governmental agencies in the Canal Zone. In addition, I am happy to report that the arbitrary distinction between “gold” and “silver” employees has been officially discontinued; both the Military Establishment and the Panama Canal now pay unskilled and semi-skilled labor at locality wage rates. After 1 May 1949 a uniform leave policy will be in effect for United States and Panamanian employees of the Canal and Railroad. Within the past twelve months, wages have been increased for certain classes of labor; further increases may be expected within available appropriations, particularly in the lower paid categories. In this connection, it is noteworthy that local unskilled or semi-skilled laborers employed by U.S. Government agencies in the Canal Zone are beneficiaries of more advantageous personnel practices than those of the same category employed by the Republic of Panama.

This last point brings me to a consideration of the basic assertion of the Republic of Panama, viz., that under the treaty of 1936 Panamanian employees of U.S. Government agencies in the Canal Zone should be paid the same salaries and wages as U.S. citizens employed by these same agencies. In this connection I should like to point out that by the treaty itself the United States did not agree to maintain equality of opportunity and treatment for Panamanians in the Canal Zone. It would appear that the specific language to which the Panamanian Embassy has reference is a declaration of policy by Mr. Cordell Hull, then Secretary of State, in one of a series of notes exchanged with the Panamanian Treaty Commission in Washington.3 There may therefore be some question whether this declaration is legally binding upon the United States, but I would welcome your opinion on this point.

It is true, as charged by the Panamanian Embassy, that two wage scales are employed by the Armed Services in the Canal Zone. Apart from the classified civil service, skilled labor recruited in the United States is paid at rates prevailing here, whereas unskilled labor recruited locally is paid at a rate determined in accordance with that prevailing in Panamanian business and industry. This rate of pay for unskilled workers is determined only after periodic surveys have established a figure which will provide a reasonable standard of living and prove attractive to employees without being so much greater than the average prevailing rate as to deprive local civilian industries of [Page 715] an adequate labor supply. I believe that any basic departure from this locality wage policy for unskilled labor would tend to have an unfortunate reaction in other employment areas of the National Military Establishment, since it is in effect not only for overseas commands, but within the United States as well. However, in view of the strategic importance of the Canal, and therefore of our relations with Panama, you may feel that it is desirable to make exceptions for Panamanian labor employed in the Zone.

I should like to inform you that within the last few weeks there has been added to my staff a Personnel Policy Board, pursuant to the authority vested in me by the National Security Act of 1947. This Board, whose chairman is Mr. Thomas R. Reid, is now responsible for establishing personnel policies governing all military and civilian employees of the National Military Establishment, including those outside the continental limits of the United States. I anticipate that the Board, in cooperation with representatives of the Army, Navy, and Air Force and the Personnel Board now established in the Canal Zone, will be able to arrive at a long term solution of labor problems in the Canal Zone which will be satisfactory to the Republic of Panama and to ourselves.

I will welcome your views on the advisability of taking further action at the present time.4

Sincerely yours,

Louis Johnson
  1. Letters of September 24, 1948 and February 28, 1949, not printed. For the letter of September 7, 1948, see Foreign Relations, 1948, vol. ix, p. 680.
  2. Ibid., p. 684.
  3. See footnote 6 to despatch No. 39 from Panama, February 3, p. 708.
  4. For the Department of State’s reply, January 17, 1950, see p. 744.