PM–29. Letter from the Deputy Assistant Secretary of Defense for International Security Affairs (Knight) to the Deputy Under Secretary of State for Political Affairs (Merchant)1
Confirming our conversation, the Department of Defense believes that it is unwise to accede to the Panamanian request to fly the Panamanian flag in the Canal Zone. A memorandum setting forth our reasoning is attached.2 Basically, we feel strongly on the basis of all of the information available to us that acceding to the Panamanian request will be interpreted as a sign of weakness on our part, and more importantly, as a symbol of the rightness of the position of those Panamanians who urge that the Canal and the Zone territory should be controlled by the Republic of Panama.
We are aware that there are both other and competing considerations which you and your Colleagues are most competent to weigh, and therefore, we confidently leave the ultimate decision to the Department of State. If you find it necessary or desirable to state our views, however, we would appreciate your doing so essentially as set forth in this letter and the attached.
In the event that it is ultimately decided that the Panamanian flag should be displayed in the Canal Zone, we are also of the opinion that this should be done a suitable period of time after the forthcoming Panamanian elections. Perhaps the next November Panamanian Independence Day would be most appropriate.
[Typeset Page 931]It is the considered opinion of the Defense officials most familiar with this problem that after carefully weighing the pros and cons of flying the flag prior to the elections, there is too great a risk that the results, if any, to be achieved by acceding to the Panamanian request can well be dissipated or lost by permitting our yielding on this question to become a subject of campaign oratory, and possibly stimulating demands for additional concessions.
[Facsimile Page 2]Additionally, I am attaching a memorandum setting forth our position on the remaining differences between our Departments with respect to third country imports3 for such use as you care to make of it.
As you are aware, our principal concern is the effect which a ban on third country imports into the Canal Zone would have upon our post exchange and commissary relations in other countries of the world. Local competing commercial entities always have a selfish interest in curbing these facilities at the expense of United States personnel serving overseas. While I am informed that the amount of commerce about which our representatives differ amounts to less than one percent of total third country purchases for resale, a total ban in the Zone might well form a basis, somewhat justifiable, for increased agitation for similar bans elsewhere.
Sincerely yours,