611.19/2–2654
The Secretary of State to the Secretary of Defense (Wilson)1
Dear Mr. Secretary: The point has now been reached, in the negotiations which are currently being carried on between representatives of this Government and representatives of the Government of Panama, where the Panamanian Delegation has been informed of the present United States position on all principal points raised by Panama with one exception: the question of treatment of Panamanians employed by United States governmental agencies in the Canal Zone.
[Page 1441]It is becoming increasingly imperative that this Government’s position on this question be communicated to the Panamanian Delegation at an early date. This is a matter which has been under the active consideration of representatives of our respective Departments since June of last year. As noted in this Department’s letter of January 18, 1954,2 the dual-wage system and other inequalities constitute the most conspicuous and long-standing single irritant in United States–Panama relations. I consider it essential to our national interest that prompt remedial action should be taken by the employing agencies in the Zone to mitigate this situation.
Certain suggestions along this line were embodied in the above-mentioned letter of January 18, 1954, which I consider should merit your favorable consideration. It would not appear that there is any fundamental reason why the dual-wage system cannot be abolished and uniform personnel policies and retirement provisions applied by the three Armed Services and the Panama Canal Company-Government. Mr. Kyes appears to have the impression, which he revealed to General Smith, that the President had conceded, in the course of the conversation at the White House on February 273 in which Mr. Kyes and I participated, that the Defense Department should attempt to reorganize its systems for treatment of employees all over the world at the same time that it remedies the situation in the Canal Zone. I think the President’s memorandum to you of February 264 indicated his concurrence in the need to carry out his commitment to President Remon when the two met in the White House and was later incorporated in the two Presidents’ joint communiqué of October 1, 1953. I believe that the systems in the Canal Zone should be equalized without awaiting such sweeping world-wide reorganization to avert the possibility of having the negotiations now under way blow up on us.
There has, I believe, been some misconception of the effects of the changes that have been suggested. Elimination of the dual-wage systems would simply involve a combining and dovetailing of the existing two wage schedules and would not in itself increase Panamanian wages. The obvious existence of two different wage scales has had a very undesirable psychological effect, and a large part of this disadvantage could be eliminated by a single scale. This, with uniformity of treatment by all United States agencies, would be the minimum which would carry out the commitment made by President Eisenhower in September.
It has been necessary to give negative replies to a large number of the Panamanian requests which are unacceptable because they would impair our fundamental position, constitute a detrimental relinquishing [Page 1442] of treaty rights, or involve special treatment or heavy expenditures for which we see no justification or obligation. On the other hand, in my opinion, there are enough important items on which we can take favorable action as to constitute a sufficiently handsome package to bring the negotiations to a mutually satisfactory conclusion if the problem of the treatment of labor can be resolved.
I feel strongly that we should not lose the opportunity to better United States–Panama relations by further delay in dealing with the labor problem. This is the only remaining principal item on which a United States position has not been expressed in these negotiations. Our inability to express a position is now resulting in a lapse in the negotiations. A prolonged lapse, resulting from indecision on this point, will serve only to exaggerate the importance of this item and to increase irritations resulting from the existing situation. Prolonged silence on this subject is tantamount to a negative reply and may well result in a failure of these negotiations with consequent serious effects on relations between the United States and Panama. I, therefore, urge upon you the importance of agreeing very soon to a satisfactory position with respect to this matter as advanced in the President’s memorandum of February 26.
Sincerely yours,