44. Memorandum From the Panama Negotiations Staff Support Group to the Deputy U.S. Negotiator (Bell)1

Panama Negotiations: Subject Matter of First Substantive Discussions

In accordance with your request, we have considered the relative merits of beginning substantive talks with (a) the issue of jurisdiction, (b) questions concerning jurisdiction and United States “use” rights combined, or (c) the matter of Panamanian participation in the administration of the Canal by the United States.

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We have concluded that participation should be the first topic for substantive discussion. The following factors are fundamental of this conclusion:

1. The primary objective in selecting a topic for the first substantive talks on major treaty issues is to discuss a subject area which will be mutually productive and conducive to enhancement of negotiations.

2. The first round of substantive talks will be exploratory in nature, and will therefore concern basic concepts rather than specific formulae.

3. The possible U.S. positions concerning Panamanian participation reflected in the attached paper will be approved by the U.S. negotiators after consultation with the interested agencies and bureaus within the U.S. Government.2

4. The established style of negotiation does not require that all major issues identified under a particular principle be addressed together, but rather will permit issues to be addressed in the order most convenient to the negotiators. In this regard, it is assumed that the negotiators will not necessarily exhaust a particular issue (i.e., reach a “threshold agreement”) before moving to another, but may discuss a number of issues at the conceptual level before entering into more detailed discussion of any one of them.

The advantages and disadvantages of the options presented, as we view them, are as follows:

Option 1: The question of all aspects relative to jurisdiction.

Advantages

1. Might be possible to separate out for independent discussion any one of the five basic categories of jurisdiction involved (i.e., criminal, civil, police, private enterprise and legal rights of US agencies), thus narrowing the scope of discussion to a manageable level.

2. Might permit the U.S. to demonstrate an accommodating attitude at the outset of substantive talks on an issue of overriding importance to Panama and might encourage Panama to reciprocate on other issues of importance to the U.S.

3. Would constitute a positive response to Panama’s initial statement of preference for this as the first substantive issue to be addressed.

Disadvantages

1. Would require the expenditure of significant U.S. concessions, without providing us the opportunity to seek substantive Panamanian concessions in return.

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2. Would risk the possibility of reaching an impasse at the outset. Might be faced with previous Panamanian hardline, inflexible positions and therefore the choice of leaving the issue unresolved in principle (and hanging heavily over discussions of other issues) or of making unacceptable concessions.

3. Is a very complex issue and has not been recently reviewed. These issues could be discussed in only the most general and vague way.

4. Even if we attempt to separate out basic categories, Panama may force us into a discussion of other issues such as lands and facilities.

Option 2: Same as Option 1, but expand scope of discussion to include the question of the “use” rights which Panama will confer upon the United States to enable it to carry out the functions provided for in Principle 6.

Advantages

1. Would permit a balanced discussion of possible trade-offs between matters of importance to each party.

2. Fairly positive response to Panama’s proposal.

Disadvantages

1. Probably impossible to prepare for in short time frame available (i.e., with respect to some complex categories of U.S. rights, notably defense, the process of identifying our objectives within the U.S. Government may not be completed for some time. Thus, we would have to limit the discussion of U.S. rights with the attendant problem of reducing the range of Panamanian concessions which we could seek in return for U.S. concessions). In any event, would be a much more complex subject for discussion than either Option 1 or 3.

2. Possibility of reaching impasse on jurisdiction (see Disadvantages 2–4 under Option 1) with additional disadvantage of drawing U.S. rights into such a situation.

Option 3: The questions of what form the administration of the Canal by the United States will take and of Panama’s participation in it. (Issues 1–4 under Principle 6.)

Advantages

1. Would exploit recent Panamanian expressions of willingness to discuss this option.

2. Would permit the U.S. to retain the negotiating initiative.

3. Would probably not require such extensive U.S. accommodations as would the issue of jurisdiction.

4. Absence of previous fixed Panamanian positions on issue might prompt a flexible approach by Panama.

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5. Could pave the way for a more accommodating Panamanian approach to the issue of U.S. rights based upon understandings reached concerning the form and degree of Panamanian participation in the administration of the Canal.

6. Would serve to draw out Panamanian views on major Canal administration and participation issues which are essential to developing a comprehensive U.S. position.

Disadvantages

1. Could risk an impasse due to the lack of information about Panama’s views on this issue.

2. Might pose difficulty for Panama in discussing this issue in depth.

Attachment3

United States Administration of the Canal and Panamanian Participation

I. Issues 1 through 4 Under Principle VI

Issue 1

The question of what form the administration of the Canal by the United States will take.

Issue 2

The question of how Panama shall begin to participate in the administration of the Canal.

Issue 3

The question of whether there should be established regular procedures for consultation between the two parties, with the objective of implementing the provisions of the treaty relating to Panama’s participation in the administration of the Canal.

Issue 4

The question of applying the concept of growth over time to Panama’s participation in the administration of the Canal with the objective of its assuming total responsibility for the operation of the Canal upon the termination of the treaty.

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Current Presidential Guidance

The U.S. negotiators are to seek “an arrangement whereby the U.S. retains control of canal operations with Panamanian participation in the canal organization.”

Previous U.S. Positions

A. 1971 Treaty Draft

The 1971 treaty draft permitted the United States to establish a U.S. Government instrumentality (probably in corporate form) to operate and maintain the canal and auxiliary works. There was to be a Panamanian liaison officer to the U.S. instrumentality and there were general consultation provisions.

B. 1967 Treaty Draft

The 1967 treaty drafts established an “international judicial entity”, the “joint administration”, which was to operate the canal and administer the Canal Area. It was to be managed by a board composed of five members from the United States and four from Panama. It had general corporate powers and the extraordinary power to adopt a code governing civil and criminal matters pertaining to the canal.

II. Nature of the Problem

A. The problem is to guarantee effective U.S. control over canal operations while incorporating Panamanians into the administration of the canal.

B. There are two levels of the problem we must consider. First is the degree of control which the United States must maintain in the overall policy of canal operations. Second is the extent of Panamanian participation in the day to day management and operation of the canal. In pursuing current guidance to retain US control, we are not certain what Panama desires when it says that it wishes to participate in canal administration. However it is reasonable that Panama will wish to participate at both levels. In the past Panama has been primarily concerned with having the maximum number of Panamanians employed at all levels of the canal administration. From discussions between the Deputy Negotiators it is no longer clear that such a quantitative goal remains paramount. Rather, Panama now appears primarily interested in “meaningful” participation involving selected functions and progressively more responsible positions without disturbing effective US control agreed to in the Statement of Principles.

III. Form of the Canal Administration

The form of the canal administration is largely a technical matter and is perhaps better considered after we know Panama’s concerns. [Page 127] Nevertheless if Panama desires to discuss this matter, we are prepared to begin discussions noting that there are several possible forms which could accomplish United States’ purposes. Each of these forms is sufficiently flexible to permit Panamanian participation yet preserving essential control in the United States. They are:

(a) continuation of present Panama Canal Company

(b) creation of new United States Government corporation

(c) transfer of canal to a civil works function of the United States Army Corps of Engineers

(d) creation of joint United States-Panamanian government corporation, with control resting in United States.

The primary purpose of this entity would be to operate and maintain the canal. However in creating the entity we should be careful to provide in some way for administering those activities beyond mere operation and maintenance of the canal (e.g. fire protection, housing, legal systems, etc.), whether by the canal entity or a separate United States agency. In this regard, prior Panamanian agreement is needed to confer such activities on the United States.

IV. Panamanian Participation

At the policy level, the GOP might seek representation in the entity which will operate and maintain the canal. The U.S. might agree to have Panamanians appointed to the Board of Directors, while maintaining a US majority which ensures US control of the canal’s operation. The U.S. might also consider other means to allow Panamanian participation in the canal entity—such as allowing Panama to become a minority shareholder.

Secondly, we presume Panama will seek to have more of its citizens employed in all functions and at all levels of canal administration. Agreement on this form of participation requires considerable Panamanian understanding of the complexities and restraints which are inherent in this matter and which involve U.S. citizen employees, their civil service status and labor unions. For our part, it may be necessary to give preference to Panamanians for certain jobs. It will probably be necessary to modify previous practices regarding security positions. In this regard one feasible and attractive response might be to use the GOP state employment agency as the primary labor source. This difficult issue may need to be referred to a joint US-Panamanian committee.

V. Consultations and Concept of Growing Panamanian Participation over Time

These two issues are very closely related. The mutual goal of the new concept of growing Panamanian participation is to insure that Panama is capable of assuming complete canal operation upon termina [Page 128] tion of the new treaty. In keeping with a concept of responsible partnership both parties should be able to reach agreement that the need for growing Panamanian participation is a matter of good management.

Although we do not believe it is practical or desirable to reach agreement at this point on fixed quotas and timetables, we are prepared to accept the concept of gradually increasing participation. Perhaps the best approach is to schedule periodic consultations to insure that progress is being made toward the goal of full and meaningful participation by Panamanian nationals. Guided by a clear statement of intent, these consultations could also consider questions of training programs, employment practices, promotion and general personnel policies. There are many forms which the consultations could take. They could be the responsibility of the legal entity which operates the canal or carried out separately through any number of possible formats. Through consultation at the policy level, it might be useful and desirable to create some type of personnel system at the administrative level which could contribute to the smooth and gradual integration of qualified Panamanian nationals into the process of operating the canal.

  1. Source: National Archives, RG 185, Negotiating and Planning Records for 1977, Box 2, Neg. Talks aka Dep. Deg. Talks 3–74 to 3–75. Confidential. In the upper right-hand margin, an unknown hand wrote: “EPS— [illegible]—. Given to me by Mike Kozak. P.”
  2. In the lower right-hand margin, an unknown hand wrote: “No Group.”
  3. Confidential.