Foreign Relations of the United States, 1969–1976, Volume XXII, Panama, 1973–1976

108. Memorandum From the Department of Defense Deputy Negotiator (Dolvin) to Multiple Recipients¹

Washington, December 29, 1975.

SUBJECT

• December 1975 Negotiating Round, Panama Canal Negotiations (U)

1. On Tuesday, 16 December 1975, a high-level group of Panamanians met with the US Negotiators with the objective of reaching—or making substantial progress toward—conceptual agreement on the remaining unresolved major issues in the negotiations. The members of the Panamanian Negotiating Team were:

a. Juan Antonio Tack (Foreign Minister and Chief Negotiator).

b. Nico Gonzalez-Revilla (Ambassador to the United States and Deputy Negotiator).

c. Rory Gonzalez (Business partner and personal confidant of General Torrijos —clearly the most powerful member of the team).

d. Adolpho Ahumada (Minister of Labor and an attorney).

e. Edwin Fabrega (Director of IRHE, Panama’s power and light enterprise—a member of the “secret” treaty advisory group).

f. Carlos Lopez-Guevara (Prominent Panamanian attorney and legal adviser to the team).

2. General

a. The Panamanian Team was very high-powered and had full authority to negotiate for agreement in concept on the remaining issues. This new attitude, or willingness to bargain on all issues, constituted in itself a major change in Panama’s approach toward the negotiations, and provided the US Negotiators an opportunity to probe their position on all issues, individually and collectively, during the course of this round of negotiations. The remaining unresolved major issues in the negotiations at the outset of this round were:

(1) Duration (operation)

(2) Duration (defense)

(3) Related activities

(4) Neutrality

(5) Expansion

(6) Jurisdiction over US civilian employees of the new Canal Administrative Entity

(7) Arbitration

(8) Compensation

(9) Lands and Waters

b. The US negotiating position on each of these issues at the beginning of the December 1975 round (as modified by the November 1975 round results), together with the remaining approved fallbacks as of that time, is shown in summary form at TAB A. The results of this round are discussed below, relative to each issue.

3. Land and Water Areas. This is an area in which the Panamanian negotiating position evidenced marked movement during the December 1975 round. At the first meeting of the negotiating teams, Panama tabled a new proposal on the issue of land and water areas, which was explained by Edwin Fabrega. This proposal is depicted graphically by the map (and legend) attached at TAB B.² Basically, the proposal involves several different categories of proposed land-use rights, and a timetable for the use rights of certain lands to change during the lifetime of the Treaty. Upon clarification by the Panamanians to the Defense Department members of the Canal Negotiations Support Group, it became clear that although the proposal in its present form was unacceptable to the US, it represented major movement by Panama on this issue, and that the two positions were closer than at any time in the past. Moreover, the time-phased approach held out interesting possibilities for the United States, in addition to filling the Panamanians’ expressed need for a “living” Treaty, i.e., one involving a process of events over time, visible to the Panamanian people rather than a static Treaty. Also, it became clear during their clarification of the proposal that there was a definite measure of flexibility in their position concerning most land areas of major interest to the US. After the conclusion of the clarification sessions on their land and water proposal, the Panamanian Team proposed a conceptual agreement on the lands and waters issue, which is attached at TAB C.³ While the language of their proposed conceptual accord on lands and waters is unacceptable to the US as it stands, its basic approach warrants serious consideration and offers the possibility of accommodating the present US position in an only slightly modified way. Additionally, the Panamanian Negotiators proposed that the United States make available one representative each from the Panama Canal Company and USSOUTHCOM to participate as active members of the Panamanian Department of Urban Planning. The US team agreed with this proposal.

4. Duration (operation). During the November 1975 round, the US had met the Panamanian position on the duration of effective US control of the new Canal Administrative Entity. In this most recent round, Panama tabled a proposed Threshold Agreement (TAB D)⁴ that, while maintaining 31 December 1999 as the termination date for US operation, proposed a transfer of control of the entity to Panama in 1995. This proposal was, however, withdrawn by Panama during the subsequent course of the negotiations. The US Team offered 20 years for operation duration if Panama would accept 40 years for defense duration. Panama rejected this proposal. Note: For an issue-by-issue comparison of the US position at the beginning of this round with the Panamanian position tabled in their proposed Threshold Agreement, see TAB E.⁵

5. Duration (defense). The proposed Threshold Agreement tabled by Panama during this round (TAB D) proposed a duration for US defense rights of until 31 December 1999, with a provision that no state, other than Panama, would have the right to station troops in Panama after the Treaty’s termination. Subsequently, during the course of the negotiations, Panama agreed to add to that provision the phrase, “except as otherwise mutually agreed by the parties prior to the Treaty’s termination.” Concerning the 40-year duration period proposed by the United States, however, Panama still would not agree to a defense duration that extended beyond the turn of the century. In this regard, the Panamanian Team indicated only that Panama would consider a primary defense responsibility of the US that extended beyond the century if the US would:

a. Accept the Panamanian lands and waters proposal made earlier during the round.

b. Agree to a shorter period for US operation of the Canal.

c. Agree to maintain no physical military presence in Panama after the year 2000.

d. Accept Panama’s position on neutrality (i.e. no primary guarantor status for the US beyond the Canal Treaty’s life).

6. Related activities. The Threshold Agreement tabled by Panama proposed that the duration of each of these activities be considered and negotiated individually (see TABS D and E). The US Team accepted this approach. Panama indicated that it was interested in having the US agree to be obligated to continue certain of these activities (unspecified); the US Team did not, however, respond to this indication. Generally, it was apparent that these activities were not a major concern to Panama.

7. Neutrality

a. Here, as in the issue of defense duration, Panama did not show much flexibility. Their position on this issue, as expressed in their proposed Threshold Agreement (TAB D), is set out in summary form in the spread sheet at TAB E. During the subsequent course of the negotiations, however, Panama did:

(1) Agree to add a provision expressly insuring the unimpeded transit of troops, materials of war, and vessels of war, however powered or armed, of all nations, provided that nuclear powered or armed vessels may be required to post bond with the Entity or otherwise insure against damage to persons or property in Panama.

(2) Caveat their proposed language on the stationing of troops in Panama with language excepting arrangements “otherwise mutually agreed to by the Parties prior to the termination of the [bilateral] Treaty [between the U.S. and Panama].”

(3) Agree that no third country other than Panama will operate the Canal after the Treaty’s termination.

(4) Clarify their insistence that military vessels of all nations, including the US, be required to pay tolls.

b. The US Team responded by proposing that this issue be referred to technical groups of both negotiating teams. This was agreed to by the Panamanians, and, while the ensuing talks at the technical team level were helpful in probing the Panamanian position on neutrality, they nonetheless stalled on the questions of:

(1) The primary right of the US to guarantee the permanent neutrality of the Canal.

(2) Whether US military vessels should be allowed toll-free transit.

(3) Whether there would be a bonding, or insurance, arrangement for transiting nuclear powered or armed vessels.

8. Expansion. The Panamanian position on expansion embodied in their proposed threshold agreement is set forth in full in TAB D and in summary form in TAB E. Significantly, their new position on expansion represented considerable movement. It grants to the US the exclusive right to expand interoceanic canal capacity in Panama. Concerning the definitive right requested by the US, the Panamanian team wanted to know generally what terms the US wanted definitively set out in the treaty. In response, the US Negotiators offered conditionally (see para. 14, infra) the provision at TAB F⁶ concerning expansion. In response to this indication, the Panamanian Team “took note that the US offer on expansion seems to be workable.”

9. Jurisdiction over US civilian employees of the New Canal Administrative Entity. Panama’s position on this issue is set out in TAB D. However, the Panamanian Team indicated subsequently that here again, “the U.S. offer seems to be workable.”

10. Arbitration. In the proposed Threshold Agreement tabled by Panama (TAB D), Panama held firm on their position that there be in the new treaty an obligatory obligation to submit all disputes under the treaty to binding arbitration. During the subsequent course of the negotiations, however, Panama fell back to a position that only disputes involving those aspects of the treaty concerning operation of the Canal be subject to obligatory submission to binding arbitration; those aspects of the treaty concerning US defense rights (including the SOFA) would not be the subject of obligatory arbitration. Moreover, the Panamanian Team indicated “that the U.S. offer seems to be workable.”

11. Compensation. Panama proposed a fixed annuity in its proposed Threshold Agreement (TAB D), but both teams agreed that this issue should be put aside until all others are resolved.

12. The New Canal Administrative Entity

a. The Panamanian Team proposed that the new Canal Administrative Entity be “created jointly by means of the treaty.” Upon clarification of this proposal, and express reaffirmation by Panama in this connection that effective control of the entity be with the United States, the US Negotiators conditionally (see para. 14, infra) agreed to this proposal with the express understanding that effective control would be with the US.

b. Also in connection with the entity, the Panamanians asked two questions: First, whether the United States would be agreeable to a clause obligating the US to maintain the Canal during the Treaty’s life; and secondly, whether Panama would receive control at the end of the Treaty without assuming any liabilities of the entity.

c. The US Team also indicated with regard to the Canal Entity that we were prepared to offer Panama an organizational structure that enbodies the principle of a definite minority partnership for Panama in the decision-making and decision-implementing aspects of the Treaty, and offered conditionally (see para. 14, infra) there would be no “security positions” in the new entity.

d. It was agreed that this issue would be an appropriate one to be addressed by technical teams of both countries, sometime in the near future.

13. Protection and Defense

a. While this subject had not been a major issue in the negotiations, the Panamanian proposed threshold agreement (TAB D) addressed itself to this issue by proposing:

(1) That the new treaty shall ensure the increasing participation by Panama in the protection and defense of the Canal.

(2) That there be a pre-established level of US Forces on Panamanian territory.

(3) That the level shall decrease, in accordance with a process spelled out in the treaty, until eliminated.

b. The Panamanian negotiators subsequently changed their proposal in this area to:

(1) That the new treaty shall establish the mechanism which shall permit the increasing participation by Panama in the protection and defense of the Canal (i.e. the “combined Defense Board” already agreed to in the SOFA).

(2) That the level of US Forces shall not exceed the number of Guardia Nacional, except in cases of conflicts with third countries (with no process of reducing the level of US Forces spelled out in the treaty.

(3) That the Guardia Nacional shall be supplied by the United States, without charge, the same equipment as the US provides to its own troops in Panama.

c. I expressed to them that it was unacceptable from the US point of view to have the primary responsibility for protection and defense of the Canal and at the same time be subject to arbitrary limits on our troop level in Panama. The Panamanian Team suggested that the formula could be modified with, for example, a minimum level to the maximum limit and a broader exception than “conflicts with third countries.” Nonetheless, I expressed that this approach was unacceptable to the United States. I indicated in the alternative, however, that there could be an event-oriented process for the reduction of the US military presence in Panama, and that the US Team would conditionally (see para. 14, infra) commit itself to formulate a proposal incorporating such a process.

14. Conditional Proposals

a. The following US responses to the Panamanian Team were made expressly conditional on their acceptance of our position on either SOFA jurisdiction and rights for US civilian employees of the new entity or the US position on no obligatory arbitration:

(1) Our acceptance of the principle that Panama and the US create the Canal Entity jointly by means of the Treaty (with the express understanding of Panama that the entity will be under US control).

(2) Our acceptance that there will be no “security positions” in the new Canal Entity.

(3) Our commitment to formulate an event-oriented process for the reduction of the US military presence in Panama over the life of the Treaty.

(4) Our new position on expansion (TAB F).

b. In response, the Panamanian Team said it “took note of the conditional US offer, and that the offer seems “workable.”

15. Summary. In summary, this negotiating session succeeded in clarifying the remaining issues. The Panamanian conceptual proposal for handling the lands and waters issue seems to be workable with some modifications. It is clear that further negotiations will be necessary before agreement in concept can be reached on the remaining major issues.⁷ The next negotiating session is tentatively scheduled for the latter part of January.

Welborn G. Dolvin

Lieutenant General, USA (Ret)

Deputy Negotiator from the Department of Defense for the Panama Canal Negotiations

Tab A⁸

Undated.

ISSUE	US NEGOTIATING POSITION AS OF 5 SEPTEMBER 1975	APPROVED FALLBACKS AS OF 5 SEPTEMBER 1975	US NEGOTIATING POSITION AS OF 25 NOVEMBER 1975
COMPENSATION	US will provide annual payment for life of treaty computed on basis of 27¢/Panama Canal ton. US will provide minimum payment if Canal closed outside control of Panama. US and Panama to share costs of reopening after any such closure./cell>	Amount: First 3 years, 27¢/ton Next 2 years, 28¢/ton Next 3 years, 29¢/ton Remainder, 30¢/ton Minimum Guaranteed Payments: First Fallback. Extended payment period, to maximum of 10 quarters. Second Fallback. Increase minimum payment to $2.5 million per quarter. Third Fallback. Recede from seeking Panama’s agreement to share in costs of reopening.	[Same as position in 5 September 1975 proposal.]
LANDS AND WATERS	January 18, 1975 offer with addition of: —Coco Solo Ramps, Fort Randolph and access to them via Randolph Road —Portions of the Albrook/Clayton Training areas	—Cristobal piers —Land and water areas in Gatun Lake —Ft Sherman jungle training area south of the 22d grid	[Same as position in 5 September 1975 proposal.]
NEUTRALITY	Joint US-Panama Guarantee, with Colombia and Costa Rica invited to join as subordinate co-guarantors. No nation other than Panama or US to operate, protect or defend any canal in Panama, except as otherwise mutually agreed. US right to pass troops, vessels of war, and materials of war freely and without charge through any canal in Panama.	Include provision for some form of “approval” and/or “recognition” of the Joint Guarantee by other countries, provided that any actions to be taken by the US to implement the Guarantee would not require the prior approval of such countries.	US accepts language of Threshold Agreement (on Protection and Defense) relating to neutrality as it stands with following clarifications: —US willing for Panama to declare Canal’s neutrality while two contracting parties would jointly guarantee it. —US willing for UN to serve as a depository for declarations by other countries that they recognize and respect the regime of neutrality.
CIVILIAN EMPLOYEES	US civilian employees have same privileges as members of civilian component under SOFA. Limited number of high-ranking US officials enjoy diplomatic immunity.	First Fallback. Foryears, same SOFA status. Thereafter, same as SOFA except US primary jurisdiction only in official duty cases. Limited number of high-ranking US officials enjoy diplomatic immunity. Second Fallback. Same as SOFA status, except US primary jurisdiction only in official duty cases. Limited number of high-ranking officials enjoy diplomatic immunity.	[Second fallback.]

ISSUE	US NEGOTIATING POSITION AS OF 5 SEPTEMBER 1975	APPROVED FALLBACKS AS OF 5 SEPTEMBER 1975	US NEGOTIATING POSITION AS OF 25 NOVEMBER 1975
EXPANSION	US to have definitive and exclusive right to expand interoceanic Canal capacity in Panama, whether by construction of a sea-level canal or by addition of a third lane of locks for existing Canal. Panama’s agreement, in event of US exercise of right to expand, to make available without cost to the US such additional areas—determined through negotiations—as would be necessary for expansion works. US to use nuclear construction techniques only with consent of Panama. No automaticity of extension of duration if Canal capacity expanded; however, possibility of negotiating extended duration that is commensurate with magnitude of US investment.	First Fallback. Reduce the duration of the definitive right, while retaining the exclusive right to expand for the remainder of the Treaty’s duration. If the exclusive right were exercised, parties would negotiate mutually satisfactory agreement not only with respect to duration but also with respect to terms under which the expanded Canal capacity would be constructed, operated, maintained, protected, and defended. Such negotiations would be guided by principle that US role in operation, protection and defense of expanded Canal would be commensurate with magnitude of US investment. Second Fallback. While retaining a definitive right of some length, recede from seeking the exclusive right, and incorporate in lieu thereof a first refusal right for period from termination of definitive right to Treaty’s termination.	[Same as position in 5 September 1975 proposal, with non-substantive changes in language.]
DURATION (OPERATION)	25 years	Adjust termination date downward toward, and then to, the minimum period authorized by Presidential guidance, i.e., 20 years	December 31, 1999
DURATION (DEFENSE)	50 years, with an agreement to agree on residual defense role for US as follows: Parties “commit themselves to agree mutually, not less than 3 years prior to [termination of period for defense duration], upon the military arrangements to facilitate United States participation in helping Panama to ensure the Canal’s neutrality, the non-discriminatory character of its operation, and its security against threat following the convention’s termination, including arrangements with respect to locales and rights of use appertaining to the United States.”	Adjust termination date downward toward, and then to, the minimum period authorized by Presidential guidance, i.e., 40 years.	40 years, with an agreement to negotiate on residual defense role for US as follows: Parties “agree to meet prior to [termination of period for defense duration] to negotiate in good faith concerning the best means of ensuring the Canal’s security, neutrality, and non-discriminatory character following the treaty’s termination.”
RELATED ACTIVITIES	Duration linked to defense duration, on understanding that: (a) Panamanian participation in designated activities, civilian and military, in a manner mutually agreed upon by 2 parties. (b) Authorization renewable, from time to time, in whole or in part, beyond defense duration period by mutual agreement between the two parties through negotiations to be held not less than 3 years prior to termination of defense duration period.	First Fallback. Incorporate a provision whereby the two parties “shall periodically, as agreed in the separate agreements, reexamine the requirement for continuation of such activities.” Second Fallback. Adjust the duration of the US authority to conduct related activities downward toward, and then to, the term of the operation treaty.	Duration linked to operation duration, on understanding that (a) Panamanian participation in designated activities, civilian and military, in a manner mutually agreed upon by two parties. (b) Parties shall periodically during the treaty’s lifetime reexamine the requirement for continuation of such activities.

1. Source: Washington National Records Center, RG 330, OSD Files, FRC 330–80–0044, Negotiations—Panama and Panama Canal Zone, Nov 1975–Feb 1976. Secret; Sensitive. Brackets are in the original.
2. Attached but not printed.
3. Tab C, dated December 22, is attached but not printed.
4. Tab D, dated December 19, is attached but not printed.
5. Tab E is attached but not printed.
6. Tab F, undated, entitled “New Works/Expansion,” is attached but not printed. The provision reads, in part, “During the treaty period the United States shall have the right to (a) add additional locks to the existing canal, or (b) construct a sea-level canal in Panama.”
7. In a December 22 memorandum to Jorden, May described the talks as “rocky” and added: “The Panamanians are close to a state of ‘panic,’ that is to say they are very much concerned that these talks will not result in sufficient movement to justify their trip or satisfy General Torrijos.” (National Archives, RG 84, American Embassy, Panama, Panama Canal Treaty Negotiation Files, Lot 81F1, Box 125, POL 33.3–2/Canal Treaty Negotiations/General, July–Dec 1975)
8. Secret.