611.19/11–753
Memorandum by the Acting Secretary
of State to the President
confidential
Washington, November 7,
1953.
Subject:
- Relations between the United States and the Republic of
Panama
I refer to your memorandum of September 29 to the Secretary of
Defense1 concerning certain complaints of President
Remón of Panama.
These complaints are for the most part not new; most of them are the
subject of agreements, and of continuing discussion, since 1903. On the
whole, it can be said that the Canal Zone authorities have taken all
reasonable steps to guard against the abuses mentioned, often without
corresponding cooperation by the Panamanian authorities. The specific
complaints made to you by President Remón are one-sided. I have discussed these in brief
detail in the accompanying attachment.
These complaints are among those under study by an Interdepartmental
Committee, established upon the initiative of the State Department. This
Committee has the task of formulating the United States position on the
issues which the Panamanians are raising in the conversations, now under
way in Washington, on the whole field of United States–Panama relations
arising from the construction and operation of the Canal. A genuine
effort will be made to reach fair and just solutions, as you have
directed.
While President Remón presented
the Panamanian side solely, I believe that there are a number of steps
which might be taken by this Government which would, without sacrificing
any of our basic rights in the Zone, go a long way toward removing
current Panamanian dissatisfactions. Among these might be listed the
transfer to Panama of certain lands no longer needed for the operation
and/or protection of the Canal and its auxiliary works, increased
purchases from Panama, closer adherence to our commitment to pursue a
policy of equality of [Page 1427]
treatment and opportunity for Panamanian labor in the Canal Zone,
fulfillment of our commitment to build a bridge or tunnel, to be under
full United States jurisdiction, at the Pacific end of the Canal, and
the granting to Panama of the right now prohibited by treaty to tax
Panamanian citizens employed in the Canal Zone. I shall place before you
certain recommendations when the current conversations have progressed
to a point where such a step is feasible.
The Department of the Army has concurred in this memorandum.2
[Enclosure]
Comments on Issues Raised by President
Remón
1. Establishment of the Panama
Canal Company.
The reorganization of the Panama Canal Company was the result, not of
a desire to make the operation free of control from Washington, but
of a study by the Bureau of the Budget which recommended certain
organizational changes with a view to putting the Canal on a
business-like basis. In its report to the President of the United
States in 1950, the Bureau of the Budget recommended that the
operation of the waterway and all related business enterprises be
transferred to the Panama Railroad Company, a United States
Government-owned corporation operating as an adjunct to the Canal
and already conducting most of the business enterprises related to
the Canal. This recommendation was transmitted to the Congress by
the President with his approval, and implementing legislation was
enacted in 1950, becoming effective on July 1, 1951. The Company was
renamed the Panama Canal Company.
The Panamanians apparently fearful that the word “company” implied a
commercial enterprise, formally protested the new organization in
March 1953, as indicating the intention of this Government through
such reorganization to escape fulfillment of certain treaty
obligations to Panama. The Panamanian protest was rejected on the
grounds that it is for the Government of the United States to
determine which agencies or instrumentalities are appropriate for
the exercise of its rights and the performance of its obligations.
At the same time, the Panamanian Government was assured that it does
not seek in any way to avoid fulfillment of its treaty obligations
to Panama. The Secretary [Page 1428]
of the Army, under delegation of authority from the President, gives
continuous and close personal supervision to the operations of the
Company and the Canal Zone Government with respect to basic policies
and selection of officials.
2. Sales to Ships.
The sale of supplies to ships passing through the Canal, which
President Remón alleges to
be a violation of the spirit of the treaty, is in fact expressly
authorized in a note accessory to the 1936 Treaty with Panama.
Panamanian suppliers, however, are permitted and encouraged to
participate in this market, and the Panama Canal Company, for the
express purpose of permitting Panamanian merchants to compete,
imposes a special surcharge on many items sold by the Panama Canal
Company to such ships.
3. Commercial
Competition.
The United States is pledged to regular and continued opportunity for
conference and exchange of views on this question. A joint
commission is maintained in an endeavor to suppress smuggling from
the Zone into Panama. The Zone also maintains a costly system of
checks to insure that only duly authorized persons purchase at the
commissaries and PX’s, where prices are lower than in Panama.
Undoubtedly some purchases in the Zone are made by authorized
persons for friends and relatives who lack the privilege, and it is
virtually impossible to control such transactions in the home. The
Panamanian Government, on its part, has never adopted or enforced
measures complementary to those of the Zone. The Panamanians aspire
to the elimination of the commissaries and PX’s, and a monopoly of
the Canal Zone market. Such a step, however, under present
circumstances would work a hardship on Zone personnel by placing
them at the mercy of price-gouging merchants in Panama. However, as
long as prices in the Canal Zone are cheaper than those in Panama,
this problem will continue to be an irritant in United States-Panama
relations. Imports into the Zone are duty-free, with resultant lower
retail price, because the Canal Zone is outside the customs area of
the United States and by treaty is not subject to Panamanian
duties.
One source of complaint in this field is in the process of
liquidation. The supply and storage yards formerly maintained by
contractors on military reservations in the Canal Zone are being
discontinued. The Government of Panama had pointed out that such
yards were susceptible for use as bases of contraband
operations.
4. Panamanian Taxation of
Panamanian Employees of the Canal Zone.
The right of the Government of Panama to impose taxes on persons
employed in the Canal agencies was expressly relinquished by Panama
in the 1903 Treaty. This restriction appears to work an undue
hardship [Page 1429] upon the
Republic, since many of these persons enjoy the benefit of
Government services from the Republic. The matter of permitting
Panama to tax its citizens residing in Panama or the Canal Zone, as
well as United States citizens working in the Zone but residing in
Panama, is being explored by the United States agencies
concerned.
