57. Telegram from the Panama Canal Zone to the Department of Defense1

629. FM Governor Parfitt, Balboa HTS CZ to Mr. Ford, acting ASA (CW), Wash DC. Subj: Panama Canal Draft Treaty

1. We appreciate the opportunity to review State’s June 25 drafts of a Canal Treaty and implementing agreement, since the rapidity of changes and new agreements in the accelerated negotiations in recent weeks have made it impossible for us to stay fully abreast of developments.2 Our review will be somewhat restricted by the short deadline and instructions to the effect that the drafts embody principles and language already agreed to by Panama and that we should therefore try to minimize suggestions for change.

2. Since the matter apparently is being rapidly brought to a conclusion, I have at your invitation sent representatives to Washington to participate in the meetings now going on. This message will be restricted to observations and suggestions concerning selected major issues, by way of stating our position or pointing up some areas we think involve inconsistencies or ambiguity.

3. The drafts are said to be based upon a draft treaty the Panama Canal prepared in 1975, but, although there are similarities in form and substance, it is apparent that in a number of areas important to Canal operation the negotiators have not been able to sustain this agency’s positions. The matters that do not reflect our views, most of which have been stated many times and are covered by the Panama Canal drafts, include by way of example:

A. Ownership of installations and property. Vesting immediate ownership in Panama of all U.S. real property including improvements thereon (Canal locks, dams, all buildings and installations, etc.) is not sound in my opinion. The reason for proposing this transfer of right, title and interest is not clear to us. Presumably it is intended that Panama at the same time grants back to the United States full right to use the property as though it were the owner. The problems involved [Page 190] include: (1) it is important to fiscal management that the property be subject to the usual depreciation; (2) management should be free to modify, replace or otherwise dispose of or act with respect to improvements to real property as an owner would in the operation of the enterprise; (3) potential conflict with Panama over interpretation of use rights of facilities in the light of their ownership by Panama. If the concept of Article VIII3 is pursued, it should be made absolutely clear that the Panama grant of use under Article III4 is free of charge and includes the right to modify, replace, or otherwise dispose of improvements, and that any inconsistencies in other provisions be resolved so that there is no doubt as to the rights that accrue to the United States even though Panama is the owner of, say, a building or other improvement to real property.

B. Control of Balboa port facilities, including Drydock No. 1, U.S. housing, and licensing of land in Canal operating areas. The drafts do not give the Canal administration the control we have recommended and still recommend.

C. Status of forces agreement application. The drafts treat Canal U.S. employees differently than military civilian U.S. employees in some important respects, contrary to our recommendations and to the U.S. negotiating position in the past. Most importantly, the use of military exchanges, commissaries and post offices should not be limited to five years.

4. I have serious concern about the coordinating committee established by Article III of the draft implementing agreement, and its functions which are many and varied under the provisions of the agreement. There should not be, in my opinion, in addition to the board of directors and the consultative committee, a further joint committee with independent authority which could superimpose its management of certain matters on the Canal administration, diluting its authority and affecting its responsibilities. I do not question the need for coordination between the Canal administration and Panama in the many matters referred to in the drafts.

We have in the past concurred in a joint advisory committee, with technical subcommittees, to coordinate various matters with Panama, with the U.S. representative being either the Canal administrator or his designee. I think the relationship between the coordinating committee and the administrator needs to be clearly established and, specifically, I recommend that the committee be composed of a U.S. citizen [Page 191] who is either the Canal administrator or his designee, and a representative of Panama.

5. There are a number of other questions or comments concerning the drafts which my representatives now working with you in Washington will bring to your attention and which are therefore not included in this message.

6. On many occasions, particularly in the past two months, my staff has been called upon to choose between what we have viewed as unsatisfactory alternatives bearing on the future operation and maintenance of the Canal and retention of the necessary skilled workforce. I realize that the negotiators are balancing broad national policy considerations against our operational considerations which have often been outweighed. It should be understood, however, that our attempts to select the best from among alternatives which do not reflect our position, and our efforts now in working to make the best of whatever is decided, are not to be construed as an endorsement of the negotiators’ positions that are contrary to ours.

7. In order to achieve a treaty, the negotiators have made concessions which cause me real concern as to whether the United States will have or be able to retain the controls it needs to maintain and operate the Canal for the duration of the treaty with a reasonable degree of efficiency and on a sound financial basis. Apart from the basic question of jurisdiction, resolved in favor of Panama long ago, the concessions causing this concern include the dilution of U.S. control over the Canal operating area; relinquishment of Balboa port facilities, including Drydock No. 1, that are essential to Canal support; relinquishment of U.S. citizen housing with only limited use rights retained; the switch in 1990 to a Panamanian administrator; and inadequate treatment of employee rights and benefits.

8. On the latter point, I feel obligated to emphasize once again that the adequate protection of employees is very important not only to the employees, both U.S. citizens and others, but to Canal management as well. If our employees perceive the proposed treaty as deficient in this respect, I anticipate labor problems which could disrupt or shut down the Canal operations, with results that could complicate and jeopardize the ratification process. Our detailed, written views on employee rights, benefits and assurances have been fully presented during the past year.

Warm regards,

  1. Source: National Archives, RG 185, Subject Files of the 1979 Panama Canal Treaty Planning Group (1950–1980), Box 9, Negotiations—General II (Jan. 77 to ). Confidential; Eyes Only. Sent for information to USCINCSO Panama Canal Negotiations Working Group (PCNWG) and Quarry Heights.
  2. According to a June 29 memorandum by G.F. Carroll (OSD), Bunker sent the PCNWG a June 24 memorandum requesting prompt consideration of a draft treaty package. State requested urgent action on the draft treaty in the hopes of commencing treaty drafting with the Panamanians during the week of July 4. (Washington National Records Center, ISA Files, FRC: 330–79–0089, Panama, January–15 Aug 1977)
  3. Article VIII of the final Panama Canal Treaty was entitled “Privileges and Immunities.”
  4. Article III of the final Panama Canal Treaty was entitled “Canal Operation and Management.”