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III. FINDINGS

WHY A NEW PANAMA CANAL TREATY IS NECESSARY

In 1903, the United States and the Republic of Panama signed the Hay-Bunau-Varilla Treaty which granted the United States a strip of land 10-miles wide and 50-miles long for the purpose of constructing, operating, maintaining, and defending a Canal between the Atlantic and Pacific Oceans and which gave the United States rights as "if it were the sovereign" in perpetuity on Panamanian soil.

Today that treaty and the relationship that it produced is over 72 years old. The treaty led to an engineering miracle, which has served the United States and Panama well; it also led to an American governmental presence on Panamanian territory which now causes serious offense to Panamanians.

While some Americans argue that the 1903 treaty has served the test of time and there are no good reasons to replace it, the terms of the 1903 accord do not reflect the major changes that have occurred in Panama, the United States and the world. In the 1970's no nation can continue to accept a treaty which permits the exercise of extensive extraterritorial rights in "perpetuity." We cannot expect Panama to continue to accept what no other state will accept. The reasons for increasing Panamanian opposition to the present treaty are apparent and understandable.

There are several reasons for negotiating a new treaty. Among the more important are:

(a) In order for the United States to protect and promote its only crucial national interest in Panama-an open, efficient, and secure Canal-a new treaty is necessary, in part because of the united position of the Panamanians and in part because if we want a secure access to the Cànal, we need a cooperative arrangement with Panama.

(b) The Republic of Panama, an important and staunch friend and supporter of the United States, wants a new treaty. Four American Presidents have been on record for 11 years as wanting to conclude a new treaty relationship. Without a new treaty, continued friendship with Panama will not be possible. We will be opting for confrontation with all the risks that course can pose for a safe and open Panama Canal.

(c) The major concern of the Panamanians is an end to the concept of America having rights in "perpetuity" in Panama and U.S. jurisdiction over the Canal Zone. This concern cannot be addressed in any reasonable fashion without a new arrangement. If we choose not to deal with it, we will have a confrontation with Panama. If we continue to insist upon our rights in perpetuity in today's world, we are launched on a dangerous, high-risk course.

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(d) Over the last several months, Panama has obtained important and diversified international support for a new treaty. The strong and unequivocal support of all Latin American nations for Panamanian aspirations, alone, suggests that serious problems in our hemispheric relations will result from a failure to conclude a new treaty. Rejection of a treaty that protects vital U.S. interests will lead to a deterioration of our relations with all Latin American nations.

(e) The United States has a unique opportunity to obtain a treaty on acceptable terms. If this opportunity is lost and the talks falter, there will likely be another wave of anti-Americanism in Panama and resumption of treaty talks, a few years from now, in an atmosphere less favorable to the United States and less conducive to preserving for us the essential that we want, namely responsibility for the operation and defense of the Canal for a specified period of time.

In brief, a treaty which satisfies the legitimate interests of both Panama and the United States is a realistic policy, and signifies a positive step toward a mature relationship between the United States and the countries of Latin America.

WHAT ARE THE CONSEQUENCES IF NEGOTIATIONS FAIL?

The issue before the United States is not between having a new treaty and continuing the present treaty, but rather between negotiations that will lead eventually to a draft treaty and what would be the likely consequences of no new treaty.

The treaty of 1903 gave the United States certain rights, not territory and not sovereignty, in Panama. It is those rights that are the subject of the current negotiations. The current uneven pace of negotiations has, at times, produced a climate between the United States and Panama that could undermine our rights there in the future. If we fail to reach a treaty that will redefine our relationship and rights for the future, we run the risk of a confrontation that can only reinforce distrust and jeopardize our national interests in the Canal.

Such confrontations have occurred in the past because of this issue. They occurred in 1957, 1964, 1975. In 1964, over 20 people died in events relating to Panamanian frustrations over the Canal Zone and its inhabitants. More recently, demonstrations of a large and increasingly vocal student population have become a problem. While the students are not united and they represent political organizations across the entire political spectrum, although mainly on the left side, they are united in the view that a new treaty is necessary now. It is a matter of national pride and dignity to all Panamanians.

While negotiations have been in progress and there is hope that a new treaty is possible, the Government of Panama has been willing to deal with the more outspoken and violent activities of student groups. But as each month passes the Panamanian Government is under increasing pressure to produce tangible signs of progress. If it perceives a complete impasse in the negotiations, the Government might be unwilling to pay the political price for containing demonstrators.

Demonstrations against the United States last occurred in September 1975. At that time students demonstrated against our Embassy and then proceeded to demonstrate outside the Panamanian Foreign Ministry, two easy and natural targets for frustrations over the absence of a treaty.

Although only minor damage was done, the message was clear. If we are unable to draft a mutually acceptable treaty, we run the risk of becoming engulfed in an uncontrollable confrontation between Americans and Panamanians in the Canal Zone. Such a situation could easily produce bloodshed, as it did in 1964. If a confrontation occurs, both Panama and the United States would lose precisely what we both are intent upon preserving an open, secure, and efficient Canal available for the trade and commerce of all states.

WHAT ARE THE PRINCIPAL ISSUES IN DISPUTE IN NEGOTIATIONS FOR A NEW TREATY?

Our discussions with American and Panamanian officials focused in detail on nine specific issues involved in efforts to negotiate a new treaty. On some of these issues, differences between the United States and Panama have been resolved and, on others, intensive negotiating is still needed.

The nine issues are:

1. TIMETABLE FOR THE TREATY

Since 1964, both the United States and the Republic of Panama have been committed to the concept of a new treaty and the necessity of a comprehensive modernization of their relationship. Between 1964 and 1967, three draft treaties were negotiated, but none were ever signed by the parties and no effort was made to seek ratification. In June 1971, another effort to reach a treaty commenced at the request of the Torrijos Government which came to power in 1968. However, a new U.S. treaty offer submitted to Panama in December 1971 was rejected. One year later formal negotiations resumed. Little was accomplished in this new round of talks until after Ambassador Ellsworth Bunker was appointed U.S. negotiator in late 1973. Since then, substantial progress has been made.

A first stage of the negotiations ended in February 1974 when Secretary of State Henry Kissinger went to Panama City to initial with the Panamanian Foreign Minister a set of eight principles which were to serve as guidelines in working out the details of a new treaty.1 The signing of the eight principles had a significant and positive impact on Panama's confidence in this new effort to draft a mutually acceptable treaty. Many Panamanians felt for the first time that they could negotiate on grounds where they knew they would get something new. After the delineation of these principles it was relatively easy for the parties to identify the major issues that would be the subject of detailed negotiations.

1 See appendix, p. 17.

For the past 20 months or so, Ambassador Bunker's team has been meeting periodically with Panamanian negotiators seeking to narrow differences and prepare a draft treaty. These periodic negotiations have resolved some problems but others remain.

From the Panamanian viewpoint, these negotiation sessions were not progressing fast enough toward the end of 1975 and little headway had been made. They saw the negotiations as an extended process, dating from 1964, with the major issues unresolved. Some Panamanians question the sincerity and commitment of the United States to a new treaty.

Some Panamanians now appear willing to delay any ratification of a new treaty until after the 1976 Presidential elections in the United States, but they remain uneasy about what lies beyond. The greater the assurance the United States can give that it intends to negotiate earnestly toward the end of 1976, the greater the ability and willingness of the Panamanian Government to accept the delays and to deal with the political activists who argue that violence is a better path to achieving Panamanian rights in the Canal Zone.

The United States needs to pay particularly close attention to the timing, momentum, and substance of the negotiating process during the coming months. Substance and progress can be given to the talks now without necessarily concluding negotiations and creating political problems here in the United States.

2. DURATION OF TREATY

A key issue confronting United States and Panamanian negotiators is the duration of the new treaty. Panamanian leaders want a fixed duration and oppose any treaty period extending beyond the turn of the century. They object strongly to a 50-year term for the treaty.

Some progress has been made on this issue but further clarifications are needed. It remains possible to have a fixed term for the operation of the Canal, and some residual ability beyond that term where the United States could retain certain rights to defend the Canal.

3. OPERATION OF THE CANAL

The negotiations will also focus on the rights required for the United States to be able, during the term of the treaty, to operate and maintain an efficient Canal.

During the course of the negotiations to date, considerable progress has been made on this issue. The United States will retain primary responsibility for the operation of the Canal during the term of the new treaty, but as time progresses trained Panamanians will be increasingly filling positions. Retiring American employees can be replaced in an orderly manner by Panamanian citizens. This procedure would minimize loss of jobs and large-scale dislocations of American employees.

4. DEFENSE OF THE CANAL

During the course of negotiations, Panamanian officials have expressed appreciation for America's concern about the defense of the

Canal. They appear willing to grant the United States primary responsibility and necessary rights for the defense of the Canal during the duration of the treaty. Although Panama will be able to participate in the defense of the Canal to the extent of its capabilities, the 8,300-man Panamanian National Guard is a small force, incapable of dealing with some of the threats our forces in Panama now are prepared to handle. Our present military presence numbers about 22,000, counting dependents.

Although general progress has been made on this issue, there will be several questions relating to personnel and base issues that can only be resolved when negotiations on other substantive issues are completed.

5. LANDS AND WATERS

The size and location of land and water areas the United States will need to defend and operate the Canal during the term of the treaty remain undetermined in the negotiations. Much of the land in the Canal Zone and some of the facilities are not required for the defense and operation of the Canal and could be returned to Panamanian jurisdiction.

This aspect of the talks may take considerable time, and will involve reduction, elimination and consolidation of some existing facilities, but, if other issues can be resolved, these geographic issues can probably be resolved expeditiously. It is uncertain whether the United States will seek to retain control over the entire Canal and all areas adjacent to the Canal or whether only isolated areas of control will be sufficient. In any event, Panamanian jurisdiction would apply and something like a status-of-forces agreement would provide the basis for a continued American military presence.

6. JURISDICTION

During the course of negotiations, agreement in principle has been reached that jurisdiction over the Canal Zone will pass to Panama during the term of the treaty even though the United States will retain. the right to use certain areas necessary for the defense and operation of the Canal itself.

The major unresolved questions are when and under what procedures current U.S. jurisdiction will terminate and what functions, if any, will be performed by the United States after its jurisdiction is terminated. With agreement reached on the principle involved here, which has concerned Panama for decades, the format and technical procedures for transfer can be worked out.

7. EXPANSION OF CAPACITY

During the lifetime of the treaty there will be a need for additional capital investment in the Canal and for the United States to have normal operating rights for minor improvements.

In the negotiations, several questions need to be resolved, among them:

How would any possible enlargement of the Canal be achieved; who would pay for it; what rights the United States has to make certain

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