The points raised in the memorandum reflect a difference of
interpretation which has arisen between the Governments of Panama and
the United States of certain important provisions of the agreements
signed on January 25, 1955. By unilateral interpretation the Government
of Panama is attempting to give a meaning to certain provisions which
goes beyond their stated terms and the intentions of the United States
Government in their negotiation. These differences have been discussed
at length with Panamanian officials through regular diplomatic channels
and by Assistant Secretaries Holland and Roderick in personal interiews with the President and
President-elect of Panama and their advisors.
The United States position in these matters is fully in accord with the
provisions of the 1955 Agreements, the arguments of Panama
notwithstanding. It is our policy to treat Panama justly and even
generously, in recognition of our special relationship in the Canal
enterprise, but at the same time to keep intact our treaty rights on the
Isthmus and to insist that observance of treaty provisions be mutual and
complete.
In view of the desirability of keeping these discussions in regular
diplomatic channels, I propose, if you agree, to have the Department of
State reply to the Memorandum along the lines of the attached
report.3
[Enclosure]
REPORT TO THE PRESIDENT ON THE MEMORANDUM OF THE GOVERNMENT OF
PANAMA DATED SEPTEMBER, 1956
The Panamanian delegate to the conference of the Inter-American
Committee of Presidential Representatives left with you a Memorandum
and Annex in which were set forth the Panamanian viewpoint on
certain current problems in United States-Panama relations. The
following comments are made in response to your request for a report
on the subject.
Point 1 of the Memorandum treats of the expected increase in the cost
of living to non-American citizens who work in the Canal Zone and
reside in Panama as a result of their forthcoming loss of the
privilege of buying in the Canal Zone commissaries. Panama urges
that a compensatory wage increase be granted. She has argued that we
have an implied commitment to do so.
The provisions of Article XII of the Treaty of 1955 which terminate
the commissary privileges of United States Government employees in
the Canal Zone who are not citizens of the United States and who
reside outide of the Canal Zone become effective December 31, 1956.
This provision was agreed to by the United States Government at the
insistence of the Government of Panama which argued that the
privilege obtaining prior to the conclusion of the 1955 Treaty
constituted an unjust and unfair competition with the economy of
Panama. The United States gained nothing by this provision of the
Treaty. Instead, this provision will result in a substantial loss of
revenue to the Panama Canal Company. Since the termination of these
privileges has become a treaty obligation on the part of the United
States, it has no choice but to put this provision into effect on
the date specified, in the absence of any indication from the
Government of Panama that it desires to waive this right and request
postponement of the effective date of the provision. There is no
provision in the 1955 Agreements obligating this Government to grant
a compensatory wage increase to the affected employees.
The United States Government recognizes, however, that the withdrawal
of commissary privileges from a group of its employees may result in
an increase in their cost of living. Periodic studies are regularly
conducted by the Panama Canal Company to determine cost of living
trends in the economies of both the Canal Zone and Panama. As a
result of these studies, employees’ wages are adjusted from time to
time to meet changes in the costs of living. Should these continuing
periodic studies show the employees of the Zone, despite the wage
increase already granted in May 1955, to be at a
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disadvantage as a result of their loss
of commissary privileges, consideration will be given by the Zone
authorities to the feasibility of a wage increase. Such action if
taken would be routinely taken pursuant to this Government’s
constant interest in the welfare of its employees and not because of
any alleged obligation, implied or otherwise, in the 1955
Agreements.
Point 2 of the Memorandum deals with the provision of Item 1 of the
Memorandum of Understandings Reached which provides for the
establishment of a single basic wage scale in the Canal Zone, and
expresses concern regarding the statements of certain high officials
of the United States Government to the effect that, pursuant to the
new classification of positions now being made, the rates of
remuneration for the different positions will continue to be related
to the geographic area from which the bulk of the employees in each
category of positions comes.
Under Item 1 the United States Government has agreed, subject to the
enactment of the necessary legislation, to govern the labor
practices of United States agencies in the Canal Zone by the
following precepts:
- (a)
- All positions will have a basic wage level, the same for
all employees eligible for appointment thereto without
regard to United States or Panamanian citizenship. In the
case of an employee who is a United States citizen, however,
there will be added an increment representing an overseas
differential plus an allowance for those elements which
operate to reduce the disposable income of such an employee
as compared with an employee who is a resident of the area.
The United States citizen will also, for obvious reasons, be
eligible for greater leave benefits and travel
allowances.
- (b)
- Legislation will be sought for uniform application of the
Civil Service Retirement Act to all United States and
Panamanian citizen employees of this Government in the Canal
Zone.
- (c)
- Equality of opportunity will be afforded to Panamanian
citizens for employment in all United States Government
positions in the Canal Zone for which they are qualified
except where security factors serve to make undesirable the
employment of non-United States citizens. Positions will be
evaluated, classified, and titled without regard to the
nationality of the incumbent or prospective
incumbent.
- (d)
- Panamanian citizens will be afforded opportunity to
participate in such training programs as may be conducted
for employees by United States agencies in the Canal
Zone.
These provisions, when the Congress enacts the necessary enabling
legislation, obviously will confer important benefits upon all
locally recruited employees. Under subparagraph (a) employees in any
non-security position will receive the same base rate of
compensation without regard to nationality and there is no intention
that the rates of pay of individuals in the same job should vary
with the
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area of
recruitment. In those categories of jobs for which any employees
must be recruited in the United States, the basic rate of pay will
be the rate paid for comparable employment in the United States and
all employees in that job, Panamanian as well as United States
citizen, will receive the United States rate. In those categories of
jobs which can be filled entirely by local recruitment, the basic
rate will be based on the rate paid for comparable employment in
Panama, and all employees in that job, United States citizen as well
as Panamanian, will receive the same basic rate. It is appropriate
to note in this connection that even the rates based on those in
Panama will be higher than the actual rates paid there.
The plan outlined above is fully in accord with the provisions of the
agreement with Panama. It was set forth in detail during the public
hearings on the Treaty before the Foreign Relations Committee of the
United States Senate and was described in the Senate Committee
Report on the Treaty.4 It involves no
discrimination of any kind and removes even the appearance of
discrimination to which the former pay plan in the Canal Zone may
have been subject.
Point 3 of the Memorandum questions the interpretation the United
States Government places on Item 8 of the Memorandum of
Understandings Reached, which reads as follows:
“8. In general connection with the matter of the importation
of items of merchandise for resale in the sales stores in
the Canal Zone, it will be the practice of the agencies
concerned to acquire such items either from United States or
Panamanian sources unless, in certain instances, it is not
feasible to do so.”
The Memorandum takes exception to this Government’s
interpretation of the word “feasible” as used in Item 8. Panama
asserts that it can have but one interpretation, that of “possible”.
Had “possible” been intended, that word would presumably have been
included. Such meaning, if accepted by the United States Government,
would restrict purchases of merchandise for resale in the Zone to
United States and Panamanian sources only, irrespective of other
contingent factors, including reasonableness of price.
It is the view of this Government that the purpose and intent, as
disclosed by the record of the negotiations, is to give preference
to United States and to Panamanian sources over other sources in
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the supplying of goods for
resale in the Canal Zone. However, that preference, while considered
to be real and valuable, is not absolute or unlimited. The word
“feasible”, far from being synonymous with “possible”, requires this
Government to purchase merchandise for resale in the Zone from
United States or Panamanian sources only if the object of purchase
is available in the desired quality, variety or kind, in adequate
quantity, at a reasonable price, and with adequate assurance of
continuous supply. Failing any of these contingencies, the United
States Government is free to purchase from sources in third
countries, if it desires. The wording of Item 8 was deliberately
chosen to permit appropriate competitive safeguards for the proper
protection of this Government and the consumer in the Canal Zone. It
is noteworthy that, despite this limited interpretation, Panamanian
sales of goods and services to the Zone are steadily increasing, in
the last quarter year alone registering a jump of over 50%. At the
present rate these sales will exceed $20,000,000 for the current
year.
