PM–31. Letter from the Deputy Under Secretary of State for Political Affairs (Merchant) to the Deputy Assistant Secretary of Defense for International Security Affairs (Knight)1
I have received your letter of January 14, I–216/60,2 by which the Department of Defense positions on the issues of (1) the display of the Panamanian flag in the Canal Zone, and (2) resale of luxury items, and third country imports into the Canal Zone, were transmitted to this Department.
My colleagues and I have carefully reviewed the Defense positions as well as the two memoranda supporting them. As I stated at the January 7 meeting at my office, during which the issue of third country purchases was last discussed by representatives of State, Defense and the Panama Canal Company, I find that our differing positions are apparently irreconcilable and I have approved a recommendation that the Secretary of State forward a Memorandum for the President recommending that Caribbean Command be directed to revise its policies on third country imports for resale to conform with those already put into effect by the Panama Canal Company.
On the Panamanian flag issue, I have recommended that further action be suspended for the time being in view of certain developments which are now taking place. We will not fail to take the views of the Department of Defense into consideration when a recommendation is being formulated. As of the present time, however, no final position has been taken at the higher levels of this Department.
[Facsimile Page 2]I am enclosing a copy of the Department’s Memorandum for the President on the unresolved third country import issues.3 It has been approved by the Secretary and will be transmitted to the White House shortly.
Sincerely yours,
Livingston T. Merchant
Under Secretary for Political Affairs
- Source: Department of State, Central Files, 611.19/1–1460. Confidential. Drafted by Sharp on January 20.↩
- See Document PM–29.↩
- For the Secretary of State’s Memorandum to the President, see Document PM�30.↩