79. Memorandum From the Assistant to the President (Jordan) and William Hyland of the National Security Council Staff to President Carter1


  • Panama Canal Treaty

Attached is the background material you requested on the new Panama Canal Treaty: (1) Basic Elements and (2) Talking Points.

However, the latest report from Panama indicates the negotiations have slowed down somewhat today and that an announcement that an agreement in principle has been reached may be delayed for three or four days.2

The negotiators are encountering some new problems as they examine the new Panamanian draft of the treaty. We do not yet have a sense of how serious these problems are. In addition, the military negotiators working on the land and water issues have encountered minor problems. Under these circumstances, it would be best to hold off making any telephone calls until we have further word.

We will send you an update as soon as we talk to Bunker or Linowitz.


Basic Framework for a New Panama Canal Treaty3

Basic Framework for a New Panama Canal Treaty

1. Canal defense.

The United States shall have primary responsibility for the Canal’s defense during the treaty’s term. Panama will participate. A Status of [Page 247] Forces Agreement similar to such agreements elsewhere will cover the activities and presence of our military forces.

2. Canal operation.

The United States shall have responsibility for Canal operations during the term of the treaty. It shall possess all necessary rights and shall act through a United States Government agency which will replace the Panama Canal Company. A policy level board of five Americans and four Panamanians will serve as the board of directors. Until 1990, the Canal Administrator will be an American and the Deputy Administrator a Panamanian. Thereafter, the Administrator will be Panamanian and the Deputy, American.

3. Canal operating and defense areas.

The Canal Zone will cease to exist at the treaty’s start. The United States will continue to have access to and the rights to use all land and water areas and installations necessary for the operation, maintenance and defense of the Canal during the treaty period.

4. Neutrality.

Panama and the United States will maintain a regime providing for the permanent neutrality of the Canal including non-discriminatory access and tolls for merchant and naval vessels of all nations. United States and Panamanian warships will enjoy expeditious passage of the Canal at all times. Our freedom of action to maintain the Canal’s neutrality is not limited by the treaty.

5. Economic arrangements.

During the treaty’s life the United States will make an annual payment to Panama from toll revenues of 30 cents (to be adjusted periodically for inflation), per Panama Canal ton transiting the Canal.

—The United States will also pay Panama a fixed sum of $10 million per annum, plus an additional $10 million if Canal revenues permit.

—In addition, the United States will undertake, outside the treaty, to arrange an economic program of $295 million to be implemented by separate economic agreements involving loans and guarantees.

6. Sea-level canal.

Panama and the United States commit themselves jointly to study the feasibility of a sea-level canal and, if they agree that such canal is necessary, to negotiate mutually agreeable terms for its construction.

7. Jurisdiction.

Panama will assume general territorial jurisdiction over the present Canal Zone at the treaty’s start.

8. Duration.

The basic treaty will terminate on December 31, 1999. Our military presence will cease by the treaty’s end.

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Talking Points on Canal Treaty4

Talking Points on Canal Treaty

We have reached agreement with Panama on the terms of a treaty to guarantee and modernize the Panama Canal’s role as a neutral international waterway open to all nations on an equal basis.

—Our main objectives are to keep the Canal open, operating efficiently, neutral, and open to all ships on a nondiscriminatory basis. The Canal cannot remain open for long or be operated efficiently if we do not have the cooperation of the Panamanians since the Canal is extraordinarily vulnerable. (One person carrying a suitcase full of dynamite can blow up a lock or a dam and put the Canal out of business for two years.)

—The 1903 Treaty with Panama no longer reflects the many changes that have occurred in Panama, the United States, and the World. Today no nation, including ours, could continue to accept a treaty which permits the exercise of such extensive extra-territorial rights in “perpetuity.” Last week, in Bogota, our closest friends in the hemisphere—the democracies of Venezuela, Costa Rica, Colombia, Mexico, and Jamaica—issued a Joint Communique urging the United States and Panama to complete and ratify this new treaty.5

—There are two parts to our agreement: one deals with the operation, jurisdiction, and defense of the Canal, and it will remain in effect until the year 2000; the second part will give us the right to guarantee the neutrality of the Canal forever. During the 23-year lifetime of the basic Treaty, the United States will retain the primary rights and responsibilities necessary to operate and defend the Canal. But we will gradually seek to increase the role of Panama in both the operation and the defense of the Canal so that Panama will be ready to shoulder its full responsibilities after the year 2000. Our job will be to help Panama become a full partner. The Canal is their most important resource, and they therefore have a strong incentive to see that it works well.

—After the year 2000, the United States will not have the responsibility to directly operate or defend the Canal, but we will retain the rights to take whatever action is necessary to guarantee its neutrality.

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—At the Treaty’s start, Panama will obtain jurisdictional rights over the Canal Zone. The United States will retain rights of criminal jurisdiction for U.S. civilians over a three-year period, and for our military during the life of the treaty (under a status of forces agreement, as we have with all our military bases overseas).

—The Canal will be operated during the Treaty’s lifetime by an organization in which the United States will have effective control.

—The United States will continue to have access to all the lands and water areas and defense facilities necessary for the operation, maintenance, and defense of the Canal during the treaty period.

The United States will not have to pay any tax dollars to Panama. Panama will share in the toll revenues (30 cents per canal ton, plus $10 million, plus an additional $10 million if revenues permit) and will receive approximately $295 million in loans, guarantees, and Export-Import Bank credits.

—Panama and the United States will jointly study the feasibility of a sea-level canal, and if they agree that it is necessary, we will negotiate terms for its construction.

I have no doubts that this treaty will provide for the most effective defense of the Canal and will further our strategic, commercial, economic, and moral interests. In addition, I am confident that the new treaty will lead to closer political and commercial relations with all Latin American and Caribbean nations.

  1. Source: Carter Library, Plains Files, President’s Personal Foreign Affairs File, Box 3, Panama Canal, 8/77. Confidential.
  2. In telegram 5677 from Panama City, August 9, Jorden reported that while the negotiations were proceeding at an intensive pace, a long list of matters remained to be covered before agreement in principle could be reached in all matters. Jorden questioned whether or not work on the remaining list could be completed that week. (National Archives, RG 59, Central Foreign Policy File, D770286–1220)
  3. Confidential.
  4. Confidential.
  5. See footnote 5, Document 66.