3. Paper Prepared in the Department of State1

[Omitted here is the table of contents.]

POLICY REVIEW MEMORANDUM: PANAMA

I. CURRENT SITUATION

Our basic national interest in Panama is that the Canal remain efficient, secure, neutral, and continuously open to all world shipping at reasonable tolls. The present Canal has served us well over the years, and is still a “major” defense asset which enhances U.S. capability for timely reinforcement of U.S. Forces and flexibility in deployment (Tab 1, Strategic Importance of Canal).2

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While its near-term economic value may be enhanced by the requirement to transport Alaskan oil to the Gulf Coast, it is now an aging utility of declining commercial value. Of total tonnage that transits the Canal, about 44% originates in, and 22% is destined for, U.S. ports. These figures represent 16% of total U.S. export and import tonnage. More than 30% of Panama’s foreign exchange earnings and 13% of its GNP are attributed to the presence of the Canal.

Alternatives to the Canal have emerged—use of super tankers, land bridge, pipelines. After 63 years of operation, the Canal’s strategic significance has diminished, while its potential as a source of conflict has increased. Moreover, it is the intelligence community’s estimate that while delay in a treaty invites violence against the Canal, it would also endanger Torrijos’ position.3 Therefore both Panama and the United States have incentives to negotiate seriously and quickly.

The Panama Canal Company and Canal Zone Government are independent financially self-supporting agencies of the United States Government. The Secretary of the Army acts as the direct representative of the President in supervising the operation of these agencies. (For further data concerning the Canal and Zone, see Tab 2.)4

Our central objective over the past 12 years has been to protect our national interest by negotiating a new treaty with Panama that would eliminate what have been viewed as anachronistic “colonial” aspects of our presence in Panama without endangering the continuing operation, safety and availability of the Canal. Any agreement must be acceptable to Panama, the Congress, the Federal agencies involved and the American public.

Our negotiators believe that we can, with continued effort, shortly be within reach of a treaty with Panama that will meet these requirements, provided that both sides are willing to make compromises on certain issues. Though we differ over questions related to the exercise of sovereignty, particularly over the nature and duration of the United States defense role, Panama’s national interest in an open, efficient and safe canal is similar to ours. The Torrijos Government is—in comparison to any successor government conceivable now—one from which we can get more of what we want and one with which we have the best chance of negotiating a lasting treaty (National Intelligence Estimate [NIE] Summary, Tab 3).5

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Much progress has been made since 1974 including agreement to cede legal jurisdiction over the present Canal Zone to Panama and to increase Panamanian participation in the operation of the Canal while retaining a primary U.S. operation and defense role. The negotiations have, however, been essentially stalled since February 1976. The major issues that remain to be resolved include treaty duration (which is particularly important to Panama), and post-treaty defense rights and neutrality (which are particularly important to the U.S.). Other politically sensitive issues include employee benefits (which affect some 3,800 U.S. citizen employees) and United States use of the lands and waters of the Canal Zone during the treaty period on which positive movement has been made during the past year on an informal and “what if” basis.

Once our negotiators reach agreement in principle on the main treaty issues, they can begin to draft the actual treaty—a process that has not yet commenced.

It should be emphasized that domestic politics in both countries have added greatly to the numerous problems inherent in this complex negotiation; they affect—sometimes unpredictably—many individual issues, as well as the pace and conduct of the negotiations and their public presentation in both Panama and the U.S. (Tab 4, Major Forces Involved).6

The negotiation of a new Canal treaty, moreover, is not a purely bilateral issue. Panama has elicited broad expressions of support from individual countries, the United Nations, the OAS and in the non-aligned movement of developing countries.

While Panama probably overemphasizes the value of international support at the negotiating table, a breakdown of the negotiations would gravely burden our policies throughout this Hemisphere, where the talks are generally viewed as a practical test of U.S. credibility. Conversely, to many Latin American countries the Canal is even more important commercially than it is to the United States. Those countries are supportive of a Canal treaty that will insure continuous effective operation and defense of the Canal.

In sum, the successful conclusion of a new treaty that would protect our basic national interests in the Canal would do more than remove a source of tension and potential bloodshed: it would strengthen the reputation of the United States as a force for creative world leadership.

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II. BACKGROUND

A. Negotiating History

The commitment to negotiate a new treaty to replace the Hay-Bunau-Varilla Treaty of 1903—which gave the United States the rights to construct, operate, maintain and defend a canal across Panama in perpetuity—was made publicly in 1964 by President Johnson after consulting with former Presidents Truman and Eisenhower.7

Three draft treaties were initialled in 19678 but never signed by either country. The 1971–72 negotiations ended in a stalemate which led to a United Nations Security Council meeting in Panama in 1973, where the United States was forced to exercise its right of veto.9

In February 1974 the Secretary of State and the Panamanian Foreign Minister signed a Joint Statement containing eight principles (Tab 5) to guide the formulation of a new treaty.10 These principles stipulate essentially that:

—the new treaty will be for a fixed term;

—Panama will grant the United States the rights and use of lands necessary to operate and defend the Canal during the treaty’s lifetime;

—the United States will return to Panama jurisdiction over all of its territory (the Canal Zone) and provide for increased Panamanian participation in the operation of the Canal.

B. Negotiating Approach and Guidance

Ambassador Ellsworth Bunker was appointed Chief U.S. Negotiator in late 1973. Bunker’s approach, which was fully coordinated between the Departments of State and Defense, was to attempt to satisfy Panamanian aspirations for full sovereignty over all of its territory, while ensuring that the U.S. would maintain primary responsibility for the operation and defense of the Canal during the treaty’s lifetime.

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Presidential Guidance is contained in NSDMs 302, 131 and 115 (Tab 6).11 It should be noted that these NSDMs were written to address individual treaty questions at particular moments in the negotiations. They are not, therefore, all inclusive. The main issues treated in the NSDMs concern duration, jurisdiction, lands and waters, expansion and post-treaty guarantees.

Within the framework of this guidance, Ambassador Bunker was able to negotiate three conceptual agreements with Panama in November 1974. These are:

—Threshold Agreement on Protection and Defense of the Canal. This would give the United States primary responsibility for the protection and defense of the Canal during the lifetime of the treaty. Panama would participate in Canal protection. Panama and the United States would retain unilateral rights to take action necessary to protect and defend the Canal. Both parties committed themselves to maintain the permanent neutrality of the waterway.

—Threshold Agreement on Increasing Panamanian Participation in the Administration of the Canal. Panama agreed that the United States would have the primary responsibility for the operation of the Canal during the term of the treaty. Panamanian citizens would have growing participation in all levels of employment and in the formulation of overall policy concerning Canal operation.

—Threshold Agreement on Jurisdiction and Rights of Use. It was agreed that jurisdiction over the Canal Zone would return to Panama during a three-year transition period. Panama would confer upon the United States, the use of the areas which are necessary for the specific purposes of the operation, maintenance, protection and defense of the Canal. The specific lands and waters areas would be determined during the treaty negotiations.

In March 1975 Bunker also obtained Panama’s agreement to a draft Status of Forces Agreement granting to United States military forces stationed in Panama standard military privileges and immunities (Tab 8).12

C. Areas of Disagreement with Panama

The major issues of disagreement are: (1) treaty duration; and (2) Canal neutrality and United States post-treaty defense rights:

Duration. Panama believes this to be the key remaining issue. It has consistently, vigorously and publicly maintained that December 31, 1999, is the latest possible date for treaty termination. Its position [Page 9]appears fixed. The United States agreed basically with that date only as it applies to the termination of United States control over Canal operation. As provided in NSDM 302, we have insisted on a 40-year duration for United States defense rights (Paragraph B, Tab 9).

Neutrality Guarantees and Post-Treaty Defense Arrangements. We have proposed that Panama and the United States guarantee the neutrality of the Canal jointly and that there be a post-treaty agreement on joint defense. Panama agrees in principle that the Canal should be permanently open on a nondiscriminatory basis to all world shipping. Panama, sensitive to the “perpetuity” implications of this formula, wants UN members to guarantee the Canal’s neutrality after the treaty’s termination (Paragraphs C and D, Tab 9).

—In addition, there are other areas of disagreement with Panama. They are:

—The lands and waters in the present Canal Zone, use of which will be required by the U.S. for the operation, maintenance, defense and protection of the Canal (Paragraph E, Tab 9).

—The privileges and immunities to be accorded U.S. employees of the entity (a very sensitive point for the “Zonians”) (Paragraph F, Tab 9).

—The nature and structure of the Canal entity (Paragraph G, Tab 9).

—The financial benefits which Panama would receive under the new treaty which involves the question of whether appropriated funds or only Canal earnings should be used for compensation (Paragraph H, Tab 9).

—Expansion (Paragraph I, Tab 9).

D. U.S. Options on Major Issues

Duration, neutrality and post-treaty arrangements are closely related and are the major issues in the negotiations. This inter-relationship makes these issues somewhat complex but also offers opportunities for negotiation of compromise formulas that will meet essential United States security interests while being consistent with Panamanian concerns and domestic pressures. It is important to keep in mind that on these issues tradeoffs which are mutually perceived to protect each party’s basic interests could provide the basis for a final agreement.

Panama has flatly rejected the duration position (December 31, 1999, for operation and 40 years for defense) presented by the United States negotiators. Informally, the Panamanian negotiators have emphasized, however, that if we could terminate both operation and defense rights (including military presence) by 2000, it could then be “flexible” concerning new arrangements for protecting United States security interests beyond the year 2000. Panama has not offered a formula for such arrangements.

Our options on the duration for U.S. control of Canal operation are: (1) hold with 1999; (2) go to 20 years as provided in existing guidance; or (3) choose some slightly earlier date (Tab 9A, Discussion).

On duration for defense, we can hold at 40 years with several sub-options or choose a shorter period down to the year 2000.

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Panama’s willingness to accept a given period for duration of U.S. defense rights under a new treaty is contingent at least in part on the type of military presence or rights which the U.S. would be authorized to maintain after Panama assumes full control of the Canal’s operation. The options that may be acceptable from the point of view of our defense needs range from (a) a full military presence such as we now maintain to (b) a token presence for the purpose of maintaining a logistics base to (c) no presence but a right to return to protect the Canal. There has been no decision within the Government on whether it is necessary to keep troops and bases in Panama after our operation rights terminate in order to protect U.S. security interests (Tab 9B, Discussion). The uniformed services have not yet identified the level of residual military presence or the type of formal arrangements with Panama necessary to reasonably assure the Canal’s defense in the post-treaty period.

Regarding the closely related questions of neutrality and post-treaty arrangements, Defense and State agree that the U.S. wants solid assurance (after our operational rights terminate) that the Canal will be kept open permanently and on a nondiscriminatory basis to world shipping and to U.S. military and commercial vessels.

The two Departments also agree that we could further the objective of assuring access by inserting a clause in the neutrality agreement guaranteeing that the waterway will be open on a nondiscriminatory basis to ships of all nations—a provision to which Panama has not objected. The issue is what states should be the guarantors and what provisions if any need to be included to make that abstract neutrality effective.

There is general Defense agreement that several options are open for attaining the guarantee of neutrality and to make clear that U.S. interest in the Canal is not diminished. One way to achieve this objective would be to provide for a continuing right for the U.S. to take such action unilaterally in Panama after the year 2000 as the U.S. (by itself) determined was necessary to protect our interests in the Canal. (This was the formal Defense position under the prior Administration.) Another way of meeting this objective—which is also consistent with the Defense position—would be a formal “agreement to agree” on a post-treaty defense arrangement. Obviously, this “agreement to agree” could take varied forms—e.g., a mutual security agreement separate from but coordinated with the Canal treaty.

State is convinced that Panama would never accept an explicit perpetual U.S. right of unilateral intervention. State further believes that if we were to agree to a treaty ending in 2000, Panama might accept a mechanism whereby Panama and the United States jointly guaranteed in the neutrality treaty (perhaps joined by others, such as [Page 11]other Latins) that the waterway will always be open and neutral. State’s reasoning is that if Panama ever closed the Canal to U.S. shipping, we could move to counter that threat unilaterally whatever the treaty formula. Defense believes a formal legal provision concerning post-treaty defense is important both in itself and from the point of view of ratification. State and Defense agree that some provision in the treaty, or a unilateral U.S. declaration relating to a U.S. role in post-treaty defense or insuring the Canal’s neutrality, would be useful in the ratification process and would establish a basis for U.S. action if it were to become necessary.

Our options on a neutrality guarantee are:

(a) joint U.S.-Panama guarantee with explicit right of intervention*;13

(b) joint U.S.-Panama guarantee*;14

(c) a guarantee joined by some other countries;

(d) a unilateral U.S. guarantee; or

(e) no external guarantee, with Panama promising to operate the Canal on a neutral and nondiscriminatory basis.

Our options on post-treaty defense arrangements involve three areas:

(a) U.S. presence

(1) full presence similar to current forces

(2) token forces

(3) logistical base

(4) no presence

(b) U.S.-Panama defense agreement

(1) continuous U.S. defense role until agreement reached on different role

(2) agreement to agree with continuation of treaty regime if no agreement reached

(3) agreement to agree without continuation of treaty regime if no agreement reached

(4) agreement to negotiate without continuation of treaty regime if no agreement reached

(5) no provision for continuing U.S. role

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(c) U.S. defense rights

(1) explicit Panamanian agreement to U.S. right to intervene

(2) unilateral U.S. declaration of intention to act if necessary to protect interests

(3) silence: U.S. reliance on Panama’s realization of U.S. capability to intervene.

III. ISSUES—NEXT STEP

The discussion in this section assumes that the new Administration wishes to have a new treaty rapidly and, therefore, addresses how to resume the negotiations and carry them forward at a satisfactory pace to their completion. Another issue—Congressional concern—will be addressed later.

Option I—Start with a Formal Offer

Negotiations would be resumed only after inter-agency agreement had been reached on instructions regarding major outstanding issues. The instructions would involve the fixing of negotiating positions on these issues and would identify a range of choices for each.

Option II—Informal Exploration

At Presidential direction the U.S. would resume negotiations promptly and seek through informal exploration with Panama to fill remaining U.S. needs in exchange for U.S. acceptance of the year 2000 as the duration of a new treaty. Having first obtained—in lieu of formal guidance—an informal understanding with the President on the limits of his flexibility, the Chief Negotiator also would be empowered to address other options (trade-offs) on a “what if” basis if they emerge from the discussions. Following the talks with Panama, our negotiators would then report back to the President with a draft “conceptual agreement” and recommendations for such changes as may be necessary in Presidential instructions.

Discussion of Options

Option I would provide the new Administration an opportunity to examine in depth the status of the negotiations and reach a coordinated position on the major outstanding issues. It would provide clear guidance on how and at what pace to proceed. At the same time it could facilitate coordinated efforts to gain support for a treaty with the public and Congress. However, the time involved in early resolution of intra-USG differences would substantially delay resumption of negotiations. Such a delay could prevent us from reaching agreement with Panama and gaining Congressional acceptance of a treaty this year. Failure to resume the negotiations within a few weeks following the inauguration [Page 13]could also be interpreted by our Congressional opponents, Panama and probably the nations of this hemisphere as a signal that the new Administration lacks commitment to move rapidly toward a new treaty.

Option II would allow early resumption of the negotiations and would provide the negotiators with broad flexibility to probe for the basis of agreement with Panama without requiring a time-consuming prior review of U.S. positions. By providing an early positive signal as to our intent, Option II would assure Latin America and the Third World of our interest in speedily resolving the issue. The first step under this option would be an initial airing of inter-agency views through discussion of an options paper culminating in an NSC meeting and an understanding between the President and the Chief Negotiator on the limits of U.S. proposals. The negotiators would then meet with their Panamanian counterparts for exploratory discussions. The improved understanding of possible alternatives resulting from these early discussions would then allow the different USG agencies to surface the issues more clearly for prompt Presidential decision.

Option II could permit the initialing of a “conceptual agreement” with Panama by mid-March and presentation of a draft treaty to the President for final concurrence by June 15. Formal treaty signing could occur by July 1 and presentation to the Senate could follow by as early as August 1 (an early submission would be broadly advantageous to permit ratification prior to the 1978 elections).

Implementing Actions Needed by Option I

—Develop a USG position on all outstanding issues; subsequently, issue instructing NSDM. If this option is selected, see Tab 9 for a discussion of the major unresolved treaty issues together with their related options.

—Explain to Panama that the new Administration will require some time to formulate new positions.

—Take the necessary steps to obtain public support for a treaty (Tab 10).

Implementing Actions Needed by Option II

—Instruct the negotiators after prompt inter-agency coordination and early NSC consideration to explore informally Panama’s willingness to accept our needs on all oustanding issues in the event we were to accede to the year 2000 as the date of the treaty’s termination. Empower the negotiators to address other options (tradeoffs) on a “what if” basis if they emerge from the discussions.

—Take the necessary steps to obtain public support for a treaty (Tab 10).

There are two matters which will require early attention, whatever the option selected.

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The first concerns Congressional relations and the negative impact from a possible reintroduction in the Senate of the Thurmond Resolution opposing the treaty negotiations.15 While there is almost no possibility that such a resolution would be adopted, it could be a liability for the success of the negotiations and the treaty effort if it were to attract the sponsorship of something approaching a blocking third of the Senate membership. Sponsorship would tend to commit Senators and make it more difficult for them to support a treaty when one is submitted to the Senate. There is a danger that a number of Senators might sign the resolution without fully appreciating the depth of the Administration’s commitment to a new treaty effort—or the dangers to our interests in the Canal from failure to have a new treaty. It would be highly desirable to communicate the Administration’s views to individual Senators and to urge them not to pre-judge the treaty issue.

The second matter which will require attention concerns interagency coordination. Until now the negotiators have relied on ordinary interagency coordination procedures supplemented by the efforts of the State-Defense Support Group, which has functioned as a negotiators’ “think-tank”. This group regularly drafts informal papers which, if approved by the negotiators, are then introduced into the formal interdepartmental clearance process.

State believes that it is likely that this procedure will not fully serve the Administration’s purposes once the negotiating process is resumed and efforts are accelerated in pursuit of an early treaty. It is State’s view that a mechanism must be established which will permit rapid coordination of negotiating issues. Accordingly, State believes that it would be highly desirable to establish an interagency committee under the chairmanship of the Under Secretary of State for Political Affairs. The members of this committee, which would function below the level of the Policy Review Group, would be fully empowered to speak for their agencies in addressing rapidly the negotiators’ requests for Executive Branch guidance. The Committee would include representatives from State, Defense, NSC, Secretary of the Army, and Treasury and (when appropriate) Labor, Commerce, Transportation, Justice, CIA, OMB and the Civil Service Commission. Defense believes that except for the most unusual circumstances, the coordination authority available to the negotiators and the existing Washington interagency mechanism will be more than adequate for issues not requiring higher level [Page 15]decision. Issues involving other agencies/departments of the Executive Branch will be complex in nature and necessarily require thorough analysis to insure that irrevocable mistakes are not permitted, through haste, to become part of a major new treaty. When interagency issues are identified, the appropriate agency should be tasked to respond to State/Defense request for coordination. Defense suggests that standby representatives of agencies listed above be identified early on, and if a full interagency committee effort should be required at some future date, the committee be chaired by a designated member of the NSC staff.

Tab 1—Strategic Importance of the Panama Canal

Tab 2—Description of Canal operations

Tab 3—NIE Summary

Tab 4—The Forces Involved in the U.S. and Panama

Tab 5—Joint Statement of Principles

Tab 6—NSDM 302, 131 and 115

Tab 7—Threshold Agreements

Tab 8—SOFA (Summary)

Tab 9—Major Unresolved Treaty Issues

Tab 10—Steps to Obtain Public Support for a Treaty.

Tab 9

Major Unresolved Treaty Issues 16

MAJOR UNRESOLVED TREATY ISSUES

The following issues deal with the substance of the negotiations. They should be examined with the understanding that:

—except for lands and waters, our perception of specific Panamanian views is clouded by the pause in the negotiations which has existed since February 1976. Exploration of the issues with Panama will give a clearer focus as to what is, and what is not, negotiable;

—a seriatim review—in which each issue and the options for dealing with it are considered in isolation—leaves out certain considerations which need to be taken into account in devising an overall treaty package that meets U.S. interests. Some interests are more important than others. In addition, the issues are interrelated and trade-offs [Page 16]among them are possible, so that the selection of an option under one issue may depend in part on what option is chosen under another related issue.

—the negotiability of an option relating to a specific issue may be affected by the nature of our positions on other issues. For example, so called “hard” positions on some issues might be acceptable to Panama in exchange for a concessionary U.S. position on others. Therefore, a preferable approach to the issuance of negotiating guidance would be to identify preferred and fallback positions wherever possible.

A. ISSUE—Duration of U.S. Control of Canal Operation

Definition

This issue involves determining duration of effective U.S. control of canal operations.

Background

Presidential guidance (NSDM 302)17 requires that the U.S. obtain the rights to operate the Canal for a period not to terminate before December 31, 1999. As a fallback negotiators are authorized to offer a reduction of the duration of operation to a period of not less than 20 years. The Panamanian position is that U.S. operation rights shall terminate by the year 2000. The most recent U.S. offer was 20 years for U.S. Canal operation rights if Panama would accept 40 years for U.S. Canal defense duration. Earlier the U.S. had offered to end Canal operation by the year 2000. It should be noted that the new treaty’s duration applicable to operation-related rights might exceed the duration of U.S. control over Canal operation. This possibility is discussed further under the issue of the nature of the Canal entity.

Options

Option I. U.S. Canal operation rights will end by December 31, 1999.

Option II. U.S. Canal operation rights will end in 20 years.

Option III. U.S. Canal operation rights will extend for some period of less than 20 years.

Discussion

We have omitted any options which would call for a duration in excess of our current guidance because selection of such options would preclude any possibility of agreement with Panama. The three options identified all appear acceptable to Panama. On the other hand, the briefer the time period included in the three options, the more likely it will encounter opposition from the Congress and the public.

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Guidance Changes Needed

Option I. No change needed.

Option II. No change needed.

Option III. Would require a change in Presidential guidance to permit agreement on a period of less than 20 years.

B. ISSUE—Duration of U.S. Canal Defense Rights

Definition

This issue involves determining the duration of U.S. Canal defense rights.

Background

Presidential guidance requires the negotiators to obtain a U.S. right for unilateral defense of the Canal and Canal areas for a period of (NSDM 302) not less than 50 years with a fallback of not less than 40 years. Panama’s position is that U.S. defense rights must terminate no later than December 31, 1999. Panama has rejected the U.S. negotiators’ November 1975 offer of 40 years for defense.

Options

Option I. Defense duration for 40 years.

Option II. Canal defense rights for 40 years with full military presence through 1999; residual military presence with limited combat forces in Panama for the balance of the 40 years.

Option III. Canal defense rights for 40 years. Full military presence through 1999; residual military presence without combat forces present in Panama for the balance of the 40 years.

Option IV. Canal defense rights for 40 years. Full military presence through 1999; no U.S. military presence in Panama for the balance of the 40 years.

Option V. Canal defense rights and full military presence through 1999 with reliance thereafter on separate post-treaty defense and/or neutrality arrangements.

Discussion

We have omitted any options which would call for a duration in excess of our current offer to Panama (40 years) because selection of such an option would preclude any possibility of agreement with Panama.

Panama has “definitively” rejected Option I and indicated strong opposition to Options II, III and IV. Conceivably Panama would accept some limited period for U.S. defense rights beyond the year 2000, but the cost to the U.S. could be unacceptable in terms of less than satisfac[Page 18]tory neutrality or post-treaty defense arrangements. On the other hand, Option V could meet Panama’s main political concern that the treaty terminate by 2000 while guaranteeing that there would be a mutually satisfactory post-treaty defense and/or neutrality agreement. If Option V were selected, Defense believes a strong post-treaty defense arrangement would be essential to safeguard U.S. interests in the Canal. State believes that a neutrality agreement would be an adequate basis for further U.S. action.

Each of these options would encounter some resistance in Congress and with the public. However, this opposition will be based more on the general idea of “surrender” or “give away” than upon the adequacy of a particular duration proposal. The shorter the term of U.S. defense rights, the greater will be the U.S. concern. However, under Option V independent arrangements would be provided to protect long-term U.S. security interests.

Guidance Changes Needed

Option I. No change to current Presidential guidance required.

Option II. No change to current Presidential guidance required.

Option III. No change to current Presidential guidance required.

Option IV. No change to current Presidential guidance required.

Option V. Instruct the U.S. negotiators to obtain a treaty with a termination date of not earlier than 1999, on the condition that separate post-treaty arrangements can be negotiated which will adequately protect U.S. security interests in the Canal.

C. ISSUE—Permanent Neutrality Guarantee

Definition.

This issue involves determining the best means for guaranteeing the permanent neutrality of the canal.

Background.

Presidential guidance (NSDM 115)18 requires the negotiators to seek a joint U.S. Panamanian guarantee that the canal will be open to all world shipping without discrimination (at reasonable tolls). Panama has not opposed the concept of the canal’s permanent neutrality but has been unwilling to accept any special role in perpetuity for the U.S. in ensuring neutrality. Panama has indicated that it would enter into a neutrality agreement, either without a U.S. neutrality guarantee or with a guarantee to which any country could adhere.

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Options.

There are five options, all of which would be in the context of a permanent agreement which would establish the rules of neutrality for the operation of the canal:

Option I. A permanent joint U.S.-Panamanian guarantee of the canal’s neutrality which would contain a provision that each party could take whatever action it deems appropriate, including military action, to counter a threat to the neutrality or security of the canal.

Option II. A permanent joint U.S.-Panamanian guarantee to each other in broad, general language that the canal will be operated in accordance with neutrality rules specified in the treaty, but with no specific reference in the treaty to military action.

Option III. Same as Option II, but with a formal declaration by the U.S. which Panama agrees not to challenge, that the U.S. interprets the general guarantee language to encompass military action if necessary.

Option IV. A neutrality treaty which would be multilateral and would contain a provision obligating all signatory states to guarantee to each other that the canal would be operated forever in accordance with the neutrality rules specified in the treaty. The signatories could be limited specifically to a small number of invited states, to states party to the Rio Pact,19 or opened to any state desiring to sign under United Nation auspices.

Option V. A bilateral neutrality treaty which would not contain any provision obligating the U.S. to guarantee operation of the canal in accordance with the neutrality rules set out in the treaty, but would create only an obligation by Panama to the United States to operate the canal forever in accordance with the neutrality rules.

Discussion of Options.

The differences among the five options are significant more in terms of political pressures and posturing than in terms of strict legal benefits. Any of them would legally bind Panama to keep the canal neutral. None of them would provide the U.S. with an independent legal right to act with force to remedy a violation of this obligation by Panama. This is so because of restraints on the unilateral use of force to settle disputes (even obvious violations of clear legal rights) in the UN and OAS Charters. Therefore, the important factors in considering these Options are their initial political acceptability and the strength of the political justification they would provide for any necessary future U.S. military actions.

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Option I presumably would be attractive to much of the Congress and the public, since it would be a very specific formulation of what the United States can do to protect its security interest in the canal forever. On the other hand, a growing segment of the Congress and the public might believe that such a provision is an extension of a colonial relationship and would therefore be harmful to long-term U.S. interests in the canal and elsewhere and likely to engender opposition from within Panama—opposition in which many countries of the world would support Panama.

Even though most uses of force in Panama against Panama’s will would violate the UN and OAS Charters and provoke considerable international criticism, circumstances could develop in which the President felt compelled to act with force. In such a case, it could prove very helpful to our justification for so acting if we had the language suggested in Option I to cite.

However, in State’s view, Panama could never accept such a U.S. right and might even be inclined to question the good faith of the United States in proposing it. Also, it would be contrary to our interest to present this Option unless we were reasonably sure that Panama would accept it. Were Panama to reject it, the negotiating record would show we had wanted an explicit intervention right, but had been unable to obtain it. Thereafter, we would have even more difficulty in arguing that the broad and very general neutrality guarantee provision we finally got was intended to mean that the U.S. could take any action it deemed appropriate, including intervention, to ensure the neutrality of the canal.

Defense believes that, packaged appropriately with careful drafting, this Option may be acceptable to Panama. Its proposal and rejection would not make appreciably more difficult any argument that we had an intervention right without specific use-of-force language to cite.

Option II, while imposing an obligation on Panama to keep the canal neutral, would probably be less attractive to the Congress and U.S. public because it would not provide as strong a political justification for any U.S. military action as Option I. This option would communicate our commitment to the permanent neutrality of the canal without stating explicitly that we would take measures, against Panama’s will, to see that the canal’s neutrality is maintained. State believes that Option II would provide almost as much protection for our long-term interests as Option I and could be sold to the Congress and the public on this basis. The Department of Defense believes that this Option would encounter stiff opposition on the Hill. There is a good chance that Panama ultimately would accept a skillfully worded formulation of Option II as part of an overall package satisfactory to Panama on the duration issue.

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Option III is very similar in all respects but form to Option I.

Option IV would add other nations as guarantors to the Option II formulation. Although this option has the advantage of probable acceptability to Panama, it has the disadvantage of encumbering U.S. unilateral actions to protect the canal’s neutrality.

Option V has already been proposed by Panama. It is less attractive as a basis for future political justification of U.S. action than the other Options and thus less attractive to Congress and the public. So although its strictly legal effects would not be significantly different from that of the other options, it probably would have to be coupled with other post-treaty defense arrangements to satisfy the public and Congress of our ability to protect our long-term security interests.

Guidance Changes Needed

Option I. Current guidance neither requires nor precludes this option.

Option II. No change required. This option is required, as a minimum, by present guidance.

Option III. No change required.

Option IV. Presidential guidance would have to be changed to authorize a multilateral guarantee.

Option V. Provide authority to agree to a bilateral neutrality treaty which would rely upon a unilateral Panamanian obligation to the U.S. to guarantee the canal’s neutrality.

D. ISSUE—Post-Treaty Defense Arrangements

Definition.

This issue involves the nature of U.S. rights to continue to participate in canal defense subsequent to the terminating of the treaty.

Background.

Current Presidential guidance (NSDM 302) tasks the negotiators with making efforts to obtain a right in principle for the United States to participate in post-treaty canal defense, including a limited military presence. The U.S. negotiators proposed to Panama in November 1975, a modified U.S. position on post-treaty defense; namely, an agreement to negotiate in good faith prior to the treaty termination concerning post-treaty defense rights. Panama has not officially responded.20 However, its publicly stated position has been that all U.S. defense commitments must terminate by the year 2000.

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Options.

Option I. Panama would agree in the treaty to a right in principle for the U.S. to participate in canal defense, with a limited military presence following the termination of the treaty. However, the U.S. defense rights in the treaty would not terminate until agreement was reached on the U.S. role following termination.

Option II. Panama would agree in the treaty to a right in principle for the U.S. to participate in canal defense, with a limited military presence, following termination of the treaty.

Option III. Panama would agree in the treaty to a right in principle for the U.S. to participate in canal defense, without a military presence in Panama following termination of the treaty.

Option IV. Panama would agree to negotiate with the U.S., in good faith, before treaty termination, on a role for the U.S. in post-treaty canal defense.

Option V. Panama and the U.S. would agree to the terms for a separate, periodically renewable mutual security agreement to become effective upon termination of the canal treaty.

Option VI. The U.S. would make a unilateral declaration or treaty reservation, of its intent to ensure the security of the canal. Panama would either not respond or would issue a statement of no-objection.

Discussion.

Option I is, in essence, a defense right in perpetuity. Thus this option would be subject to considerations similar to those expressed under Neutrality Option I. This position provides the U.S. with the strongest assurance of a post-treaty defense capability.

Option II was presented to Panama in September of 1975.21 Because of Panama’s strenuous objection to it as “perpetuity”, it was later withdrawn. However, it is only an “agreement to agree” and might be acceptable ultimately to Panama in the context of an acceptable duration proposal particularly if the element of military presence were eliminated. It would have some attraction for the Congress and public opinion because it would show Panama has agreed in principle to our continued involvement in canal defense beyond the term of the treaty.

Option III is similar to Option II with the modification that the U.S. participation in canal defense would be without a military presence in Panama. While preferable to no post-treaty defense arrangements, this option is not favored over Option I since lack of forces in place significantly complicates any U.S. exercise of its defense role.

Option IV would not commit Panama to anything other than good faith negotiation on a U.S. post-treaty defense role. Thus, it would not [Page 23]of itself protect U.S. long-term security interests or be of more than some slight psychological value in convincing the Congress and the public of our ability to protect those long-term interests. Its value, however, might be in making it easier politically for Panama to agree to a continuing U.S. defense role at the time the treaty terminates.

Option V would affirm that Panama would be an ally of the United States beyond the treaty period. It would also demonstrate our continuing commitment to ensure the security of the canal. The psychological effect of Panama’s commitment to remain our ally would be significant to Congress and to the public.

Under Option VI Panama would not be agreeing to any U.S. action, but the public and Congress would be somewhat reassured by our declaration of intent to take necessary action to protect our interests. This, however, is not as protective to our security interests as a mutual security agreement would be because it does not demonstrate that Panama would be a continuing ally of the U.S. and could be countered at any time by a declaration from Panama that it must consent in advance to U.S. action.

Guidance Changes Needed

Option I. Harden existing Presidential guidance to indicate clearly that U.S. Canal defense will not terminate until the U.S. and Panama have agreed on a new role for the U.S. in canal defense.

Option II. Harden existing Presidential guidance clearly to require a right in principle for the U.S. to participate in post-treaty canal defense, with a limited presence.

Option III. Harden existing Presidential guidance clearly to require a right in principle for the U.S. to participate in post-treaty canal defense without a U.S. military presence.

Option IV. No change in guidance needed.

Option V. Present Presidential guidance allows but does not require this option. Only if Option V is considered mandatory should guidance be changed to require Panama’s agreement to the terms of a separate mutual security treaty to be effective after treaty termination and to run for a specified period.

Option VI. Present Presidential guidance allows but does not require this option. Only if Option VI is considered mandatory should guidance be changed to require Panama’s agreement not to object to a unilateral U.S. declaration of intent to take any necessary action to ensure the neutrality of the canal.

E. ISSUE—Lands and Waters

Definition.

The definition of those lands and waters whose use will be required by the United States to execute its responsibilities for the operation, [Page 24]maintenance, protection and defense of the canal under the new treaty, and securing the rights necessary for their use.

Background.

Until December 1975, the United States position on this issue envisaged relinquishing only those areas of the current Canal Zone which were of limited value to the United States. The Presidential guidance contained in NSDM 302 endorsed this approach. The Panamanian position was based upon: (a) its narrow definition of those areas whose use it considered that the United States would require for canal operation and defense, as modified by; (b) its perception of its own requirements in terms of domestic political acceptability and for purposes of economic development. The two positions based on these divergent approaches to the issue resulted in a stalemate. In December 1975, the United States Negotiators initiated development of a compromise lands and waters position designed to accommodate the United States’ requirements for operation and defense of the canal in a combined United States-Panamanian defense arrangement, while taking into account to the extent possible, Panama’s economic and political requirements.22

Options.

Option I. Stand fast with existing guidance.

Option II. Pursue the exploratory approach used by the negotiators in 1976 on a “what if” basis.23

Discussion of Options

The return of any areas of the present Canal Zone to Panama will result in some criticism by the Congress and the general public. However, it is improbable that the degree of such criticism will relate to the details of what specific areas are relinquished to Panama and what areas are retained by the United States so long as these details have the support of all interested agencies of the Executive Branch.

From the Panamanian standpoint, retention by the United States of the entire Canal Zone, or of what appeared in Panama to be overly-substantial parts of it, would mean no agreement. It is now generally recognized by both State and Defense that agreement with Panama is therefore not possible on the basis of the lands and waters position reflected in current Presidential guidance. Option I is not realistically supported by any interested agency of the United States Government.

The process of negotiation on this issue has consisted of seeking both to educate the Panamanian negotiators as to the nature of United [Page 25]States requirements relating to the operation and defense of the canal, and seeking to develop a compromise United States position as described above.

State and Defense consider that essential United States interests on this subject may be achieved through continuing to pursue these discussions with the Panamanian negotiators. Our objective in doing so should continue to be to resolve the manifold individual questions making up this issue in a manner which takes maximum account of Panama’s requirements while retaining for the United States the necessary rights to use those specific lands and waters which will be needed for canal operation and defense under a new treaty assuming a combined United States-Panamanian defense arrangement. It should be noted that the Secretary of the Army has presented a lands-and-waters position which differs in some respects from the negotiators’ unofficial proposal. These differences are being considered by the negotiators in the preparation of their position.

Guidance Changes Needed.

Option I. No guidance change needed.

Option II. Change existing guidance to read as follows: “Authorize the United States negotiators to continue to negotiate to obtain appropriate rights to use such lands and waters areas as may be concurred in by the Department of Defense and State as the minimum necessary for the operation of the canal and for its defense under a combined United States–Panamanian defense arrangement.”

F. ISSUE—Rights, Benefits and Privileges for United States Citizen Employees of the Canal Entity

Definition.

This issue concerns the rights, benefits and privileges which will be provided to United States citizen employees of the Canal entity under a new agreement with the Republic of Panama.

Background.

No direct Presidential guidance exists on this issue. However, the United States negotiators have sought to achieve rights and immunities for United States citizen Canal employees equivalent to those which United States civilian employees of the Armed Forces receive under the Status of Forces Agreement (SOFA). The Panamanian negotiators have indicated that Panama attaches importance to agreement on those benefits necessary to retain a trained Canal work-force, but has difficulty in accepting certain specific rights which we have sought for United States citizen employees.

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Options.

Option I. Obtain rights equivalent to those for civilian employees of the United States Armed Forces under the Status of Forces Agreement (Summary of SOFA attached at Tab 8).

Option II. Obtain job guarantees and other privileges approaching those in the SOFA (As identified in the fallback position contained in the current Defense position on this issue.)

Discussion of Options.

Retention of an adequate United States citizen component of the Canal work-force is essential until such time as the particular skills provided by this group are obtainable—as in many cases they presently are not—in the Panamanian labor market. Our basic objective on this issue is the provision of rights, privileges and benefits sufficient to permit the retention and/or recruitment from the U.S. labor force of the skills required.

Everyone, including Panamanians, agrees that United States citizen Canal employees should not suffer economic losses or job insecurity as a result of a new treaty and that employee rights should be adequately covered in the treaty. However, there is still a marked difference in United States and Panamanian perceptions of what, in specific terms, will be required to achieve our objectives in relation to Canal operation.

This issue has generated a tremendous emotional charge in the Canal Zone; Canal employees actively campaigning against a new treaty have exploited the insecurities of other employees concerning their uncertainties as to their status under a new treaty. The issue has therefore assumed additional importance in humanitarian terms and as a political issue within the United States.

United States labor organizations appear disposed to support an arrangement which provides normal job guarantees for employees, without evidencing a particular concern for special status for U.S. citizens. The U.S. public and Congress would probably go along with an arrangement which appeared fair to the U.S. citizen employees.

Many of the actions necessary in relation to Canal employees would fall outside the scope of the treaty as being either within the competence of the management of the new Canal entity, and/or as subjects for unilateral resolution by the United States Government.

Panama’s negotiators have declined to consider outright inclusion of Canal entity U.S. citizen employees under the SOFA, but might accept some modified version of rights analagous to those accorded in the SOFA if “repackaged.” The degree to which these rights would approach those under the SOFA will probably be increased greatly in the event we were to agree to a “favorable” resolution of the duration issue.

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Some employees will voluntarily leave their employment before or immediately after a new treaty enters into force. However, a combination of adequate actions to allay employee concerns while treaty negotiations progress, unilateral U.S. Government actions to preserve the employee’s confidence in his job security, and adequate resolution of the details of this issue with Panama will probably permit a sufficient number to adjust to their situation under the new treaty to preserve our operational objectives in the Canal.

Guidances Changes Needed.

Option I. No change needed.

Option II. No change needed.

G. ISSUE—Nature of Canal Operating Entity

Definition.

This issue involves the nature and structure of the new entity that will operate the canal for the life of the new treaty.

Background.

Current Presidential guidance directs that effective U.S. control of canal operations (for a duration of time consistent with guidance) is to be considered non-negotiable; it provides further that the first negotiating objective should be continued exclusive U.S. control of canal operations, and that the fallback U.S. position should be an arrangement whereby the U.S. retains control of canal operations with Panamanian participation in the canal organization (NSDM 115).

The Panamanian position on this issue is that the new entity be an international juridical entity, jointly created by means of the treaty, with U.S. majority control. Under the Panamanian approach, the existence of the entity would terminate along with the termination of U.S. control at the end of the treaty. Recent Panamanian proposals have included the concept of a termination of U.S. majority control in the year 1995 with U.S. minority participation until the end of the treaty, which would be the year 2000.

In the February 1974 Joint Statement of Principles24 and in the November 1974 Threshold Agreements, the U.S. agreed to the concepts of participation by Panama, and increasing participation by Panamanians, in the administration of the canal. In those same agreements, however, Panama agreed to “grant to the United States” the rights necessary to operate and maintain the canal for the duration of the new treaty. Implicit was that a USG agency would exercise these rights [Page 28]on behalf of the USG. More recently, Panama has proposed that the treaty grant the operation-related rights to a jointly created international juridical entity, as outlined above. The U.S. negotiators have consistently maintained that the new entity be a USG agency, but recently have indicated a willingness to explore the possibility of an international juridical entity along the lines of OPTION III below.

Options.

Option I. A USG agency, with Panamanian participation, would operate the canal until U.S. operating rights terminate. At the termination of U.S. operating rights, Panama would assume total responsibility for canal operation.

Option II. A joint U.S.-Panamanian international juridical entity, created in the treaty, would operate the canal until its operating rights terminate. The U.S. would enjoy majority control until the entity’s operating rights terminate. At that time, Panama would assume total responsibility for canal operation.

Option III. A joint U.S.-Panamanian international juridical entity, created in the treaty, would operate the canal until the entity’s operating rights are terminated. The U.S. would enjoy majority control until at least a certain date, but would have a right to a minority participation for a specific time thereafter. Panama would enjoy minority participation for the duration of U.S. majority control, and would have a right to majority control at a certain date subsequent to the termination of U.S. majority control. Selected user nations would have minority participation for the entity’s life.

Discussion of Options.

State and Defense both believe that Option I (USG agency) would lend itself to the simplest treatment in the treaty and the process of negotiation. It would also be attractive to Congress, since Congress would establish the USG agency and delegate to it the operating rights. Correspondingly, Option I would also insure Congressional control over the exercise of our operation-related rights, including the rights to control employee relations, navigation and tolls, which Panama has already agreed to. It also would be, however, the most difficult of the three options for Panama to accept, and is not necessarily the most protective for our interest of the three options.

State and Defense agree, conversely, that Option II would be acceptable to Panama, but would be the least attractive of the three options to Congress.

State and Defense believe that Option III might be acceptable to Panama if the duration of U.S. minority participation were relatively short, but likely unacceptable with a long duration of U.S. minority [Page 29]participation, particularly if the U.S. insisted on the same duration of U.S. majority control as under Option I. Panama’s willingness to accept a longer duration of U.S. minority participation would be increased if the U.S. would also be willing to accept a shorter duration of U.S. majority control than is authorized by current guidance. (A reduced duration is not key to this option for U.S. majority control.) Domestic U.S. acceptability of Option III would be enhanced by a period of U.S. minority participation following the termination of U.S. majority control, but would be hampered by any reduction in the period of U.S. majority control of canal operations. Further, Option III would give selected user nations some understanding of the problems of canal management, and their participation would add a measure of stability to canal operation over the long term and could have a moderating effect on Panamanian ambitions to realize excessive profits from canal operations. Finally, this option would, as a practical matter, allow for the possibility of Panama’s continuing the entity voluntarily beyond the termination of the U.S. right to minority participation, and ideally, would result in the creation of a permanent entity structure continued by all interested parties on a voluntary basis indefinitely.

Guidance changes needed.

Option I. No change in guidance required.

Option II. No change in guidance required.

Option III. No change in guidance would be required to authorize the option as stated, but a change in current guidance on the issue of duration of U.S. control of canal operation would be required in the event it is considered desirable, as part of this option, to authorize the negotiators to propose a shorter duration of majority U.S. control than is presently authorized in exchange for a longer duration of the U.S. right to minority participation.

H. ISSUE—Nature and Level of Financial Benefits

Definition.

This involves determining what financial benefits will accrue to Panama as a result of a new treaty.

Background.

Existing guidance calls for substantially increased income to Panama from Canal operations (even though this may involve significant increases in tolls) and the opening of commercial opportunities to Panama in the Canal area (NSDM 115). We believe that Panama will expect to receive considerable compensation under any new treaty arrangements. The issue has not yet been discussed in any depth in the treaty negotiations, beyond the tabling by the U.S. in January 1975 [Page 30]of a proposal for an annual payment during the life of the treaty based initially on 27 cents per ton of cargo transiting the Canal.25 (This proposal would have amounted to about $35 million at the 1975 traffic level.) Both sides have agreed that they would reserve discussion of this issue until all others have been resolved.

Options.

Option I. Substantial payment to Panama to be financed from tolls and based on volume of traffic in tons transiting the Canal (current position).

Option II. Payment to Panama from tolls (reduced below level of Option I) plus additional compensation based on some combination of the following: economic and security assistance and/or a fixed annuity, and/or payments for base rights all to be financed by Congressional appropriations; credit for USG physical assets transferred and services provided to Panama (e.g., technical training, utilities, etc.).

Discussion of Options.

There has been limited study within the USG of the question of financial benefits. Further immediate review is planned in order to determine specific compensation packages which might appropriately be proposed in the negotiations.

Option I, by making Panamanian receipts dependent on the volume of shipping using the Canal, provides an incentive for Panama to cooperate in insuring that the Canal operates efficiently and that maximum traffic is encouraged. Its principal disadvantage is that the amount generated may be insufficient to meet Panamanian desires. Further, if Canal revenue were insufficient to cover the payments, the USG would have to seek Congressional appropriations in order to meet its obligations to Panama.

Option II would permit us to offer a larger package of financial benefits to Panama. This would contribute to facilitating overall agreement on a new treaty. By offering to Panama, through a variety of means, U.S. assistance in integrating the Canal into its economy and furthering its own development, it would contribute to increased prospects for long-term Panamanian stability and for providing the secure environment that is essential to continued efficient operation of the Canal. It would also enable us to assist Panama in such activities as preparing the Panamanian armed forces to participate in defense of the canal, to develop the manpower needed to operate it, and to help Panama meet the costs of taking over certain functions (fire, police, [Page 31]courts, etc.) as jurisdiction passes early in the new treaty period. Since Panama, because of its pressing financial problems and high debt service levels, will find it difficult to find international lenders for planned projects, Panama would certainly be attracted by a U.S. package involving investments in the Canal operation and infrastructure and funds to support a smooth transition to Panamanian jurisdiction. By helping to provide the favorable economic climate in Panama that would serve U.S. interests, a well-designed Option II package presumably could be made acceptable to the Congress in spite of its inherent preference for an option financed from tolls.

Many of the items that might be included in this option—such as base rights payments, economic and security assistance, or an annuity, would require Congressional appropriations, with consequent requirement to justify these expenditures to Congress. We anticipate that Congress might be more resistant to appropriations for general economic and security assistance than for expenditures that have some close relation to canal operations, such as aid to help Panama exploit commercial opportunities in the Zone (e.g., construction of a container port) or to improve Panamanian military forces to enable them to contribute to Canal defense. Defense opposes payments for base rights during the life of a new treaty on the grounds that the primary function of the bases is canal defense, which is equally of benefit to Panama and the U.S.

With regard to credit for physical assets, the monetary value of the package could be substantially increased if these items were included. However, it is likely that Panama will not attach much weight to benefits of this sort, since these assets will be available to Panama under a new treaty in any event.

Guidance Changes Needed.

Option I. No guidance change needed.

Option II. Changes in Presidential guidance would be proposed as the elements of a package and levels of financial benefits are developed and refined. Defense believes that before preparing proposals under this option, Presidential guidance should be sought on the appropriateness of incorporating elements in such proposals that would require the use of appropriated funds.

Defense believes that an exceptionally large compensation package to Panama, as may be envisioned in Option II, could well endanger Congressional and public acceptance of the treaty.

I. ISSUE—Expansion

Definition.

This issue involves determining the rights the United States should have in the treaty to expand canal capacity.

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Background.

Current guidance asks the negotiators to obtain an exclusive right, under terms and conditions set out in the treaty, to expand canal capacity through addition of a third lane of locks or construction of a sea-level canal throughout the period of U.S. canal operation with agreements that (a) the neutrality guarantee will apply to any new canal ever constructed in Panama; and (b) no third country will ever have responsibility for operation or defense of a canal within Panama. As a fallback, duration of the U.S. right to expand may run for less than the total period of U.S. canal operation with agreement by Panama that the U.S. will be given a right of first refusal on any expansion project during the remainder of the period of U.S. canal operation (NSDM 302).

The Panamanian position is that the U.S. would have the right, in the treaty, to expand canal capacity during the first ten years of the duration of this treaty. Thereafter, during the period of U.S. control of canal operations, both Panama and the U.S. would have to agree upon any project for expansion of canal capacity undertaken in Panama.

Options.

Options I. U.S. would have a detailed and exclusive right to expand canal capacity, including a commitment by Panama to preserve in advance the required territorial right of way and to extend the treaty duration if expansion is undertaken.

Option II. U.S. would have a defined and exclusive right to expand canal capacity, but without Panama’s agreement (a) on the necessary land areas in advance; and (b) on extending the duration of the treaty if expansion is undertaken.

Option III. U.S. would have a detailed and exclusive right for some period less than full term of U.S. canal operation, with a U.S. first refusal right thereafter during term of U.S. canal operation.

Discussion.

The resolution of this issue will not have a significant impact on U.S. interests as it now does not appear likely that we will make a decision to expand canal capacity during the period of U.S. control of canal operations. Option I would be similar to the rights the United States would have obtained under the 1967 draft treaties.26 Panama would object to it strongly and while it would be particularly attractive to a limited number of members of Congress and the public, it would be of minor significance to most of the Congress and the public.

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Option II is the position we currently have tabled with Panama. It will give us a right definitive enough to allow us to undertake the addition of a third lane of locks to the present canal should we decide to do so. This will be attractive to some members of Congress and the public. Panama’s current position is so close to Option II that it seems likely Panama would accept this option in the context of an entire treaty package.

Option III would allow us to agree to Panama’s current position. It is less attractive to all interests in the U.S. because our rights would be less, but acceptance of it would not significantly affect our national interest.

Guidance Changes Needed.

Option I. Harden guidance to require negotiators to obtain Panama’s agreement (a) to preserve a territorial right-of-way for future U.S. use in contruction of a sea-level canal and (b) to extend the duration of the treaty if U.S. decides to expand the canal.

Option II. No guidance change necessary.

Option III. No guidance change necessary.

Tab 10

Steps to Obtain Congressional and Public Support for a Treaty 27

STEPS TO OBTAIN CONGRESSIONAL AND PUBLIC SUPPORT FOR A TREATY

a. Hold another Presidential meeting with the Congressional leadership,28 to be attended also by the Secretaries of State and Defense, the JCS Chairman, and the U.S. negotiators. The President would: (a) set forth the status of the negotiations and his plans for the treaty timetable; (b) seek the Congressional leadership’s advice on the course to be followed in the negotiations and on a strategy for winning Congressional approval; and (c) explore how best to involve members of the Congress in the negotiations.

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b. Issue a Presidential statement, to follow immediately after the above meeting, setting forth the Administration’s objectives and commitment to obtaining a new treaty.29

c. Issue Presidential instructions30 directing State, in coordination with Defense and White House congressional staffs to begin immediate, intensive, coordinated and continuing consultations with the Congress.

d. Instruct appropriate agencies to begin working promptly to lessen congressional support, particularly in the Senate, for prospective anti-treaty initiatives including those designed to cut off funds for the negotiations.

e. Undertake White House-directed effort to obtain support of concerned interests groups—veterans organizations, business groups, labor unions, church groups, Hispanic Americans. Perhaps also the organization of a national “Citizen’s Committee for a Panama Treaty”, its membership to be solicited by the White House.31

f. Make follow-up Presidential statements (including a fireside chat) to inform the public and to build support for the treaty. If an early fireside chat is decided upon to set a positive public framework for the negotiations, it should focus more on the U.S. interests and objectives that would be served by a new treaty, rather than on details that might weaken our negotiating position or compromise the President.32

g. Undertake private Presidential consultations with selected department heads and other senior officials to emphasize the priority attached to the treaty effort and the desire that all agencies concerned cooperate in the attainment of a new treaty.

  1. Source: Carter Library, National Security Affairs, Staff Material, North/South, Box 42, Panama, PRM–1, 1/77. Secret. Prepared in response to PRM–1. The Defense Department and CIA contributed to the paper.
  2. Tab 1 is attached but not printed.
  3. A reference to National Intelligence Estimate (NIE) 84–1–77, “Panama: Developments and Prospects,” dated January 6. (Central Intelligence Agency, National Intelligence Council, Job 82B00421R: NFIB Documents—Microfiche, Box 1, Folder 4: Soviet Civil Defense Collection and Production Strategy for 1972)
  4. Tab 2 is attached but not printed.
  5. Tab 3, the précis of NIE 84–1–77, is attached but not printed.
  6. Tab 4 is attached but not printed.
  7. On December 18, 1964, Johnson announced his decision to propose to Panama the negotiation of a new Panama Canal Treaty. For the full text of Johnson’s remarks, see Public Papers: Johnson, 1963–1964, Book II, pp. 1663–1665.
  8. See Foreign Relations, 1964–1968, vol. XXXI, South and Central America: Mexico, Document 439.
  9. The U.N. Security Council held 10 meetings in Panama City March 15–21, 1973, many of which focused on the canal and the Canal Zone. On March 21, the Security Council voted on a draft resolution sponsored by Panama and Peru, which, among other things, called for the prompt execution of a new canal treaty. The U.S. vetoed the draft resolution, arguing that its matters were in the process of bilateral negotiations, making it inappropriate for the Security Council to adopt a resolution dealing with those matters. For further explanation of the meetings, the draft resolution and the Security Council decision, see Yearbook of the United Nations, 1973, pp. 165–170.
  10. Tab 5 is attached but not printed. For the text of the principles, see the Department of State Bulletin, February 25, 1974, pp. 184–185.
  11. NSDMs 302, 131, and 115 are attached but not printed. For the full texts of NSDM 302, 131, and 115, see Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Document 95; Foreign Relations, 1969–1976, vol. E–10, Documents on American Republics, 1969–1972, Document 555; and Foreign Relations, 1969–1976, vol. E–10, Documents on American Republics, 1969–1972, Document 549.
  12. Tab 8 is attached but not printed.
  13. Defense prefers either Option (a), or Option (b) if coupled with either (1) an “agreement to agree” on a post-treaty U.S. defense role with a clear understanding that without such agreement, U.S. defense rights under the treaty will continue or (2) a treaty agreement on a post-treaty defense role. [Footnote is in the original.]
  14. See footnote 13 above.
  15. Thurmond introduced Senate Resolution 301 on March 29, 1974. The resolution sought to ensure that the U.S. Government retained and protected its sovereign rights and jurisdiction over the Panama Canal Zone. Thurmond reintroduced this resolution on March 4, 1975, as Senate Resolution 97. For more information on Thurmond’s resolution, see Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Documents 38 and 39.
  16. Secret.
  17. See footnote 11 above.
  18. See footnote 11 above.
  19. The Inter-American Treaty of Reciprocal Assistance, known as the Rio Pact or Rio Treaty, was signed by 19 American countries on September 2, 1947, in Rio de Janiero. It asserted that aggression toward one American state would be considered an attack on all countries bound by the treaty.
  20. See Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Documents 102 and 108.
  21. See Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Document 99.
  22. See footnote 20 above.
  23. See Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Document 114.
  24. See footnote 10 above.
  25. For a brief summary of the January 1975 meetings in Panama, see Foreign Relations, 1969–1976, vol. XXII, Panama, 1973–1976, Document 66.
  26. See footnote 8 above.
  27. Secret.
  28. According to the President’s Daily Diary, Carter hosted a breakfast meeting with Democratic congressional leaders on January 25 from 7:57 to 9:08 a.m. (Carter Library, Presidential Materials, President’s Daily Diary)
  29. Not found.
  30. Not found.
  31. See Document 43.
  32. Carter delivered remarks to the American people on February 2 but did not mention Panama. For the text of the remarks, see Public Papers: Carter, 1977, Book I, pp. 69–77.