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

611.1913/8–1654

Memorandum by the Secretary of State to the President ¹

confidential

[Washington,] August 16, 1954.

Subject:

• Discussions with Panama

A point has now been reached in the discussions which we have been carrying on with representatives of the Government of Panama where we are prepared to give full and final replies to the proposals which Panama has presented for consideration.

I propose, subject to your approval, to present to the Panama Delegation the offers and requests summarized below as the totality of the United States position with reference to these proposals.

United States offers:

1. To increase the annuity by one million dollars, which would more than triple the presently agreed amount.

2. To seek legislative authorization to institute a single wage scale applying to all employees of the United States Government in the Canal Zone, together with other measures favorable to non-United States citizen employees of Canal Zone agencies.

3. To seek legislative authorization for the transfer to Panama of:

a) Panama City railroad yard, with improvements,

b) J. N. Vialette and Huerte de San Doval tracts and the Aspin-wall tract on Taboga Island,

c) Paitilla Point,

d) Las Isletas and Santa Catalina Military Reservations on Taboga,

e) Those areas of Colon known as de Lesseps, Colon Beach and New Cristobal, with improvements (with the exception of two lots in the de Lesseps area which the U.S. intends to use for consulate purposes),

f) Railroad passenger station site and structure in Colon,

g) Certain lands and waters on the coast of Colon,

h) Lot in Colon now reserved for consulate purposes.

4. To seek legislative authorization to make grants for the economic development of Panama, particularly in the field of housing. This would be in addition to the Technical Cooperation Program administered by the Foreign Operations Administration.

5. To amend Article X of the 1903 Convention to enable Panama to levy income tax on employees of Canal Zone agencies who are Panamanian citizens wherever resident and on non-Panamanian, non-United States citizen employees residing in Panama.

6. To exempt United States agencies in the Canal Zone from the scope of the Buy American Act, as a gesture of good will toward Panama and as further evidence of the desire of the United States to assist in all appropriate and practicable ways in the development of the Panamanian economy.

7. To extend the existing arrangement regarding sales of “sea stores” to sales of “ships’ stores” and, in cooperation with Panama, to give greater effectiveness to that arrangement.

8. To seek legislative authorization and appropriations for the construction of a bridge or tunnel at Balboa, referred to in the 1942 General Relations Agreement.

9. To withdraw certain sales and service privileges in the Canal Zone from non-resident, non-United States employees of Zone agencies.

10. To make of record a declaration that in connection with the matter of the importation of items of merchandise for resale in the sale stores in the Canal Zone, it will continue to be the practice of the agencies concerned to acquire such items either from United States sources or Panamanian sources unless, in certain instances, it is impracticable to do so.

11. To terminate gradually certain manufacturing and processing activities in the Canal Zone.

12. To make of record a declaration that Canal Zone agencies in making purchases of supplies, materials and equipment will, so far as permitted under United States legislation, afford to the economy of the Republic of Panama full opportunity to compete for such business.

13. To waive the monopoly on the part of the United States for the establishment of any system of communication by railroad or highway across the Republic of Panama between the Caribbean Sea and the Pacific Ocean, with certain reservations.

14. To terminate that provision of Article VII of the 1903 Convention which has reference to the exercise of sanitary jurisdiction by the United States in the cities of Panama and Colon.

15. To give sympathetic consideration to Panama’s request for the functioning of nautical inspectors in Canal Zone ports concerned with laws relating to vessels of Panamanian registry under conditions which would not prejudice the expeditious transit of vessels and which would be consonant with the jurisdictional position of the United States in the Canal Zone.

16. To give consideration to the feasibility of withdrawing from the handling of commercial cargo for transshipment on Canal Zone piers so soon as Panamanian port facilities are in satisfactory operation in Colon.

United States requests which are to be considered in conjunction with the United States offers:

1. Extension of post exchange privileges, on a limited basis, to visiting foreign military personnel of friendly nations.

2. Reduction of price of alcoholic beverages.

3. Termination of the obligation provided under Article XIX of the 1903 Convention regarding free transportation on the Panama Railroad.

4. Lease of certain property adjacent to the United States Embassy residence; preservation of the area in front of the Embassy office building as a park area.

5. Maneuver rights in the Rio Hato area.

6. Favorable consideration of certain proposals which the United States may wish to make relating to the use of a projected trans-Isthmian highway within the Canal Zone.

This over-all position has been coordinated with the interested agencies of the Government, as well as with the Congressional Committees particularly concerned with such matters. I believe that the position summarized above fully reflects your direction that Panama’s proposals be treated fairly and generously and that we should seek mutually satisfactory arrangements that would, on the one hand, satisfy Panamanian aspirations and, on the other, protect vital United States interests in the Panama Canal. I am confident that the United States offers are generous to Panama and equitable to both Governments.

John Foster Dulles

1. This memorandum, drafted by Mr. Kuppinger, was sent to President Remón under cover of a letter from President Eisenhower, dated Aug. 23, 1954. In his letter to Remón, Eisenhower noted that the United States was not able to agree to those proposals which would in any way undermine the U.S. position relating to the Panama Canal or would involve large sums of money for projects which the U.S. Government felt went beyond its proper obligations. However, he stated his belief that the Panamanian President would find that the U.S. positions on all other Panamanian proposals were distinctly favorable to his country’s legitimate interests. (611.1913/8–2354)