PM–30. Memorandum from the Secretary of State to the President1
SUBJECT
- Recommendation on Third Country Imports and Luxury Item sales by Canal Zone Agencies.
You will recall that at your meeting on October 12, seeking means for eliminating frictions in United States-Panama relations, you instructed the Panama Canal Company to desist in its importation from third countries of merchandise for resale in Canal Zone sales stores and to reduce to the greatest extent possible the handling of luxury [Typeset Page 932] goods in commissaries and PX’s. Since the third country purchase issue revolves around the interpretation of Item B of the Memorandum or Understandings Reached in connection with the 1955 Treaty, your instruction was construed to include the military sales stores in the Zone as well.
In October the Panama Canal Company revised its procurement procedures on third country imports and substantially limited luxury items sales, in accordance with your instruction. However, the Department of Defense, because it believes that to limit procurement for resale in its Canal Zone outlets to United States and Panamanian sources would have a precedential impact on worldwide military PX/commissary policy, appealed to you in early December for a reconsideration of your instructions on third country imports. Both State and Defense Departments were requested to seek a solution which would minimize the potential impact at other Defense installations overseas.
Both the State and Defense departments are agreed that a uniform policy for both the Panama Canal Company and Caribbean Command is required, and a satisfactory policy on luxury item sales has been found. On the third country imports issue, we cannot reach a satisfactory solution. This Department holds that all third country imports for resale in Zone outlets should be halted, with the single exception of gasoline. Our Defense colleagues cannot agree because of their fear of setting a worldwide precedent. Since the Canal Zone is a [Facsimile Page 2] unique establishment with both civilian and military outlets within that limited area, it is our view that defensible arguments can be devised to preclude demands for like treatment by other governments on whose territory Defense installations exist.
In actual fact, the value of the commerce over which the Defense and State Departments disagree is insignificant, but it is my view that a question of principle is involved—that of living up to the spirit as well as the letter of our 1955 Treaty undertaking.
I therefore recommend, on foreign policy grounds, that you reiterate your earlier instruction on this matter and that Caribbean Command be directed to revise its procurement policies on third country imports for resale to conform with those policies already in effect by the Panama Canal Company.
- Source: Department of State, Central Files, 611.1913/2–960.↩