I think that the fundamental question here is the matter of the revision
of the Treaty. I think we must continue to make it clear that we will
not, under any circumstances, enter into discussions directed at a
revision of the Treaty, but that we are willing to discuss
interpretation and application of the Treaty as it now stands. I believe
President Remon will undoubtedly
require tactful handling but, if we remain firm in this regard, we
should not have undue trouble with him.
[Enclosure]
Comments on Key Issues Involved in Conversations With
Panama3
Of the points presented for discussion by Panama (Tab A)4 many of those of greatest
import to Panama concern matters regarding which the United States
unilaterally can make certain adjustments—adjustments which would
benefit Panama and at the same time conform with the overall
interests of the United States.
This brief discussion is predicated on the proposition that a
politically and economically stable Panama is essential to the
defense of the Canal and the maintenance of its present status, and
therefore that it is in the United States interest to take all
practicable steps to stimulate the development of Panamanian
commerce, agriculture and industry. The development of the
Panamanian economy—especially agriculture—also has a defense facet,
to insure the basic food supply of the Canal Zone in time of
emergency. It is believed, however, that the Panamanian economy can
best be stimulated by closer integration with that of the Zone
rather than by United States grants and bounties.
The matters of major concern to Panama at the present time are
considered to be:
1. Increased Share in Supplying the Zone
Market.
Substantial purchases in Panama are now being made by the United
States agencies in the Zone but they are restricted to a degree by
the Buy American Act and riders to the annual appropriation acts. If
these restrictions were removed our relations with Panama would be
improved greatly and at a saving in money to the United States
Government.
2. Elimination of United States Government-financed
Commercial Competition.
In earlier times it was necessary for the health and welfare of Zone
personnel for the United States to operate various types of
processing and service facilities in the Zone. Examples are
slaughter house and meat processing, ice cream plant, dairy, soda
water bottling, etc. Panamanian commerce is now able satisfactorily
to meet the need in many of these fields. By closing United States
facilities which duplicate those of Panama we could confer a
Substantial benefit to Panama’s economy at no cost to ourselves. It
also would be helpful if the post exchanges and commissaries were to
leave the sale of foreign luxury items to the merchants of
Panama.
3. Treatment of Panamanian Labor in the Canal
Zone.
General McSherry made a thorough study of the
labor problem in the Canal Zone upon inter-Departmental request in
1947. He reported that, despite the commitments of the United States
to Panama to the contrary, there is discrimination against
Panamanian workers in the Canal Zone. McSherry
made a series of recommendations, the most important of which have
yet to be carried out. The abolition of the present dual wage scale
in the Canal Zone, greater opportunities for Panamanians to compete
for higher paying jobs, and adherence to a [Page 1419] policy of equal pay for equal work would go a
long way toward removing Panamanian discontent on this point. In
addition, it would be most desirable to have uniformity in the labor
policies and practices of the several United States Government
agencies operating in the Canal Zone, which at present vary widely.
Finally, it is desirable that adequate retirement provisions be made
for the present local-rate workers of the Canal Company Government.
At the present time, these workers are thrown upon the charity of
the Republic of Panama when retired, since the present maximum of
$25 per month fixed by the Cash Relief Act of 1937 is
inadequate.
4. Fulfillment of Existing Commitments to
Panama.
The two most important alleged unfulfilled commitments to Panama are
the removal of the railroad station in Panama City and the
construction of a bridge or tunnel at the Pacific end of the Canal,
which were made in the Executive Agreement of 1942. The bridge or
tunnel commitment is not clear; it has not been implemented
primarily because of uncertainty regarding future plans for the
Canal and the high cost involved. The commitment to move the
railroad station in Panama City is conditioned on Panama’s supplying
another site. Legislation now is before the Bureau of the Budget
which would permit the carrying out of the R.R. station commitment
whenever Panama offers a suitable site.
5. Return to Panama of Lands Outside the Canal Zone
no Longer Necessary for the Operation of the Canal.
Although there is no treaty obligation for the return to Panama of
the following areas, Panama apparently desires the return of
Paitilla Point, New Cristobal and the present railroad terminal site
in Panama City, if and when the station is moved.
The current discontent in Panama regarding relations with the Canal
Zone involves two additional matters:
1. Exclusive United States Jurisdiction in the
Canal Zone.
By the 1903 Treaty, the Republic of Panama granted to the United
States all the power and authority within the Zone “which the United
States would possess and exercise if it were the sovereign of the
territory within which said lands and waters are located to the
entire exclusion of the exercise by the Republic of Panama of any
such sovereign rights, power or authority”. Panama, however, aspires
to the exercise of jurisdiction in the Canal Zone in all fields
outside of those essential for construction, operation, maintenance,
sanitation and protection of the Canal. The exercise of such
jurisdiction by Panama is not authorized by the present Treaties,
and Panamanian demands for such jurisdiction should be firmly
resisted by this Government as incompatible with the security of our
position on the Isthmus.
2. Increased Annuity for the Canal Zone.
There has been widespread criticism in Panama of the $430,000 annual
payment made to Panama for the Canal Zone, since 1934, as
insufficient. (Theretofore, the United States paid Panama 10 million
dollars plus $250,000 annually, the increase in the annuity having
been made after the change in value of the U.S. dollar.) The absence
of this item from the list of subjects presented by the Panamanians,
is probably contingent upon this Government’s granting the greater
economic opportunities in the Canal Zone which the other Panamanian
[Page 1420] demands would
provide. To agree to an increase in the annuity would necessitate
revising the 1936 Treaty, and such action would open the door to
requests from succeeding administrations in Panama for further
increases.
