204. Memorandum From the Department of Defense Representative for Panama Canal Treaty Affairs (Dolvin) to Multiple Recipients1


  • US-Panama Canal Treaty Consultation

1. Summary. The United States-Panama Joint Review Group (JRG) met in Panama during the period 8–12 January 1979. During the visit, the U.S. contingent participated in the signing of three treaty-related bilateral agreements, received treaty implementation status briefings from the Panama Review Committee (PRC) and the Binational Working Group (BWG), made a courtesy call on President Royo, and met with representatives of various Canal Zone Labor and Civic groups. Three major points emerged as characteristic of the current situation in Panama. First, the U.S. decision on the new labor-management system and wage policy may become a bilateral issue. It is clear that the Government of Panama (GOP) fully supports labor’s position for maximum benefits and high wages. Second, implementation planning at the Joint Subcommittee level has reached a critical stage—with most committees now engaged in detailed planning to accomplish agreed upon objectives. Planning cycle involves establishing procedures, identifying resources, scheduling training, and then actual implementation. The one major exception is the juridical subcommittee which has yet to meet. Both parties realize the need for urgent action in order to meet 1 October 1979 implementation deadline. Formation of the new Panama Canal Authority (PCA) should help reduce planning lag on GOP side. And third, the spirit of cooperation and friendship established as the result of the treaty ratification atmosphere remains good. President Royo pledged his government’s full cooperation in making the Canal Treaty work and will apparently exercise close supervision over all treaty-related matters.

2. Bilateral Agreements. One of the major objectives of the trip was to participate in the formal signing of the FAA Agreement and to resolve differences which were delaying conclusion of the Prisoner Exchange Treaty and the Cemetery Agreement. The FAA Agreement, which concerns air traffic control and related services, was signed on [Page 495] 8 January 1979. The final details of the other two pacts were negotiated by representatives of both parties and the formal signing ceremony occurred on 11 January 1979. All three agreements were called for in the Panama Canal Treaties and related agreements. Details on the latter two agreements are at Tab A.2

3. Labor Issues. The major topic at all levels of our consultations was the USG determination of its labor-management policy and the wage scales for various types of canal-related employees—both Canal Commission and Defense. Although our policy is still under active consideration, the GOP has come down strongly on the side of the local unions. Lewis projected the subject to the forefront with a sweeping statement that the only “Just” solution for the wage problem was maintenance of the U.S. wage scale for old and new USG employees in Panama. Specifically, the GOP favors one wage scale, wage bargaining, no RIFS for Panamanians, and delayed bumping rights for Commission employees needed by Panama. We avoided any specific discussion of the USG position, but Lewis made it clear that labor was the principal treaty implementing issue and described it as a dynamic political problem which was key to the “partnership” concept of the new treaties. Lewis did acknowledge, however, that under the provisions of the Canal Treaty, the USG had the unilateral right to decide the final labor policy and wage scales.

4. Treaty Implementation Planning. The JRG received in-depth briefings on the status of implementation planning from both the unilateral and bilateral points of view. Talks with the PRC, the BWG, and detailed reports from selected subcommittees (ports/railroad/post office) produced the following general impressions:

Implementation Planning Status. Both the Defense and canal subcommittees have generally reached agreement on their planning objectives and are heavily engaged in developing specific plans to accomplish same. The one principal exception is the juridical subcommittee which has yet to meet. Working atmosphere is good and the BWG is carefully monitoring the subcommittee performance to insure that any disagreements are resolved at the appropriate level. The next several weeks are critical, as proposals from both side are considered and adjudicated. Some lag time has been experienced on the GOP side due to their up-to-now slow policy and decision-making process, key personnel shifts, [Page 496] and a lack of knowledgeable personnel on some subcommittees, particularly on the military side of the house. Problem is particularly acute on the Guardia Nacional staff representation,—where in some cases Lieutenants are facing off with U.S. Colonels and Lieutenant Colonels. This problem is being addressed and the GN is already using civilian technicians from other GOP agencies to form their representation on some subcommittees.

Panama Canal Authority. The appointment of Gabriel Lewis, the former Panamanian Ambassador to the U.S., as head of the new GOP Panama Canal Authority (PCA) should lead to a more responsive Panamanian implementing capability. All treaty-related actions will be coordinated through the PCA. Lewis claims to have authority to make decisions and cut through red tape. He has just completed assembling his “Team” and is now awaiting a USG response to his urgent request for the use of a building in the Zone to house the PCA.

GOP Capability. A major USG concern has been the capability of the GOP to assume all treaty-related responsibilities assigned to them by 1 October 1979. It appears that the GOP will retain primary responsibility for running public service type functions (ports/railroad/post offices) and will contract out many of the commercial-related functions (drydock/bunkering). Lewis indicated that the GOP will have a list of PCC employees this week that Panama would like to have help operate those functions and activities being transferred to Panama. Persons selected will be offerred direct GOP employment or a reimbursable detail from Panama Canal Commission (PCC) as inducement to continue in present jobs after October 1. Lewis and GOP are asking for “delayed bumping rights” for employees who elect to accept reimbursable detail until GOP has hired Panamanian replacements or they are no longer needed. PCC stressed need for GOP decisions ASAP and no later than April 1 for PCC employees needed to support transferred activities and also stressed need for similar decisions re extent of PCC support required by GOP (e.g., heavy electrical repair for railroad).

5. CZ Civic and Labor Organizations. Ambassador Popper and I met with some 70 representatives of the various Canal Zone Civic Councils and Labor unions on 11 January 1979. Purpose of the meeting was to solicit views from group on treaty implementation and related problems. Tenor of meeting centered on resident concerns regarding wages, early retirement, future of the Canal Zone College and the status of non-profit organizations (churches/YMCA/Fraternal Organizations) under Panamanian jurisdiction. In regard to the Canal Zone College, we informed the group of the recent favorable decision made by Mr. Duncan to sustain the school system substantially as it is for FY 1980. Residents see the College as a major factor in maintaining their “Quality of Life” under the new treaties. Representatives also requested that [Page 497] Canal Zone residents be kept better informed of treaty-related developments. Labor leaders used this occasion to further publicize demands for rights and privileges that are not in the treaty nor the Administration version of the Implementing Legislation. (Collective bargaining for wages/use of DOD facilities after 5 year cutoff/U.S. minimum wage for new employees/early retirement option for DOD employees, etc.)

6. Miscellaneous. During the course of our discussions with the PCA, representatives reaffirm GOP intent to satisfactorily settle outstanding debts to the Panama Canal Company and to waive any claim for retroactive taxes on U.S. businesses operating in the Canal Zone. Discussions are currently underway concerning the debt repayment schedule. The signing of the bilateral agreements and the resolution of the GOP debt and taxation issues are both concrete examples of the willingness of both sides to overcome obstacles and get to the work at hand—planning for the 1 October 1979 implementation of the Canal Treaty. While considerable progress has been made since our September 1978 trip to Panama,3 much work remains to be accomplished in the months ahead.

Welborn G. Dolvin
Lieutenant General, USA (Ret)
Department of Defense Representative for Panama Canal Treaty Affairs
  1. Source: Washington National Records Center, OSD Files, FRC: 330–82–0205, Pan (Jan-Apr 1979). No classification marking. Duncan initialed the memorandum. A stamped notation reads: “Jan 17 1979 Dep Sec Has Seen.” Sent to Duncan, Alexander, Jones, and McGiffert.
  2. Attached but not printed. The Prisoner Exchange Treaty made it possible for Americans arrested and convicted under Panamanian legal jurisdiction to request to serve their sentences in the United States. The Cemetery Agreement provided that a portion of the Corozal Cemetery, where many Americans were buried in the former Canal Zone, be permanently maintained by the American Battle Monuments Commission as a suitable resting place for deceased Americans.
  3. See Document 194.