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

611.19/6–554

The Secretary of State to the Secretary of Defense (Wilson)¹

confidential

[Washington,] June 5, 1954.

Dear Mr. Secretary: I refer to my letter of May 13, 1954,² concerning the question of the treatment to be accorded Panamanian labor employed in the Canal Zone, a matter which is the most crucial point under consideration in the current discussions between representatives of the Government of the United States and the Government of Panama.

As indicated in my letter under reference, it was the intention of this Department in replying to that section of the Panamanian memorandum of May 14³ dealing with the labor question, to confirm that it was not intended that local employees of the Armed Services be included within the single wage system contemplated by the Canal Company-Government. It was added, however, that if Panama should return formally to the matter it might become desirable to review the question.

The Panamanian reaction to this position was expressed at the meeting held on May 20. The relevant extract of the transcript of that meeting is enclosed.⁴

It is clear that Panama will not willingly accept the position which has been expressed by this Government on this matter and that unless the United States position can be more nearly accommodated to the Panamanian position this subject will remain as a point of serious irritation in Panama–United States relations. In fact, if this matter cannot be more satisfactorily resolved, I doubt whether these discussions can be brought to a successful conclusion. I consider it of the utmost importance, especially in view of recent developments in that critical area, that all semblance of discrimination in employment practices in the Canal Zone based on nationality and/or color be removed. So long as a dual wage system is maintained in the Canal Zone by any agency of the Government of the United States, we are vulnerable to such charges and provide our enemies with material on which they can capitalize to the detriment of our position and prestige in that area and throughout Latin America.

I therefore recommend to your most favorable consideration a choice of one of the following possible courses, either of which I believe would provide a satisfactory solution of the problem:

a) That Armed Services agencies in the Canal Zone contract for their local personnel from the Panama Canal Company, thereby according such employees the same conditions of employment as those to be enjoyed by Canal Company employees. This would free the Armed Services from possible embarrassment elsewhere on the grounds of deviation from their uniform employment practices abroad since the Armed Forces would not be the actual employer, or

b) That the Armed Forces take the position that the Canal Zone situation is unique in that such a situation does not exist elsewhere in the world. Thus employees in other areas abroad would have no sound basis for demanding similar treatment on the ground of uniformity.

This subject is to be discussed again in the very near future with the Panamanian Delegation. I earnestly hope that this matter will be accorded renewed consideration by your Department and that you will find it possible to take the decision to adopt one or the other of the courses of action outlined above.

Sincerely yours,

John Foster Dulles

1. Drafted by Mr. Kuppinger.
2. Not printed (611.19/5–354).
3. Not found in Department of State files.
4. This extract contained a statement by a member of the Panamanian Delegation arguing against the institution of a dual U.S. policy in the Canal Zone which, while eliminating wage discrimination for Panamanian employees of the Canal Company, would preserve it for workers employed by the Armed Services (611.19/6–554).