Following consultation with the Governor of the Canal Zone and the
Commander in Chief, Caribbean Command, a note, copy of which is
enclosed, was handed to the Foreign Minister by the Ambassador on April
8, 1959. The Department will observe that at the top of page 2 of the
copy an appropriate reference was made to the letter from President de
la Guardia to President Eisenhower4 and
that in the first sentence in the last paragraph on page 1 the wording
has been modified slightly in accordance with a suggestion by the
Commander in Chief.
There is also enclosed a copy of a memorandum from the Ambassador
regarding an oral statement made to the Foreign Minister when the note
was presented.5 This
statement was in substitution for an addition to the note itself which
was proposed by the Governor in his letter of April 1, 1959, copy of
which is also enclosed.6
[Enclosure]
Note from the Ambassador in Panama (Harrington) to the Panamanian
Foreign Minister (Moreno)7
No. 424.
Panama City,
April 9,
1959
Excellency:
I have the honor to refer to the Foreign Ministry’s note P.r.e.u.
215/1021 dated April 8, 1958.8 Your Excellency’s Aide Memoire
dated October 8, 1958,9 which you handed to the Secretary of
State in Washington, and the Memorandum received in the Department
of State under cover of a note from the Embassy of Panama in
Washington dated November 13, 1958,10 concerning implementation
and interpretation by the Government of the United States of certain
provisions of the Treaty of 1955 and related Memorandum of
Understandings Reached, together with certain other matters relating
to the Canal Zone. A number of the matters mentioned in these
communications were subjects of discussion by President de la
Guardia with Dr. Milton
Eisenhower during the latter’s visit to Panama in
July 1958.
In keeping with the traditionally close ties of cooperation and
friendship which have characterized relations between our two
countries, my Government has carefully and sympathetically
considered the comments and opinions expressed by Your Excellency’s
Government on the issues raised. On behalf of the United States
Government I am authorized to reply as follows to the points raised
in the several communications.
Implementation of the Wage Scale
Legislation:
Under the provisions of Item 1 of the Memorandum of Understandings
Reached, the United States agreed to seek legislation which would
authorize each agency of the United States Government in the Canal
Zone to establish a uniform wage system providing a basic wage for
each grade level and to provide a uniform retirement benefit system
for employees, applicable alike to citizens of the United States and
of Panama. Also, in Item 1 of the Memorandum of Understandings
Reached, the United States agreed to afford equality
[Typeset Page 899]
of opportunity to
citizens of Panama for employment in the Canal Zone, save for
security positions. Further, the United States agreed to evaluate,
classify and title all positions in the Canal Zone without regard to
the nationality of the incumbent or proposed incumbent and provide
opportunity for participation in any training programs. The
necessary legislation was passed by the Congress (Public Law 85–550,
85th Congress) and approved on July 25, 1958. In connection with the
implementation of this law two informal meetings have taken place in
the Foreign Ministry and helpful suggestions were made by the
Panamanian participants. The points raised by the Panamanian
participants were further discussed in Washington and clarifying
information will be made available to the Government of Panama as
soon as
[Facsimile Page 3]
possible. In this connection, further representations have been
made by His Excellency President de la Guardia in a letter sent
directly to President Eisenhower, under date of March 7, 1959, to which a
direct reply will be forthcoming shortly.
Item 5 of the Memorandum of Understandings
Reached:11
During the First Session of the 85th Congress, the Congress
appropriated $750,000 to defray the costs of the initial engineering
studies and testings, drafting of plans and other preliminary work
related to the contemplated construction of a high-level bridge over
the Panama Canal at Balboa, legislation which the United States had
undertaken to seek under Item 5 of the Memorandum of Understandings
Reached. Legislative action on a bill requesting an additional
appropriation of $19,250,000 for construction of the bridge was
completed on June 17, 1958, and the President approved the bill on
June 25, 1958. In complying with this undertaking, my Government has
provided $20,000,000 for a project which will make substantial
immediate and long-range contributions to the Panamanian
economy.
Item 8 of the Memorandum of Understandings
Reached:
My Government has given further consideration to the provisions of
Item 8 of the Memorandum of Understandings Reached but adheres to
the correctness of its interpretation of the meaning and intent of
the provisions of Item 8, including the definition of the word
“feasible”, which is that in certain instances purchases in third
countries may be made. Item 8 provides “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
[Typeset Page 900]
concerned to acquire
such items either from United States sources or Panamanian sources
unless, in certain instances, it is not feasible
to do so.” (Underscoring added). The wording of the
provisions of Item 8—“in certain instances, it is not feasible to do
so”—is sufficiently broad to permit purchases in third countries. My
Government considers that the provisions of Item 8 in general
recognize the preferential position of United States and Panamanian
sources over other sources in the supplying of goods for resale in
the Canal Zone. However, that preference, while considered to be
real and important, is not absolute or unlimited. Conversely, the
provisions of Item 8 are not regarded as precluding or prohibiting
the acquisition of merchandise from third countries “in certain
instances” for sale in the Canal Zone. Your Excellency’s Government
of course is aware of the obligations of the United States
Government in this respect as a party to the General Agreement on
Tariffs and Trade.
Notwithstanding the foregoing, the good will of the United States has
already been demonstrated by the considerable increase in purchases
by Canal Zone agencies from Panamanian suppliers,
[Facsimile Page 4]
and
by the interest of the Canal Zone Government expressed in the
development of Panamanian production capable of being used in the
Canal Zone. The volume of third-country purchases for resale is now
a minute percentage of the total value of such purchases. However,
desirous of eliminating areas of disagreement between the two
Governments, the Canal Zone authorities are so supervising their
procurement procedures as to afford Panamanian suppliers increased
opportunities to supply their goods. In addition, United States
Government agencies are cooperating, and intend to continue to
cooperate, in increasing the volume and variety of Panamanian
production. These efforts, augmented by Panamanian enterprise,
should serve further to decrease the already small volume of
third-country purchases.
Tire Recapping, Laundry and Dry-Cleaning
Services:
As the Government of Panama has been previously informed, my
Government does not consider tire recapping, laundry and drycleaning
to be activities within the purview of Item 9 of the Memorandum of
Understandings Reached inasmuch as they are services as
distinguished from the manufacture and processing of goods within
the coverage of Item 9. Notwithstanding the fact that these services
are not subject to the commitment contained in the Memorandum of
Understandings Reached, my Government will continue to afford full
opportunity to Panamanian industry to compete in these fields of
activity.
[Typeset Page 901]
Item 9 of the Memorandum of Understandings
Reached:
I refer to Your Excellency’s note P.r.e.u. 505/1021 dated September
12, 1958,12 as well as the Aide Memoire dated
October 8, 1958, requesting the closing of the Mindi Dairy and Mount
Hope processing plant. Under the criteria of Item 9, the Government
of the United States undertakes to terminate the manufacture and
processing of goods for sale to or consumption by individuals
whenever and for so long as such goods “are determined by the United
States of America to be available in the Republic of Panama on a
continuing basis, in satisfactory qualities and quantities, and at
reasonable prices.” As a result of the request by Your Excellency’s
Government, and in the light of these criteria, the Canal Zone
authorities have given consideration to the problem of the supply of
milk and milk products which loom so importantly in the lives of the
people both in Panama and in the Canal Zone. My Government has
concluded that, despite a certain progress that has been achieved by
Panama’s dairy industry in recent years, circumstances still oblige
the Canal Zone to rely on the Mindi Dairy for a portion of its milk
supply. Therefore, my Government considers it must defer termination
of the activities of the Mindi Dairy and Mount Hope processing plant
until the public milk supply of Panama is produced under proven
conditions fully assuring that supply in accordance with the
criteria of Item 9. In order to help the Government and dairy
industry of Panama
[Facsimile Page 5]
achieve a record upon which the Canal Zone
might rely in applying the criteria of Item 9, the United States
will, of course, continue to give assistance and advice when so
requested by Your Excellency’s Government.
Sale of Alcoholic Beverages:
The Government of Panama has sought the cooperation of Canal Zone
authorities in eliminating contraband activities said to exist at
the present time in the sale of alcoholic beverages by Panamanian
dealers to consumers in the Canal Zone. This matter has been
discussed with the Governor of the Canal Zone and the
Commander-in-Chief of the Caribbean Forces, and I am happy to assure
Your Excellency that the authorities in the Canal Zone will gladly
give consideration to any practical system that the Government of
Panama might suggest to ensure a more effective control, such as the
establishment of a single outlet in Panama on each side of the
Isthmus.
Luxury Merchandise:
It has been and continues to be the opinion of my Government that
there are no provisions under existing treaties and agreements
[Typeset Page 902]
which
preclude the importation and sale of so-called luxury merchandise in
the Canal Zone. However, it has been, and will continue to be, the
policy of the responsible authorities in the Canal Zone to encourage
greater benefits to Panama through purchases of such merchandise
from Panamanian sources.
Requested Wage Increase:
While it was pointed out in Your Excellency’s note P.r.e.u. 489/ 1021
dated September 6, 195813 and Aide Memoire dated October
8, 1958, that the majority of Panamanians working in the Canal Zone
were not qualified to receive the ten per cent pay increase approved
by the Congress on June 14, 1958, for United States Government
federal employees in classified Civil Service jobs,14 the suggestion
was made that granting of this pay increase to all employees might
be justified on the basis of the constant and progressive rise in
living costs.
The recent statutory ten per cent increase in salaries applied to
positions subject to the Classification Act. All persons employed in
the Canal Zone, regardless of citizenship, who held positions
subject to the Classification Act or who were paid at rates based on
that Act received the increase. The rates of pay for other positions
are adjusted from time to time independently of rate increases for
positions subject to the Classification Act. It will be recalled
that adjustments in these rates were effected immediately prior to
the adjustment of the Classification Act salaries. In this
connection, it should be pointed out that total wages paid
non-United States citizens by the Canal Zone
[Facsimile Page 6]
agencies in Fiscal
Year 1955 amounted $24,257,000, while in Fiscal Year 1958 the
comparable figure had risen to $27,841,000. It might be pointed out
that the consumer price index published by the Department of
Statistics and Census of Your Excellency’s Government has indicated
a substantially consistent decrease in the cost of living in Panama
since the inception of the index in 1952.
Site for the Proposed Panama Railroad
Passenger Terminal:
In accordance with the obligation undertaken under Item 2(b) of the
Memorandum of Understandings Reached that the Panama Canal Company
should remove its railway terminal operations from the City of
Panama, a new freight station is now being constructed in the Canal
Zone and a tentative site had been chosen for the location of the
new passenger station. Your Excellency’s Government, however, has
[Typeset Page 903]
expressed concern about the proposed location for the new passenger
terminal and has asked my Government, not as a treaty obligation but
as a measure of cooperation, to reconsider this matter. Your
Excellency’s Government is informed that the passenger terminal will
not be located on the site originally intended. Current plans
contemplate its location on a site considerably closer to the new
freight terminal now in course of construction.
Your Excellency may be assured that my Government will continue to
have an active interest in the economic and general well-being of
the Government and people of Panama.
Accept, Excellency, the renewed assurances of my most distinguished
consideration.
