Foreign Relations of the United States, 1964–1968, Volume XXXI, South and Central America; Mexico

420. Memorandum From the President’s Special Assistant for National Security Affairs (Bundy) to President Johnson¹

Washington, undated.

SUBJECT

• Relations with Panama and Sea-Level Canal Negotiations

A briefing for you on relations with Panama and proposals for negotiations with Panama on canal problems has been arranged for December 2 at 5:45 PM.

Relations with Panama

The Robles Administration passed a test of strength during the week of November 23–27 against Communist and anti-American elements. The demonstrations which occurred were not primarily directed at the United States, but were intended to protest what these elements regarded as a weakening of the Panamanian position in its negotiations with the United States. Although the National Assembly sustained the Government, it did so in a resolution which called for abrogation of the 1903 Treaty. Before these events, it was hoped that a satisfactory interim program, until a sea-level canal were opened, might be the nine-points agreed to between State and Defense (Tab A).² It is doubtful now that such an interim program would be adequate. State suggests the following program, on which McNamara has not yet had a chance to decide his position.

Possible Package Program

1. A general policy statement which discusses relations with Panama and negotiations on a sea-level canal (draft attached Tab B).³ Such a statement, if made this month, would permit us to seize the initiative and dampen current efforts by anti-American elements in Panama to stage large anti-American demonstrations on January 9; avoid any appearance of responding to pressure generated by demonstrations; and provide the terms of reference for the conduct of negotiations with Panama and other countries on a sea-level canal.

Such a statement would restate our major objectives in operating the present or any future canal; recognize that the existing canal and treaty arrangements are becoming obsolete; note the Congressional authorization for a sea-level canal study, and give some ideas on how the surveys would be conducted, and how a sea-level canal would be financed, constructed, operated, maintained and defended; discuss what we propose to do about the present canal during the interim period until a new one is opened, including the protection of the interest of American and Panamanian employees; and request the cooperation of all in this forward-looking program.

2. A sea-level canal treaty which would give us the right to conduct necessary surveys and construct a new canal at our option. (Draft of November 18 is attached at Tab C.⁴ There are still some disagreements between State and Defense on this draft which they hope to reconcile before the December 2 meeting.) The treaty would separate the security aspects from the business of operating a canal. The canal would be operated and maintained by an international commission on a self-sustaining basis. Defense of the sea-level canal would be the responsibility of the United States and Panama (Colombia or Nicaragua–Costa Rica) with almost the entire burden falling on the United States.⁵

The country in which the canal is located would retain sovereignty, but would grant to the Commission specific rights which would enable the Commission to control, operate, maintain and protect the canal. The suggested composition of the Commission is such that we would have a majority.

This treaty, and the base rights treaty under 3 below, would be negotiated with Panama, Colombia, and Nicaragua-Costa Rica before we begin surveys or other works. Such simultaneous negotiations in advance would put us in the best bargaining position with these countries. Panamanian oligarchs will not like the international approach on operating the canal, but this offers the best basis for selling it to world opinion and puts us in a favorable position.

3. A base rights treaty to accompany a sea-level canal treaty which covers the continued stationing of our forces in Panama (Colombia or Nicaragua-Costa Rica). Present treaties permit such forces only for defense of the canal, and we need to broaden this to cover hemisphere defense. Such a treaty would be similar to the NATO status of forces agreements, but it cannot be drafted until Defense determines what areas of lands it needs for bases.

4. A new treaty with Panama which would replace all existing treaties and would remain in force until two years after a sea-level canal opens. The Panamanian Foreign Minister has informed us that the Robles Administration must obtain agreement to negotiate a new treaty if it is to remain in office. Ambassador Vaughn agrees with this assessment. In drafting it, we would follow the same technique as on the sea-level canal—recognize Panamanian sovereignty but then provide specific grants of rights to the United States. Some 80% of the provisions could be the same as in the three existing treaties. (State has prepared a rough draft, which is attached Tab D.)⁶

The purpose of such a treaty would be in great part psychological—to remove those emotional issues (sovereignty, etc.) which provide grist for agitators in Panama, and at the same time, preserve our essential rights and requirements for operation, maintenance and protection of the canal (operation of courts, police jurisdiction, stationing of military forces, etc.). It would include those items from the nine-point interim program (Tab A above) that are appropriate. At the same time we must expect the Panamanians to insist that many of the peripheral privileges we have hitherto enjoyed, which cannot reasonably be justified as necessary for the operation, maintenance and protection of the canal, will probably have to be eliminated (operation of commissaries, movie houses, bowling alleys, use of Canal Zone stamps, use of unneeded land and facilities, and so forth). We should be able to soften the blow on civilian employees by cost-of-living allowances or agreement by Panama that the employees may run cooperative stores, or both.

5. An undertaking on our part to help Panama to adjust economically to the construction of a sea-level canal elsewhere in Panama or in another country.

For the meeting on December 2, it is proposed that we concentrate primarily on the proposed policy statement. If you approve the statement, you could then review it with the leadership on December 18, and any others you thought appropriate, such as General Eisenhower. It is hoped that the statement could be issued before Christmas.

It is intended that all the proposed treaties be negotiated with Panama at the same time, and the package then presented to the Senate for ratification. Only the sea-level canal and base rights treaties would be negotiated with Colombia and Nicaragua-Costa Rica.

Secretary McNamara plans to bring Cyrus Vance and Steve Ailes to the briefing.

Robert Anderson, Leonard Meeker (State’s Acting Legal Adviser), Ambassador Vaughn and Edward Clark (Director of Panamanian Affairs). Secretary Rusk is meeting with Foreign Ministers who will be in New York for the meeting of the U.N. General Assembly. He has reviewed the general features of the program outlined above and concurs in them. But he does not believe we should at this time raise the possibility of using nuclear detonations to build the canal.

Bob Sayre and I would also attend the briefing.

McGeorge Bundy ⁷

1. Source: Johnson Library, National Security Security File, Country File, Panama, Vol. VI, August 1964–January 1965. Confidential.
2. Tab A, atttached but not printed, is a November 19 memorandum from Mann to McNamara, that contains nine interim steps that would demonstrate to Panama progress in the negotiations and reduce the possibility of violence. These were: (1) flying Panamanian flags in addition to the American flag and flag of registry; (2) Spanish as an official language in the Zone; (3) use of Panamanian postage stamps with Canal authority overprinting in the Zone; (4) a Panamanian and an American citizen resident in Panama to join the Canal Board of Directors; (5) negotiations for a Labor Advisory Committee;(6) negotiations for an agreement for purchase of gasoline for use in the Zone; (7) negotiations for withholding and remittance to Panama of income taxes of Panamanian employees of private companies in the Zone; (8) negotiations to permit private Panamanian companies to establish businesses in the Zone; and (9) free treated water to Panama.
3. Tab B, attached but not printed, is a draft outline of a policy statement prepared by Mann on November 28.
4. Tab C, attached but not printed, is a draft of the treaty prepared November 18.
5. The Joint Chiefs addressed the issue of a proposed sea-level canal in two memoranda to McNamara on December 2, JCSM–1012–64 and CM–285–64. (Washington National Records Center, OSD Files: FRC 330 70 A 1266, Pan 800 (4 January, 1965), Sea Level Canal, and Johnson Library, National Security File, Country File, Panama, VI, August 1964–January 1965, respectively) The JCS generally concurred in the proposed treaty provided “joint defense” included the right of the United States to defend the host country against Communist domination as well as to defend the canal. The JCS also noted that the draft treaty should be submitted to careful analysis and interagency coordination before it was adopted as policy.
6. Tab D, attached but not printed, is the Department of State draft prepared on November 26.
7. Printed from a copy that bears this typed signature.