Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

Eisenhower Library, Eisenhower papers, Whitman file, Administration series

Memorandum by the Deputy Secretary of Defense (Kyes) to the President ¹

secret

Washington, 27 February 1954.

I refer to your letter dated 26 February 1954² in which you mentioned three points regarding United States Armed Services wage and retirement policies in the Canal Zone. Mention was also made of a desire to announce a change in these policies to the Panamanian Delegation prior to the opening of the Caracas Conference on 1 March 1954.

The request of the Panamanian Government for changes in the wage policies of the Armed Services in the Canal Zone is presently under consideration in this Department. I wish to assure you that the Department of Defense regards these matters as being of considerable importance and we fully appreciate the significance of maintaining excellent relations with our Panamanian neighbors. In this connection, there are a number of factors of profound importance to the Armed Services and the United States Government generally, which I believe should be brought to your attention. The more important of these factors follow:

1. The establishment of a single U.S. pay schedule for U.S. and non-U.S. citizens employed by the Services in the Canal Zone conflicts with the world-wide policy of the Armed Services of paying non-U.S. citizen personnel liberal wages based on local prevailing rates.

2. Adoption in the Canal Zone of U.S. wage rates for non-U.S. citizens would have world-wide implications. The Services employ hundreds of thousands of non-U.S. citizens throughout the world and pressure would certainly be brought to bear which would result in a tremendous increase in the operating costs of the Services.

3. The Panamanians have indicated they do not desire persons of other than U.S. or Panamanian nationality to receive pay based upon U.S. rates. However, the United States employs a significant number of personnel of other nationalities in the Canal Zone against whom there should be no discrimination.

4. The 1936 Accessory Notes make no mention of the establishment of a single U.S. wage schedule, but rather provide for equality of opportunity and treatment. The Services have followed this principle.

5. The establishment of a single wage schedule such as that proposed by the Panama Canal Company would require legislative changes. For example, the Civil Service Classification Act would require amendment.

6. The Department of Defense agrees that a uniform retirement system should apply to non-U.S. citizens employed in each foreign area. This problem is under consideration by the Kaplan Committee and it is believed action should await its recommendations.

In view of the foregoing, it is my considered opinion that action at this time on the points mentioned in your letter would have a significantly adverse effect on the overseas operations of this Department. Accordingly, it is recommended that we not act on this matter prior to the Caracas Conference.

Roger M. Kyes

1. The ribbon copy of this memorandum in the folder entitled “Wilson, Chas. E.” at the Eisenhower Library is signed by Deputy Secretary of Defense Kyes; the Department of State file copy has Secretary of Defense Wilson’s name typed on the signature line (611.19/5–354).
2. Presumably the memorandum of that date, p. 1429.