We have gone a substantial distance toward meeting Panamanian
aspirations. Panama will never be contented. We can hope only to have
them satisfied for the time being. I feel very definitely that if we can
avoid being used by individual Panamanian
politicians and can make progress in solving the pending main problems
we will be able to bring these negotiations to a reasonably successful
conclusion.
[Enclosure]
confidential
[Washington,] March 5,
1954.
Subject:
- Review of Panamanian Negotiations.1
The basic approach to the consideration of the Panamanian proposals
has been a firm stand against any derogation of our fundamental
treaty position in the Zone. There is no disposition to give ground
on that score although many of the Panamanian proposals are aimed at
that goal.
The Department of State, however, feels strongly that it is in the
national interest, in promoting the security of the Canal, to make
such adjustments as can be made in Panama’s favor as do not
prejudice the U.S. position or discriminate against our personnel
residing in the Zone.
Many of the positive steps we are considering taking vis-à-vis Panama
should have been taken voluntarily by us over the years rather than
to hold fast until Panamanian resentment reached a high emotional
pitch. To do these things all at one time and at Panamanian urging
has given rise to the superficial impression that we are making
great concessions to Panama. Such action takes on another face,
however, when it is considered that we are, in large part,
discharging recognized obligations, rather belatedly in some
instances.
Our relationships today with Panama would undoubtedly be better if we
had taken steps on our own initiative long since to reduce the
irritation arising from the competition with Panamanian commerce as
results from the manufacture or processing of consumer goods in the
Zone; we should have endeavored to broaden our purchases in Panama;
we should have given greater consideration to the commissary
problem; we should have taken steps to implement more completely the
commitment we made in 1936 with respect to Panamanian labor in [Page 1435] the Canal Zone (this
matter is still pending inter-agency agreement); and we should have
fulfilled before now the bridge/tunnel commitment we assumed in
1942.
To do so even at this relatively late date will still serve to
improve our relations but the favorable impact would have been much
greater had we done these things voluntarily and more
seasonably.
In addition, we are now prepared:
-
a)
- to accede to the Panamanian request concerning the levying
of income tax on their nationals who are employed by Zone
agencies. This provision of the 1903 Treaty is now an
anachronism and equity clearly dictates its repeal.
-
b)
- to enter into an arrangement by which Panama can more
effectively compete in the sale of certain ships’ stores to
ships transiting the Canal.
-
c)
- to turn over to Panama certain parcels of land to which
the United States holds title in the Isthmus which are no
longer essential for Canal purposes, together with
improvements where they exist, all without cost to Panama.
In some cases title to these lands was acquired by purchase
and not by condemnation under the 1903 Treaty. Thus, this
gesture takes on substantial proportions in view of the
considerable value of the lands and improvements. The
requests we are making in return are modest and involve very
little cost to the Panamanian Government. On balance this
gesture weighs very heavily in Panama’s favor, and the
United States can properly assert that it has acted with
generosity in this case.
-
d)
- to meet—indirectly—the request for an increased annuity by
agreeing to seek Congressional approval for an economic aid
program involving the expenditure for jointly-approved and
financed projects of up to $20 million over a period of ten
years in lieu of a direct increase in the annuity. It is
generally agreed that the present annuity figure is
inadequate; the principal question we have had to consider
is what would be the most desirable way to handle the
matter. Considerable sentiment has been expressed against a
direct increase in this payment and the economic aid program
was evolved as a desirable substitute. Panama, however, is
very much dissatisfied with our proposal in this regard. To
them the annuity is an important symbol; is it something
tangible in the way of benefits accruing to Panama from the
Canal which is understood by everyone. It may well be the
case that we shall have to review our thinking on this
matter largely from the point of view of the political
implications which are tied to this question.
Purchasing policies, limitations on commissaries, elimination of
competitive manufacturing and processing in the Zone, sales of
ships’ stores, labor policy, income tax, transfer of lands and the
annuity payment are tangible matters on which we have made, or hope
to make, adjustments which will move toward meeting in varying
degrees those of Panama’s aspirations which we consider
justified.
Less spectacular perhaps, but nonetheless important in that
Panamanian sensibilities are involved, are the adjustments we are
prepared to make in the field of intangibles. Income tax
jurisdiction [Page 1436] can be
included in this category also since we will remove an impediment
which has prevented Panama from exercising the normal tax powers of
a sovereign nation with respect to non-U.S. employees of Zone
agencies; also included in this category are our willingness to
waive our monopoly rights with respect to the construction of
trans-Isthmian railroads and highways; and our disposition to give
up our treaty right to exercise jurisdiction over sanitary matters
in the terminal cities.
We can point to these actions as proof of our willingness to make
adjustments in our relations where changing circumstances have
altered the situations which originally gave rise to special grants
of authority and where no question of our fundamental position in
the Zone is concerned. While we can and should take full credit for
displaying an enlightened outlook in this regard, we may also admit
among ourselves that such action is no more than we feel it
desirable to take in our long range national interest under the
precepts which guide our international relations.
The Panamanian proposals, when originally received, gave rise to a
considerable degree of puzzlement on our part since many were
predicated on the Panamanian theory of limited jurisdiction on the
part of the United States in the Zone with reserved jurisdiction
remaining with Panama. As the Panamanians well know, we reject this
theory completely and hold to the position that our status in the
Zone is clearly set forth in Article III of the 1903 Convention
which confers on the United States “all the rights, power and
authority … (as) if it were the sovereign” to the entire exclusion
of the exercise by Panama of such rights. The Panamanians who
prepared their proposals were fully aware of this divergence of
interpretation and, unless they thought they could catch us
unawares, they must have known that acceptance by us of proposals
predicated on their theory was completely out of the question.
Therefore, on a scoreboard basis they could have foreseen that the
negotiations would end with Panama on the short end of the score,
comparing proposals accepted against those rejected. Now it is also
known that several persons closely identified with these
negotiations on the Panamanian side have political ambitions which
might be furthered if President Remon had to take the responsibility for failure to
obtain significant success in attaining Panamanian aspirations. A
complete failure of these negotiations could conceivably result in
Remon vacating the
presidential office—an event which might not be to our interest. A
new president, if not particularly well-disposed toward the United
States, coming to power on the wave of a tide of resentment toward
the United States would inevitably result in strained relations
between the United States and Panama—the very thing we are seeking
to avoid.
[Page 1437]
We believe that even though some of the Panamanian proposals have
been loaded—intentionally or not—with requests which are
unacceptable to the United States, the result of the negotiations
can be shown to be, on balance, favorable enough to Panama that
fairly informed public opinion can be satisfied if, in addition to
those tangible and intangible adjustments we are prepared to make,
we can resolve the three important remaining problems: (a) the annuity payment, (b) treatment of Panamanian labor in the Zone, and (c) ease Panamanian keen disappointment at the
limited degree to which we are prepared to limit manufacturing and
processing and sales practices in the Canal Zone, and especially at
our reluctance to give any formal commitment in this regard.
The annuity matter could possibly be solved without too much
difficulty by bringing the figure up to $2 million, the amount we
had in mind for the economic aid program. In fact, by so doing, we
may save $430,000 per year.
The labor problem, however, requires an alteration of attitude on the
part of the Defense authorities. If they persist in their adamantly
negative position on this question, the result of these negotiations
will remain in jeopardy with attendant dangers insofar as our long
range relations with Panama are concerned.
